10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-K

____________________________________

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017

Commission File Number: 000-51398

FEDERAL HOME LOAN BANK OF SAN FRANCISCO

(Exact name of registrant as specified in its charter)

____________________________________

Federally chartered corporation	94-6000630
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification number)
600 California Street San Francisco, CA	94108
(Address of principal executive offices)	(Zip code)

(415) 616-1000

(Registrant's telephone number, including area code)

____________________________________

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

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

Class B Stock, par value $100

(Title of class)

____________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o  Yes    x  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o  Yes    x  No

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 for the past 90 days.    x  Yes    o  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes    o  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. x

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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	o
		Emerging growth company	o

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

Registrant's capital stock is not publicly traded and is only issued to members of the registrant. Such capital stock is issued and redeemed at par value, $100 per share, subject to certain regulatory and statutory limits. At June 30, 2017, the aggregate par value of the capital stock held by shareholders of the registrant was approximately $3,091 million. At February 28, 2018, the total shares of capital stock outstanding, including mandatorily redeemable capital stock, totaled 37,340,430.

DOCUMENTS INCORPORATED BY REFERENCE: None.

Federal Home Loan Bank of San Francisco

2017 Annual Report on Form 10-K

Table of Contents

PART I.
Item 1.	Business	1
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	22
Item 2.	Properties	22
Item 3	Legal Proceedings	23
Item 4	Mine Safety Disclosures	23
PART II.
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	23
Item 6.	Selected Financial Data	25
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
	Overview	27
	Results of Operations	28
	Financial Condition	40
	Liquidity and Capital Resources	47
	Risk Management	51
	Critical Accounting Policies and Estimates	92
	Recently Issued Accounting Guidance and Interpretations	100
	Recent Developments	100
	Off-Balance Sheet Arrangements and Aggregate Contractual Obligations	101
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	102
Item 8.	Financial Statements and Supplementary Data	103
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	187
Item 9A.	Controls and Procedures	187
Item 9B.	Other Information	189
PART III.
Item 10.	Directors, Executive Officers and Corporate Governance	190
Item 11.	Executive Compensation	198
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	226
Item 13.	Certain Relationships and Related Transactions, and Director Independence	227
Item 14.	Principal Accounting Fees and Services	230
PART IV.
Item 15.	Exhibits, Financial Statement Schedules	231
SIGNATURES		234

PART I. FINANCIAL INFORMATION

ITEM 1. BUSINESS

At the Federal Home Loan Bank of San Francisco (Bank), our purpose is to enhance the availability of credit for residential mortgages and economic development by providing a readily available, competitively priced source of funds for housing and community lenders. We are a wholesale bank—we link our customers to the global capital markets and seek to manage our own liquidity and interest rate risk management so that funds are available when our customers need them. By providing needed liquidity and financial risk management tools, our credit programs enhance competition in the mortgage market and benefit homebuyers and communities.

We are one of 11 regional Federal Home Loan Banks (FHLBanks) that serve the United States as part of the Federal Home Loan Bank System. Each FHLBank operates as a separate federally chartered corporation with its own board of directors, management, and employees. The FHLBanks were organized under the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), and are government-sponsored enterprises (GSEs). The FHLBanks are not government agencies and do not receive financial support from taxpayers. The U.S. government does not guarantee, directly or indirectly, the debt securities or other obligations of the Bank or the FHLBank System. The FHLBanks are regulated by the Federal Housing Finance Agency (Finance Agency), an independent federal agency.

We have a cooperative ownership structure. To access our products and services, a financial institution must be approved for membership and purchase capital stock in the Bank. The member's capital stock requirement is generally based on its use of Bank products, subject to a minimum asset-based membership requirement that is intended to reflect the value to the member of having ready access to the Bank as a reliable source of competitively priced funds. Bank capital stock is issued, transferred, redeemed, and repurchased at its par value of $100 per share, subject to certain regulatory and statutory limits. It is not publicly traded.

Our members may include federally insured and regulated financial depositories, regulated insurance companies that are engaged in residential housing finance, community development financial institutions (CDFIs) that have been certified by the CDFI Fund of the U.S. Treasury Department, and privately insured, state-chartered credit unions. Financial depositories may include commercial banks, credit unions, industrial loan companies, and savings institutions. CDFIs may include community development loan funds, community development venture capital funds, and privately insured, state-chartered credit unions. All members have a principal place of business located in Arizona, California, or Nevada, the three states that make up the Eleventh District of the FHLBank System. Our members range in size from $6 million to over $198 billion in assets.

Our primary business is providing competitively priced, collateralized loans, known as advances, to our members and certain qualifying housing associates. Advances may be fixed or adjustable rate, with terms ranging from one day to 30 years. We accept a wide range of collateral types, some of which cannot be readily pledged elsewhere or readily securitized. Members use their access to advances to support their mortgage loan portfolios, lower their funding costs, facilitate asset-liability management, reduce on-balance sheet liquidity, offer a wider range of mortgage products to their customers, and improve profitability.

As of December 31, 2017, we had advances and capital stock, including mandatorily redeemable capital stock, outstanding to the following types of institutions:

1

				Advances
(Dollars in millions)	Total Number of Institutions	Capital Stock Outstanding		Number of Institutions	Par Value of Advances Outstanding
Commercial banks	164	$	1,764	88	$	43,045
Savings institutions	11	520		7	15,885
Credit unions	134	913		40	6,664
Industrial loan companies	3	2		3	42
Insurance companies	9	40		2	214
Community development financial institutions	6	4		4	78
Total member institutions	327	3,243		144	65,928
Housing associates eligible to borrow	2	—		1	107
Other nonmember institutions(1)	7	309		5	11,451
Total	336	$	3,552	150	$	77,486

(1) Nonmember institutions may be former members or may have acquired the advances and capital stock of a former member. Capital stock held by nonmember shareholders is classified as mandatorily redeemable capital stock, a liability. Nonmember shareholders with advances outstanding are required to meet the Bank's applicable credit, collateral, and capital stock requirements, including requirements regarding creditworthiness and collateral borrowing capacity. Nonmembers (including former members and member successors) are not eligible to borrow new advances from the Bank or renew existing advances as they mature.

To fund their operations, the FHLBanks issue debt in the form of consolidated obligation bonds and discount notes (jointly referred to as consolidated obligations) through the FHLBanks’ Office of Finance, the fiscal agent for the issuance and servicing of consolidated obligations on behalf of the FHLBanks. Because the FHLBanks’ consolidated obligations are rated Aaa/P-1 by Moody’s Investors Service (Moody’s) and AA+/A-1+ by S&P Global Ratings (S&P) and because of the FHLBanks' GSE status, the FHLBanks are generally able to raise funds at rates that are typically at a small to moderate spread above U.S. Treasury security yields. Our cooperative ownership structure allows us to pass along the benefit of these low funding rates to our members.

Members also benefit from our affordable housing and economic development programs, which provide grants and below-market-rate loans that support members’ involvement in creating affordable housing and revitalizing communities.

Our Business Model

Our cooperative ownership structure has led us to develop a business model that is different from that of a typical financial services firm. Our business model is based on the premise that we maintain a balance between our objective to promote housing, homeownership, and community and economic development through our activities with members and our objective to provide a return on the private capital provided by our members through their investment in the Bank's capital stock. We achieve this balance by delivering low-cost credit to help our members meet the credit needs of their communities while striving to pay members a reasonable return on their investment in the Bank's capital stock.

As a cooperatively owned wholesale bank, we require our members to purchase capital stock to support their activities with the Bank. We leverage this capital stock and the Bank’s retained earnings by using our GSE status to borrow funds in the capital markets at rates that are generally at a small to moderate spread above U.S. Treasury security yields. We lend these funds to our members at rates that are competitive with the cost of most wholesale borrowing alternatives available to our largest members.

We may also invest in residential mortgage-backed securities (MBS) up to the regulatory policy limit of three times regulatory capital, composed of retained earnings and capital stock, including mandatorily redeemable capital stock. Our MBS investments include agency-issued MBS that are guaranteed through the direct obligation of or are supported by the U.S. government and private-label residential MBS (PLRMBS) that were AAA-rated at the time of purchase. We also have a portfolio of residential mortgage loans purchased from members. Earnings on these mortgage assets have historically provided us with the financial flexibility to continue providing cost-effective

2

credit and liquidity to our members. While the mortgage assets we hold are intended to increase our earnings, they also modestly increase our credit and interest rate risk.

Additional information about our investments is provided in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Investments.”

Our financial strategies are designed to enable us to safely expand and contract our assets, liabilities, and capital as our member base and our members' credit needs change. Our capital increases when members are required to purchase additional capital stock as they increase their advances borrowings, and it contracts when we repurchase excess capital stock from members as their advances decline. As a result of these strategies, we have been able to achieve our mission by meeting member credit needs and maintaining our strong regulatory capital position, while paying dividends (including dividends on mandatorily redeemable capital stock) and repurchasing and redeeming excess capital stock. Throughout 2017, the Bank continued to monitor the condition of its PLRMBS portfolio, the ratio of the Bank’s estimated market value of total capital to par value of capital stock, its overall financial performance and retained earnings, developments in the mortgage and credit markets, and other relevant information as the basis for determining the payment of dividends and the repurchase of excess capital stock. Additional information regarding the Bank’s dividends and the repurchase of excess capital stock is provided in “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital – Excess Stock Repurchase, Retained Earnings, and Dividend Framework.”

Products and Services

Advances. We offer our members a wide array of fixed and adjustable rate loans, called advances, with maturities ranging from one day to 30 years. Our advance products are designed to help members compete effectively in their markets and meet the credit needs of their communities. For members that choose to retain the mortgage loans they originate as assets (portfolio lenders), advances serve as a funding source for a variety of conforming and nonconforming mortgage loans, including multifamily mortgage loans. As a result, advances support an array of housing market segments, including those focused on low- and moderate-income households. For members that sell or securitize mortgage loans and other assets, advances can provide interim funding.

Our credit products also help members with their asset-liability management. Members can use a wide range of advance types, with different maturities and payment characteristics, to match the characteristics of their assets and reduce their interest rate risk. We offer advances that are callable at the member's option and advances with embedded option features (such as caps and floors), which can reduce the interest rate risk associated with holding fixed rate mortgage loans and adjustable rate mortgage loans with interest rate caps in the member's portfolio.

We offer both standard and customized advance structures. Standard advances include fixed and adjustable rate advance products with different maturities, interest rates, and payment characteristics. Fixed rate advances generally have maturities ranging from one day to 30 years. Adjustable rate advances generally have maturities ranging from less than 30 days to 10 years, with the interest rates resetting periodically at a fixed spread to the London Interbank Offered Rate (LIBOR) or to another specified index. Customized advances may include:

• advances with non-standard indices;

• advances with embedded option features (such as interest rate caps, floors, and call and put options);

• amortizing advances; and

• advances with partial prepayment symmetry. (Partial prepayment symmetry is a product feature under which the Bank may charge a prepayment fee or pay a prepayment credit, depending on certain circumstances, such as movements in interest rates, if the advance is prepaid.)

For each customized advance, we typically execute a derivative to enable us to offset the customized features embedded in the advance.

We manage the credit risk of advances and other credit products by setting the credit and collateral terms available to individual members and housing associates based on their creditworthiness and the quality and value of the assets

3

they pledge as collateral. We also have procedures to assess the mortgage loan quality and documentation standards of institutions that pledge mortgage loan collateral. In addition, we have collateral policies and restricted lending procedures in place to help manage our exposure to institutions that experience difficulty in meeting their capital requirements or other standards of creditworthiness. These credit and collateral policies balance our dual goals of meeting the needs of members and housing associates as a reliable source of liquidity and mitigating credit risk by adjusting credit and collateral terms in view of changes in member creditworthiness.

All advances must be fully collateralized. To secure advances, borrowers may pledge one- to four-family first lien residential mortgage loans, multifamily mortgage loans, MBS, U.S. government and agency securities, deposits in the Bank, and certain other real estate-related collateral, such as commercial real estate loans and second lien residential mortgage loans. We may also accept small business, small farm, and small agribusiness loans that are fully secured by collateral (such as real estate, equipment and vehicles, accounts receivable, and inventory) as eligible collateral from members that are community financial institutions. The Housing and Economic Recovery Act of 2008 (Housing Act) added secured loans for community development activities as a type of collateral that we may accept from community financial institutions. The Housing Act defined community financial institutions as depository institutions insured by the Federal Deposit Insurance Corporation with average total assets over the preceding three-year period of $1 billion or less, to be adjusted for inflation annually by the Finance Agency. The average total asset cap for 2017 was $1,148 million.

Pursuant to our lending agreements with our borrowers, including members, housing associates, and nonmember institutions with credit outstanding, we limit extensions of credit to a borrower to a percentage of the market value or unpaid principal balance of the borrower’s pledged collateral, known as the borrowing capacity. The borrowing capacity percentage varies according to several factors, including the charter type of the institution, the collateral type, the value assigned to the collateral, the results of our collateral field review of the borrower’s collateral, the pledging method used for loan collateral (specific identification or blanket lien), the amount of loan data provided (detailed or summary reporting), the data reporting frequency (monthly or quarterly), the borrower’s financial strength and condition, and any institution-specific collateral risks. Under the terms of our lending agreements, the aggregate borrowing capacity of a borrower’s pledged eligible collateral must meet or exceed the total amount of the borrower’s outstanding advances, other extensions of credit, and certain other borrower obligations and liabilities. We monitor each borrower’s aggregate borrowing capacity and collateral requirements on a daily basis, by comparing the institution's borrowing capacity to its obligations to us.

In addition, the total amount of advances made available to each member or housing associate may be limited by the financing availability assigned by the Bank, which is generally expressed as a percentage of the member’s or housing associate’s assets. The amount of financing availability is generally determined by the creditworthiness of the member or housing associate.

We regularly review and adjust our lending parameters in light of changing market conditions, both negative and positive, and periodically adjust the maximum borrowing capacity of certain collateral types. When necessary, we require additional collateral to fully secure advances.

Based on the collateral pledged as security for advances, our credit analyses of our borrowers' financial condition, and our credit extension and collateral policies, we expect to collect all amounts due according to the contractual terms of the advances. Therefore, no allowance for losses on advances was deemed necessary by the Bank in 2017. We have never experienced any credit losses on advances.

When a borrower prepays an advance prior to its original maturity, we may charge the borrower a prepayment fee, depending on certain circumstances, such as movements in interest rates, at the time the advance is prepaid. For an advance with partial prepayment symmetry, we may charge the borrower a prepayment fee or pay the member a prepayment credit, depending on certain circumstances at the time the advance is prepaid. Our prepayment fee policy is designed to recover at least the net economic costs, if any, associated with the reinvestment of the advance prepayment proceeds or the cost to terminate the funding associated with the prepaid advance, which generally enables us to be financially indifferent to the prepayment of the advance.

4

Because of the funding alternatives available to our largest borrowers, we establish advances prices that take into account the cost of alternative market choices available to our largest members each day. We offer the same advances prices to all members each day, which means that all members benefit from this pricing strategy. In addition, if further price concessions are negotiated with any member to reflect market conditions on a given day, those price concessions are also made available to all members for the same product with the same terms on the same day.

Standby Letters of Credit. We issue standby letters of credit to support certain obligations of members to third parties. Members may use standby letters of credit issued by the Bank to facilitate residential housing finance and community lending, to achieve liquidity and asset-liability management goals, to secure certain state and local agency deposits, and to provide credit support to certain tax-exempt bonds. Our underwriting and collateral requirements for standby letters of credit are generally the same as our underwriting and collateral requirements for advances, but may differ in cases where member creditworthiness is impaired.

Investments. We invest in high-quality non-MBS investments to facilitate our role as a cost-effective provider of credit and liquidity to members and to enhance the Bank's earnings. We have adopted credit policies and exposure limits for investments that support liquidity and diversification of risk. These policies restrict the amounts and terms of our investments according to our own capital position as well as the capital and creditworthiness of the individual counterparties, with different unsecured credit limit policies for members and nonmembers. When we execute non-MBS investments with members, we may give consideration to their secured credit availability with the Bank and our advances price levels.

We may invest in short-term unsecured interest-bearing deposits, Federal funds sold, negotiable certificates of deposit, and commercial paper. We may also invest in short-term secured transactions, such as U.S. Treasury resale agreements. Our investments also include bonds issued by the Federal Farm Credit Banks, all of which are rated Aaa by Moody’s and AA+ by S&P. In addition, we may invest in housing finance agency bonds issued by housing finance agencies located in Arizona, California, and Nevada, the three states that make up the Eleventh District of the FHLBank System. These bonds are federally taxable mortgage revenue bonds, collateralized by pools of first lien residential mortgage loans and credit-enhanced by bond insurance. The bonds we hold are issued by the California Housing Finance Agency.

In addition, our investments include PLRMBS, all of which were AAA-rated at the time of purchase, and agency residential MBS, which are guaranteed through the direct obligation of, or are supported by, the U.S. government. Some of these PLRMBS were issued by and/or purchased from members, former members, or their respective affiliates. We execute all MBS investments without preference to the status of the counterparty or the issuer of the investment as a nonmember, member, or affiliate of a member. The Bank has not purchased any PLRMBS since the first quarter of 2008.

Additional information about our investments and OTTI charges associated with our PLRMBS is provided in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Investments” and in “Item 8. Financial Statements and Supplementary Data – Note 7 – Other-Than-Temporary Impairment Analysis.”

Mortgage Loans. Under the Mortgage Partnership Finance® (MPF®) Program, the Bank may purchase from members, for its own portfolio, conventional conforming fixed rate mortgage loans under the MPF Original product and mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) under the MPF Government product. In addition, the Bank may facilitate the purchase of conforming fixed rate mortgage loans from members for concurrent sale to Fannie Mae under the MPF Xtra® product; of jumbo fixed rate mortgage loans for concurrent sale to Redwood Residential Acquisition Corporation, a subsidiary of Redwood Trust, Inc., a real estate investment trust, under the MPF Direct product; and of government-insured or government-guaranteed mortgage loans that will be packaged into securities backed by the mortgage

5

loans and guaranteed by Ginnie Mae under the MPF Government MBS product. (“Mortgage Partnership Finance,” “MPF,” and “MPF Xtra” are registered trademarks of the FHLBank of Chicago.)

The Bank has approved 23 members as participating financial institutions since renewing its participation in the MPF Program in 2013. We previously purchased conventional conforming fixed rate residential mortgage loans from participating financial institutions from May 2002 to October 2006. The MPF Program allows us to further serve the needs of our members by offering them a competitive alternative secondary market channel for their mortgage originations. The MPF Government and MPF Government MBS products also allow us to offer members a new mechanism to help low- and moderate-income homeowners and first-time homebuyers.

Affordable Housing Program. Through our Affordable Housing Program (AHP), we provide subsidies to assist in the purchase, construction, or rehabilitation of housing for households earning up to 80% of the median income for the area in which they live. Each year, to fund the AHP, we set aside 10% of the current year's net earnings (income before interest expense related to dividends paid on mandatorily redeemable capital stock and the assessment for the AHP), to be awarded in the following year. Since 1990, we have awarded $1.0 billion in AHP subsidies to support the purchase, development, or rehabilitation of approximately 132,000 affordable homes.

We allocate at least 65% of our annual AHP subsidy to our competitive AHP, under which applications for specific owner-occupied and rental housing projects are submitted by members and are evaluated and scored by the Bank in an annual competitive process. All subsidies for the competitive AHP are funded to affordable housing sponsors or developers through our members in the form of direct subsidies or subsidized advances.

We allocate the remainder of our annual AHP subsidy, up to 35%, to our two homeownership set-aside programs, the Individual Development and Empowerment Account Program and the Workforce Initiative Subsidy for Homeownership Program. Under these programs, members reserve funds from the Bank to be used as matching grants for eligible first-time homebuyers.

Access to Housing and Economic Assistance for Development (AHEAD) Program. AHEAD Program grants, funded annually at the discretion of our Board of Directors, provide funding for targeted economic development projects and non-AHP-eligible housing initiatives that create or preserve jobs, deliver social services, training or education programs, or provide other services and programs that benefit low- and moderate-income communities. AHEAD Program applications are submitted by members working with local community groups, and awards are based on project eligibility and evaluation of the applications. In 2017, the Bank awarded $1.5 million in AHEAD Program grants.

Discounted Credit Programs. We offer members two discounted credit programs available in the form of advances and standby letters of credit. Members may use the Community Investment Program to fund mortgages for low- and moderate-income households, to finance first-time homebuyer programs, to create and maintain affordable housing, and to support other eligible lending activities related to housing for low- and moderate-income families. Members may use the Advances for Community Enterprise (ACE) Program to fund projects and activities that create or retain jobs or provide services or other benefits for low- and moderate-income people and communities. Members may also use ACE Program funds to support eligible community lending and economic development, including small business, community facilities, and public works projects.

Funding Sources

We obtain most of our funds from the sale of the FHLBanks' debt instruments (consolidated obligations), which consist of consolidated obligation bonds and discount notes. The consolidated obligations are issued through the Office of Finance using authorized securities dealers and are backed only by the financial resources of the FHLBanks. As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The regulations provide a

6

general framework for addressing the possibility that an FHLBank may be unable to repay the consolidated obligations for which it is the primary obligor. For more information, see “Item 8. Financial Statements and Supplementary Data – Note 20 – Commitments and Contingencies.” We have never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of December 31, 2017, and through the date of this report, we do not believe that it is probable that we will be asked to do so.

The Bank’s status as a GSE is critical to maintaining its access to the capital markets. Although consolidated obligations are backed only by the financial resources of the FHLBanks and are not guaranteed by the U.S. government, the capital markets have traditionally treated the FHLBanks’ consolidated obligations as comparable to federal agency debt, providing the FHLBanks with access to funding at relatively favorable rates. As of December 31, 2017, S&P rated the FHLBanks’ consolidated obligations AA+/A-1+, and Moody’s rated them Aaa/P-1. As of December 31, 2017, S&P assigned each of the FHLBanks a long-term credit rating of AA+ with a stable outlook, andMoody's assigned each of the FHLBanks a long-term credit rating of Aaa with a stable outlook. Changes in the long-term credit ratings of individual FHLBanks do not necessarily affect the credit rating of the consolidated obligations issued on behalf of the FHLBanks. Rating agencies may change or withdraw a rating from time to time because of various factors, including operating results or actions taken, business developments, or changes in their opinion regarding, among other factors, the general outlook for a particular industry or the economy.

Regulations govern the issuance of debt on behalf of the FHLBanks and related activities. All new debt is jointly issued by the FHLBanks through the Office of Finance, which serves as their fiscal agent in accordance with the FHLBank Act and applicable regulations. Pursuant to these regulations, the Office of Finance, often in conjunction with the FHLBanks, has adopted policies and procedures for consolidated obligations that may be issued by the FHLBanks. The policies and procedures relate to the frequency and timing of issuance, issue size, minimum denomination, selling concessions, underwriter qualifications and selection, currency of issuance, interest rate change or conversion features, call or put features, principal amortization features, and selection of clearing organizations and outside counsel. The Office of Finance has responsibility for facilitating and approving the issuance of the consolidated obligations in accordance with these policies and procedures. In addition, the Office of Finance has the authority to redirect, limit, or prohibit the FHLBanks' requests to issue consolidated obligations that are otherwise allowed by its policies and procedures if it determines that its action is consistent with: (i) the regulatory requirement that consolidated obligations be issued efficiently and at the lowest all-in cost over time, consistent with prudent risk management practices, prudent debt parameters, short- and long-term market conditions, and the FHLBanks' status as GSEs; (ii) maintaining reliable access to the short-term and long-term capital markets; and (iii) positioning the issuance of debt to take advantage of current and future capital markets opportunities. The authority of the Office of Finance to redirect, limit, or prohibit the Bank's requests for issuance of consolidated obligations has never adversely affected the Bank's ability to finance its operations. The Office of Finance also services all outstanding FHLBank debt, serves as a source of information for the FHLBanks on developments in the capital markets, and prepares the FHLBanks' quarterly and annual combined financial reports. In addition, it administers the Resolution Funding Corporation and the Financing Corporation, two corporations established by Congress in the 1980s to provide funding for the resolution and disposition of insolvent savings institutions.

Consolidated Obligation Bonds. Consolidated obligations are generally issued with either fixed rate payment terms or adjustable rate payment terms, which use a variety of indices for interest rate resets, including LIBOR. In addition, to meet the specific needs of certain investors, fixed rate and adjustable rate consolidated obligation bonds may contain certain embedded features, which may result in call options and complex coupon payment terms. In general, when such consolidated obligation bonds are issued for which the Bank is the primary obligor, we simultaneously enter into interest rate exchange agreements containing offsetting features to, in effect, convert the terms of the bond to the terms of a simple adjustable rate bond (tied to an index, such as those listed above). Typically, the maturities of these securities range from 6 months to 15 years, but the maturities are not subject to any statutory or regulatory limit. Consolidated obligation bonds may be issued and distributed daily through negotiated or competitively bid transactions with approved underwriters or selling group members.

7

We receive 100% of the net proceeds of a bond issued through direct negotiation with underwriters of debt when we are the only FHLBank involved in the negotiation. In these cases, the Bank is the sole primary obligor on the consolidated obligation bond. When the Bank and one or more other FHLBanks jointly negotiate the issuance of a bond directly with underwriters, we receive the portion of the proceeds of the bond agreed upon with the other FHLBank(s); in those cases, the Bank is the primary obligor for a pro rata portion of the bond, including all customized features and terms, based on the proceeds received.

We may also request specific amounts of specific consolidated obligation bonds to be offered by the Office of Finance for sale in a competitive auction conducted with the underwriters in a bond selling group. One or more other FHLBanks may also request amounts of those same bonds to be offered for sale for their benefit in the same auction. We may receive zero to 100% of the proceeds of the bonds issued in a competitive auction depending on: (i) the amounts of and costs for the consolidated obligation bonds bid by underwriters; (ii) the maximum costs we or other FHLBanks participating in the same issue, if any, are willing to pay for the bonds; and (iii) guidelines for the allocation of bond proceeds among multiple participating FHLBanks administered by the Office of Finance.

Consolidated Obligation Discount Notes. The FHLBanks also issue consolidated obligation discount notes with maturities ranging from one day to one year, which may be offered daily through a consolidated obligation discount note selling group and through other authorized underwriters. Discount notes are issued at a discount and mature at par.

On a daily basis, we may request specific amounts of discount notes with specific maturity dates to be offered by the Office of Finance at a specific cost for sale to underwriters in the discount note selling group. One or more other FHLBanks may also request amounts of discount notes with the same maturities to be offered for sale for their benefit the same day. The Office of Finance commits to issue discount notes on behalf of the participating FHLBanks when underwriters in the selling group submit orders for the specific discount notes offered for sale. We may receive zero to 100% of the proceeds of the discount notes issued through this sales process depending on: (i) the maximum costs we or other FHLBanks participating in the same discount note issuance, if any, are willing to pay for the discount notes; (ii) the order amounts for the discount notes submitted by underwriters; and (iii) guidelines for the allocation of discount note proceeds among multiple participating FHLBanks administered by the Office of Finance.

Twice weekly, we may also request specific amounts of discount notes with fixed terms to maturity ranging from 4 to 26 weeks to be offered by the Office of Finance for sale in a competitive auction conducted with underwriters in the discount note selling group. One or more other FHLBanks may also request amounts of those same discount notes to be offered for sale for their benefit in the same auction. The discount notes offered for sale in a competitive auction are not subject to a limit on the maximum costs the FHLBanks are willing to pay. We may receive zero to 100% of the proceeds of the discount notes issued in a competitive auction depending on: (i) the amounts of and costs for the discount notes bid by underwriters and (ii) guidelines for the allocation of discount note proceeds among multiple participating FHLBanks administered by the Office of Finance.

Debt Investor Base. The FHLBanks’ consolidated obligations have traditionally had a diversified funding base of domestic and foreign investors. Purchasers of the FHLBanks' consolidated obligations include fund managers, commercial banks, pension funds, insurance companies, foreign central banks, state and local governments, and retail investors. These purchasers are also diversified geographically, with a significant portion of investors historically located in the United States, Europe, and Asia.

Segment Information

We use an analysis of the Bank’s financial results based on the financial components and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and determine financial management strategies related to the operations of these two business segments. For purposes of segment reporting, adjusted net interest income includes interest income and expenses associated with net settlements from economic hedges that

8

are recorded in “Net gain/(loss) on derivatives and hedging activities” in other income and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” Other key financial information, such as any credit-related OTTI charges on our PLRMBS or other expenses and assessments, is not included in the segment reporting analysis, but is incorporated into our overall assessment of financial performance.

The advances-related business consists of advances and other credit products, related financing and hedging instruments, liquidity and other non-MBS investments associated with our role as a liquidity provider, and capital stock. Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield on all assets associated with the business activity in this segment and the cost of funding those activities, including the net settlements from associated interest rate exchange agreements, and from earnings on invested capital.

The mortgage-related business consists of MBS investments, mortgage loans acquired through the MPF Program, the consolidated obligations specifically identified as funding those assets, and the related hedging instruments. Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield on the MBS and mortgage loans and the cost of the consolidated obligations funding those assets. This includes the net settlements from associated interest rate exchange agreements and net accretion of related income, which is a result of improvement in expected cash flows on certain other-than-temporarily-impaired PLRMBS, less the provision for credit losses on mortgage loans.

Additional information about business segments is provided in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Segment Information” and in “Item 8. Financial Statements and Supplementary Data – Note 17 – Segment Information.”

Use of Interest Rate Exchange Agreements

We use interest rate exchange agreements, also known as derivatives, as part of our risk management and funding strategies to reduce funding costs and interest rate risk inherent in the ordinary course of business. The types of derivatives we may use include interest rate swaps (including callable, putable, and basis swaps); swaptions; and interest rate cap and floor agreements.

The regulations governing the operations of the FHLBanks and the Bank's Risk Management Policy establish guidelines for our use of derivatives. These regulations and guidelines prohibit trading in derivatives for profit and any other speculative purposes and limit the amount of credit risk allowable from derivative counterparties.

We primarily use derivatives to manage our exposure to market risk from changes in interest rates. The goal of our market risk management strategy is not to eliminate market risk, but to manage it within appropriate limits that are consistent with the financial strategies approved by the Board of Directors. One key way we manage market risk is to acquire and maintain a portfolio of assets and liabilities, which, together with their associated derivatives, are conservatively matched with respect to the expected repricings of the assets and the liabilities. We may also use derivatives to adjust the effective repricing frequency or option characteristics of financial instruments (such as advances and consolidated obligations) to achieve risk management objectives.

We measure the Bank’s market risk at the enterprise level, as well as on a portfolio basis, taking into account all financial instruments. The market risk of the derivatives and the hedged items is included in the measurement of our various market risk measures. The Bank’s low interest rate risk profile reflects our conservative asset-liability mix, which is supported by integrated use of derivatives in our daily financial management.

Additional information about our interest rate exchange agreements is provided in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Market Risk – Total Bank Market Risk – Interest Rate Exchange Agreements” and in “Item 8. Financial Statements and Supplementary Data – Note 18 – Derivatives and Hedging Activities.”

9

Capital

From its enactment in 1932, the FHLBank Act provided for a subscription-based capital structure for the FHLBanks. The amount of capital stock that each FHLBank issued was determined by a statutory formula establishing how much FHLBank capital stock each member was required to purchase. With the enactment of the Gramm-Leach-Bliley Act of 1999, Congress replaced the statutory subscription-based member capital stock purchase formula with requirements for total capital, leverage capital, and risk-based capital for the FHLBanks and required the FHLBanks to develop new capital plans to replace the previous statutory structure.

We implemented our capital plan on April 1, 2004. The capital plan bases the stock purchase requirement on the level of activity a member has with the Bank, subject to a minimum membership requirement that is intended to reflect the value to the member of having access to the Bank as a funding source. With the approval of the Board of Directors, we may adjust these requirements from time to time within the ranges established in the capital plan. Any changes to our capital plan must be approved by our Board of Directors and the Finance Agency.

Bank capital stock cannot be publicly traded, and under the capital plan, may be issued, transferred, redeemed, and repurchased only at its par value of $100 per share, subject to certain regulatory and statutory limits. Under the capital plan, a member's capital stock will be redeemed by the Bank upon five years' notice from the member, subject to certain conditions. In addition, we have the discretion to repurchase excess capital stock from members.

Dividends and Retained Earnings. The Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) summarizes the Bank’s capital management principles and objectives, as well as its policies and practices with respect to restricted retained earnings, dividend payments, and the repurchase of excess capital stock.

As required by the regulations governing the operations of the FHLBanks, the Framework is reviewed at least annually by the Bank’s Board of Directors. The Board of Directors may amend the Framework from time to time. In January 2017, the Framework was amended and approved by the Bank’s Board of Directors to include the Bank’s dividend philosophy to endeavor to pay a quarterly dividend at an annualized rate between 5% and 7%. The decision to declare any dividend and the dividend rate are at the discretion of the Bank’s Board of Directors, which may choose to follow the dividend philosophy as guidance in the dividend declaration. The Bank’s historical dividend rates and the dividend philosophy are not indicative of future dividend declarations. The Bank’s dividend policy may be revised or eliminated in the future and there can be no assurance as to future dividends.

In accordance with the Framework, the Bank retains certain amounts in restricted retained earnings, which are not made available for dividends in the current dividend period, and maintains an amount of total retained earnings at least equal to its required retained earnings as described in the Framework. The Bank may be restricted from paying dividends if it is not in compliance with any of its minimum capital requirements or if payment would cause the Bank to fail to meet any of its minimum capital requirements. In addition, the Bank may not pay dividends if any principal or interest due on any consolidated obligation has not been paid in full or is not expected to be paid in full, or, under certain circumstances, if the Bank fails to satisfy certain liquidity requirements under applicable regulations.

The regulatory liquidity requirements state that each FHLBank must: (i) maintain eligible high quality assets (advances with a maturity not exceeding five years, U.S. Treasury securities investments, and deposits in banks or trust companies) in an amount equal to or greater than the deposits received from members, and (ii) hold contingent liquidity in an amount sufficient to meet its liquidity needs for at least five business days without access to the consolidated obligations markets. At December 31, 2017, advances maturing within five years totaled $76.6 billion, significantly in excess of the $281 million of member deposits on that date. In addition, as of December 31, 2017, the Bank held estimated total sources of funds in an amount that would have allowed the Bank to meet its liquidity needs for more than five consecutive business days without issuing new consolidated obligations, subject to certain conditions. For more information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk.”

10

The Bank’s Risk Management Policy limits the payment of dividends based on the ratio of the Bank’s estimated market value of total capital to par value of capital stock. If this ratio at the end of any quarter is less than 100% but greater than or equal to 70%, any dividend would be limited to an annualized rate no greater than the daily average of the three-month London Interbank Offered Rate (LIBOR) for the applicable quarter (subject to certain conditions), and if this ratio is less than 70%, the Bank would be restricted from paying a dividend. For more information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Market Risk.”

Restricted Retained Earnings – The Bank’s Framework assesses the level and adequacy of retained earnings and establishes amounts to be retained in restricted retained earnings, which are not made available in the current dividend period. Prior to July 2017, the Bank’s Framework had three categories of restricted retained earnings: Valuation Adjustments, Other (which represented a targeted amount), and the Joint Capital Enhancement (JCE Agreement). In 2011, the FHLBanks entered into a JCE Agreement, intended to enhance the capital position of each FHLBank by allocating a portion of each FHLBank’s earnings to a separate retained earnings account at that FHLBank. In accordance with the JCE Agreement, each FHLBank is required to allocate 20% of its net income each quarter to a separate restricted retained earnings account until the balance of the account equals at least 1% of that FHLBank’s average balance of outstanding consolidated obligations for the previous quarter. Under the JCE Agreement, these restricted retained earnings will not be available to pay dividends. Under the Framework, the Bank’s required amount of restricted retained earnings was determined using the Bank’s retained earnings methodology. As determined using the Bank’s methodology, from July 2015 to January 2017, the Bank’s restricted retained earnings requirement was $2,000, and from January 2017 to July 2017, the Bank’s restricted retained earnings requirement was $2,300.

In July 2017, the Bank’s Board of Directors approved the transfer of all amounts classified as restricted retained earnings, other than the amounts related to the JCE Agreement, to unrestricted retained earnings. As a conforming change related to the transfer, the Bank’s Board of Directors amended the Framework to eliminate two of the categories of restricted retained earnings (Valuation Adjustments and Other) and approved revisions to the Bank’s retained earnings methodology to provide for a required level of total retained earnings of $2,300 for loss protection, capital compliance, and business growth. In January 2018, the methodology was further revised to provide a required level of total retained earnings of $2,500. The Bank satisfies its retained earnings requirement with both restricted retained earnings (i.e., amounts related to the JCE Agreement) and unrestricted retained earnings.

The Bank’s retained earnings requirement may be changed at any time. The Board of Directors periodically reviews the retained earnings methodology and analysis to determine whether any adjustments are appropriate.

Dividend Payments – Finance Agency rules state that FHLBanks may declare and pay dividends only from previously retained earnings or current net earnings, and may not declare or pay dividends based on projected or anticipated earnings. There is no requirement that the Board of Directors declare and pay any dividend. A decision by the Board of Directors to declare or not declare a dividend is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks.

In addition, Finance Agency rules do not permit the Bank to pay dividends in the form of capital stock if its excess

capital stock exceeds 1% of its total assets. Excess capital stock is defined as the aggregate of the capital stock held by each shareholder in excess of its minimum capital stock requirement, as established by the Bank’s capital plan. Additional information about our capital, including dividends and retained earnings, is provided in “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital.”

11

Competition

Demand for Bank advances is affected by many factors, including the availability and cost of other sources of funding for members, including retail and brokered deposits. We compete with our members' other suppliers of wholesale funding, both secured and unsecured. These suppliers may include securities dealers, commercial banks, and other FHLBanks for members with affiliated institutions that are members of other FHLBanks.

Under the FHLBank Act and regulations governing the operations of the FHLBanks, affiliated institutions in different FHLBank districts may be members of different FHLBanks. Members may have access to alternative funding sources through sales of securities under agreements to resell. Some members, particularly larger members, may have access to many more funding alternatives, including independent access to the national and global credit markets. The availability of alternative funding sources for members can significantly influence the demand for our advances and can vary as a result of many factors, including market conditions, members' creditworthiness, members' strategic objectives, and the availability of collateral.

Our ability to compete successfully for the advances business of our members depends primarily on our advances prices, ability to fund advances through the issuance of consolidated obligations at competitive rates, credit and collateral terms, prepayment terms, product features such as embedded option features, ability to meet members' specific requests on a timely basis, capital stock requirements, retained earnings policy, excess capital stock repurchase policies, and dividends.

In addition, the FHLBanks compete with the U.S. Treasury, Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, sovereign, and supranational entities, for funds raised through the issuance of unsecured debt in the national and global debt markets. Increases in the supply of competing debt products may, in the absence of increases in demand, result in higher debt costs or lower amounts of debt issued at the same cost.

Regulatory Oversight, Audits, and Examinations

The FHLBanks are supervised and regulated by the Finance Agency, an independent agency in the executive branch of the U.S. government. The Finance Agency is also responsible for supervising and regulating Fannie Mae and Freddie Mac. The Finance Agency is supported entirely by assessments from the FHLBanks, Fannie Mae, and Freddie Mac. With respect to the FHLBanks, the Finance Agency is charged with ensuring that the FHLBanks carry out their housing finance mission, remain adequately capitalized and able to raise funds in the capital markets, and operate in a safe and sound manner. The Finance Agency also establishes regulations governing the operations of the FHLBanks.

The Finance Agency has broad supervisory authority over the FHLBanks, including, but not limited to, the power to suspend or remove any entity-affiliated party (including any director, officer, or employee) of an FHLBank who violates certain laws or commits certain other acts; to issue and serve a notice of charges upon an FHLBank or any entity-affiliated party; to obtain a cease and desist order, or a temporary cease and desist order, to stop or prevent any unsafe or unsound practice or violation of law, order, rule, regulation, or condition imposed in writing; to issue civil money penalties against an FHLBank or an entity-affiliated party; to require an FHLBank to take certain actions, or refrain from certain actions, under the prompt corrective action provisions that authorize or require the Finance Agency to take certain supervisory actions, including the appointment of a conservator or receiver for an FHLBank under certain conditions; and to require any one or more of the FHLBanks to repay the primary obligations of another FHLBank on outstanding consolidated obligations.

Pursuant to the Housing Act, the Finance Agency exercises prompt corrective action authority over the FHLBanks. The Capital Classification and Prompt Corrective Action rule establishes the criteria for each of the following capital classifications for the FHLBanks specified in the Housing Act: adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. Under the rule, unless the Finance Agency has reclassified an FHLBank based on factors other than its capital levels, an FHLBank is adequately capitalized if it has sufficient total and permanent capital to meet or exceed both its risk-based and minimum capital requirements;

12

is undercapitalized if it fails to meet one or more of its risk-based or minimum capital requirements, but is not significantly undercapitalized; is significantly undercapitalized if its total or permanent capital is less than 75% of what is required to meet any of its requirements, but it is not critically undercapitalized; and is critically undercapitalized if its total capital is equal to or less than 2% of its total assets.

By letter dated December 11, 2017, the Director of the Finance Agency notified the Bank that, based on September 30, 2017, financial information, the Bank met the definition of adequately capitalized under the Finance Agency's Capital Classification and Prompt Corrective Action rule.

The Housing Act and Finance Agency regulations govern capital distributions by an FHLBank, which include cash dividends, capital stock dividends, capital stock repurchases, or any transaction in which the FHLBank purchases or retires any instrument included in its capital. Under the Housing Act and Finance Agency regulations, an FHLBank may not make a capital distribution if after doing so it would not be adequately capitalized or would be reclassified to a lower capital classification, or if such distribution violates any statutory or regulatory restriction, and, in the case of a significantly undercapitalized FHLBank, an FHLBank may not make any capital distribution without approval from the Director of the Finance Agency.

To assess the safety and soundness of the Bank, the Finance Agency conducts an annual on-site examination of the Bank and other periodic reviews of its financial operations. In addition, we are required to submit information on our financial condition and results of operations each month to the Finance Agency.

Finance Agency regulations require that the Bank’s strategic business plan describe how our business activities will achieve our mission, consistent with the Finance Agency’s core mission assets (CMA) guidance. The Finance Agency will assess annually each FHLBank’s core mission achievement by determining the ratio of primary mission assets, which includes the average par balances of advances and mortgage loans acquired from members, to the average par balance of consolidated obligations. Our core mission activities primarily include the issuance of advances. In addition, we acquire member assets through the MPF program. The Bank’s CMA ratio was 74.06% for the year ended December 31, 2017, which exceeded the Finance Agency’s recommended minimum ratio of 70%.

The Bank’s capital stock is registered with the Securities and Exchange Commission (SEC) under Section 12(g)(1) of the Securities Exchange Act of 1934 (1934 Act) and, as a result, we are required to comply with the disclosure and reporting requirements of the 1934 Act and to file annual, quarterly, and current reports with the SEC, as well as meet other SEC requirements.

Our Board of Directors has an audit committee, and we have an internal audit department. An independent registered public accounting firm audits our annual financial statements. The independent registered public accounting firm conducts these audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Like other federally chartered corporations, the FHLBanks are subject to general congressional oversight. Each FHLBank must submit annual management reports to Congress, the President, the Office of Management and Budget, and the Comptroller General. These reports include a statement of financial condition, a statement of operations, a statement of cash flows, a statement of internal accounting and administrative control systems, and the report of the independent registered public accounting firm on the financial statements.

The U.S. Commodity Futures Trading Commission (CFTC) has been given regulatory authority over derivative transactions pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the FHLBanks are subject to the rules promulgated by the CFTC with respect to their derivatives activities. These rules affect all aspects of the Bank’s derivatives activities by establishing requirements relating to derivatives recordkeeping and reporting, clearing, execution, and margining of uncleared derivative transactions.

The Comptroller General has authority under the FHLBank Act to audit or examine the Finance Agency and the FHLBanks and to determine the extent to which they fairly and effectively fulfill the purposes of the FHLBank Act.

13

Furthermore, the Government Corporations Control Act provides that the Comptroller General may review any audit of the financial statements conducted by an independent registered public accounting firm. If the Comptroller General conducts such a review, then he or she must report the results and provide his or her recommendations to Congress, the Office of Management and Budget, and the relevant FHLBank. The Comptroller General may also conduct his or her own audit of any financial statements of an FHLBank.

The U.S. Treasury, or a permitted designee, is authorized under the combined provisions of the Government Corporations Control Act and the FHLBank Act to prescribe: the form, denomination, maturity, interest rate, and conditions to which FHLBank debt will be subject; the way and time FHLBank debt is issued; and the price for which FHLBank debt will be sold. The U.S. Treasury may purchase FHLBank debt up to an aggregate principal amount of $4.0 billion pursuant to the standards and terms of the FHLBank Act.

All of the FHLBanks' financial institution members are subject to federal or state laws and regulations, and changes to these laws or regulations or to related policies might adversely or favorably affect the business of the FHLBanks.

Available Information

The SEC maintains a website at www.sec.gov that contains all electronically filed or furnishedSEC reports, including our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, as well as any amendments. On our website at www.fhlbsf.com, we provide a link to the page on the SEC website that lists all of these reports. These reports may also be read and copied at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. (Further information about the operation of the Public Reference Room may be obtained at 1-800-SEC-0330.) In addition, we provide direct links from our website to our annual report on Form 10-K and our quarterly reports on Form 10-Q on the SEC website as soon as reasonably practicable after electronically filing or furnishing the reports to the SEC. (Note: The website addresses of the SEC and the Bank have been included as inactive textual references only. Information on those websites is not part of this report.)

Employees

We had 287 employees at December 31, 2017. Our employees are not represented by a collective bargaining unit, and we consider our relationship with our employees to be satisfactory.

ITEM 1A. RISK FACTORS

The following discussion summarizes certain of the risks and uncertainties that the Federal Home Loan Bank of San Francisco (Bank) faces. The list is not exhaustive and there may be other risks and uncertainties that are not described below that may also affect our business. Any of these risks or uncertainties, if realized, could negatively affect our financial condition or results of operations or limit our ability to fund advances, pay dividends, or redeem or repurchase capital stock.

Economic weakness could adversely affect the business of many of our members and our business and results of operations.

Our business and results of operations are sensitive to conditions in the housing and mortgage markets, as well as general business and economic conditions. While economic conditions improved and credit standards eased in 2017, geopolitical instability, trade disruptions, or a sustained capital market correction could weaken consumer and business confidence and depress personal consumption and business investment. These factors could, in turn, adversely affect overall economic and housing market conditions. If economic and housing market conditions deteriorate, the Bank’s business and results of operations could be adversely affected.

14

Adverse trends in the mortgage lending sector, including declines in housing prices or deterioration in loan performance trends, could trigger a reduction in the value of collateral pledged to the Bank to secure member credit and in the fair value of the Bank’s mortgage-backed securities (MBS) investments.

Changing economic conditions may slow or reverse home price appreciation experienced since 2012 and negatively affect the Bank’s MBS and mortgage loan portfolios, adversely affecting our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

Gains in home price appreciation were led, in part, by highly accommodative global monetary policy and an improving employment market. However, there can be no assurance that these conditions will continue. The rebound in developed market economies may lead global central banks to pull back from negative nominal and real rates. GSE reform could substantially raise the cost of secondary market mortgage financing. Recent tax changes have reduced the tax incentive for home ownership slightly. A significant decline in housing prices could adversely affect the Bank’s private-label residential MBS (PLRMBS) and mortgage loan portfolio, which may adversely affect the Bank’s financial condition, results of operations, ability to pay dividends, and ability to redeem or repurchase capital stock.

Market uncertainty and volatility may adversely affect our business, profitability, or results of operations.

Adverse conditions in the housing and mortgage markets, or GSE restructuring that weakens the government’s commitment to encourage home ownership as a pillar of financial security, could result in a decrease in the availability of credit and liquidity within the mortgage industry, causing disruptions in the operations of mortgage originators, including some of our members. We continue to be subject to potential adverse effects on our financial condition, results of operations, ability to pay dividends, and ability to redeem or repurchase capital stock should economic conditions significantly deteriorate.

Weaknesses in the housing and mortgage markets may undermine the need for wholesale funding and have a negative impact on the demand for advances.

Recent changes in tax law that reduced the tax advantages to home ownership may reduce mortgage lending at member institutions and may reduce their demand for wholesale funding. This could result in a decline in advance levels and adversely affect our financial condition and results of operations.

Changes in or limits on our ability to access the capital markets could adversely affect our financial condition, results of operations, or ability to fund advances, pay dividends, or redeem or repurchase capital stock.

Our primary source of funds is the sale of Federal Home Loan Bank (FHLBank) System consolidated obligations in the capital markets. Our ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets, such as investor demand and liquidity in the financial markets. The sale of FHLBank System consolidated obligations can also be influenced by factors other than conditions in the capital markets, including legislative and regulatory developments and government programs and policies that affect the relative attractiveness of FHLBank System consolidated obligations. In addition, the level of dealer participation and support also affect liquidity in the agency debt markets. Based on these factors, we may not be able to obtain funding on acceptable terms. If we cannot access funding on acceptable terms when needed, our ability to support and continue our operations could be adversely affected, which could negatively affect our financial condition, results of operations, or ability to fund advances, pay dividends, or redeem or repurchase capital stock.

Limitations on the payment of dividends and repurchase of excess capital stock may adversely affect the attractiveness to members of the Bank's business model.

Our business model is based on the premise that we maintain a balance between our objective to promote housing, homeownership, and community and economic development through our activities with members and our objective to provide a return on the private capital provided by our members. We achieve this balance by delivering low-cost

15

credit to help our members meet the credit needs of their communities while striving to pay members a reasonable return on their investment in the Bank’s capital stock. Our financial strategies are designed to enable us to safely expand and contract our assets, liabilities, and capital as our member base and our members' credit needs change. Our capital increases when members are required to purchase additional capital stock as they increase their advances, and it contracts when we repurchase excess capital stock from members as their advances decline. In addition, the Bank manages its retained earnings to ensure compliance with regulatory capital requirements in the event of significant growth in member business. As a result of these strategies, we have historically been able to achieve our mission by meeting member credit needs and maintaining our strong regulatory capital position while paying dividends (including dividends on mandatorily redeemable capital stock) and repurchasing and redeeming excess capital stock. Limitations on the payment of dividends and the repurchase of excess capital stock may diminish the value of membership from the perspective of a member.

Changes in the credit ratings on FHLBank System consolidated obligations may adversely affect the cost of consolidated obligations.

FHLBank System consolidated obligations are rated Aaa/P-1 with a stable outlook by Moody's Investors Service (Moody's) and AA+/A-1+ with a stable outlook by S&P Global Ratings (S&P). Rating agencies may from time to time change a rating or issue negative reports. Because all of the FHLBanks have joint and several liability for all FHLBank consolidated obligations, negative developments at any FHLBank may affect these credit ratings or result in the issuance of a negative report regardless of our own financial condition and results of operations. In addition, because of the FHLBanks' GSE status, the credit ratings of the FHLBank System and the FHLBanks are generally constrained by the long-term sovereign credit rating of the United States, and any downgrade in that sovereign credit rating may result in a corresponding downgrade to the credit ratings of FHLBank System consolidated obligations. Any adverse rating change or negative report may adversely affect our cost of funds and the FHLBanks' ability to issue consolidated obligations on acceptable terms, which could also adversely affect our financial condition or results of operations or limit our ability to make advances on acceptable terms, pay dividends, or redeem or repurchase capital stock.

Changes in federal fiscal and monetary policy could adversely affect our business or results of operations.

Our business and results of operations are significantly affected by the fiscal and monetary policies of the federal government and its agencies, including the Federal Reserve Board, which regulates the supply of money and credit in the United States. The Federal Reserve Board's policies directly and indirectly influence the yield on interest-earning assets and the cost of interest-bearing liabilities, which could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

Changes in interest rates could adversely affect our financial condition, results of operations, or ability to fund advances on acceptable terms, pay dividends, or redeem or repurchase capital stock.

We realize income primarily from the spread between interest earned on our outstanding advances and investments and interest paid on our consolidated obligations and other liabilities. Although we use various methods and procedures to monitor and manage our exposure to changes in interest rates, we may experience instances when our interest-bearing liabilities will be significantly more sensitive to changes in interest rates than our interest-earning assets, or vice versa. In either case, interest rate movements contrary to our position could negatively affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock. Moreover, the impact of changes in interest rates on mortgage-related assets can be exacerbated by prepayment risks, which are the risk that the assets will be refinanced by the obligor in low interest rate environments and the risk that the assets will remain outstanding longer than expected at below-market yields when interest rates increase.

16

Our exposure to credit risk could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

We assume secured and unsecured credit risk associated with the risk that a borrower or counterparty could default, and we could suffer a loss if we were not able to fully recover amounts owed to us on a timely basis. In addition, we have exposure to credit risk because the market value of an obligation may decline as a result of deterioration in the creditworthiness of the obligor or the credit quality of a security instrument. We have a high concentration of credit risk exposure to financial institutions. Significant credit losses could have an adverse effect on our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

We depend on institutional counterparties to provide credit obligations that are critical to our business. Defaults by one or more of these institutional counterparties on their obligations to the Bank could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

We face the risk that one or more of our institutional counterparties may fail to fulfill contractual obligations to us. The primary exposures to institutional counterparty risk are with derivative counterparties, mortgage servicers that service the loans we hold as collateral for advances, and third-party providers of supplemental or primary mortgage insurance for mortgage loans purchased under the Mortgage Partnership Finance® (MPF®) Program. A default by a counterparty could result in losses to the Bank if our credit exposure to the counterparty was under-collateralized or our credit obligations to the counterparty were over-collateralized, and could also adversely affect our ability to conduct our operations efficiently and at cost-effective rates, which in turn could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock. (“Mortgage Partnership Finance” and “MPF” are registered trademarks of the FHLBank of Chicago.)

We rely on derivative transactions to reduce our market risk and funding costs, and changes in our credit ratings or the credit ratings of our derivative counterparties or changes in the legislation or the regulations affecting how derivatives are transacted may adversely affect our ability to enter into derivative transactions on acceptable terms.

Our financial strategies are highly dependent on our ability to enter into derivative transactions on acceptable terms to reduce our market risk and funding costs. We currently have a long-term credit rating of Aaa with a stable outlook from Moody's and AA+ with a stable outlook from S&P. All of our derivative counterparties or guarantors currently have investment grade long-term credit ratings from Moody's and S&P. Rating agencies may from time to time change a rating or issue negative reports, or other factors may raise questions regarding the creditworthiness of a counterparty, which may adversely affect our ability to enter into derivative transactions with acceptable counterparties on satisfactory terms in the quantities necessary to manage our interest rate risk and funding costs effectively. Changes in legislation or regulations affecting how derivatives are transacted may also adversely affect our ability to enter into derivative transactions with acceptable counterparties on satisfactory terms. Any of these changes could negatively affect our financial condition, results of operations, or ability to make advances on acceptable terms, pay dividends, or redeem or repurchase capital stock.

Insufficient collateral protection could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

We require that all outstanding advances be fully collateralized. In addition, for mortgage loans that we purchase under the MPF Program, we require that the participating financial institutions fully collateralize the outstanding credit enhancement obligations not covered through the purchase of supplemental mortgage insurance. We evaluate the types of collateral pledged by borrowers and participating financial institutions and assign borrowing capacities to the collateral based on the risks associated with each type of collateral. If we have insufficient collateral before or after an event of payment default by the borrower, or we are unable to liquidate the collateral for the value we assigned to it in the event of a payment default by a borrower, we could experience a credit loss on advances, which could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

17

We may not be able to meet our obligations as they come due or meet the credit and liquidity needs of our members in a timely and cost-effective manner.

We seek to be in a position to meet our members' credit and liquidity needs and pay our obligations without maintaining excessive holdings of low-yielding liquid investments or having to incur unnecessarily high borrowing costs. In addition, we maintain a contingency liquidity plan designed to enable us to meet our obligations and the credit and liquidity needs of members in the event of operational disruptions or short-term disruptions in the capital markets. Our efforts to manage our liquidity position, including our contingency liquidity plan, may not enable us to meet our obligations and the credit and liquidity needs of our members, which could have an adverse effect on our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

We face competition for advances and access to funding, which could adversely affect our business.

Our primary business is making advances to our members. We compete with other suppliers of wholesale funding, both secured and unsecured, including investment banks, commercial banks, the Federal Reserve Banks, and, in certain circumstances, other FHLBanks. Our members may have access to alternative funding sources, including independent access to the national and global credit markets. These alternative funding sources may offer more favorable terms than we do on our advances, including more flexible credit or collateral standards. In addition, many of our competitors are not subject to the same regulations as the FHLBanks, which may enable those competitors to offer products and terms that we are not able to offer.

The FHLBanks also compete with the U.S. Treasury, Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, sovereign, and supranational entities, for funds raised through the issuance of unsecured debt in the national and global debt markets. Increases in the supply of competing debt products may, in the absence of increases in demand, result in higher debt costs or lower amounts of debt issued at the same cost. Increased competition could adversely affect our ability to access funding, reduce the amount of funding available to us, or increase the cost of funding available to us. Any of these results could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

Our efforts to make advances pricing attractive to our members may affect earnings.

A decision to lower advances prices to maintain or gain volume or increase the benefits to borrowing members could result in lower earnings, which could adversely affect the dividends on our capital stock.

If the Bank’s activity stock requirement is below the Bank’s regulatory capital requirements, a significant increase in business growth may require the Bank to increase its activity stock requirement in the future.

An activity stock requirement that is below the Bank’s regulatory capital requirement requires the Bank to maintain a certain level of retained earnings for capital compliance and business growth. Depending on the level of the Bank’s retained earnings and business growth and the Bank’s capital management strategies, the Bank may be required to increase its activity stock requirement in the future.

We have a high concentration of advances and capital with five institutions and their affiliates, and a loss or change of business activities with any of these institutions could adversely affect our results of operations, financial condition, or ability to pay dividends or redeem or repurchase capital stock.

We have a high concentration of advances and capital with five institutions and their affiliates. All of the institutions may prepay or repay advances as they come due. If no other advances or investments are made to replace the prepaid and repaid advances of these institutions, it would result in a significant reduction of our total assets. The reduction in advances could result in a reduction of capital as the Bank repurchases the resulting excess capital stock, at the Bank’s discretion, or redeems the excess capital stock after the expiration of the relevant five-year redemption period. The reduction in assets and capital could reduce the Bank’s net income.

18

The timing and magnitude of the impact of a reduction in the amount of advances to these institutions would depend on a number of factors, including:

• the amount and period of time over which the advances are prepaid or repaid,

• the amount and timing of any corresponding decreases in capital stock,

• the profitability of the advances,

• the amount and profitability of our investments,

• the extent to which consolidated obligations mature as the advances are prepaid or repaid, and

• our ability to extinguish consolidated obligations or transfer them to other FHLBanks and the associated costs of extinguishing or transferring the consolidated obligations.

Additional information regarding concentration risk is set forth in “Item 8. Financial Statements and Supplementary Data – Note 8 – Advances – Credit and Concentration Risk.”

A material and prolonged decline in advances could adversely affect our results of operations, financial condition, or ability to pay dividends or redeem or repurchase capital stock.

If members continue to experience high levels of liquidity, we could experience decreases in members’ use of Bank advances. Also, nonmembers (including former members and member successors) are not eligible to borrow new advances from the Bank or renew existing advances as they mature. Although the Bank’s business model is designed to enable us to safely expand and contract our assets, liabilities, and capital as our members’ credit needs change, a prolonged material decline in advances could affect our results of operations, financial condition, or ability to pay dividends or redeem or repurchase capital stock.

Volatile market conditions increase the risk that our financial models will produce unreliable results.

We use market-based information as inputs to our financial models, which we use to inform our operational decisions and to derive estimates for use in our financial reporting processes. While model inputs based on economic conditions and expectations are regularly evaluated and adjusted to changing conditions, sudden significant changes in these conditions may increase the risk that our models could produce unreliable results or estimates that vary widely or prove to be inaccurate.

We may become liable for all or a portion of the consolidated obligations for which other FHLBanks are the primary obligors.

As provided by the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), and regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Federal Housing Finance Agency (Finance Agency) to require any FHLBank to repay all or any portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor, whether or not the other FHLBank has defaulted in the payment of those obligations and even though the FHLBank making the repayment received none of the proceeds from the issuance of the obligations. The likelihood of triggering the Bank's joint and several liability obligation depends on many factors, including the financial condition and financial performance of the other FHLBanks. If we are required by the Finance Agency to repay the principal or interest on consolidated obligations for which another FHLBank is the primary obligor, our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock could be adversely affected.

If the Bank or any other FHLBank has not paid the principal or interest due on all consolidated obligations, we may not be able to pay dividends or redeem or repurchase any shares of our capital stock.

If the principal or interest due on any consolidated obligations has not been paid in full or is not expected to be paid in full, we may not be able to pay dividends on our capital stock or redeem or repurchase any shares of our capital stock. If another FHLBank defaults on its obligation to pay principal or interest on any consolidated obligations, the

19

regulations governing the operations of the FHLBanks provide that the Finance Agency may allocate outstanding principal and interest payments among one or more of the remaining FHLBanks on a pro rata basis or any other basis the Finance Agency may determine. Our ability to pay dividends or redeem or repurchase capital stock could be affected not only by our own financial condition, but also by the financial condition of one or more of the other FHLBanks.

We are affected by federal laws and regulations, which could change or be applied in a manner detrimental to our operations.

The FHLBanks are GSEs, organized under the authority of and governed by the FHLBank Act, and, as such, are also governed by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 and other federal laws and regulations. From time to time, Congress has amended the FHLBank Act and adopted other legislation in ways that have significantly affected the FHLBanks and the manner in which the FHLBanks carry out their housing finance mission and business operations. New or modified legislation enacted by Congress or regulations or policies of the Finance Agency could have a negative effect on our ability to conduct business or on our cost of doing business. In addition, new or modified legislation or regulations governing our members may affect our ability to conduct business or our cost of doing business with our members. Because of the recent change in the leadership of the U.S. government administration, there are additional uncertainties in the legislative and regulatory environment as well.

Changes in statutory or regulatory requirements or policies or in their application could result in changes in, among other things, the FHLBanks' cost of funds, capital requirements, accounting policies, liquidity management, debt issuance, permissible business activities, and the size, scope, and nature of the FHLBanks' lending, investment, and mortgage purchase program activities. These changes could negatively affect our financial condition, results of operations, ability to pay dividends, or ability to redeem or repurchase capital stock. In addition, given the Bank's relationship with other FHLBanks, we could be affected by events other than another FHLBank's default on a consolidated obligation. Events that affect other FHLBanks, such as member failures or capital deficiencies at another FHLBank, could lead the Finance Agency to require or request that an FHLBank provide capital or other assistance to another FHLBank, purchase assets from another FHLBank, or impose other forms of resolution affecting one or more of the other FHLBanks. If the Bank were called upon by the Finance Agency to take any of these steps, it could affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

We could change our policies, programs, and agreements affecting our members.

We may change our policies, programs, and agreements affecting our members from time to time, including, without limitation, policies, programs, and agreements affecting the availability of and conditions for access to our advances and other credit products, the Affordable Housing Program (AHP), dividends, the repurchase of capital stock, and other programs, products, and services. These changes could cause our members to obtain financing from alternative sources, which could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock. In addition, changes to our policies, programs, and agreements affecting our members could adversely affect the value of membership from the perspective of a member.

The failure of the FHLBanks to set aside, in the aggregate, at least $100 million annually for the AHP could result in an increase in our AHP contribution, which could adversely affect our results of operations or ability to pay dividends or redeem or repurchase capital stock.

The FHLBank Act requires each FHLBank to establish and fund an AHP. Annually, the FHLBanks are required to set aside, in the aggregate, the greater of $100 million or 10% of their current year's net earnings (income before interest expense related to dividends paid on mandatorily redeemable capital stock and the assessment for the AHP) for their AHPs. If the FHLBanks do not make the minimum $100 million annual AHP contribution in a given year, we could be required to contribute more than 10% of our current year’s net earnings to the AHP. An increase in our

20

AHP contribution could adversely affect our results of operations or ability to pay dividends or redeem or repurchase capital stock.

Our members are governed by federal and state laws and regulations, which could change in a manner detrimental to their ability or motivation to invest in the Bank or to use our products and services.

Most of our members are highly regulated financial institutions, and the regulatory environment affecting members could change in a manner that would negatively affect their ability or motivation to acquire or own our capital stock or use our products and services. Statutory or regulatory changes that make it less attractive to hold our capital stock or use our products and services could negatively affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

Changes in the status, regulation, and perception of the housing GSEs or in policies and programs relating to the housing GSEs may adversely affect our business activities, future advances balances, the cost of debt issuance, or future dividend payments.

Changes in the status of Fannie Mae and Freddie Mac during the next phases of their conservatorships may result in higher funding costs for the FHLBanks, which could negatively affect our business and financial condition. In addition, negative news articles, industry reports, and other announcements pertaining to GSEs, including Fannie Mae, Freddie Mac, and any of the FHLBanks, could create pressure on all GSE debt pricing, as investors may perceive their debt instruments as bearing increased risk.

As a result of these factors, the FHLBank System may have to pay higher rates on consolidated obligations to make them attractive to investors. If we maintain our current approach to pricing advances, an increase in the cost of issuing consolidated obligations could reduce our net interest spread (the difference between the interest rate received on advances and the interest rate paid on consolidated obligations) and cause our advances to be less profitable. If we increase the price of our advances to avoid a decrease in the net interest spread, the advances may be less attractive to our members, and our outstanding advances balances may decrease. In addition, an increase in the cost of issuing consolidated obligations could reduce our net interest spread on other interest-earning assets. As a result, an increase in the cost of issuing consolidated obligations could negatively affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

We rely heavily on information systems and other technology. A failure, interruption, or security breach, including events caused by cyber attacks, of our information systems or those of critical vendors and third parties could disrupt the Bank’s business or adversely affect our financial condition, results of operations, or reputation.

We rely heavily on our information systems and other technology to conduct and manage our business, and we rely on vendors and other third parties to perform certain critical services. If we or one of our critical vendors experiences a failure, interruption, or security breach in any information systems or other technology, including events caused by cyber attacks, we may be unable to conduct and manage our business effectively. In addition, such failure or breach could result in significant losses, a loss of personal and confidential information, or reputational damage. In the event of a breach resulting in loss of data, such as personally identifiable information or other such data protected by data privacy or other laws, we may be liable for damages, fines, and penalties for such losses under applicable regulatory frameworks despite not being able to limit our liability or damages in the event of such a loss. In addition, significant initiatives undertaken by the Bank to replace information systems or other technology infrastructures may subject the Bank to a temporary risk of failure or interruption while the Bank is in the process of implementing these new systems or technology infrastructures. Although we have implemented a business continuity plan, we may not be able to prevent, timely and adequately address, or mitigate the negative effects of any failure or interruption. Any failure or interruption could adversely affect our member business, member relations, risk management, reputation, or profitability, which could negatively affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

21

Restrictions on the redemption, repurchase, or transfer of the Bank's capital stock could significantly reduce the liquidity of our shareholders’ capital stock investment.

Under the Gramm-Leach-Bliley Act of 1999, Finance Agency regulations, and our capital plan, our capital stock must be redeemed upon the expiration of the relevant five-year redemption period, subject to certain conditions. Capital stock may become subject to redemption following a five-year redemption period after a member provides a written redemption notice to the Bank; gives notice of intention to withdraw from membership; attains nonmember status by merger or acquisition, charter termination, or other involuntary membership termination; or after a receiver or other liquidating agent for a member transfers the member's Bank capital stock to a nonmember entity. Only capital stock that is not required to meet the membership capital stock requirement of a member or nonmember shareholder or to support a member or nonmember shareholder's outstanding activity with the Bank (excess capital stock) may be redeemed at the end of the redemption period. In addition, we may elect to repurchase some or all of the excess capital stock of a shareholder at any time at our sole discretion.

There is no guarantee, however, that we will be able to redeem capital stock held by a shareholder even at the end of the redemption period or to repurchase excess capital stock. If the redemption or repurchase of the capital stock would cause us to fail to meet our minimum regulatory capital requirements or cause the shareholder to fail to maintain its minimum investment requirement, then the redemption or repurchase is prohibited by Finance Agency regulations and our capital plan. In addition, since our capital stock may only be owned by our members (or, under certain circumstances, former members and certain successor institutions), and our capital plan requires our approval before a member or nonmember shareholder may transfer any of its capital stock to another member or nonmember shareholder, we cannot provide assurance that a member or nonmember shareholder would be allowed to transfer any excess capital stock to another member or nonmember shareholder at any time.

Changes to and replacement of the LIBOR benchmark interest rate could adversely affect our business, financial condition, and results of operations.

In July 2017, the United Kingdom's Financial Conduct Authority (FCA), a regulator of financial services firms and financial markets in the U.K., stated that they will plan for a phase out of regulatory oversight of LIBOR interest rate indices. The FCA has indicated they will support the LIBOR indices through 2021 to allow for an orderly transition to an alternative reference rate. Other financial services regulators and industry groups, including the International Swaps and Derivatives Association and the Alternative Reference Rates Committee, are evaluating the possible phase-out of LIBOR and the development of alternate interest rate indices or reference rates, such as the Secured Overnight Financing Rate. Many of the Bank's assets and liabilities are indexed to LIBOR. Given the large volume of LIBOR-based mortgages and financial instruments, the basis adjustment to the replacement floating rate will receive extraordinary scrutiny, but whether the net impact is positive or negative cannot yet be ascertained. The infrastructure necessary to manage hedging in the alternative reference rate still needs to be built out, and the transition in the markets, and adjustments in Bank systems, could be disruptive.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

The Federal Home Loan Bank of San Francisco (Bank) maintains its principal offices in leased premises totaling 109,008 square feet of space at 600 California Street in San Francisco, California, and 580 California Street in San Francisco, California. The Bank also leases other offices totaling 9,858 square feet of space at 1155 15^th Street NW in Washington, D.C., as well as off-site business continuity facilities located in Rancho Cordova, California. The Bank believes these facilities are adequate for the purposes for which they are currently used and are well maintained.

22

ITEM 3. LEGAL PROCEEDINGS

The Federal Home Loan Bank of San Francisco (Bank) may be subject to various legal proceedings arising in the normal course of business.

In 2010, the Bank filed two complaints in the Superior Court of the State of California, County of San Francisco (San Francisco Superior Court), relating to the purchase of private-label residential mortgage-backed securities (PLRMBS). The Bank sought rescission and asserted claims for and violations of the California Corporate Securities Act and common law rescission of contract. In January 2017, the Bank entered into a settlement agreement with a defendant for an amount of $119 million (after netting certain legal fees and expenses). The Bank has settled or entered into settlement agreements with all the defendants in connection with the Bank’s PLRMBS litigation.

After consultation with legal counsel, the Bank is not aware of any other legal proceedings that are expected to have a material effect on its financial condition or results of operations or that are otherwise material to the Bank.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

PART II. OTHER INFORMATION

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The Federal Home Loan Bank of San Francisco (Bank) has a cooperative ownership structure. The members and certain nonmembers own all the capital stock of the Bank, the majority of the directors of the Bank are officers or directors of members, and the directors are elected by members (or selected by the Board of Directors to fill mid-term vacancies). There is no established marketplace for the Bank's capital stock. The Bank’s capital stock is not publicly traded. The Bank issues only one class of capital stock, Class B stock, which, under the Bank’s capital plan, may be redeemed at par value, $100 per share, upon five years’ notice from the member to the Bank, subject to certain statutory and regulatory requirements and to the satisfaction of any ongoing capital stock investment requirements applying to the member.

At the Bank’s discretion and at any time, the Bank may repurchase shares held by a member in excess of the member’s required capital stock holdings. The Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) summarizes the Bank’s capital management principles and objectives, as well as its policies and practices with respect to restricted retained earnings, dividend payments, and the repurchase of excess capital stock. In January 2017, the Framework was amended and approved by the Bank’s Board of Directors to include the Bank’s dividend philosophy to endeavor to pay a quarterly dividend at an annualized rate between 5% and 7%. The decision to declare any dividend and the dividend rate are at the discretion of the Bank’s Board of Directors, which may choose to follow the dividend philosophy as guidance in the dividend declaration. The Bank’s historical dividend rates and the dividend philosophy are not indicative of future dividend declarations. The Bank’s dividend policy may be revised or eliminated in the future and there can be no assurance as to future dividends. For information on the Bank’s policies and practices with respect to dividend payments, see “Part I. Financial Information, Item 1. Business – Capital – Dividends and Retained Earnings,” which is herein incorporated by reference.

The information regarding the Bank’s capital requirements is set forth in “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital.” At February 28, 2018, the Bank had 34,245,255 shares of Class B stock held by 334 members and 3,095,175 shares of Class B stock held by 7 nonmembers. Class B stock held by nonmembers is classified as mandatorily redeemable capital stock.

23

Federal Housing Finance Agency (Finance Agency) rules state that FHLBanks may declare and pay dividends only from previously retained earnings or current net earnings, and may not declare or pay dividends based on projected or anticipated earnings. In addition, Finance Agency rules do not permit the Bank to pay dividends in the form of capital stock if its excess capital stock exceeds 1% of its total assets. Excess capital stock is defined as the aggregate of the capital stock held by each shareholder in excess of its minimum capital stock requirement, as established by the Bank’s capital plan.

There is no requirement that the Board of Directors declare and pay any dividend. A decision by the Board of Directors to declare or not declare a dividend is a discretionary matter and is subject to the requirements and restrictions of the Federal Home Loan Bank Act and applicable requirements under the regulations governing the operations of the FHLBanks.

The Bank’s dividend rates declared (annualized) and amounts paid during the respective periods indicated are listed in the table below; the rates and amounts are not indicative of dividends to be paid in the future.

	2017						2016
	Amount of Cash Dividends						Amount of Cash Dividends
(Dollars in millions)	Capital Stock – Class B – Putable		Mandatorily Redeemable Capital Stock		Annualized Rate(1)		Capital Stock – Class B – Putable		Mandatorily Redeemable Capital Stock		Annualized Rate(1)
First quarter	$	54	$	11	9.08	%	$	45	$	10	7.99	%
Second quarter	41		7		7.00		49		12		8.90
Third quarter	44		7		7.00		52		11		9.17
Fourth quarter(2)	48		7		7.00		138		27		22.51

(1) Reflects the annualized rate paid on all of the Bank's average capital stock outstanding regardless of its classification for reporting purposes as either capital stock or mandatorily redeemable capital stock (a liability), based on the par value of $100 per share.

(2) In the fourth quarter of 2016, the amount includes a special dividend at an annualized rate of 13.57%, totaling $100 million, including $83 million in dividends on capital stock and $17 million in dividends on mandatorily redeemable capital stock.

Additional information regarding the Bank’s dividends is set forth in “Item 1. Business” and in “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital.”

24

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data of the Federal Home Loan Bank of San Francisco (Bank) should be read in conjunction with the financial statements and notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein.

(Dollars in millions)	2017			2016			2015			2014			2013
Selected Statement of Condition Data at Yearend
Total Assets	$	123,385		$	91,941		$	85,698		$	75,807		$	85,774
Advances	77,382			49,845			50,919			38,986			44,395
Mortgage Loans Held for Portfolio, Net	2,076			826			655			708			905
Investments(1)	43,570			40,986			32,275			31,949			35,260
Consolidated Obligations:(2)
Bonds	85,063			50,224			51,827			47,045			53,207
Discount Notes	30,440			33,506			27,647			21,811			24,194
Mandatorily Redeemable Capital Stock	309			457			488			719			2,071
Capital Stock —Class B —Putable	3,243			2,370			2,253			3,278			3,460
Unrestricted Retained Earnings	2,670			888			610			294			317
Restricted Retained Earnings	575			2,168			2,018			2,065			2,077
Accumulated Other Comprehensive Income/(Loss) (AOCI)	318			111			15			56			(145		)
Total Capital	6,806			5,537			4,896			5,693			5,709
Selected Operating Results for the Year
Net Interest Income	$	567		$	471		$	477		$	539		$	482
Provision for/(Reversal of) Credit Losses on Mortgage Loans	—			—			1			—			(1		)
Other Income/(Loss)	78			485			388			(154		)	5
Other Expense	224			158			148			144			128
Assessments	45			86			78			36			52
Net Income/(Loss)	$	376		$	712		$	638		$	205		$	308
Selected Other Data for the Year
Net Interest Margin(3)	0.55		%	0.52		%	0.57		%	0.64		%	0.56		%
Operating Expenses as a Percent of Average Assets	0.14			0.16			0.16			0.16			0.13
Return on Average Assets	0.36			0.77			0.76			0.24			0.35
Return on Average Equity	6.21			13.63			11.68			3.58			5.36
Annualized Dividend Rate	7.50			12.33			12.39			7.02			3.99
Dividend Payout Ratio(4)	49.59			39.98			57.81			117.29			52.29
Average Equity to Average Assets Ratio	5.82			5.68			6.52			6.75			6.55
Selected Other Data at Yearend
Regulatory Capital Ratio(5)	5.51			6.40			6.26			8.38			9.24
Duration Gap (in months)	1			1			1			—			1

(1) Investments consist of interest-bearing deposits, securities purchased under agreements to resell, Federal funds sold, trading securities, available-for-sale securities, and held-to-maturity securities.

(2) As provided by the Federal Home Loan Bank Act of 1932, as amended, or regulations governing the operations of the FHLBanks, all of the FHLBanks have joint and several liability for FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Federal Housing Finance Agency (Finance Agency) to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of December 31, 2017, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of all FHLBanks at the dates indicated was as follows:

25

Yearend	Par Value (In millions)
2017	$	1,034,260
2016	989,311
2015	905,202
2014	847,175
2013	766,837

(3) Net interest margin is net interest income divided by average interest-earning assets.

(4) This ratio is calculated as dividends per share divided by net income per share.

(5) This ratio is calculated as regulatory capital divided by total assets. Regulatory capital includes retained earnings, Class B capital stock, and mandatorily redeemable capital stock (which is classified as a liability), but excludes AOCI.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements contained in this annual report on Form 10-K, including statements describing the objectives, projections, estimates, or predictions of the future of the Federal Home Loan Bank of San Francisco (Bank) or the Federal Home Loan Bank System (FHLBank System), are “forward-looking statements.” These statements may use forward-looking terms, such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “probable,” “project,” “should,” “will,” or their negatives or other variations on these terms, and include statements related to, among others, gains and losses on derivatives, plans to pay dividends and repurchase excess capital stock, future other-than-temporary impairment losses, future classification of securities, and reform legislation. The Bank cautions that by their nature, forward-looking statements involve risk or uncertainty that could cause actual results to differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These risks and uncertainties include, among others, the following:

• changes in economic and market conditions, including conditions in the mortgage, housing, and capital markets;

• the volatility of market prices, rates, and indices;

• the timing and volume of market activity;

• political events, including legislative, regulatory, judicial, or other developments that affect the Bank, its members, counterparties, or investors in the consolidated obligations of the Federal Home Loan Banks (FHLBanks), such as the impact of any government-sponsored enterprises (GSE) legislative reforms, changes in the Federal Home Loan Bank Act of 1932, as amended (FHLBank 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;

• changes in the Bank’s capital structure and composition;

• the ability of the Bank to pay dividends or redeem or repurchase capital stock;

• membership changes, including changes resulting from mergers or changes in the principal place of business of Bank members;

• the soundness of other financial institutions, including Bank members, nonmember borrowers, other counterparties, and the other FHLBanks;

• changes in Bank members’ demand for Bank advances;

• changes in the value or liquidity of collateral underlying advances to Bank members or nonmember borrowers or collateral pledged by the Bank’s derivative counterparties;

• changes in the fair value and economic value of, impairments of, and risks associated with the Bank’s investments in mortgage loans and mortgage-backed securities (MBS) or other assets and the related credit enhancement protections;

• changes in the Bank’s ability or intent to hold MBS and mortgage loans to maturity;

• competitive forces, including the availability of other sources of funding for Bank members;

• the willingness of the Bank’s members to do business with the Bank;

• changes in investor demand for consolidated obligations (including the terms of consolidated obligations) and/or the terms of interest rate exchange or similar agreements;

26

• the impact of any changes and developments in FHLBank System-wide debt issuance and governance practices;

• 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 the Bank has joint and several liability;

• changes in key Bank personnel;

• technology changes and enhancements, and the Bank’s ability to develop and support technology and information systems sufficient to manage the risks of the Bank’s business effectively; and

• changes in the FHLBanks’ long-term credit ratings.

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

Overview

The Bank serves eligible financial institutions in Arizona, California and Nevada, the three states that make up the Eleventh District of the FHLBank System. The Bank’s primary business is providing competitively priced, collateralized loans, known as advances, to its member institutions and certain qualifying housing associates. The Bank's principal source of funds is debt issued in the capital markets. All 11 FHLBanks issue debt in the form of consolidated obligations through the Office of Finance as their agent, and all 11 FHLBanks are jointly and severally liable for the repayment of all consolidated obligations.

The Bank experienced strong earnings in 2017. Net income for the year was $376 million, compared with net income of $712 million for 2016. The $336 milliondecrease in net income primarily reflected a $391 million decrease in gains on settlements relating to the Bank's private-label residential mortgage-backed securities (PLRMBS) litigation. The decrease in net income also reflected voluntary charitable contributions of $60 million made by the Bank during 2017 for the Quality Jobs Fund, a donor-advised fund established to support quality job growth and small business expansion, as well as voluntary contributions of $7 million to the Affordable Housing Program (AHP) to offset the impact on the AHP assessment of the expense related to the charitable contributions.

The $96 millionincrease in net interest income for 2017 relative to the prior year reflected higher average balances of interest-earning assets, combined with higher spreads on those assets, and lower dividends paid on mandatorily redeemable capital stock, which are classified as interest expense.

Retained earnings grew to $3.2 billion at December 31, 2017, from $3.1 billion at December 31, 2016, and the Bank paid dividends at an annualized rate of 7.50%, totaling $219 million, including $187 million in dividends on capital stock and $32 million in dividends on mandatorily redeemable capital stock during 2017.

During 2017, total assets increased $31.5 billion, to $123.4 billion at December 31, 2017, from $91.9 billion at December 31, 2016, primarily reflecting an increase in period end advance balances, which increased to $77.4 billion at December 31, 2017, from $49.8 billion at December 31, 2016. In addition, investments increased$2.6 billion, to $43.6 billion at December 31, 2017, from $41.0 billion at December 31, 2016, primarily reflecting an increase in Federal funds sold.

Accumulated other comprehensive income increased by $207 million during 2017, to $318 million at December 31, 2017, from$111 million at December 31, 2016, primarily as a result of improvement in the fair value of PLRMBS classified as available-for-sale.

On February 21, 2018, the Bank’s Board of Directors declared a quarterly cash dividend on the capital stock outstanding during the fourth quarter of 2017 at an annualized rate of 7.00%. The dividend will total $59 million, including $6 million in dividends on mandatorily redeemable capital stock that will be reflected as interest expense in the first quarter of 2018. The Bank recorded the dividend on February 21, 2018, and expects to pay the dividend on or about March 15, 2018.

27

As of December 31, 2017, the Bank was in compliance with all of its regulatory capital requirements. The Bank’s total regulatory capital ratio was 5.5%, exceeding the 4.0% requirement. The Bank had $6.8 billion in permanent capital, exceeding its risk-based capital requirement of $2.0 billion.

The Bank plans to repurchase the surplus capital stock of all members and the excess capital stock of all nonmember shareholders on March 16, 2018. Surplus capital stock is defined as any stock holdings in excess of 115% of a member’s minimum capital stock requirement.

The Bank will continue to monitor the condition of its PLRMBS portfolio, the ratio of the Bank’s estimated market value of total capital to par value of capital stock, its overall financial performance and retained earnings, developments in the mortgage and credit markets, and other relevant information as the basis for determining the payment of dividends and the repurchase of excess capital stock in future quarters.

Hurricanes Harvey and Irma. During 2017, two significant hurricanes struck the southeastern coast of the United States. On August 25, 2017, Hurricane Harvey made landfall near Corpus Christi, Texas, causing substantial damage and flooding to southeastern Texas, including the Houston metropolitan area. On September 10, 2017, Hurricane Irma made landfall on the Florida mainland near Marco Island, Florida. Hurricane Irma then moved northward through Florida and into Georgia, causing significant damage to property in Florida, Georgia, and certain other southeastern states.

The Bank has analyzed the potential impact that damage related to Hurricanes Irma and Harvey might have on the Bank’s advances, letters of credit, mortgage loans, and PLRMBS securities. Based on the information currently available, the Bank does not expect that the potential losses resulting from the hurricanes will have a material effect on the Bank’s financial condition or results of operations. The Bank continues to evaluate the impact of the hurricanes on its mortgage loans held for portfolio and PLRMBS investments. If additional information becomes available indicating that any of these assets have been impaired and the amount of the loss can be reasonably estimated, the Bank will record appropriate reserves at that time. 

Results of Operations

Comparison of 2017 and 2016

Net Interest Income. The primary source of the Bank’s earnings is net interest income, which is the interest earned on advances, mortgage loans, and investments. This includes net accretion of related income, which is a result of improvement in expected cash flows on certain other-than-temporarily-impaired PLRMBS, less interest paid on consolidated obligations, deposits, mandatorily redeemable capital stock, and other borrowings. The Average Balance Sheets tables that follow present the average balances of interest-earning asset categories and the sources that funded those interest-earning assets (liabilities and capital) for the years ended December 31, 2017 and 2016, together with the related interest income and expense. They also present the average rates on total interest-earning assets and the average costs of total funding sources.

28

Average Balance Sheets
	2017							2016
(Dollars in millions)	Average Balance			Interest Income/ Expense		Average Rate		Average Balance			Interest Income/ Expense		Average Rate
Assets
Interest-earning assets:
Interest-bearing deposits	$	727		$	8	1.05	%	$	603		$	2	0.38	%
Securities purchased under agreements to resell	1,008			9		0.93		3,120			12		0.37
Federal funds sold	10,871			115		1.06		7,010			29		0.41
Trading securities:
Mortgage-backed securities (MBS)	7			—		2.24		9			—		1.91
Other investments	1,338			17		1.23		1,537			10		0.61
Available-for-sale (AFS) securities:(1)
MBS(2)	3,890			239		6.14		4,839			262		5.42
Held-to-maturity (HTM) securities:(1)
MBS	12,679			274		2.16		10,756			247		2.30
Other investments	915			11		1.22		466			4		0.90
Mortgage loans held for portfolio	1,402			52		3.74		662			30		4.50
Advances(3)	70,169			875		1.25		62,168			482		0.78
Loans to other FHLBanks	7			—		1.11		3			—		0.40
Total interest-earning assets	103,013			1,600		1.55		91,173			1,078		1.18
Other assets(4)(5)	964			—				768			—
Total Assets	$	103,977		$	1,600			$	91,941		$	1,078
Liabilities and Capital
Interest-bearing liabilities:
Consolidated obligations:
Bonds(3)	$	62,905		$	713	1.13	%	$	51,606		$	410	0.79	%
Discount notes	33,657			285		0.85		33,504			136		0.41
Deposits and other borrowings	258			3		0.96		342			1		0.19
Mandatorily redeemable capital stock	387			32		8.30		494			60		12.25
Borrowings from other FHLBanks	8			—		0.57		13			—		0.46
Total interest-bearing liabilities	97,215			1,033		1.06		85,959			607		0.71
Other liabilities(4)	709			—				756			—
Total Liabilities	97,924			1,033				86,715			607
Total Capital	6,053			—				5,226			—
Total Liabilities and Capital	$	103,977		$	1,033			$	91,941		$	607
Net Interest Income				$	567						$	471
Net Interest Spread(6)						0.49	%						0.47	%
Net Interest Margin(7)						0.55	%						0.52	%
Interest-earning Assets/Interest-bearing Liabilities	105.96		%					106.07		%

(1) The average balances of AFS securities and HTM securities are reflected at amortized cost. As a result, the average rates do not reflect changes in fair value or non-credit-related OTTI losses.

(2) Interest income on AFS securities includes accretion of yield adjustments on other-than-temporarily impaired PLRMBS (resulting from improvement in expected cash flows) totaling $69 million and $81 million in 2017 and 2016, respectively.

(3) Interest income/expense and average rates include the effect of associated interest rate exchange agreements, as follows:

29

	2017									2016
(In millions)	(Amortization)/ Accretion of Hedging Activities			Net Interest Settlements			Total Net Interest Income/(Expense)			(Amortization)/ Accretion of Hedging Activities			Net Interest Settlements			Total Net Interest Income/(Expense)
Advances	$	1		$	(27	)	$	(26	)	$	(1	)	$	(55	)	$	(56	)
Consolidated obligation bonds	(1		)	27			26			4			180			184

(4) Includes forward settling transactions and valuation adjustments for certain cash items.

(5) Includes non-credit-related OTTI losses on AFS and HTM securities.

(6) Net interest spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

(7) Net interest margin is net interest income (annualized) divided by average interest-earning assets.

Net interest income in 2017 was $567 million, a 20%increase from $471 million in 2016. The following table details the changes in interest income and interest expense for 2017 compared to 2016. Changes in both volume and interest rates influence changes in net interest income, net interest spread, and net interest margin.

Change in Net Interest Income: Rate/Volume Analysis 2017 Compared to 2016
	Increase/ (Decrease)			Attributable to Changes in(1)
(In millions)				Average Volume			Average Rate
Interest-earning assets:
Interest-bearing deposits	$	6		$	1		$	5
Securities purchased under agreements to resell	(3		)	(12		)	9
Federal funds sold	86			22			64
Trading securities: Other investments	7			(1		)	8
AFS securities:
MBS	(23		)	(55		)	32
HTM securities:
MBS	27			42			(15		)
Other investments	7			5			2
Mortgage loans held for portfolio	22			28			(6		)
Advances(2)	393			69			324
Total interest-earning assets	522			99			423
Interest-bearing liabilities:
Consolidated obligations:
Bonds(2)	303			103			200
Discount notes	149			1			148
Deposits and other borrowings	2			—			2
Mandatorily redeemable capital stock	(28		)	(11		)	(17		)
Total interest-bearing liabilities	426			93			333
Net interest income	$	96		$	6		$	90

(1) Combined rate/volume variances, a third element of the calculation, are allocated to the rate and volume variances based on their relative sizes.

(2) Interest income/expense and average rates include the interest effect of associated interest rate exchange agreements.

The net interest margin was 55 basis points for 2017, 3 basis points higher than the net interest margin for 2016, which was 52 basis points. The net interest spread was 49 basis points for 2017, 2 basis points higher than the net interest spread for 2016, which was 47 basis points. These increases were primarily due to higher average balances of interest-earning assets, combined with higher spreads on those assets.

For securities previously identified as other-than-temporarily impaired, the Bank updates its estimate of future estimated cash flows on a regular basis. If there is no additional impairment on the security, any improvement in expected cash flows is accreted into interest income. As a result of improvements in the estimated cash flows of

30

securities previously identified as other-than-temporarily impaired, the accretion of yield adjustments is likely to continue to be a positive source of net interest income in future periods. (See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Fair Values – Other-Than-Temporary Impairment for Investment Securities” for further information.)

Member demand for wholesale funding from the Bank can vary greatly depending on a number of factors, including economic and market conditions, competition from other wholesale funding sources, member deposit inflows and outflows, the activity level of the primary and secondary mortgage markets, and strategic decisions made by individual member institutions. As a result, Bank asset levels and operating results may vary significantly from period to period.

Other Income/(Loss). The following table presents the components of “Other Income/(Loss)” for the years ended December 31, 2017 and 2016.

Other Income/(Loss)
(In millions)	2017			2016
Other Income/(Loss):
Total OTTI loss	$	(10	)	$	(26	)
Net amount of OTTI loss reclassified to/(from) AOCI	(6		)	10
Net OTTI loss, credit-related	(16		)	(16		)
Net gain/(loss) on trading securities(1)	—			4
Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	(31		)	(40		)
Net gain/(loss) on derivatives and hedging activities	(14		)	9
Gains on litigation settlements, net	119			510
Other	20			18
Total Other Income/(Loss)	$	78		$	485

(1) The net gain/(loss) on trading securities that were economically hedged totaled $1 million and $1 million in 2017 and 2016, respectively.

Net Other-Than-Temporary Impairment Loss, Credit-Related – Each quarter, the Bank updates its OTTI analysis to reflect current housing market conditions, changes in anticipated housing market conditions, observed and anticipated borrower behavior, and updated information on the loans supporting the Bank’s PLRMBS.

Additional information about the OTTI loss is provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Investments” and in “Item 8. Financial Statements and Supplementary Data – Note 7 – Other-Than-Temporary Impairment Analysis.”

Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held Under Fair Value Option – The following table presents the net gain/(loss) on advances and consolidated obligation bonds held under the fair value option for the years ended December 31, 2017 and 2016.

Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held Under Fair Value Option
(In millions)	2017			2016
Advances	$	(31	)	$	(27	)
Consolidated obligation bonds	—			(13		)
Total	$	(31	)	$	(40	)

31

Under the fair value option, the Bank elected to carry certain assets and liabilities at fair value. In general, transactions elected for the fair value option are in economic hedge relationships. Gains or losses on these transactions are generally offset by losses or gains on the derivatives that economically hedge these instruments.

The net gains/(losses) on advances and consolidated obligation bonds held under the fair value option were primarily driven by the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to the actual terms on the advances and consolidated obligation bonds during the period.

Additional information about advances and consolidated obligation bonds held under the fair value option is provided in “Item 8. Financial Statements and Supplementary Data – Note 19 – Fair Value.”

Net Gain/(Loss) on Derivatives and Hedging Activities – Under the accounting for derivative instruments and hedging activities, the Bank is required to carry all of its derivative instruments on the Statement of Condition at fair value. If derivatives meet the hedging criteria, including effectiveness measures, the carrying value of the underlying hedged instruments may also be adjusted to reflect changes in the fair value attributable to the risk being hedged so that some or all of the unrealized gain or loss recognized on the derivative is offset by a corresponding unrealized loss or gain on the underlying hedged instrument. The unrealized gain or loss on the “ineffective” portion of all hedges, which represents the amount by which the change in the fair value of the derivative differs from the change in the fair value of the hedged item or the variability in the cash flows of the forecasted transaction, is recognized in current period earnings. In addition, certain derivatives are associated with assets or liabilities but do not qualify as fair value hedges under the accounting for derivative instruments and hedging activities. These economic hedges are recorded on the Statement of Condition at fair value with the unrealized gain or loss recorded in earnings without any offsetting unrealized loss or gain from the associated asset or liability.

The following table shows the accounting classification of hedges and the categories of hedged items that contributed to the gains and losses on derivatives and hedged items that were recorded in “Net gain/(loss) on derivatives and hedging activities” in 2017 and 2016.

Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives and Hedging Activities 2017 Compared to 2016
(In millions)	2017												2016
	Gain/(Loss)						Income/ (Expense) on						Gain/(Loss)						Income/ (Expense) on
Hedged Item	Fair Value Hedges, Net			Economic Hedges			Economic Hedges			Total			Fair Value Hedges, Net			Economic Hedges			Economic Hedges			Total
Advances:
Elected for fair value option	$	—		$	33		$	(23	)	$	10		$	—		$	44		$	(43	)	$	1
Not elected for fair value option	(3		)	(6		)	1			(8		)	1			(9		)	3			(5		)
Consolidated obligation bonds:
Elected for fair value option	—			—			3			3			—			(1		)	13			12
Not elected for fair value option	2			(14		)	8			(4		)	(3		)	(18		)	23			2
Consolidated obligation discount notes:
Not elected for fair value option	—			(5		)	(29		)	(34		)	—			23			(28		)	(5		)
MBS:
Not elected for fair value option	—			(5		)	—			(5		)	—			—			—			—
Non-MBS investments:
Not elected for fair value option	—			—			—			—			—			(1		)	—			(1		)
Mortgage delivery commitment:
Not elected for fair value option	—			24			—			24			—			5			—			5
Total	$	(1	)	$	27		$	(40	)	$	(14	)	$	(2	)	$	43		$	(32	)	$	9

32

During 2017, net losses on derivatives and hedging activities totaled $14 million compared to net gains of $9 million in 2016. These amounts included expense of $40 million and expense of $32 million resulting from net settlements on derivative instruments used in economic hedges in 2017 and 2016, respectively. Excluding the impact of income or expense from net settlements on derivative instruments used in economic hedges, the net gains or losses on fair value and economic hedges were primarily associated with the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors during the period.

The ongoing impact of these valuation adjustments on the Bank cannot be predicted and the effects of these valuation adjustments may lead to significant volatility in future earnings, including earnings available for dividends.

Additional information about derivatives and hedging activities is provided in “Item 8. Financial Statements and Supplementary Data – Note 18 – Derivatives and Hedging Activities.”

Gains on Litigation Settlements, Net – During 2017 and 2016,gains relating to settlements with certain defendants in connection with the Bank’s PLRMBS litigation (after netting certain legal fees and expenses) totaled $119 million and $510 million, respectively.

Other Expense. Other expenses were $224 million in 2017 compared to $158 million in 2016, primarily reflecting voluntary charitable contributions for the Quality Jobs Fund in 2017.

Quality Jobs Fund Expenseand Other– In the first quarter of 2017, the Board of Directors approved an allocation of $100 million for the Quality Jobs Fund, a donor-advised fund established to support quality jobs growth and small business expansion to be funded by the Bank in incremental amounts over the next two year period. During 2017, the Bank made voluntary charitable contributions of $60 million for the Quality Jobs Fund, as well as voluntary contributions of $7 million to the Affordable Housing Program (AHP) to offset the impact on the AHP assessment of the charitable contribution expense.

Affordable Housing Program. The FHLBank Act requires each FHLBank to establish and fund an AHP. Each FHLBank’s AHP provides subsidies to members, which use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Subsidies may be in the form of direct grants or below-market interest rate advances.

To fund the AHP, the FHLBanks must set aside, in the aggregate, the greater of $100 million or 10% of the current year's net earnings (income before interest expense related to dividends paid on mandatorily redeemable capital stock and the assessment for the AHP). To the extent that the aggregate 10% calculation is less than $100 million, the FHLBank Act requires that each FHLBank contribute such prorated sums as may be required to ensure that the aggregate contribution of the FHLBanks equals $100 million. The proration would be made on the basis of the income of the FHLBanks for the previous year. In the aggregate, the FHLBanks set aside $384 million and $392 million for their AHPs in 2017 and 2016, respectively, and there was no AHP shortfall in any of those years.

The Bank’s total AHP assessments equaled $45 million in 2017, compared to $86 million in 2016. The decrease in the AHP assessments reflected lower earnings in 2017.

Return on Average Equity. Return on average equity (ROE) was 6.21% in 2017, compared to 13.63% in 2016. The decrease primarily reflected lower net income in 2017, and the increase in average equity from $5.2 billion for 2016 to $6.1 billion for 2017.

Dividends and Retained Earnings. In 2017, the Bank paid dividends at an annualized rate of 7.50%, totaling $219 million, including $187 million in dividends on capital stock and $32 million in dividends on mandatorily redeemable capital stock. In 2016, the Bank paid dividends at an annualized rate of 12.33%, totaling $344 million, including $284 million in dividends on capital stock and $60 million in dividends on mandatorily redeemable capital stock. The dividends paid in 2016 included four quarterly dividends and a special dividend in the amount of

33

$100 million, including $83 million in dividends on capital stock and $17 million in dividends on mandatorily redeemable capital stock.

The Bank paid these dividends in cash. Dividends on capital stock are recognized as dividends on the Statements of Capital Accounts, and dividends on mandatorily redeemable capital stock are recognized as interest expense on the Statements of Income.

On February 21, 2018, the Bank’s Board of Directors declared a quarterly cash dividend on the capital stock outstanding during the fourth quarter of 2017 at an annualized rate of 7.00% totaling $59 million, including $53 million in dividends on capital stock and $6 million in dividends on mandatorily redeemable capital stock. The Bank recorded the quarterly dividend on February 21, 2018. The Bank expects to pay the quarterly dividend on March 15, 2018. Dividends on mandatorily redeemable capital stock will be recognized as interest expense in the first quarter of 2018.

The Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) assesses the level and adequacy of retained earnings and establishes amounts to be retained in restricted retained earnings, which are not made available in the current dividend period. Prior to July 2017, the Bank’s Framework had three categories of restricted retained earnings: Valuation Adjustments, Other (which represented a targeted amount), and the Joint Capital Enhancement (JCE Agreement). Under the Framework, the Bank’s required amount of restricted retained earnings was determined using the Bank’s retained earnings methodology. As determined using the Bank’s methodology, from July 2015 to January 2017, the Bank’s restricted retained earnings requirement was $2,000, and from January 2017 to July 2017, the Bank’s restricted retained earnings requirement was $2,300.

In July 2017, the Bank’s Board of Directors approved the transfer of all amounts classified as restricted retained earnings, other than the amounts related to the JCE Agreement, to unrestricted retained earnings. As a conforming change related to the transfer, the Bank’s Board of Directors amended the Framework to eliminate two of the categories of restricted retained earnings (Valuation Adjustments and Other) and approved revisions to the Bank’s retained earnings methodology to provide for a required level of total retained earnings of $2,300 for loss protection, capital compliance, and business growth. In January 2018, the methodology was further revised to provide a required level of total retained earnings of $2,500. The Bank satisfies its retained earnings requirement with both restricted retained earnings (i.e., amounts related to the JCE Agreement) and unrestricted retained earnings.

Retained earnings related to the JCE Agreement totaled $575 million and $500 million at December 31, 2017 and 2016, respectively. Additional restricted retained earnings totaled $1.7 billion at December 31, 2016. Total restricted retained earnings were $575 million and $2.2 billion as of December 31, 2017 and 2016, respectively.

The Bank will continue to monitor the condition of its PLRMBS portfolio, the ratio of the Bank’s estimated market value of total capital to par value of capital stock, its overall financial performance and retained earnings, developments in the mortgage and credit markets, and other relevant information as the basis for determining the payment of dividends in future quarters.

For more information, see “Item 1. Business – Dividends and Retained Earnings” and “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital – Excess Stock Repurchase, Retained Earnings, and Dividend Framework.”

Comparison of 2016 and 2015

Net Interest Income. The Average Balance Sheets tables that follow present the average balances of interest-earning asset categories and the sources that funded those interest-earning assets (liabilities and capital) for the years ended December 31, 2016 and 2015, together with the related interest income and expense. They also present the average rates on total interest-earning assets and the average costs of total funding sources.

34

Average Balance Sheets
	2016							2015
(Dollars in millions)	Average Balance			Interest Income/ Expense		Average Rate		Average Balance			Interest Income/ Expense		Average Rate
Assets
Interest-earning assets:
Interest-bearing deposits	$	603		$	2	0.38	%	$	719		$	—	0.01	%
Securities purchased under agreements to resell	3,120			12		0.37		2,513			3		0.10
Federal funds sold	7,010			29		0.41		6,847			9		0.13
Trading securities:
Mortgage-backed securities (MBS)	9			—		1.91		10			—		1.68
Other investments	1,537			10		0.61		2,439			5		0.21
Available-for-sale (AFS) securities:(1)
MBS(2)	4,839			262		5.42		5,809			264		4.54
Held-to-maturity (HTM) securities:(1)
MBS	10,756			247		2.30		11,783			292		2.48
Other investments	466			4		0.90		297			1		0.51
Mortgage loans held for portfolio	662			30		4.50		675			33		4.91
Advances(3)	62,168			482		0.78		51,899			299		0.58
Loans to other FHLBanks	3			—		0.40		5			—		0.11
Total interest-earning assets	91,173			1,078		1.18		82,996			906		1.09
Other assets(4)(5)	768			—				829			—
Total Assets	$	91,941		$	1,078			$	83,825		$	906
Liabilities and Capital
Interest-bearing liabilities:
Consolidated obligations:
Bonds(3)	$	51,606		$	410	0.79	%	$	47,481		$	317	0.67	%
Discount notes	33,504			136		0.41		28,853			46		0.16
Deposits and other borrowings	342			1		0.19		1,107			1		0.05
Mandatorily redeemable capital stock	494			60		12.25		421			65		15.49
Borrowings from other FHLBanks	13			—		0.46		15			—		0.11
Total interest-bearing liabilities	85,959			607		0.71		77,877			429		0.55
Other liabilities(4)	756			—				485			—
Total Liabilities	86,715			607				78,362			429
Total Capital	5,226			—				5,463			—
Total Liabilities and Capital	$	91,941		$	607			$	83,825		$	429
Net Interest Income				$	471						$	477
Net Interest Spread(6)						0.47	%						0.54	%
Net Interest Margin(7)						0.52	%						0.57	%
Interest-earning Assets/Interest-bearing Liabilities	106.07		%					106.57		%

(1) The average balances of AFS securities and HTM securities are reflected at amortized cost. As a result, the average rates do not reflect changes in fair value or non-credit-related OTTI losses.

(2) Interest income on AFS securities includes accretion of yield adjustments on other-than-temporarily impaired PLRMBS (resulting from improvement in expected cash flows) totaling $81 million and $74 million in 2016 and 2015, respectively.

(3) Interest income/expense and average rates include the effect of associated interest rate exchange agreements, as follows:

35

	2016									2015
(In millions)	(Amortization)/ Accretion of Hedging Activities			Net Interest Settlements			Total Net Interest Income/(Expense)			(Amortization)/ Accretion of Hedging Activities			Net Interest Settlements			Total Net Interest Income/(Expense)
Advances	$	(1	)	$	(55	)	$	(56	)	$	(2	)	$	(106	)	$	(108	)
Consolidated obligation bonds	4			180			184			5			257			262

(4) Includes forward settling transactions and valuation adjustments for certain cash items.

(5) Includes non-credit-related OTTI losses on AFS and HTM securities.

(6) Net interest spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

(7) Net interest margin is net interest income (annualized) divided by average interest-earning assets.

Net interest income in 2016 was $471 million, a 1% decrease from $477 million in 2015. The following table details the changes in interest income and interest expense for 2016 compared to 2015. Changes in both volume and interest rates influence changes in net interest income, net interest spread, and net interest margin.

Change in Net Interest Income: Rate/Volume Analysis 2016 Compared to 2015
	Increase/ (Decrease)			Attributable to Changes in(1)
(In millions)				Average Volume			Average Rate
Interest-earning assets:
Interest-bearing deposits	$	2		$	—		$	2
Securities purchased under agreements to resell	9			1			8
Federal funds sold	20			—			20
Trading securities: Other investments	5			(2		)	7
AFS securities:
MBS	(2		)	(48		)	46
HTM securities:
MBS	(45		)	(25		)	(20		)
Other investments	3			1			2
Mortgage loans held for portfolio	(3		)	(1		)	(2		)
Advances(2)	183			66			117
Total interest-earning assets	172			(8		)	180
Interest-bearing liabilities:
Consolidated obligations:
Bonds(2)	93			29			64
Discount notes	90			9			81
Deposits and other borrowings	—			(1		)	1
Mandatorily redeemable capital stock	(5		)	10			(15		)
Total interest-bearing liabilities	178			47			131
Net interest income	$	(6	)	$	(55	)	$	49

(1) Combined rate/volume variances, a third element of the calculation, are allocated to the rate and volume variances based on their relative sizes.

(2) Interest income/expense and average rates include the interest effect of associated interest rate exchange agreements.

Net interest income included $5 million of advance prepayment fees in 2016 compared to $8 million in 2015.

The net interest margin was 52 basis points for 2016, 5 basis points lower than the net interest margin for 2015, which was 57 basis points. The net interest spread was 47 basis points for 2016, 7 basis points lower than the net interest spread for 2015, which was 54 basis points. These decreases were primarily due to lower average balances of mortgage-related assets, partially offset by lower dividends on mandatorily redeemable capital stock, which are classified as interest expense.

36

Member demand for wholesale funding from the Bank can vary greatly depending on a number of factors, including economic and market conditions, competition from other wholesale funding sources, member deposit inflows and outflows, the activity level of the primary and secondary mortgage markets, and strategic decisions made by individual member institutions. As a result, Bank asset levels and operating results may vary significantly from period to period.

Other Income/(Loss). The following table presents the components of “Other Income/(Loss)” for the years ended December 31, 2016 and 2015.

Other Income/(Loss)
(In millions)	2016			2015
Other Income/(Loss):
Total OTTI loss	$	(26	)	$	(31	)
Net amount of OTTI loss reclassified to/(from) AOCI	10			16
Net OTTI loss, credit-related	(16		)	(15		)
Net gain/(loss) on trading securities(1)	4			(2		)
Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	(40		)	(50		)
Net gain/(loss) on derivatives and hedging activities	9			(16		)
Gains on litigation settlements, net	510			459
Other	18			12
Total Other Income/(Loss)	$	485		$	388

(1) The net gain/(loss) on trading securities that were economically hedged totaled $1 million and a de minimis amount in 2016 and 2015, respectively.

Net Other-Than-Temporary Impairment Loss, Credit-Related – Each quarter, the Bank updates its OTTI analysis to reflect current housing market conditions, changes in anticipated housing market conditions, observed and anticipated borrower behavior, and updated information on the loans supporting the Bank’s PLRMBS.

Additional information about the OTTI loss is provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Investments” and in “Item 8. Financial Statements and Supplementary Data – Note 7 – Other-Than-Temporary Impairment Analysis.”

Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held Under Fair Value Option – The following table presents the net gain/(loss) on advances and consolidated obligation bonds held under the fair value option for the years ended December 31, 2016 and 2015.

Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held Under Fair Value Option
(In millions)	2016			2015
Advances	$	(27	)	$	(31	)
Consolidated obligation bonds	(13		)	(19		)
Total	$	(40	)	$	(50	)

Under the fair value option, the Bank elected to carry certain assets and liabilities at fair value. In general, transactions elected for the fair value option are in economic hedge relationships. Gains or losses on these transactions are generally offset by losses or gains on the derivatives that economically hedge these instruments.

The net gains/(losses) on advances and consolidated obligation bonds held under the fair value option were primarily driven by the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and

37

other market factors relative to the actual terms on the advances and consolidated obligation bonds during the period.

Additional information about advances and consolidated obligation bonds held under the fair value option is provided in “Item 8. Financial Statements and Supplementary Data – Note 19 – Fair Value.”

Net Gain/(Loss) on Derivatives and Hedging Activities – Under the accounting for derivative instruments and hedging activities, the Bank is required to carry all of its derivative instruments on the Statement of Condition at fair value. If derivatives meet the hedging criteria, including effectiveness measures, the carrying value of the underlying hedged instruments may also be adjusted to reflect changes in the fair value attributable to the risk being hedged so that some or all of the unrealized gain or loss recognized on the derivative is offset by a corresponding unrealized loss or gain on the underlying hedged instrument. The unrealized gain or loss on the “ineffective” portion of all hedges, which represents the amount by which the change in the fair value of the derivative differs from the change in the fair value of the hedged item or the variability in the cash flows of the forecasted transaction, is recognized in current period earnings. In addition, certain derivatives are associated with assets or liabilities but do not qualify as fair value hedges under the accounting for derivative instruments and hedging activities. These economic hedges are recorded on the Statement of Condition at fair value with the unrealized gain or loss recorded in earnings without any offsetting unrealized loss or gain from the associated asset or liability.

The following table shows the accounting classification of hedges and the categories of hedged items that contributed to the gains and losses on derivatives and hedged items that were recorded in “Net gain/(loss) on derivatives and hedging activities” in 2016 and 2015.

Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives and Hedging Activities 2016 Compared to 2015
(In millions)	2016												2015
	Gain/(Loss)						Income/ (Expense) on						Gain/(Loss)						Income/ (Expense) on
Hedged Item	Fair Value Hedges, Net			Economic Hedges			Economic Hedges			Total			Fair Value Hedges, Net			Economic Hedges			Economic Hedges			Total
Advances:
Elected for fair value option	$	—		$	44		$	(43	)	$	1		$	—		$	19		$	(73	)	$	(54	)
Not elected for fair value option	1			(9		)	3			(5		)	(1		)	1			1			1
Consolidated obligation bonds:
Elected for fair value option	—			(1		)	13			12			—			8			49			57
Not elected for fair value option	(3		)	(18		)	23			2			(9		)	(19		)	35			7
Consolidated obligation discount notes:
Not elected for fair value option	—			23			(28		)	(5		)	—			4			(30		)	(26		)
MBS:
Not elected for fair value option	—			—			—			—			—			(3		)	—			(3		)
Non-MBS investments:
Not elected for fair value option	—			(1		)	—			(1		)	—			—			—			—
Mortgage delivery commitment:
Not elected for fair value option	—			5			—			5			—			2			—			2
Total	$	(2	)	$	43		$	(32	)	$	9		$	(10	)	$	12		$	(18	)	$	(16	)

During 2016, net gains on derivatives and hedging activities totaled $9 million compared to net losses of $16 million in 2015. These amounts included expense of $32 million and expense of $18 million resulting from net settlements on derivative instruments used in economic hedges in 2016 and 2015, respectively. Excluding the impact of income or expense from net settlements on derivative instruments used in economic hedges, the net gains or losses on fair value and economic hedges were primarily associated with the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors during the period.

38

The ongoing impact of these valuation adjustments on the Bank cannot be predicted and the effects of these valuation adjustments may lead to significant volatility in future earnings, including earnings available for dividends.

Additional information about derivatives and hedging activities is provided in “Item 8. Financial Statements and Supplementary Data – Note 18 – Derivatives and Hedging Activities.”

Gains on Litigation Settlements, Net – During 2016 and 2015,gains relating to settlements with certain defendants in connection with the Bank’s PLRMBS litigation (after netting certain legal fees and expenses) totaled $510 million and $459 million, respectively.

Other Expense. Other expenses were $158 million in 2016 compared to $148 million in 2015, reflecting higher compensation and benefits and operating expenses in 2016.

Affordable Housing Program. The FHLBank Act requires each FHLBank to establish and fund an AHP. Each FHLBank’s AHP provides subsidies to members, which use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Subsidies may be in the form of direct grants or below-market interest rate advances.

The Bank’s total AHP assessments equaled $86 million in 2016, compared to $78 million in 2015. The increase in the AHP assessments reflected higher earnings in 2016.

Return on Average Equity. Return on average equity (ROE) was 13.63% in 2016, compared to 11.68% in 2015. The increase primarily reflected higher net income in 2016, and the decrease in average equity from $5.5 billion for 2015 to $5.2 billion for 2016.

Dividends and Retained Earnings. In 2016, the Bank paid dividends at an annualized rate of 12.33%, totaling $344 million, including $284 million in dividends on capital stock and $60 million in dividends on mandatorily redeemable capital stock. The dividends included four quarterly dividends and a special dividend in the amount of $100 million, including $83 million in dividends on capital stock and $17 million in dividends on mandatorily redeemable capital stock. In 2015, the Bank paid dividends at an annualized rate of 12.39%, totaling $434 million, including $369 million in dividends on capital stock and $65 million in dividends on mandatorily redeemable capital stock. The dividends included four quarterly dividends and a special dividend in the amount of $145 million, including $120 million in dividends on capital stock and $25 million in dividends on mandatorily redeemable capital stock.

The Bank paid these dividends in cash. Dividends on capital stock are recognized as dividends on the Statements of Capital Accounts, and dividends on mandatorily redeemable capital stock are recognized as interest expense on the Statements of Income.

Retained earnings related to valuation adjustments totaled $18 million and $10 million at December 31, 2016 and 2015, respectively. Retained earnings related to the JCE Agreement totaled $500 million and $358 million at December 31, 2016 and 2015, respectively. Restricted retained earnings for loss protection and capital compliance were $2.2 billion as of December 31, 2016.

The Bank will continue to monitor the condition of its PLRMBS portfolio, the ratio of the Bank’s estimated market value of total capital to par value of capital stock, its overall financial performance and retained earnings, developments in the mortgage and credit markets, and other relevant information as the basis for determining the payment of dividends in future quarters.

For more information, see “Item 1. Business – Dividends and Retained Earnings” and “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital – Excess Stock Repurchase, Retained Earnings, and Dividend Framework.”

39

Financial Condition

Total assets were $123.4 billion at December 31, 2017, compared to $91.9 billion at December 31, 2016. Advances increased by $27.6 billion, or 55%, to $77.4 billion at December 31, 2017, from $49.8 billion at December 31, 2016. MBS increased by $0.8 billion, or 5%, to $17.8 billion at December 31, 2017, from $17.0 billion at December 31, 2016. Average total assets were $104.0 billion for 2017, a 13%increase compared to $91.9 billion for 2016. Average advances were $70.2 billion for 2017, a 13%increase from $62.2 billion for 2016. Average MBS were $16.6 billion for 2017, a 6%increase from $15.6 billion for 2016.

Advances outstanding at December 31, 2017, included net unrealized losses of $104 million, of which $88 million represented unrealized losses on advances hedged in accordance with the accounting for derivative instruments and hedging activities and $16 million represented unrealized losses on economically hedged advances that are carried at fair value in accordance with the fair value option. Advances outstanding at December 31, 2016, included unrealized losses of $12 million, of which $22 million represented unrealized losses on advances hedged in accordance with the accounting for derivative instruments and hedging activities and $10 million represented unrealized gains on economically hedged advances that are carried at fair value in accordance with the fair value option. The overall increase in the unrealized losses on the hedged advances and advances carried at fair value from December 31, 2016, to December 31, 2017, was primarily attributable to the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to the terms on the Bank’s advances during the period.

Total liabilities were $116.6 billion at December 31, 2017, an increase of $30.2 billion from $86.4 billion at December 31, 2016, primarily reflecting a $31.8 billionincrease in consolidated obligations outstanding to $115.5 billion at December 31, 2017, from $83.7 billion at December 31, 2016, partially offset by a $1.3 billiondecrease in borrowings from other FHLBanks. Average total liabilities were $97.9 billion for 2017, a 13%increase compared to $86.7 billion for 2016. Average consolidated obligations were $96.6 billion for 2017 and $85.1 billion for 2016.

Consolidated obligations outstanding at December 31, 2017, included unrealized gains of $37 million on consolidated obligation bonds hedged in accordance with the accounting for derivative instruments and hedging activities and unrealized gains of $6 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. Consolidated obligations outstanding at December 31, 2016, included unrealized losses of $6 million on consolidated obligation bonds hedged in accordance with the accounting for derivative instruments and hedging activities and unrealized gains of $8 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. The increase in the net unrealized gains on the hedged consolidated obligation bonds and on the consolidated obligation bonds carried at fair value from December 31, 2016, to December 31, 2017, were primarily attributable to the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to the actual terms on the Bank's consolidated obligation bonds during the period.

As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of December 31, 2017, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of the FHLBanks was $1,034.3 billion at December 31, 2017, and $989.3 billion at December 31, 2016.

On August 29, 2017, S&P Global Ratings (S&P) affirmed the long-term issuer credit ratings on all of the FHLBanks at AA+. The outlook for all ratings remained stable.

On November 14, 2017, Moody’s Investors Service (Moody’s) affirmed the Aaa long-term ratings of the FHLBank System. The outlook for all ratings remained stable.

40

Changes in the long-term credit ratings of individual FHLBanks do not necessarily affect the credit rating of the consolidated obligations issued on behalf of the FHLBanks. Rating agencies may change or withdraw a rating from time to time because of various factors, including operating results or actions taken, business developments, or changes in their opinion regarding, among other factors, the general outlook for a particular industry or the economy.

The Bank does not believe, as of the date of this report, that it is probable that the Bank will be required to repay any principal or interest associated with consolidated obligations for which the Bank is not the primary obligor.

Segment Information

The Bank uses an analysis of financial results based on the financial components and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and determine financial management strategies related to the operations of these two business segments. For purposes of segment reporting, adjusted net interest income includes income and expense associated with net settlements from economic hedges that are recorded in “Net gain/(loss) on derivatives and hedging activities” in other income and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” Other key financial information, such as any credit-related OTTI losses on the Bank’s PLRMBS, other expenses, and assessments, is not included in the segment reporting analysis, but is incorporated into the Bank’s overall assessment of financial performance. For a reconciliation of the Bank’s operating segment adjusted net interest income to the Bank’s total net interest income, see “Item 8. Financial Statements and Supplementary Data – Note 17 – Segment Information.”

Advances-Related Business. The advances-related business consists of advances and other credit products, related financing and hedging instruments, liquidity and other non-MBS investments associated with the Bank’s role as a liquidity provider, and capital. Assets associated with this segment increased$29.4 billion to $103.4 billion (84% of total assets) at December 31, 2017, from $74.0 billion (81% of total assets) at December 31, 2016.

Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield on advances and non-MBS investments and the cost of the consolidated obligations funding these assets, including the net settlements from associated interest rate exchange agreements, and from earnings on capital.

Adjusted net interest income for this segment was $234 million in 2017, an increase of $80 million, or 52%, compared to $154 million in 2016. The increase was primarily due to an improvement in spreads and higher balances on advances-related assets and higher earnings from an increase in spreads on non-MBS investments, partially offset by lower earnings from advance prepayment fees.

Adjusted net interest income for this segment represented 42%, 31%, and 31% of total adjusted net interest income for 2017, 2016, and 2015, respectively.

Members and nonmember borrowers prepaid $8.5 billion of advances in 2017 compared to $3.5 billion in 2016. Interest income was increased by net prepayment fees of $1 million in 2017 and $5 million in 2016.

Advances – The par value of advances outstanding increased by $27.7 billion, or 56%, to $77.5 billion at December 31, 2017, from $49.8 billion at December 31, 2016. Average advances outstanding were $70.2 billion in 2017, a 13%increase from $62.2 billion in 2016. Outstanding balances of advances may significantly increase and decrease from period to period because of a member’s liquidity and financial strategies.

As of December 31, 2017, advances outstanding to the Bank’s top five borrowers and their affiliates increased by $16.0 billion, and advances outstanding to the Bank’s other borrowers increased by $11.7 billion. Advances to the top five borrowers increased to $48.4 billion at December 31, 2017, from $32.4 billion at December 31, 2016. (See

41

“Item 8. Financial Statements and Supplementary Data – Note 8 – Advances – Credit and Concentration Risk” for further information.)

During the fourth quarter of 2017, Charles Schwab Bank increased its advances balance from $5.0 billion as of September 30, 2017 to $15.0 billion as of December 31, 2017. If the advances outstanding to Charles Schwab Bank (and the other top five borrowers) with contractual maturities of one year or less are repaid as they come due and no other advances are made to replace them, the Bank’s assets would decrease significantly in 2018. In addition, as of December 31, 2017, JPMorgan Chase had $11.4 billion in advances outstanding, of which a significant portion is expected to be redeemed during 2018. Because JPMorgan Chase is not a member of the Bank, it is not able to borrow new advances from the Bank or replace outstanding advances as they are repaid or prepaid. (See “Item 8. Financial Statements and Supplementary Data – Note 8 – Advances – Redemption Terms” for further information.)

The $27.7 billionincrease in advances outstanding primarily reflected a $20.5 billionincrease in fixed rate advances and a $4.9 billionincrease in adjustable rate advances, partially offset by a $2.3 billionincrease in variable rate advances.

The components of the advances portfolio at December 31, 2017 and 2016, are presented in the following table.

Advances Portfolio by Product Type
	2017				2016
(Dollar in millions)	Par Value		Percentage of Total Par Value		Par Value		Percentage of Total Par Value
Adjustable – LIBOR	$	6,957	9	%	$	3,232	6	%
Adjustable – LIBOR, callable at borrower’s option	16,495		21		15,396		31
Adjustable – LIBOR, with caps and/or floors and PPS(1)	83		—		30		—
Adjustable – Other Indices	2		—		2		—
Subtotal adjustable rate advances	23,537		30		18,660		37
Fixed	38,242		50		20,448		42
Fixed – amortizing	210		—		214		—
Fixed – with PPS(1)	4,035		5		3,060		6
Fixed – with caps and PPS(1)	425		1		375		1
Fixed – callable at borrower’s option	1,802		2		2		—
Fixed – callable at borrower’s option with PPS(1)	75		—		107		—
Fixed – putable at Bank’s option	—		—		50		—
Fixed – putable at Bank’s option with PPS(1)	—		—		75		—
Subtotal fixed rate advances	44,789		58		24,331		49
Daily variable rate	9,160		12		6,866		14
Total par value	$	77,486	100	%	$	49,857	100	%

(1) Partial prepayment symmetry (PPS) is a product feature under which the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. Any prepayment credit on an advance with PPS would be limited to the lesser of 10% of the par value of the advance or the gain recognized on the termination of the associated interest rate swap, which may also include a similar contractual gain limitation.

For a discussion of advances credit risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Advances.”

Non-MBS Investments –The Bank’s non-MBS investment portfolio consists of financial instruments that are used primarily to facilitate the Bank’s role as a cost-effective provider of credit and liquidity to members and to support the operations of the Bank. The Bank’s total non-MBS investment portfolio was $25.7 billion and $23.9 billion as of December 31, 2017 and 2016, respectively. The increase in the total size of the non-MBS investment portfolio

42

reflects higher balances of Federal funds sold, partially offset by lower balances of securities purchased under agreements to resell, agency securities, and certificates of deposit.

Interest rate payment terms for non-MBS investments classified as HTM at December 31, 2017 and 2016, are detailed in the following table:

Non-MBS Investments: Interest Rate Payment Terms
(In millions)	2017		2016
Amortized cost of HTM securities other than MBS:
Fixed rate	$	500	$	1,350
Adjustable rate	187		225
Total	$	687	$	1,575

Borrowings – Total liabilities (primarily consolidated obligations) funding the advances-related business increased to $96.6 billion at December 31, 2017, from $68.5 billion at December 31, 2016. For further information and discussion of the Bank’s joint and several liability for FHLBank consolidated obligations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” and “Item 8. Financial Statements and Supplementary Data – Note 20 – Commitments and Contingencies.”

To meet the specific needs of certain investors, fixed and adjustable rate consolidated obligation bonds may contain embedded call options or other features that result in complex coupon payment terms. When these consolidated obligation bonds are issued on behalf of the Bank, typically the Bank simultaneously enters into interest rate exchange agreements with features that offset the complex features of the bonds and, in effect, convert the bonds to adjustable rate instruments. For example, the Bank uses fixed rate callable bonds that are typically offset with interest rate exchange agreements with call features that offset the call options embedded in the callable bonds. This combined financing structure enables the Bank to meet its funding needs at costs not generally attainable solely through the issuance of comparable term non-callable debt.

At December 31, 2017, the notional amount of interest rate exchange agreements associated with the advances-related business totaled $95.5 billion, of which $44.3 billion were hedging advances, $50.4 billion were hedging consolidated obligations, $0.8 billion were economically hedging trading securities, and $14 million were offsetting derivatives. At December 31, 2016, the notional amount of interest rate exchange agreements associated with the advances-related business totaled $59.4 billion, of which $18.7 billion were hedging advances, $39.9 billion were hedging consolidated obligations, $0.7 billion were economically hedging trading securities, and $0.1 billion were offsetting derivatives. The hedges associated with advances and consolidated obligations were primarily used to convert the fixed rate cash flows of the advances and consolidated obligations to adjustable rate cash flows or to manage the interest rate sensitivity and net repricing gaps of assets, liabilities, and interest rate exchange agreements.

FHLBank System consolidated obligation bonds and discount notes, along with similar debt securities issued by other GSEs such as Fannie Mae and Freddie Mac, are generally referred to as agency debt. The costs of debt issued by the FHLBanks and the other GSEs generally rise and fall with increases and decreases in general market interest rates.

The following table presents a comparison of selected market interest rates as of December 31, 2017 and 2016. All selected market interest rates increased in 2017 compared to the prior yearend.

43

Selected Market Interest Rates
Market Instrument	2017		2016
Federal Reserve target range for overnight Federal funds	1.25-1.50	%	0.50-0.75	%
3-month Treasury bill	1.36		0.50
3-month LIBOR	1.69		1.00
2-year Treasury note	1.89		1.19
5-year Treasury note	2.21		1.93

The following table presents a comparison of the average issuance cost of FHLBank System consolidated obligation bonds and discount notes converted to LIBOR-indexed liabilities through interest rate swaps in 2017 and 2016. The average issuance cost relative to LIBOR of bonds improved while the average issuance cost of discount notes deteriorated in 2017 compared to 2016.

	Spread to LIBOR of Average Cost of Consolidated Obligations for the Twelve Months Ended
(In basis points)	December 31, 2017	December 31, 2016
Consolidated obligation bonds	–21.6	–14.8
Consolidated obligation discount notes (one month and greater)	–26.1	–30.5

Mortgage-Related Business. The mortgage-related business consists of MBS investments, mortgage loans acquired through the Mortgage Partnership Finance (MPF) Program, and the related financing and hedging instruments. Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield on the MBS and mortgage loans and the cost of the consolidated obligations funding those assets, including the net settlements from associated interest rate exchange agreements.

At December 31, 2017, assets associated with this segment were $20.0 billion (16% of total assets), an increase of $2.1 billion from $17.9 billion at December 31, 2016 (19% of total assets).

Adjusted net interest income for this segment was $325 million in 2017, a decrease of $13 million, or 4%, from $338 million in 2016. The decrease in adjusted net interest income was due to lower spreads on interest-earning assets, primarily caused by lower spreads on new investments, and lower accretion-related income, which more than offset the impact of higher average balances of MBS investments and mortgage loans.

Adjusted net interest income for this segment represented 58%, 69%, and 69% of total adjusted net interest income for 2017, 2016, and 2015, respectively.

MBS Investments – The Bank’s MBS portfolio was $17.8 billion at December 31, 2017, compared with $17.0 billion at December 31, 2016. During 2017, the Bank’s MBS portfolio increased primarily because of $4.9 billion in new MBS investments, partially offset by $4.1 billion in principal repayments. Average MBS investments were $16.6 billion in 2017, an increase of $1.0 billion from $15.6 billion in 2016. For a discussion of the composition of the Bank’s MBS portfolio and the Bank’s OTTI analysis of that portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Investments” and “Item 8. Financial Statements and Supplementary Data – Note 7 – Other-Than-Temporary Impairment Analysis.”

Intermediate-term and long-term fixed rate MBS investments are subject to prepayment risk, and intermediate-term and long-term adjustable rate MBS investments are also subject to interest rate cap risk. The Bank has managed these risks predominately by purchasing intermediate-term fixed rate MBS (rather than long-term fixed rate MBS), funding the fixed rate MBS with a mix of non-callable and callable debt, and using interest rate exchange agreements with interest rate risk characteristics similar to callable debt. The Bank has purchased interest rate caps to hedge some of the interest rate cap risk associated with the long-term adjustable rate MBS investments.

44

Interest rate payment terms for MBS securities at December 31, 2017 and 2016, are shown in the following table:

MBS Investments: Interest Rate Payment Terms
(In millions)	2017		2016
Amortized cost of MBS:
Passthrough securities:
Fixed rate	$	26	$	84
Adjustable rate	2,406		1,414
Subtotal	2,432		1,498
Collateralized mortgage obligations:
Fixed rate	4,738		6,427
Adjustable rate	10,325		8,989
Subtotal	15,063		15,416
Total	$	17,495	$	16,914

Certain MBS classified as fixed rate passthrough securities and fixed rate collateralized mortgage obligations have an initial fixed interest rate that subsequently converts to an adjustable interest rate on a specified date as follows:

(In millions)	2017		2016
Passthrough securities:
Converts in 1 year or less	$	—	$	48
Converts after 1 year through 5 years	24		32
Total	$	24	$	80
Collateralized mortgage obligations:
Converts in 1 year or less	$	—	$	91
Total	$	—	$	91

MPF Program – Under the MPF Program, the Bank may purchase from members, for its own portfolio, conventional conforming fixed rate mortgage loans under the MPF Original product and mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) under the MPF Government product. In addition, the Bank may facilitate the purchase of conforming fixed rate mortgage loans from members for concurrent sale to Fannie Mae under the MPF Xtra product; of jumbo fixed rate mortgage loans for concurrent sale to Redwood Residential Acquisition Corporation, a subsidiary of Redwood Trust, Inc., a real estate investment trust, under the MPF Direct product; and of government-insured or government-guaranteed mortgage loans that will be packaged into securities backed by the mortgage loans and guaranteed by Ginnie Mae under the MPF Government MBS product. When members sell mortgage loans under the MPF Xtra, MPF Direct, and MPF Government MBS products, the loans are sold to a third-party investor and are not recorded on the Bank’s Statements of Condition.

From May 2002 through October 2006, the Bank purchased conventional conforming fixed rate mortgage loans from its participating financial institutions under the MPF Original and MPF Plus products. Participating members originated or purchased the mortgage loans, credit-enhanced them and sold them to the Bank, and generally retained the servicing of the loans.

As of December 31, 2017, all mortgage loans purchased by the Bank under the MPF Program were qualifying conventional conforming fixed rate, first lien mortgage loans with fully amortizing loan terms of up to 30 years. A conventional loan is one that is not insured by the federal government or any of its agencies. Conforming loan size, which is established annually as required by Finance Agency regulations, may not exceed the loan limits set by the Finance Agency each year. All MPF loans are secured by owner-occupied, one- to four-unit residential properties or single-unit second homes.

45

The MPF Servicing Guide establishes the MPF Program requirements for loan servicing and servicer eligibility. At the time the Bank purchases loans under the MPF Program, the member selling the loans makes representations that all mortgage loans it delivers to the Bank have the characteristics of an investment quality mortgage. An investment quality mortgage is a loan that is made to a borrower from whom repayment of the debt can be expected, is adequately secured by real property, and was originated and is being serviced in accordance with the MPF Origination Guide and MPF Servicing Guide or an approved waiver.

The FHLBank of Chicago, which developed the MPF Program, establishes the minimum eligibility standards for members to participate in the program, the structure of the MPF products, and the standard eligibility criteria for the loans; establishes pricing and manages the delivery mechanism for the loans; publishes and maintains the MPF Origination Guide and the MPF Servicing Guide; and provides operational support for the program. In addition, the FHLBank of Chicago acts as master servicer and as master custodian for the MPF loans held by the Bank and is compensated for these services through fees paid by the Bank. The FHLBank of Chicago is obligated to provide operational support to the Bank for all loans purchased until those loans are fully repaid.

As of December 31, 2017, the Bank had approved 23 members as participating financial institutions since renewing its participation in the MPF Program in 2013. The Bank purchased $1.4 billion in eligible loans under the MPF Original product during 2017.

Mortgage loan balances increased to $2.1 billion at December 31, 2017, from $0.8 billion at December 31, 2016, an increase of $1.3 billion. Average mortgage loans were $1.4 billion in 2017, an increase of $0.7 billion from $0.7 billion in 2016.

At December 31, 2017 and 2016, the Bank held conventional conforming fixed rate mortgage loans purchased under one of two MPF products, MPF Plus or MPF Original, which are described in greater detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – MPF Program.” Mortgage loan balances at December 31, 2017 and 2016, were as follows:

Mortgage Loan Balances by MPF Product Type
(In millions)	2017			2016
MPF Plus	$	267		$	354
MPF Original	1,738			460
Subtotal	2,005			814
Unamortized premiums	76			18
Unamortized discounts	(5		)	(6		)
Mortgage loans held for portfolio	2,076			826
Less: Allowance for credit losses	—			—
Mortgage loans held for portfolio, net	$	2,076		$	826

The following table presents the balances of loans wholly owned by the Bank and loans with allocated participation interests that were outstanding as of December 31, 2017 and 2016. Only the FHLBank of Chicago owned participation interests in any of the Bank’s MPF loans.

46

Balances Outstanding on Mortgage Loans
(Dollars in millions)	2017		2016
Outstanding amounts wholly owned by the Bank	$	1,916	$	688
Outstanding amounts with participation interests by FHLBank:
San Francisco	89		126
Chicago	62		84
Total	$	2,067	$	898
Number of loans outstanding:
Number of outstanding loans wholly owned by the Bank	5,797		3,671
Number of outstanding loans participated	2,203		3,180
Total number of loans outstanding	8,000		6,851

Under the Bank’s agreement with the FHLBank of Chicago, the credit risk is shared pro rata between the two FHLBanks according to: (i) their respective ownership of the loans in each master commitment for MPF Plus and (ii) their respective participation shares of the first loss account for the master commitment for MPF Original.

The Bank is responsible for credit oversight of the participating financial institution, which consists of monitoring the financial condition of the participating financial institution on a quarterly basis and holding collateral to secure the participating financial institution’s outstanding credit enhancement obligations. Monitoring of the participating financial institution’s financial condition includes an evaluation of its capital, assets, management, earnings, and liquidity.

The Bank performs periodic reviews of its mortgage loan portfolio to identify probable credit losses in the portfolio and to determine the likelihood of collection on the loans in the portfolio. For more information on the Bank’s mortgage loan portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – MPF Program” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Allowance for Credit Losses – Mortgage Loans Acquired Under the MPF Program.”

The Bank manages the interest rate risk and prepayment risk of the mortgage loans by funding these assets with callable and non-callable debt, by entering into certain interest rate swaps, and by limiting the size of the fixed rate mortgage loan portfolio.

Borrowings – Total consolidated obligations funding the mortgage-related business increased$2.1 billion to $20.0 billion at December 31, 2017, from $17.9 billion at December 31, 2016, paralleling the increase in MBS investments. For further information and discussion of the Bank’s joint and several liability for FHLBank consolidated obligations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” and “Item 8. Financial Statements and Supplementary Data – Note 20 – Commitments and Contingencies.”

The notional amount of interest rate exchange agreements associated with the mortgage-related business totaled $4.1 billion at December 31, 2017, of which $2.6 billion were hedging or were associated with consolidated obligations funding the mortgage portfolio and $1.5 billion were associated with MBS. The notional amount of interest rate exchange agreements associated with the mortgage-related business totaled $5.6 billion at December 31, 2016, of which $3.4 billion were hedging or were associated with consolidated obligations funding the mortgage portfolio and $2.2 billion were associated with MBS.

47

Liquidity and Capital Resources

The Bank’s financial strategies are designed to enable the Bank to expand and contract its assets, liabilities, and capital as membership composition and member credit needs change. The Bank’s liquidity and capital resources are designed to support its financial strategies. The Bank’s primary source of liquidity is its access to the debt capital markets through consolidated obligation issuance, which is described in “Item 1. Business – Funding Sources.” The Bank’s status as a GSE is critical to maintaining its access to the capital markets. Although consolidated obligations are backed only by the financial resources of the FHLBanks and are not guaranteed by the U.S. government, the capital markets have traditionally treated the FHLBanks’ consolidated obligations as comparable to federal agency debt, providing the FHLBanks with access to funding at relatively favorable rates. The maintenance of the Bank’s capital resources is governed by its capital plan.

Liquidity

The Bank strives to maintain the liquidity necessary to repay maturing consolidated obligations for which it is the primary obligor, meet other obligations and commitments, and meet expected and unexpected member credit demands. The Bank monitors its financial position in order to maintain ready access to sufficient liquid funds to meet normal transaction requirements, take advantage of appropriate investment opportunities, and cover unforeseen liquidity demands.

The Bank’s ability to expand as member credit needs increase is based, in part, on the capital stock requirements for advances. A member is required to maintain sufficient capital stock to support its advances activity with the Bank. Unless a member already has sufficient excess capital stock, it must increase its capital stock investment in the Bank as its balance of outstanding advances increases. Under the Bank’s Capital Plan, the Bank may also require a member to purchase activity-based stock for mortgage loans purchased and held by the Bank. The activity-based capital stock requirement is currently 2.7% for outstanding advances and 0.0% for mortgage loans purchased and held by the Bank, while the Bank’s minimum regulatory capital-to-assets ratio requirement is currently 4.0%; therefore, the Bank maintains a certain required level of retained earnings to support capital compliance and business growth. For more information, see “Item 1. Business – Dividends and Retained Earnings” and “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital – Excess Stock Repurchase, Retained Earnings, and Dividend Framework.” Because the Bank’s capital plan does not provide for the issuance of Class A stock (non-permanent capital that is redeemable upon six months’ notice), regulatory capital for the Bank is composed of retained earnings and Class B stock, including mandatorily redeemable capital stock (which is classified as a liability for financial reporting purposes), and excludes AOCI.

The Bank is also able to contract its balance sheet as borrowers’ credit needs decrease. As changing borrower credit

needs result in reduced advances, borrowers will have capital stock in excess of the amount required by the Bank’s

capital plan. The Bank’s capital plan allows the Bank to repurchase a borrower’s excess capital stock, at the Bank’s

discretion. The Framework sets forth the Bank’s practice of repurchasing the surplus capital stock of all members and the excess capital stock of all nonmember shareholders on a regular quarterly basis, at the Bank’s discretion and subject to certain statutory and regulatory requirements and to the Bank’s Risk Management Policy and capital plan limitations. Surplus capital stock is defined as any stock holdings in excess of 115% of a member’s minimum stock requirement.

The Bank may also allow its consolidated obligations to mature without replacement or repurchase and retire outstanding consolidated obligations, allowing its balance sheet to contract.

The Bank maintained its strong regulatory capital position while repurchasing $414 million and $812 million in excess capital stock during 2017 and 2016, respectively, and redeeming $75 million and $28 million in mandatorily redeemable capital stock in 2017 and 2016, respectively. Total excess capital stock was $493 million as of December 31, 2017, compared to $488 million as of December 31, 2016.

48

The Bank is not able to predict future trends in member credit needs since they are driven by complex interactions among a number of factors, including members’ mortgage loan growth, other asset portfolio growth, deposit growth, and the attractiveness of advances compared to other wholesale borrowing alternatives. The Bank regularly monitors current trends and anticipates future debt issuance needs with the objective of being prepared to fund its members’ credit needs and appropriate investment opportunities.

Short-term liquidity management practices are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk.” The Bank manages its liquidity needs to enable it to meet all of its contractual obligations on a timely basis, to support its members’ daily liquidity needs, and to pay operating expenditures as they come due. The Bank maintains contingency liquidity plans to meet its obligations and the liquidity needs of members in the event of short-term operational disruptions at the Bank or the Office of Finance or short-term disruptions of the capital markets. For further information and discussion of the Bank’s guarantees and other commitments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Off-Balance Sheet Arrangements and Aggregate Contractual Obligations.” For further information and discussion of the Bank’s joint and several liability for FHLBank consolidated obligations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” and “Item 8. Financial Statements and Supplementary Data – Note 20 – Commitments and Contingencies.”

Capital

The Bank may repurchase some or all of a shareholder’s excess capital stock, including any excess mandatorily redeemable capital stock, at the Bank’s discretion, subject to certain statutory and regulatory requirements. The Bank must give the shareholder 15 days’ written notice; however, the shareholder may waive this notice period. The Bank may also repurchase all of a member's excess capital stock at a member’s request, at the Bank’s discretion, subject to certain statutory and regulatory requirements. Excess capital stock is defined as any capital stock holdings in excess of a shareholder's minimum capital stock requirement, as established by the Bank’s capital plan.

A member may schedule redemption of its excess capital stock following a five-year redemption period, subject to certain conditions, by providing a written redemption notice to the Bank. Capital stock may also become subject to redemption following a five-year redemption period after a member gives notice of intention to withdraw from membership or attains nonmember status by merger or acquisition, charter termination, or other involuntary membership termination, or after a receiver or other liquidating agent for a member transfers the member’s Bank capital stock to a nonmember entity. Capital stock required to meet a withdrawing member’s membership capital stock requirement may only be redeemed at the end of the five-year redemption period, subject to statutory and regulatory limits and other conditions.

On a quarterly basis, the Bank determines whether it will repurchase excess capital stock. The Bank maintained its strong regulatory capital position while repurchasing $414 million and $812 million in excess capital stock during 2017 and 2016, respectively.

The Bank's Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) sets forth the Bank’s practice of repurchasing the surplus capital stock of all members and the excess capital stock of all nonmember shareholders on a regular quarterly basis, at the Bank’s discretion and subject to certain statutory and regulatory requirements and to the Bank’s Risk Management Policy and capital plan limitations. Surplus capital stock is defined as any stock holdings in excess of 115% of a member’s minimum stock requirement, and excess capital stock is defined as any stock holdings in excess of a shareholder’s minimum stock requirement. In addition, at the Bank’s discretion, all of the excess stock held by a member may be repurchased upon request of the member, subject to the requirements and limitations mentioned above. In accordance with the Framework, each quarter Bank management evaluates and determines the amount of capital stock to be repurchased in that quarter, if any, giving consideration to certain capital metrics and capital management objectives and strategies, and subject to the requirements and limitations listed above. At least 15 calendar days before any repurchase, the Bank will notify shareholders of its intention to repurchase capital stock and of the scheduled repurchase date. On the scheduled

49

repurchase date, the Bank will calculate the amount of stock to be repurchased to ensure that each member and former nonmember shareholder will continue to meet its minimum stock requirement after the repurchase.

In accordance with its practice, the Bank plans to repurchase the surplus capital stock of all members and the excess capital stock of all nonmember shareholders on March 16, 2018.

The Bank is required to redeem any mandatorily redeemable capital stock that is in excess of a former member’s minimum stock requirement on or after the expiration of the five-year redemption date. During 2017 and 2016, the Bank redeemed $75 million and $28 million, respectively, in mandatorily redeemable capital stock, for which the five-year redemption period had expired, at its $100 par value. The stock was redeemed on the scheduled redemption dates or, for stock that was not excess stock on its scheduled redemption date because of outstanding activity with the Bank, on the first available repurchase date after the stock was no longer required to support outstanding activity with the Bank.

The Bank will continue to monitor the condition of its PLRMBS portfolio, the ratio of the Bank’s estimated market value of total capital to par value of capital stock, its overall financial performance and retained earnings, developments in the mortgage and credit markets, and other relevant information as the basis for determining the repurchase of excess capital stock in future quarters.

Excess capital stock totaled $493 million as of December 31, 2017, which included surplus capital stock of $317 million. Excess capital stock totaled $488 million as of December 31, 2016, which included surplus capital stock of $325 million.

Provisions of the Bank’s capital plan are more fully discussed in “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital.”

Regulatory Capital Requirements

The FHLBank Act and Finance Agency regulations specify that each FHLBank must meet certain minimum regulatory capital standards. The Bank must maintain: (i) total regulatory capital in an amount equal to at least 4% of its total assets, (ii) leverage capital in an amount equal to at least 5% of its total assets, and (iii) permanent capital in an amount that is greater than or equal to its risk-based capital requirement. Because the Bank issues only Class B stock, regulatory capital and permanent capital for the Bank are both composed of retained earnings and Class B stock, including mandatorily redeemable capital stock (which is classified as a liability for financial reporting purposes). Regulatory capital and permanent capital do not include AOCI. Leverage capital is defined as the sum of permanent capital weighted by a 1.5 multiplier plus non-permanent capital. The risk-based capital requirement is equal to the sum of the Bank’s credit risk, market risk, and operations risk capital requirements, all of which are calculated in accordance with the rules and regulations of the Finance Agency.

The following table shows the Bank’s compliance with the Finance Agency’s capital requirements at December 31, 2017 and 2016. The Bank’s risk-based capital requirement decreased to $2.0 billion at December 31, 2017, from $2.2 billion at December 31, 2016.  

Regulatory Capital Requirements
	2017						2016
(Dollars in millions)	Required			Actual			Required			Actual
Risk-based capital	$	2,023		$	6,797		$	2,241		$	5,883
Total regulatory capital	4,935			6,797			3,678			5,883
Total regulatory capital ratio	4.00		%	5.51		%	4.00		%	6.40		%
Leverage capital	$	6,169		$	10,195		$	4,597		$	8,825
Leverage ratio	5.00		%	8.26		%	5.00		%	9.60		%

50

The Bank repurchased $414 million in excess capital stock during 2017. As a result of changes in the Bank’s capital plan in 2015 that reduced the activity-based capital stock requirement to 2.7% for outstanding advances and 0.0% for mortgage loans purchased and held by the Bank, both capital stock and retained earnings are required to support regulatory capital compliance.

The Bank’s capital requirements are more fully discussed in “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital.”

Risk Management

The Bank has an integrated corporate governance and internal control framework designed to support effective management of the Bank’s business activities and the risks inherent in these activities. As part of this framework, the Bank’s Board of Directors has adopted a Risk Governance Policy that outlines the key roles and responsibilities of the Board of Directors and management and sets forth how the Bank is organized to achieve its risk management objectives, including the implementation of the Bank’s strategic objectives, risk management strategies, corporate governance, and standards of conduct. The policy also establishes the Bank’s risk governance organizational structure and identifies the general roles and responsibilities of the Board of Directors and management in establishing risk management policies, procedures, and guidelines; in overseeing the enterprise risk profile; and in implementing enterprise risk management processes and business strategies. The policy establishes an independent risk oversight function to identify, assess, measure, monitor, and report on the enterprise risk profile and risk management capabilities of the Bank.

The Bank’s risk management framework includes a risk appetite statement, risk policies, and related procedures and guidelines established by the Board of Directors and management to address and manage risk. These include both enterprise-wide risk policies and related procedures and guidelines.

The Risk Management Policy establishes risk limits, guidelines, and standards for credit risk, market risk, liquidity risk, operations risk, and business risk in accordance with Finance Agency regulations, the risk profile established by the Board of Directors, and other applicable guidelines in connection with the Bank’s overall risk management. The Member Products Policy, which applies to products offered to members and housing associates (nonmember mortgagees approved under Title II of the National Housing Act, to which the Bank is permitted to make advances under the FHLBank Act), addresses the credit risk of secured credit by establishing credit underwriting criteria, appropriate collateralization levels, and collateral valuation methodologies. The Bank also establishes polices for capital management and compliance risk management.

Business Risk

Business risk is defined as the possibility of an adverse impact on the Bank’s ability to fulfill its mission and to meet ongoing business and profitability objectives resulting from external factors that may occur in both the short and long term. Such factors may include, but are not limited to, continued financial services industry consolidation; changes in the membership base and in member demand for Bank products; the concentration of borrowing among members; the introduction of new competing products and services; increased inter-FHLBank and non-FHLBank competition; and significant adverse changes to the effectiveness and competitiveness of the Bank’s products, services, or business model associated with regulatory and legislative changes.

The identification of business risks is an integral part of the Bank’s annual planning process, and the Bank’s strategic plan identifies initiatives and plans to address these risks.

Operations Risk

Operations risk is defined as the risk of loss to the Bank resulting from inadequate or failed internal processes, resources, and systems and from external events. The Bank’s operations risk is controlled through a system of

51

internal controls designed to minimize the risk of operational losses. Also, the Bank has established and annually tests its business continuity plan under various business disruption scenarios involving offsite recovery and the testing of the Bank’s operations and information systems. In addition, an ongoing internal audit function audits significant risk areas to evaluate the Bank’s internal controls.

Concentration Risk

Concentration risk for the Bank is defined as the exposure to loss arising from a disproportionately large number of financial transactions with a limited number of individual customers or counterparties.

Advances. The following tables present the concentration in advances and the interest income (before the impact of interest rate exchange agreements associated with advances) from the advances to the Bank’s top five borrowers and their affiliates at December 31, 2017 and 2016.

Concentration of Advances and Interest Income from Advances Top Five Borrowers and Their Affiliates
(Dollars in millions)
December 31, 2017
Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
Charles Schwab Bank	$	15,000	19	%	$	40	5	%
JPMorgan Chase Bank, National Association(2)	11,363		15		174		19
First Republic Bank	8,400		11		112		12
MUFG Union Bank, National Association	7,250		9		48		5
Bank of the West	6,409		8		87		10
Subtotal	48,422		62		461		51
Others	29,064		38		438		49
Total par value	$	77,486	100	%	$	899	100	%

December 31, 2016
Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
JPMorgan Chase Bank, National Association(2)	$	14,807	30	%	$	119	23	%
Bank of the West	7,305		14		49		9
First Republic Bank	5,900		12		70		13
CIT Bank, N.A.	2,411		5		28		5
Star One Credit Union	2,024		4		27		5
Subtotal	32,447		65		293		55
Others	17,410		35		240		45
Total par value	$	49,857	100	%	$	533	100	%

(1) Interest income amounts exclude the interest effect of interest rate exchange agreements with derivative counterparties; as a result, the total interest income amounts will not agree to the Statements of Income. The amount of interest income from advances can vary depending on the amount outstanding, terms to maturity, interest rates, and repricing characteristics.

(2) Nonmember institution.

Because of this concentration in advances, the Bank may perform more frequent credit and collateral reviews for some of these institutions, including more frequent analysis of detailed data on pledged loan collateral to assess the credit quality and risk-based valuation of the loans. The Bank also analyzes the implications for its financial

52

management and profitability if it were to lose the advances business of one or more of these institutions or if the advances outstanding to one or more of these institutions were not replaced when repaid.

If these institutions were to prepay the advances (subject to the Bank’s limitations on the amount of advances prepayments from a single borrower in a day or a month) or repay the advances as they came due and no other advances were made to replace them, the Bank’s assets would decrease significantly and income could be adversely affected. In addition, because JPMorgan Chase is not a member of the Bank, it is not able to borrow new advances from the Bank or replace outstanding advances as they are repaid or prepaid, so a decrease in advances outstanding to JPMorgan Chase, if they are not replaced with advances to other members or other assets, will result in lower total assets and may result in lower net income for the Bank. The timing and magnitude of the impact would depend on a number of factors, including: (i) the amount of advances prepaid or repaid and the period over which the advances were prepaid or repaid, (ii) the amount and timing of any decreases in capital, (iii) the profitability of the advances, (iv) the size and profitability of the Bank’s investments, (v) the extent to which debt matured as the advances were prepaid or repaid, and (vi) the ability of the Bank to extinguish debt or transfer it to other FHLBanks and the costs to extinguish or transfer the debt. As discussed in “Item 1. Business – Our Business Model,” the Bank’s financial strategies are designed to enable it to expand and contract its assets, liabilities, and capital in view of changes in membership composition and member credit needs while striving to pay members a reasonable return on their investment in the Bank’s capital stock. Under the Bank’s capital plan, the Bank may repurchase all of a shareholder’s excess capital stock, including any excess mandatorily redeemable capital stock, at the Bank’s discretion, subject to certain statutory and regulatory requirements.

MPF Program. The Bank had the following concentration in MPF loans with institutions whose outstanding total of mortgage loans sold to the Bank represented 10% or more of the Bank’s total outstanding mortgage loans at December 31, 2017 and 2016.

Concentration of Mortgage Loans
(Dollars in millions)
December 31, 2017
Name of Institution	Mortgage Loan Balances Outstanding		Percentage of  Total Mortgage Loan Balances Outstanding		Number of Mortgage Loans Outstanding	Percentage of Total Number of Mortgage  Loans Outstanding
Fremont Bank	$	1,145	57	%	2,121	27	%
JPMorgan Chase Bank, National Association(1)	249		12		3,244	40
Subtotal	1,394		69		5,365	67
Others	611		31		2,635	33
Total	$	2,005	100	%	8,000	100	%

December 31, 2016
Name of Institution	Mortgage Loan Balances Outstanding		Percentage of  Total Mortgage Loan Balances Outstanding		Number of Mortgage Loans Outstanding	Percentage of Total Number of Mortgage  Loans Outstanding
JPMorgan Chase Bank, National Association(1)	$	323	40	%	4,065	59	%
Bank of Hope(2)	132		16		319	5
Fremont Bank	99		12		211	3
Kinecta Federal Credit Union	90		11		167	3
Subtotal	644		79		4,762	70
Others	170		21		2,089	30
Total	$	814	100	%	6,851	100	%

(1) Nonmember institution.

(2) Effective July 29, 2016, Wilshire Bank merged with and into BBCN Bank, which was renamed Bank of Hope.

53

Members that sell mortgage loans to the Bank through the MPF Program make representations and warranties that the loans comply with the MPF underwriting guidelines. In the event a mortgage loan does not comply with the MPF underwriting guidelines, the Bank’s agreement with the participating financial institution provides that the institution is required to repurchase the loan as a result of the breach of the institution’s representations and warranties. The Bank may, at its discretion, choose to retain the loan if the Bank determines that the noncompliance can be cured or mitigated through additional contract assurances from the institution or any successor. In addition, most participating financial institutions have retained the servicing on the mortgage loans purchased by the Bank, and the servicing obligation of any former participating financial institution is held by the successor or another Bank-approved financial institution. The FHLBank of Chicago (the MPF Provider and master servicer) has contracted with Wells Fargo Bank, N.A., to monitor the servicing performed by all participating financial institutions and successors, including JPMorgan Chase, Bank of Hope, Fremont Bank, and Kinecta Federal Credit Union. The Bank obtains a Type II Statement on Standards for Attestation Engagements (SSAE) No. 18 service auditor's report to confirm the effectiveness of the MPF Provider's controls over the services it provides to the Bank, including its monitoring of the participating financial institutions’ servicing. The FHLBank of Chicago outsourced a portion of its infrastructure controls to a third party, and the SSAE No. 18 service auditor’s report addresses the effectiveness of certain controls performed by the third party. The Bank has the right to transfer the servicing at any time, without paying the participating financial institution or any successor a servicing termination fee, in the event a participating financial institution or any successor does not meet the MPF servicing requirements. The Bank may also transfer servicing without cause subject to a servicing transfer fee payable to the participating financial institution or any successor.

Investments. The following table presents the portfolio concentration in the Bank’s investment portfolios at December 31, 2017 and 2016, with U.S. government corporation and GSE issuers and other issuers (at the time of purchase), whose aggregate carrying values represented 10% or more of the Bank’s capital (including mandatorily redeemable capital stock). The amounts include securities issued by the issuer’s holding company, along with its affiliated companies. The Bank’s investment portfolio includes securities classified as trading, AFS, and HTM, and other assets such as securities purchased under agreements to resell, interest-bearing deposits, and Federal funds sold.

Investments: Portfolio Concentration
	2017				2016
(In millions)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Non-MBS:
Certificates of deposit
Toronto Dominion Bank	$	—	$	—	$	600	$	600
Other(1)	500		500		750		750
Total Certificates of deposit	500		500		1,350		1,350
Housing finance agency bonds:
California Housing Finance Agency (CalHFA) bonds	187		178		225		207
GSEs:
Federal Farm Credit Bank (FFCB) bonds	1,158		1,158		2,058		2,058
Total non-MBS	1,845		1,836		3,633		3,615
MBS:
Other U.S. obligations:
Ginnie Mae	757		757		959		963
GSEs:
Freddie Mac	6,690		6,687		4,349		4,356
Fannie Mae	5,731		5,759		6,095		6,127
Total GSEs	12,421		12,446		10,444		10,483

54

Investments: Portfolio Concentration (continued)
	2017				2016
(In millions)	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
PLRMBS:
Bank of America Corporation	—		—		550		548
Bear Stearns Companies Inc.	—		—		528		528
Countrywide Financial Corporation	665		665		802		801
IndyMac Bank, F.S.B.	697		705		802		811
Lehman Brothers Inc.	701		701		919		916
UBS AG	—		—		529		526
Other(1)	2,591		2,591		1,516		1,505
Total PLRMBS	4,654		4,662		5,646		5,635
Total MBS	17,832		17,865		17,049		17,081
Total securities	19,677		19,701		20,682		20,696
Securities purchased under agreements to resell:
Daiwa Capital Markets America, Inc.	1,500		1,500		—		—
Federal Reserve Bank of New York	7,250		7,250		15,500		15,500
HSBC Securities (USA), Inc.	1,000		1,000		—		—
Nomura Securities International, Inc.	2,000		2,000		—		—
Total Securities purchased under agreements to resell	11,750		11,750		15,500		15,500
Federal funds sold:
Australia & New Zealand Bank Group	1,725		1,725		1,033		1,033
The Bank of New York Mellon	1,033		1,033		—		—
Bank of Nova Scotia	1,100		1,100		688		688
Bank of Tokyo-Mitsubishi UFJ	1,108		1,108		—		—
Nordea Bank Finland	1,000		1,000		—		—
Rabobank Nederland	804		804		—		—
Societe Generale	—		—		688		688
Other(1)	4,258		4,259		1,805		1,805
Total Federal funds sold	11,028		11,029		4,214		4,214
Interest-bearing deposits
Citibank, N.A.	1,075		1,075		590		590
Other(1)	40		40		—		—
Total interest-bearing deposits	1,115		1,115		590		590
Total investments	$	43,570	$	43,595	$	40,986	$	41,000

(1) Includes issuers of securities that have a carrying value that is less than 10% of total Bank capital (including mandatorily redeemable capital stock).

Many of the Bank’s members and their affiliates are extensively involved in residential mortgage finance. Accordingly, members or their affiliates may be involved in the sale of MBS to the Bank or in the origination or securitization of the mortgage loans backing the MBS purchased by the Bank.

Capital Stock. The following table presents the concentration in capital stock held by institutions whose capital stock ownership represented 10% or more of the Bank’s outstanding capital stock, including mandatorily redeemable capital stock, as of December 31, 2017 or 2016.

55

	2017				2016
Name of Institution	Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding		Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding
Charles Schwab Bank	$	405	11	%	$	81	3	%
JPMorgan Chase Bank, National Association(1)	307		9		400		14
Subtotal	712		20		481		17
Others	2,840		80		2,346		83
Total	$	3,552	100	%	$	2,827	100	%

(1) The capital stock held by this nonmember institution is classified as mandatorily redeemable capital stock.

Derivative Counterparties. The following table presents the concentration in derivatives with derivative counterparties whose outstanding notional balances represented 10% or more of the Bank’s total notional amount of derivatives outstanding as of December 31, 2017 and 2016.

Concentration of Derivative Counterparties
(Dollars in millions)	2017					2016
Derivative Counterparty	Credit   Rating(1)	Notional Amount		Percentage of Total Notional Amount		Credit   Rating(1)	Notional Amount		Percentage of Total Notional Amount
Uncleared
Others	At least BBB	$	13,900	14	%	At least BBB	$	10,032	15	%
Subtotal uncleared		13,900		14			10,032		15
Cleared
LCH Ltd(2)
Credit Suisse Securities (USA) LLC	A	54,371		55		A	30,548		47
Morgan Stanley & Co. LLC	A	31,322		31		A	20,994		33
Deutsche Bank Securities Inc.		—		—		BBB	3,482		5
Subtotal cleared		85,693		86			55,024		85
Total(3)		$	99,593	100	%		$	65,056	100	%

(1) The credit ratings used by the Bank are based on the lower of Moody’s Investors Service (Moody’s) or S&P Global Ratings (S&P) ratings.

(2) London Clearing House (LCH) Ltd is the Bank’s counterparty for all of its cleared swaps. For purposes of clearing swaps with LCH Ltd, Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC are the Bank’s clearing agents, and Deutsche Bank Securities Incorporated was one of the Bank’s clearing agents until March 2017. LCH Ltd’s parent, LCH Group Holdings Limited, was rated A+ by S&P. On May 31, 2017, S&P lowered the rating to A and withdrew the rating at LCH Group Holdings Limited’s request. LCH Ltd’s ultimate parent, London Stock Exchange Group, plc., is rated A3 by Moody’s and A- by S&P.

(3) Total notional amount at December 31, 2017 and 2016, does not include $16 million and $13 million of mortgage delivery commitments with members, respectively.

Liquidity Risk

Liquidity risk is defined as the risk that the Bank will be unable to meet its obligations as they come due or meet the credit needs of its members and eligible nonmember borrowers in a timely and cost-effective manner. The Bank is required to maintain liquidity for operating needs and for contingency purposes in accordance with Finance Agency regulations and guidelines and with the Bank's own Risk Management Policy. The Bank strives to maintain the liquidity necessary to repay maturing consolidated obligations for which it is the primary obligor, meet other obligations and commitments, and meet expected and unexpected member credit demands. The Bank monitors its financial position in order to maintain ready access to sufficient liquid funds to meet normal transaction requirements, take advantage of appropriate investment opportunities, and cover unforeseen liquidity demands.

56

The Bank generally manages operational, contingent, and structural liquidity risks using a portfolio of cash and short-term investments and access to the debt capital markets. In addition, the Bank maintains alternate sources of funds, detailed in its contingent liquidity plan, which also includes an explanation of how sources of funds may be allocated under stressed market conditions, such as short-term operational disruptions at the Bank or the Office of Finance or short-term disruptions in the debt capital markets. The Bank maintains short-term, high-quality money market investments and government and agency securities in amounts that may average up to three times the Bank’s capital as a primary source of funds to satisfy these requirements and objectives.

The Bank has a regulatory contingent liquidity requirement to maintain at least 5 business days of liquidity to enable it to meet its obligations without issuance of new consolidated obligations. In addition, the Finance Agency has established liquidity guidelinesthatrequire each FHLBank to maintain sufficient on-balance sheet liquidity in an amount at least equal to its anticipated cash outflows for two different scenarios. Both scenarios assume no new consolidated obligation issuance and no reliance on repurchase agreements and permit the sale of certain existing investments as determined by the Finance Agency. The two scenarios differ only in the treatment of maturing advances. One scenario assumes that the Bank does not renew any maturing advances. For this scenario, the Bank must have sufficient liquidity to meet its obligations for 15 calendar days. The second scenario requires the Bank to renew maturing advances for certain members based on specific criteria established by the Finance Agency. For this scenario, the Bank must have sufficient liquidity to meet its obligations for 5 calendar days.

In addition to the regulatory contingent liquidity requirement and the Finance Agency’s guidelines on contingent liquidity, the Bank models its cash commitments and expected cash flows on a daily basis to determine its projected liquidity position. If a market or operational disruption occurred that prevented the issuance of new consolidated obligations, the Bank could meet its obligations by: (i) allowing short-term liquid investments to mature, (ii) using eligible securities as collateral for repurchase agreement borrowings, and (iii) if necessary, allowing advances to mature without renewal. In addition, the Bank may be able to borrow on a short-term unsecured basis from other financial institutions (Federal funds purchased) or other FHLBanks (inter-FHLBank borrowings).

The Bank actively monitors and manages structural liquidity risks, which the Bank defines as maturity mismatches greater than 90 days for sources and uses of funds, of the advances business segment. Structural liquidity maturity mismatches are identified using maturity gap analysis and valuation sensitivity metrics that quantify the risk associated with the Bank’s structural liquidity position.

The following table shows the Bank’s principal financial obligations due, estimated sources of funds available to meet those obligations, and the net difference between funds available and funds needed for the 5-business-day period following December 31, 2017 and 2016.

Principal Financial Obligations Due and Funds Available for Selected Period
	As of December 31, 2017		As of December 31, 2016
(In millions)	5 Business Days		5 Business Days
Obligations due:
Demand deposits	$	299	$	184
Loans from other FHLBanks	—		1,345
Discount note and bond maturities and expected exercises of bond call options	3,950		2,412
Subtotal obligations due	4,249		3,941
Sources of available funds:
Maturing investments	21,613		19,175
Available cash	27		1
Proceeds from scheduled settlements of discount notes and bonds	635		1,346
Maturing advances and scheduled prepayments	7,854		7,121
Subtotal sources of available funds	30,129		27,643
Net funds available	$	25,880	$	23,702

57

In addition, Section 11(i) of the FHLBank Act authorizes the U.S. Treasury to purchase certain obligations issued by the FHLBanks aggregating not more than $4.0 billion under certain conditions. There were no such purchases by the U.S. Treasury during the two-year period endedDecember 31, 2017.

Credit Risk

Credit risk is defined as the risk that the market value, or estimated fair value if market value is not available, of an obligation will decline as a result of deterioration in the creditworthiness of the obligor. The Bank further refines the definition of credit risk as the risk that a secured or unsecured borrower is unable to meet its financial obligations and the Bank is inadequately protected by the liquidation value of collateral, if any, which could result in a credit loss to the Bank.

Advances. The Bank manages the credit risk of advances and other credit products by setting the credit and collateral terms available to individual members and housing associates based on their creditworthiness and on the quality and value of the assets they pledge as collateral. The Bank also has procedures to assess the mortgage loan quality and documentation standards of institutions that pledge mortgage loan collateral. In addition, the Bank has collateral policies and restricted lending procedures in place to help manage its exposure to institutions that experience difficulty in meeting their capital requirements or other standards of creditworthiness. These credit and collateral policies balance the Bank’s dual goals of meeting the needs of members and housing associates as a reliable source of liquidity and mitigating credit risk by adjusting credit and collateral terms in view of deterioration in creditworthiness. The Bank has never experienced a credit loss on an advance.

The Bank determines the maximum amount and maximum term of the advances it will make to a member or housing associate based on the institution’s creditworthiness and eligible collateral pledged in accordance with the Bank’s credit and collateral policies and regulatory requirements. The Bank may review and change the maximum amount and maximum term at any time. The maximum amount a member or housing associate may borrow is also limited by the amount and type of collateral pledged because all advances must be fully collateralized.

To identify the credit strength of each borrower and potential borrower, other than insurance companies, community development financial institutions (CDFIs), and housing associates, the Bank assigns each member and each nonmember borrower an internal credit quality rating from one to ten, with one as the highest credit quality rating. These ratings are based on results from the Bank’s credit model, which considers financial, regulatory, and other qualitative information, including regulatory examination reports. The internal ratings are reviewed on an ongoing basis using current available information and are revised, if necessary, to reflect the institution’s current financial position. Credit and collateral terms may be adjusted based on the results of this credit analysis.

The Bank determines the maximum amount and maximum term of the advances it will make to an insurance company based on an ongoing risk assessment that considers the member's financial and regulatory standing and other qualitative information deemed relevant by the Bank. This evaluation results in the assignment of an internal credit quality rating from one to ten, with one as the highest credit quality rating. Approved terms are designed to meet the needs of the individual member while mitigating the unique credit and collateral risks associated with insurance companies, including risks related to the resolution process for insurance companies, which is significantly different from the resolution processes established for the Bank’s insured depository members.

The Bank determines the maximum amount and maximum term of the advances it will make to a CDFI based on an ongoing risk assessment that considers information from the CDFI’s audited annual financial statements, supplemented by additional information deemed relevant by the Bank. Approved terms are designed to meet the needs of the individual member while mitigating the unique credit and collateral risks of CDFIs, which do not file quarterly regulatory financial reports and are not subject to the same inspection and regulation requirements as the Bank’s insured depository members.

58

The Bank determines the maximum amount and maximum term of the advances it will make to a housing associate based on an ongoing risk assessment that considers the housing associate’s financial and regulatory standing and other qualitative information deemed relevant by the Bank. Approved terms are designed to meet the needs of the individual housing associate while mitigating the unique credit and collateral risks of housing associates, which do not file quarterly regulatory financial reports and are not subject to the same inspection and regulation requirements as the Bank’s insured depository members.

The Bank underwrites and actively monitors the financial condition and performance of all borrowers to determine and periodically assess creditworthiness. The Bank uses, to the extent available, financial information provided by the borrower, quarterly financial reports filed by borrowers with their primary regulators, regulatory examination reports and known regulatory enforcement actions, and public information. In determining creditworthiness, the Bank considers available examination findings, performance trends and forward-looking information, the borrower's business model, changes in risk profile, capital adequacy, asset quality, profitability, interest rate risk, supervisory history, the results of periodic collateral field reviews conducted by the Bank, the risk profile of the collateral, and the amount of eligible collateral on the borrower's balance sheet.

In accordance with the FHLBank Act, borrowers may pledge the following eligible assets to secure advances: one- to four-family first lien residential mortgage loans; multifamily mortgage loans; MBS; securities issued, insured, or guaranteed by the U.S. government or any of its agencies, including without limitation MBS backed by Fannie Mae, Freddie Mac, or Ginnie Mae; cash or deposits in the Bank; and certain other real estate-related collateral, such as commercial real estate loans and second lien residential mortgage loans or home equity loans. The Bank may also accept small business, small farm, and small agribusiness loans that are fully secured by collateral (such as real estate, equipment and vehicles, accounts receivable, and inventory) from members that are community financial institutions. The Housing and Economic Recovery Act of 2008 (Housing Act) added secured loans for community development activities as collateral that the Bank may accept from community financial institutions. The Housing Act defined community financial institutions as depository institutions insured by the Federal Deposit Insurance Corporation with average total assets over the preceding three-year period of $1 billion or less, to be adjusted for inflation annually by the Finance Agency. The average total asset cap for 2017 was $1,148 million.

Under the Bank’s written lending agreements with its borrowers, its credit and collateral policies, and applicable statutory and regulatory provisions, the Bank has the right to take a variety of actions to address credit and collateral concerns, including calling for the borrower to pledge additional or substitute collateral (including ineligible collateral) at any time that advances are outstanding to the borrower, and requiring the delivery of all pledged collateral. In addition, if a borrower fails to repay any advance or is otherwise in default on its obligations to the Bank, the Bank may foreclose on and liquidate the borrower’s collateral and apply the proceeds toward repayment of the borrower’s obligations to the Bank. The Bank’s collateral policies are designed to address changes in the value of collateral and the risks and costs relating to foreclosure and liquidation of collateral, and the Bank periodically adjusts the amount it is willing to lend against various types of collateral to reflect these factors. Market conditions, the volume and condition of the borrower’s collateral at the time of liquidation, and other factors could affect the amount of proceeds the Bank is able to realize from liquidating a borrower’s collateral. In addition, the Bank could sell collateral over an extended period of time, rather than liquidating it immediately, and the Bank would have the right to receive principal and interest payments made on the collateral it continued to hold and apply those proceeds toward repayment of the borrower’s obligations to the Bank.

The Bank perfects its security interest in securities collateral by taking delivery of all securities at the time they are pledged. The Bank perfects its security interest in loan collateral by filing a UCC-1 financing statement for each borrower that pledges loans. The Bank may also require delivery of loan collateral under certain conditions (for example, from a newly formed institution or when a borrower's creditworthiness deteriorates below a certain level). In addition, the FHLBank Act provides that any security interest granted to the Bank by any member or member affiliate has priority over the claims and rights of any other party, including any receiver, conservator, trustee, or similar entity that has the rights of a lien creditor, unless these claims and rights would be entitled to priority under otherwise applicable law or are held by bona fide purchasers for value or by parties that have actual perfected security interests.

59

Pursuant to the Bank’s lending agreements with its borrowers, the Bank limits extensions of credit to individual borrowers to a percentage of the market value or unpaid principal balance of the borrower’s pledged collateral, known as the borrowing capacity. The borrowing capacity percentage varies according to several factors, including the charter type of the institution, the collateral type, the value assigned to the collateral, the results of the Bank’s collateral field review of the borrower’s collateral, the pledging method used for loan collateral (specific identification or blanket lien), the amount of loan data provided (detailed or summary reporting), the data reporting frequency (monthly or quarterly), the borrower’s financial strength and condition, and any institution-specific collateral risks. Under the terms of the Bank’s lending agreements, the aggregate borrowing capacity of a borrower’s pledged eligible collateral must meet or exceed the total amount of the borrower’s outstanding advances, other extensions of credit, and certain other borrower obligations and liabilities. The Bank monitors each borrower’s aggregate borrowing capacity and collateral requirements on a daily basis by comparing the institution’s borrowing capacity to its obligations to the Bank.

In addition, the total amount of advances made available to each member or housing associate may be limited by the financing availability assigned by the Bank, which is generally expressed as a percentage of the member’s or housing associate’s assets. The amount of financing availability is generally determined by the creditworthiness of the member or housing associate.

When a nonmember financial institution acquires some or all of the assets and liabilities of a member, including outstanding advances and Bank capital stock, the Bank may allow the advances to remain outstanding, at its discretion. The nonmember borrower is required to meet the Bank’s applicable credit, collateral, and capital stock requirements, including requirements regarding creditworthiness and collateral borrowing capacity.

The following tables present a summary of the status of the credit outstanding and overall collateral borrowing capacity of the Bank’s member and nonmember borrowers as of December 31, 2017 and 2016. During 2017, the Bank’s internal credit ratings stayed the same or improved for the majority of members and nonmember borrowers.

Member and Nonmember Credit Outstanding and Collateral Borrowing Capacity by Credit Quality Rating
(Dollars in millions)
December 31, 2017
	All Members and Nonmembers	Members and Nonmembers with Credit Outstanding
					Collateral Borrowing Capacity(2)
Member or Nonmember Credit Quality Rating	Number	Number	Credit Outstanding(1)		Total		Used
1-3	265	155	$	84,257	$	240,247	35	%
4-6	58	25	9,255		22,005		42
7-10	4	1	—		25		—
Subtotal	327	181	93,512		262,277		36
CDFIs	6	4	78		99		79
Housing associates	2	1	107		112		96
Total	335	186	$	93,697	$	262,488	36	%

60

December 31, 2016
	All Members and Nonmembers	Members and Nonmembers with Credit Outstanding
					Collateral Borrowing Capacity(2)
Member or Nonmember Credit Quality Rating	Number	Number	Credit Outstanding(1)		Total		Used
1-3	266	155	$	55,290	$	181,405	30	%
4-6	62	28	9,662		22,606		43
7-10	3	2	17		46		37
Subtotal	331	185	64,969		204,057		32
CDFIs	6	3	60		82		73
Housing associates	2	1	10		16		63
Total	339	189	$	65,039	$	204,155	32	%

(1) Includes advances, letters of credit, the market value of swaps, estimated prepayment fees for certain borrowers, and the credit enhancement obligation on MPF loans.

(2) Collateral borrowing capacity does not represent any commitment to lend on the part of the Bank.

Member and Nonmember Credit Outstanding and Collateral Borrowing Capacity by Unused Borrowing Capacity
(Dollars in millions)
December 31, 2017
Unused Borrowing Capacity	Number of Members and Nonmembers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)
0% – 10%	4	$	160	$	169
11% – 25%	4	553		672
26% – 50%	35	33,571		54,487
More than 50%	143	59,413		207,160
Total	186	$	93,697	$	262,488

December 31, 2016
Unused Borrowing Capacity	Number of Members and Nonmembers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)
0% – 10%	2	$	26	$	27
11% – 25%	9	1,791		2,261
26% – 50%	30	33,096		52,503
More than 50%	148	30,126		149,364
Total	189	$	65,039	$	204,155

(1) Includes advances, letters of credit, the market value of swaps, estimated prepayment fees for certain borrowers, and the credit enhancement obligation on MPF loans.

(2) Collateral borrowing capacity does not represent any commitment to lend on the part of the Bank.

Based on the collateral pledged as security for advances, the Bank’s credit analyses of borrowers’ financial condition, and the Bank’s credit extension and collateral policies, the Bank expects to collect all amounts due according to the contractual terms of the advances. Therefore, no allowance for credit losses on advances is deemed necessary by the Bank. The Bank has never experienced any credit losses on advances.

Securities pledged as collateral are assigned borrowing capacities that reflect the securities’ pricing volatility and market liquidity risks. Securities are delivered to the Bank’s custodian when they are pledged. The Bank prices securities collateral on a daily basis or twice a month, depending on the availability and reliability of external pricing sources. Securities that are normally priced twice a month may be priced more frequently in volatile market conditions. The Bank benchmarks the borrowing capacities for securities collateral to the market on a periodic basis and may review and change the borrowing capacity for any security type at any time. As of December 31, 2017, the

61

borrowing capacities assigned to U.S. Treasury and agency securities ranged from 75% to 98% of their market value. The borrowing capacities assigned to private-label MBS, which must be rated AAA or AA when initially pledged, generally ranged from 65% to 85% of their market value, depending on the underlying collateral (residential mortgage loans, home equity loans, or commercial real estate loans), the rating, and the subordination structure of the respective securities.

The following table presents the securities collateral pledged by all members and by nonmembers with credit outstanding at December 31, 2017 and 2016.

Composition of Securities Collateral Pledged by Members and by Nonmembers with Credit Outstanding
(In millions)	2017				2016
Securities Type with Current Credit Ratings	Current Par		Borrowing Capacity		Current Par		Borrowing Capacity
U.S. Treasury (bills, notes, bonds)	$	1,946	$	1,875	$	2,377	$	2,315
Agency (notes, subordinated debt, structured notes, indexed amortization notes, and Small Business Administration pools)	3,135		3,019		3,147		3,063
Agency pools and collateralized mortgage obligations	34,182		32,755		8,986		8,559
PLRMBS – publicly registered investment-grade-rated senior tranches	—		—		1		—
Private-label commercial MBS – publicly registered investment-grade-rated senior tranches	3		2		—		—
PLRMBS – private placement investment-grade-rated senior tranches	68		51		83		62
Municipal Bonds – investment-grade-rated	55		49		61		55
Total	$	39,389	$	37,751	$	14,655	$	14,054

With respect to loan collateral, most borrowers may choose to pledge loan collateral by specific identification or under a blanket lien. Insurance companies, CDFIs, and housing associates are required to pledge loan collateral by specific identification with monthly reporting. All other borrowers pledging by specific identification must provide a detailed listing of all the loans pledged to the Bank on a monthly basis. With a blanket lien, a borrower generally pledges the following loan types, whether or not the individual loans are eligible to receive borrowing capacity: all loans secured by real estate; all loans made for commercial, corporate, or business purposes; and all participations in these loans. Borrowers pledging under a blanket lien may provide a detailed listing of loans or may use a summary reporting method.

The Bank may require certain borrowers to deliver pledged loan collateral to the Bank for one or more reasons, including the following: the borrower is a de novo institution (chartered within the last three years), an insurance company, a CDFI, or a housing associate; the Bank is concerned about the borrower’s creditworthiness; or the Bank is concerned about the maintenance of its collateral or the priority of its security interest. With the exception of insurance companies, CDFIs, and housing associates, borrowers required to deliver loan collateral must pledge those loans under a blanket lien with detailed reporting.

As of December 31, 2017, of the loan collateral pledged to the Bank, 24% was pledged by 27 institutions by specific identification, 52% was pledged by 121 institutions under a blanket lien with detailed reporting, and 24% was pledged by 126 institutions under a blanket lien with summary reporting.

The Bank monitors each borrower’s borrowing capacity and collateral requirements on a daily basis. The borrowing capacities for loan collateral reflect the assignedvalue of the collateral and a margin for the costs and risks of liquidation. The Bank reviews the margins for loan collateral regularly and may adjust them at any time as market conditions change.

62

The Bank assigns a value to loan collateral using one of two methods. For mortgage loans that are reported to the Bank with detailed information on the individual loans, the Bank uses third-party pricing vendors to price all the loans on a quarterly basis. The third-party vendors use proprietary analytical tools to calculate the value of each loan. The vendors model the future performance of each individual loan and generate the monthly cash flows given the current loan characteristics and applying specific market assumptions. The value of each loan is determined based on the present value of those cash flows after being discounted by the current market yields commonly used by buyers of these types of loans. The current market yields are derived by the third-party pricing vendors from prevailing conditions in the secondary market. For mortgage loans pledged under a blanket lien with summary reporting, the Bank establishes a standard market value for each collateral type based on quarterly pricing results.

For each borrower that pledges loan collateral, the Bank conducts loan collateral field reviews once every six months or every one, two, or three years, depending on the risk profile of the borrower and the types of collateral pledged by the borrower. During the borrower's collateral field review, the Bank examines a statistical sample of the borrower's pledged loans to validate loan ownership, confirm the existence of the critical legal documents, identify documentation and servicing deficiencies, and verify eligibility. Based on any loan defects identified in the pool of sample loans, the Bank determines the applicable non-credit secondary market discounts. The Bank also sends the sample loans to a third-party pricing vendor for valuation of the financial and credit-related attributes of the loans. The Bank adjusts the borrower's borrowing capacity for each collateral type in its pledged portfolio based on the pricing of the field review sample loans and the non-credit secondary market discounts identified in the field review.

As of December 31, 2017, the Bank’s maximum borrowing capacities as a percentage of the assigned market value of mortgage loan collateral pledged under a blanket lien with detailed reporting were as follows: 90% for first lien residential mortgage loans, 88% for multifamily mortgage loans, 88% for commercial mortgage loans, and 77% for second lien residential mortgage loans. The maximum borrowing capacity for small business, small agribusiness, and small farm loans was 50% of the unpaid principal balance, although most of these loans are pledged under blanket lien with summary reporting, with a maximum borrowing capacity of 25%. The highest borrowing capacities are available to borrowers that pledge under a blanket lien with detailed reporting because the detailed loan information allows the Bank to assess the value of the collateral more precisely and because additional collateral is pledged under the blanket lien that may not receive borrowing capacity but may be liquidated to repay advances in the event of default. The Bank may review and change the maximum borrowing capacity for any type of loan collateral at any time.

The table below presents the mortgage loan collateral pledged by all members and by nonmembers with credit outstanding at December 31, 2017 and 2016.

Composition of Loan Collateral Pledged by Members and by Nonmembers with Credit Outstanding
(In millions)	2017				2016
Loan Type	Unpaid Principal Balance		Borrowing Capacity		Unpaid Principal Balance		Borrowing Capacity
First lien residential mortgage loans	$	162,740	$	138,937	$	124,257	$	107,775
Second lien residential mortgage loans and home equity lines of credit	22,440		12,500		23,238		13,302
Multifamily mortgage loans	26,143		20,098		23,191		19,082
Commercial mortgage loans	68,703		48,759		62,586		44,802
Loan participations(1)	4,793		3,487		5,450		4,375
Small business, small farm, and small agribusiness loans	3,830		956		3,016		765
Other	2		—		—		—
Total	$	288,651	$	224,737	$	241,738	$	190,101

63

(1) The unpaid principal balance for loan participations is 100% of the outstanding loan amount. The borrowing capacity for loan participations is based on the participated amount pledged to the Bank.

The Bank holds a security interest in subprime residential mortgage loans pledged as collateral. Subprime loans are defined as loans with a borrower FICO score of 660 or less at origination, or if the original FICO score is not available, as loans with a current borrower FICO score of 660 or less. At December 31, 2017 and 2016, the unpaid principal balance of these loans totaled $9 billion and $9 billion, respectively. The Bank reviews and assigns borrowing capacities to subprime mortgage loans as it does for all other types of loan collateral, taking into account the known credit attributes in the pricing of the loans. All advances, including those made to borrowers pledging subprime mortgage loans, are required to be fully collateralized. The Bank limits the amount of borrowing capacity that may be supported by subprime collateral.

MPF Program. Under the MPF Program, the Bank may purchase from members, for its own portfolio, conventional conforming fixed rate mortgage loans under the MPF Original product and FHA-insured or VA-guaranteed mortgage loans under the MPF Government product. In addition, the Bank may facilitate the purchase of conforming fixed rate mortgage loans from members for concurrent sale to Fannie Mae under the MPF Xtra product and of jumbo fixed rate mortgage loans for concurrent sale to Redwood Residential Acquisition Corporation, a subsidiary of Redwood Trust, Inc., a real estate investment trust, under the MPF Direct product; and of government-insured or government-guaranteed mortgage loans that will be packaged into securities backed by the mortgage loans and guaranteed by Ginnie Mae under the MPF Government MBS product. As of December 31, 2017, the Bank had approved 23 members as participating financial institutions since renewing its participation in the MPF Program in 2013.

From May 2002 through October 2006, the Bank purchased conventional conforming fixed rate mortgage loans from its participating financial institutions members under the MPF Original and MPF Plus products. Participating members originated or purchased the mortgage loans, credit-enhanced them and sold them to the Bank, and generally retained the servicing of the loans. Unlike conventional MPF products held for portfolio, under the MPF Xtra, MPF Direct, MPF Government, and MPF Government MBS products, participating financial institutions are not required to provide credit enhancement and do not receive credit enhancement fees. When members sell mortgage loans under the MPF Xtra, MPF Direct, and MPF Government MBS products, the loans are sold to a third-party investor and are not recorded on the Bank’s Statements of Condition.

The Bank and any participating financial institution share in the credit risk of the loans sold by that institution under the MPF Original and MPF Plus products as specified in a master agreement. As of December 31, 2017, loans purchased under the MPF Program generally had a credit risk exposure at the time of purchase that, as determined by the MPF Program methodology, would be expected from an equivalent investment rated AA if purchased prior to April 2017, or rated BBB if purchased since April 2017, taking into consideration the credit risk sharing structure mandated by the Finance Agency’s acquired member assets (AMA) regulation. The MPF Program structures potential credit losses on conventional MPF loans into layers with respect to each pool of loans purchased by the Bank under a single master commitment, as follows:

1. The first layer of protection against loss is the liquidation value of the real property securing the loan.

2. The next layer of protection comes from the primary mortgage insurance that is required for loans with an initial loan-to-value ratio greater than 80%, if still in place.

3. Losses that exceed the liquidation value of the real property and any primary mortgage insurance, up to an agreed-upon amount called the first loss account for each master commitment, are incurred by the Bank.

4. Losses in excess of the first loss account for each master commitment, up to an agreed-upon amount called the “credit enhancement amount,” are covered by the participating financial institution's credit enhancement obligation at the time losses are incurred.

5. Losses in excess of the first loss account and the participating financial institution's remaining credit enhancement for the master commitment, if any, are incurred by the Bank.

64

The first loss account provided by the Bank is a memorandum account, a record-keeping mechanism the Bank uses to track the amount of potential expected losses for which it is liable on each master commitment (before the participating financial institution's credit enhancement is used to cover losses).

As of December 31, 2017, the credit enhancement amount for each master commitment, together with any primary mortgage insurance coverage, was sized to limit the Bank’s credit losses in excess of the first loss account to those that would be expected on an equivalent investment with a long-term credit rating of AA for loans purchased prior to April 2017 and BBB for loans purchased thereafter, as determined by the MPF Program methodology. By requiring credit enhancement in the amount determined by the MPF Program methodology, the Bank expects to have the same probability of incurring credit losses in excess of the first loss account and the participating financial institution's credit enhancement obligation on mortgage loans purchased under any master commitment as an investor would have of incurring credit losses on an equivalent investment with a corresponding long-term credit rating.

Before delivering loans for purchase under the MPF Program, each participating financial institution submits data on the individual loans to the FHLBank of Chicago, which calculates the loan level credit enhancement needed. The rating agency model used considers many characteristics, such as loan-to-value ratio, property type, loan purpose, borrower credit scores, level of loan documentation, and loan term, to determine the loan level credit enhancement. The resulting credit enhancement amount for each loan purchased is accumulated under a master commitment to establish a pool level credit enhancement amount for the master commitment.

The Bank’s mortgage loan portfolio currently consists of mortgage loans purchased under two MPF products: MPF Original and MPF Plus, which differ from each other in the way the amount of the first loss account is determined, the options available for covering the participating financial institution's credit enhancement obligation, and the fee structure for the credit enhancement fees.

Under MPF Original, the first loss account accumulates over the life of the master commitment. Each month, the outstanding aggregate principal balance of the loans at monthend is multiplied by an agreed-upon percentage (typically 4 basis points per annum), and that amount is added to the first loss account. As credit and special hazard losses are realized that are not covered by the liquidation value of the real property or primary mortgage insurance, they are first charged to the Bank, with a corresponding reduction of the first loss account for that master commitment up to the amount accumulated in the first loss account at that time. Over time, the first loss account may cover the expected credit losses on a master commitment, although losses that are greater than expected or that occur early in the life of the master commitment could exceed the amount accumulated in the first loss account. In that case, the excess losses would be charged next to the member's credit enhancement to the extent available. For each master commitment, the Bank considers the credit performance, credit enhancement levels, and the nationally recognized statistical rating organization (NRSRO) rating equivalent as determined under the MPF Program methodology, in the determination of its risk-based capital requirements, and the credit performance, collateral protection, and availability of credit enhancement in the evaluation of appropriate loan loss allowances.

The aggregate first loss account for all participating financial institutions for MPF Original totaled $1 million for the years ended December 31, 2017, 2016, and 2015.

The participating financial institution’s credit enhancement obligation under MPF Original must be collateralized by the participating financial institution in the same way that advances from the Bank are collateralized, as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Advances.”For taking on the credit enhancement obligation, the Bank pays the participating financial institution a credit enhancement fee, typically 10 basis points per annum, calculated on the unpaid principal balance of the loans in the master commitment. A participating financial institution may elect to receive credit enhancement fees monthly over the life of the loans or in an upfront lump sum amount that is included in the purchase price at the time the loans are sold to the Bank. The lump sum amount is approximately equivalent to the present value of the monthly credit enhancement fees that the Bank would otherwise be expected to pay over the life of the loans. In both cases, the Bank charges credit enhancement fees to interest income, which

65

effectively reduces the overall yield earned on the loans purchased by the Bank. The Bank reduced net interest income for credit enhancement fees that are paid monthly totaling $0.5 million in 2017, $0.2 million in 2016, and $0.1 million in 2015 for MPF Original loans.

Under MPF Plus, the first loss account is equal to a specified percentage of the scheduled principal balance of loans in the pool as of the sale date of each loan. The percentage of the first loss account was negotiated for each master commitment. The participating financial institution provides credit enhancement for loans sold to the Bank under MPF Plus by maintaining a supplemental mortgage insurance (SMI) policy that equals its credit enhancement obligation. The amount of required credit enhancement is recalculated annually. Because the MPF Plus product provides that the requirement may only be reduced (and not increased), the SMI coverage could be reduced as a result of the annual recalculation of the required credit enhancement.

Typically, the amount of the first loss account is equal to the deductible on the SMI policy. However, the SMI policy does not cover special hazard losses or credit losses on loans with a loan-to-value ratio below a certain percentage (usually 50%). As a result, credit losses on loans not covered by the SMI policy and special hazard losses may reduce the amount of the first loss account without reducing the deductible on the SMI policy. If the deductible on the SMI policy has not been met and the pool incurs credit losses that exceed the amount of the first loss account, those losses will be allocated to the Bank until the SMI policy deductible has been met. Once the deductible has been met, the SMI policy will cover credit losses on loans covered by the policy up to the maximum loss coverage provided by the policy. If the SMI provider's claims-paying ability rating falls below a specified level, the participating financial institution has six months to either replace the SMI policy or assume the credit enhancement obligation and fully collateralize the obligation; otherwise the Bank may choose not to pay the participating financial institution its performance-based credit enhancement fee. Finally, the Bank will absorb credit losses that exceed the maximum loss coverage of the SMI policy (or the substitute credit enhancement provided by the participating financial institution), all credit losses on loans not covered by the policy, and all special hazard losses, if any.

Three of the six master commitments (totaling $0.3 billion) continue to rely on SMI coverage for a portion of their credit enhancement obligation, which is provided by two SMI companies and totals $9.4 million after the deductible. The claims-paying ability ratings of these two SMI companies are below the AA rating required for the program; one is rated BB+ and the other is rated BBB-. The participating financial institutions associated with the relevant master commitments have chosen to forego their performance-based credit enhancement fees rather than assume the credit enhancement obligation. The largest of the commitments (totaling$0.2 billion) did not achieve AA credit equivalency, as determined by the MPF Program methodology, solely because the SMI company was rated BB+.

At December 31, 2017, the deductibles under the SMI policies totaled approximately 35% of the participating financial institutions’ credit enhancement obligation on MPF Plus loans. At December 31, 2016, the deductibles under the SMI policies totaled approximately 35% of the participating financial institutions’ credit enhancement obligation on MPF Plus loans. None of the SMI was provided by participating financial institutions or their affiliates at December 31, 2017 and 2016.

The first loss account for MPF Plus for the years ended December 31, 2017, 2016, and 2015 was as follows:

First Loss Account for MPF Plus
(In millions)	2017		2016			2015
Balance, beginning of the period	$	8	$	9		$	10
Losses incurred in excess of liquidation value of the real property securing the loan and primary mortgage insurance	—		(1		)	(1		)
Balance, end of the period	$	8	$	8		$	9

66

Under MPF Plus, the Bank pays the participating financial institution a credit enhancement fee that is divided into a fixed credit enhancement fee and a performance-based credit enhancement fee. The fixed credit enhancement fee is paid each month beginning with the month after each loan delivery. The performance-based credit enhancement fee accrues monthly beginning with the month after each loan delivery and is paid to the member beginning 12 months later. Performance-based credit enhancement fees payable to the member are reduced by an amount equal to loan losses, up to the full amount of the first loss account established for each master commitment. If losses up to the full amount of the first loss account, net of previously withheld performance-based credit enhancement fees, exceed the credit enhancement fee payable in any period, the excess will be carried forward and applied against future performance-based credit enhancement fees. Because loans in the MPF Plus program have experienced a high rate of voluntary prepayments, causing the current balance of each respective master commitment to be significantly reduced since purchase, it is possible that the remaining loans will not generate enough performance-based credit enhancement fees over the remaining life of each master commitment to enable the Bank to collect performance-based credit enhancement fees equal to the full amount of the first loss account established for each MPF Plus master commitment. The amount of performance-based credit enhancement fees expected to be accrued in the future is uncertain and highly dependent on the future rate of principal prepayments of the underlying mortgage loans. The Bank reduced net interest income for credit enhancement fees totaling $0.2 million in 2017, $0.3 million in 2016, and $0.3 million in 2015 for MPF Plus loans. The Bank’s liability for performance-based credit enhancement fees for MPF Plus was de minimis at December 31, 2017 and 2016.

The Bank provides for a loss allowance, net of the credit enhancement, for any impaired loans and for the estimates of other probable losses, and the Bank has policies and procedures in place to monitor the credit risk. The Bank bases the allowance for credit losses for the Bank’s mortgage loan portfolio on its estimate of probable credit losses in the portfolio as of the Statements of Condition date.

Effective January 1, 2015, the Bank implemented the accounting requirements of regulatory Advisory Bulletin 2012-02. As a result, for any mortgage loans that are more than 180 days past due and that have any outstanding balance in excess of the fair value of the property, less cost to sell, this excess is charged off as a loss by the end of the month in which the applicable time period elapses. Likewise, when a borrower is in bankruptcy, loans are written down to the fair value of the collateral, less cost to sell, in general within 60 days of receipt of the notification of filing from the bankruptcy court, unless it can be clearly demonstrated and documented that repayment is likely to occur. As a result of these charge-offs, the corresponding Allowance for Credit Losses on MPF Loans, which had previously provided for most of these expected losses, was reduced accordingly.

Mortgage Loans Evaluated at the Individual Master Commitment Level – The credit risk analysis of all conventional MPF loans is performed at the individual master commitment level to determine the credit enhancements available to recover losses on MPF loans under each individual master commitment.

Individually Evaluated Mortgage Loans – Certain conventional mortgage loans, primarily impaired mortgage loans that are considered collateral-dependent, may be specifically identified for purposes of calculating the allowance for credit losses. The estimated credit losses on impaired collateral-dependent loans may be separately determined because sufficient information exists to make a reasonable estimate of the inherent loss on those loans on an individual loan basis. The Bank estimates the fair value of collateral using real estate broker price opinions or automated valuation models based on property characteristics as well as recent market sales and current listings. The resulting incurred loss, if any, is equal to the difference between the carrying value of the loan and the estimated fair value of the collateral less estimated selling costs.

Collectively Evaluated Mortgage Loans – The credit risk analysis of conventional loans collectively evaluated for impairment considers loan pool-specific attribute data, applies estimated loss severities, and considers the associated credit enhancements to determine the Bank's best estimate of probable incurred losses. The analysis includes estimating projected cash flows that the Bank is likely to collect based on an assessment of all available information, including prepayment speeds, default rates, and loss severity of the mortgage loans based on underlying loan-level borrower and loan characteristics; expected housing price changes; and interest rate assumptions. In performing a detailed cash flow analysis, the Bank develops its best estimate of the cash flows

67

expected to be collected using a third-party model to project prepayments, default rates, and loss severities based on borrower characteristics and the particular attributes of the mortgage loans, in conjunction with assumptions related primarily to future changes in housing prices and interest rates. The assumptions used as inputs to the model, including the forecast of future housing price changes, are consistent with assumptions used for the Bank's evaluation of its PLRMBS for OTTI.

The Bank performs periodic reviews of its mortgage loan portfolio to identify the probable credit losses in the portfolio and to determine the likelihood of collection on the loans in the portfolio. The overall allowance is determined by an analysis that includes consideration of observable data such as delinquency statistics, past performance, current performance, loan portfolio characteristics, collateral valuations, industry data, collectability of credit enhancements from members or from mortgage insurers, and prevailing economic conditions, taking into account the credit enhancement provided by the member under the terms of each master commitment.

The amounts of charge-offs and recoveries of allowance for credit losses on the mortgage loan portfolio were de minimis during the years ended December 31, 2017 and 2016. Net charge-offs of allowance for credit losses on the mortgage loan portfolio were $2 during the year ended December 31, 2015.

The continued decline in the estimated allowance for credit losses during 2017 is primarily due to a decline in the balance of the seasoned portion of mortgage loans, originated between 2002 and 2006, as well as a decline in serious delinquencies in mortgage loans purchased subsequent to 2013 and continuing improvements in the economy and the housing market.

The allowance for credit losses and recorded investment by impairment methodology for individually and collectively evaluated impaired loans are as follows:

(In millions)	2017		2016
Allowance for credit losses, end of the period:
Individually evaluated for impairment	$	—	$	—
Total allowance for credit losses	$	—	$	—
Recorded investment, end of the period:
Individually evaluated for impairment	$	9	$	12
Collectively evaluated for impairment	2,078		818
Total recorded investment	$	2,087	$	830

The recorded investment, unpaid principal balance, and related allowance of impaired loans individually evaluated for impairment are as follows:

	2017						2016
(In millions)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance	$	9	$	9	$	—	$	12	$	12	$	—
With an allowance	—		—		—		—		—		—
Total	$	9	$	9	$	—	$	12	$	12	$	—

The average recorded investment on impaired loans individually evaluated for impairment is as follows:

(In millions)	2017		2016
With no related allowance	$	10	$	12
With an allowance	—		—
Total	$	10	$	12

68

For the three MPF Plus master commitments that still rely on SMI for a portion of their credit enhancement obligation, the external ratings of the SMI providers have declined since the loans were purchased. Because the relevant participating financial institutions have elected not to assume the credit enhancement obligations as their own, the Bank has discontinued paying the associated performance-based credit enhancement fees, in accordance with the terms of the applicable agreements. Formerly, upon a realized loss, the Bank would have withheld credit enhancement fees up to the amount of the SMI deductible to offset the loss. Because these fees are no longer owed to the participating financial institutions, they cannot be withheld to offset a loss. Instead, the Bank is accounting for the performance-based credit enhancement fees as income and has now begun to directly recognize the potential loan losses in the related loan loss allowance account.

For more information on how the Bank determines its estimated allowance for credit losses on mortgage loans, see “Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Allowance for Credit Losses – Mortgage Loans Acquired Under the MPF Program” and “Item 8. Financial Statements and Supplementary Data – Note 10 – Allowance for Credit Losses.”

A mortgage loan is considered to be impaired when it is reported 90 days or more past due (nonaccrual) or when it is probable, based on current information and events, that the Bank will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreement.

The following table presents information on delinquent mortgage loans as of December 31, 2017 and 2016.

Mortgage Loan Delinquencies
	2017			2016
(Dollars in millions)	Recorded Investment(1)			Recorded Investment(1)
30 – 59 days delinquent	$	8		$	7
60 – 89 days delinquent	2			3
90 days or more delinquent	12			15
Total past due	22			25
Total current loans	2,065			805
Total mortgage loans	$	2,087		$	830
In process of foreclosure, included above(2)	$	3		$	5
Nonaccrual loans	$	12		$	15
Loans past due 90 days or more and still accruing interest	$	—		$	—
Serious delinquencies as a percentage of total mortgage loans outstanding(3)	0.59		%	1.79		%

(1) The recorded investment in a loan is the unpaid principal balance of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs. The recorded investment is not net of any valuation allowance.

(2) Includes loans for which the servicer has reported a decision to foreclose or to pursue a similar alternative, such as deed-in-lieu. Loans in process of foreclosure are included in past due or current loans depending on their delinquency status.

(3) Represents loans that are 90 days or more past due or in the process of foreclosure as a percentage of the recorded investment of total mortgage loans outstanding.

For 2017, 2016, and 2015, the interest on nonaccrual loans that was contractually due and recognized in income was as follows:

69

Interest on Nonaccrual Loans
(In millions)	2017		2016		2015
Interest contractually due on nonaccrual loans during the period	$	1	$	1	$	1
Interest recognized in income for nonaccrual loans during the period	—		—		—
Shortfall	$	1	$	1	$	1

Delinquencies amounted to 1.11% of the total loans in the Bank’s portfolio as of December 31, 2017, and 3.12% of the total loans in the Bank’s portfolio as of December 31, 2016. The decline in the delinquency percentage was due to the purchase of new loans in 2017 as well as declining delinquencies during 2017. The weighted average age of the Bank’s MPF portfolio was 36 months as of December 31, 2017, and 87 months as of December 31, 2016.

Troubled Debt Restructurings –Troubled debt restructuring (TDR) is considered to have occurred when a concession is granted to the debtor for economic or legal reasons related to the debtor's financial difficulties and that concession would not have been considered otherwise. An MPF loan considered a TDR is individually evaluated for impairment when determining its related allowance for credit losses. Credit loss is measured by factoring in expected cash flow shortfalls incurred as of the reporting date as well as the economic loss attributable to delaying the original contractual principal and interest due dates, if applicable.

The Bank’s TDRs of MPF loans primarily involve modifying the borrower's monthly payment for a period of up to 36 months to reflect a housing expense ratio that is no more than 31% of the borrower's qualifying monthly income. The outstanding principal balance is re-amortized to reflect a principal and interest payment for a term not to exceed 40 years from the original note date and a housing expense ratio not to exceed 31%. This would result in a balloon payment at the original maturity date of the loan because the maturity date and number of remaining monthly payments are not adjusted. If the 31% ratio is still not achieved through re-amortization, the interest rate is reduced in 0.125% increments below the original note rate, to a floor rate of 3%, resulting in reduced principal and interest payments, for the temporary payment modification period of up to 36 months, until the 31% housing expense ratio is met.

The recorded investment of the Bank’s nonperforming MPFloans classified as TDRs totaled $3 million as of December 31, 2017, and $3 million as of December 31, 2016. During 2017 and 2016, the difference between the pre- and post-modification recorded investment in TDRs that occurred during the year was de minimis. None of the MPF loans classified as TDRs within the previous 12 months experienced a payment default.

At December 31, 2017, the Bank’s other assets included $1 million of real estate owned (REO) resulting from the foreclosure of 11 mortgage loans held by the Bank. At December 31, 2016, the Bank’s other assets included $1 million of REO resulting from the foreclosure of 12 mortgage loans held by the Bank.

Investments. The Bank has adopted credit policies and exposure limits for investments that promote risk limitation, diversification, and liquidity. These policies determine eligible counterparties and restrict the amounts and terms of the Bank’s investments with any given counterparty according to the Bank’s own capital position as well as the capital and creditworthiness of the counterparty.

The Bank monitors its investments for substantive changes in relevant market conditions and any declines in fair value. For securities in an unrealized loss position because of factors other than movements in interest rates, such as widening of mortgage asset spreads, the Bank considers whether it expects to recover the entire amortized cost basis of the security by comparing the best estimate of the present value of the cash flows expected to be collected from the security with the amortized cost basis of the security. If the Bank’s best estimate of the present value of the cash flows expected to be collected is less than the amortized cost basis, the difference is considered the credit loss.

When the fair value of an individual investment security falls below its amortized cost, the Bank evaluates whether the decline is other than temporary. The Bank recognizes an OTTI when it determines that it will be unable to

70

recover the entire amortized cost basis of the security and the fair value of the investment security is less than its amortized cost. The Bank considers its intent to hold the security and whether it is more likely than not that the Bank will be required to sell the security before its anticipated recovery of the remaining cost basis, and other factors. The Bank generally views changes in the fair value of the securities caused by movements in interest rates to be temporary.

The following tables present the Bank’s investment credit exposure at the dates indicated, based on the lowest of the long-term credit ratings provided by Moody’s, S&P, or comparable Fitch Ratings (Fitch) ratings.

Investment Credit Exposure
(In millions)
December 31, 2017
	Carrying Value
	Credit Rating(1)
Investment Type	AAA		AA		A		BBB		Below Investment Grade		Unrated		Total
Non-MBS
Certificates of deposit	$	—	$	—	$	500	$	—	$	—	$	—	$	500
Housing finance agency bonds:
CalHFA bonds	—		—		187		—		—		—		187
GSEs:
FFCB bonds	—		1,158		—		—		—		—		1,158
Total non-MBS	—		1,158		687		—		—		—		1,845
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	—		757		—		—		—		—		757
GSEs – single-family:
Freddie Mac	—		2,039		—		—		—		—		2,039
Fannie Mae(2)	—		3,588		7		—		5		—		3,600
Subtotal	—		5,627		7		—		5		—		5,639
GSEs – multifamily:
Freddie Mac	—		4,651		—		—		—		—		4,651
Fannie Mae	—		2,131		—		—		—		—		2,131
Subtotal	—		6,782		—		—		—		—		6,782
Total GSEs	—		12,409		7		—		5		—		12,421
PLRMBS:
Prime	—		—		12		200		642		31		885
Alt-A, option ARM	—		—		—		—		834		—		834
Alt-A, other	2		13		12		57		2,549		302		2,935
Total PLRMBS	2		13		24		257		4,025		333		4,654
Total MBS	2		13,179		31		257		4,030		333		17,832
Total securities	2		14,337		718		257		4,030		333		19,677
Interest-bearing deposits	—		40		1,075		—		—		—		1,115
Securities purchased under agreements to resell	—		11,750		—		—		—		—		11,750
Federal funds sold(3)	—		5,283		5,745		—		—		—		11,028
Total investments	$	2	$	31,410	$	7,538	$	257	$	4,030	$	333	$	43,570

71

(In millions)
December 31, 2016
	Carrying Value
	Credit Rating(1)
Investment Type	AAA		AA		A		BBB		Below Investment Grade		Unrated		Total
Non-MBS
Certificates of deposit	$	—	$	600	$	750	$	—	$	—	$	—	$	1,350
Housing finance agency bonds:
CalHFA bonds	—		—		225		—		—		—		225
GSEs:
FFCB bonds	—		2,058		—		—		—		—		2,058
Total non-MBS	—		2,658		975		—		—		—		3,633
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	—		959		—		—		—		—		959
GSEs – single-family:
Freddie Mac	—		2,793		—		—		—		—		2,793
Fannie Mae(2)	—		5,020		10		—		7		—		5,037
Subtotal	—		7,813		10		—		7		—		7,830
GSEs – multifamily:
Freddie Mac	—		1,556		—		—		—		—		1,556
Fannie Mae	—		1,058		—		—		—		—		1,058
Subtotal	—		2,614		—		—		—		—		2,614
Total GSEs	—		10,427		10		—		7		—		10,444
PLRMBS:
Prime	—		1		1		295		842		2		1,141
Alt-A, option ARM	—		—		—		—		897		—		897
Alt-A, other	5		15		17		128		3,440		3		3,608
Total PLRMBS	5		16		18		423		5,179		5		5,646
Total MBS	5		11,402		28		423		5,186		5		17,049
Total securities	5		14,060		1,003		423		5,186		5		20,682
Interest-bearing deposits	—		—		590		—		—		—		590
Securities purchased under agreements to resell	—		15,500		—		—		—		—		15,500
Federal funds sold(3)	—		1,576		2,585		53		—		—		4,214
Total investments	$	5	$	31,136	$	4,178	$	476	$	5,186	$	5	$	40,986

(1) Credit ratings of BB and lower are below investment grade.

(2) The Bank has one security guaranteed by Fannie Mae but rated D by S&P because of extraordinary expenses incurred during bankruptcy of the security's sponsor.

(3) Includes $225 million and $130 million at December 31, 2017 and 2016, respectively, in Federal funds sold to a member counterparty determined by the Bank to have an internal credit rating equivalent to an AA rating.

For all securities in its AFS and HTM portfolios, for Federal funds sold, and for securities purchased under agreements to resell, the Bank does not intend to sell any security and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.

The Bank invests in short-term unsecured interest-bearing deposits, short-term unsecured Federal funds sold, securities purchased under agreements to resell, and negotiable certificates of deposit with member and nonmember counterparties, all of which are highly rated.

Bank policies set forth the creditworthiness requirements for member and nonmember counterparties for unsecured credit. All Federal funds counterparties (members and nonmembers) must be federally insured financial institutions or domestic branches of foreign commercial banks. The general unsecured credit policy limits are as follows:

72

Unsecured Credit Policy Limits
		Unsecured Credit Limit Amount (Lower of Percentage of Bank Capital or Percentage of Counterparty Capital)
	Long-Term Credit Rating(1)	Maximum Percentage Limit for Outstanding Term(2)		Maximum Percentage Limit for Total Outstanding		Maximum Investment Term (Months)
Member counterparty	AAA	15	%	30	%	3
	AA	14		28		3
	A	9		18		3
	BBB	—		6		Overnight
Nonmember counterparty	AAA	15		30		3
	AA	14		28		3
	A	9		18		3

(1) Long-term credit ratings are based on the lowest of Moody’s, S&P, or comparable Fitch ratings. The Bank also uses other similar standards, such as the

Bank’s internal credit quality rating, to determine maximum limits to members and nonmembers. If a member is not rated by an NRSRO, the Bank will

determine the applicable credit rating by using the Bank’s credit quality rating and may provide overnight unsecured credit to that member.

(2) Term limit applies to unsecured extensions of credit excluding Federal funds transactions with a maturity of one day or less and Federal funds subject to a

continuing contract.

The Bank’s unsecured investment credit limits and terms for member counterparties may be less restrictive than for nonmember counterparties because the Bank has access to more information about members to assist in evaluating the member counterparty credit risk.

The Bank actively monitors its credit exposures and the credit quality of its counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, likelihood of parental or sovereign support, and the current market perceptions of the counterparties. The Bank may also consider general macroeconomic and market conditions and political stability when establishing limits on unsecured investments with U.S. branches and agency offices of foreign commercial banks. As a result of deteriorating financial condition or concerns about adverse economic or market developments, the Bank may reduce limits or terms on unsecured investments or suspend a counterparty.

Finance Agency regulations limit the amount of unsecured credit that an individual FHLBank may extend to a single counterparty. This limit is calculated with reference to a percentage of either the FHLBank’s or the counterparty’s capital and to the counterparty’s overall credit rating. Under these regulations, the lesser of the FHLBank’s total regulatory capital or the counterparty’s Tier 1 capital is multiplied by a percentage specified in the regulation. The percentages used to determine the maximum amount of term extensions of unsecured credit range from 1% to 15%, depending on the counterparty’s overall credit rating. Term extensions of unsecured credit include on-balance sheet transactions, off-balance sheet commitments, and derivative transactions, but exclude overnight Federal funds sales, even if subject to a continuing contract. (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Derivative Counterparties” for additional information related to derivatives exposure.)

Finance Agency regulations also permit the FHLBanks to extend additional unsecured credit to the same single counterparty for overnight sales of Federal funds, even if subject to a continuing contract. However, an FHLBank’s total unsecured credit to a single counterparty (total term plus additional overnight Federal funds unsecured credit) may not exceed twice the regulatory limit for term exposures (2% to 30% of the lesser of the FHLBank’s total regulatory capital or the counterparty’s Tier 1 capital, based on the counterparty’s overall credit rating). In addition, the FHLBanks are prohibited by Finance Agency regulation from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks.

Under Finance Agency regulations, the total amount of unsecured credit that an FHLBank may extend to a group of affiliated counterparties for term extensions of unsecured credit and overnight Federal funds sales, combined, may

73

not exceed 30% of the FHLBank’s total capital. These limits on affiliated counterparty groups are in addition to the limits on extensions of unsecured credit applicable to any single counterparty within the affiliated group.

The following table presents the unsecured credit exposure with counterparties by investment type at December 31, 2017 and 2016.

Unsecured Investment Credit Exposure by Investment Type
	Carrying Value(1)
(In millions)	2017		2016
Interest-bearing deposits	$	1,115	$	590
Certificates of deposit	500		1,350
Federal funds sold	11,028		4,214
Total	$	12,643	$	6,154

(1) Excludes unsecured investment credit exposure to U.S. government agencies and instrumentalities, government-sponsored enterprises, and supranational entities and does not include related accrued interest as of December 31, 2017 and 2016.

The following table presents the credit ratings of the unsecured investment credit exposures presented 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, based on the lowest of the credit ratings provided by Moody’s, S&P, or comparable Fitch ratings. This table does not reflect the foreign sovereign government’s credit rating. At December 31, 2017, 42% of the carrying value of unsecured investments held by the Bank were rated AA, and 76% of the Bank’s total unsecured investments were to U.S. branches and agency offices of foreign commercial banks.

Ratings of Unsecured Investment Credit Exposure by Domicile of Counterparty
(In millions)
December 31, 2017
	Carrying Value(1)
	Credit Rating(2)
Domicile of Counterparty	AA		A		Total
Domestic(3)	$	1,298	$	1,763	$	3,061
U.S. subsidiaries of foreign commercial banks	—		—		—
Total domestic and U.S. subsidiaries of foreign commercial banks	1,298		1,763		3,061
U.S. branches and agency offices of foreign commercial banks:
Australia	1,975		—		1,975
Austria	—		650		650
Canada	550		1,350		1,900
France	—		100		100
Japan	—		1,608		1,608
Netherlands	—		804		804
Norway	—		345		345
Singapore	500		—		500
Sweden	1,000		—		1,000
Switzerland	—		500		500
United Kingdom	—		200		200
Total U.S. branches and agency offices of foreign commercial banks	4,025		5,557		9,582
Total unsecured credit exposure	$	5,323	$	7,320	$	12,643

(1) Excludes unsecured investment credit exposure to U.S. government agencies and instrumentalities, government-sponsored enterprises, and supranational entities and does not include related accrued interest as of December 31, 2017.

(2) Does not reflect changes in ratings, outlook, or watch status occurring after December 31, 2017. These ratings represent the lowest rating available for each unsecured investment owned by the Bank, based on the ratings provided by Moody’s, S&P, or comparable Fitch ratings. The Bank’s internal rating may differ from this rating.

74

(3) Includes $225 million at December 31, 2017, in Federal funds sold to a member counterparty determined by the Bank to have an internal credit rating equivalent to an AA rating.

The following table presents the contractual maturity of the Bank’s unsecured investment credit exposure by the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks. At December 31, 2017, 76% of the carrying value of unsecured investments held by the Bank had overnight maturities.

Contractual Maturity of Unsecured Investment Credit Exposure by Domicile of Counterparty
(In millions)
December 31, 2017
	Carrying Value(1)
Domicile of Counterparty	Overnight		Due 2 Days Through 30 Days		Due 31 Days Through 90 Days		Total
Domestic	$	3,061	$	—	$	—	$	3,061
U.S. subsidiaries of foreign commercial banks	—		—		—		—
Total domestic and U.S. subsidiaries of foreign commercial banks	3,061		—		—		3,061
U.S. branches and agency offices of foreign commercial banks:
Australia	1,225		300		450		1,975
Austria	400		—		250		650
Canada	1,400		—		500		1,900
France	100		—		—		100
Japan	1,108		—		500		1,608
Netherlands	804		—		—		804
Norway	345		—		—		345
Singapore	—		—		500		500
Sweden	1,000		—		—		1,000
Switzerland	—		—		500		500
United Kingdom	200		—		—		200
Total U.S. branches and agency offices of foreign commercial banks	6,582		300		2,700		9,582
Total unsecured credit exposure	$	9,643	$	300	$	2,700	$	12,643

(1) Excludes unsecured investment credit exposure to U.S. government agencies and instrumentalities, government-sponsored enterprises, and supranational entities and does not include related accrued interest as of December 31, 2017.

The Bank’s investments may also include housing finance agency bonds issued by housing finance agencies located in Arizona, California, and Nevada, the three states that make up the Bank’s district. These bonds are federally taxable mortgage revenue bonds, collateralized by pools of first lien residential mortgage loans and credit-enhanced by bond insurance. The bonds held by the Bank are issued by the California Housing Finance Agency (CalHFA) and insured by either National Public Financial Guarantee (formerly MBIA Insurance Corporation), or Assured Guaranty Municipal Corporation (formerly Financial Security Assurance Incorporated). At December 31, 2017, all of the bonds were rated at least A by Moody’s or S&P.

For the Bank’s investments in housing finance agency bonds, which were issued by CalHFA, the gross unrealized losses were mainly due to an illiquid market, credit concerns regarding the underlying mortgage collateral, and credit concerns regarding the monoline insurance providers, causing these investments to be valued at a discount to their acquisition cost. The Bank independently modeled cash flows for the underlying collateral, using assumptions for default rates and loss severity that a market participant would deem reasonable, and concluded that the available credit support within the CalHFA structure more than offset the projected underlying collateral losses. The Bank determined that, as of December 31, 2017, all of the gross unrealized losses on the CalHFA bonds are temporary because the underlying collateral and credit enhancements were sufficient to protect the Bank from losses. As a

75

result, the Bank expects to recover the entire amortized cost basis of these securities. If conditions in the housing and mortgage markets and general business and economic conditions deteriorate, the fair value of the CalHFA bonds may decline further and the Bank may experience OTTI in future periods.

The Bank’s MBS investments include PLRMBS, all of which were AAA-rated at the time of purchase, and

agency residential MBS, which are backed by Fannie Mae, Freddie Mac, or Ginnie Mae. Some of the PLRMBS were issued by and/or purchased from members, former members, or their affiliates. The Bank has investment credit limits and terms for these investments that do not differ for members and nonmembers. Regulatory policy limits total MBS investments to three times the Bank’s capital at the time of purchase. At December 31, 2017, the Bank’s MBS portfolio was 257% of Bank capital (as determined in accordance with regulations governing the operations of the FHLBanks). The Bank has not purchased any PLRMBS since the first quarter of 2008.

The Bank executes all MBS investments without preference to the status of the counterparty or the issuer of the investment as a nonmember, member, or affiliate of a member. When the Bank executes non-MBS investments with members, the Bank may give consideration to their secured credit availability and the Bank’s advances price levels.

At December 31, 2017, PLRMBS representing 20% of the amortized cost of the Bank’s MBS portfolio were labeled Alt-A by the issuer. These PLRMBS are generally collateralized by mortgage loans that are considered less risky than subprime loans but more risky than prime loans. These loans are generally made to borrowers with credit scores that are high enough to qualify for a prime mortgage loan, but the loans may not meet standard underwriting guidelines for documentation requirements, property type, or loan-to-value ratios.

As of December 31, 2017, the Bank’s investment in MBS had gross unrealized losses totaling $77 million, most of which were related to PLRMBS. These gross unrealized losses were primarily due to illiquidity in the MBS market and market expectations of the credit performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost.

For its agency MBS, the Bank expects to recover the entire amortized cost basis of these securities because the Bank determined that the strength of the issuers’ guarantees through direct obligations or support from the U.S. government is sufficient to protect the Bank from losses. As a result, the Bank determined that, as of December 31, 2017, all of the gross unrealized losses on its agency MBS are temporary.

To assess whether it expects to recover the entire amortized cost basis of its PLRMBS, the Bank performed a cash flow analysis for all of its PLRMBS as of December 31, 2017, using two third-party models. The FHLBanks’ OTTI Committee developed a short-term housing price forecast with projected changes ranging from a decrease of 5.0% to an increase of 12.0% over the 12-month period beginning October 1, 2017. For the vast majority of markets, the projected short-term housing price changes range from an increase of 2.0% to an increase of 6.0%. Thereafter, a unique path is projected for each geographic area based on an internally developed framework derived from historical data.

The projected cash flows are based on a number of assumptions and expectations, and the results of these models can vary significantly with changes in assumptions and expectations. The scenario of cash flows determined reflects a best-estimate scenario and includes a base case housing price forecast that reflects the expectations for near- and long-term housing price behavior.

In addition to evaluating its PLRMBS under a base case (or best estimate) scenario, the Bank performed a cash flow analysis for each of these securities under a more adverse housing price scenario. This more adverse scenario was primarily based on a short-term housing price forecast that was five percentage points below the base case forecast, followed by a recovery path with annual rates of housing price growth that were 33.0% lower than the base case.

The following table shows the base case scenario and what the credit-related OTTI loss would have been under the more adverse housing price scenario at December 31, 2017:

76

OTTI Analysis Under Base Case and Adverse Case Scenarios
	Housing Price Scenario
	Base Case						Adverse Case
(Dollars in millions)	Number of Securities	Unpaid Principal Balance		Credit- Related OTTI(1)			Number of Securities	Unpaid Principal Balance		Credit- Related OTTI(1)
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Alt-A, other	5	$	144	$	(1	)	8	$	186	$	(2	)
Total	5	$	144	$	(1	)	8	$	186	$	(2	)

(1) Amounts are for the three months ended December 31, 2017.

For more information on the Bank’s OTTI analysis and reviews, see “Item 8. Financial Statements and Supplementary Data – Note 7 – Other-Than-Temporary Impairment Analysis.”

The following table presents the ratings of the Bank’s PLRMBS as of December 31, 2017, by collateral type at origination and by year of securitization.

Unpaid Principal Balance of PLRMBS by Year of Securitization and Credit Rating
(In millions)
December 31, 2017
	Unpaid Principal Balance
	Credit Rating(1)
Collateral Type at Origination and Year of Securitization	AAA		AA		A		BBB		Below Investment Grade		Unrated		Total
Prime
2008	$	—	$	—	$	—	$	—	$	110	$	—	$	110
2007	—		—		—		—		244		34		278
2006	—		—		—		—		26		—		26
2005	—		—		—		14		34		—		48
2004 and earlier	—		—		12		186		264		2		464
Total Prime	—		—		12		200		678		36		926
Alt-A, option ARM
2007	—		—		—		—		686		—		686
2006	—		—		—		—		130		—		130
2005	—		—		—		—		136		—		136
Total Alt-A, option ARM	—		—		—		—		952		—		952
Alt-A, other
2008	—		—		—		—		76		—		76
2007	—		—		—		—		740		196		936
2006	—		—		—		—		282		101		383
2005	—		2		—		—		1,421		48		1,471
2004 and earlier	2		12		12		56		281		6		369
Total Alt-A, other	2		14		12		56		2,800		351		3,235
Total par value	$	2	$	14	$	24	$	256	$	4,430	$	387	$	5,113

(1) The credit ratings used by the Bank are based on the lowest of Moody’s, S&P, or comparable Fitch ratings. Credit ratings of BB and lower are below investment grade.

77

The following table presents the ratings of the Bank’s other-than-temporarily impaired PLRMBS at December 31, 2017, by collateral type at origination and by year of securitization.

Unpaid Principal Balance of Other-Than-Temporarily Impaired PLRMBS by Year of Securitization and Credit Rating
(In millions)
December 31, 2017
	Unpaid Principal Balance
	Credit Rating(1)
Collateral Type at Origination and Year of Securitization	AA		Below Investment Grade		Unrated		Total
Prime
2008	$	—	$	102	$	—	$	102
2007	—		210		34		244
2006	—		10		—		10
2005	—		16		—		16
2004 and earlier	—		33		—		33
Total Prime	—		371		34		405
Alt-A, option ARM
2007	—		687		—		687
2006	—		130		—		130
2005	—		136		—		136
Total Alt-A, option ARM	—		953		—		953
Alt-A, other
2008	—		76		—		76
2007	—		734		196		930
2006	—		282		101		383
2005	—		1,421		48		1,469
2004 and earlier	3		126		4		133
Total Alt-A, other	3		2,639		349		2,991
Total par value	$	3	$	3,963	$	383	$	4,349

(1) The credit ratings used by the Bank are based on the lowest of Moody’s, S&P, or comparable Fitch ratings. Credit ratings of BB and lower are below investment grade.

For the Bank’s PLRMBS, the following table shows the amortized cost, estimated fair value, credit- and non-credit-related OTTI, performance of the underlying collateral based on the classification at the time of origination, and credit enhancement statistics by type of collateral and year of securitization. Credit enhancement is defined as the percentage of subordinated tranches and over-collateralization, if any, in a security structure that will absorb losses before the Bank will experience a loss on the security, expressed as a percentage of the underlying collateral balance. The credit enhancement figures include the additional credit enhancement required by the Bank (above the amounts required for an AAA rating by the credit rating agencies) for selected securities starting in late 2004, and for all securities starting in late 2005. The calculated weighted averages represent the dollar-weighted averages of all the PLRMBS in each category shown. The classification (prime or Alt-A) is based on the model used to run the estimated cash flows for the security, which may not necessarily be the same as the classification at the time of origination.

78

PLRMBS Credit Characteristics
(Dollars in millions)
December 31, 2017
																	Underlying Collateral Performance and Credit Enhancement Statistics
Collateral Type at Origination and Year of Securitization	Amortized Cost		Gross Unrealized Losses(2)			Estimated Fair Value		Total OTTI(1)			Non- Credit- Related OTTI(1)			Credit- Related OTTI(1)			Weighted Average 60+ Days Collateral Delinquency Rate		Original Weighted Average Credit Support		Current Weighted Average Credit Support
Prime
2008	$	94	$	—		$	106	$	—		$	—		$	—		13.06	%	30.00	%	10.32	%
2007	230		(3		)	239		(1		)	—			(1		)	14.27		22.91		2.18
2006	23		—			25		—			—			—			13.08		12.28		4.36
2005	46		—			48		—			—			—			10.39		11.88		15.64
2004 and earlier	463		(3		)	466		—			—			—			6.91		4.50		13.80
Total Prime	856		(6		)	884		(1		)	—			(1		)	10.20		13.64		9.73
Alt-A, option ARM
2007	566		(9		)	621		—			—			—			19.98		44.22		13.52
2006	98		—			119		—			—			—			16.38		44.91		3.85
2005	50		(1		)	94		—			—			—			16.28		22.82		5.12
Total Alt-A, option ARM	714		(10		)	834		—			—			—			18.96		41.26		11.00
Alt-A, other
2008	73		—			74		—			—			—			6.56		31.80		21.88
2007	793		(14		)	834		(8		)	(3		)	(11		)	18.35		26.95		8.63
2006	273		—			335		—			—			—			17.67		18.44		0.58
2005	1,249		(15		)	1,330		(1		)	(3		)	(4		)	12.14		14.44		4.03
2004 and earlier	365		(2		)	371		—			—			—			9.88		8.27		19.13
Total Alt-A, other	2,753		(31		)	2,944		(9		)	(6		)	(15		)	14.20		18.24		7.09
Total	$	4,323	$	(47	)	$	4,662	$	(10	)	$	(6	)	$	(16	)	14.36	%	21.70	%	8.30	%

(1) Amounts are for the year ended December 31, 2017.

(2) Represents total gross unrealized losses, including non-credit-related other-than-temporary impairment recognized in AOCI. The unpaid principal

balance of Prime, Alt-A, option ARM, and Alt-A, other in a gross unrealized loss position was $221 million, $176 million, and $643 million, respectively, at December 31, 2017, and the amortized cost of Prime, Alt-A, option ARM, and Alt-A, other in a gross unrealized loss position was $221 million, $154 million, and $589 million, respectively, at December 31, 2017.

The following table presents a summary of the significant inputs used to determine potential OTTI credit losses in the Bank’s PLRMBS portfolio at December 31, 2017.

79

Significant Inputs to OTTI Credit Analysis for All PLRMBS
December 31, 2017
	Significant Inputs			Current
	Prepayment Rates	Default Rates	Loss Severities	Credit Enhancement
Year of Securitization	Weighted Average %	Weighted Average %	Weighted Average %	Weighted Average %
Prime
2008	15.9	9.4	32.4	15.1
2007	12.3	3.1	20.1	8.8
2006	13.2	3.0	22.4	6.8
2005	19.6	4.6	19.7	12.8
2004 and earlier	19.8	3.0	21.2	12.9
Total Prime	18.1	4.8	24.2	13.1
Alt-A, option ARM
2007	8.4	33.5	42.1	13.5
2006	7.7	34.8	37.5	3.9
2005	8.6	23.9	35.2	5.1
Total Alt-A, option ARM	8.3	32.3	40.5	11.0
Alt-A, other
2007	12.4	22.7	38.6	4.2
2006	11.1	24.1	38.0	7.2
2005	14.6	18.5	34.7	4.3
2004 and earlier	18.1	10.2	30.6	19.5
Total Alt-A, other	13.8	19.7	35.8	6.6
Total	13.3	20.0	35.2	8.3

Credit enhancement is defined as the subordinated tranches and over-collateralization, if any, in a security structure that will generally absorb losses before the Bank will experience a loss on the security, expressed as a percentage of the underlying collateral balance. The calculated averages represent the dollar-weighted averages of all the PLRMBS investments in each category shown. The classification (prime or Alt-A) is based on the model used to run the estimated cash flows for the security, which may not necessarily be the same as the classification at the time of origination.

The following table presents the fair value of the Bank’s PLRMBS as a percentage of the unpaid principal balance by collateral type at origination and year of securitization.

80

Fair Value of PLRMBS as a Percentage of Unpaid Principal Balance by Year of Securitization
Collateral Type at Origination and Year of Securitization	December 31, 2017		September 30, 2017		June 30, 2017		March 31, 2017		December 31, 2016
Prime
2008	96.89	%	96.60	%	92.68	%	92.93	%	92.87	%
2007	86.40		86.17		83.80		84.87		83.93
2006	93.86		93.98		93.21		92.25		92.38
2005	100.58		100.02		99.55		99.44		98.97
2004 and earlier	100.47		100.21		99.70		99.09		98.68
Weighted average of all Prime	95.65		95.44		94.14		94.15		93.71
Alt-A, option ARM
2007	90.43		90.00		87.34		83.66		83.05
2006	91.66		89.62		86.82		83.04		80.76
2005	68.99		65.67		62.10		57.79		57.58
Weighted average of all Alt-A, option ARM	87.53		86.46		83.66		79.82		79.05
Alt-A, other
2008	97.22		96.70		94.73		93.62		93.31
2007	89.07		88.80		87.38		86.49		85.88
2006	87.40		87.02		85.55		83.63		82.57
2005	90.44		90.35		88.96		87.31		87.11
2004 and earlier	100.47		100.21		99.54		99.10		98.51
Weighted average of all Alt-A, other	90.98		90.80		89.60		88.33		87.86
Weighted average of all PLRMBS	91.18	%	90.84	%	89.36	%	87.89	%	87.40	%

The Bank determined that, as of December 31, 2017, the gross unrealized losses on the PLRMBS that have not had an OTTI loss are primarily due to illiquidity in the PLRMBS market and market expectations of the credit performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost. The Bank does not intend to sell these securities, it is not more likely than not that the Bank will be required to sell these securities before its anticipated recovery of the remaining amortized cost basis, and the Bank expects to recover the entire amortized cost basis of these securities. As a result, the Bank determined that, as of December 31, 2017, all of the gross unrealized losses on these securities are temporary. The Bank will continue to monitor and analyze the performance of these securities to assess the likelihood of the recovery of the entire amortized cost basis of these securities as of each balance sheet date.

If conditions in the housing and mortgage markets and general business and economic conditions deteriorate, the fair value of MBS may decline further and the Bank may experience OTTI of additional PLRMBS in future periods, as well as further impairment of PLRMBS that were identified as other-than-temporarily impaired as of December 31, 2017. Additional future credit-related OTTI losses could adversely affect the Bank’s earnings and retained earnings and its ability to pay dividends and repurchase capital stock. The Bank cannot predict whether it will be required to record additional credit-related OTTI losses on its PLRMBS in the future.

Derivative Counterparties. The Bank has also adopted credit policies and exposure limits for uncleared derivatives credit exposure. Over-the-counter derivatives may be either entered into directly with a counterparty (uncleared derivatives) or executed either with an executing dealer or on a swap execution facility and then cleared through a futures commission merchant (clearing agent) with a derivatives clearing organization (cleared derivatives).

Uncleared Derivatives. The Bank selects only highly rated derivative dealers and major banks (derivative dealer counterparties) that meet the Bank’s eligibility criteria to act as counterparties for its uncleared derivative activities. In addition, for all uncleared derivative transactions, the Bank has entered into master netting agreements and bilateral credit support agreements with all active derivative dealer counterparties that provide for delivery of

81

collateral at specified levels to limit the Bank’s net unsecured credit exposure to these counterparties. Under these policies and agreements, the amount of unsecured credit exposure to an individual derivative dealer counterparty is set at zero (subject to a minimum transfer amount). All credit exposure from derivative transactions entered into by the Bank with member counterparties that are not derivative dealers (including interest rate swaps, caps, and floors), for which the Bank serves as an intermediary, must be fully secured by eligible collateral, and all such derivative transactions are subject to both the Bank’s Advances and Security Agreement and a master netting agreement.

The Bank is subject to the risk of potential nonperformance by the counterparties to derivative agreements. A counterparty generally must deliver collateral to the Bank if the total market value of the Bank’s exposure to that counterparty rises above a specific trigger point. Currently, all of the Bank’s active uncleared derivative counterparties have a zero threshold. As a result of these risk mitigation initiatives, the Bank does not anticipate any credit losses on its uncleared derivative transactions with counterparties as of December 31, 2017.

Cleared Derivatives. The Bank is subject to nonperformance by the derivatives clearing organizations (clearinghouses) and clearing agents. The requirement that the Bank post initial and variation margin through the clearing agent, to the clearinghouse, exposes the Bank to institutional credit risk in the event that the clearing agent or the clearinghouse fails to meet its obligations. However, the use of cleared derivatives mitigates the Bank’s overall credit risk exposure because a central counterparty is substituted for individual counterparties and variation margin is posted daily for changes in the value of cleared derivatives through a clearing agent. The Bank does not anticipate any credit losses on its cleared derivatives as of December 31, 2017.

The following table presents the Bank’s credit exposure to its derivative dealer counterparties at the dates indicated.

Credit Exposure to Derivative Dealer Counterparties
(In millions)
December 31, 2017
Counterparty Credit Rating(1)	Notional Amount		Net Fair Value of Derivatives Before Collateral			Cash Collateral Pledged to/ (from) Counterparty			Non-cash Collateral Pledged to/ (from) Counterparty		Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives
A	$	4,879	$	7		$	(5	)	$	—	$	2
Cleared derivatives(2)	85,692		83			(2		)	—		81
Liability positions with credit exposure:
Uncleared derivatives
AA	300		(1		)	1			—		—
A	638		—			—			—		—
BBB	1,641		(1		)	1			—		—
Total derivative positions with credit exposure to nonmember counterparties	93,150		88			(5		)	—		83
Member institutions(3)	16		—			—			—		—
Total	93,166		$	88		$	(5	)	$	—	$	83
Derivative positions without credit exposure	6,443
Total notional	$	99,609

82

December 31, 2016
Counterparty Credit Rating(1)	Notional Amount		Net Fair Value of Derivatives Before Collateral		Cash Collateral Pledged to/ (from) Counterparty			Non-cash Collateral Pledged to/ (from) Counterparty		Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives
A	$	2,872	$	9	$	(6	)	$	—	$	3
BBB	826		2		(1		)	—		1
Cleared derivatives(2)	55,024		54		8			—		62
Total derivative positions with credit exposure to nonmember counterparties	58,722		65		1			—		66
Member institutions(3)	13		—		—			—		—
Total	58,735		$	65	$	1		$	—	$	66
Derivative positions without credit exposure	6,334
Total notional	$	65,069

(1) The credit ratings used by the Bank are based on the lower of Moody's or S&P ratings.

(2) Represents derivative transactions cleared with LCH Ltd, the Bank’s clearinghouse, which is not rated. LCH Ltd’s parent, LCH Group Holdings Limited, was rated A+ by S&P. On May 31, 2017, S&P lowered the rating to A and withdrew the rating at LCH Group Holdings Limited’s request. LCH Ltd’s ultimate parent, London Stock Exchange Group, plc., is rated A3 by Moody’s and A- by S&P.

(3) Member institutions include mortgage delivery commitments with members.

The increase or decrease in the credit exposure net of cash collateral, from one period to the next, may be affected by changes in several variables, such as the size and composition of the portfolio, market values of derivatives, and accrued interest.

Based on the master netting arrangements, its credit analyses, and the collateral requirements in place with each counterparty, the Bank does not expect to incur any credit losses on its derivative agreements.

Market Risk

Market risk is defined as the risk to the Bank's market value of capital and future earnings (excluding the impact of any cumulative net gains or losses on derivatives and associated hedged items and on financial instruments carried at fair value) as a result of movements in market interest rates, interest rate spreads, interest rate volatility, and other market factors (market rate factors). This profile reflects the Bank’s objective of maintaining a conservative asset-liability mix and its commitment to providing value to its members through products and dividends without subjecting their investments in Bank capital stock to significant market risk.

The Bank’s Risk Management Policy includes a market risk management objective aimed at maintaining a relatively low adverse exposure of the market value of capital and future earnings (excluding the impact of any cumulative net gains or losses on derivatives and associated hedged items and on financial instruments carried at fair value) to changes in market rate factors. See “Total Bank Market Risk” below.

Market risk identification and measurement are primarily accomplished through market value of capital sensitivity analyses and projected earnings and adjusted return on capital sensitivity analyses. The Risk Management Policy approved by the Bank’s Board of Directors establishes market risk policy limits and market risk measurement standards at the total Bank level as well as at the business segment level. Additional guidelines approved by the Bank’s Enterprise Risk Committee apply to the Bank’s two business segments, the advances-related business and the mortgage-related business. These guidelines provide limits that are monitored at the segment level and are consistent with the Bank’s policy limits. Market risk is managed for each business segment on a daily basis, as discussed below in “Segment Market Risk.” Compliance with Bank policies and guidelines is reviewed by the Bank’s Board of Directors on a regular basis, along with a corrective action plan if applicable.

83

Total Bank Market Risk

Market Value of Capital Sensitivity – The Bank uses market value of capital sensitivity (the interest rate sensitivity of the net fair value of all assets, liabilities, and interest rate exchange agreements) as an important measure of the Bank’s exposure to changes in interest rates.

The Bank’s market value of capital sensitivity policy limits the potential adverse impact of an instantaneous parallel shift of a plus or minus 100-basis-point change in interest rates from current rates (base case) to no worse than –4.0% of the estimated market value of capital. In addition, the policy limits the potential adverse impact of an instantaneous plus or minus 100-basis-point change in interest rates measured from interest rates that are 200 basis points above or below the base case to no worse than –6.0% of the estimated market value of capital. In the case where a market risk sensitivity compliance metric cannot be estimated with a parallel shift in interest rates because of prevailing low interest rates, the sensitivity metric is not reported. The Bank’s measured market value of capital sensitivity was within the policy limits as of December 31, 2017.

To determine the Bank’s estimated risk sensitivities to interest rates for the market value of capital sensitivity, the Bank uses a third-party proprietary asset and liability system to calculate estimated market values under alternative interest rate scenarios. The system analyzes all of the Bank’s financial instruments, including derivatives, on a transaction-level basis using sophisticated valuation models with consistent and appropriate behavioral assumptions and current position data. The system also includes a third-party mortgage prepayment model.

At least annually, the Bank reexamines the major assumptions and methodologies used in the model, including interest rate curves, spreads for discounting, and mortgage prepayment assumptions. The Bank also compares the mortgage prepayment assumptions in the third-party model to other sources, including actual mortgage prepayment history.

The table below presents the sensitivity of the market value of capital (the market value of all of the Bank’s assets, liabilities, and associated interest rate exchange agreements, with mortgage assets valued using market spreads implied by current market prices) to changes in interest rates. The table presents the estimated percentage change in the Bank’s market value of capital that would be expected to result from changes in interest rates under different interest rate scenarios, using market spread assumptions. 

Market Value of Capital Sensitivity Estimated Percentage Change in Market Value of Bank Capital for Various Changes in Interest Rates
Interest Rate Scenario(1)	2017		2016
+200 basis-point change above current rates	–3.8	%	–4.3	%
+100 basis-point change above current rates	–1.7		–2.0
–100 basis-point change below current rates(2)	+2.0		+2.5
–200 basis-point change below current rates(2)	+5.0		+6.3

(1) Instantaneous change from actual rates at dates indicated.

(2) Interest rates for each maturity are limited to non-negative interest rates.

The Bank’s estimates of the sensitivity of the market value of capital to changes in interest rates as of December 31, 2017, are comparable to the estimates as of December 31, 2016. LIBOR interest rates as of December 31, 2017, were 71 basis points higher for the 1-year term, 28 basis points higher for the 5-year term, and 6 basis points higher for the 10-year term. Because interest rates in the declining rate scenarios are limited to non-negative interest rates and the current interest rate environments as of December 31, 2017 and 2016, were low, the interest rates in the declining rate scenarios may not decrease to the same extent that the interest rates in the rising rate scenarios can increase.

84

The Bank's Risk Management Policy provides guidelines for the payment of dividends and the repurchase of excess capital stock based on the ratio of the Bank's estimated market value of total capital to par value of capital stock. If this ratio at the end of any quarter is: (i) less than 100% but greater than or equal to 90%, any dividend would be limited to an annualized rate no greater than the daily average of the three-month LIBOR for the applicable quarter (subject to certain conditions), and any excess capital stock repurchases would not exceed $500 million (subject to certain conditions); (ii) less than 90% but greater than or equal to 70%, any dividend and any excess capital stock repurchases would be subject to the same limitations and conditions as in (i) above, except that any excess capital stock repurchases would not exceed 4% of the Bank's outstanding capital stock as of the repurchase date; and (iii) less than 70%, the Bank would not pay a dividend, not repurchase excess capital stock (but continue to redeem excess capital stock as provided in the Bank's Capital Plan), limit the acquisition of certain assets, and review the Bank's risk policies. A decision by the Board of Directors to declare or not declare any dividend or repurchase any excess capital stock is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks. The ratio of the Bank's estimated market value of total capital to par value of capital stock was 207% as of December 31, 2017.

Adjusted Return on Capital – The adjusted return on capital is a measure used by the Bank to assess financial performance. The adjusted return on capital is based on current period economic earnings that exclude the effects of unrealized net gains or losses resulting from the Bank’s derivatives and associated hedged items and from financial instruments carried at fair value, which will generally reverse through changes in future valuations and settlements of contractual interest cash flows over the remaining contractual terms to maturity or by the call or put date of the assets and liabilities held under the fair value option, hedged assets and liabilities, and derivatives.Economic earnings also exclude the interest expense on mandatorily redeemable capital stock and the 20% of net income allocated to the Bank’s restricted retained earnings account in accordance with the FHLBanks’ JCE Agreement. Economic earnings exclude these amounts in order to more accurately reflect the amount of earnings that may be available to be paid as dividends to shareholders.

The Bank limits the sensitivity of projected financial performance through a Board of Directors policy limit on projected adverse changes in the adjusted return on capital. The Bank’s adjusted return on capital sensitivity policy limits the potential adverse impact of an instantaneous parallel shift of a plus or minus 200-basis-point change in interest rates from current rates (base case) to no worse than –120 basis points from the base case projected adjusted return on capital. With the indicated interest rate shifts, the adjusted return on capital for the projected 12-month horizon would be expected to decrease by 28 basis points in the –200 basis points scenario, well within the policy limit of –120 basis points.

Duration Gap – Duration gap is the difference between the estimated durations (market value sensitivity) of assets and liabilities (including the impact of interest rate exchange agreements) and reflects the extent to which estimated maturity and repricing cash flows for assets and liabilities are matched. The Bank monitors duration gap analysis at the total Bank level and does not have a policy limit. The Bank’s duration gap was one month at December 31, 2017, and one month at December 31, 2016.

Total Bank Duration Gap Analysis
	2017			2016
	Amount (In millions)		Duration Gap(1) (In months)	Amount (In millions)		Duration Gap(1)(2) (In months)
Assets	$	123,385	4	$	91,941	6
Liabilities	116,579		3	86,404		5
Net	$	6,806	1	$	5,537	1

(1) Duration gap values include the impact of interest rate exchange agreements.

(2) Because of the low interest rate environment, the duration gap is estimated using an instantaneous, one-sided parallel change upward of 100 basis points from base case interest rates.

85

Segment Market Risk. The financial performance and interest rate risks of each business segment are managed within prescribed guidelines and policy limits.

Advances-Related Business – Interest rate risk arises from the advances-related business primarily through the use of shareholder-contributed capital and retained earnings to fund fixed rate investments of targeted amounts and maturities. In general, advances result in very little net interest rate risk for the Bank because most fixed rate advances with original maturities greater than three months and all advances with embedded options are simultaneously hedged with an interest rate swap or option with terms offsetting the advance. The interest rate swap or option generally is maintained as a hedge for the life of the advance. These hedged advances effectively create a pool of variable rate assets, which, in combination with the strategy of raising debt swapped to variable rate liabilities, creates an advances portfolio with low net interest rate risk.

Money market investments used for liquidity management generally have maturities of one month or less. In addition, the Bank invests in non-MBS agency securities, generally with terms of less than three years. These investments may be variable rate or fixed rate, and the interest rate risk resulting from the fixed rate coupon is hedged with an interest rate swap or fixed rate debt.

The interest rate risk in the advances-related business is primarily associated with the Bank’s strategy for investing capital (capital stock, including mandatorily redeemable capital stock, and retained earnings). The Bank’s strategy is generally to invest 50% of capital in short-term investments (maturities of three months or less) and 50% in intermediate-term investments (a laddered portfolio of investments with maturities of up to four years). However, this strategy may be altered from time to time depending on market conditions. The strategy to invest 50% of capital in short-term assets is intended to mitigate the market value of capital risks associated with the potential repurchase or redemption of excess capital stock. Excess capital stock usually results from a decline in a borrower’s outstanding advances or by a membership termination. Under the Bank’s capital plan, capital stock, when repurchased or redeemed, is required to be repurchased or redeemed at its par value of $100 per share, subject to certain regulatory and statutory limits. The strategy to invest 50% of capital in a laddered portfolio of investments with short to intermediate maturities is intended to take advantage of the higher earnings available from a generally positively sloped yield curve, when intermediate-term investments generally have higher yields than short-term investments.

The Bank updates the repricing and maturity gaps for actual asset, liability, and derivative transactions that occur in the advances-related segment each day. The Bank regularly compares the targeted repricing and maturity gaps to the actual repricing and maturity gaps to identify rebalancing needs for the targeted gaps. On a weekly basis, the Bank evaluates the projected impact of expected maturities and scheduled repricings of assets, liabilities, and interest rate exchange agreements on the interest rate risk of the advances-related segment. The analyses are prepared under base case and alternate interest rate scenarios to assess the effect of options embedded in the advances, related financing, and hedges. These analyses are also used to measure and manage potential reinvestment risk (when the remaining term of advances is shorter than the remaining term of the financing) and potential refinancing risk (when the remaining term of advances is longer than the remaining term of the financing).

Because of the short-term and variable rate nature of the assets, liabilities, and derivatives of the advances-related business, the Bank’s interest rate risk guidelines address the amounts of net assets that are expected to mature or reprice in a given period. The market value sensitivity analyses and net interest income simulations are also used to identify and measure risk and variances to the target interest rate risk exposure in the advances-related segment.

Mortgage-Related Business– The Bank’s mortgage assets include MBS, most of which are classified as held-to-maturity (HTM) or available-for-sale (AFS), with a small amount classified as trading, and mortgage loans held for portfolio purchased under the MPF Program. The Bank is exposed to interest rate risk from the mortgage-related business because the principal cash flows of the mortgage assets and the liabilities that fund them are not exactly matched through time and across all possible interest rate scenarios, given the impact of mortgage prepayments and the existence of interest rate caps on certain adjustable rate MBS.

86

Historically, the Bank purchased a mix of intermediate-term fixed rate and adjustable rate MBS. The last purchase of a fixed rate MBS was in March 2014. Since March 2014, all MBS purchases were agency adjustable rate MBS. MPF loans that have been acquired are medium- or long-term fixed rate mortgage assets. This results in a mortgage portfolio that has a diversified set of interest rate risk attributes.

The estimated market risk of the mortgage-related business is managed both at the time an asset is purchased and on an ongoing basis for the total portfolio. At the time of purchase (for all significant mortgage asset acquisitions), the Bank analyzes the estimated earnings sensitivity and estimated market value sensitivity, taking into consideration the estimated mortgage prepayment sensitivity of the mortgage assets and anticipated funding and hedging activities under various interest rate scenarios. The related funding and hedging transactions are executed at or close to the time of purchase of a mortgage asset.

At least monthly, the Bank reviews the estimated market risk profile of the entire portfolio of mortgage assets and related funding and hedging transactions. The Bank then considers rebalancing strategies to modify the estimated mortgage portfolio market risk profile. Periodically, the Bank performs more in-depth analyses, which include an analysis of the impacts of non-parallel shifts in the yield curve and assessments of the impacts of unanticipated mortgage prepayment behavior. Based on these analyses, the Bank may take actions to rebalance the mortgage portfolio’s market risk profile. These rebalancing strategies may include entering into new funding and hedging transactions, forgoing or modifying certain funding or hedging transactions normally executed with new mortgage purchases, or terminating certain funding and hedging transactions for the mortgage asset portfolio.

The Bank manages the estimated interest rate risk associated with mortgage assets, including mortgage prepayment risk, through a combination of debt issuance and derivatives. The Bank may obtain funding through callable and non-callable FHLBank System debt and may execute derivative transactions to achieve principal cash flow patterns and market value sensitivities for the liabilities and derivatives that provide a significant offset to the interest rate and mortgage prepayment risks associated with the mortgage assets. Debt issued to finance mortgage assets may be fixed rate debt, callable fixed rate debt, or adjustable rate debt. Derivatives may be used as temporary hedges of anticipated debt issuance or long-term hedges of debt used to finance the mortgage assets. The derivatives used to hedge the interest rate risk of fixed rate mortgage assets generally may be callable and non-callable pay-fixed interest rate swaps. Derivatives may also be used to offset the interest rate cap risk embedded in adjustable rate MBS.

As discussed above in “Total Bank Market Risk – Market Value of Capital Sensitivity” the Bank uses market value of capital sensitivity as a primary market value metric for measuring the Bank’s exposure to interest rates. The Bank’s interest rate risk policies and guidelines for the mortgage-related business address the market value of capital sensitivity of the assets, liabilities, and derivatives of the mortgage-related business.

The following table presents results of the estimated market value of capital sensitivity analysis attributable to the mortgage-related business as of December 31, 2017 and 2016.

Market Value of Capital Sensitivity Estimated Percentage Change in Market Value of Bank Capital Attributable to the Mortgage-Related Business for Various Changes in Interest Rates
Interest Rate Scenario(1)	2017		2016
+200 basis-point change	–1.7	%	–2.2	%
+100 basis-point change	–0.7		–1.0
–100 basis-point change(2)	+1.1		+1.3
–200 basis-point change(2)	+3.2		+3.8

(1) Instantaneous change from actual rates at dates indicated.

(2) Interest rates for each maturity are limited to non-negative interest rates.

87

For the mortgage-related business, the Bank’s estimates of the sensitivity of the market value of capital to changes in interest rates as of December 31, 2017, are comparable to the estimates as of December 31, 2016. LIBOR interest rates as of December 31, 2017, were 71 basis points higher for the 1-year term, 28 basis points higher for the 5-year term, and 6 basis points higher for the 10-year term. Because interest rates in the declining rate scenarios are limited to non-negative interest rates and the current interest rate environments as of December 31, 2017 and 2016, were low, the interest rates in the declining rate scenarios may not decrease to the same extent that the interest rates in the rising rate scenarios can increase.

Interest Rate Exchange Agreements

A derivative transaction or interest rate exchange agreement is a financial contract whose fair value is generally derived from changes in the value of an underlying asset or liability. The Bank uses interest rate swaps; interest rate cap and floor agreements; and callable and putable interest rate swaps (collectively, interest rate exchange agreements) to manage its exposure to market risks inherent in its ordinary course of business, including its lending, investment, and funding activities.

The Bank uses interest rate exchange agreements to implement the following hedging strategies for addressing market risk:

• To convert fixed rate advances to adjustable rate structures, which reduces the Bank’s exposure to fixed interest rates.

• To convert certain adjustable rate indexed advances to other adjustable rate structures, which reduces the Bank’s exposure to basis risk.

• To convert fixed rate consolidated obligations to adjustable rate structures, which reduces the Bank’s exposure to fixed interest rates. (A combined structure of the callable derivative and callable debt instrument is usually lower in cost than a comparable adjustable rate debt instrument, allowing the Bank to reduce its funding costs.)

• To convert certain adjustable rate indexed consolidated obligations to other adjustable rate structures, which reduces the Bank’s exposure to basis risk.

• To reduce the interest rate sensitivity and modify the repricing frequency of assets and liabilities.

• To obtain callable fixed rate equivalent funding by entering into a callable pay-fixed interest rate swap in connection with the issuance of a short-term discount note. The callable fixed rate equivalent funding is used to reduce the Bank’s exposure to prepayment of mortgage assets.

• To offset an embedded option in an advance.

The following table summarizes the Bank’s interest rate exchange agreements by type of hedged item, hedging instrument, associated hedging strategy, accounting designation as specified under the accounting for derivative instruments and hedging activities, and notional amount as of December 31, 2017 and 2016.

88

Interest Rate Exchange Agreements
(In millions)			Notional Amount
Hedging Instrument	Hedging Strategy	Accounting Designation	2017		2016
Hedged Item: Advances
Pay fixed, receive adjustable interest rate swap	Fixed rate advance converted to an adjustable rate	Fair Value Hedge	$	16,713	$	11,880
Basis swap	Adjustable rate advance converted to another adjustable rate index to reduce interest rate sensitivity and repricing gaps	Economic Hedge(1)	2		2
Received fixed, pay adjustable interest rate swap	Adjustable rate advance converted to a fixed rate	Economic Hedge(1)	1,972		1,432
Pay fixed, receive adjustable interest rate swap	Fixed rate advance converted to an adjustable rate	Economic Hedge(1)	19,401		1,681
Pay fixed, receive adjustable interest rate swap; swap may be callable at the Bank’s option or putable at the counterparty’s option	Fixed rate advance (with or without an embedded cap) converted to an adjustable rate; advance and swap may be callable or putable; matched to advance accounted for under the fair value option	Economic Hedge(1)	6,163		3,677
Interest rate cap or floor	Interest rate cap or floor embedded in an adjustable rate advance; matched to advance accounted for under the fair value option	Economic Hedge(1)	83		30
Subtotal Economic Hedges(1)			27,621		6,822
Total			44,334		18,702
Hedged Item: Non-Callable Bonds
Receive fixed or structured, pay adjustable interest rate swap	Fixed rate or structured rate non-callable bond converted to an adjustable rate	Fair Value Hedge	5,373		8,371
Receive fixed or structured, pay adjustable interest rate swap	Fixed rate or structured rate non-callable bond converted to an adjustable rate	Economic Hedge(1)	1,106		6,550
Receive fixed or structured, pay adjustable interest rate swap	Fixed rate or structured rate non-callable bond converted to an adjustable rate; matched to non-callable bond accounted for under the fair value option	Economic Hedge(1)	90		590
Basis swap	Fixed rate or adjustable rate non-callable bond previously converted to an adjustable rate index, converted to another adjustable rate index to reduce interest rate sensitivity and repricing gaps	Economic Hedge(1)	7,050		500
Pay fixed, receive adjustable interest rate swap	Fixed rate or adjustable rate non-callable bond, which may have been previously converted to an adjustable rate, converted to fixed rate debt that offsets the interest rate risk of mortgage assets	Economic Hedge(1)	4,620		—
Subtotal Economic Hedges(1)			12,866		7,640
Total			18,239		16,011

89

Interest Rate Exchange Agreements (continued)
(In millions)			Notional Amount
Hedging Instrument	Hedging Strategy	Accounting Designation	2017		2016
Hedged Item: Callable Bonds
Receive fixed or structured, pay adjustable interest rate swap with an option to call at the counterparty’s option	Fixed or structured rate callable bond converted to an adjustable rate; swap is callable	Fair Value Hedge	2,184		490
Receive fixed or structured, pay adjustable interest rate swap with an option to call at the counterparty’s option	Fixed or structured rate callable bond converted to an adjustable rate; swap is callable	Economic Hedge(1)	3,357		685
Receive fixed or structured, pay adjustable interest rate swap with an option to call at the counterparty’s option	Fixed or structured rate callable bond converted to an adjustable rate; swap is callable; matched to callable bond accounted for under the fair value option	Economic Hedge(1)	865		950
Subtotal Economic Hedges(1)			4,222		1,635
Total			6,406		2,125
Hedged Item: Discount Notes
Pay fixed, receive adjustable callable interest rate swap	Discount note, which may have been previously converted to an adjustable rate, converted to fixed rate callable debt that offsets the prepayment risk of mortgage assets	Economic Hedge(1)	1,535		1,535
Basis swap or receive fixed, pay adjustable interest rate swap	Discount note converted to short-term adjustable rate to hedge repricing gaps	Economic Hedge(1)	26,435		23,244
Pay fixed, receive adjustable non-callable interest rate swap	Discount note, which may have been previously converted to an adjustable rate, converted to fixed rate non-callable debt that offsets the interest rate risk of mortgage assets	Economic Hedge(1)	400		450
Total			28,370		25,229
Hedged Item: Trading Securities
Basis swap	Basis swap hedging adjustable rate Federal Farm Credit Bank (FFCB) bonds	Economic Hedge(1)	750		750
Interest rate cap	Interest rate cap used to offset cap risk embedded in floating rate MBS	Economic Hedge(1)	1,480		2,150
Total			2,230		2,900
Hedged Item: Intermediary Positions and Offsetting Derivatives
Pay fixed, receive adjustable interest rate swap and receive fixed, pay adjustable interest rate swap	Interest rate swap used to offset the economic effect of interest rate swap that is no longer designated to advances, investments, or consolidated obligations	Economic Hedge(1)	14		89
Total			14		89
Stand-Alone Derivatives
Mortgage delivery commitments	N/A	N/A	16		13
Total			16		13
Total Notional Amount			$	99,609	$	65,069

(1) Economic hedges are derivatives that are matched to balance sheet instruments or other derivatives that do not meet the requirements for hedge accounting under the accounting for derivative instruments and hedging activities.

Although the Bank uses interest rate exchange agreements to achieve the specific financial objectives described above, certain transactions do not qualify for hedge accounting (economic hedges). An economic hedge introduces the potential for earnings variability caused by changes in the fair value of the derivatives that are recorded in the Bank’s income but are not offset by corresponding changes in the value of the economically hedged assets and liabilities. Finance Agency regulations and the Bank’s Risk Management Policy prohibit the speculative use of interest rate exchange agreements, and the Bank does not trade derivatives for profit.

90

It is the Bank’s policy to use interest rate exchange agreements only to reduce the market risk exposures inherent in the otherwise unhedged asset and funding positions of the Bank and to achieve other financial objectives of the Bank, such as obtaining low-cost funding for advances and mortgage assets. The primary objective of the financial management practices of the Bank is to preserve and enhance the long-term economic performance and risk management of the Bank. In accordance with the accounting for derivative instruments and hedging activities, reported net income and other comprehensive income will likely exhibit period-to-period volatility, which may be significant.

The following tables categorize the notional amounts and estimated fair values of the Bank’s interest rate exchange agreements, unrealized gains and losses from the related hedged items, and estimated fair value gains and losses from financial instruments carried at fair value by type of accounting treatment and product as of December 31, 2017 and 2016.

Interest Rate Exchange Agreements Notional Amounts and Estimated Fair Values
December 31, 2017
(In millions)	Notional Amount		Fair Value of Derivatives			Unrealized Gain/(Loss) on Hedged Items			Financial Instruments Carried at Fair Value			Difference
Fair value hedges:
Advances	$	16,713	$	85		$	(88	)	$	—		$	(3	)
Non-callable bonds	5,373		(23		)	24			—			1
Callable bonds	2,184		(12		)	13			—			1
Subtotal	24,270		50			(51		)	—			(1		)
Not qualifying for hedge accounting:
Advances	27,621		27			—			(28		)	(1		)
Non-callable bonds	12,866		—			—			(1		)	(1		)
Callable bonds	4,222		(29		)	—			10			(19		)
Discount notes	28,370		23			—			—			23
FFCB bonds	750		(1		)	—			—			(1		)
MBS	1,480		1			—			—			1
Mortgage delivery commitments	16		—			—			—			—
Offsetting derivatives	14		—			—			—			—
Subtotal	75,339		21			—			(19		)	2
Total excluding accrued interest	99,609		71			(51		)	(19		)	1
Accrued interest	—		18			(15		)	9			12
Total	$	99,609	$	89		$	(66	)	$	(10	)	$	13

91

December 31, 2016
(In millions)	Notional Amount		Fair Value of Derivatives			Unrealized Gain/(Loss) on Hedged Items			Financial Instruments Carried at Fair Value			Difference
Fair value hedges:
Advances	$	11,880	$	23		$	(22	)	$	—		$	1
Non-callable bonds	8,371		7			(8		)	—			(1		)
Callable bonds	490		(1		)	2			—			1
Subtotal	20,741		29			(28		)	—			1
Not qualifying for hedge accounting:
Advances	6,822		—			—			2			2
Non-callable bonds	7,640		—			—			(1		)	(1		)
Callable bonds	1,635		(16		)	—			10			(6		)
Discount notes	25,229		29			—			—			29
FFCB bonds	750		(1		)	—			—			(1		)
MBS	2,150		6			—			—			6
Mortgage delivery commitments	13		—			—			—			—
Offsetting derivatives	89		—			—			—			—
Subtotal	44,328		18			—			11			29
Total excluding accrued interest	65,069		47			(28		)	11			30
Accrued interest	—		12			(10		)	6			8
Total	$	65,069	$	59		$	(38	)	$	17		$	38

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, if applicable, and the reported amounts of income, expenses, gains, and losses during the reporting period. Changes in these judgments, estimates, and assumptions could potentially affect the Bank’s financial position and results of operations significantly. Although the Bank believes these judgments, estimates, and assumptions to be reasonably accurate, actual results may differ.

The Bank has identified the following accounting policies and estimates as critical because they require the Bank to make subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies and estimates are: estimating the allowance for credit losses on the advances and mortgage loan portfolios; accounting for derivatives; estimating fair values of investments classified as trading and AFS, derivatives and associated hedged items carried at fair value in accordance with the accounting for derivative instruments and associated hedging activities, and financial instruments carried at fair value under the fair value option, and accounting for other-than-temporary impairment for investment securities; and estimating the prepayment speeds on MBS and mortgage loans for the accounting of amortization of premiums and accretion of discounts on MBS and mortgage loans. These policies and the judgments, estimates, and assumptions are also described in “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies.”

92

Allowance for Credit Losses

The Bank has developed and documented a systematic methodology for determining an allowance for credit losses, where applicable, for:

• advances, letters of credit, and other extensions of credit, collectively referred to as “credit products,”

• MPF loans held for portfolio,

• term securities purchased under agreements to resell, and

• term Federal funds sold.

The allowance for credit losses for credit products and mortgage loans acquired under the MPF Program represents the Bank’s estimate of the probable credit losses inherent in these two portfolios. Determining the amount of the allowance for credit losses is considered a critical accounting estimate because the Bank’s evaluation of the adequacy of the provision is inherently subjective and requires significant estimates, including the amounts and timing of estimated future cash flows, estimated losses based on historical loss experience, and consideration of current economic trends, all of which are subject to change. The Bank’s assumptions and judgments in estimating its allowance for credit losses are based on information available as of the date of the financial statements. Actual results could differ from these estimates.

Credit Products. In determining the allowance for credit losses on credit products, the Bank evaluates its exposure to credit loss taking into consideration: (i) the Bank's judgment as to the creditworthiness of the borrowers to which the Bank lends funds, and (ii) review and valuation of the collateral pledged by borrowers.

The Bank has policies and procedures in place to manage its credit risk on credit products. These include:

• Monitoring the creditworthiness and financial condition of the borrowers.

• Assessing the quality and value of collateral pledged by borrowers to secure advances.

• Establishing borrowing capacities based on collateral value and type for each borrower, including assessment of margin requirements based on factors such as the cost to liquidate and inherent risk exposure based on collateral type.

• Evaluating historical loss experience.

The Bank is required by the FHLBank Act and Finance Agency regulations to obtain sufficient collateral on credit products and to accept only certain collateral for credit products, such as one- to four-family first lien residential mortgage loans, multifamily mortgage loans, MBS, U.S. government and agency securities, deposits in the Bank, and certain other real estate-related collateral, such as commercial real estate loans and second lien residential mortgage loans. The Bank may also accept small business, small farm, and small agribusiness loans that are fully secured by collateral (such as real estate, equipment and vehicles, accounts receivable, and inventory) as eligible collateral from members that are community financial institutions. The Housing Act added secured loans for community development activities as a type of collateral that the Bank may accept from community financial institutions.

At December 31, 2017, the Bank had $77.4 billion of advances outstanding and collateral pledged with an estimated borrowing capacity of $262.5 billion. At December 31, 2016, the Bank had $49.8 billion of advances outstanding and collateral pledged with an estimated borrowing capacity of $204.2 billion.

Based on the collateral pledged as security for advances, the Bank’s credit analyses of borrowers’ financial condition, and the Bank’s credit extension and collateral policies as of December 31, 2017, the Bank expects to collect all amounts due according to the contractual terms. Therefore, no allowance for losses on credit products was deemed necessary by the Bank. The Bank has never experienced a credit loss on any of its credit products.

Significant changes to any of the factors described above could materially affect the Bank’s allowance for losses on credit products. For example, the Bank’s current assumptions about the financial strength of any borrower may change because of various circumstances, such as new information becoming available regarding the borrower’s financial strength or changes in the national or regional economy. New information may cause the Bank to: place a

93

borrower on credit watch, require the borrower to pledge additional collateral, require the borrower to deliver collateral, adjust the borrowing capacity of the borrower's collateral, require prepayment of the credit products, or provide for losses on the credit products.

Mortgage Loans Acquired Under the MPF Program. In determining the allowance for credit losses on mortgage loans, the Bank evaluates its exposure to credit loss taking into consideration: (i) the Bank’s judgment as to the eligibility of participating financial institutions to continue to service and credit-enhance the loans sold to the Bank, (ii) evaluation of credit exposure on purchased loans, (iii) valuation of available credit enhancements, and (iv) estimation of loss exposure and historical loss experience.

The Bank has policies and procedures in place to manage its credit risk. These include:

• Monitoring the creditworthiness and financial condition of the institutions that sold the mortgage loans to the Bank or their successors (both considered to be participating financial institutions) and their ability to meet servicing obligations.

• Determining required credit enhancements to be provided by participating financial institutions and assessing the availability of other credit enhancements.

• Estimating loss exposure and historical loss experience to establish an adequate level of allowance for credit losses.

The Bank maintains an allowance for credit losses, net of credit enhancements, on mortgage loans acquired under the MPF Program at levels that it believes to be adequate to absorb estimated losses identified and inherent in the total mortgage portfolio. Setting the level of allowance for credit losses requires significant judgment and regular evaluation by the Bank. Many factors, including delinquency statistics, past performance, current performance, loan portfolio characteristics, collateral valuations, industry data, collectability of credit enhancements from institutions or from mortgage insurers, and prevailing economic conditions, are important in estimating mortgage loan losses, taking into account the available credit enhancement. The use of different estimates or assumptions as well as changes in external factors could produce materially different allowance levels.

The Bank calculates its estimated allowance for credit losses for MPF Original and MPF Plus loans as described below.

The Bank has a process in place for monitoring and identifying loans that are deemed impaired. The Bank also uses a credit model to estimate credit losses. A loan is considered impaired when it is reported 90 days or more past due (nonaccrual) or when it is probable, based on current information and events, that the Bank will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreement.

Allowance for Credit Losses on MPF Loans –The Bank evaluates the allowance for credit losses on MPF mortgage loans based on two components. The first component applies to each individual loan that is specifically identified as impaired. The Bank evaluates the exposure on these loans by considering the first layer of loss protection (the liquidation value of the real property securing the loan) and the availability and collectability of credit enhancements under the terms of each master commitment, and then records a provision for credit losses. For this component, the Bank established a de minimis allowance for credit losses for MPF Original loans as of December 31, 2017 and 2016. For MPF Plus loans, the Bank established an allowance for credit losses totaling de minimis amounts as of December 31, 2017 and 2016.

The second component applies to loans that are not specifically identified as impaired and is based on the Bank’s estimate of probable credit losses on those loans as of the financial statement date. The Bank evaluates the credit loss exposure on a loan pool basis considering various observable data, such as delinquency statistics, past performance, current performance, loan portfolio characteristics, collateral valuations, industry data, and prevailing economic conditions. The Bank also considers the availability and collectability of credit enhancements from participating financial institutions or from mortgage insurers under the terms of each master commitment. For this component, the Bank established an allowance for credit losses for MPF Original loans totaling de minimis amounts

94

as of December 31, 2017 and 2016, and for MPF Plus loans totaling de minimis amounts as of December 31, 2017 and 2016.

Significant changes in any of the factors described above could materially affect the Bank’s allowance for credit losses on mortgage loans. In addition, as the Bank’s mortgage loan portfolio ages and becomes sufficiently seasoned and additional loss history is obtained, the Bank may have to adjust its methods of estimating its allowance for credit losses and make additional provisions for credit losses in the future.

Term Securities Purchased Under Agreements to Resell. Securities purchased under agreements to resell are considered collateralized financing arrangements and effectively represent short-term loans to counterparties that are considered by the Bank to be of investment quality, which are classified as assets in the Statements of Condition. Securities purchased under agreements to resell are held in safekeeping in the name of the Bank by third-party custodians approved by the Bank. In accordance with the terms of these loans, if the market value of the underlying securities decreases below the market value required as collateral, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash. If an agreement to resell is deemed to be impaired, the difference between the fair value of the collateral and the amortized cost of the agreement is charged to earnings. The Bank did not have any term securities purchased under agreements to resell at December 31, 2017 and 2016.

Term Federal Funds Sold. The Bank invests in Federal funds sold with counterparties that are considered by the Bank to be of investment quality, and these investments are evaluated for purposes of an allowance for credit losses if the investment is not paid when due. All investments in Federal funds sold as of December 31, 2017 and 2016, were repaid or are expected to be repaid according to the contractual terms.

Accounting for Derivatives

Accounting for derivatives includes the following assumptions and estimates by the Bank: (i) assessing whether the hedging relationship qualifies for hedge accounting, (ii) assessing whether an embedded derivative should be bifurcated, (iii) calculating the estimated effectiveness of the hedging relationship, (iv) evaluating exposure associated with counterparty credit risk, and (v) estimating the fair value of the derivatives (which is discussed in “Fair Values” below). The Bank’s assumptions and judgments include subjective calculations and estimates based on information available as of the date of the financial statements and could be materially different based on different assumptions, calculations, and estimates.

For additional discussion of the Bank’s accounting for derivatives, see “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” and “Note 18 – Derivatives and Hedging Activities.”

Assessment of Effectiveness. Highly effective hedging relationships that use interest rate swaps as the hedging instrument and that meet certain criteria under the accounting for derivative instruments and hedging activities may qualify for the “short-cut” method of assessing effectiveness. The short-cut method allows the Bank to make the assumption of no ineffectiveness, which means that the change in fair value of the hedged item can be assumed to be equal to the change in fair value of the derivative. No further evaluation of effectiveness is performed for these hedging relationships unless a critical term is changed. Included in these hedging relationships may be hedged items for which the settlement of the hedged item occurs within the shortest period of time possible for the type of instrument based on market settlement conventions. The Bank defines market settlement conventions to be 5 business days or less for advances and 30 calendar days, using a next business day convention, for consolidated obligations. The Bank designates the hedged item in a qualifying hedging relationship as of its trade date. Although the hedged item will not be recognized in the financial statements until the settlement date, in certain circumstances when the fair value of the hedging instrument is zero on the trade date, the Bank believes that it meets a condition that allows the use of the short-cut method. The Bank then records the changes in fair value of the derivative and the hedged item beginning on the trade date.

95

For a hedging relationship that does not qualify for the short-cut method, the Bank measures its effectiveness using the “long-haul” method, in which the change in fair value of the hedged item must be measured separately from the change in fair value of the derivative. The Bank designs effectiveness testing criteria based on its knowledge of the hedged item and hedging instrument that were employed to create the hedging relationship. The Bank uses regression analyses or other statistical analyses to evaluate effectiveness results, which must fall within established tolerances. Effectiveness testing is performed at inception and on at least a quarterly basis for both prospective considerations and retrospective evaluations.

Hedge Discontinuance.When a hedging relationship fails the effectiveness test, the Bank immediately discontinues hedge accounting for that relationship. In addition, the Bank discontinues hedge accounting when it is no longer probable that a forecasted transaction will occur in the original expected time period and when a hedged firm commitment no longer meets the required criteria of a firm commitment. The Bank treats modifications of hedged items (such as a reduction in par value, change in maturity date, or change in strike rates) as a termination of a hedge relationship.

Accounting for Hedge Ineffectiveness. The Bank quantifies and records in other income the ineffective portion of its hedging relationships. Ineffectiveness for fair value hedging relationships is calculated as the difference between the change in fair value of the hedging instrument and the change in fair value of the hedged item. Ineffectiveness for anticipatory hedge relationships is recorded when the change in the forecasted fair value of the hedging instrument exceeds the change in the fair value of the anticipated hedged item.

Credit Risk for Counterparties.The Bank is subject to credit risk as a result of potential nonperformance by counterparties to the derivative agreements. All uncleared derivatives with counterparties that are members of the Bank and that are not derivative dealers, in which the Bank serves as an intermediary, are fully secured by eligible collateral and are subject to both the Bank's Advances and Security Agreement and a master netting agreement. For all derivative dealer counterparties, the Bank selects only highly rated derivative dealers and major banks that meet the Bank's eligibility requirements. In addition, the Bank enters into master netting agreements and bilateral security agreements with all active derivative dealer and major bank counterparties that provide for delivery of collateral at specified levels tied to counterparty credit rating to limit the Bank’s net unsecured credit exposure to these counterparties. The Bank makes judgments on each counterparty’s creditworthiness and estimates of collateral values in analyzing its credit risk for nonperformance by counterparties. In addition, the Bank is subject to nonperformance by the clearinghouse(s) and clearing agents. The requirement that the Bank post initial and variation margin through the clearing agent to the clearinghouse exposes the Bank to institutional credit risk in the event that the clearing agent or the clearinghouse fails to meet its obligations. However, the use of cleared derivatives mitigates the Bank’s overall credit risk exposure because a central counterparty is substituted for individual counterparties and variation margin is posted daily for changes in the value of cleared derivatives through a clearing agent. See additional discussion of credit exposure to derivatives counterparties in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Derivative Counterparties.”

Fair Values

Fair Value Measurements. Fair value measurement guidance defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and stipulates disclosures about fair value measurements. This guidance applies whenever other accounting pronouncements require or permit assets or liabilities to be measured at fair value. The Bank uses fair value measurements to record fair value adjustments for certain assets and liabilities and to determine fair value disclosures.

Fair value is defined 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. Fair value is a market-based measurement, and the price used to measure fair value is an exit price considered from the perspective of the market participant that holds the asset or owes the liability.

96

This guidance establishes a three-level fair value hierarchy that prioritizes the inputs into the valuation technique used to measure fair value. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

• Level 1 – Inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. 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 to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are supported by little or no market activity or by the Bank’s own assumptions.

A financial instrument's categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The use of fair value to measure the Bank's financial instruments is fundamental to the Bank's financial statements and is a critical accounting estimate because a significant portion of the Bank's assets and liabilities are carried at fair value.

The following assets and liabilities, including those for which the Bank has elected the fair value option, are carried at fair value on the Statements of Condition as of December 31, 2017:

• Trading securities

• AFS securities

• Certain advances

• Derivative assets and liabilities

• Certain consolidated obligation bonds

• Certain other assets

In general, these items carried at fair value are categorized within Level 2 of the fair value hierarchy and are valued primarily using inputs that are observable in the marketplace or can be substantially derived from observable market data.

Certain assets and liabilities are measured at fair value on a nonrecurring basis, that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustment in certain circumstances (for example, when there is evidence of impairment). At December 31, 2017, the Bank measured its REO and certain impaired mortgage loans held for portfolio on a nonrecurring basis at Level 3 of the fair value hierarchy.

The Bank monitors and evaluates the inputs into its fair value measurements to ensure that the asset or liability is properly categorized in the fair value hierarchy based on the lowest level of input that is significant to the fair value measurement. Because items classified as Level 3 are generally based on unobservable inputs, the process to determine the fair value of such items is generally more subjective and involves a higher degree of judgment and assumptions by the Bank.

The Bank employs internal control processes to validate the fair value of its financial instruments. These control processes are designed to ensure that the fair value measurements used for financial reporting are based on observable inputs wherever possible. In the event that observable market-based inputs are not available, the control processes are designed to ensure that the valuation approach used is appropriate and consistently applied and that the assumptions and judgments made are reasonable. The Bank’s control processes provide for segregation of duties and oversight of the fair value methodologies and valuations by the Bank. Valuation models are regularly reviewed by the Bank and are subject to an independent model validation process. Any changes to the valuation methodology or the models are also reviewed to confirm that the changes are appropriate.

97

The assumptions and judgments applied by the Bank may have a significant effect on its estimates of fair value, and the use of different assumptions as well as changes in market conditions could have a material effect on the Bank’s results of operations or financial condition. See “Item 8. Financial Statements and Supplementary Data – Note 19 – Fair Value” for further information regarding the fair value measurement guidance (including the classification within the fair value hierarchy) and the summary of valuation methodologies and primary inputs used to measure fair value for all the Bank’s assets and liabilities carried at fair value.

The Bank continues to refine its valuation methodologies as markets and products develop and the pricing for certain products becomes more or less transparent. While the Bank believes that its valuation methodologies are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a materially different estimate of fair value as of the reporting date. These fair values may not represent the actual values of the financial instruments that could have been realized as of yearend or that will be realized in the future. Although the Bank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology.

Other-Than-Temporary Impairment for Investment Securities. A security is considered impaired when its fair value is less than its amortized cost basis. For impaired debt securities, an entity is required to assess whether: (i) it has the intent to sell the debt security; (ii) it is more likely than not that it will be required to sell the debt security before its anticipated recovery of the remaining amortized cost basis of the security; or (iii) it does not expect to recover the entire amortized cost basis of the impaired debt security. If any of these conditions is met, an OTTI on the security must be recognized.

With respect to any debt security, a credit loss is defined as the amount by which the amortized cost basis exceeds the present value of the cash flows expected to be collected. If a credit loss exists but the entity does not intend to sell the debt security and it is not more likely than not that the entity will be required to sell the debt security before the anticipated recovery of its remaining amortized cost basis (the amortized cost basis less any current-period credit loss), the carrying value of the debt security is adjusted to its fair value. However, instead of recognizing the entire difference between the amortized cost basis and fair value in earnings, only the amount of the impairment representing the credit loss is recognized in earnings, while the amount of non-credit-related impairment is recognized in AOCI. The total OTTI is presented in the Statements of Income with an offset for the amount of the total OTTI that is recognized in AOCI. This presentation provides additional information about the amounts that the entity does not expect to collect related to a debt security. The credit loss on a debt security is limited to the amount of that security's unrealized losses.

For subsequent accounting of other-than-temporarily impaired securities, if the present value of cash flows expected to be collected is less than the amortized cost basis, the Bank records an additional OTTI. The amount of total OTTI for a security that was previously impaired is calculated as the difference between its amortized cost less the amount of OTTI recognized in AOCI prior to the determination of OTTI and its fair value. For an other-than-temporarily impaired security that was previously impaired and has subsequently incurred an additional OTTI related to credit loss (limited to that security's unrealized losses), this additional credit-related OTTI, up to the amount in AOCI, would be reclassified out of non-credit-related OTTI in AOCI and charged to earnings. Any credit loss in excess of the related AOCI is charged to earnings.

Subsequent related increases and decreases (if not an OTTI) in the fair value of AFS securities will be netted against the non-credit component of OTTI previously recognized in AOCI.

For securities classified as HTM, the OTTI recognized in AOCI is accreted to the carrying value of each security on a prospective basis, based on the amount and timing of future estimated cash flows (with no effect on earnings unless the security is subsequently sold or there are additional decreases in cash flows expected to be collected). For securities classified as AFS, the Bank does not accrete the OTTI recognized in AOCI to the carrying value because the subsequent measurement basis for these securities is fair value.

98

For securities previously identified as other-than-temporarily impaired, the Bank recognizes accretion or amortization of OTTI credit charges along with the net interest income associated with the securities’ effective yield in net interest income in the Statement of Income. The total accretion or amortization associated with OTTI credit charges was $93 million, $101 million, and $82 million for the years ended December 31, 2017, 2016, and 2015, respectively. The Bank updates its estimate of future expected cash flows for previously other-than-temporarily impaired securities on a regular basis. If there is no additional impairment on the security, any improvement in expected cash flows is accreted into interest income. This accretion, included in the total accretion or amortization amounts above, totaled $69 million, $81 million, and $74 million for the years ended December 31, 2017, 2016, and 2015, respectively.

As of December 31, 2017, on a cumulative basis, the Bank had recognized $1.5 billion in credit-related OTTI in its Statements of Income. Each reporting period, these losses were based on the Bank’s then-current best estimates of lifetime losses on each security determined to be other-than-temporarily impaired. As housing prices, mortgage credit conditions, and other key inputs into the Bank’s OTTI assumptions and estimates have improved, the Bank has seen significant increases in expected cash flows on previously other-than-temporarily-impaired securities. Based on the Bank’s current assumptions and estimates, the Bank’s estimate of lifetime losses on its other-than-temporarily-impaired securities as of December 31, 2017, is $829 million. As a result of the improvements in expected cash flows and resulting decreases in estimated lifetime losses, the Bank has recognized significant amounts of accretion-related income since 2015. As of December 31, 2017, the Bank estimates that it will accrete approximately $335 million of additional interest income associated with the reduction in OTTI losses over the life of the securities. This estimate of accretion of additional interest income is a forward-looking statement. The Bank updates its estimates on an ongoing basis, and actual results may differ materially from the Bank’s current estimation.

The Bank closely monitors the performance of its investment securities classified as AFS or HTM on at least a quarterly basis to evaluate its exposure to the risk of loss on these investments in order to determine whether a loss is other-than-temporary.

Each FHLBank is responsible for making its own determination of impairment and of the reasonableness of the assumptions, inputs, and methodologies used and for performing the required present value calculations using appropriate historical cost bases and yields. FHLBanks that hold the same private-label MBS are required to consult with one another to ensure that any decision that a commonly held private-label MBS is other-than-temporarily impaired, including the determination of fair value and the credit loss component of the unrealized loss, is consistent among those FHLBanks.

In performing the cash flow analysis for each security, the Bank uses two third-party models. The first model projects prepayments, default rates, and loss severities on the underlying collateral based on borrower characteristics and the particular attributes of the loans underlying the Bank's securities, in conjunction with assumptions related primarily to future changes in housing prices and interest rates. Another significant input to the first model is the forecast of future housing price changes for the relevant states and CBSAs, which are based on an assessment of the regional housing markets. CBSA refers collectively to metropolitan and micropolitan statistical areas as defined by the U.S. Office of Management and Budget. As currently defined, a CBSA must contain at least one urban area with a population of 10,000 or more people. The FHLBanks’ OTTI Committee developed a short-term housing price forecast with projected changes ranging from a decrease of 5.0% to an increase of 12.0% over the 12-month period beginning October 1, 2017. For the vast majority of markets, the projected short-term housing price changes range from an increase of 2.0% to an increase of 6.0%. Thereafter, a unique path is projected for each geographic area based on an internally developed framework derived from historical data.

The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, default rates, and loss severities, are then input into a second model that allocates the projected loan level cash flows and losses to the various security classes in each securitization structure in accordance with the structure's prescribed cash flow and loss allocation rules. When the credit enhancement for the senior securities in a securitization is derived from the presence of subordinated securities, losses are generally allocated first to the

99

subordinated securities until their principal balance is reduced to zero. The projected cash flows are based on a number of assumptions and expectations, and the results of these models can vary significantly with changes in assumptions and expectations. The scenario of cash flows determined based on the model approach described above reflects a best-estimate scenario and includes a base case housing price forecast that reflects the expectations for near- and long-term housing price behavior.

At each quarter end, the Bank compares the present value of the cash flows expected to be collected on its PLRMBS to the amortized cost basis of the securities to determine whether a credit loss exists. For the Bank's variable rate and hybrid PLRMBS, the Bank uses the effective interest rate derived from a variable rate index (for example, the one-month LIBOR) plus the contractual spread, plus or minus a fixed spread adjustment when there is an existing discount or premium on the security. As the implied forward rates of the index change over time, the effective interest rates derived from that index will also change over time. The Bank then uses the effective interest rate for the security prior to impairment for determining the present value of the future estimated cash flows. For all securities, including securities previously identified as other-than-temporarily impaired, the Bank updates its estimate of future estimated cash flows on a quarterly basis.

For the years ended December 31, 2017, 2016, and 2015, the Bank recorded a credit-related OTTI charge of $16 million, $16 million, and $15 million, respectively.

Because there is a risk that the Bank may record additional material OTTI charges in future periods, the Bank's earnings and retained earnings and its ability to pay dividends and repurchase excess capital stock could be adversely affected in future periods.

Additional information about OTTI charges associated with the Bank’s PLRMBS is provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Investments” and in “Item 8. Financial Statements and Supplementary Data – Note 7 – Other-Than-Temporary Impairment Analysis.”

Amortization of Premiums and Accretion of Discounts on MBS and Purchased Mortgage Loans

When the Bank purchases MBS and mortgage loans, it does not necessarily pay the seller the par value of the MBS or the exact amount of the unpaid principal balance of the mortgage loans. If the Bank pays more than the par value or the unpaid principal balance, purchasing the asset at a premium, the premium reduces the yield the Bank recognizes on the asset below the coupon rate. Conversely, if the Bank pays less than the par value or the unpaid principal balance, purchasing the asset at a discount, the discount increases the yield above the coupon rate.

The Bank amortizes premiums and accretes discounts from the acquisition dates of the MBS and mortgage loans. The Bank applies the level-yield method on a retrospective basis over the estimated life of the MBS and purchased mortgage loans for which prepayments reasonably can be expected and estimated. This method requires a retrospective adjustment of the effective yield each time the Bank changes the estimated life as if the new estimate had been known since the original acquisition date of the securities. Use of the retrospective method may increase volatility of reported earnings during periods of changing interest rates, and the use of different estimates or assumptions as well as changes in external factors could produce significantly different results.

Recently Issued Accounting Guidance and Interpretations

See “Item 8. Financial Statements and Supplementary Data – Note 2 – Recently Issued and Adopted Accounting Guidance” for a discussion of recently issued accounting standards and interpretations.

Recent Developments

There are no recent developments for the fourth quarter 2017 that are expected to have a material effect on the financial condition or results of operations or that are otherwise material to the Bank.

100

Off-Balance Sheet Arrangements and Aggregate Contractual Commitments

Off-Balance Sheet Arrangements and Other Commitments

In accordance with regulations governing the operations of the FHLBanks, each FHLBank, including the Bank, is jointly and severally liable for the FHLBank System’s consolidated obligations issued under Section 11(a) of the FHLBank Act, and in accordance with the FHLBank Act, each FHLBank, including the Bank, is jointly and severally liable for consolidated obligations issued under Section 11(c) of the FHLBank Act. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor.

The par value of the outstanding consolidated obligations of the FHLBanks was $1,034.3 billion at December 31, 2017, and $989.3 billion at December 31, 2016. The par value of the Bank’s participation in consolidated obligations was $115.6 billion at December 31, 2017, and $83.7 billion at December 31, 2016. The Bank had committed to the issuance of $729 million and $1.5 billion in consolidated obligations at December 31, 2017 and 2016, respectively.

In addition, in the ordinary course of business, the Bank engages in financial transactions that, in accordance with U.S. GAAP, are not recorded on the Bank’s Statement of Condition or may be recorded on the Bank’s Statement of Condition in amounts that are different from the full contract or notional amount of the transactions. For example, the Bank routinely enters into commitments to extend advances and issues standby letters of credit. These commitments and standby letters of credit may represent future cash requirements of the Bank, although the standby letters of credit usually expire without being drawn upon. Standby letters of credit are subject to the same underwriting and collateral requirements as advances made by the Bank. At December 31, 2017, the Bank had $1 million in advance commitments and $16.2 billion in standby letters of credit outstanding. At December 31, 2016, the Bank had $6 million in advance commitments and $15.2 billion in standby letters of credit outstanding.

For additional information, see “Item 8. Financial Statements and Supplementary Data – Note 20 – Commitments and Contingencies.”

Contractual Obligations

The following table summarizes the Bank’s contractual obligations as of December 31, 2017, except for obligations associated with short-term discount notes. Additional information with respect to the Bank’s consolidated obligations is presented in “Item 8. Financial Statements and Supplementary Data – Note 12 – Consolidated Obligations” and “Note 20 – Commitments and Contingencies.”

In addition, “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital” includes a discussion of the Bank’s mandatorily redeemable capital stock, and “Item 8. Financial Statements and Supplementary Data – Note 16 – Employee Retirement Plans and Incentive Compensation Plans” includes a discussion of the Bank’s pension and retirement expenses and commitments.

The Bank enters into derivative financial instruments, which create contractual obligations, as part of the Bank’s market risk management. “Item 8. Financial Statements and Supplementary Data – Note 18 – Derivatives and Hedging Activities” includes additional information regarding derivative financial instruments.

101

Contractual Obligations
(In millions)
December 31, 2017
	Payments Due By Period
Contractual Obligations	< 1 Year		1 to < 3 Years		3 to < 5 Years		≥ 5 Years		Total
Long-term debt	$	69,734	$	9,246	$	4,052	$	2,076	$	85,108
Mandatorily redeemable capital stock	—		306		—		3		309
Capital leases	2		4		3		—		9
Operating leases	5		6		—		—		11
Pension and post-retirement contributions	3		5		7		15		30
Commitments to fund/purchase mortgage loans	16		—		—		—		16
Total contractual obligations	$	69,760	$	9,567	$	4,062	$	2,094	$	85,483

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition – Risk Management – Market Risk.”

102

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements and Supplementary Data

Financial Statements:
	Management's Report on Internal Control Over Financial Reporting	104
	Report of Independent Registered Public Accounting Firm	105
	Statements of Condition as of December 31, 2017 and 2016	107
	Statements of Income for the Years Ended December 31, 2017, 2016, and 2015	108
	Statements of Comprehensive Income for the Years Ended December 31, 2017, 2016, and 2015	109
	Statements of Capital Accounts for the Years Ended December 31, 2017, 2016, and 2015	110
	Statements of Cash Flows for the Years Ended December 31, 2017, 2016, and 2015	111
	Notes to Financial Statements	113
Supplementary Data:
	Supplementary Financial Data (Unaudited)	183

103

Management's Report on Internal Control Over Financial Reporting

The management of the Federal Home Loan Bank of San Francisco (Bank) is responsible for establishing and maintaining adequate internal control over the Bank's financial reporting. The Bank’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. There are inherent limitations in the ability of internal control over financial reporting to provide absolute assurance of achieving financial reporting objectives. These inherent limitations include the possibility of human error and the circumvention or overriding of controls. Accordingly, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. These inherent limitations are known features of the financial reporting process, however, and it is possible to design into the process safeguards to reduce, although not eliminate, this risk.

Management assessed the effectiveness of the Bank's internal control over financial reporting as of December 31, 2017. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concludes that, as of December 31, 2017, the Bank maintained effective internal control over financial reporting. The effectiveness of the Bank's internal control over financial reporting as of December 31, 2017, has been audited by PricewaterhouseCoopers LLP, the Bank's independent registered public accounting firm, as stated in its report appearing on the following page, which expressed an unqualified opinion on the effectiveness of the Bank's internal control over financial reporting as of December 31, 2017.

104

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of the Federal Home Loan Bank of San Francisco:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying statements of condition of the Federal Home Loan Bank of San Francisco (the “FHLBank”) as of December 31, 2017 and 2016, and the related statements of income, comprehensive income, capital accounts and cash flows for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “financial statements”). We also have audited the FHLBank’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the FHLBank as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the FHLBank maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The FHLBank’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the FHLBank’s financial statements and on the FHLBank’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the FHLBank in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,

105

accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

March 9, 2018

We have served as the FHLBank’s auditor since 1990.

106

Federal Home Loan Bank of San Francisco

Statements of Condition

(In millions-except par value)	December 31, 2017		December 31, 2016
Assets:
Cash and due from banks	$	31	$	2
Interest-bearing deposits	1,115		590
Securities purchased under agreements to resell	11,750		15,500
Federal funds sold	11,028		4,214
Trading securities(a)	1,164		2,066
Available-for-sale (AFS) securities(a)	3,833		4,489
Held-to-maturity (HTM) securities (fair values were $14,704 and $14,141, respectively)(a)	14,680		14,127
Advances (includes $6,431 and $3,719 at fair value under the fair value option, respectively)	77,382		49,845
Mortgage loans held for portfolio, net of allowance for credit losses of $0 and $0, respectively	2,076		826
Accrued interest receivable	119		79
Premises, software, and equipment, net	29		33
Derivative assets, net	83		66
Other assets	95		104
Total Assets	$	123,385	$	91,941
Liabilities:
Deposits	$	281	$	169
Consolidated obligations:
Bonds (includes $949 and $1,507 at fair value under the fair value option, respectively)	85,063		50,224
Discount notes	30,440		33,506
Total consolidated obligations	115,503		83,730
Mandatorily redeemable capital stock	309		457
Borrowings from other Federal Home Loan Banks (FHLBanks)	—		1,345
Accrued interest payable	116		67
Affordable Housing Program (AHP) payable	204		205
Derivative liabilities, net	1		2
Other liabilities	165		429
Total Liabilities	116,579		86,404
Commitments and Contingencies (Note 20)
Capital:
Capital stock—Class B—Putable ($100 par value) issued and outstanding:
32 shares and 24 shares, respectively	3,243		2,370
Unrestricted retained earnings	2,670		888
Restricted retained earnings	575		2,168
Total Retained Earnings	3,245		3,056
Accumulated other comprehensive income/(loss) (AOCI)	318		111
Total Capital	6,806		5,537
Total Liabilities and Capital	$	123,385	$	91,941

(a) At December 31, 2017 and 2016, none of these securities were pledged as collateral that may be repledged.

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

107

Federal Home Loan Bank of San Francisco

Statements of Income

	For the Years Ended December 31,
(In millions)	2017			2016			2015
Interest Income:
Advances	$	874		$	477		$	291
Prepayment fees on advances, net	1			5			8
Interest-bearing deposits	8			2			—
Securities purchased under agreements to resell	9			12			3
Federal funds sold	115			29			9
Trading securities	17			10			5
AFS securities	239			262			264
HTM securities	285			251			293
Mortgage loans held for portfolio	52			30			33
Total Interest Income	1,600			1,078			906
Interest Expense:
Consolidated obligations:
Bonds	713			410			317
Discount notes	285			136			46
Deposits	3			1			1
Mandatorily redeemable capital stock	32			60			65
Total Interest Expense	1,033			607			429
Net Interest Income	567			471			477
Provision for/(reversal of) credit losses on mortgage loans	—			—			1
Net Interest Income After Mortgage Loan Loss Provision	567			471			476
Other Income/(Loss):
Total other-than-temporary impairment (OTTI) loss	(10		)	(26		)	(31		)
Net amount of OTTI loss reclassified to/(from) AOCI	(6		)	10			16
Net OTTI loss, credit-related	(16		)	(16		)	(15		)
Net gain/(loss) on trading securities	—			4			(2		)
Net gain/(loss) on advances and consolidated obligation bonds held under fair value option	(31		)	(40		)	(50		)
Net gain/(loss) on derivatives and hedging activities	(14		)	9			(16		)
Gains on litigation settlements, net	119			510			459
Other	20			18			12
Total Other Income/(Loss)	78			485			388
Other Expense:
Compensation and benefits	76			74			67
Other operating expense	70			74			71
Federal Housing Finance Agency	6			6			6
Office of Finance	5			4			4
Quality Jobs Fund expense	60			—			—
Other	7			—			—
Total Other Expense	224			158			148
Income/(Loss) Before Assessment	421			798			716
AHP Assessment	45			86			78
Net Income/(Loss)	$	376		$	712		$	638

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

108

Federal Home Loan Bank of San Francisco

Statements of Comprehensive Income

	For the Years Ended December 31,
(In millions)	2017		2016			2015
Net Income/(Loss)	$	376	$	712		$	638
Other Comprehensive Income/(Loss):
Net change in pension and postretirement benefits	3		(2		)	(2		)
Net non-credit-related OTTI gain/(loss) on AFS securities:
Non-credit-related OTTI loss transferred from HTM securities	—		—			(1		)
Net change in fair value of other-than-temporarily impaired securities	195		103			(29		)
Net amount of OTTI loss reclassified to/(from) other income/(loss)	6		(10		)	(15		)
Total net non-credit-related OTTI gain/(loss) on AFS securities	201		93			(45		)
Net non-credit-related OTTI gain/(loss) on HTM securities:
Net amount of OTTI loss reclassified to/(from) other income/(loss)	—		—			(1		)
Accretion of non-credit-related OTTI loss	3		5			6
Non-credit-related OTTI loss transferred to AFS securities	—		—			1
Total net non-credit-related OTTI gain/(loss) on HTM securities	3		5			6
Total other comprehensive income/(loss)	207		96			(41		)
Total Comprehensive Income/(Loss)	$	583	$	808		$	597

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

109

Federal Home Loan Bank of San Francisco

Statements of Capital Accounts

	Capital Stock Class B—Putable					Retained Earnings												Total Capital
(In millions)	Shares		Par Value			Restricted			Unrestricted			Total			AOCI
Balance, December 31, 2014	33		$	3,278		$	2,065		$	294		$	2,359		$	56		$	5,693
Comprehensive income/(loss)						103			535			638			(41		)	597
Issuance of capital stock	8		829															829
Repurchase of capital stock	(14	)	(1,439		)													(1,439		)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	(4	)	(415		)													(415		)
Transfers from restricted retained earnings						(150		)	150			—						—
Cash dividends paid on capital stock (12.39%)									(369		)	(369		)				(369		)
Balance, December 31, 2015	23		$	2,253		$	2,018		$	610		$	2,628		$	15		$	4,896
Comprehensive income/(loss)						150			562			712			96			808
Issuance of capital stock	9		926															926
Repurchase of capital stock	(7	)	(753		)													(753		)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	(1	)	(56		)													(56		)
Cash dividends paid on capital stock (12.33%)									(284		)	(284		)				(284		)
Balance, December 31, 2016	24		$	2,370		$	2,168		$	888		$	3,056		$	111		$	5,537
Comprehensive income/(loss)						178			198			376			207			583
Issuance of capital stock	12		1,214															1,214
Repurchase of capital stock	(4	)	(339		)													(339		)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net	—		(2		)													(2		)
Transfers from restricted retained earnings						(1,771		)	1,771			—						—
Cash dividends paid on capital stock (7.50%)									(187		)	(187		)				(187		)
Balance, December 31, 2017	32		$	3,243		$	575		$	2,670		$	3,245		$	318		$	6,806

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

110

Federal Home Loan Bank of San Francisco

Statements of Cash Flows

	For the Years Ended December 31,
(In millions)	2017			2016			2015
Cash Flows from Operating Activities:
Net Income/(Loss)	$	376		$	712		$	638
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and amortization	(62		)	(82		)	(80		)
Provision for/(reversal of) credit losses on mortgage loans	—			—			1
Change in net fair value of trading securities	—			(4		)	2
Change in net fair value adjustment on advances and consolidated obligation bonds held under the fair value option	31			40			50
Change in net derivatives and hedging activities	(8		)	(24		)	(33		)
Net OTTI loss, credit-related	16			16			15
Net change in:
Accrued interest receivable	(45		)	(22		)	16
Other assets	6			(21		)	(9		)
Accrued interest payable	50			(17		)	(20		)
Other liabilities	(22		)	(16		)	109
Total adjustments	(34		)	(130		)	51
Net cash provided by/(used in) operating activities	342			582			689
Cash Flows from Investing Activities:
Net change in:
Interest-bearing deposits	(514		)	294			(404		)
Securities purchased under agreements to resell	3,750			(5,500		)	(9,000		)
Federal funds sold	(6,814		)	412			2,877
Premises, software, and equipment	(12		)	(13		)	(12		)
Trading securities:
Proceeds from maturities of long-term	902			277			2,339
Purchases of long-term	—			(1,155		)	—
AFS securities:
Proceeds from maturities of long-term	933			1,104			996
HTM securities:
Net (increase)/decrease in short-term	850			(1,350		)	—
Proceeds from maturities of long-term	3,240			2,927			2,746
Purchases of long-term	(4,901		)	(4,639		)	—
Advances:
Repaid	1,575,597			1,414,120			1,057,469
Originated	(1,603,226		)	(1,413,136		)	(1,069,480		)
Mortgage loans held for portfolio:
Principal collected	184			175			184
Purchases	(1,413		)	(343		)	(131		)
Proceeds from sales of foreclosed assets	3			3			4
Net cash provided by/(used in) investing activities	(31,421		)	(6,824		)	(12,412		)

111

Federal Home Loan Bank of San Francisco

Statements of Cash Flows (continued)

	For the Years Ended December 31,
(In millions)	2017			2016			2015
Cash Flows from Financing Activities:
Net change in deposits and other financing activities	114			(923		)	262
Borrowings from other FHLBanks	(1,345		)	1,345			—
Net (payments)/proceeds on derivative contracts with financing elements	—			9			17
Net proceeds from issuance of consolidated obligations:
Bonds	80,506			40,041			38,935
Discount notes	165,408			136,608			106,536
Payments for matured and retired consolidated obligations:
Bonds	(45,622		)	(41,514		)	(33,968		)
Discount notes	(168,491		)	(130,761		)	(100,717		)
Proceeds from issuance of capital stock	1,214			926			829
Payments for repurchase/redemption of mandatorily redeemable capital stock	(150		)	(87		)	(646		)
Payments for repurchase of capital stock	(339		)	(753		)	(1,439		)
Cash dividends paid	(187		)	(284		)	(369		)
Net cash provided by/(used in) financing activities	31,108			4,607			9,440
Net increase/(decrease) in cash and due from banks	29			(1,635		)	(2,283		)
Cash and due from banks at beginning of the period	2			1,637			3,920
Cash and due from banks at end of the period	$	31		$	2		$	1,637
Supplemental Disclosures:
Interest paid	$	990		$	578		$	412
AHP payments	53			53			53
Supplemental Disclosures of Noncash Investing and Financing Activities:
Transfers of mortgage loans to real estate owned	1			1			2
Transfers of other-than-temporarily impaired HTM securities to AFS securities	—			—			15
Transfers of capital stock to mandatorily redeemable capital stock	2			56			415

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

112

Federal Home Loan Bank of San Francisco

Notes to Financial Statements

(Dollars in millions except per share amounts)

Background Information

The Federal Home Loan Bank of San Francisco (Bank), a federally chartered corporation exempt from ordinary federal, state, and local taxation except real property taxes, is one of 11 regional Federal Home Loan Banks (FHLBanks). The FHLBanks are government-sponsored enterprises (GSEs) that serve the public by enhancing the availability of credit for residential mortgages and targeted community development by providing a readily available, competitively priced source of funds to their member institutions. Each FHLBank is operated as a separate entity with its own management, employees, and board of directors. The Bank does not have any special purpose entities or any other type of off-balance sheet conduits. The Bank has a cooperative ownership structure. Regulated financial depositories and insurance companies engaged in residential housing finance, with principal places of business located in Arizona, California, and Nevada, are eligible to apply for membership. In addition, authorized community development financial institutions are eligible to be members of the Bank. All members are required to purchase capital stock in the Bank. State and local housing authorities that meet certain statutory criteria may also borrow from the Bank. While eligible to borrow, these housing authorities are not members of the Bank, and, as such, are not required to hold capital stock. To access the Bank's products and services, a financial institution must be approved for membership and purchase capital stock in the Bank. The member's capital stock requirement is generally based on its use of Bank products, subject to a minimum asset-based membership requirement that is intended to reflect the value to the member of having ready access to the Bank as a reliable source of competitively priced funds. Bank capital stock is issued, transferred, redeemed, and repurchased at its par value of $100 per share, subject to certain regulatory and statutory limits. It is not publicly traded. All shareholders may receive dividends on their capital stock, to the extent declared by the Bank's Board of Directors.

The Bank conducts business with members in the ordinary course of business. See Note 21 – Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks for more information.

The Federal Housing Finance Agency (Finance Agency), an independent federal agency in the executive branch of the United States government, supervises and regulates the FHLBanks and the FHLBanks' Office of Finance.

The Office of Finance is a joint office of the FHLBanks that facilitates the issuance and servicing of the debt instruments (consolidated obligations) of the FHLBanks and prepares the combined quarterly and annual financial reports of the FHLBanks.

The primary source of funds for the FHLBanks is the proceeds from the sale to the public of the FHLBanks' consolidated obligations through the Office of Finance using authorized securities dealers. As provided by the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), or regulations governing the operations of the FHLBanks, all the FHLBanks have joint and several liability for all FHLBank consolidated obligations. Other funds are provided by deposits, other borrowings, and the issuance of capital stock to members. The Bank primarily uses these funds to provide advances to members.

Note 1 — Summary of Significant Accounting Policies

Use of Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make a number of judgments, estimates, and assumptions that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income, expenses, gains, and losses during the reporting period. The most significant of these estimates include estimating the allowance for credit losses on the advances and mortgage loan portfolios; accounting for derivatives; estimating fair values of investments classified as trading and available-for-sale, derivatives and associated hedged items carried at fair value in accordance with the accounting for derivative instruments and associated hedging activities, and financial instruments carried at fair value under the fair value option, and accounting for other-than-temporary impairment (OTTI) for investment

113

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

securities; and estimating the prepayment speeds on mortgage-backed securities (MBS) and mortgage loans for the accounting of amortization of premiums and accretion of discounts on MBS and mortgage loans. Actual results could differ significantly from these estimates.

Estimated Fair Values. Many of the Bank's financial instruments lack an available liquid trading market as characterized by frequent exchange transactions between a willing buyer and willing seller. Therefore, the Bank uses financial models employing significant assumptions and present value calculations for the purpose of determining estimated fair values. Thus, the fair values may not represent the actual values of the financial instruments that could have been realized as of yearend or that will be realized in the future.

Fair values for certain financial instruments are based on quoted prices, market rates, or replacement rates for similar financial instruments as of the last business day of the year. The estimated fair values of the Bank's financial instruments and related assumptions are detailed in Note 19 – Fair Value.

Securities Purchased under Agreements to Resell. These investments provide short-term liquidity and are carried at cost. The Bank treats securities purchased under agreements to resell as collateralized financing arrangements because they effectively represent short-term loans to counterparties that are considered by the Bank to be of investment quality, which are classified as assets in the Statements of Condition. Securities purchased under agreements to resell are held in safekeeping in the name of the Bank by third-party custodians approved by the Bank. In accordance with the terms of these loans, if the market value of the underlying securities decreases below the market value required as collateral, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash. If an agreement to resell is deemed to be impaired, the difference between the fair value of the collateral and the amortized cost of the agreement is charged to earnings.

Federal Funds Sold. These investments provide short-term liquidity and are carried at cost. The Bank invests in Federal funds sold with counterparties that are considered by the Bank to be of investment quality.

Interest-bearing Deposits. This investment provides short-term liquidity and is carried at cost. Interest-bearing deposits includeinterest-bearing deposits in banks not meeting the definition of a security. Interest income on interest-bearing deposits is accrued as earned and recorded in interest income on the Statements of Income.

Investment Securities. The Bank classifies investments as trading, available-for-sale (AFS), or held-to-maturity (HTM) at the date of acquisition. Purchases and sales of securities are recorded on a trade date basis.

The Bank classifies certain investments as trading. These securities are held for liquidity purposes and carried at fair value with changes in the fair value of these investments recorded in other income. The Bank does not participate in speculative trading practices and holds these investments indefinitely as the Bank periodically evaluates its liquidity needs.

The Bank classifies certain securities as AFS and carries these securities at their fair value. Unrealized gains and losses on these securities are recognized in accumulated other comprehensive income (AOCI).

HTM securities are carried at cost, adjusted for periodic principal repayments; amortization of premiums and accretion of discounts; and previous OTTI recognized in net income and AOCI. The Bank classifies these investments as HTM securities because the Bank has the positive intent and ability to hold these securities until maturity.

Certain changes in circumstances may cause the Bank to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future. Thus, the sale or transfer of an HTM security because of certain changes in circumstances, such as evidence of significant deterioration in the issuer's creditworthiness or changes in regulatory requirements, is not considered to be inconsistent with its original classification. Other events that are isolated, nonrecurring, and unusual for the Bank

114

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

that could not have been reasonably anticipated may cause the Bank to sell or transfer an HTM security without necessarily calling into question its intent to hold other debt securities to maturity. In addition, sales of debt securities that meet either of the following two conditions may be considered as maturities for purposes of the classification of securities: (i) the sale occurs near enough to its maturity date (or call date if exercise of the call is probable) that interest rate risk is substantially eliminated as a pricing factor and changes in market interest rates would not have a significant effect on the security's fair value, or (ii) the sale occurs after the Bank has already collected a substantial portion (at least 85%) of the principal outstanding at acquisition because of prepayments on the debt security or scheduled payments on a debt security payable in equal installments (both principal and interest) over its term.

The Bank calculates the amortization of purchase premiums and accretion of purchase discounts on investments using the level-yield method on a retrospective basis over the estimated life of the securities. This method requires a retrospective adjustment of the effective yield each time the Bank changes the estimated life as if the new estimate had been known since the original acquisition date of the securities. The Bank uses nationally recognized, market-based, third-party prepayment models to project estimated lives.

On a quarterly basis, the Bank evaluates its individual AFS and HTM investment securities in an unrealized loss position for OTTI. A security is considered impaired when its fair value is less than its amortized cost basis. For impaired debt securities, an entity is required to assess whether: (i) it has the intent to sell the debt security; (ii) it is more likely than not that it will be required to sell the debt security before its anticipated recovery of the remaining amortized cost basis of the security; or (iii) it does not expect to recover the entire amortized cost basis of the impaired debt security. If any of these conditions is met, an OTTI on the security must be recognized.

With respect to any debt security, a credit loss is defined as the amount by which the amortized cost basis exceeds the present value of the cash flows expected to be collected. If a credit loss exists but the entity does not intend to sell the debt security and it is not more likely than not that the entity will be required to sell the debt security before the anticipated recovery of its remaining amortized cost basis (the amortized cost basis less any current-period credit loss), the carrying value of the debt security is adjusted to its fair value. However, instead of recognizing the entire difference between the amortized cost basis and fair value in earnings, only the amount of the impairment representing the credit loss is recognized in earnings, while the amount of non-credit-related impairment is recognized in AOCI. The total OTTI is presented in the Statements of Income with an offset for the amount of the total OTTI that is recognized in AOCI. This presentation provides additional information about the amounts that the entity does not expect to collect related to a debt security. The credit loss on a debt security is limited to the amount of that security's unrealized losses.

For subsequent accounting of other-than-temporarily impaired securities, if the present value of cash flows expected to be collected is less than the amortized cost basis, the Bank records an additional OTTI. The amount of total OTTI for a security that was previously impaired is calculated as the difference between its amortized cost less the amount of OTTI recognized in AOCI prior to the determination of OTTI and its fair value. For an other-than-temporarily impaired security that was previously impaired and has subsequently incurred an additional OTTI related to credit loss (limited to that security's unrealized losses), this additional credit-related OTTI, up to the amount in AOCI, would be reclassified out of non-credit-related OTTI in AOCI and charged to earnings. Any credit loss in excess of the related AOCI is charged to earnings.

Subsequent related increases and decreases (if not an OTTI) in the fair value of AFS securities will be netted against the non-credit component of OTTI previously recognized in AOCI.

For securities classified as HTM, the OTTI recognized in AOCI is accreted to the carrying value of each security on a prospective basis, based on the amount and timing of future estimated cash flows (with no effect on earnings unless the security is subsequently sold or there are additional decreases in cash flows expected to be collected). For securities classified as AFS, the Bank does not accrete the OTTI recognized in AOCI to the carrying value because the subsequent measurement basis for these securities is fair value.

115

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

For securities previously identified as other-than-temporarily impaired, the Bank updates its estimate of future estimated cash flows on a regular basis. If there is no additional impairment on the security, any improvement in expected cash flows is accreted into interest income in the Statements of Income.

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

The net exposure for these financial instruments can change on a daily basis; therefore, there may be a delay between the time this exposure change is identified and additional collateral is requested, and the time this collateral is received or pledged. Likewise, there may be a delay for excess collateral to be returned. For derivative instruments that meet the netting requirements, any excess cash collateral received or pledged is recognized as a derivative liability or derivative asset. Additional information regarding these agreements is provided in Note 18 – Derivatives and Hedging Activities. Based on the fair value of the related collateral held, the securities purchased under agreements to resell were fully collateralized for the periods presented.

Variable Interest Entities. The Bank’s investments in variable interest entities (VIEs) are limited to private-label residential mortgage-backed securities (PLRMBS). On an ongoing basis, the Bank performs a quarterly evaluation

to determine whether it is the primary beneficiary in any VIE. The Bank evaluated its investments in VIEs as of December 31, 2017, to determine whether it is a primary beneficiary of any of these investments. The primary beneficiary is required to consolidate a VIE. The Bank determined that consolidation accounting is not required because the Bank is not the primary beneficiary of these VIEs for the periods presented. The Bank does not have the power to significantly affect the economic performance of any of these investments because it does not act as a key decision maker nor does it have the unilateral ability to replace a key decision maker. In addition, the Bank does not design, sponsor, transfer, service, or provide credit or liquidity support in any of its investments in VIEs. The Bank’s maximum loss exposure for these investments is limited to the carrying value.

Advances. The Bank reports advances (loans to members, former members or their successors, or housing associates) either at amortized cost or at fair value when the fair value option is elected. Advances carried at amortized cost are reported net of premiums, discounts (including discounts related to the Affordable Housing Program), and hedging adjustments. The Bank amortizes premiums and accretes discounts and recognizes hedging adjustments resulting from the discontinuation of a hedging relationship to interest income using a level-yield methodology. Interest on advances is credited to income as earned. For advances carried at fair value, the Bank recognizes contractual interest in interest income.

Advance Modifications. In cases in which the Bank funds an advance concurrent with or within a short period of time before or after the prepayment of a previous advance to the same member, the Bank evaluates whether the subsequent advance meets the accounting criteria to qualify as a modification of an existing advance or whether it constitutes a new advance. The Bank compares the present value of the cash flows on the subsequent advance to the present value of the cash flows remaining on the previous advance. If there is at least a 10% difference in the present value of the cash flows or if the Bank concludes that the difference between the advances is more than minor based on a qualitative assessment of the modifications made to the previous advance's contractual terms, then the subsequent advance is accounted for as a new advance. In all other instances, the subsequent advance is accounted for as a modification.

Prepayment Fees. When a borrower prepays certain advances prior to the original maturity, the Bank may charge the borrower a prepayment fee. For certain advances with partial prepayment symmetry, the Bank may charge the

116

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid.

For prepaid advances that are hedged and meet the hedge accounting requirements, the Bank terminates the hedging relationship upon prepayment and records the associated fair value gains and losses, adjusted for the prepayment fees, in interest income. If a new advance represents a modification of an original hedged advance, the fair value gains or losses on the advance and the prepayment fees are included in the carrying amount of the modified advance, and gains or losses and prepayment fees are amortized in interest income over the life of the modified advance using the level-yield method. If the modified advance is also hedged and the hedge meets the hedge accounting requirements, the modified advance is marked to fair value after the modification, and subsequent fair value changes are recorded in other income. If the prepayment represents an extinguishment of the original hedged advance, the prepayment fee and any fair value gain or loss are immediately recognized in interest income.

For prepaid advances that are not hedged or that are hedged but do not meet the hedge accounting requirements, the Bank records prepayment fees in interest income unless the Bank determines that the new advance represents a modification of the original advance. If the new advance represents a modification of the original advance, the prepayment fee on the original advance is deferred, recorded in the basis of the modified advance, and amortized over the life of the modified advance using the level-yield method. This amortization is recorded in interest income.

Mortgage Loans Held in Portfolio. Under the Mortgage Partnership Finance® (MPF®) Program, the Bank may purchase from members, for its own portfolio, conventional conforming fixed rate residential mortgage loans under the MPF Original product and mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) from its participating members under the MPF Government product. (“Mortgage Partnership Finance” and “MPF” are registered trademarks of the FHLBank of Chicago.) Participating members originate or purchase the mortgage loans, credit-enhance them and sell them to the Bank, and generally retain the servicing of the loans. The Bank manages the interest rate risk, prepayment risk, and liquidity risk of each loan in its portfolio. The Bank and the participating financial institution (either the original participating member that sold the loans to the Bank or a successor to that member) share in the credit risk of the loans, with the Bank assuming the first loss obligation limited by the first loss account, and the participating financial institution assuming credit losses in excess of the first loss account, up to the amount of the credit enhancement obligation specified in the master agreement. The amount of the credit enhancement is calculated so that any Bank credit losses (excluding special hazard losses) in excess of the first loss account are limited to those that would be expected from an equivalent investment with a long-term credit rating of AA for loans purchased prior to April 2017 and BBB for loans purchased thereafter, as determined by the MPF Program methodology.

In addition, the Bank may facilitate the purchase of conforming fixed rate mortgage loans from members for concurrent sale to Fannie Mae under the MPF Xtra® product; of jumbo fixed rate mortgage loans for concurrent sale to Redwood Residential Acquisition Corporation, a subsidiary of Redwood Trust, Inc., a real estate investment trust, under the MPF Direct product; and of government-insured or government-guaranteed mortgage loans that will be packaged into securities backed by the mortgage loans and guaranteed by Ginnie Mae under the MPF Government MBS product. When members sell mortgage loans under the MPF Xtra, MPF Direct, and MPF Government MBS products, the loans are sold to a third-party investor and are not recorded on the Bank’s Statements of Condition. (“MPF Xtra” is a registered trademark of the FHLBank of Chicago.)

For taking on the credit enhancement obligation, the Bank pays the participating financial institution a credit enhancement fee, which is calculated on the remaining unpaid principal balance of the mortgage loans. Depending on the specific MPF product, all or a portion of the credit enhancement fee is typically paid monthly beginning with the month after each delivery of loans. The MPF Original product provides participating financial institutions the option to receive credit enhancement fees on a monthly basis or in an upfront lump sum amount that is included in the purchase price at the time loans are sold to the Bank. The lump sum amount is approximately equivalent to the present value of the monthly credit enhancement fees that the Bank would otherwise be expected to pay over the life of the loans. The MPF Plus product provides for a performance-based credit enhancement fee, which accrues

117

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

monthly, beginning with the month after each delivery of loans, and is paid to the participating financial institution beginning 12 months later. The performance-based credit enhancement fee will be reduced by an amount equivalent to loan losses up to the amount of the first loss account established for each master commitment. The participating financial institutions obtain supplemental mortgage insurance (SMI) to cover their credit enhancement obligations under this product. If the SMI provider's claims-paying ability rating falls below a specified level, the participating financial institution has six months to either replace the SMI policy or assume the credit enhancement obligation and fully collateralize the obligation; otherwise the Bank may choose not to pay the participating financial institution its performance-based credit enhancement fee.

The Bank classifies mortgage loans as held for investment and, accordingly, reports them at their principal amount outstanding net of unamortized premiums, unamortized credit enhancement fees paid as a lump sum at the time loans are purchased, discounts, and unrealized gains and losses from loans initially classified as mortgage loan commitments. The Bank defers and amortizes these amounts as interest income using the level-yield method on a retrospective basis over the estimated life of the related mortgage loan. Actual prepayment experience and estimates of future principal prepayments are used in calculating the estimated life of the mortgage loans. The Bank aggregates the mortgage loans by similar characteristics (type, maturity, note rate, and acquisition date) in determining prepayment estimates. A retrospective adjustment is required each time the Bank changes the estimated amounts as if the new estimate had been known since the original acquisition date of the assets. The Bank uses nationally recognized, market-based, third-party prepayment models to project estimated lives.

The Bank records credit enhancement fees as a reduction to interest income.

Allowance for Credit Losses. An allowance for credit losses is a valuation allowance separately established for each identified portfolio segment, if it is probable that impairment has occurred in the Bank's portfolio as of the Statements of Condition date and the amount of loss can be reasonably estimated. To the extent necessary, an allowance for credit losses for off-balance sheet credit exposures is recorded as a liability.

Portfolio Segments.A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. The Bank has developed and documented a systematic methodology for determining an allowance for credit losses for each applicable portfolio segment.

See Note 10 – Allowance for Credit Losses for more information.

Impairment Methodology on Mortgage Loans. A mortgage loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the mortgage loan agreement.

Loans that are on non-accrual status and that are considered collateral-dependent are measured for impairment based on the fair value of the underlying property less estimated selling costs. Loans are considered collateral-dependent if repayment is expected to be provided solely by the sale of the underlying property, that is, there is no other available and reliable source of repayment. Collateral-dependent loans are impaired if the fair value of the underlying collateral less estimated selling costs is insufficient to recover the unpaid principal balance on the loan. Interest income on impaired loans is recognized in the same manner as interest income on non-accrual loans noted below.

The Bank places a mortgage loan on nonaccrual status when the collection of the contractual principal or interest from the participating financial institution is reported 90 days or more past due or when the loan is in foreclosure. When a mortgage loan is placed on nonaccrual status, accrued but uncollected interest is reversed against interest income. The Bank records cash payments received on nonaccrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful. If the collection of the remaining principal amount due is considered doubtful, then cash payments received would be applied first solely to principal until the remaining principal amount due is

118

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

expected to be collected and then as a recovery of any charge-off, if applicable, followed by recording interest income. A loan on non-accrual status may be restored to accrual when (1) none of its contractual principal and interest is due and unpaid, and the Bank expects repayment of the remaining contractual interest and principal, or (2) it otherwise becomes well secured and in the process of collection. For any mortgage loans that are more than 180 days past due and that have any outstanding balance in excess of the fair value of the property, less cost to sell, this excess is charged off as a loss by the end of the month in which the applicable time period elapses. Likewise, when a borrower is in bankruptcy, loans are written down to the fair value of the collateral, less cost to sell, in general within 60 days of receipt of the notification of filing from the bankruptcy court, unless it can be clearly demonstrated and documented that repayment is likely to occur.

Real Estate Owned. Real estate owned (REO) includes assets that have been received in satisfaction of debt through foreclosures. REO is initially recorded at fair value less estimated selling costs and is subsequently carried at the lower of that amount or current fair value less estimated selling costs. The Bank recognizes a charge-off to the allowance for credit losses if the fair value of the REO less estimated selling costs is less than the recorded investment in the loan at the date of transfer from loans to REO. Any subsequent realized gains, realized or unrealized losses, and carrying costs are included in other non-interest expense in the Statements of Income. REO is recorded in “Other assets” in the Statements of Condition. At December 31, 2017, the Bank’s other assets included $1 of REO resulting from foreclosure of 11 mortgage loans held by the Bank. At December 31, 2016, the Bank’s other assets included $1 of REO resulting from foreclosure of 12 mortgage loans held by the Bank.

Other Fees. Letter of credit fees are recorded as other income over the term of the letter of credit.

Derivatives. All derivatives are recognized on the Statements of Condition at their fair value. The Bank has elected to report derivative assets and derivative liabilities net of cash collateral, including initial and variation margin, and accrued interest received from or pledged to futures commission merchants (clearing agents) or counterparties. The fair values of derivatives are netted by clearing agent or counterparty when the netting requirements have been met. If these netted amounts are positive, they are classified as an asset, and if negative, they are classified as a liability. Cash flows associated with derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be a financing derivative.

Each derivative is designated as one of the following:

(1) a qualifying hedge of the change in fair value of (i) a recognized asset or liability or (ii) an unrecognized firm commitment (a fair value hedge);

(2) a qualifying hedge of (i) a forecasted transaction or (ii) the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a cash flow hedge);

(3) a non-qualifying hedge of an asset or liability for asset-liability management purposes or of certain advances and consolidated obligation bonds for which the Bank elected the fair value option (an economic hedge); or

(4) a non-qualifying hedge of another derivative (an intermediation hedge) that is offered as a product to members or used to offset other derivatives with nonmember counterparties.

If hedging relationships meet certain criteria, including but not limited to formal documentation of the hedging relationship and an expectation to be hedge effective, they are eligible for hedge accounting, and the offsetting changes in fair value of the hedged items attributable to the hedged risk may be recorded in earnings. The application of hedge accounting generally requires the Bank to evaluate the effectiveness of the hedging relationships at inception and on an ongoing basis and to calculate the changes in fair value of the derivatives and the related hedged items independently. This is known as the “long-haul” method of hedge accounting. Transactions that meet certain criteria qualify for the “short-cut” method of hedge accounting, in which an assumption can be made that the change in the fair value of a hedged item, because of changes in the benchmark rate, exactly offsets the change in the value of the related derivative. Under the shortcut method, the entire change in fair value of the interest rate swap is considered to be effective at achieving offsetting changes in fair values or cash flows of the hedged asset or liability.

119

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Derivatives are typically executed at the same time as the hedged item, and the Bank designates the hedged item in a qualifying hedge relationship as of the trade date. In many hedging relationships, the Bank may designate the hedging relationship upon its commitment to disburse an advance or trade a consolidated obligation in which settlement occurs within the shortest period of time possible for the type of instrument based on market settlement conventions. The Bank records the changes in the fair value of the derivatives and the hedged item beginning on the trade date.

Changes in the fair value of a derivative that qualifies as a fair value hedge and is designated as a fair value hedge, along with changes in the fair value of the hedged asset or liability (hedged item) that are attributable to the hedged risk (including changes that reflect losses or gains on firm commitments), are recorded in other income as “Net gain/(loss) on derivatives and hedging activities.”

Changes in the fair value of a derivative that qualifies as a cash flow hedge and is designated as a cash flow hedge, to the extent that the hedge is effective, are recorded in AOCI, a component of capital, until earnings are affected by the variability of the cash flows of the hedged transaction (until the periodic recognition of interest on a variable rate asset or liability is recorded in earnings).

For both fair value and cash flow hedges, any hedge ineffectiveness (which represents the amount by which the change in the fair value of the derivative differs from the change in the fair value of the hedged item or the variability in the cash flows of the forecasted transaction) is recorded in other income as “Net gain/(loss) on derivatives and hedging activities.”

Changes in the fair value of a derivative designated as an economic hedge or an intermediation hedge are recorded in current period earnings with no fair value adjustment to an asset or liability. An economic hedge is defined as a derivative hedging certain advances and consolidated obligation bonds for which the Bank elected the fair value option, or hedging specific or non-specific underlying assets, liabilities, or firm commitments, that does not qualify or was not designated for fair value or cash flow hedge accounting, but is an acceptable hedging strategy under the Bank's risk management program. These economic hedging strategies also comply with Finance Agency regulatory requirements prohibiting speculative hedge transactions. An economic hedge introduces the potential for earnings variability caused by the changes in fair value of the derivatives that are recorded in the Bank's income but are not offset by corresponding changes in the value of the economically hedged assets, liabilities, or firm commitments. The derivatives used in intermediary activities do not qualify for hedge accounting treatment and are separately marked to market through earnings. The net result of the accounting for these derivatives does not significantly affect the operating results of the Bank. Changes in the fair value of these non-qualifying hedges are recorded in other income as “Net gain/(loss) on derivatives and hedging activities.” In addition, the net settlements associated with these non-qualifying hedges are recorded in other income as “Net gain/(loss) on derivatives and hedging activities.” Cash flows associated with these stand-alone derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be designated as a financing derivative.

The net settlements of interest receivables and payables on derivatives designated as fair value or cash flow hedges are recognized as adjustments to the interest income or interest expense of the designated underlying hedged item. The net settlements of interest receivables and payables on intermediated derivatives for members and other economic hedges are recognized in other income as “Net gain/(loss) on derivatives and hedging activities.”

The Bank discontinues hedge accounting prospectively when: (i) it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (ii) the derivative and/or the hedged item expires or is sold, terminated, or exercised; (iii) it is no longer probable that the forecasted transaction will occur in the originally expected period; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; (v) it determines that

120

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

designating the derivative as a hedging instrument is no longer appropriate; or (vi) it decides to use the derivative to offset changes in the fair value of other derivatives or instruments carried at fair value.

When hedge accounting is discontinued, the Bank either terminates the derivative or continues to carry the derivative on the Statements of Condition at its fair value, ceases to adjust the hedged asset or liability for changes in fair value, and amortizes the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using a level-yield methodology.

When hedge accounting is discontinued because the Bank determines that the derivative no longer qualifies as an effective cash flow hedge of an existing hedged item, the Bank continues to carry the derivative on the Statements of Condition at its fair value and reclassifies the AOCI adjustment into earnings when earnings are affected by the existing hedged item (the original forecasted transaction).

Under limited circumstances, when the Bank discontinues cash flow hedge accounting because it is no longer probable that the forecasted transaction will occur by the end of the originally specified time period, or within the following two months, but it is probable the transaction will still occur in the future, the gain or loss on the derivative remains in AOCI and is recognized in earnings when the forecasted transaction affects earnings. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within the following two months, the gains and losses that were recorded in AOCI are recognized immediately in earnings.

When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the Bank continues to carry the derivative on the Statements of Condition at its fair value, removing from the Statements of Condition any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.

The Bank may be the primary obligor on consolidated obligations and may make advances in which derivative instruments are embedded. Upon execution of these transactions, the Bank assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance or debt (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that: (i) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and designated as a stand-alone derivative instrument equivalent to an economic hedge. However, the entire contract is carried on the Statements of Condition at fair value and no portion of the contract is designated as a hedging instrument if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current period earnings (such as an investment security classified as trading, as well as hybrid financial instruments that are eligible for the fair value option), or if the Bank cannot reliably identify and measure the embedded derivative for purposes of separating the derivative from its host contract.

Premises, Software, and Equipment. The Bank records premises, software, and equipment at cost less accumulated depreciation and amortization.The Bank's accumulated depreciation and amortization related to premises, software, and equipment totaled $74 and $61 at December 31, 2017 and 2016, respectively. Improvements and major renewals are capitalized; ordinary maintenance and repairs are expensed as incurred. Depreciation is computed on the straight-line method over the estimated useful lives of assets ranging from 3 to 10 years, and leasehold improvements are amortized on the straight-line method over the estimated useful life of the improvement or the remaining term of the lease, whichever is shorter. Depreciation and amortization expense was $16 for 2017, $12 for 2016, and $8 for 2015.

121

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The cost of computer software developed or obtained for internal use is capitalized and depreciated over future periods. At December 31, 2017 and 2016, the Bank had $10 and $17 in unamortized computer software costs respectively. Depreciation of computer software costs charged to expense was $9, $8, and $6 in 2017, 2016, and 2015, respectively.

Consolidated Obligations. Consolidated obligations are recorded at amortized cost unless the Bank has elected the fair value option, in which case the consolidated obligations are carried at fair value.

Concessions on Consolidated Obligations. Concessions are paid to dealers in connection with the issuance of consolidated obligations for which the Bank is the primary obligor. The amount of the concession is allocated to the Bank by the Office of Finance based on the percentage of the debt issued for which the Bank is the primary obligor. Concessions paid on consolidated obligations designated under the fair value option are expensed as incurred in non-interest expense. Concessions paid on consolidated obligations not designated under the fair value option are deferred and amortized to expense using the level-yield method over the remaining contractual life or on a retrospective basis over the estimated life of the consolidated obligations. Amortization of concessions is included in consolidated obligation interest expense and totaled $6, $13, and $7, in 2017, 2016, and 2015, respectively.

Discounts and Premiums on Consolidated Obligations. The discounts on consolidated obligation discount notes for which the Bank is the primary obligor are amortized to expense using the level-yield method over the term to maturity. The discounts and premiums on consolidated obligation bonds for which the Bank is the primary obligor are amortized to expense using the level-yield method over the remaining contractual life or on a retrospective basis over the estimated life of the consolidated obligation bonds.

Mandatorily Redeemable Capital Stock. The Bank reclassifies the capital stock subject to redemption from capital to a liability after a member provides the Bank with a written notice of redemption; gives notice of intention to withdraw from membership; or attains nonmember status by merger or acquisition, charter termination, or other involuntary membership termination; or after a receiver or other liquidating agent for a member transfers the member's Bank capital stock to a nonmember entity, resulting in the member's shares then meeting the definition of a mandatorily redeemable financial instrument. Shares meeting this definition are reclassified to a liability at fair value. Dividends declared on shares classified as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments (by repurchase or redemption of the shares) is reflected as a financing cash outflow in the Statements of Cash Flows once settled. See Note 15 – Capital for more information.

If a member cancels its written notice of redemption or notice of withdrawal or if the Bank allows the transfer of mandatorily redeemable capital stock to a member, the Bank reclassifies mandatorily redeemable capital stock from a liability to capital. After the reclassification, dividends on the capital stock are no longer classified as interest expense.

Finance Agency Expenses. The FHLBanks fund a portion of the costs of operating the Finance Agency, and each FHLBank is assessed a proportionate share of those costs. The Finance Agency allocates its expenses and working capital fund among the FHLBanks based on the ratio between each FHLBank's minimum required regulatory capital and the aggregate minimum required regulatory capital of all the FHLBanks.

Office of Finance Expenses. Each FHLBank is assessed a proportionate share of the cost of operating the Office of Finance, which facilitates the issuance and servicing of consolidated obligations. The Office of Finance allocates its operating and capital expenditures among the FHLBanks as follows: (1) two-thirds of the assessment is based on each FHLBank's share of total consolidated obligations outstanding, and (2) one-third of the assessment is based on an equal pro rata allocation.

Affordable Housing Program. As more fully discussed in Note 13 – Affordable Housing Program, the FHLBank Act requires each FHLBank to establish and fund an Affordable Housing Program (AHP). The Bank charges the

122

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

required funding for the AHP to earnings and establishes a liability. The AHP funds provide subsidies to members to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Subsidies may be in the form of direct grants or below-market interest rate advances.

Gains on Litigation Settlements, Net. Litigation settlement gains, net of related legal expenses, are recorded in Other Income/(Loss) in “Gains on litigation settlements, net” in the Statements of Income. A litigation settlement gain is considered realized and recorded when the Bank receives cash or assets that are readily convertible to known amounts of cash or claims to cash. In addition, a litigation settlement gain is considered realizable and recorded when the Bank enters into a signed agreement that is not subject to appeal, where the counterparty has the ability to pay, and the amount to be received can be reasonably estimated. Prior to being realized or realizable, the Bank considers potential litigation settlement gains to be gain contingencies, and therefore they are not recorded in the Statements of Income. The related legal expenses are contingent-based fees and are only incurred and recorded upon a litigation settlement gain.

Note 2 — Recently Issued and Adopted Accounting Guidance

Targeted Improvements to Accounting for Hedging Activities. On August 28, 2017, the Financial Accounting Standards Board (FASB) issued amended guidance to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. This guidance requires that, for fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness be presented in the same income statement line that is used to present the earnings effect of the hedged item. For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness must be recorded in other comprehensive income. In addition, the amendments include certain targeted improvements to the assessment of hedge effectiveness and permit, among other things, the following:

• Measurement of the change in fair value of the hedged item on the basis of the benchmark rate component of the contractual coupon cash flows determined at hedge inception.

• Measurement of the hedged item in a partial-term fair value hedge of interest rate risk by assuming the hedged item has a term that reflects only the designated cash flows being hedged.

• Consideration only of how changes in the benchmark interest rate affect a decision to settle a prepayable instrument before its scheduled maturity in calculating the change in the fair value of the hedged item attributable to interest rate risk.

• For a cash flow hedge of interest rate risk of a variable-rate financial instrument, an entity could designate as the hedged risk the variability in cash flows attributable to the contractually specified interest rate.

This guidance becomes effective for the Bank for interim and annual periods beginning on January 1, 2019, and early adoption is permitted. The amended presentation and disclosure guidance is required only prospectively. The Bank does not intend to adopt this guidance early. The Bank is in the process of evaluating this guidance, and its effect on the Bank’s financial condition, results of operations, cash flows, and financial statement disclosures has not yet been determined.

Premium Amortization on Purchased Callable Debt Securities. On March 30, 2017, the FASB issued amended guidance to shorten the amortization period for certain purchased callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. This guidance affects all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date (that is, at a premium). This guidance is effective for the Bank for interim and annual periods beginning on January 1, 2019, and early adoption is permitted. This guidance should be applied using a modified retrospective method through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The adoption of this guidance is not expected to have any effect on the Bank’s financial condition, results of operations, or cash flows.

123

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. On March 10, 2017, the FASB issued amended guidance to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments require that employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the Statements of Income. This guidance became effective for the Bank for interim and annual periods beginning on January 1, 2018, and was adopted retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the Statements of Income. The adoption of this guidance did not have a material effect on the Bank’s financial condition, results of operations, cash flows, and financial statement disclosures.

Classification of Certain Cash Receipts and Cash Payments. On August 26, 2016, the FASB issued amendments to clarify guidance on the classification of certain cash receipts and payments in the Statements of Cash Flows. This guidance is intended to reduce existing diversity in practice in how certain cash receipts and cash payments are presented and classified on the Statements of Cash Flows. This guidance became effective for the Bank for interim and annual periods beginning on January 1, 2018. The adoption of this guidance did not have any effect on the Bank’s financial condition, results of operations, or cash flows.

Measurement of Credit Losses on Financial Instruments. On June 16, 2016, the FASB issued amended guidance for the accounting for credit losses on financial instruments. The amendments require entities to measure expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate under the circumstances. In addition, under the new guidance, a financial asset, or a group of financial assets, is required to be measured at its amortized cost to be presented at the net amount expected to be collected over the contractual term of the financial assets. Among other things, the guidance also requires:

• The Statement of Income to reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period.

• The entities to determine the allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis in a similar manner to other financial assets measured at amortized cost basis. The initial allowance for credit losses is required to be added to the purchase price.

• Credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The amendments limit the allowance for credit losses to the amount by which fair value is below amortized cost.

• Public entities to further disaggregate the current disclosure of credit quality indicators in relation to the amortized cost of financing receivables by the year of origination (i.e., vintage).

The guidance is effective for the Bank for interim and annual periods beginning on January 1, 2020. Early application is permitted as of the interim and annual reporting periods beginning after December 15, 2018. The guidance should be applied using a modified-retrospective approach, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. In addition, the entities are required to use a prospective transition approach for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination and for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The Bank does not intend to adopt the guidance early. The Bank is in the process of evaluating this guidance and expects the adoption of the guidance may result in an increase in the allowance for credit losses given the requirement to assess losses for the entire estimated life of the financial asset, including an allowance for debt securities. The effect on the Bank’s financial condition, results of operations, and cash flows will depend on the composition of financial assets held by the Bank at the adoption date, as well as on economic conditions and forecasts at that time.

124

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Contingent Put and Call Options in Debt Instruments. On March 14, 2016, the FASB issued amendments to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The guidance requires entities to apply only the four-step decision sequence when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks. This guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2017. The adoption of this guidance had no effect on the Bank’s financial condition, results of operations, and cash flows.

Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. On March 10, 2016, the FASB issued amendments to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under U.S. GAAP does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. This guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2017, and early adoption was permitted. The amendments provide entities with the option to apply the guidance using either a prospective approach or a modified retrospective approach, retrospectively applied to all derivative instruments that meet the specific conditions. The Bank elected to early adopt the guidance prospectively on January 1, 2016. The adoption of this guidance had no effect on the Bank’s financial condition, results of operations, and cash flows.

Recognition of Lease Assets and Lease Liabilities. On February 25, 2016, the FASB issued guidance that requires recognition of lease assets and lease liabilities on the Statements of Condition and disclosure of key information about leasing arrangements. In particular, this guidance requires a lessee of operating or finance leases to recognize on the Statements of Condition a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. However, for leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. Under previous U.S. GAAP, a lessee was not required to recognize lease assets and lease liabilities arising from operating leases on the Statements of Condition. While this guidance does not fundamentally change lessor accounting, some changes have been made to align that guidance with the lessee guidance and other areas within U.S. GAAP.

The guidance becomes effective for the Bank for the interim and annual periods beginning on January 1, 2019, and early application is permitted. The guidance requires lessors and lessees to recognize and measure leases at the beginning of the earliest period presented in the financial statements using a modified retrospective approach. The Bank does not intend to adopt this guidance early. Upon adoption, the Bank expects to report higher assets and liabilities as a result of recording right-of-use assets and lease liabilities for its existing leases on the Statements of Condition. The Bank is in the process of evaluating this guidance, but its effect on the Bank’s financial condition, results of operations, and cash flows is not expected to be material.

Recognition and Measurement of Financial Assets and Financial Liabilities. On January 5, 2016, the FASB issued amended guidance on certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance includes, but is not limited to, the following:

• Requires equity investments (with certain exceptions) to be measured at fair value with changes in fair value recognized in net income;

• Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments;

• Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the Statement of Condition or in the accompanying notes to the financial statements;

125

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

• Eliminates the requirement for public entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the Statement of Condition.

The guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2018. The adoption of this guidance affected the Bank’s disclosures. However, the requirement to present the instrument-specific credit risk in other comprehensive income did not have any effect on the Bank’s financial condition, results of operations, and cash flows.

Revenue from Contracts with Customers. On May 28, 2014, the FASB issued its guidance on revenue from contracts with customers. This guidance outlines a comprehensive model for recognizing revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In addition, this guidance amends the existing requirements for the recognition of a gain or loss on the transfer of non-financial assets that are not in a contract with a customer. This guidance applies to all contracts with customers except those that are within the scope of certain other standards, such as financial instruments, certain guarantees, insurance contracts, and lease contracts.

The guidance provides entities with the option of using either of the following adoption methods: a full retrospective method, applied retrospectively to each prior reporting period presented; or a modified retrospective method, with the cumulative effect of retrospectively applying this guidance recognized at the date of initial application.

On August 12, 2015, the FASB issued an amendment to defer the effective date of the guidance issued in May 2014 by one year. In 2016 and 2017, the FASB issued additional amendments to clarify certain aspects of the new revenue guidance. However, the amendments do not change the core principle in the new revenue standard. The guidance became effective for the Bank for interim and annual periods beginning on January 1, 2018. Given that the majority of the Bank’s financial instruments and other contractual rights that generate revenue are covered by other accounting guidance under U.S. GAAP, the effect of this guidance on the Bank’s financial condition, results of operations, and cash flows was not material.

Note 3 — Cash and Due from Banks

Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Bank are included in Cash and due from banks on the Statements of Condition.

Cash and due from banks includes certain compensating balances, wherethe Bank maintains collected cash balances with commercial banks in consideration for certain services. There are no legal restrictions under these agreements on the withdrawal of these funds. The average collected cash balances were approximately $30 for 2017 and $44 for 2016.

126

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 4 — Trading Securities

The estimated fair value of trading securities as of December 31, 2017 and 2016, was as follows:

	December 31, 2017		December 31, 2016
Government-Sponsored Enterprises (GSEs) – Federal Farm Credit Bank (FFCB) bonds	$	1,158	$	2,058
MBS – Other U.S. obligations – Ginnie Mae	6		8
Total	$	1,164	$	2,066

The net unrealized gain/(loss) on trading securities was de minimis, $4, and $(2) for the years ended December 31, 2017, and 2016, and 2015, respectively. These amounts represent the changes in the fair value of the securities during the reported periods.

Note 5 — Available-for-Sale Securities

Available-for-sale (AFS) securities by major security type as of December 31, 2017 and 2016, were as follows:

December 31, 2017
	Amortized Cost(1)		OTTI Recognized in AOCI			Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
PLRMBS:
Prime	$	335	$	—		$	29	$	—	$	364
Alt-A, option ARM	714		(10		)	130		—		834
Alt-A, other	2,447		(23		)	211		—		2,635
Total	$	3,496	$	(33	)	$	370	$	—	$	3,833

December 31, 2016
	Amortized Cost(1)		OTTI Recognized in AOCI			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
PLRMBS:
Prime	$	413	$	(1	)	$	22	$	—		$	434
Alt-A, option ARM	853		(31		)	77		(2		)	897
Alt-A, other	3,087		(82		)	154		(1		)	3,158
Total	$	4,353	$	(114	)	$	253	$	(3	)	$	4,489

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings.

Expected maturities of PLRMBS will differ from contractual maturities because borrowers generally have the right to prepay the underlying obligations without prepayment fees.

At December 31, 2017, the amortized cost of the Bank’s PLRMBS classified as AFS included credit-related OTTI of $801. At December 31, 2016, the amortized cost of the Bank’s PLRMBS classified as AFS included credit-related OTTI of $941.

The following table summarizes the AFS securities with unrealized losses as of December 31, 2017 and 2016. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position. Total unrealized losses in the following table will not agree to total gross unrealized losses in the table above. The unrealized losses in the following table also include non-credit-related

127

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

OTTI losses recognized in AOCI. For OTTI analysis of AFS securities, see Note 7 – Other-Than-Temporary Impairment Analysis.

December 31, 2017
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
PLRMBS:
Prime	$	—	$	—	$	11	$	—	$	11	$	—
Alt-A, option ARM	—		—		144		10		144		10
Alt-A, other	5		—		356		23		361		23
Total	$	5	$	—	$	511	$	33	$	516	$	33

December 31, 2016
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
PLRMBS:
Prime	$	—	$	—	$	14	$	1	$	14	$	1
Alt-A, option ARM	14		—		249		33		263		33
Alt-A, other	57		—		1,048		83		1,105		83
Total	$	71	$	—	$	1,311	$	117	$	1,382	$	117

As indicated in the tables above, as of December 31, 2017, the Bank’s investments classified as AFS had unrealized losses related to PLRMBS, which were primarily due to illiquidity in the PLRMBS market and market expectations of the credit performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost.

See Note 7 – Other-Than-Temporary Impairment Analysis for information on the transfers of securities between the AFS portfolio and the HTM portfolio.

128

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 6 — Held-to-Maturity Securities

The Bank classifies the following securities as HTM because the Bank has the positive intent and ability to hold these securities to maturity:

December 31, 2017
	Amortized Cost(1)		OTTI Recognized in AOCI(1)			Carrying Value(1)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Estimated Fair Value
Certificates of deposit	$	500	$	—		$	500	$	—	$	—		$	500
Housing finance agency bonds:
California Housing Finance Agency (CalHFA) bonds	187		—			187		—		(9		)	178
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	751		—			751		1		(1		)	751
GSEs – single-family:
Freddie Mac	2,039		—			2,039		12		(15		)	2,036
Fannie Mae	3,600		—			3,600		34		(8		)	3,626
Subtotal GSEs – single-family	5,639		—			5,639		46		(23		)	5,662
GSEs – multifamily:
Freddie Mac	4,651		—			4,651		6		(6		)	4,651
Fannie Mae	2,131		—			2,131		2		—			2,133
Subtotal GSEs – multifamily	6,782		—			6,782		8		(6		)	6,784
Subtotal GSEs	12,421		—			12,421		54		(29		)	12,446
PLRMBS:
Prime	521		—			521		5		(6		)	520
Alt-A, other	306		(6		)	300		11		(2		)	309
Subtotal PLRMBS	827		(6		)	821		16		(8		)	829
Total MBS	13,999		(6		)	13,993		71		(38		)	14,026
Total	$	14,686	$	(6	)	$	14,680	$	71	$	(47	)	$	14,704

129

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

December 31, 2016
	Amortized Cost(1)		OTTI Recognized in AOCI(1)			Carrying Value(1)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Estimated Fair Value
Certificates of deposit	$	1,350	$	—		$	1,350	$	—	$	—		$	1,350
Housing finance agency bonds:
California Housing Finance Agency (CalHFA) bonds	225		—			225		—		(18		)	207
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	951		—			951		5		(1		)	955
GSEs – single-family:
Freddie Mac	2,793		—			2,793		23		(15		)	2,801
Fannie Mae	5,037		—			5,037		47		(14		)	5,070
Subtotal GSEs – single-family	7,830		—			7,830		70		(29		)	7,871
GSEs – multifamily:
Freddie Mac	1,556		—			1,556		—		(1		)	1,555
Fannie Mae	1,058		—			1,058		—		(1		)	1,057
Subtotal GSEs – multifamily	2,614		—			2,614		—		(2		)	2,612
Subtotal GSEs	10,444		—			10,444		70		(31		)	10,483
PLRMBS:
Prime	707		—			707		2		(15		)	694
Alt-A, other	459		(9		)	450		11		(9		)	452
Subtotal PLRMBS	1,166		(9		)	1,157		13		(24		)	1,146
Total MBS	12,561		(9		)	12,552		88		(56		)	12,584
Total	$	14,136	$	(9	)	$	14,127	$	88	$	(74	)	$	14,141

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

At December 31, 2017, the amortized cost of the Bank’s MBS classified as HTM included premiums of $19, discounts of $24, and credit-related OTTI of $7. At December 31, 2016, the amortized cost of the Bank’s MBS classified as HTM included premiums of $29, discounts of $34, and credit-related OTTI of $8.

The following tables summarize the HTM securities with unrealized losses as of December 31, 2017 and 2016. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position. Total unrealized losses in the following table will not agree to the total gross unrecognized holding losses in the table above. The unrealized losses in the following table also include non-credit-related OTTI losses recognized in AOCI. For OTTI analysis of HTM securities, see Note 7 – Other-Than-Temporary Impairment Analysis.

130

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

December 31, 2017
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Housing finance agency bonds:
CalHFA bonds	$	—	$	—	$	178	$	9	$	178	$	9
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	406		1		—		—		406		1
GSEs – single-family:
Freddie Mac	895		9		323		6		1,218		15
Fannie Mae	702		4		205		4		907		8
Subtotal GSEs – single-family	1,597		13		528		10		2,125		23
GSEs – multifamily:
Freddie Mac	1,058		6		—		—		1,058		6
Fannie Mae	456		—		—		—		456		—
Subtotal GSEs – multifamily	1,514		6		—		—		1,514		6
Subtotal GSEs	3,111		19		528		10		3,639		29
PLRMBS:
Prime	2		—		202		6		204		6
Alt-A, other	15		—		191		8		206		8
Subtotal PLRMBS	17		—		393		14		410		14
Total MBS	3,534		20		921		24		4,455		44
Total	$	3,534	$	20	$	1,099	$	33	$	4,633	$	53

December 31, 2016
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Housing finance agency bonds:
CalHFA bonds	$	—	$	—	$	193	$	18	$	193	$	18
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	190		1		—		—		190		1
GSEs – single-family:
Freddie Mac	1,498		15		3		—		1,501		15
Fannie Mae	2,665		12		96		2		2,761		14
Subtotal GSEs – single-family	4,163		27		99		2		4,262		29
GSEs – multifamily:
Freddie Mac	1,007		1		—		—		1,007		1
Fannie Mae	387		1		—		—		387		1
Subtotal GSEs – multifamily	1,394		2		—		—		1,394		2
Subtotal GSEs	5,557		29		99		2		5,656		31
PLRMBS:
Prime	1		—		517		15		518		15
Alt-A, other	—		—		452		18		452		18
Subtotal PLRMBS	1		—		969		33		970		33
Total MBS	5,748		30		1,068		35		6,816		65
Total	$	5,748	$	30	$	1,261	$	53	$	7,009	$	83

131

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

As indicated in the tables above, the Bank’s investments classified as HTM had unrealized losses on CalHFA bonds and MBS. The unrealized losses associated with the CalHFA bonds were mainly due to an illiquid market, credit concerns regarding the underlying mortgage collateral, and credit concerns regarding the monoline insurance providers, causing these investments to be valued at a discount to their acquisition cost. For its agency MBS, the Bank expects to recover the entire amortized cost basis of these securities because the Bank determined that the strength of the issuers’ guarantees through direct obligations or support from the U.S. government is sufficient to protect the Bank from losses. The unrealized losses associated with the PLRMBS were primarily due to illiquidity in the PLRMBS market and market expectations of the credit performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost.

Redemption Terms. The amortized cost, carrying value, and estimated fair value of non-MBS securities by contractual maturity (based on contractual final principal payment) and of MBS as of December 31, 2017 and 2016, are shown below. Expected maturities of MBS will differ from contractual maturities because borrowers generally have the right to prepay the underlying obligations without prepayment fees.

December 31, 2017
Year of Contractual Maturity	Amortized Cost(1)		Carrying Value(1)		Estimated Fair Value
HTM securities other than MBS:
Due in 1 year or less	$	500	$	500	$	500
Due after 5 years through 10 years	12		12		12
Due after 10 years	175		175		166
Subtotal	687		687		678
MBS	13,999		13,993		14,026
Total	$	14,686	$	14,680	$	14,704

December 31, 2016
Year of Contractual Maturity	Amortized Cost(1)		Carrying Value(1)		Estimated Fair Value
HTM securities other than MBS:
Due in 1 year or less	$	1,350	$	1,350	$	1,350
Due after 5 years through 10 years	35		35		34
Due after 10 years	190		190		173
Subtotal	1,575		1,575		1,557
MBS	12,561		12,552		12,584
Total	$	14,136	$	14,127	$	14,141

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

See Note 7 – Other-Than-Temporary Impairment Analysis for information on the transfers of securities between the AFS portfolio and the HTM portfolio.

Note 7 — Other-Than-Temporary Impairment Analysis

On a quarterly basis, the Bank evaluates its individual AFS and HTM investment securities in an unrealized loss position for OTTI.

PLRMBS. To assess whether it expects to recover the entire amortized cost basis of its PLRMBS, the Bank performed a cash flow analysis for all of its PLRMBS as of December 31, 2017, using two third-party models. The OTTI Governance Committee of the Federal Home Loan Banks (FHLBanks) developed a short-term housing price

132

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

forecast with projected changes ranging from a decrease of 5.0% to an increase of 12.0% over the 12-month period beginning October 1, 2017. For the vast majority of markets, the projected short-term housing price changes range from an increase of 2.0% to an increase of 6.0%. Thereafter, a unique path is projected for each geographic area based on an internally developed framework derived from historical data.

The projected cash flows are based on a number of assumptions and expectations, and the results of these models can vary significantly with changes in assumptions and expectations. The scenario of cash flows determined reflects a best-estimate scenario and includes a base case housing price forecast that reflects the expectations for near- and long-term housing price behavior.

At each quarter end, the Bank compares the present value of the cash flows expected to be collected on its PLRMBS to the amortized cost basis of the securities to determine whether a credit loss exists. The Bank then uses the effective interest rate for the security prior to impairment for determining the present value of the future estimated cash flows.

For all the PLRMBS in its AFS and HTM portfolios, the Bank does not intend to sell any security and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.

For securities determined to be other-than-temporarily impaired as of December 31, 2017 (securities for which the Bank determined that it does not expect to recover the entire amortized cost basis), the following table presents a summary of the significant inputs used in measuring the amount of credit loss recognized in earnings during the year ended December 31, 2017, and the related current credit enhancement for the Bank.

December 31, 2017
	Significant Inputs for Other-Than-Temporarily Impaired PLRMBS			Current
	Prepayment Rates	Default Rates	Loss Severities	Credit Enhancement
Year of Securitization	Weighted Average % (1)	Weighted Average % (1)	Weighted Average % (1)	Weighted Average % (1)
Alt-A, other
2007	10.4	29.5	39.4	0.7
2006	10.8	20.2	39.2	25.0
2005	13.5	17.8	34.6	2.9
2004 and earlier	14.0	1.7	31.4	9.3
Total Alt-A, other	11.5	23.4	37.8	7.5
Total	11.5	23.4	37.8	7.5

(1) Weighted average percentage is based on unpaid principal balance.

Credit enhancement is defined as the percentage of subordinated tranches, excess spread, and over-collateralization, if any, in a security structure that will generally absorb losses before the Bank will experience a loss on the security. The calculated averages represent the dollar-weighted averages of all the PLRMBS investments in each category shown. The classification is based on the model used to run the estimated cash flows for the CUSIP, which may not necessarily be the same as the classification at the time of origination.

The following table presents the credit-related OTTI, which is recognized in earnings, for the years ended December 31, 2017, 2016, and 2015.

133

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	2017			2016			2015
Balance, beginning of the period	$	1,183		$	1,255		$	1,314
Additional charges on securities for which OTTI was previously recognized(1)	16			16			15
Securities matured during the period(2)	(1		)	(7		)	—
Accretion of yield adjustments resulting from improvement of expected cash flows that are recognized over the remaining life of the securities(3)	(69		)	(81		)	(74		)
Balance, end of the period	$	1,129		$	1,183		$	1,255

(1) For the years ended December 31, 2017, 2016, and 2015, “securities for which OTTI was previously recognized” represents all securities that were also other-than-temporarily impaired prior to January 1, 2017, 2016, and 2015, respectively.

(2) Represents reductions related to securities having reached final maturity during the period, which therefore are no longer held by the Bank at the end of the period.

(3) The total net accretion/(amortization) associated with other-than-temporarily impaired PLRMBS (amount recognized in interest income) totaled $93, $101, and $82 for the years ended December 31, 2017, 2016, and 2015, respectively.

Changes in circumstances may cause the Bank to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future. The sale or transfer of an HTM security because of certain changes in circumstances, such as evidence of significant deterioration in the issuers’ creditworthiness, is not considered to be inconsistent with its original classification. In addition, other events that are isolated, nonrecurring, or unusual for the Bank that could not have been reasonably anticipated may cause the Bank to sell or transfer an HTM security without necessarily calling into question its intent to hold other debt securities to maturity.

The Bank elected to transfer any PLRMBS that incurred a credit-related OTTI charge during the applicable period from the Bank’s held-to-maturity portfolio to its available-for-sale portfolio at their fair values. The Bank recognized an OTTI credit loss on these held-to-maturity PLRMBS, which the Bank believes is evidence of a significant decline in the issuers’ creditworthiness. The decline in the issuers’ creditworthiness is the basis for the transfers to the available-for-sale portfolio. These transfers allow the Bank the option to sell these securities prior to maturity in view of changes in interest rates, changes in prepayment risk, or other factors, while recognizing the Bank’s intent to hold these securities for an indefinite period of time. The Bank does not intend to sell its other-than-temporarily impaired securities and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.

The Bank did not transfer any PLRMBS from its HTM portfolio to its AFS portfolio during the years ended December 31, 2017 and 2016.

The following tables present the Bank’s AFS and HTM PLRMBS that incurred OTTI losses anytime during the life of the securities at December 31, 2017 and 2016, by loan collateral type:

December 31, 2017
	Available-for-Sale Securities						Held-to-Maturity Securities
	Unpaid Principal Balance		Amortized Cost		Estimated Fair Value		Unpaid Principal Balance		Amortized Cost		Carrying Value		Estimated Fair Value
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	$	405	$	335	$	364	$	—	$	—	$	—	$	—
Alt-A, option ARM	953		714		834		—		—		—		—
Alt-A, other	2,927		2,447		2,635		64		59		53		63
Total	$	4,285	$	3,496	$	3,833	$	64	$	59	$	53	$	63

134

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

December 31, 2016
	Available-for-Sale Securities						Held-to-Maturity Securities
	Unpaid Principal Balance		Amortized Cost		Estimated Fair Value		Unpaid Principal Balance		Amortized Cost		Carrying Value		Estimated Fair Value
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	$	498	$	413	$	434	$	—	$	—	$	—	$	—
Alt-A, option ARM	1,134		853		897		—		—		—		—
Alt-A, other	3,650		3,087		3,158		93		88		79		91
Total	$	5,282	$	4,353	$	4,489	$	93	$	88	$	79	$	91

For the Bank’s PLRMBS that were not other-than-temporarily impaired as of December 31, 2017, the Bank has experienced net unrealized losses primarily because of illiquidity in the PLRMBS market and market expectations of the credit performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost. The Bank does not intend to sell these securities, it is not more likely than not that the Bank will be required to sell these securities before its anticipated recovery of the remaining amortized cost basis, and the Bank expects to recover the entire amortized cost basis of these securities. As a result, the Bank determined that, as of December 31, 2017, all of the gross unrealized losses on these PLRMBS are temporary. These securities were included in the securities that the Bank reviewed and analyzed for OTTI as discussed above, and the analyses performed indicated that these securities were not other-than-temporarily impaired.

All Other Available-for-Sale and Held-to-Maturity Investments. For the Bank’s investments in housing finance agency bonds, which were issued by CalHFA, the gross unrealized losses were mainly due to an illiquid market, credit concerns regarding the underlying mortgage collateral, and credit concerns regarding the monoline insurance providers, causing these investments to be valued at a discount to their acquisition cost. The Bank independently modeled cash flows for the underlying collateral, using assumptions for default rates and loss severity that a market participant would deem reasonable, and concluded that the available credit support within the CalHFA structure more than offset the projected underlying collateral losses. The Bank determined that, as of December 31, 2017, all of the gross unrealized losses on the bonds are temporary because the underlying collateral and credit enhancements were sufficient to protect the Bank from losses. As a result, the Bank expects to recover the entire amortized cost basis of these securities.

For its agency MBS, the Bank expects to recover the entire amortized cost basis of these securities because the Bank determined that the strength of the issuers’ guarantees through direct obligations or support from the U.S. government is sufficient to protect the Bank from losses. As a result, the Bank determined that, as of December 31, 2017, all of the gross unrealized losses on its agency MBS are temporary.

Note 8 — Advances

The Bank offers a wide range of fixed and adjustable rate advance products with different maturities, interest rates, payment characteristics, and option features. Fixed rate advances generally have maturities ranging from one day to 30 years. Adjustable rate advances generally have maturities ranging from less than 30 days to 10 years, with the interest rates resetting periodically at a fixed spread to LIBOR or to another specified index.

Redemption Terms. The Bank had advances outstanding, excluding overdrawn demand deposit accounts, at interest rates ranging from 0.79% to 8.57% at December 31, 2017, and 0.43% to 8.57% at December 31, 2016, as summarized below.

135

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	2017					2016
Contractual Maturity	Amount Outstanding			Weighted Average Interest Rate		Amount Outstanding			Weighted Average Interest Rate
Within 1 year	$	46,403		1.46	%	$	22,902		0.78	%
After 1 year through 2 years	16,287			1.61		7,608			1.36
After 2 years through 3 years	5,423			1.73		9,410			1.22
After 3 years through 4 years	6,719			1.69		2,083			1.39
After 4 years through 5 years	1,741			2.10		6,423			1.24
After 5 years	913			3.13		1,431			2.60
Total par value	77,486			1.57	%	49,857			1.09	%
Valuation adjustments for hedging activities	(88		)			(22		)
Valuation adjustments under fair value option	(16		)			10
Total	$	77,382				$	49,845

Many of the Bank’s advances are prepayable at the borrower’s option. However, when advances are prepaid, the borrower is generally charged a prepayment fee intended to make the Bank financially indifferent to the prepayment. In addition, for certain advances with partial prepayment symmetry, the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. The Bank had advances with partial prepayment symmetry outstanding totaling $4,619 at December 31, 2017, and $3,647 at December 31, 2016. Some advances may be repaid on pertinent call dates without prepayment fees (callable advances). The Bank had callable advances outstanding totaling $18,373 at December 31, 2017, and $15,505 at December 31, 2016.

The Bank’s advances at December 31, 2017 and 2016, included $0 and $125 of putable advances, respectively. At the Bank’s discretion, the Bank may terminate these advances on predetermined exercise dates and offer replacement funding at prevailing market rates, subject to certain conditions. The Bank would typically exercise such termination rights when interest rates increase relative to contractual rates.

The following table summarizes advances at December 31, 2017 and 2016, by the earlier of the year of contractual maturity or next call date for callable advances and by the earlier of the year of contractual maturity or next put date for putable advances.

	Earlier of Contractual Maturity or Next Call Date				Earlier of Contractual Maturity or Next Put Date
	2017		2016		2017		2016
Within 1 year	$	52,624	$	25,784	$	46,403	$	22,927
After 1 year through 2 years	12,593		11,078		16,287		7,583
After 2 years through 3 years	7,973		4,465		5,423		9,410
After 3 years through 4 years	1,719		5,782		6,719		2,083
After 4 years through 5 years	1,729		1,421		1,741		6,423
After 5 years	848		1,327		913		1,431
Total par value	$	77,486	$	49,857	$	77,486	$	49,857

Credit and Concentration Risk. The following tables present the concentration in advances to the top five borrowers and their affiliates at December 31, 2017 and 2016. The tables also present the interest income from

these advances before the impact of interest rate exchange agreements associated with these advances for the years ended December 31, 2017 and 2016.

136

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

December 31, 2017

Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
Charles Schwab Bank	$	15,000	19	%	$	40	5	%
JPMorgan Chase Bank, National Association(2)	11,363		15		174		19
First Republic Bank	8,400		11		112		12
MUFG Union Bank, National Association	7,250		9		48		5
Bank of the West	6,409		8		87		10
Subtotal	48,422		62		461		51
Others	29,064		38		438		49
Total par value	$	77,486	100	%	$	899	100	%

December 31, 2016

Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
JPMorgan Chase Bank, National Association(2)	$	14,807	30	%	$	119	23	%
Bank of the West	7,305		14		49		9
First Republic Bank	5,900		12		70		13
CIT Bank, N.A.	2,411		5		28		5
Star One Credit Union	2,024		4		27		5
Subtotal	32,447		65		293		55
Others	17,410		35		240		45
Total par value	$	49,857	100	%	$	533	100	%

(1) Interest income amounts exclude the interest effect of interest rate exchange agreements with derivative counterparties; as a result, the total interest income amounts will not agree to the Statements of Income. The amount of interest income from advances can vary depending on the amount outstanding, terms to maturity, interest rates, and repricing characteristics.

(2) Nonmember institution.

The Bank held a security interest in collateral from each of the top five advances borrowers and their affiliates sufficient to support their respective advances outstanding, and the Bank does not expect to incur any credit losses on these advances.

For information related to the Bank’s credit risk on advances and allowance methodology for credit losses, see Note 10 – Allowance for Credit Losses.

Interest Rate Payment Terms. Interest rate payment terms for advances at December 31, 2017 and 2016, are detailed below:

137

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	2017		2016
Par value of advances:
Fixed rate:
Due within 1 year	$	31,767	$	13,486
Due after 1 year	13,022		10,845
Total fixed rate	44,789		24,331
Adjustable rate:
Due within 1 year	14,636		9,416
Due after 1 year	18,061		16,110
Total adjustable rate	32,697		25,526
Total par value	$	77,486	$	49,857

The Bank may use derivatives to adjust the repricing and options characteristics of advances to more closely match the characteristics of the Bank’s funding liabilities. In general, whenever a member executes a fixed or variable rate advance with embedded options, the Bank will simultaneously execute an interest rate exchange agreement with terms that offset the terms and embedded options in the advance. The combination of the advance and the interest rate exchange agreement effectively creates a variable rate asset. This type of hedge relationship receives fair value option accounting treatment. In addition, for certain advances for which the Bank has elected the fair value option, the Bank will simultaneously execute an interest rate exchange agreement with terms that economically offset the terms of the advance. However, this type of hedge is treated as an economic hedge because these combinations generally do not meet the requirements for fair value hedge accounting treatment. For more information, see Note 18 – Derivatives and Hedging Activities and Note 19 – Fair Value.

The Bank did not have any advances with embedded features that met the requirements to separate the embedded feature from the host contract and designate the embedded feature as a stand-alone derivative at December 31, 2017 or 2016. The Bank has generally elected to account for certain advances with embedded features under the fair value option, and these advances are carried at fair value on the Statements of Condition. For more information, see Note 19 – Fair Value.

Prepayment Fees, Net. The Bank charges borrowers prepayment fees or pays borrowers prepayment credits when the principal on certain advances is paid prior to original maturity. The Bank records prepayment fees net of any associated fair value adjustments related to prepaid advances that were hedged. The net amount of prepayment fees is reflected as interest income in the Statements of Income for the years ended December 31, 2017, 2016, and 2015, as follows:

	2017		2016			2015
Prepayment fees received	$	1	$	6		$	28
Fair value adjustments	—		(1		)	(20		)
Net	$	1	$	5		$	8
Advance principal prepaid	$	8,469	$	3,459		$	2,229

Note 9 — Mortgage Loans Held for Portfolio

Under the MPF® Program, the Bank may purchase from members, for its own portfolio, conventional conforming fixed rate mortgage loans under the MPF Original product and mortgage loans insured by the FHA or guaranteed by the Department of VA under the MPF Government product. In addition, the Bank may facilitate the purchase of conforming fixed rate mortgage loans from members for concurrent sale to Fannie Mae under the MPF Xtra® product; of jumbo fixed rate mortgage loans for concurrent sale to Redwood Residential Acquisition Corporation, a subsidiary of Redwood Trust, Inc., a real estate investment trust, under the MPF Direct product; and of government-insured or government-guaranteed mortgage loans that will be packaged into securities backed by the mortgage

138

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

loans and guaranteed by Ginnie Mae under the MPF Government MBS product. When members sell mortgage loans under the MPF Xtra, MPF Direct, and MPF Government MBS products, the loans are sold to a third-party investor and are not recorded on the Bank’s Statements of Condition. As of December 31, 2017, the Bank had approved 23 members as participating financial institutions since renewing its participation in the MPF Program in 2013.

From May 2002 through October 2006, the Bank purchased conventional conforming fixed rate mortgage loans from its participating financial institutions under the MPF Original and MPF Plus products. Participating members originated or purchased the mortgage loans, credit-enhanced them and sold them to the Bank, and generally retained the servicing of the loans.

The following table presents information as of December 31, 2017 and 2016, on mortgage loans, all of which are secured by one- to four-unit residential properties and single-unit second homes.

	2017			2016
Fixed rate medium-term mortgage loans	$	32		$	55
Fixed rate long-term mortgage loans	1,973			759
Subtotal	2,005			814
Unamortized premiums	76			18
Unamortized discounts	(5		)	(6		)
Mortgage loans held for portfolio	2,076			826
Less: Allowance for credit losses	—			—
Total mortgage loans held for portfolio, net	$	2,076		$	826

Medium-term loans have original contractual terms of 15 years or less, and long-term loans have contractual terms of more than 15 years.

The participating financial institution and the Bank share the risk of credit losses on conventional MPF loan products by structuring potential losses on conventional MPF loans into layers with respect to each master commitment. After any primary mortgage insurance, the Bank is obligated to incur the first layer or portion of credit losses not absorbed by the liquidation value of the real property securing the loan. Under the MPF Program, the participating financial institution’s credit enhancement protection consists of the credit enhancement amount, which may be a direct obligation of the participating financial institution or may be a supplemental mortgage insurance policy paid for by the participating financial institution, and may include a contingent performance-based credit enhancement fee payable to the participating financial institution. The participating financial institution is required to pledge collateral to secure any portion of its credit enhancement amount that is a direct obligation.

For taking on the credit enhancement obligation, the Bank pays the participating financial institution or any successor a credit enhancement fee, typically 10 basis points per annum, which is calculated on the remaining unpaid principal balance of the mortgage loans. A participating financial institution may elect to receive the credit enhancement fees monthly over the life of the loans or as an upfront lump sum amount that is included in the purchase price at the time loans are sold to the Bank. The lump sum amount is approximately equivalent to the present value of the monthly credit enhancement fees that the Bank would otherwise be expected to pay over the life of the loans. The Bank records credit enhancement fees as a reduction to interest income. The Bank reduced net interest income for credit enhancement fees totaling $1 million in 2017 and de minimis amounts in 2016 and 2015.

For information related to the Bank’s credit risk on mortgage loans and allowance methodology for credit losses, see Note 10 – Allowance for Credit Losses.

139

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 10 — Allowance for Credit Losses

An allowance for credit losses is a valuation allowance separately established for each identified portfolio segment, if it is probable that impairment has occurred in the Bank's portfolio as of the Statements of Condition date and the amount of loss can be reasonably estimated. To the extent necessary, an allowance for credit losses for off-balance sheet credit exposures is recorded as a liability.

Portfolio Segments.A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. The Bank has developed and documented a systematic methodology for determining an allowance for credit losses for each of the following portfolio segments:

• advances, letters of credit, and other extensions of credit, collectively referred to as “credit products,”

• MPF loans held for portfolio,

• term securities purchased under agreements to resell, and

• term Federal funds sold.

Classes of Financing Receivables.Classes of financing receivables generally are a disaggregation of a portfolio segment to the extent needed to understand the exposure to credit risk arising from these financing receivables. The Bank determined that no further disaggregation of the portfolio segments identified above is needed because the credit risk arising from these financing receivables is assessed and measured by the Bank at the portfolio segment level.

Credit Products. The Bank lends to member financial institutions that have a principal place of business in Arizona, California, or Nevada. Under the FHLBank Act, the Bank is required to obtain sufficient collateral for credit products to protect the Bank from credit losses. Collateral eligible to secure credit products includes certain investment securities, residential mortgage loans, cash or deposits with the Bank, and other eligible real estate-related assets. The capital stock of the Bank owned by each borrowing member is pledged as additional collateral for the member's indebtedness to the Bank. The Bank may also accept secured small business, small farm, and small agribusiness loans, and securities representing a whole interest in such secured loans, as collateral from members that are community financial institutions. The Housing and Economic Recovery Act of 2008 (Housing Act) added secured loans for community development activities as collateral that the Bank may accept from community financial institutions. In addition, the Bank has advances outstanding to former members and member successors, which are also subject to these security terms.

The Bank requires each borrowing member to execute a written Advances and Security Agreement, which describes the lending relationship between the Bank and the borrower. At December 31, 2017 and 2016, the Bank had a perfected security interest in collateral pledged by each borrowing member, or by the member's affiliate on behalf of the member, and by each nonmember borrower, with an estimated value in excess of the outstanding credit products for that borrower. Based on the financial condition of the borrower, the Bank may either (i) allow the borrower or the pledging affiliate to retain physical possession of loan collateral pledged to the Bank, provided that the borrower or the pledging affiliate agrees to hold the collateral for the benefit of the Bank, or (ii) require the borrower or the pledging affiliate to deliver physical possession of loan collateral to the Bank or its custodial agent. All securities collateral is required to be delivered to the Bank's custodial agent. All loan collateral pledged to the Bank is subject to a UCC-1 financing statement.

Section 10(e) of the FHLBank Act affords any security interest granted to the Bank by a member or any affiliate of the member or any nonmember borrower priority over claims or rights of any other party, except claims or rights that (i) would be entitled to priority under otherwise applicable law and (ii) are held by bona fide purchasers for value or secured parties with perfected security interests.

The Bank classifies as impaired any advance with respect to which it is probable that all principal and interest due will not be collected according to its contractual terms. Impaired advances are valued using the present value of expected future cash flows discounted at the advance's effective interest rate, the advance's observable market price

140

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

or, if collateral-dependent, the fair value of the advance's underlying collateral. When an advance is classified as impaired, the accrual of interest is discontinued and unpaid accrued interest is reversed. Advances do not return to accrual status until they are brought current with respect to both principal and interest and until the future principal payments are no longer in doubt. No advances were classified as impaired during the periods presented.

The Bank manages its credit exposure related to credit products through an integrated approach that generally provides for a credit limit to be established for each borrower, includes an ongoing review of each borrower’s financial condition, and is coupled with conservative collateral and lending policies to limit the risk of loss while taking into account borrowers’ needs for a reliable funding source. At December 31, 2017 and 2016, none of the Bank’s credit products were past due, on nonaccrual status, or considered impaired. There were no troubled debt restructurings related to credit products during December 31, 2017 and 2016.

Based on the collateral pledged as security for advances, the Bank’s credit analyses of borrowers’ financial condition, and the Bank’s credit extension and collateral policies as of December 31, 2017, the Bank expects to collect all amounts due according to the contractual terms. Therefore, no allowance for losses on credit products was deemed necessary by the Bank. The Bank has never experienced any credit losses on its credit products.

Nomember institutions were placed into receivership during 2017 or from January 1, 2018 to February 28, 2018.

Mortgage Loans Held for Portfolio. A mortgage loan is considered to be impaired when it is reported 90 days or more past due (nonaccrual) or when it is probable, based on current information and events, that the Bank will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreement.

Loans that are on nonaccrual status and that are considered collateral-dependent are measured for impairment based on the fair value of the underlying property less estimated selling costs. Loans are considered collateral-dependent if repayment is expected to be provided solely by the sale of the underlying property, that is, if it is considered likely that the borrower will default and there is no credit enhancement to offset losses under the master commitment, or the collectability or availability of credit enhancement is deemed to be uncertain. Collateral-dependent loans are impaired if the fair value of the underlying collateral less estimated selling costs is insufficient to recover the unpaid principal balance on the loan. Interest income on impaired loans is recognized in the same manner as interest income on nonaccrual loans, as noted below.

The Bank places a mortgage loan on nonaccrual status when the collection of the contractual principal or interest from the participating financial institution is reported 90 days or more past due or when the loan is in foreclosure. When a mortgage loan is placed on nonaccrual status, accrued but uncollected interest is reversed against interest income. The Bank records cash payments received on nonaccrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful.

The following table presents information on delinquent mortgage loans as of December 31, 2017 and 2016.

141

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	2017			2016
	Recorded Investment(1)			Recorded Investment(1)
30 – 59 days delinquent	$	8		$	7
60 – 89 days delinquent	2			3
90 days or more delinquent	12			15
Total past due	22			25
Total current loans	2,065			805
Total mortgage loans	$	2,087		$	830
In process of foreclosure, included above(2)	$	3		$	5
Nonaccrual loans	$	12		$	15
Loans past due 90 days or more and still accruing interest	$	—		$	—
Serious delinquencies as a percentage of total mortgage loans outstanding(3)	0.59		%	1.79		%

(1) The recorded investment in a loan is the unpaid principal balance of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs. The recorded investment is not net of any valuation allowance.

(2) Includes loans for which the servicer has reported a decision to foreclose or to pursue a similar alternative, such as deed-in-lieu. Loans in process of foreclosure are included in past due or current loans depending on their delinquency status.

(3) Represents loans that are 90 days or more past due or in the process of foreclosure as a percentage of the recorded investment of total mortgage loans outstanding.

Mortgage Loans Evaluated at the Individual Master Commitment Level – The credit risk analysis of all conventional MPF loans is performed at the individual master commitment level to determine the credit enhancements available to recover losses on MPF loans under each individual master commitment.

Individually Evaluated Mortgage Loans – Certain conventional mortgage loans, primarily impaired mortgage loans that are considered collateral-dependent, may be specifically identified for purposes of calculating the allowance for credit losses. The estimated credit losses on impaired collateral-dependent loans may be separately determined because sufficient information exists to make a reasonable estimate of the inherent loss on those loans on an individual loan basis. The Bank estimates the fair value of collateral using real estate broker price opinions or automated valuation models (AVMs) based on property characteristics as well as recent market sales and current listings. The resulting incurred loss, if any, is equal to the difference between the carrying value of the loan and the estimated fair value of the collateral less estimated selling costs.

Collectively Evaluated Mortgage Loans – The credit risk analysis of conventional loans collectively evaluated for impairment considers loan pool-specific attribute data, applies estimated loss severities, and considers the associated credit enhancements to determine the Bank's best estimate of probable incurred losses. The analysis includes estimating projected cash flows that the Bank is likely to collect based on an assessment of all available information, including prepayment speeds, default rates, and loss severity for the mortgage loans based on underlying loan-level borrower and loan characteristics; expected housing price changes; and interest rate assumptions. In performing a detailed cash flow analysis, the Bank develops its best estimate of the cash flows expected to be collected using a third-party model to project prepayments, default rates, and loss severities based on borrower characteristics and the particular attributes of the mortgage loans, in conjunction with assumptions related primarily to future changes in housing prices and interest rates. The assumptions used as inputs to the model, including the forecast of future housing price changes, are consistent with assumptions used for the Bank's evaluation of its PLRMBS for OTTI.

The amounts of charge-offs and recoveries of allowance for credit losses on the mortgage loan portfolio were de minimis during the years ended December 31, 2017 and 2016. Net charge-offs of allowance for credit losses on the mortgage loan portfolio were $2 during the year ended December 31, 2015.

142

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The allowance for credit losses and recorded investment by impairment methodology for individually and collectively evaluated impaired loans are as follows:

(In millions)	2017		2016
Allowance for credit losses, end of the period:
Individually evaluated for impairment	$	—	$	—
Collectively evaluated for impairment	—		—
Total allowance for credit losses	$	—	$	—
Recorded investment, end of the period:
Individually evaluated for impairment	$	9	$	12
Collectively evaluated for impairment	2,078		818
Total recorded investment	$	2,087	$	830

The recorded investment, unpaid principal balance, and related allowance of impaired loans individually evaluated for impairment are as follows:

	2017						2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance	$	9	$	9	$	—	$	12	$	12	$	—
With an allowance	—		—		—		—		—		—
Total	$	9	$	9	$	—	$	12	$	12	$	—

The average recorded investment on impaired loans individually evaluated for impairment is as follows:

	2017		2016
With no related allowance	$	10	$	12
With an allowance	—		—
Total	$	10	$	12

The Bank and any participating financial institution share in the credit risk of the loans sold by that institution as specified in a master agreement. Loans purchased under the MPF Program generally had a credit risk exposure at the time of purchase that, as determined by the MPF Program methodology, would be expected from an equivalent investment rated AA if purchased prior to April 2017, or rated BBB if purchased since April 2017, taking into consideration the credit risk sharing structure mandated by the Finance Agency’s acquired member assets (AMA) regulation. The MPF Program structures potential credit losses on conventional MPF loans into layers with respect to each pool of loans purchased by the Bank under a single master commitment, as follows:

1. The first layer of protection against loss is the liquidation value of the real property securing the loan.

2. The next layer of protection comes from the primary mortgage insurance that is required for loans with a loan-to-value ratio greater than 80%, if still in place.

3. Losses that exceed the liquidation value of the real property and any primary mortgage insurance, up to an agreed-upon amount called the first loss account for each master commitment, are incurred by the Bank.

4. Losses in excess of the first loss account for each master commitment, up to an agreed-upon amount called the credit enhancement amount, are covered by the participating financial institution’s credit enhancement obligation at the time losses are incurred.

5. Losses in excess of the first loss account and the participating financial institution’s remaining credit enhancement for the master commitment, if any, are incurred by the Bank.

The Bank calculates its estimated allowance for credit losses on mortgage loans acquired under the MPF Original and MPF Plus products as described below. Effective January 1, 2015, the Bank implemented the accounting

143

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

requirements of regulatory Advisory Bulletin 2012-02. As a result, for any mortgage loans that are more than 180 days past due and that have any outstanding balance in excess of the fair value of the property, less cost to sell, this excess is charged off as a loss by the end of the month in which the applicable time period elapses. Likewise, when a borrower is in bankruptcy, loans are written down to the fair value of the collateral, less cost to sell, in general within 60 days of receipt of the notification of filing from the bankruptcy court, unless it can be clearly demonstrated and documented that repayment is likely to occur. As a result of these charge-offs, corresponding Allowance for Credit Losses on MPF Loans, which had previously provided for most of these expected losses, was reduced accordingly.

Allowance for Credit Losses on MPF Loans –The Bank evaluates the allowance for credit losses on MPF mortgage loans based on two components. The first component applies to each individual loan that is specifically identified as impaired. The Bank evaluates the exposure on these loans by considering the first layer of loss protection (the liquidation value of the real property securing the loan) and the availability and collectability of credit enhancements under the terms of each master commitment and records a provision for credit losses. For this component, the Bank established a de minimis allowance for credit losses for MPF Original and MPF Plus loans as of December 31, 2017 and 2016.

The second component applies to loans that are not specifically identified as impaired and is based on the Bank’s estimate of probable credit losses on those loans as of the financial statement date. The Bank evaluates the credit loss exposure on a loan pool basis considering various observable data, such as delinquency statistics, past performance, current performance, loan portfolio characteristics, collateral valuations, industry data, and prevailing economic conditions. The Bank also considers the availability and collectability of credit enhancements from participating financial institutions or from mortgage insurers under the terms of each master commitment. For this component, the Bank established an allowance for credit losses for MPF Original and MPF Plus loans totaling de minimis amounts as of December 31, 2017 and 2016.

Troubled Debt Restructurings –Troubled debt restructuring (TDR) is considered to have occurred when a concession is granted to the debtor for economic or legal reasons related to the debtor’s financial difficulties and that concession would not have been considered otherwise. An MPF loan considered a TDR is individually evaluated for impairment when determining its related allowance for credit losses. Credit loss is measured by factoring in expected cash flow shortfalls incurred as of the reporting date as well as the economic loss attributable to delaying the original contractual principal and interest due dates, if applicable.

The recorded investment of the Bank's nonperforming MPFloans classified as TDRs totaled $3 as of December 31, 2017, and $3 as of December 31, 2016. During 2017 and 2016, the difference between the pre- and post-modification recorded investment in TDRs that occurred during the year was de minimis. None of the MPF loans classified as TDRs within the previous 12 months experienced a payment default.

Term Federal Funds Sold. The Bank invests in Federal funds sold with counterparties that are considered by the Bank to be of investment quality, and these investments are evaluated for purposes of an allowance for credit losses only if the investment is not paid when due. All investments in Federal funds sold as of December 31, 2017 and 2016, were repaid or are expected to be repaid according to the contractual terms.

Note 11 — Deposits

The Bank maintains demand deposit accounts that are directly related to the extension of credit to members and offers short-term deposit programs to members and qualifying nonmembers. In addition, a member that services mortgage loans may deposit in the Bank funds collected in connection with the mortgage loans, pending disbursement of these funds to the owners of the mortgage loans. The Bank classifies these types of deposits as non-interest-bearing deposits.

144

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Deposits as of December 31, 2017 and 2016, were as follows:

	2017		2016
Interest-bearing deposits:
Demand and overnight	$	263	$	167
Total interest-bearing deposits	263		167
Non-interest-bearing deposits	18		2
Total	$	281	$	169

Interest Rate Payment Terms. Deposits classified as demand, overnight, and other pay interest based on a daily interest rate. Term deposits pay interest based on a fixed rate determined at the issuance of the deposit. Interest rate payment terms for deposits at December 31, 2017 and 2016, are detailed in the following table:

	2017				2016
	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate
Interest-bearing deposit – Adjustable rate	$	263	1.10	%	$	167	0.01	%
Non-interest-bearing deposits	18				2
Total	$	281			$	169

Note 12 — Consolidated Obligations

Consolidated obligations, consisting of consolidated obligation bonds and discount notes, are jointly issued by the FHLBanks through the Office of Finance, which serves as the FHLBanks’ agent. As provided by the FHLBank Act or by regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. For a discussion of the joint and several liability regulation, see Note 20 – Commitments and Contingencies. In connection with each issuance of consolidated obligations, each FHLBank specifies the type, term, and amount of debt it requests to have issued on its behalf. The Office of Finance tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks and records as a liability its specific portion of the consolidated obligations issued and is the primary obligor for that portion of the consolidated obligations issued. The Finance Agency and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office of Finance.

Consolidated obligation bonds may be issued to raise short-, intermediate-, and long-term funds for the FHLBanks. The maturity of consolidated obligation bonds generally ranges from 6 months to 15 years, but the maturity is not subject to any statutory or regulatory limits. Consolidated obligation discount notes are primarily used to raise short-term funds. These notes are issued at less than their face amount and redeemed at par value when they mature.

The par value of the outstanding consolidated obligations of the FHLBanks was $1,034,260 at December 31, 2017, and $989,311 at December 31, 2016. Regulations require the FHLBanks to maintain, for the benefit of investors in consolidated obligations, in the aggregate, unpledged qualifying assets in an amount equal to the consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; assets with an assessment or credit rating at least equivalent to the current assessment or credit rating of the consolidated obligations; obligations, participations, mortgages, or other securities of or issued by the United States or an agency of the United States; and such securities as fiduciary and trust funds may invest in under the laws of the state in which the FHLBank is located. Any assets subject to a lien or pledge for the benefit of holders of any issue of consolidated obligations are treated as if they were free from lien or pledge for the purposes of compliance with these regulations. At December 31, 2017, the Bank had qualifying assets totaling $123,177, and the Bank's participation in consolidated obligations outstanding was $115,503.

145

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

General Terms. Consolidated obligations are generally issued with either fixed rate payment terms or adjustable rate payment terms. In addition, to meet the specific needs of certain investors, fixed rate and adjustable rate consolidated obligation bonds may contain certain embedded features, such as call options and complex coupon payment terms. In general, when such consolidated obligation bonds are issued for which the Bank is the primary obligor, the Bank simultaneously enters into interest rate exchange agreements containing offsetting features to, in effect, convert the terms of the bond to the terms of a simple adjustable rate bond.

In addition to having fixed rate or simple adjustable rate coupon payment terms, consolidated obligations may include:

• Callable bonds, which the Bank may call in whole or in part at its option on predetermined call dates according to the terms of the bond offerings;

• Step-up callable bonds, which pay interest at increasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-up dates according to the terms of the bond offerings;

• Step-down callable bonds, which pay interest at decreasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-down dates according to the terms of the bond offerings;

• Conversion callable bonds, which have coupon rates that convert from fixed to adjustable or from adjustable to fixed on predetermined dates and can generally be called at the Bank’s option on predetermined call dates according to the terms of the bond offerings;

• Range bonds, which have coupons at fixed or variable rates and pay the fixed or variable rate as long as a reference rate is within an established range, but generally pay zero percent or a minimal interest rate if the specified reference rate is outside the established range.

Redemption Terms. The following is a summary of the Bank’s participation in consolidated obligation bonds at December 31, 2017 and 2016.

	2017					2016
Contractual Maturity	Amount Outstanding			Weighted Average Interest Rate		Amount Outstanding			Weighted Average Interest Rate
Within 1 year	$	69,734		1.33	%	$	33,879		0.82	%
After 1 year through 2 years	6,461			1.42		10,597			0.99
After 2 years through 3 years	2,785			1.74		1,318			1.32
After 3 years through 4 years	2,058			1.78		1,055			1.84
After 4 years through 5 years	1,994			2.15		1,350			1.59
After 5 years	2,076			2.80		2,021			2.42
Total par value	85,108			1.41	%	50,220			0.98	%
Unamortized premiums	9					15
Unamortized discounts	(11		)			(9		)
Valuation adjustments for hedging activities	(37		)			6
Fair value option valuation adjustments	(6		)			(8		)
Total	$	85,063				$	50,224

The Bank’s participation in consolidated obligation bonds outstanding includes callable bonds of $9,612 at December 31, 2017, and $4,670 at December 31, 2016. When a callable bond for which the Bank is the primary obligor is issued, the Bank may simultaneously enter into an interest rate swap (in which the Bank pays a variable rate and receives a fixed rate) with a call feature that mirrors the call option embedded in the bond (a sold callable swap). The Bank had notional amounts of interest rate exchange agreements hedging callable bonds of $6,406 at December 31, 2017, and $2,125 at December 31, 2016. The combined sold callable swaps and callable bonds enable

146

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

the Bank to meet its funding needs at costs not otherwise directly attainable solely through the issuance of non-callable debt, while effectively converting the Bank’s net payment to an adjustable rate.

The Bank’s participation in consolidated obligation bonds at December 31, 2017 and 2016, was as follows:  

	2017		2016
Par value of consolidated obligation bonds:
Non-callable	$	75,496	$	45,550
Callable	9,612		4,670
Total par value	$	85,108	$	50,220

The following is a summary of the Bank’s participation in consolidated obligation bonds outstanding at December 31, 2017 and 2016, by the earlier of the year of contractual maturity or next call date.

Earlier of Contractual Maturity or Next Call Date	2017		2016
Within 1 year	$	78,606	$	38,099
After 1 year through 2 years	5,326		10,747
After 2 years through 3 years	935		743
After 3 years through 4 years	85		455
After 4 years through 5 years	55		85
After 5 years	101		91
Total par value	$	85,108	$	50,220

Consolidated obligation discount notes are consolidated obligations issued to raise short-term funds. These notes are issued at less than their face value and redeemed at par value when they mature. The Bank’s participation in consolidated obligation discount notes, all of which are due within one year, was as follows:

	2017					2016
	Amount Outstanding			Weighted Average Interest Rate (1)		Amount Outstanding			Weighted Average Interest Rate (1)
Par value	$	30,494		1.24	%	$	33,529		0.46	%
Unamortized discounts	(54		)			(23		)
Total	$	30,440				$	33,506

(1) Represents yield to maturity excluding concession fees.

Interest Rate Payment Terms. Interest rate payment terms for consolidated obligations at December 31, 2017 and 2016, are detailed in the following table.

147

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	2017		2016
Par value of consolidated obligations:
Bonds:
Fixed rate	$	17,967	$	15,960
Adjustable rate	66,276		33,435
Step-up	565		515
Step-down	200		200
Fixed rate that converts to adjustable rate	—		10
Range bonds	100		100
Total bonds, par value	85,108		50,220
Discount notes, par value	30,494		33,529
Total consolidated obligations, par value	$	115,602	$	83,749

Consolidated obligation bonds may be structured to meet the Bank's or the investors' needs. Common structures include fixed rate bonds with or without call options and adjustable rate bonds with or without embedded options. In general, when bonds are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that offset the terms and embedded options, if any, of the consolidated obligation bond. This combination of the consolidated obligation bond and the interest rate exchange agreement effectively creates an adjustable rate bond. The cost of this funding combination is generally lower than the cost that would be available through the issuance of an adjustable rate bond alone. These transactions generally receive fair value hedge accounting treatment. In addition, when certain consolidated obligation bonds for which the Bank has elected the fair value option are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that economically offset the terms of the consolidated obligation bond. However, this type of hedge is treated as an economic hedge because these combinations generally do not meet the requirements for fair value hedge accounting treatment. For more information, see Note 18 – Derivatives and Hedging Activities and Note 19 – Fair Value.

The Bank did not have any bonds with embedded features that met the requirements to separate the embedded feature from the host contract and designate the embedded feature as a stand-alone derivative at December 31, 2017 or 2016. The Bank has generally elected to account for certain bonds with embedded features under the fair value option, and these bonds are carried at fair value on the Statements of Condition. For more information, see Note 19 – Fair Value.

Note 13 — Affordable Housing Program

The FHLBank Act requires each FHLBank to establish an Affordable Housing Program (AHP). Each FHLBank provides subsidies to members, which use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Subsidies may be in the form of direct grants or below-market interest rate advances. Annually, the FHLBanks must set aside for their AHPs, in the aggregate, the greater of $100 or 10% of the current year's net earnings (income before interest expense related to dividends paid on mandatorily redeemable capital stock and the assessment for AHP).

The Bank accrues its AHP assessment monthly based on its net earnings. If the Bank experienced a net loss during a quarter but still had net earnings for the year, the Bank's obligation to the AHP would be calculated based on the Bank's year-to-date net earnings. If the Bank had net earnings in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. If the Bank experienced a net loss for a full year, the amount of the AHP liability would be equal to zero, since each FHLBank's required annual AHP contribution is limited to its annual net earnings. However, if the result of the aggregate 10% calculation is less than $100 for the FHLBanks combined, then the FHLBank Act requires that each FHLBank contribute such prorated sums as may be required to ensure that the aggregate contribution of the FHLBanks equals $100. The proration would be made on the basis of an FHLBank's income in relation to the income of all the FHLBanks for the previous

148

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

year. There was no AHP shortfall, as described above, in 2017, 2016, or 2015. If an FHLBank finds that its required AHP assessments are contributing to the financial instability of that FHLBank, it may apply to the Finance Agency for a temporary suspension of its contributions. The Bank did not make such an application in 2017, 2016, or 2015.

The Bank's total AHP assessments equaled $45, $86, and $78 during 2017, 2016, and 2015, respectively. These amounts were charged to earnings each year and recognized as a liability. As subsidies are disbursed, the AHP liability is reduced. The AHP liability was as follows:

	2017			2016			2015
Balance, beginning of the period	$	205		$	172		$	147
AHP assessments	45			86			78
AHP voluntary contributions	7			—			—
AHP grant payments	(53		)	(53		)	(53		)
Balance, end of the period	$	204		$	205		$	172

All subsidies were distributed in the form of direct grants in 2017, 2016, and 2015.

149

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 14 — Accumulated Other Comprehensive Income/(Loss)

The following table summarizes the changes in AOCI for the years ended December 31, 2017, 2016, and 2015:

	Net Non-Credit-Related OTTI Loss on AFS Securities			Net Non-Credit-Related OTTI Loss on HTM Securities			Pension and Postretirement Benefits			Total AOCI
Balance, December 31, 2014	$	88		$	(20	)	$	(12	)	56
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits							(2		)	(2		)
Non-credit-related OTTI loss	(18		)	(1		)				(19		)
Non-credit-related OTTI loss transferred	(1		)	1						—
Net change in fair value	(29		)							(29		)
Accretion of non-credit-related OTTI loss				6						6
Reclassification from other comprehensive income/(loss) to net income/(loss):
Non-credit-related OTTI to credit-related OTTI	3			—						3
Net current period other comprehensive income/(loss)	(45		)	6			(2		)	(41		)
Balance, December 31, 2015	$	43		$	(14	)	$	(14	)	15
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits							(2		)	(2		)
Non-credit-related OTTI loss	(17		)	—						(17		)
Net change in fair value	103									103
Accretion of non-credit-related OTTI loss				5						5
Reclassification from other comprehensive income/(loss) to net income/(loss):
Non-credit-related OTTI to credit-related OTTI	7			—						7
Net current period other comprehensive income/(loss)	93			5			(2		)	96
Balance, December 31, 2016	$	136		$	(9	)	$	(16	)	$	111
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits							3			3
Non-credit-related OTTI loss	(4		)	—						(4		)
Net change in fair value	195									195
Accretion of non-credit-related OTTI loss				3						3
Reclassification from other comprehensive income/(loss) to net income/(loss):
Non-credit-related OTTI to credit-related OTTI	10			—						10
Net current period other comprehensive income/(loss)	201			3			3			207
Balance, December 31, 2017	$	337		$	(6	)	$	(13	)	$	318

Note 15 — Capital

Capital Requirements. The Bank issues only one class of capital stock, Class B stock, with a par value of one hundred dollars per share, which may be redeemed (subject to certain conditions) upon five years' notice by the member to the Bank. In addition, at its discretion, under certain conditions, the Bank may repurchase excess capital stock at any time. (See “Excess Capital Stock” below for more information.) The capital stock may be issued, redeemed, and repurchased only at its stated par value, subject to certain statutory and regulatory requirements. The Bank may only redeem or repurchase capital stock from a shareholder if, following the redemption or repurchase,

150

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

the shareholder will continue to meet its minimum capital stock requirement and the Bank will continue to meet its regulatory requirements for total capital, leverage capital, and risk-based capital.

Under the Housing Act, the Director of the Finance Agency is responsible for setting the risk-based capital standards for the FHLBanks. The FHLBank Act and regulations governing the operations of the FHLBanks require that the Bank’s minimum capital stock requirement for shareholders must be sufficient to enable the Bank to meet its regulatory requirements for total capital, leverage capital, and risk-based capital. The Bank must maintain: (i) total regulatory capital in an amount equal to at least 4% of its total assets, (ii) leverage capital in an amount equal to at least 5% of its total assets, and (iii) permanent capital in an amount that is greater than or equal to its risk-based capital requirement. Because the Bank issues only Class B stock, regulatory capital and permanent capital for the Bank are both composed of retained earnings and Class B stock, including mandatorily redeemable capital stock (which is classified as a liability for financial reporting purposes). Regulatory capital and permanent capital do not include AOCI. Leverage capital is defined as the sum of permanent capital, weighted by a 1.5 multiplier, plus non-permanent capital.

The risk-based capital requirement is equal to the sum of the Bank’s credit risk, market risk, and operations risk capital requirements, all of which are calculated in accordance with the rules and regulations of the Finance Agency. The Finance Agency may require an FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined.

As of December 31, 2017 and 2016, the Bank was in compliance with these capital rules and requirements as shown in the following table.

	2017						2016
	Required			Actual			Required			Actual
Risk-based capital	$	2,023		$	6,797		$	2,241		$	5,883
Total regulatory capital	$	4,935		$	6,797		$	3,678		$	5,883
Total regulatory capital ratio	4.00		%	5.51		%	4.00		%	6.40		%
Leverage capital	$	6,169		$	10,195		$	4,597		$	8,825
Leverage ratio	5.00		%	8.26		%	5.00		%	9.60		%

The Bank's capital plan requires each member to own capital stock in an amount equal to the greater of its membership capital stock requirement or its activity-based capital stock requirement. The Bank may adjust these requirements from time to time within limits established in the capital plan. Any changes to the capital plan must be approved by the Bank's Board of Directors and the Finance Agency.

A member's membership capital stock requirement is 1.0% of its membership asset value. The membership capital stock requirement for a member is capped at $15. The Bank may adjust the membership capital stock requirement for all members within a range of 0.5% to 1.5% of a member's membership asset value and may adjust the cap for all members within an authorized range of $10 to $50. A member's membership asset value is determined by multiplying the amount of the member's membership assets by the applicable membership asset factors. Membership assets are generally defined as assets (other than Bank capital stock) of a type that could qualify as collateral to secure a member's indebtedness to the Bank under applicable law, whether or not the assets are pledged to the Bank or accepted by the Bank as eligible collateral. The membership asset factors were initially based on the typical borrowing capacity percentages generally assigned by the Bank to the same types of assets when pledged to the Bank (although the factors may differ from the actual borrowing capacities, if any, assigned to particular assets pledged by a specific member at any point in time).

A member's activity-based capital stock requirement is the sum of 2.7% of the member's outstanding advances plus 0.0% of any portion of any mortgage loan purchased and held by the Bank. The Bank may adjust the activity-based capital stock requirement for all members within a range of 2.0% to 5.0% of the member's outstanding advances and a range of 0.0% to 5.0% of any portion of any mortgage loan purchased and held by the Bank.

151

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Any member may withdraw from membership and, subject to certain statutory and regulatory restrictions, have its capital stock redeemed after giving the required notice. Members that withdraw from membership may not reapply for membership for five years, in accordance with Finance Agency rules.

Mandatorily Redeemable Capital Stock. The Bank reclassifies the capital stock subject to redemption from capital to a liability after a member provides the Bank with a written notice of redemption; gives notice of intention to withdraw from membership; or attains nonmember status by merger or acquisition, charter termination, or other involuntary membership termination; or after a receiver or other liquidating agent for a member transfers the member's Bank capital stock to a nonmember entity, resulting in the member's shares then meeting the definition of a mandatorily redeemable financial instrument. Shares meeting this definition are reclassified to a liability at fair value. Dividends declared on shares classified as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments (by repurchase or redemption of the shares) is reflected as a financing cash outflow in the Statements of Cash Flows once settled.

The Bank has a cooperative ownership structure under which members, former members, and certain other nonmembers own the Bank's capital stock. Former members and certain other nonmembers are required to maintain their investment in the Bank's capital stock until their outstanding transactions are paid off or until their capital stock is redeemed following the relevant five-year redemption period for capital stock or is repurchased by the Bank, in accordance with the Bank's capital requirements. Capital stock cannot be issued, repurchased, redeemed, or transferred except between the Bank and its members (or their affiliates and successors) at the capital stock's par value of one hundred dollars per share. If a member cancels its written notice of redemption or notice of withdrawal or if the Bank allows the transfer of mandatorily redeemable capital stock to a member, the Bank reclassifies mandatorily redeemable capital stock from a liability to capital. After the reclassification, dividends on the capital stock are no longer classified as interest expense.

The Bank will not redeem or repurchase capital stock required to meet the minimum capital stock requirement until five years after the member's membership is terminated or after the Bank receives notice of the member's withdrawal, and the Bank will redeem or repurchase only the amounts that are in excess of the capital stock required to support activity (advances and mortgage loans) that may remain outstanding after the five-year redemption period has expired. In both cases, the Bank will only redeem or repurchase capital stock if certain statutory and regulatory conditions are met. In accordance with the Bank's current practice, if activity-based capital stock becomes excess capital stock because an activity no longer remains outstanding, the Bank may repurchase the excess activity-based capital stock at its discretion, subject to certain statutory and regulatory conditions, on a scheduled quarterly basis.

The Bank had mandatorily redeemable capital stock totaling $309 outstanding to seven institutions at December 31, 2017, and $457 outstanding to six institutions at December 31, 2016. The change in mandatorily redeemable capital stock for the years ended December 31, 2017, 2016, and 2015, was as follows:

	2017			2016			2015
Balance at the beginning of the period	$	457		$	488		$	719
Reclassified from/(to) capital during the period(1)	2			56			415
Redemption of mandatorily redeemable capital stock	(75		)	(28		)	(53		)
Repurchase of excess mandatorily redeemable capital stock	(75		)	(59		)	(593		)
Balance at the end of the period	$	309		$	457		$	488

(1) The Bank reclassified $403 of capital stock to mandatorily redeemable capital stock (a liability) on September 1, 2015, as a result of the merger of JPMorgan B&T with an into JPMorgan Chase, a nonmember of the Bank.

Cash dividends on mandatorily redeemable capital stock were recorded as interest expense in the amount of $32, $60, and $65 for the years ended December 31, 2017, 2016, and 2015, respectively.

152

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The following table presents mandatorily redeemable capital stock amounts by contractual redemption period at December 31, 2017 and 2016.

Contractual Redemption Period	2017		2016
After 2 years through 3 years	$	306	$	—
After 3 years through 4 years	—		379
Past contractual redemption date because of remaining activity(1)	3		78
Total	$	309	$	457

(1) Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because of outstanding activity.

A member may cancel its notice of redemption or notice of withdrawal from membership by providing written notice to the Bank prior to the end of the relevant five-year redemption period or the membership termination date. If the Bank receives the notice of cancellation within 30 months following the notice of redemption or notice of withdrawal, the member is charged a fee equal to fifty cents multiplied by the number of shares of capital stock affected. If the Bank receives the notice of cancellation more than 30 months following the notice of redemption or notice of withdrawal (or if the Bank does not redeem the member's capital stock because following the redemption the member would fail to meet its minimum capital stock requirement), the member is charged a fee equal to one dollar multiplied by the number of shares of capital stock affected. In certain cases the Board of Directors may waive a cancellation fee for bona fide business purposes.

The Bank's capital stock is considered putable by the shareholder. There are significant statutory and regulatory restrictions on the Bank's obligation or ability to redeem outstanding capital stock, which include the following:

• The Bank may not redeem any capital stock if, following the redemption, the Bank would fail to meet its minimum capital requirements for total capital, leverage capital, and risk-based capital. All of the Bank's capital stock immediately becomes nonredeemable if the Bank fails to meet its minimum capital requirements.

• The Bank may not be able to redeem any capital stock if either its Board of Directors or the Finance Agency determines that it has incurred or is likely to incur losses resulting in or expected to result in a charge against capital that would have any of the following effects: cause the Bank not to comply with its regulatory capital requirements, result in negative retained earnings, or otherwise create an unsafe and unsound condition at the Bank.

• In addition to being able to prohibit capital stock redemptions, the Bank's Board of Directors has a right to call for additional capital stock purchases by its members, as a condition of continuing membership, as needed for the Bank to satisfy its statutory and regulatory capital requirements.

• If, during the period between receipt of a capital stock redemption notice and the actual redemption (a period that could last indefinitely), the Bank becomes insolvent and is either liquidated or merged with another FHLBank, the redemption value of the capital stock will be established either through the liquidation or the merger process. If the Bank is liquidated, after satisfaction of the Bank's obligations to creditors and to the extent funds are then available, each shareholder will be entitled to receive the par value of its capital stock as well as any retained earnings in an amount proportional to the shareholder's share of the total shares of capital stock, subject to any limitations that may be imposed by the Finance Agency. In the event of a merger or consolidation, the Board of Directors will determine the rights and preferences of the Bank's shareholders, subject to any terms and conditions imposed by the Finance Agency.

• The Bank may not redeem any capital stock if the principal or interest due on any consolidated obligations issued by the Office of Finance has not been paid in full.

• The Bank may not redeem any capital stock if the Bank fails to provide the Finance Agency with the quarterly certification required by Finance Agency rules prior to declaring or paying dividends for a quarter.

• The Bank may not redeem any capital stock if the Bank is unable to provide the required quarterly certification, projects that it will fail to comply with statutory or regulatory liquidity requirements or will be unable to fully meet all of its obligations on a timely basis, actually fails to satisfy these requirements or

153

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

obligations, or negotiates to enter or enters into an agreement with another FHLBank to obtain financial assistance to meet its current obligations.

Mandatorily redeemable capital stock is considered capital for determining the Bank's compliance with its regulatory capital requirements. Based on Finance Agency interpretation, the classification of certain shares of the Bank's capital stock as mandatorily redeemable does not affect the definition of total capital for purposes of: determining the Bank's compliance with its regulatory capital requirements, calculating its mortgage-backed securities investment authority (300% of total capital), calculating its unsecured credit exposure to other GSEs (limited to 100% of total capital), or calculating its unsecured credit limits to other counterparties (various percentages of total capital depending on the rating of the counterparty).

Excess Stock Repurchase, Retained Earnings, and Dividend Framework. By Finance Agency regulation, dividends may be paid only out of current net earnings or previously retained earnings. As required by the Finance Agency, the Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) summarizes the Bank’s capital management principles and objectives, as well as its policies and practices, with respect to retained earnings, dividend payments, and the repurchase of excess capital stock.The Bank may be restricted from paying dividends if the Bank is not in compliance with any of its minimum capital requirements or if payment would cause the Bank to fail to meet any of its minimum capital requirements. In addition, the Bank may not pay dividends if any principal or interest due on any consolidated obligations has not been paid in full or is not expected to be paid in full, or, under certain circumstances, if the Bank fails to satisfy certain liquidity requirements under applicable Finance Agency regulations.

The Bank’s Board of Directors reviews the Framework at least annually and may amend the Framework from time to time. In January 2017, the Framework was amended and approved by the Bank’s Board of Directors to include a dividend philosophy to endeavor to pay a quarterly dividend at an annualized rate between 5% and 7%, which was intended to be considered by the Bank’s Board of Directors beginning with the Bank’s second quarter 2017 dividend declaration. The decision to declare any dividend and the dividend rate are at the discretion of the Bank’s Board of Directors, which may choose to follow the dividend philosophy as guidance in the dividend declaration.

The Bank’s Risk Management Policy limits the payment of dividends if the ratio of the Bank’s estimated market value of total capital to par value of capital stock falls below certain levels. If this ratio at the end of any quarter is less than 100% but greater than or equal to 70%, any dividend would be limited to an annualized rate no greater than the daily average of the three-month LIBOR for the applicable quarter (subject to certain conditions), and if this ratio is less than 70%, the Bank would be restricted from paying a dividend. The ratio of the Bank’s estimated market value of total capital to par value of capital stock was 207% as of December 31, 2017.

In addition, the Bank monitors the condition of its PLRMBS portfolio, the ratio of the Bank’s estimated market value of total capital to par value of capital stock, its overall financial performance and retained earnings, developments in the mortgage and credit markets, and other relevant information as the basis for determining the payment of dividends and the repurchase of excess capital stock each quarter.

The Bank’s Framework assesses the level and adequacy of retained earnings and establishes amounts to be retained in restricted retained earnings, which are not made available in the current dividend period, and maintains an amount of total retained earnings at least equal to its required retained earnings as described in the Framework. Prior to July 2017, the Bank’s Framework had three categories of restricted retained earnings: Valuation Adjustments, Other (which represented a targeted amount), and the Joint Capital Enhancement (JCE Agreement). Under the Framework, the Bank’s required amount of restricted retained earnings was determined using the Bank’s retained earnings methodology. As determined using the Bank’s methodology, from July 2015 to January 2017, the Bank’s restricted retained earnings requirement was $2,000, and from January 2017 to July 2017, the Bank’s restricted retained earnings requirement was $2,300.

154

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

In July 2017, the Bank’s Board of Directors approved the transfer of all amounts classified as restricted retained earnings, other than the amounts related to the JCE Agreement, to unrestricted retained earnings. As a conforming change related to the transfer, the Bank’s Board of Directors amended the Framework to eliminate two of the categories of restricted retained earnings (Valuation Adjustments and Other) and approved revisions to the Bank’s retained earnings methodology to provide for a required level of total retained earnings of $2,300 for loss protection, capital compliance, and business growth. In January 2018, the methodology was further revised to provide a required level of total retained earnings of $2,500. The Bank satisfies its retained earnings requirement with both restricted retained earnings (i.e., amounts related to the JCE Agreement) and unrestricted retained earnings.

The Bank’s retained earnings requirement may be changed at any time. The Board of Directors periodically reviews the retained earnings methodology and analysis to determine whether any adjustments are appropriate.

The JCE Agreement is intended to enhance the capital position of each FHLBank. In accordance with the JCE Agreement, each FHLBank is required to allocate 20% of its net income each quarter to a separate restricted retained earnings account until the balance of the account equals at least 1% of that FHLBank's average balance of outstanding consolidated obligations for the previous quarter. Under the JCE Agreement, these restricted retained earnings will not be available to pay dividends.

The following tables summarize the activity related to retained earnings for the years ended December 31, 2017 and 2016:

				Restricted Retained Earnings Related to:
	Unrestricted Retained Earnings			Valuation Adjustments			Other			Joint Capital Enhancement Agreement		Total Restricted Retained Earnings			Total Retained Earnings
Balance, December 31, 2015	$	610		$	10		$	1,650		$	358	$	2,018		$	2,628
Net income	562			8			—			142		150			712
Cash dividends on capital stock	(284		)												(284		)
Balance, December 31, 2016	$	888		$	18		$	1,650		$	500	$	2,168		$	3,056
Net income	198			3			100			75		178			376
Cash dividends on capital stock	(187		)												(187		)
Transfers from restricted retained earnings	1,771			(21		)	(1,750		)	—		(1,771		)	—
Balance, December 31, 2017	$	2,670		$	—		$	—		$	575	$	575		$	3,245

Dividend Payments – Finance Agency rules state that FHLBanks may declare and pay dividends only from previously retained earnings or current net earnings, and may not declare or pay dividends based on projected or anticipated earnings. There is no requirement that the Board of Directors declare and pay any dividend. A decision by the Board of Directors to declare or not declare a dividend is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks.

In addition, Finance Agency rules do not permit the Bank to pay dividends in the form of capital stock if its excess

capital stock exceeds 1% of its total assets. Excess capital stock is defined as the aggregate of the capital stock held by each shareholder in excess of its minimum capital stock requirement, as established by the Bank’s capital plan. As of December 31, 2017, the Bank’s excess capital stock totaled $493, or 0.40% of total assets.

In 2017, the Bank paid dividends at an annualized rate of 7.50%, totaling $219, including $187 in dividends on capital stock and $32 in dividends on mandatorily redeemable capital stock. In 2016, the Bank paid dividends at an annualized rate of 12.33%, totaling $344, including $284 in dividends on capital stock and $60 in dividends on mandatorily redeemable capital stock. The dividends paid in 2016 included four quarterly dividends and a special

155

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

dividend in the amount of $100, including $83 on capital stock and $17 in dividends on mandatorily redeemable capital stock.

For the periods referenced above, the Bank paid dividends in cash. Dividends on capital stock are recognized as dividends on the Statements of Capital Accounts, and dividends on mandatorily redeemable capital stock are recognized as interest expense on the Statements of Income.

On February 21, 2018, the Bank’s Board of Directors declared a cash dividend on the capital stock outstanding during the fourth quarter of 2017 at an annualized rate of 7.00%, totaling $59, including $53 in dividends on capital stock and $6 in dividends on mandatorily redeemable capital stock. The Bank recorded the dividend on February 21, 2018. The Bank expects to pay the dividend on March 15, 2018. Dividends on mandatorily redeemable capital stock will be recognized as interest expense in the first quarter of 2018.

Excess Capital Stock – The Bank may repurchase some or all of a shareholder’s excess capital stock, including any excess mandatorily redeemable capital stock, at the Bank’s discretion, subject to certain statutory and regulatory requirements. The Bank must give the shareholder 15 days’ written notice; however, the shareholder may waive this notice period. The Bank may also repurchase all of a member’s excess capital stock at a member’s request, at the Bank’s discretion, subject to certain statutory and regulatory requirements. A shareholder’s excess capital stock is defined as any capital stock holdings in excess of the shareholder’s minimum capital stock requirement, as established by the Bank’s capital plan. The Bank repurchased $414 and $812 in excess capital stock during 2017 and 2016, respectively.

The Bank is required to redeem any mandatorily redeemable capital stock that is in excess of a former member’s minimum stock requirement on or after the expiration of the five-year redemption date. During 2017 and 2016, the Bank redeemed $75 and $28, respectively, in mandatorily redeemable capital stock, for which the five-year redemption period had expired, at its $100 par value. The stock was redeemed on the scheduled redemption dates or, for stock that was not excess stock on its scheduled redemption date because of outstanding activity with the Bank, on the first available repurchase date after the stock was no longer required to support outstanding activity with the Bank.

The Framework sets forth the Bank’s practice of repurchasing the surplus capital stock of all members and the excess capital stock of all nonmember shareholders on a regular quarterly basis, at the Bank’s discretion and subject to certain statutory and regulatory requirements and to the Bank’s Risk Management Policy and capital plan limitations. Surplus capital stock is defined as any stock holdings in excess of 115% of a member’s minimum stock requirement. In addition, at the Bank’s discretion, all of the excess stock held by a member may be repurchased upon request of a member, subject to the requirements and limitations mentioned above. In accordance with the Framework, each quarter Bank management evaluates and determines the amount of capital stock to be repurchased in that quarter, if any, giving consideration to certain capital metrics and capital management objectives and strategies, and subject to the requirements and limitations mentioned above. At least 15 calendar days before any repurchase, the Bank will notify shareholders of its intention to repurchase capital stock and of the scheduled repurchase date. On the scheduled repurchase date, the Bank will calculate the amount of stock to be repurchased to ensure that each member and nonmember shareholder will continue to meet its minimum stock requirement after the repurchase.

On February 21, 2018, the Bank announced that it plans to repurchase the surplus capital stock of all members and the excess capital stock of all nonmember shareholders on March 16, 2018.

Excess capital stock totaled $493 as of December 31, 2017, which included surplus capital stock of $317. Excess capital stock totaled $488 as of December 31, 2016, which included surplus capital stock of $325.

156

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Concentration. The following table presents the concentration in capital stock held by institutions whose capital stock ownership represented 10% or more of the Bank’s outstanding capital stock, including mandatorily redeemable capital stock, as of December 31, 2017 or 2016.

	2017				2016
Name of Institution	Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding		Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding
Charles Schwab Bank	$	405	11	%	$	81	3	%
JPMorgan Chase Bank, National Association(1)	307		9		400		14
Subtotal	712		20		481		17
Others	2,840		80		2,346		83
Total	$	3,552	100	%	$	2,827	100	%

(1) The capital stock held by this nonmember institution is classified as mandatorily redeemable capital stock.

Note 16 — Employee Retirement Plans and Incentive Compensation Plans

Defined Benefit Plans

Qualified Defined Benefit Plan. The Bank provides retirement benefits through a Bank-sponsored Cash Balance Plan, a qualified defined benefit plan. The Cash Balance Plan is provided to all employees who have completed six months of Bank service. Under the plan, each eligible Bank employee accrues benefits annually equal to 6% of the employee's annual compensation, plus 6% interest on the benefits accrued to the employee through the prior yearend. The Cash Balance Plan is funded through a qualified trust established by the Bank.

Non-Qualified Defined Benefit Plans. The Bank sponsors the following non-qualified defined benefit retirement plans:

• Benefit Equalization Plan, a non-qualified retirement plan restoring benefits offered under the Cash Balance Plan that are limited by laws governing the plan. See below for further discussion of the defined contribution portion of the Benefit Equalization Plan.

• Supplemental Executive Retirement Plan (SERP),a non-qualified unfunded retirement benefit plan available to the Bank's eligible senior officers, which generally provides a service-linked supplemental cash balance annual contribution credit to SERP participants and an annual interest credit of 6% on the benefits accrued to the SERP participants through the prior yearend.

• Deferred Compensation Plan, a non-qualified retirement plan available to all eligible Bank officers, which provides make-up pension benefits that would have been earned under the Cash Balance Plan had the compensation not been deferred. The make-up benefits vest according to the corresponding provisions of the Cash Balance Plan. See below for further discussion of the defined contribution portion of the Deferred Compensation Plan.

Postretirement Health Benefit Plan. The Bank provides a postretirement health benefit plan to employees hired before January 1, 2003. The Bank's costs are capped at 1998 health care premium amounts. As a result, changes in health care cost trend rates will have no effect on the Bank's accumulated postretirement benefit obligation or service and interest costs.

The following table summarizes the changes in the benefit obligations, plan assets, and funded status of the defined benefit Cash Balance Plan, non-qualified defined benefit plans, and postretirement health benefit plan for the years ended December 31, 2017 and 2016.

157

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	2017									2016
	Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan			Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan
Change in benefit obligation
Benefit obligation, beginning of the period	$	51		$	21		$	2		$	46		$	24		$	2
Service cost	3			2			—			3			1			—
Interest cost	2			1			—			1			1			—
Actuarial (gain)/loss	2			—			—			2			1			—
Settlements	—			(3		)	—			—			(6		)	—
Benefits paid	(1		)	—			—			(1		)	—			—
Benefit obligation, end of the period	57			21			2			51			21			2
Change in plan assets
Fair value of plan assets, beginning of the period	53			—			—			43			—			—
Actual return on plan assets	9			—			—			3			—			—
Settlements	—			(3		)	—			—			(6		)	—
Employer contributions	2			3			—			8			6			—
Benefits paid	(1		)	—			—			(1		)	—			—
Fair value of plan assets, end of the period	63			—			—			53			—			—
Funded status at the end of the period	$	6		$	(21	)	$	(2	)	$	2		$	(21	)	$	(2	)

Amounts recognized in the Statements of Condition at December 31, 2017 and 2016, consist of:

	2017								2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan			Cash Balance Plan		Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan
Other assets/(liabilities)	$	6	$	(21	)	$	(2	)	$	2	$	(21	)	$	(2	)

Amounts recognized in AOCI at December 31, 2017 and 2016, consist of:

	2017							2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan			Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Net loss/(gain)	$	11	$	3	$	(1	)	$	14	$	3	$	(1	)

The following table presents information for pension plans with assets in excess of benefit obligations and for pension plans with benefit obligations in excess of plan assets at December 31, 2017 and 2016.

158

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	2017						2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Projected benefit obligation	$	57	$	21	$	2	$	51	$	21	$	2
Accumulated benefit obligation	56		20		2		50		21		2
Fair value of plan assets	63		—		—		53		—		—

Components of the net periodic benefit costs and other amounts recognized in other comprehensive income for the years ended December 31, 2017, 2016, and 2015, were as follows:

	2017							2016								2015
	Cash Balance Plan			Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan		Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan
Net periodic benefit cost/(income)
Service cost	$	3		$	2	$	—	$	3		$	1		$	—	$	3		$	1		$	—
Interest cost	2			1		—		1			1			—		2			1			—
Expected return on plan assets	(4		)	—		—		(3		)	—			—		(3		)	—			—
Amortization of net loss/(gain)	1			—		—		1			—			—		—			1			(1		)
Settlement loss	—			—		—		—			1			—		—			—			—
Net periodic benefit cost	2			3		—		2			3			—		2			3			(1		)
Other changes in plan assets and benefit obligations recognized in other comprehensive income
Net loss/(gain)	(2		)	—		—		3			1			—		3			(1		)	—
Amortization of net loss/(gain)	(1		)	—		—		(1		)	—			—		—			(1		)	1
Prior service cost recognized due to settlement loss	—			—		—		—			(1		)	—		—			—			—
Total recognized in other comprehensive income	(3		)	—		—		2			—			—		3			(2		)	1
Total recognized in net periodic benefit cost and other comprehensive income	$	(1	)	$	3	$	—	$	4		$	3		$	—	$	5		$	1		$	—

The amounts in AOCI expected to be recognized as components of net periodic benefit cost in 2018 are de minimis.

Weighted average assumptions used to determine the benefit obligations at December 31, 2017 and 2016, for the Cash Balance Plan, non-qualified defined benefit plans, and postretirement health benefit plan were as follows:

	2017						2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post- retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Discount rate	3.25	%	3.25	%	3.50	%	3.50	%	3.50	%	4.00	%
Rate of salary increase	3.00% through 2018, 4.00% thereafter		3.00% through 2018, 4.00% thereafter		—		3.00% through 2017 4.00% thereafter		3.00% through 2017 4.00% thereafter		—

159

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Weighted average assumptions used to determine the net periodic benefit costs for the years ended December 31, 2017, 2016, and 2015, for the Cash Balance Plan, non-qualified defined benefit plans, and postretirement health benefit plan were as follows:

	2017						2016						2015
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Discount rate	3.50	%	3.50	%	4.00	%	3.75	%	3.75	%	4.00	%	3.50	%	3.50	%	3.75	%
Rate of salary increase	3.00% through 2017, 4.00% thereafter		3.00% through 2017, 4.00% thereafter		—		3.00% through 2016 4.00% thereafter		3.00% through 2016 4.00% thereafter		—		3.00% through 2015 4.00% thereafter		3.00% through 2015 4.00% thereafter		—
Expected return on plan assets	7.75	%	—		—		7.75	%	—		—		8.00	%	—		—

The Bank uses a discount rate to determine the present value of its future benefit obligations. The discount rate was determined based on the Citigroup Pension Discount Curve at the measurement date. The Citigroup Pension Discount Curve is a yield curve that reflects the market-observed yields for high-quality fixed income securities for each maturity. The projected benefit payments for each year from the plan are discounted using the spot rates on the yield curve to derive a single equivalent discount rate. The discount rate is reset annually on the measurement date.

The expected return on plan assets was determined based on: (i) the historical returns for each asset class, (ii) the expected future long-term returns for these asset classes, and (iii) the plan's target asset allocation.

The table below presents the fair values of the Cash Balance Plan's assets as of December 31, 2017 and 2016, by asset category. See Note 19 – Fair Value for further information regarding the three levels of fair value measurement.

	2017								2016
	Fair Value Measurement Using:								Fair Value Measurement Using:
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	1	$	—	$	—	$	1	$	1	$	—	$	—	$	1
Equity mutual funds	40		—		—		40		32		—		—		32
Fixed income mutual funds	18		—		—		18		16		—		—		16
Real estate mutual funds	2		—		—		2		2		—		—		2
Other mutual funds	2		—		—		2		2		—		—		2
Total	$	63	$	—	$	—	$	63	$	53	$	—	$	—	$	53

The Cash Balance Plan is administered by the Bank's Retirement Committee, which establishes the plan's Statement of Investment Policy and Objectives. The Retirement Committee has adopted a strategic asset allocation based on a stable distribution of assets among major asset classes. These asset classes include domestic large-, mid-, and small-capitalization equity investments; international equity investments; real return investments; and fixed income investments. The Retirement Committee has set the Cash Balance Plan's target allocation percentages for a mix of 60% equity, 10% real return, and 30% fixed income. The Retirement Committee reviews the performance of the Cash Balance Plan on a regular basis.

The Cash Balance Plan's weighted average asset allocation at December 31, 2017 and 2016, by asset category was as follows:

160

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Asset Category	2017		2016
Cash and cash equivalents	2	%	3	%
Equity mutual funds	63		61
Fixed income mutual funds	28		29
Real estate mutual funds	4		4
Other mutual funds	3		3
Total	100	%	100	%

The Bank contributed $2 in 2017 and expects to contribute $3 in 2018 to the Cash Balance Plan. The Bank contributed $3 in 2017 and expects to contribute a de minimis amount in 2018 to the non-qualified defined benefit plans and postretirement health benefit plan.

The following are the estimated future benefit payments, which reflect expected future service, as appropriate:

Year	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Postretirement Health Benefit Plan
2018	$	4	$	—	$	—
2019	4		5		—
2020	4		—		—
2021	4		1		—
2022	16		6		—
2023 – 2027	20		14		1

Defined Contribution Plans

Retirement Savings Plan. The Bank sponsors a qualified defined contribution retirement 401(k) savings plan, the Federal Home Loan Bank of San Francisco Savings Plan (Savings Plan). Contributions to the Savings Plan consist of elective participant contributions of up to 20% of each participant's base compensation and a Bank matching contribution of up to 6% of each participant's base compensation. The Bank contributed approximately $2, $2, and $2 during the years ended December 31, 2017, 2016, and 2015, respectively.

Benefit Equalization Plan. The Bank sponsors a non-qualified retirement plan restoring benefits offered under the Savings Plan that have been limited by laws governing the plan. Contributions made during the years ended December 31, 2017, 2016, and 2015, were de minimis.

Deferred Compensation Plan. The Bank maintains a deferred compensation plan that is available to all eligible Bank officers. The defined contribution portion of the plan is comprised of two components: (i) officer or director deferral of current compensation, and (ii) make-up matching contributions for officers that would have been made by the Bank under the Savings Plan had the compensation not been deferred. The make-up benefits under the Deferred Compensation Plan vest according to the corresponding provisions of the Savings Plan. The Deferred Compensation Plan liability consists of the accumulated compensation deferrals and accrued earnings on the deferrals, as well as the make-up matching contributions and any accrued earnings on the contributions. The Bank's obligation for this plan at December 31, 2017, 2016, and 2015, was $44, $37, and $35, respectively.

Incentive Compensation Plans

The Bank provides incentive compensation plans for many of its employees, including senior officers. Other liabilities include $13 and $13 for incentive compensation at December 31, 2017 and 2016, respectively.

161

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 17 — Segment Information

The Bank uses an analysis of financial results based on the financial components and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and determine financial management strategies related to the operations of these two business segments. For purposes of segment reporting, adjusted net interest income includes income and expense associated with net settlements from economic hedges that are recorded in “Net gain/(loss) on derivatives and hedging activities” in other income and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” Other key financial information, such as any credit-related OTTI losses on the Bank’s PLRMBS, other expenses, and assessments, is not included in the segment reporting analysis, but is incorporated into the Bank’s overall assessment of financial performance.

The advances-related business consists of advances and other credit products, related financing and hedging

instruments, other non-MBS investments associated with the Bank's role as a liquidity provider, and capital.

Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield

on all assets associated with the business activities in this segment and the cost of funding those activities, including

the net settlements from associated interest rate exchange agreements, and from earnings on invested capital.

The mortgage-related business consists of MBS investments, mortgage loans acquired through the MPF Program,

the consolidated obligations specifically identified as funding those assets, and related hedging instruments.

Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield

on the MBS and mortgage loans and the cost of the consolidated obligations funding those assets. This includes the net settlements from associated interest rate exchange agreements and net accretion related income, which is a result of improvement in expected cash flows on certain other-than-temporarily-impaired PLRMBS, less the provision for credit losses on mortgage loans.

The following table presents the Bank’s adjusted net interest income by operating segment and reconciles total adjusted net interest income to income before the AHP assessment for the years ended December 31, 2017, 2016, and 2015.

	Advances- Related Business		Mortgage- Related Business(1)		Adjusted Net Interest Income		Amortization of Basis Adjustments(2)			Income/(Expense) on Economic Hedges(3)			Interest Expense on Mandatorily Redeemable Capital Stock(4)		Net Interest Income After Mortgage Loan Loss Provision		Other Income/ (Loss)		Other Expense		Income Before AHP Assessment
2017	$	234	$	325	$	559	$	—		$	(40	)	$	32	$	567	$	78	$	224	$	421
2016	154		338		492		(7		)	(32		)	60		471		485		158		798
2015	155		351		506		(17		)	(18		)	65		476		388		148		716

(1) The mortgage-related business includes total accretion or amortization associated with other-than-temporarily impaired PLRMBS, which are recognized in interest income, totaled $93, $101, and $82 for the years ended December 31, 2017, 2016, and 2015, respectively. The mortgage-related business does not include credit-related OTTI losses of $16, $16, and $15 for the years ended December 31, 2017, 2016, and 2015, respectively.

(2) Represents amortization of amounts deferred for adjusted net interest income purposes only, in accordance with the Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework.

(3) The Bank includes income and expense associated with net settlements from economic hedges in adjusted net interest income in its analysis of financial performance for its two operating segments. For financial reporting purposes, the Bank does not include these amounts in net interest income in the Statements of Income, but instead records them in other income in “Net gain/(loss) on derivatives and hedging activities.”

(4) The Bank excludes interest expense on mandatorily redeemable capital stock from adjusted net interest income in its analysis of financial performance for its two operating segments.

The following table presents total assets by operating segment at December 31, 2017, 2016, and 2015.

162

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	Advances- Related Business		Mortgage- Related Business		Total Assets
2017	$	103,426	$	19,959	$	123,385
2016	74,018		17,923		91,941
2015	69,047		16,651		85,698

Note 18 — Derivatives and Hedging Activities

General. The Bank may enter into interest rate swaps (including callable, putable, and basis swaps); and cap and floor agreements (collectively, interest rate exchange agreements or derivatives). Most of the Bank’s interest rate exchange agreements are executed in conjunction with the origination of advances or the issuance of consolidated obligation bonds to create variable rate structures. The interest rate exchange agreements are generally executed at the same time the advances and bonds are transacted and generally have the same maturity dates as the related advances and bonds. The Bank transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. Over-the-counter derivatives may be either uncleared or cleared. In an uncleared derivative transaction, the Bank’s counterparty is the executing bank or broker-dealer. In a cleared derivative transaction, the Bank may execute the transaction either directly with the executing bank or broker-dealer or on a swap execution facility, but in either case, the Bank’s counterparty is a derivatives clearing organization or clearinghouse once the derivative transaction has been accepted for clearing. The Bank is not a derivatives dealer and does not trade derivatives for short-term profit.

Additional uses of interest rate exchange agreements include: (i) offsetting embedded features in assets and liabilities, (ii) hedging anticipated issuance of debt, (iii) matching against consolidated obligation discount notes or bonds to create the equivalent of callable or non-callable fixed rate debt, (iv) modifying the repricing frequency of assets and liabilities, (v) matching against certain advances and consolidated obligations for which the Bank elected the fair value option, and (vi) exactly offsetting other derivatives cleared at a derivatives clearing organization. The Bank’s use of interest rate exchange agreements results in one of the following classifications: (i) a fair value hedge of an underlying financial instrument, (ii) an economic hedge of assets or liabilities, or (iii) an intermediary transaction for members.

The Bank primarily uses the following derivative instruments:

Interest Rate Swaps – An interest rate swap is an agreement between two entities to exchange cash flows in the future. The agreement sets the dates on which the cash flows will be paid and the manner in which the cash flows will be calculated. One of the simplest forms of an interest rate swap involves the promise by one party to pay cash flows equivalent to the interest on a notional principal amount at a predetermined fixed rate for a given period of time. In return for this promise, the party receives cash flows equivalent to the interest on the same notional principal amount at a variable rate for the same period of time. The variable rate received or paid by the Bank in most interest rate exchange agreements is either indexed to LIBOR or to the overnight index swap rate.

Interest Rate Caps and Floors – In a cap agreement, additional cash flow is generated if the price or interest rate of an underlying variable rate rises above a certain threshold (or cap) price. In a floor agreement, additional cash flow is generated if the price or interest rate of an underlying variable rate falls below a certain threshold (or floor) price. Caps and floors may be used in conjunction with assets or liabilities. In general, caps and floors are designed as protection against the interest rate on a variable rate asset or liability rising above or falling below a certain level.

Hedging Activities. The Bank documents at inception all relationships between derivatives designated as hedging instruments and hedged items, its risk management objectives and strategies for undertaking various hedge transactions, and its method of assessing hedge effectiveness. Derivatives designated as fair value hedges may be transacted to hedge: (i) assets and liabilities on the Statement of Condition, (ii) firm commitments, or (iii) forecasted transactions. The Bank also formally assesses (both at hedge inception and on an ongoing basis) whether the hedging

163

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

derivatives have been effective in offsetting changes in the fair value of hedged items attributable to the hedged risk and whether those derivatives may be expected to remain effective hedges in future periods. The Bank typically uses regression analyses or other statistical analyses to assess the effectiveness of its hedges. When it is determined that a derivative has not been or is not expected to be effective as a hedge, the Bank discontinues hedge accounting prospectively.

The Bank discontinues hedge accounting prospectively when: (i) it determines that the derivative is no longer effective in offsetting changes in the fair value of a hedged item (including hedged items such as firm commitments or forecasted transactions); (ii) the derivative and/or the hedged item expires or is sold, terminated, or exercised; (iii) it is no longer probable that the forecasted transaction will occur in the originally expected period; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; (v) it determines that designating the derivative as a hedging instrument is no longer appropriate; or (vi) it decides to use the derivative to offset changes in the fair value of other derivatives or instruments carried at fair value.

The Bank may have the following types of hedged items:

Investments–The Bank may invest in U.S. Treasury and agency obligations, agency MBS, and the taxable portion of highly rated state or local housing finance agency obligations. In the past, the Bank has also invested in PLRMBS rated AAA at the time of acquisition. The interest rate and prepayment risk associated with these investment securities is managed through a combination of debt issuance and derivatives. The Bank may manage prepayment risk and interest rate risk by funding investment securities with consolidated obligations that have call features or by hedging the prepayment risk with a combination of consolidated obligations and callable swaps. The Bank may execute callable swaps in conjunction with the issuance of certain liabilities to create funding that is economically equivalent to fixed rate callable debt. Although these derivatives are economic hedges against prepayment risk and are designated to individual liabilities, they do not receive either fair value or cash flow hedge accounting treatment. Investment securities may be classified as trading, AFS, or HTM.

The Bank may also manage the risk arising from changing market prices or cash flows of investment securities classified as trading by entering into interest rate exchange agreements (economic hedges) that offset the changes in fair value or cash flows of the securities. The market value changes of both the trading securities and the associated interest rate exchange agreements are included in other income in the Statements of Income.

Advances– The Bank offers a wide range of advances structures to meet members’ funding needs. These advances may have maturities up to 30 years with fixed or adjustable rates and may include early termination features or options. The Bank may use derivatives to adjust the repricing and options characteristics of advances to more closely match the characteristics of the Bank’s funding liabilities. In general, whenever a member executes a fixed or variable rate advance with embedded options, the Bank will simultaneously execute an interest rate exchange agreement with terms that offset the terms and embedded options in the advance. The combination of the advance and the interest rate exchange agreement effectively creates a variable rate asset.

In addition, for certain advances for which the Bank has elected the fair value option, the Bank will simultaneously execute an interest rate exchange agreement with terms that economically offset the terms of the advance.

Mortgage Loans–The Bank’s investment portfolio includes fixed rate mortgage loans. The prepayment options embedded in mortgage loans can result in extensions or contractions in the expected repayment of these investments, depending on changes in estimated prepayment speeds. The Bank manages the interest rate risk and prepayment risk associated with fixed rate mortgage loans through a combination of debt issuance and derivatives. The Bank uses both callable and non-callable debt to achieve cash flow patterns and market value sensitivities for liabilities similar to those expected on the mortgage loans. Net income could be reduced if the Bank replaces prepaid mortgage loans with lower-yielding assets and the Bank’s higher funding costs are not reduced accordingly.

164

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The Bank executes callable swaps in conjunction with the issuance of certain consolidated obligations to create funding that is economically equivalent to fixed rate callable bonds. Although these derivatives are economic hedges against the prepayment risk of specific loan pools and are referenced to individual liabilities, they do not receive either fair value or cash flow hedge accounting treatment.

Consolidated Obligations – Consolidated obligation bonds may be structured to meet the Bank’s or the investors’ needs. Common structures include fixed rate bonds with or without call options and adjustable rate bonds with or without embedded options. In general, when bonds are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that offset the terms and embedded options, if any, of the consolidated obligation bond. This combination of the consolidated obligation bond and the interest rate exchange agreement effectively creates an adjustable rate bond. The cost of this funding combination is generally lower than the cost that would be available through the issuance of an adjustable rate bond alone. These transactions generally receive fair value hedge accounting treatment.

When the Bank issues consolidated obligation discount notes, it may also simultaneously enter into an interest rate exchange agreement to convert the fixed rate discount note to an adjustable rate discount note. This type of hedge is treated as an economic hedge.

In addition, when certain consolidated obligation bonds for which the Bank has elected the fair value option are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that economically offset the terms of the consolidated obligation bond. However, this type of hedge is treated as an economic hedge because these combinations do not meet the requirements for fair value hedge accounting treatment.

Intermediation and Offsetting Derivatives– As an additional service to its members, the Bank has in the past entered into offsetting interest rate exchange agreements, acting as an intermediary between offsetting derivative transactions with members and other counterparties. This intermediation allows members indirect access to the derivatives market. The Bank also enters into derivatives to offset the economic effect of other derivatives that are no longer designated to advances, investments, or consolidated obligations. Neither type of offsetting derivatives receives hedge accounting treatment and both are separately marked to market through earnings. The net result of the accounting for these derivatives does not significantly affect the operating results of the Bank.

The notional principal of the interest rate exchange agreements associated with derivatives with members or offsetting derivatives with other counterparties was $14 and $89, at December 31, 2017 and 2016, respectively.

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

The following table summarizes the notional amount and fair value of derivative instruments, including the effect of netting adjustments and cash collateral as of December 31, 2017 and 2016. For purposes of this disclosure, the derivative values include the fair value of derivatives and related accrued interest.

165

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	2017								2016
	Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	24,270	$	92		$	27		$	20,741	$	67		$	32
Total	24,270		92			27			20,741		67			32
Derivatives not designated as hedging instruments:
Interest rate swaps	73,760		81			57			42,135		67			49
Interest rate caps and floors	1,563		1			1			2,180		6			—
Mortgage delivery commitments	16		—			—			13		—			—
Total	75,339		82			58			44,328		73			49
Total derivatives before netting and collateral adjustments	$	99,609	174			85			$	65,069	140			81
Netting adjustments and cash collateral(1)			(91		)	(84		)			(74		)	(79		)
Total derivative assets and total derivative liabilities			$	83		$	1				$	66		$	2

(1) Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met. Cash collateral posted and related accrued interest was $10 and $22 at December 31, 2017 and 2016, respectively. Cash collateral received and related accrued interest was $18 and $16 at December 31, 2017 and 2016, respectively.

The following table presents the components of net gain/(loss) on derivatives and hedging activities as presented in the Statements of Income for the years ended December 31, 2017, 2016, and 2015.

	2017			2016			2015
	Gain/(Loss)			Gain/(Loss)			Gain/(Loss)
Derivatives designated as hedging instruments:
Interest rate swaps	$	(1	)	$	(2	)	$	(10	)
Total net gain/(loss) related to fair value hedge ineffectiveness	(1		)	(2		)	(10		)
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps	8			39			13
Interest rate caps and floors	(5		)	(1		)	(3		)
Net settlements	(40		)	(32		)	(18		)
Mortgage delivery commitments	24			5			2
Total net gain/(loss) related to derivatives not designated as hedging instruments	(13		)	11			(6		)
Net gain/(loss) on derivatives and hedging activities	$	(14	)	$	9		$	(16	)

The following tables present, by type of hedged item, the gains and losses on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on the Bank’s net interest income for the years ended December 31, 2017, 2016, and 2015.

166

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Hedged Item Type	Gain/(Loss) on Derivatives			Gain /(Loss) on Hedged Item			Net Fair Value Hedge Ineffectiveness			Effect of Derivatives on Net Interest Income(1)
Year ended December 31, 2017:
Advances	$	63		$	(66	)	$	(3	)	$	(27	)
Consolidated obligation bonds	(41		)	43			2			27
Total	$	22		$	(23	)	$	(1	)	$	—
Year ended December 31, 2016:
Advances	$	63		$	(62	)	$	1		$	(55	)
Consolidated obligation bonds	(135		)	132			(3		)	180
Total	$	(72	)	$	70		$	(2	)	$	125
Year ended December 31, 2015:
Advances	$	19		$	(20	)	$	(1	)	$	(106	)
Consolidated obligation bonds	(170		)	161			(9		)	257
Total	$	(151	)	$	141		$	(10	)	$	151

(1) The net interest on derivatives in fair value hedge relationships is presented in the interest income/expense line item of the respective hedged item.

Credit Risk – The Bank is subject to credit risk as a result of potential nonperformance by counterparties to the interest rate exchange agreements. All of the Bank’s agreements governing uncleared derivative transactions contain master netting provisions to help mitigate the credit risk exposure to each counterparty. The Bank manages counterparty credit risk through credit analyses and collateral requirements and by following the requirements of the Bank’s risk management policies, credit guidelines, and Finance Agency and other regulations. The Bank also requires credit support agreements on all uncleared derivatives.

For cleared derivatives, the clearinghouse is the Bank’s counterparty. The requirement that the Bank post initial and variation margin through a clearing agent, to the clearinghouse, exposes the Bank to institutional credit risk in the event that the clearing agent or the clearinghouse fails to meet its obligations. The use of cleared derivatives, however, mitigates the Bank’s overall credit risk exposure because a central counterparty is substituted for individual counterparties and variation margin is posted daily for changes in the value of cleared derivatives through a clearing agent. The Bank has analyzed the enforceability of offsetting rights applicable to 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 bankruptcy law and Commodity Futures Trading Commission rules in the event of a clearinghouse or clearing agent insolvency and under applicable clearinghouse rules upon a non-insolvency-based event of default of the clearinghouse or clearing agent. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular clearinghouse.

Based on the Bank’s credit analyses and the collateral requirements, the Bank does not expect to incur any credit losses on its derivative transactions.

The Bank’s agreements for uncleared derivative transactions contain provisions that link the Bank’s credit rating from Moody’s Investors Service and S&P Global Ratings to various rights and obligations. Certain of these derivative agreements provide that, if the Bank’s long-term debt rating falls below a specified rating (ranging from A3/A- to Baa3/BBB-), the Bank’s counterparty would have the right, but not the obligation, to terminate all of its outstanding derivative transactions with the Bank; the Bank’s agreements with its clearing agents for cleared derivative transactions have similar provisions with respect to the debt rating of FHLBank System consolidated bonds. If this occurs, the Bank may choose to enter into replacement hedges, either by transferring the existing transactions to another counterparty or entering into new replacement transactions, based on prevailing market rates. The aggregate fair value of all uncleared derivative instruments with credit risk-related contingent features that were

167

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

in a net derivative liability position (before cash collateral and related accrued interest) at December 31, 2017, was $6, for which the Bank had posted cash collateral of $6 in the ordinary course of business.

The Bank may present derivative instruments, related cash collateral received or pledged, and associated accrued interest by clearing agent or by counterparty when the netting requirements have been met.

The following table presents separately the fair value of derivative assets and derivative liabilities that have met the netting requirements, including the related collateral received from or pledged to counterparties as of December 31, 2017 and 2016.

	December 31, 2017							December 31, 2016
	Derivative Instruments Meeting Netting Requirements							Derivative Instruments Meeting Netting Requirements
	Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral			Total Derivative Assets and Total Derivative Liabilities		Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral			Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Uncleared	$	35	$	(33	)	$	2	$	41	$	(37	)	$	4
Cleared	139		(58		)	81		99		(37		)	62
Total						$	83						$	66
Derivative Liabilities
Uncleared	$	29	$	(28	)	$	1	$	37	$	(35	)	$	2
Cleared	56		(56		)	—		44		(44		)	—
Total						$	1						$	2

Note 19 — Fair Value

The following fair value amounts have been determined by the Bank using available market information and the Bank’s best judgment of appropriate valuation methods. These estimates are based on pertinent information available to the Bank at December 31, 2017 and 2016. Although the Bank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a portion of the Bank’s financial instruments, in certain cases fair values cannot be precisely quantified or verified and may change as economic and market factors and evaluation of those factors change. The Bank continues to refine its valuation methodologies as markets and products develop and the pricing for certain products becomes more or less transparent. While the Bank believes that its valuation methodologies are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a materially different estimate of fair value as of the reporting date. Therefore, the fair values are not necessarily indicative of the amounts that would be realized in current market transactions, although they do reflect the Bank’s judgment as to how a market participant would estimate the fair values. The fair value summary table does not represent an estimate of the overall market value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of total assets and liabilities.

The following tables present the carrying value, the estimated fair value, and the fair value hierarchy level of the Bank’s financial instruments at December 31, 2017 and 2016.

168

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	December 31, 2017
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments(1)
Assets
Cash and due from banks	$	31	$	31	$	31	$	—	$	—	$	—
Interest-bearing deposits	1,115		1,115		1,115		—		—		—
Securities purchased under agreements to resell	11,750		11,750		—		11,750		—		—
Federal funds sold	11,028		11,029		—		11,029		—		—
Trading securities	1,164		1,164		—		1,164		—		—
AFS securities	3,833		3,833		—		—		3,833		—
HTM securities	14,680		14,704		—		13,697		1,007		—
Advances	77,382		77,437		—		77,437		—		—
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	2,076		2,075		—		2,075		—		—
Accrued interest receivable	119		119		—		119		—		—
Derivative assets, net(1)	83		83		—		174		—		(91		)
Other assets(2)	9		9		9		—		—		—
Liabilities
Deposits	281		281		—		281		—		—
Consolidated obligations:
Bonds	85,063		84,938		—		84,938		—		—
Discount notes	30,440		30,437		—		30,437		—		—
Total consolidated obligations	115,503		115,375		—		115,375		—		—
Mandatorily redeemable capital stock	309		309		309		—		—		—
Accrued interest payable	116		116		—		116		—		—
Derivative liabilities, net(1)	1		1		—		85		—		(84		)
Other
Standby letters of credit	19		19		—		19		—		—

169

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	December 31, 2016
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments(1)
Assets
Cash and due from banks	$	2	$	2	$	2	$	—	$	—	$	—
Interest-bearing deposits	590		590		590		—		—		—
Securities purchased under agreements to resell	15,500		15,500		—		15,500		—		—
Federal funds sold	4,214		4,214		—		4,214		—		—
Trading securities	2,066		2,066		—		2,066		—		—
AFS securities	4,489		4,489		—		—		4,489		—
HTM securities	14,127		14,141		—		12,788		1,353		—
Advances	49,845		49,921		—		49,921		—		—
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	826		845		—		845		—		—
Accrued interest receivable	79		79		—		79		—		—
Derivative assets, net(1)	66		66		—		140		—		(74		)
Other assets(2)	11		11		11		—		—		—
Liabilities
Deposits	169		169		—		169		—		—
Consolidated obligations:
Bonds	50,224		50,188		—		50,188		—		—
Discount notes	33,506		33,505		—		33,505		—		—
Total consolidated obligations	83,730		83,693		—		83,693		—		—
Mandatorily redeemable capital stock	457		457		457		—		—		—
Borrowings from other FHLBanks	1,345		1,345		—		1,345		—		—
Accrued interest payable	67		67		—		67		—		—
Derivative liabilities, net(1)	2		2		—		81		—		(79		)
Other
Standby letters of credit	24		24		—		24		—		—

(1) Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met.

(2) Represents publicly traded mutual funds held in a grantor trust.

Fair Value Hierarchy. The fair value hierarchy is used to prioritize the fair value methodologies and valuation techniques as well as the inputs to the valuation techniques used to measure fair value for assets and liabilities carried at fair value on the Statements of Condition. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of market observability of the fair value measurement for the asset or liability. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). An entity must disclose the level within the fair value hierarchy in which the measurements are classified for all financial assets and liabilities measured on a recurring or non-recurring basis.

The application of the fair value hierarchy to the Bank’s financial assets and financial liabilities that are carried at fair value either on a recurring or non-recurring basis is as follows:

• Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in an active market that the reporting entity can access on the measurement date.

• Level 2 – Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets or liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for

170

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

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 – Unobservable inputs for the asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following assets and liabilities, including those for which the Bank has elected the fair value option, are carried at fair value on the Statements of Condition as of December 31, 2017:

• Trading securities

• AFS securities

• Certain advances

• Derivative assets and liabilities

• Certain consolidated obligation bonds

• Certain other assets

For instruments carried at fair value, the Bank reviews the fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. Such reclassifications are reported as transfers in or out as of the beginning of the quarter in which the changes occur. For the periods presented, the Bank did not have any reclassifications for transfers in or out of the fair value hierarchy levels.

Summary of Valuation Methodologies and Primary Inputs.

Cash and Due from Banks–The estimated fair value equals the carrying value.

Federal Funds Sold and Securities Purchased Under Agreements to Resell – The estimated fair value of overnight Federal funds sold and securities purchased under agreements to resell approximates the carrying value. The estimated fair value of term Federal funds sold and term securities purchased under agreements to resell has been determined by calculating the present value of expected cash flows for the instruments and reducing the amount for accrued interest receivable. The discount rates used in these calculations are the replacement rates for comparable instruments with similar terms.

Interest-Bearing Deposits –The fair value of deposits is generally equal to the carrying value of the deposits because the deposits are primarily overnight deposits or due on demand. The Bank determines the fair values of term deposits by calculating the present value of expected future cash flows from the deposits and reducing the amount for accrued interest receivable. The discount rates used in these calculations are the cost of deposits with similar terms.

Investment Securities – MBS – To value its MBS, the Bank obtains prices from multiple designated third-party pricing vendors when available. The pricing vendors use various proprietary models to price these securities. The inputs to those models are derived from various sources including, but not limited to: benchmark yields, reported trades, dealer estimates, issuer spreads, prices on benchmark securities, bids, offers, and other market-related data. Since many securities do not trade on a daily basis, the pricing vendors use available information as applicable, such as benchmark yield curves, benchmarking of like securities, sector groupings, and matrix pricing, to determine the prices for individual securities. Each pricing vendor has an established challenge process in place for all security valuations, which facilitates resolution of price discrepancies identified by the Bank.

At least annually, the Bank conducts reviews of the multiple pricing vendors to update and confirm its understanding of the vendors’ pricing processes, methodologies, and control procedures.

171

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The Bank’s valuation technique for estimating the fair values of its MBS first requires the establishment of a median vendor price for each security. If three prices are received, the middle price is the median price; if two prices are received, the average of the two prices is the median price; and if one price is received, it is the median price (and also the default fair value) subject to additional validation. All vendor prices that are within a specified tolerance threshold of the median price are included in the cluster of vendor prices that are averaged to establish a default fair value. All vendor prices that are outside the threshold (outliers) are subject to further analysis including, but not limited to, comparison to prices provided by an additional third-party valuation service, prices for similar securities and/or dealer estimates, or use of internal model prices, which are deemed to be reflective of all relevant facts and circumstances that a market participant would consider. Such analysis is also applied in those limited instances where no third-party vendor price or only one third-party vendor price is available in order to arrive at an estimated fair value. If an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair value, then the outlier (or the other price, as appropriate) is used as the fair value rather than the default fair value. If, instead, the analysis confirms that an outlier is (or outliers are) not representative of fair value and the default fair value is the best estimate, then the default fair value is used as the fair value.

If all vendor prices received for a security are outside the tolerance threshold level of the median price, then there is no default fair value, and the fair value is determined by an evaluation of all outlier prices (or the other prices, as appropriate) as described above.

As of December 31, 2017, multiple vendor prices were received for most of the Bank’s MBS, and the fair value estimates for most of those securities were determined in accordance with the Bank’s valuation technique based on these vendor prices. Based on the Bank’s reviews of the pricing methods employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or, in those instances in which there were outliers, the Bank’s additional analyses), the Bank believes that its fair value estimates are reasonable and that the fair value measurements are classified appropriately in the fair value hierarchy. Based on limited market liquidity for PLRMBS, the fair value measurements for these securities were classified as Level 3 within the fair value hierarchy.

Investment Securities – FFCB Bonds and CalHFA Bonds –The Bank estimates the fair values of these securities using the methodology described above for Investment Securities – MBS.

Advances –Because quoted prices are not available for advances, the fair values are measured using model-based valuation techniques (such as calculating the present value of future cash flows and reducing the amount for accrued interest receivable).

The Bank’s primary inputs for measuring the fair value of advances are market-based consolidated obligation yield curve (CO Curve) inputs obtained from the Office of Finance. The CO Curve is then adjusted to reflect the rates on replacement advances with similar terms and collateral. These spread adjustments are not market-observable and are evaluated for significance in the overall fair value measurement and the fair value hierarchy level of the advance. The Bank obtains market-observable inputs for complex advances. These inputs may include volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew). The discount rates used in these calculations are the replacement advance rates for advances with similar terms. Pursuant to the Finance Agency’s advances regulation, advances with an original term to maturity or repricing period greater than six months generally require a prepayment fee sufficient to make the Bank financially indifferent to the borrower’s decision to prepay the advances. The Bank determined that no adjustment is required to the fair value measurement of advances for prepayment fees. In addition, the Bank did not adjust its fair value measurement of advances for creditworthiness primarily because advances were fully collateralized.

Mortgage Loans Held for Portfolio – The estimated fair value for seasoned mortgage loans represents modeled prices based on observable market prices for seasoned agency mortgage-backed passthrough securities adjusted for differences in coupon, average loan rate, credit, and cash flow remittance between the Bank’s mortgage loans and

172

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

the referenced instruments, while the estimated fair value for newly originated mortgage loans represents modeled prices based on MPF commitment rates. Market prices are highly dependent on the underlying prepayment assumptions. Changes in the prepayment speeds often have a material effect on the fair value estimates. These underlying prepayment assumptions are susceptible to material changes in the near term because they are made at a specific point in time.

Loans to and from Other FHLBanks –Because these are overnight transactions, the estimated fair value approximates the recorded carrying value.

Accrued Interest Receivable and Payable – The estimated fair value approximates the carrying value of accrued interest receivable and accrued interest payable.

Other Assets – The estimated fair value of grantor trust assets is based on quoted market prices.

Derivative Assets and Liabilities –In general, derivative instruments transacted and held by the Bank for risk management activities are traded in over-the-counter markets where quoted market prices are not readily available. These derivatives are interest rate-related. For these derivatives, the Bank measures fair value using internally developed discounted cash flow models that use market-observable inputs, such as the overnight index swap (OIS) curve and volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew), adjusted for counterparty credit risk, as necessary.

The Bank is subject to credit risk because of the risk of potential nonperformance by its derivative counterparties. To mitigate this risk, the Bank executes uncleared derivative transactions only with highly rated derivative dealers and major banks (derivative dealer counterparties) that meet the Bank’s eligibility criteria. In addition, the Bank has entered into master netting agreements and bilateral credit support agreements with all active derivative dealer counterparties that provide for delivery of collateral at specified levels to limit the Bank’s net unsecured credit exposure to these counterparties. Under these policies and agreements, the amount of unsecured credit exposure to an individual derivative dealer counterparty is either (i) limited to an absolute dollar credit exposure limit according to the counterparty’s long-term debt or deposit credit rating, as determined by rating agencies or (ii) set at zero (subject to a minimum transfer amount). The Bank clears its cleared derivative transactions only through clearing agents that meet the Bank’s eligibility requirements, and the Bank’s credit exposure to the clearinghouse is secured by variation margin received from the clearinghouse. All credit exposure from derivative transactions entered into by the Bank with member counterparties that are not derivative dealers must be fully secured by eligible collateral. The Bank evaluated the potential for the fair value of the instruments to be affected by counterparty credit risk and determined that no adjustments to the overall fair value measurements were required.

The fair values of the derivative assets and liabilities include accrued interest receivable/payable and cash collateral remitted to/received from counterparties. The estimated fair values of the accrued interest receivable/payable and cash collateral approximate their carrying values because of their short-term nature. The fair values of derivatives that met the netting requirements are presented on a net basis. If these netted amounts are positive, they are classified as an asset and, if negative, they are classified as a liability.

Deposits –The fair value of deposits is generally equal to the carrying value of the deposits because the deposits are primarily overnight deposits or due on demand. The Bank determines the fair values of term deposits by calculating the present value of expected future cash flows from the deposits and reducing the amount for accrued interest payable. The discount rates used in these calculations are the cost of deposits with similar terms.

Consolidated Obligations –Because quoted prices in active markets are not generally available for identical liabilities, the Bank measures fair values using internally developed models that use primarily market-observable inputs. The Bank’s primary input for measuring the fair value of consolidated obligation bonds is a market-based CO Curve obtained from the Office of Finance. The Office of Finance constructs the CO Curve using the Treasury

173

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

yield curve as a base curve, which is adjusted by indicative consolidated obligation spreads obtained from market-observable sources. These market indications are generally derived from pricing indications from dealers, historical pricing relationships, and market activity for similar liabilities, such as recent GSE issuances or secondary market activity. For consolidated obligation bonds with embedded options, the Bank also obtains market-observable inputs, such as volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew).

Adjustments may be necessary to reflect the Bank’s credit quality or the credit quality of the FHLBank System when valuing consolidated obligation bonds measured at fair value. The Bank monitors its own creditworthiness and the creditworthiness of the other FHLBanks and the FHLBank System to determine whether any adjustments are necessary for creditworthiness in its fair value measurement of consolidated obligation bonds. The credit ratings of the FHLBank System and any changes to the credit ratings are the basis for the Bank to determine whether the fair values of consolidated obligations have been significantly affected during the reporting period by changes in the instrument-specific credit risk.

Mandatorily Redeemable Capital Stock –The estimated fair value of capital stock subject to mandatory redemption is generally at par value as indicated by contemporaneous purchases, redemptions, and repurchases at par value. Fair value includes estimated dividends earned at the time of reclassification from capital to liabilities, until such amount is paid, and any subsequently declared capital stock dividend. The Bank’s capital stock can only be acquired by members at par value and redeemed or repurchased at par value, subject to statutory and regulatory requirements. The Bank’s capital stock is not traded, and no market mechanism exists for the exchange of Bank capital stock outside the cooperative ownership structure.

Commitments – The estimated fair value of standby letters of credit is based on the present value of fees currently charged for similar agreements and is recorded in other liabilities. The estimated fair value of off-balance sheet fixed rate commitments to fund advances and commitments to issue consolidated obligations takes into account the difference between current and committed interest rates.

Subjectivity of Estimates Related to Fair Values of Financial Instruments. Estimates of the fair value of financial assets and liabilities using the methodologies described above 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. Changes in these judgments often have a material effect on the fair value estimates.

Fair Value Measurements. The tables below present the fair value of assets and liabilities, which are recorded on a recurring or nonrecurring basis at December 31, 2017 and 2016, by level within the fair value hierarchy.

174

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

December 31, 2017
	Fair Value Measurement Using:						Netting
	Level 1		Level 2		Level 3		Adjustments(1)			Total
Recurring fair value measurements – Assets:
Trading securities:
GSEs – FFCB bonds	$	—	$	1,158	$	—	$	—		$	1,158
MBS:
Other U.S. obligations – Ginnie Mae	—		6		—		—			6
Total trading securities	—		1,164		—		—			1,164
AFS securities:
PLRMBS	—		—		3,833		—			3,833
Total AFS securities	—		—		3,833		—			3,833
Advances(2)	—		6,431		—		—			6,431
Derivative assets, net: interest rate-related	—		174		—		(91		)	83
Other assets	9		—		—		—			9
Total recurring fair value measurements – Assets	$	9	$	7,769	$	3,833	$	(91	)	$	11,520
Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)	$	—	$	949	$	—	$	—		$	949
Derivative liabilities, net: interest rate-related	—		85		—		(84		)	1
Total recurring fair value measurements – Liabilities	$	—	$	1,034	$	—	$	(84	)	$	950
Nonrecurring fair value measurements – Assets:(4)
Impaired mortgage loans held for portfolio	$	—	$	—	$	3	$	—		$	3
Total nonrecurring fair value measurements – Assets	$	—	$	—	$	3	$	—		$	3

December 31, 2016
	Fair Value Measurement Using:						Netting
	Level 1		Level 2		Level 3		Adjustments(1)			Total
Recurring fair value measurements – Assets:
Trading securities:
GSEs – FFCB bonds	$	—	$	2,058	$	—	$	—		$	2,058
MBS:
Other U.S. obligations – Ginnie Mae	—		8		—		—			8
Total trading securities	—		2,066		—		—			2,066
AFS securities:
PLRMBS	—		—		4,489		—			4,489
Total AFS securities	—		—		4,489		—			4,489
Advances(2)	—		3,719		—		—			3,719
Derivative assets, net: interest rate-related	—		140		—		(74		)	66
Other assets	11		—		—		—			11
Total recurring fair value measurements – Assets	$	11	$	5,925	$	4,489	$	(74	)	$	10,351
Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)	$	—	$	1,507	$	—	$	—		$	1,507
Derivative liabilities, net: interest rate-related	—		81		—		(79		)	2
Total recurring fair value measurements – Liabilities	$	—	$	1,588	$	—	$	(79	)	$	1,509
Nonrecurring fair value measurements – Assets:(4)
Impaired mortgage loans held for portfolio	$	—	$	—	$	5	$	—		$	5
Total nonrecurring fair value measurements – Assets	$	—	$	—	$	5	$	—		$	5

(1) Amounts represent the netting of derivative assets and liabilities by counterparty, including cash collateral, where the netting requirements have been met.

175

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

(2) Represents advances recorded under the fair value option at December 31, 2017 and 2016.

(3) Represents consolidated obligation bonds recorded under the fair value option at December 31, 2017 and 2016.

(4) The fair value information presented is as of the date the fair value adjustment was recorded during the years ended December 31, 2017 and 2016.

The following tables present a reconciliation of the Bank’s AFS PLRMBS that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2017, 2016, and 2015.

	2017			2016			2015
Balance, beginning of the period	$	4,489		$	5,414		$	6,371
Total gain/(loss) realized and unrealized included in:
Interest income	92			102			83
Net OTTI loss, credit-related	(16		)	(16		)	(15		)
Unrealized gain/(loss) of other-than-temporarily impaired securities included in AOCI	195			103			(29		)
Net amount of OTTI loss reclassified to/(from) other income/(loss)	6			(10		)	(15		)
Settlements	(933		)	(1,104		)	(996		)
Transfers of HTM securities to AFS securities	—			—			15
Balance, end of the period	$	3,833		$	4,489		$	5,414
Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets and liabilities still held at the end of the period	$	75		$	84		$	68

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

The Bank elected the fair value option for certain financial instruments as follows:

• Adjustable rate advances with embedded options (excluding call and put options)

• Callable fixed rate advances

• Putable fixed rate advances

• Putable fixed rate advances with embedded options

• Fixed rate advances with partial prepayment symmetry

• Callable or non-callable capped floater consolidated obligation bonds

• Convertible consolidated obligation bonds

• Adjustable or fixed rate range accrual consolidated obligation bonds

• Ratchet consolidated obligation bonds

• Adjustable rate advances indexed to non-LIBOR indices such as the Prime Rate, U.S. Treasury bill, and Federal funds effective rate

• Adjustable rate consolidated obligation bonds indexed to non-LIBOR indices such as the Prime Rate and U.S. Treasury bill

• Step-up callable bonds, which pay interest at increasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-up dates

• Step-down callable bonds, which pay interest at decreasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-down dates

176

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The Bank has elected the fair value option for certain financial instruments to assist in mitigating potential earnings volatility that can arise from economic hedging relationships in which the carrying value of the hedged item is not adjusted for changes in fair value. The potential earnings volatility associated with using fair value only for the derivative is the Bank’s primary reason for electing the fair value option for financial assets and liabilities that do not qualify for hedge accounting or that have not previously met or may be at risk for not meeting the hedge effectiveness requirements.

The following tables summarize the activity related to financial assets and liabilities for which the Bank elected the fair value option during the years ended December 31, 2017, 2016, and 2015:

	2017						2016						2015
	Advances			Consolidated Obligation Bonds			Advances			Consolidated Obligation Bonds			Advances			Consolidated Obligation Bonds
Balance, beginning of the period	$	3,719		$	1,507		$	3,677		$	4,233		$	5,137		$	6,717
New transactions elected for fair value option	3,657			1,185			947			685			1,018			2,585
Maturities and terminations	(918		)	(1,745		)	(878		)	(3,420		)	(2,442		)	(5,083		)
Net gain/(loss) on advances and net (gain)/loss on consolidated obligation bonds held under fair value option	(31		)	—			(27		)	13			(31		)	19
Change in accrued interest	4			2			—			(4		)	(5		)	(5		)
Balance, end of the period	$	6,431		$	949		$	3,719		$	1,507		$	3,677		$	4,233

For instruments for which the fair value option has been elected, the related contractual interest income and contractual interest expense are recorded as part of net interest income on the Statements of Income. The remaining changes in fair value for instruments for which the fair value option has been elected are recorded as net gains/ (losses) on financial instruments held under the fair value option in the Statements of Income. The change in fair value does not include changes in instrument-specific credit risk. For advances and consolidated obligations recorded under the fair value option, the Bank determined that no adjustments to the fair values of these instruments for instrument-specific credit risk were necessary for the years ended December 31, 2017, 2016, and 2015.

The following table presents the difference between the aggregate remaining contractual principal balance outstanding and aggregate fair value of advances and consolidated obligation bonds for which the Bank elected the fair value option at December 31, 2017 and 2016:

	2017							2016
	Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance			Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance
Advances(1)	$	6,447	$	6,431	$	(16	)	$	3,709	$	3,719	$	10
Consolidated obligation bonds	955		949		(6		)	1,515		1,507		(8		)

(1) At December 31, 2017 and 2016, none of these advances were 90 days or more past due or had been placed on nonaccrual status.

Note 20 — Commitments and Contingencies

As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The regulations provide a general framework for addressing the possibility that an FHLBank may be unable to repay the consolidated obligations for which it is the primary obligor. The Bank has

177

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of December 31, 2017, and through the filing date of this report, does not believe that it is probable that it will be asked to do so.

The par value of the outstanding consolidated obligations of the FHLBanks was $1,034,260 at December 31, 2017, and $989,311 at December 31, 2016. The par value of the Bank’s participation in consolidated obligations was $115,602 at December 31, 2017, and $83,749 at December 31, 2016.

The joint and several liability regulation provides a general framework for addressing the possibility that an FHLBank may be unable to repay its participation in the consolidated obligations for which it is the primary obligor. In accordance with this regulation, the president of each FHLBank is required to provide a quarterly certification that, among other things, the FHLBank will remain capable of making full and timely payment of all its current obligations, including direct obligations.

In addition, the regulation requires that an FHLBank must provide written notice to the Finance Agency if at any time the FHLBank is unable to provide the quarterly certification; projects that it will be unable to fully meet all of its current obligations, including direct obligations, on a timely basis during the quarter; or negotiates or enters into an agreement with another FHLBank for financial assistance to meet its obligations. If an FHLBank gives any one of these notices (other than in a case of a temporary interruption in the FHLBank's debt servicing operations resulting from an external event such as a natural disaster or a power failure), it must promptly file a consolidated obligations payment plan for Finance Agency approval specifying the measures the FHLBank will undertake to make full and timely payments of all its current obligations.

Notwithstanding any other provisions in the regulation, the regulation provides that the Finance Agency in its discretion may at any time order any FHLBank to make any principal or interest payment due on any consolidated obligation. To the extent an FHLBank makes any payment on any consolidated obligation on behalf of another FHLBank, the paying FHLBank is entitled to reimbursement from the FHLBank that is the primary obligor, which will have a corresponding obligation to reimburse the FHLBank for the payment and associated costs, including interest.

The regulation also provides that the Finance Agency may allocate the outstanding liability of an FHLBank for consolidated obligations among the other FHLBanks on a pro rata basis in proportion to each FHLBank's participation in all consolidated obligations outstanding or in any other manner it may determine to ensure that the FHLBanks operate in a safe and sound manner.

Off-balance sheet commitments as of December 31, 2017 and 2016, were as follows:

	2017						2016
	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	$	12,910	$	3,240	$	16,150	$	11,094	$	4,066	$	15,160
Commitments to fund additional advances	1		—		1		5		1		6
Commitments to issue consolidated obligation discount notes, par	134		—		134		846		—		846
Commitments to issue consolidated obligation bonds, par	595		—		595		655		—		655
Commitments to purchase mortgage loans	16		—		16		13		—		13

Standby letters of credit are generally issued for a fee on behalf of members to support their obligations to third parties. If the Bank is required to make a payment for a beneficiary’s drawing under a letter of credit, the amount is immediately due and payable by the member to the Bank and is charged to the member’s demand deposit account with the Bank. The original terms of these standby letters of credit range from 14 days to 15 years, including a final expiration in 2032. The Bank monitors the creditworthiness of members that have standby letters of credit. The

178

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

value of the Bank’s obligations related to standby letters of credit is recorded in other liabilities and amounted to $19 at December 31, 2017, and $24 at December 31, 2016. Standby letters of credit are fully collateralized at the time of issuance. Based on the Bank’s credit analyses of members’ financial condition and collateral requirements, the Bank deemed it unnecessary to record any additional liability on the letters of credit outstanding as of December 31, 2017 and 2016.

Commitments to fund advances totaled $1 at December 31, 2017, and $6 at December 31, 2016. Advances funded under advance commitments are fully collateralized at the time of funding (see Note 10 – Allowance for Credit Losses). Based on the Bank’s credit analyses of members’ financial condition and collateral requirements, the Bank deemed it unnecessary to record any additional liability on the advance commitments outstanding as of December 31, 2017 and 2016.

The Bank may enter into commitments that unconditionally obligate it to purchase mortgage loans from its members. Commitments are generally for periods not exceeding 60 days. Delivery commitments are recorded at fair value as derivative assets or derivative liabilities in the Statements of Condition.

The Bank executes over-the-counter uncleared interest rate exchange agreements with major banks and derivative entities affiliated with broker-dealers and has executed uncleared interest rate exchange agreements in the past with the Bank’s members. The Bank enters into master agreements with netting provisions and into bilateral credit support agreements with all active derivative dealer counterparties. All member counterparty master agreements, excluding those with derivative dealers, are subject to the terms of the Bank’s Advances and Security Agreement with members, and all member counterparties (except for those that are derivative dealers) must fully collateralize the Bank’s net credit exposure. For cleared derivatives, the clearinghouse is the Bank’s counterparty, and the Bank has clearing agreements with clearing agents that provide for delivery of initial margin to, and exchange of variation margin with, the clearinghouse. See Note 18 – Derivatives and Hedging Activities for additional information about the Bank’s pledged collateral and other credit-risk-related contingent features.

The Bank charged operating expenses for net rental and related costs of approximately $7, $6, and $5 for the years ended December 31, 2017, 2016, and 2015, respectively. Future minimum rentals at December 31, 2017, were as follows:

Year	Equipment Capital Leases		Premises Operating Leases
2018	$	2	$	5
2019	2		4
2020	2		2
2021	2		—
2022	1		—
Total	$	9	$	11

Lease agreements for Bank premises generally provide for increases in the basic rentals resulting from increases in property taxes and maintenance expenses. Such increases are not expected to have a material effect on the Bank's financial condition or results of operations.

The Bank may be subject to various pending legal proceedings that may arise in the ordinary course of business. After consultation with legal counsel, the Bank does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on its financial condition or results of operations.

Other commitments and contingencies are discussed in Note 1 – Summary of Significant Accounting Policies, Note 8 – Advances, Note 9 – Mortgage Loans Held for Portfolio, Note 12 – Consolidated Obligations, Note 13 –

179

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Affordable Housing Program, Note 15 – Capital, Note 16 – Employee Retirement Plans and Incentive Compensation Plans, and Note 18 – Derivatives and Hedging Activities.

Note 21 — Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks

Transactions with Members and Nonmembers. The Bank has a cooperative ownership structure under which current member institutions, certain former members, and certain other nonmembers own the capital stock of the Bank. Former members and nonmembers that have outstanding transactions with the Bank are required to maintain their investment in the Bank's capital stock until their outstanding transactions mature or are paid off or until their capital stock is redeemed following the five-year redemption period for capital stock or is repurchased by the Bank, in accordance with the Bank's capital requirements. (For further information on concentration risk, see Note 15 – Capital and Note 8 – Advances).

Under the FHLBank Act and Finance Agency regulations, each member eligible to vote is entitled to cast by ballot one vote for each share of stock that it was required to hold as of the record date, which is December 31, of the year prior to each election, subject to the limitation that no member may cast more votes than the average number of shares of the Bank’s stock that are required to be held by all members located in such member's state. As of and for the three-year period ending December 31, 2017, no shareholder owned 10% or more of the total voting interests in the Bank because of this statutory limit on members' voting rights.

All advances are made to members, and all mortgage loans held for portfolio were purchased from members. The Bank also maintains deposit accounts for members, certain former members, and certain other nonmembers primarily to facilitate settlement activities that are directly related to advances and mortgage loan purchases. All transactions with members and their affiliates are entered into in the ordinary course of business.

The Bank may invest in Federal funds sold, interest-bearing deposits, commercial paper, and MBS and executes derivative transactions with members or their affiliates. The Bank purchases MBS through securities brokers or dealers and executes all MBS investments without preference to the status of the counterparty or the issuer of the investment as a nonmember, member, or affiliate of a member. When the Bank executes non-MBS investments with a member, the Bank may give consideration to the member’s secured credit and the Bank's advances pricing. As an additional service to its members, the Bank has in the past entered into offsetting interest rate exchange agreements, acting as an intermediary between exactly offsetting derivative transactions with members and other counterparties. These transactions were executed at market rates.

The FHLBank Act requires the Bank to establish an AHP. The Bank provides subsidies to members, which use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Subsidies may be in the form of direct grants or below-market interest rate advances. Only Bank members, along with their nonmember AHP project sponsors, may submit AHP applications. All AHP subsidies are made in the ordinary course of business.

The FHLBank Act also requires the Bank to establish a Community Investment Program (CIP) and authorizes the Bank to offer additional Community Investment Cash Advance (CICA) programs. Under these programs, the Bank provides subsidies in the form of grants and below-market interest rate advances to members or standby letters of credit for members for community lending and economic development projects. Only Bank members may submit applications for CICA subsidies. All CICA subsidies are made in the ordinary course of business.

In instances where the member has an officer or director serving on the Bank’s Board of Directors, all of the aforementioned transactions with the member are subject to the same eligibility and credit criteria, as well as the same conditions, as comparable transactions with all other members, in accordance with regulations governing the operations of the FHLBanks. The following tables set forth information at the dates and for the periods indicated with respect to transactions with members that have an officer or director serving on the Bank’s Board of Directors.

180

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	December 31, 2017		December 31, 2016
Assets:
Advances	$	3,072	$	3,756
Mortgage loans held for portfolio	13		17
Accrued interest receivable	5		4
Liabilities:
Deposits	$	3	$	3
Capital:
Capital Stock	$	126	$	129

	For the Years Ended December 31,
	2017		2016		2015
Interest Income:
Advances	$	41	$	35	$	35
Mortgage loans held for portfolio	1		1		1

Transactions with Other FHLBanks. The Bank may occasionally enter into transactions with other FHLBanks. These transactions are summarized below.

Deposits with other FHLBanks. The Bank may, from time to time, maintain deposits with other FHLBanks. Deposits with other FHLBanks totaled de minimis amounts at December 31, 2017 and 2016, which were recorded in the Statements of Condition in the Cash and due from banks line item.

Overnight Funds. The Bank may borrow or lend unsecured overnight funds from or to other FHLBanks. All such transactions are at current market rates. Interest income and interest expense related to these transactions with other FHLBanks are included in other interest income and interest expense from other borrowings in the Statements of Income. Balances outstanding at period end with other FHLBanks, if any, are identified in the Bank’s financial statements. During the years ended December 31, 2017, 2016, and 2015, the Bank extended overnight loans to other FHLBanks for $1,505, $505, and $1,805 respectively. During the years ended December 31, 2017, 2016, and 2015, the Bank borrowed $240, $2,490, and $4,812 respectively, from other FHLBanks. The impact to net interest income related to these transactions was de minimis in any period in this report.

MPF Mortgage Loans. The Bank pays a transaction services fee to the FHLBank of Chicago for its participation in the MPF program. This fee is assessed monthly and is based on the amount of mortgage loans in which the Bank invested and which remain outstanding on its Statements of Condition. For the years ended December 31, 2017 and 2016, the Bank recorded $1 and $1, respectively, in MPF transaction services fee expense to the FHLBank of Chicago, which was recorded in the Statements of Income as other expense. For the year ended December 31, 2015, the Bank recorded de minimis amounts in MPF transaction services fee expense to the FHLBank of Chicago.

In addition, the Bank receives a counterparty fee from the FHLBank of Chicago for facilitating the sale of loans under the MPF program. For the years ended December 31, 2017 and 2016, the Bank recorded a de minimis amount in MPF counterparty fee income from the FHLBank of Chicago, which was recorded in the Statements of Income as other income. For the year ended December 31, 2015, the Bank had no MPF counterparty fee income from the FHLBank of Chicago.

Consolidated Obligations. The Bank may, from time to time, transfer to or assume from another FHLBank the outstanding primary liability for FHLBank consolidated obligations. During the years ended December 31, 2017 and 2016, the Bank did not transfer any debt to other FHLBanks or assume any debt from other FHLBanks.

181

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Transactions with the Office of Finance. The Bank’s proportionate share of the cost of operating the Office of Finance is identified in the Statements of Income.

Note 22 — Other

The table below discloses the categories included in other operating expense for the years ended December 31, 2017, 2016, and 2015.

	2017		2016		2015
Professional and contract services	$	39	$	47	$	50
Travel	2		2		2
Occupancy	7		6		5
Equipment	16		13		10
Other	6		6		4
Total	$	70	$	74	$	71

Note 23 — Subsequent Events

There were no material subsequent events identified, subsequent to December 31, 2017, until the time of the Form 10-K filing with the Securities and Exchange Commission.

182

Supplementary Financial Data (Unaudited)

Supplementary financial data for each full quarter in the years ended December 31, 2017 and 2016, are included in the following tables (dollars in millions except per share amounts).

	Three Months Ended
	December 31, 2017			September 30, 2017			June 30,  2017			March 31, 2017
Interest income	$	485		$	434		$	366		$	315
Interest expense	342			288			222			181
Net interest income	143			146			144			134
Provision for/(reversal of) credit losses on mortgage loans	—			—			—			—
Other income/(loss)	(14		)	(4		)	(16		)	112
Other expense	54			51			39			80
Assessments	8			10			9			18
Net income/(loss)	$	67		$	81		$	80		$	148
Dividends declared per share	$	1.76		$	1.75		$	1.73		$	2.28
Annualized dividend rate	7.00		%	7.00		%	7.00		%	9.08		%

	Three Months Ended
	December 31, 2016			September 30, 2016			June 30,  2016			March 31, 2016
Interest income	$	283		$	274		$	265		$	256
Interest expense	175			151			148			133
Net interest income	108			123			117			123
Provision for/(reversal of) credit losses on mortgage loans	—			—			—			—
Other income/(loss)	82			241			(9		)	171
Other expense	46			39			37			36
Assessments	17			34			8			27
Net income/(loss)	$	127		$	291		$	63		$	231
Dividends declared per share(1)	$	5.66		$	2.28		$	2.21		$	2.01
Annualized dividend rate(1)	22.51		%	9.17		%	8.90		%	7.99		%

(1) In the fourth quarter of 2016, the amount of dividends declared per share includes a special dividend of $3.41 at an annualized dividend rate of 13.57%.

183

Investments

Supplementary financial data on the carrying values of the Bank’s investments as of December 31, 2017, 2016, and 2015, are included in the tables below.

(In millions)	2017		2016		2015
Trading securities:
U.S. government corporations and GSEs – FFCB bonds	$	1,158	$	2,058	$	1,424
MBS:
Other U.S. obligations – Ginnie Mae	6		8		9
Total trading securities	1,164		2,066		1,433
AFS securities:
MBS:
PLRMBS	3,833		4,489		5,414
Total AFS securities	3,833		4,489		5,414
HTM securities:
Certificates of deposits	500		1,350		—
States and political subdivisions:
Housing finance agency bonds – CalHFA bonds	187		225		275
U.S. government corporations and GSEs:
MBS:
Other U.S. obligations – Ginnie Mae	751		951		1,227
GSEs:
Freddie Mac	6,690		4,349		3,677
Fannie Mae	5,731		6,095		4,136
PLRMBS	821		1,157		1,487
Total HTM securities	14,680		14,127		10,802
Total securities	19,677		20,682		17,649
Securities purchased under agreements to resell	11,750		15,500		10,000
Federal funds sold	11,028		4,214		4,626
Interest-bearing deposits	1,115		590		—
Total investments	$	43,570	$	40,986	$	32,275

184

As of December 31, 2017, the Bank’s investments had the following maturity (based on contractual final principal payment) and yield characteristics.

(Dollars in millions)	Within One Year			After One Year But Within Five Years			After Five Years But Within Ten Years			After Ten Years			Carrying Value
Trading securities:
U.S. government corporations and GSEs – FFCB bonds	$	500		$	658		$	—		$	—		$	1,158
MBS:
Other U.S. obligations – Ginnie Mae	—			1			5			—			6
Total trading securities	500			659			5			—			1,164
Yield on trading securities	1.45		%	1.61		%	2.52		%	—		%	1.55		%
AFS securities:
MBS:
PLRMBS	—			—			—			3,833			3,833
Total AFS securities	—			—			—			3,833			3,833
Yield on AFS securities	—		%	—		%	—		%	6.54		%	6.54		%
HTM securities:
Certificates of deposits	500			—			—			—			500
States and political subdivisions:
Housing finance agency bonds – CalHFA bonds	—			—			12			175			187
U.S. government corporations and GSEs:
MBS:
Other U.S. obligations – single-family – Ginnie Mae	—			—			—			751			751
GSEs single-family:
Freddie Mac	—			1			3			2,035			2,039
Fannie Mae	—			2			6			3,592			3,600
Subtotal GSEs single-family	—			3			9			5,627			5,639
GSEs multifamily:
Freddie Mac	—			—			4,651			—			4,651
Fannie Mae	—			—			2,131			—			2,131
Subtotal GSEs multifamily	—			—			6,782			—			6,782
PLRMBS							10			811			821
Total HTM securities	500			3			6,813			7,364			14,680
Yield on HTM securities	1.49		%	5.79		%	1.79		%	2.52		%	2.15		%
Total securities	1,000			662			6,818			11,197			19,677
Yield on total securities	1.47		%	1.63		%	1.79		%	3.81		%	2.90		%
Securities purchased under agreements to resell	11,750			—			—			—			11,750
Federal funds sold	11,028			—			—			—			11,028
Interest-bearing deposits	1,115			—			—			—			1,115
Total investments	$	24,893		$	662		$	6,818		$	11,197		$	43,570

185

Mortgage Loan Data

The unpaid principal balances of delinquent mortgage loans for the past five years were as follows:

(Dollars in millions)	2017			2016			2015			2014			2013
30 - 59 days delinquent	$	8		$	7		$	10		$	12		$	14
60 - 89 days delinquent	2			3			5			5			7
90 days or more delinquent	12			15			18			22			27
Total past due	22			25			33			39			48
Total current loans	1,983			789			620			674			865
Total mortgage loans	$	2,005		$	814		$	653		$	713		$	913
In process of foreclosure, included above(1)	$	3		$	5		$	7		$	11		$	15
Nonaccrual loans	$	12		$	15		$	18		$	22		$	27
Loans past due 90 days or more and still accruing interest	$	—		$	—		$	—		$	—		$	—
Delinquencies as a percentage of total mortgage loans outstanding	1.11		%	3.12		%	5.05		%	5.47		%	5.26		%
Serious delinquenciesas a percentage of total mortgage loans outstanding(2)	0.61		%	1.83		%	2.79		%	3.13		%	3.00		%

(1) Includes loans for which the servicer has reported a decision to foreclose or to pursue a similar alternative, such as deed-in-lieu. Loans in process of foreclosure are included in past due or current loans depending on their delinquency status.

(2) Represents loans that are 90 days or more past due or in the process of foreclosure as a percentage of the unpaid principal balance of total mortgage loans outstanding.

The allowance for credit losses on the mortgage loan portfolio was as follows:

(Dollars in millions)	2017			2016			2015			2014			2013
Balance, beginning of the period	$	—		$	—		$	1		$	2		$	3
(Charge-offs)/recoveries	—			—			(2		)	(1		)	—
Provision for/(recovery of) credit losses	—			—			1			—			(1		)
Balance, end of the period	$	—		$	—		$	—		$	1		$	2
Ratio of net charge-offs during the period to average loans outstanding during the period	—		%	(0.03		)%	(0.24		)%	(0.05		)%	(0.07		)%

For the past five years, the interest on nonaccrual loans that was contractually due and recognized in income was as follows:

Interest on Nonaccrual Loans
(In millions)	2017		2016		2015		2014		2013
Interest contractually due on nonaccrual loans during the period	$	1	$	1	$	1	$	1	$	1
Interest recognized in income for nonaccrual loans during the period	—		—		—		—		—
Shortfall	$	1	$	1	$	1	$	1	$	1

186

Geographic Concentration of Mortgage Loans⁽¹⁾ 

	December 31, 2017		December 31, 2016
California	86.39	%	66.07	%
Arizona	1.52		2.80
New York	1.33		4.19
Illinois	1.16		3.68
Texas	1.07		1.18
All others(2)	8.53		22.08
Total	100.00	%	100.00	%

(1) Percentages calculated based on the unpaid principal balance at the end of each period.

(2) None of the remaining states represented more than 0.78% and 2.34% of the portfolio at December 31, 2017 and 2016, respectively.

Short-Term Borrowings

Borrowings with original maturities of one year or less are classified as short-term. The following is a summary of short-term borrowings for the years ended December 31, 2017, 2016, and 2015:

	Consolidated Obligation Discount Notes									Consolidated Obligation Bonds With Original Maturities of One Year or Less
(Dollars in millions)	2017			2016			2015			2017			2016			2015
Outstanding at end of the period	$	30,440		$	33,506		$	27,647		$	46,047		$	19,190		$	18,273
Weighted average rate at end of the period	1.24		%	0.46		%	0.25		%	1.23		%	0.67		%	0.25		%
Daily average outstanding for the period	$	33,657		$	33,504		$	28,853		$	25,927		$	18,536		$	11,085
Weighted average rate for the period	0.85		%	0.41		%	0.16		%	0.94		%	0.53		%	0.17		%
Highest outstanding at any monthend	$	38,632		$	42,244		$	33,859		$	46,047		$	22,913		$	18,273

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The senior management of the Federal Home Loan Bank of San Francisco (Bank) is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports filed or submitted under the Securities Exchange Act of 1934 (1934 Act) is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Bank’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Bank’s management, including its 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. In designing and evaluating the Bank’s disclosure controls and procedures, the Bank’s 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, and the Bank’s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures.

187

Management of the Bank has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with the participation of the president and chief executive officer and senior vice president and chief financial officer as of the end of the period covered by this report. Based on that evaluation, the Bank’s president and chief executive officer and senior vice president and chief financial officer have concluded that the Bank’s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.

Internal Control Over Financial Reporting

Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the 1934 Act as a process designed by, or under the supervision of, the Bank's principal executive and principal financial officers and effected by the Bank's Board of Directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Bank;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Bank are being made only in accordance with authorizations of management and directors of the Bank; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

During the three months ended December 31, 2017, there were no changes in the Bank’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting. For management’s assessment of the Bank’s internal control over financial reporting, refer to “Item 8. Financial Statements and Supplementary Data – Management’s Report on Internal Control Over Financial Reporting.”

Consolidated Obligations

The Bank’s disclosure controls and procedures include controls and procedures for accumulating and communicating information in compliance with the Bank’s disclosure and financial reporting requirements relating to the joint and several liability for the consolidated obligations of the Federal Home Loan Banks (FHLBanks). Because the FHLBanks are independently managed and operated, the Bank’s management relies on information that is provided or disseminated by the Federal Housing Finance Agency (Finance Agency), the Office of Finance, and the other FHLBanks, as well as on published FHLBank credit ratings, in determining whether the joint and several liability regulation is reasonably likely to result in a direct obligation for the Bank or whether it is reasonably possible that the Bank will accrue a direct liability.

The Bank’s management also relies on the operation of the joint and several liability regulation. The joint and several liability regulation requires that each FHLBank file with the Finance Agency a quarterly certification that it will remain capable of making full and timely payment of all of its current obligations, including direct obligations, coming due during the next quarter. In addition, if an FHLBank cannot make such a certification or if it projects that it may be unable to meet its current obligations during the next quarter on a timely basis, it must file a notice with the Finance Agency. Under the joint and several liability regulation, the Finance Agency may order any FHLBank to make principal and interest payments on any consolidated obligations of any other FHLBank, or allocate the outstanding liability of an FHLBank among all remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding or on any other basis.

188

ITEM 9B. OTHER INFORMATION

PricewaterhouseCoopers LLP (PwC) serves as the independent registered public accounting firm for the Bank. Rule 2-01(c)(1)(ii)(A) of Regulation S-X (the Loan Rule) prohibits an accounting firm, such as PwC, from having certain financial relationships with its audit clients and affiliated entities. Specifically, the Loan Rule, in relevant part, provides that an accounting firm generally would not be independent if it or a covered person in the firm received a loan from a lender that is a “record or beneficial owner of more than ten percent of the audit client’s equity securities.” A covered person in the firm includes personnel on the audit engagement team, personnel in the chain of command, partners and managers who provide ten or more hours of non-audit services to the audit client, and partners in the office where the lead engagement partner practices in connection with the client.

PwC has advised the Bank that PwC covered persons had lending relationships with two Bank shareholders (referred to below as the “Lenders”) that owned more than ten percent of the Bank’s capital stock during 2017. Under the Loan Rule, these lending relationships could call into question PwC’s independence with respect to the Bank. The Bank is providing this disclosure to explain the facts and circumstances, as well as PwC’s and the Audit Committee’s conclusions, concerning PwC’s objectivity and impartiality with respect to the audit of the Bank.

PwC advised the Audit Committee of the Bank that it believes that based on its analysis, PwC remains objective and impartial despite matters that may ultimately be determined to be inconsistent with the criteria set out in the rules and regulations of the SEC related to the Loan Rule, and therefore believes that it can continue to serve as the Bank’s independent registered public accounting firm. PwC also advised the Audit Committee that it believes that in light of its analysis, a reasonable investor possessing all the facts regarding the lending relationships described above and PwC audit relationships would conclude that PwC is able to exhibit the requisite objectivity and impartiality to report on the financial statements of the Bank as the independent registered public accounting firm. PwC has advised the Audit Committee that their views and conclusions are based in part on the following considerations:

• the features of the holdings of the more than 10% shareholders, such as limited voting rights, demonstrate that their ownership of Bank capital stock does not call into question PwC’s objectivity and impartiality;

• the covered persons do not play an active role in the conduct of the audit;

• PwC professionals are required to disclose any relationships that may raise issues about objectivity, confidentiality, independence, conflicts of interest, or favoritism; and

• the lead audit partner has no reason to believe that the Lenders have made any attempt to influence the conduct of the Bank’s audit or the objectivity and impartiality of any member of Pw C’s audit engagement team.

In addition, PwC identified no aspects of the lending relationships involving the covered persons that would impact PwC’s objectivity and impartiality.

The Bank’s Audit Committee evaluated the information provided by PwC regarding the Loan Rule and in light of this information, assessed PwC’s ability to perform an objective and impartial audit, including consideration of the ownership structure of the Bank, the limited voting rights of the Bank’s members, and the composition of the Bank’s Board of Director’s. In addition to the considerations listed above, the Audit Committee considered the following:

• as of December 31, 2017, and as of the date of the filing of this Form 10-K, no officer or director of the Lenders served on the Bank’s Board of Directors;

• only one of the Lenders will be eligible to vote in 2018, and only in the at-large independent directorship election; and

• the Lenders are subject to the same terms and conditions for conducting business with the Bank as any other borrower.

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

189

PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The Board of Directors (Board) of the Federal Home Loan Bank of San Francisco (Bank) is composed of member directors and nonmember independent directors. Each year the Federal Housing Finance Agency (Finance Agency) designates the total number of director positions for the Bank for the following year. Member director positions are allocated to each of the three states in the Bank's district. The allocation is based on the number of shares of capital stock required to be held by the members in each of the three states as of December 31 of the preceding calendar year (the record date), with at least one member director position allocated to each state and at least three member director positions allocated to California. Of the eight member director positions designated by the Finance Agency for 2017 and 2018, one was allocated to Arizona, six were allocated to California, and one was allocated to Nevada. The nonmember independent director positions on the Board must be at least two-fifths of the number of member director positions and at least two of them must be public interest director positions. The Finance Agency designated seven nonmember independent director positions for 2017 and 2018, two of which were public interest director positions.

The Bank holds elections each year for the director positions with terms ending at yearend, with new terms beginning the following January 1. For member director positions, members located in the relevant states as of the record date are eligible to participate in the election for the state in which they are located. For nonmember independent director positions, all members located in the district as of the record date are eligible to participate in the election. For each director position to be filled, an eligible institution may cast one vote for each share of capital stock it was required to hold as of the record date (according to the requirements of the Bank's capital plan), except that an eligible institution's votes for each director position to be filled may not exceed the average number of shares of capital stock required to be held by all of the members in that state as of the record date. In the case of an election to fill more than one member director position for a state, an eligible institution may not cumulate or divide its block of eligible votes. Interim vacancies in director positions are filled by the Board. The Board does not solicit proxies, nor are eligible institutions permitted to solicit or use proxies to cast their votes in an election.

Candidates for member director positions are not nominated by the Bank's Board. As provided for in the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), member director candidates are nominated by the institutions eligible to participate in the election in the relevant state. Candidates for nonmember independent director positions are nominated by the Board, following consultation with the Bank's Affordable Housing Advisory Council, and are reviewed by the Finance Agency. The Bank's Governance Committee performs certain functions that are similar to the functions of a nominating committee with respect to the nomination of nonmember independent directors. If only one individual is nominated by the Board for each open nonmember independent director position, that individual must receive at least 20% of the eligible votes to be declared elected; and if two or more individuals are nominated by the Board for any single open nonmember independent director position, the individual receiving the highest number of votes cast in the election must be declared elected by the Bank.

Each member director must be a citizen of the United States and must be an officer or director of a member of the Bank (located in the state to which the director position has been allocated) that meets all minimum capital requirements established by the member's appropriate Federal banking agency or appropriate state regulator. There are no other eligibility or qualification requirements in the FHLBank Act or the regulations governing the Federal Home Loan Banks (FHLBanks) for member directors. Each nonmember independent director must be a United States citizen and must maintain a principal residence in a state in the Bank’s district (or own or lease a residence in the district and be employed in the district). In addition, the individual may not be an officer of any FHLBank or a director, officer, or employee of any member of the Bank or of any recipient of advances from the Bank. Each nonmember independent director who serves as a public interest director must have more than four years of personal experience in representing consumer or community interests in banking services, credit needs, housing, or financial consumer protection. Each nonmember independent director other than a public interest director must have knowledge of, or experience in, financial management, auditing or accounting, risk management practices, derivatives, project development, organizational management, or law.

190

The term for each director position is four years (unless a shorter term is assigned by the Finance Agency for staggering purposes), and directors are subject to a limit on the number of consecutive terms they may serve. A director elected to three consecutive full terms on the Board is not eligible for election to a term that begins earlier than two years after the expiration of the third consecutive term. On an annual basis, the Bank's Board performs a Board assessment that includes consideration of the directors' backgrounds, experience, expertise, Board service, and other factors. Also on an annual basis, each director certifies to the Bank that he or she continues to meet all applicable statutory and regulatory eligibility and qualification requirements. In connection with the election or appointment of a nonmember independent director, the nonmember independent director completes an application form providing information to demonstrate his or her eligibility and qualifications to serve on the Board. As of the filing date of this Form 10-K, nothing has come to the attention of the Board or management to indicate that any of the current Board members do not continue to possess the necessary experience, qualifications, attributes, or skills expected of the directors to serve on the Bank's Board, as described in each director's biography below.

Information regarding the current directors and executive officers of the Bank is provided below. There are no family relationships among the directors or executive officers of the Bank. The Bank's Code of Conduct for Senior Officers, which applies to the president and senior vice presidents, and any amendments or waivers to the code are disclosed on the Bank's website located at www.fhlbsf.com.

The charter of the Audit Committee of the Bank's Board is available on the Bank's website at www.fhlbsf.com.

Board of Directors

The following table sets forth information (ages as of February 28, 2018) regarding each of the Bank's directors.

Name	Age	Director Since	Expiration of Current Term
John F. (Jack) Luikart, Chair(1)(8)	68	2007	2021
Brian M. Riley, Vice Chair(2)(6)(8)	53	2015	2018
Jeffrey K. Ball(3)(6)	53	2018	2020
Bradley W. Beal(4)(7)(9)	64	2014	2019
Craig G. Blunden(5)	70	2012	2019
Marangal (Marito) Domingo(5)	57	2018	2021
Melinda Guzman(1)(7)	54	2009	2019
Simone Lagomarsino(5)(6)(8)(9)	56	2013	2020
Kevin Murray(1)	57	2008	2019
Robert F. Nielsen(1)	71	2009	2020
Joan Opp(5)(6)(7)	51	2018	2021
John F. Robinson(5)(8)(9)	71	2011	2018
F. Daniel Siciliano(1)(6)(9)	47	2017	2020
Scott C. Syphax(1)(7)(8)(9)	54	2002	2018
John T. Wasley(1)(7)(8)(9)	56	2007	2021

(1) Elected as a nonmember independent director by the Bank members eligible to vote. Ms. Guzman also served as an appointive director from April 19, 2007, to December 31, 2008. Mr. Nielsen also served as an appointive director from April 19, 2007, to December 31, 2008, and from 1999 to 2001. Mr. Wasley also served as an appointive director from 2003 to 2005. With the enactment of the Housing and Economic Recovery Act of 2008 on July 30, 2008, the director positions previously appointed by the Federal Housing Finance Board (appointive director positions) became known as nonmember independent director positions, and the method for filling these positions was changed to election by the Bank members eligible to vote.

(2) Elected by the Bank’s Arizona members eligible to vote.

(3) Mr. Ball was selected by the Board to fill a vacant California member director position effective January 1, 2018.    

(4) Mr. Beal was declared elected by the Board as a Nevada director, for a four-year term beginning January 1, 2016. Previously, Mr. Beal was selected by the Board to fill the vacant Nevada director position and served from May 1, 2014 to December 31, 2015.

(5) Elected by the Bank's California members eligible to vote. Mr. Blunden also served as a California director from January 28, 1999, to December 31, 2006. Mr. Robinson also served as a California director from January 1, 2004, to September 11, 2005, and as a Nevada director from January 25, 2007, to October 9, 2008.

191

(6) Member of the Audit Committee in 2018.

(7) Member of the Compensation and Human Resources Committee in 2018.

(8) Member of the Audit Committee in 2017. Former director Richard A. Heldebrant served on the Audit Committee in 2017.

(9) Member of the Compensation and Human Resources Committee in 2017.

The Board has determined that Ms. Lagomarsino is an “audit committee financial expert” within the meaning of the Securities and Exchange Commission (SEC) rules. The Bank is required by SEC rules to disclose whether Ms. Lagomarsino is independent and is required to use a definition of independence from a national securities exchange or national securities association. The Bank has elected to use the National Association of Securities Dealers Automated Quotations (NASDAQ) definition of independence, and under that definition, Ms. Lagomarsino is independent. In addition, Ms. Lagomarsino is independent according to the rules governing the FHLBanks applicable to members of the audit committees of the boards of directors of the FHLBanks and the independence rules under Section 10A(m) of the Securities Exchange Act of 1934.

John F. (Jack) Luikart, Chair

John F. (Jack) Luikart has been president of Bethany Advisors LLC, San Francisco, California, since February 2007. He has also been a trustee of four asbestos trusts, including the Western Asbestos Settlement Trust, since 2004 and a board member of Wells Fargo Real Estate Investment Trust and Ohio Wesleyan University since 2014. He was senior advisor to the CEO of Red Capital Group from July 2011 to July 2012 and was chairman of Wedbush Securities Inc., Los Angeles, California, from 2006 to 2010. Previously, he was president and chief operating officer of Tucker Anthony Sutro from 2001 to 2002 and chairman and chief executive officer of Sutro & Co. from 1996 to 2002. He joined Sutro & Co. in 1988 as executive vice president of capital markets and became president in 1990. Mr. Luikart's positions as director or principal executive officer of investment banking firms (or their affiliates), and his experience in investment management, capital markets, corporate finance, securitization, and mortgage finance and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Luikart's qualifications to serve on the Bank's Board.

Brian M. Riley, Vice Chair

Brian M. Riley has been the president and chief executive officer of Mohave State Bank, Lake Havasu City, Arizona, since March 2009. He has also served as director, president, and chief executive officer of State Bank Corp., the holding company for Mohave State Bank, since March 2009. He was the chief financial officer of Mohave State Bank from April 2008 to March 2009. Prior to that, he was chief executive officer of Harbor Bank and Trust, a financial institution in organization in Southport, Connecticut. Mr. Riley has over 30 years of experience in banking including serving as president and chief executive officer of PriVest Bank, Costa Mesa, California, and holding other executive positions with Provident Savings Bank, Riverside, California, and Metro Commerce Bank, San Rafael, California. Mr. Riley is a director of the Arizona Bankers Association. Mr. Riley’s current position as the principal executive officer of a Bank member, his previous executive positions with other financial institutions, and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Riley’s qualifications to serve on the Bank's Board.

Jeffrey K. Ball

Jeffrey K. Ball has been president, chief executive officer and a director of Friendly Hills Bank, Whittier, California, since it was founded in September 2006. Prior to that, he was an Executive Vice President with Far East National Bank in Los Angeles, California. Mr. Ball serves as a director and executive committee member for the American Bankers Association and chairs their Government Relations Council. He is past chair of the California Bankers Association where he serves on the board of directors and chairs its Federal Government Relations Committee. Mr. Ball is on the board of directors and audit committee chair for Data Center, Inc., a financial technology company serving banks and credit unions. He is also the founder and current Board Chair of Kinetic Academy, a K-8 California public charter school, which includes financial education in its core curriculum. Mr. Ball’s current

192

position as the principal executive officer of a Bank member, his current position and experience as a board member and audit committee chairman of a financial technology company, and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Ball’s qualifications to serve on the Bank's Board.

Bradley W. Beal

Bradley W. Beal has been a director of One Nevada Credit Union, Las Vegas, Nevada, since September 2017. He also served as president and chief executive officer of One Nevada Credit Union from February 1990 to March 2018. Prior to that, Mr. Beal was senior vice president operations, Nevada Federal Credit Union (now One Nevada Credit Union) since 1987, and prior to that, president of Nevada State Employees Federal Credit Union, Carson City, Nevada. Mr. Beal is a member of the American Institute of Certified Public Accountants, the Nevada CPA Society, and a former board member and chairman of the National Association of Federal Credit Unions. Mr. Beal's current position as a director of a Bank member, and his previous position as the principal executive officer of a Bank member and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Beal's qualifications to serve on the Bank's Board.

Craig G. Blunden

Craig G. Blunden has been chairman and chief executive officer of Provident Savings Bank and Provident Financial Holdings, Inc., Riverside, California, since 1991 and 1996, respectively. Mr. Blunden served as president of Provident Savings Bank and Provident Financial Holdings, Inc., from 1991 to June 2011 and from 1996 to June 2011, respectively. He previously served on the Bank's Board from 1999 to 2006. He is currently on the board of directors of the Western Bankers Association. Mr. Blunden is a past chairman of the Western League of Savings Institutions and served on the Thrift Institutions Advisory Council of the Federal Reserve System for two years. Mr. Blunden's current position as the principal executive officer of a Bank member and its holding company and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Blunden's qualifications to serve on the Bank's Board.

Marangal (Marito) Domingo

Marangal (Marito) Domingo has been the chief investment officer and chief credit officer of First Technology Federal Credit Union, Mountain View, California, since March 2013. Prior to that, he was executive vice president and chief financial officer of Pacific Trust Bank from 2011 to 2012. Mr. Domingo has over 20 years of experience in banking, including serving as chief financial officer for Doral Bank, senior vice president of finance of Treasury Bank, chief executive officer of Downey Savings, head of capital markets for Washington Mutual Bank, and treasurer for American Savings. He has also served on the Mortgage Bankers Association’s Residential Board of Governors, and as a member of the board of directors for the National Equity Fund (affordable housing), Greater Los Angeles Chamber of Commerce, and the Beaverton Education Foundation. Mr. Domingo’s current position as an executive officer of a Bank member, his previous executive positions with other financial institutions, and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Domingo’s qualifications to serve on the Bank's Board.

Melinda Guzman

Melinda Guzman has been a chief executive officer of Melinda Guzman Professional Corporation, Sacramento, California, since 2009. She was a partner with Freeman & Guzman, LLP, a law firm in Sacramento, California, from 1999 to 2015. Prior to that, she was a partner with Diepenbrock, Wulff, Plant & Hannegan, LLP, also a law firm in Sacramento. Ms. Guzman's practice focuses on tort, labor, insurance, and commercial matters. She

193

previously served on the Bank's Board of Directors from April 2007 through December 2008. Ms. Guzman's involvement and experience in representing community and consumer interests with respect to banking services, in credit needs, in housing and consumer financial protections, and in corporate governance, as indicated by her background, and her management skills derived from her various legislative appointments and her service from 2002 to 2003 as chair of the Nehemiah Corporation of America (a community development corporation), her service from 2001 to 2004 as chairman of the California Hispanic Chamber of Commerce, and her service with other community-based organizations support Ms. Guzman's qualifications to serve on the Bank's Board.

Simone Lagomarsino

Simone Lagomarsino has been a director of Pacific Premier Bank, Irvine, California, and its holding company, Pacific Premier Bancorp since April 2017. Ms. Lagomarsino has also been the president and chief executive officer of the Western Bankers Association (formerly California Bankers Association) since April 2017. Prior to that she was chief executive officer and a director of Heritage Oaks Bank and president of Heritage Oaks Bancorp, Paso Robles, California, from September 2011, until its merger with Pacific Premier Bank in April 2017. She also held the position of president of Heritage Oaks Bank from January 2012 through December 2014. Prior to that, Ms. Lagomarsino was president and chief executive officer of Kinecta Federal Credit Union from June 2006 through January 2010. She is a financial services professional with more than 30 years of experience in executive positions. Ms. Lagomarsino's current position as a director of a Bank member, her previous positions as chief executive officer or chief financial officer of Bank members or other financial institutions, and her involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by her background, support Ms. Lagomarsino's qualifications to serve on the Bank's Board.

Kevin Murray

Kevin Murray has been a principal in The Murray Group, a legal and consulting firm, since its founding in December 2006. Since May 2011, Mr. Murray has served as the president and chief executive officer of the Weingart Center Association. Mr. Murray was senior vice president of the William Morris Agency, Beverly Hills, California, from January 2007 to June 2009, working primarily in the company's corporate consulting division. Mr. Murray served as a California State Senator from December 1998 until November 2006, and as a California State Assembly member from December 1994 until November 1998. Prior to serving in the California State Legislature, Mr. Murray practiced law. Mr. Murray's involvement in legislative matters relating to, among other things, the banking and insurance industries, his experience in law and corporate governance practices, and his management skills, as indicated by his background, support Mr. Murray's qualifications to serve on the Bank's Board.

Robert F. Nielsen

Robert F. Nielsen has been president of Shelter Properties, Inc., a real estate development and management company based in Reno, Nevada, since 1979. Mr. Nielsen is a member of the National Association of Home Builders and was its chairman in 2011. He is also a past chairman of the State of Nevada Housing Division Advisory Committee. He previously served on the Bank's Board of Directors from 1999 to 2001 and from April 2007 through December 2008. Mr. Nielsen's involvement and experience in representing community interests in affordable housing development and his management skills, as indicated by his background, and his role with the Affordable Housing Resource Council (a former nonprofit organization designed to provide technical assistance in affordable housing) and the Neighborhood Development Collaborative (owner and manager of affordable housing rental properties) support Mr. Nielsen's qualifications to serve as a public interest director on the Bank's Board. Mr. Nielsen is a principal shareholder and president of IDN1 Inc., which was created to invest in a multifamily tax credit property in Reno, Nevada. This property is owned by Northwest Partners, L.P., whose general partners are Santorini Corp., IDN1 Inc., and Community Services Agency Development Corporation, a nonprofit corporation under Internal Revenue Code Section 501(c)(3). Northwest Partners, L.P., filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Code on November 17, 2011. A plan of reorganization was confirmed by the court on February 25, 2013. Mr. Nielsen is also a managing member of Karen Partners, LLC, a Nevada limited liability

194

company, which was created to invest in a multifamily tax credit property in Las Vegas, Nevada. This property was owned by Karen Partners, L.P., whose general partners are Karen Partners, LLC, and Community Services Agency Development Corporation. Karen Partners, L.P., filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Code on December 19, 2011. On November 26, 2012, the automatic stay was rescinded, and this property was foreclosed upon on December 19, 2012. Mr. Nielsen is also a manager of Ridge Seniors, LLC, a Nevada limited liability company, which was created to invest in a multifamily tax credit program in Henderson, Nevada. This property is owned by Ridge Partners L.P., whose general partners are Ridge Seniors, LLC, and Silver Sage Manor, Inc. On March 15, 2012, Ridge Partners L.P. filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Code. A plan of reorganization was confirmed by the court on December 5, 2013. Mr. Nielsen is also principal shareholder and president of SUP III, Inc., which is a general partner in a multifamily tax credit property in Las Vegas, Nevada. This property was owned by East Freemont II L.P., whose general partners are SUP III, Inc., and SPE 2, LLC. East Freemont II L.P. filed a petition for protection under Chapter 11 of the U.S. Bankruptcy Code on June 21, 2012. The automatic stay was rescinded and this property was foreclosed upon on October 21, 2013.

Joan C. Opp

Joan C. Opp has been the president and chief executive officer of Stanford Federal Credit Union, Palo Alto, California, since May 2010. From February 2002 to April 2010, she was executive vice president and chief financial officer for Texas Trust Credit Union overseeing accounting, information technology, marketing and business services, as well as three credit union service organizations. Prior to that, Ms. Opp was a partner with the CPA firm of Clifton Gunderson, LLP, and is a Certified Public Accountant. Ms. Opp serves on the board of directors of CO-OP Financial. Ms. Opp’s current position as the principal executive officer of a Bank member, her previous executive positions with other financial institutions, and her involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by her background, support Ms. Opp’s qualifications to serve on the Bank's Board.

John F. Robinson

John F. Robinson has been a director of Silicon Valley Bank (SVB), Santa Clara, California, and its holding company, SVB Financial Group, since July 2010. He chairs the SVB board’s audit committee and is a chartered financial analyst. From 2002 to 2008, he was executive vice president of Washington Mutual Bank. From 1987 to 2002, he served in several senior bank regulatory roles, including Deputy Comptroller of the Currency for the Western District and Assistant Director for Policy and Western Region Director for the Office of Thrift Supervision. Mr. Robinson previously served on the Bank's Board of Directors from 2004 to 2005 and 2007 to 2008. From 2002 to 2013, he was a member of the national board and executive board for Operation HOPE, an international nonprofit organization focused on financial literacy and empowerment. Mr. Robinson's current position as the director of a Bank member, previous positions as an executive officer of a Bank member and a senior bank regulator, and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Robinson's qualifications to serve on the Bank's Board.

F. Daniel Siciliano

F. Daniel Siciliano is the co-founder of Stanford’s Rock Center for Corporate Governance and is the current co-director of the Rock Center’s Directors’ College. He has previously served as professor of the practice of law, faculty director of the Rock Center for Corporate Governance, and associate dean for executive education and special programs at Stanford Law School, Stanford, California. Mr. Siciliano is currently the chair of the board of trustees of the American Immigration Council and Co-Chair of the We Robot Conference on AI, Robotics, and Public Policy. As of 2011, he has been an advisory board member and visiting professor for the Corporate Governance Center and Law School of Pontificia Universidad Católica de Chile. Previously, he was co-founder, chief executive officer, and executive chairman of LawLogix Group, Inc., a privately held software technology company from 2000 to October 2015. Mr. Siciliano’s current and previous positions as a law professor and director

195

at Stanford’s Rock Center for Corporate Governance, his previous experience as an executive officer of a software technology company; and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management as indicated by his background, support Mr. Siciliano’s qualifications to serve on the Bank's Board.

Scott C. Syphax

Scott C. Syphax has been the CEO of Syphax Strategic Inc., a management consulting and business development firm focused on the real estate development and community finance sector, since February 2017 and has served as chairman of Nehemiah Corporation of America, a community development corporation in Sacramento, California, since 2011. He previously held the position of chief executive officer of Nehemiah Corporation of America and its affiliates from 2001 to 2017, and was president from 2001 through June 2015. Mr. Syphax has also been a member of the Board of Directors of the Greenlining Institute since 2017. From 1999 to 2001, Mr. Syphax was a manager of public affairs for Eli Lilly & Company. He was vice chair of the Bank's Board of Directors from January 2010 through January 2012. Mr. Syphax's involvement and experience in representing community interests in housing and his management skills, as indicated by his background, support Mr. Syphax's qualifications to serve as a public interest director on the Bank's Board.

John T. Wasley

John T. Wasley has been a consultant with Spencer Stuart, a global retained executive search firm, in their Los Angeles, California office, since 2017. Prior to that, he was a managing partner with Caldwell Partners, Los Angeles, California, from 2013 to 2017, and was a managing partner with Heidrick & Struggles, Los Angeles, California from June 2005 to 2013. Mr. Wasley joined Heidrick & Struggles as a partner in 2001. Previously, he was an executive director with Russell Reynolds Associates and a senior vice president of People's Bank of California. He previously served on the Bank's Board of Directors from 2003 to 2005. Mr. Wasley's involvement in and knowledge of human resources, compensation practices, and corporate governance practices, and his management skills, as indicated by his background above, along with his previous position as an executive officer of a financial institution with which Mr. Wasley had involvement in or knowledge of corporate governance practices, bank relations, financial operations, treasury functions, and financial management, support Mr. Wasley's qualifications to serve on the Bank's Board.

Executive Officers

J. Gregory Seibly

J. Gregory Seibly, 54, has been president and chief executive officer since May 2016. Prior to joining the Bank, he served as president of consumer banking at Umpqua Bank from its April 2014 merger with Sterling Financial Corporation (Sterling) until May 2016. From October 2009 to April 2014, he served as president and chief executive officer of Sterling and as a member of the board of directors. Before joining Sterling in 2007, he was president of U.S. Bank – California. With 30 years of industry experience, Mr. Seibly has also held executive-level positions in commercial banking at Wells Fargo Bank and in healthcare finance at Bank of America. He currently serves on the board of the Pacific Coast Bankers School.

Elena Andreadakis

Elena Andreadakis, 56, has been senior vice president, chief administrative officer since March 2017. Previously, Ms. Andreadakis was senior vice president and chief information officer from May 2011 to March 2017. Prior to joining the Bank, she was a senior vice president at Fidelity Investments, where she had worked since 1992. She most recently led the service and program management group for Fidelity's enterprise infrastructure organization. Prior to that, Ms. Andreadakis held a number of other senior-level business and information technology positions, with responsibility for managing a wide range of systems and business initiatives.

196

Kevin A. Gong

Kevin A. Gong, 58, has been senior vice president and chief corporate securities counsel since April 2005. Mr. Gong joined the Bank in 1997 as vice president and associate general counsel. He has previous experience as a senior attorney with the Office of Thrift Supervision, as an attorney in private practice, and as an attorney with the SEC in both the Division of Corporation Finance and the Division of Market Regulation.

Janet (Jan) Homan

Janet (Jan) Homan, 58, has been senior vice president, chief human resources officer since February 2017. Ms. Homan was also the Bank’s office of minority and women inclusion officer from February 2017 to June 2017. Prior to joining the Bank, she served as head of human resources of MACH Energy from 2007 to 2015. From 2000 to 2007, Ms. Homan served as senior human resources business partner and principal of Barclays Global Investor, and from 1991 to 2000 she was senior vice president, personnel executive for Bank of America.

Kenneth C. Miller

Kenneth C. Miller, 65, has been senior vice president and chief financial officer since August 2011. Previously, Mr. Miller was senior vice president, financial risk management and strategic planning, from 2001 to August 2011. Mr. Miller joined the Bank in July 1994 as vice president, financial risk management. Previously, Mr. Miller held the position of senior vice president, asset liability management, at First Nationwide Bank.

Lawrence H. Parks

Lawrence H. Parks, 56, has been senior vice president, external, legislative, and regulatory affairs since March 2017. Previously, he was senior vice president, external and legislative affairs, from 1997 to March 2017.

Mr. Parks had previous experience at the U.S. Department of Commerce as senior policy advisor to the Secretary, with the Mortgage Bankers Association as associate legislative counsel/director, and with the U.S. Senate Banking Committee as legislative counsel.

Patricia M. Remch

Patricia M. Remch, 65, has been senior vice president, sales, marketing, and business development since March 2017. Previously, Ms. Remch was senior vice president, sales and marketing, from August 2011 to March 2017, and was senior vice president, mortgage finance sales and product development, from February 2005 to August 2011. She joined the Bank as an economist in 1982, was promoted to capital markets specialist, and became vice president, sales manager, in 1998.

Suzanne Titus-Johnson

Suzanne Titus-Johnson, 60, has been senior vice president and general counsel since April 2005, and she has also served as corporate secretary since October 2007. Ms. Titus-Johnson joined the Bank as a staff attorney in 1986, was promoted to assistant vice president and associate general counsel in 1992, to vice president and associate general counsel in 1997, and to vice president and assistant general counsel in 2003.

Stephen P. Traynor

Stephen P. Traynor, 61, has been senior vice president, chief banking officer since March 2017. Previously, Mr. Traynor was senior vice president, member financial services and community investment, from July 2004 to March 2017. He joined the Bank in 1995 as assistant treasurer and was promoted to senior vice president, sales and marketing, in October 1999. Before joining the Bank, Mr. Traynor held vice president positions at Morgan Stanley & Co. and at Homestead Savings in the areas of mortgage banking, fixed income securities, derivatives, and capital markets.

197

Lisa Violet

Lisa Violet, 49, has been senior vice president and chief risk officer since April 2017. Prior to joining the Bank, Ms. Violet was the chief audit executive at Hitachi Data Systems from 2014 to 2017. Prior to her tenure at Hitachi Data Systems, she served in a number of senior positions in the banking industry, at institutions including Wells Fargo & Company and MUFG Union Bank, and was chief risk officer at the Bank of the Orient. Ms. Violet is a Chartered Accountant.

Gregory A. Ward

Gregory A. Ward, 48, has been senior vice president, chief audit executive since July 2017. Previously, Mr. Ward was senior vice president and director, internal audit, from January 2017 to July 2017. He joined the Bank in November 2013 as vice president, internal audit, and was promoted to deputy director in June 2016. Before joining the Bank, he worked with Ernst & Young LLP for 12 years in its Financial Services Advisory Practice. Prior to his tenure at Ernst & Young, Mr. Ward worked in the captive insurance industry in Bermuda and for Price Waterhouse in the United Kingdom in its external audit practice. He is a Chartered Accountant and Certified Internal Auditor.

ITEM 11.EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

This section provides information on the compensation program of the Federal Home Loan Bank of San Francisco (Bank) for our named executive officers for 2017. Our named executive officers are our principal executive officers, our principal financial officer, and our other three most highly compensated executive officers.

Compensation and Human Resources Committee

The Compensation and Human Resources Committee (Compensation Committee) of the Bank's Board of Directors (Board) is responsible for, among other things, reviewing and making recommendations to the full Board regarding compensation and incentive plan awards for the Bank's executive officers (the president and senior vice presidents, other than the Chief Audit Executive, for whom compensation is established by the Audit Committee). The Compensation Committee is also responsible for reviewing and making recommendations regarding compensation for the directors. For 2018, the Compensation Committee consists of five members of the Board. In 2017, the Compensation Committee consisted of six members of the Board. The Compensation Committee acts pursuant to a Board-approved charter and may rely on the assistance, advice, and recommendations of the Bank's management and other advisors and may refer specific matters to other committees of the Board. In addition, the Risk Committee of the Board is responsible for oversight of the Bank's enterprise-wide risk management framework, including overseeing an annual risk assessment of the Bank's compensation policies and practices for the Bank's employees.

Certain members of senior management assist the Compensation Committee in its responsibilities by providing compensation and performance information regarding our executive officers.

With respect to the compensation of the named executive officers of a Federal Home Loan Bank (FHLBank), the Federal Housing Finance Agency (Finance Agency) requires that an FHLBank provide the Finance Agency with copies of all materials related to the compensation decisions of the FHLBank's board of directors for its review prior to the compensation decisions taking effect.

The Finance Agency’s Advisory Bulletin 2009-AB-02 outlines several principles for sound incentive compensation practices to which the FHLBanks are expected to adhere in setting executive compensation policies and practices. The Finance Agency’s rule setting forth requirements and processes with respect to compensation provided to certain executive officers by FHLBanks and the Office of Finance addresses the authority of the Finance Agency Director to approve, disapprove, prohibit, or withhold compensation of certain executive officers of the FHLBanks and the Office of Finance. The rule also addresses the Director’s authority to approve, in advance, agreements or

198

contracts of certain executive officers that provide compensation in connection with termination of employment. The rule prohibits an FHLBank or the Office of Finance from paying compensation to certain executive officers that is not reasonable and comparable to compensation paid by similar businesses for similar duties and responsibilities.

Our Executive Compensation Philosophy and Executive Compensation Program

The Bank has a Board-approved Executive Compensation Philosophy that forms the basis of our executive compensation program. In accordance with our Executive Compensation Philosophy, we believe that to attract and retain outstanding executives we must be able to provide an executive compensation package that is competitive and appropriately motivates and rewards the executive officers who make contributions of special importance to the success of the Bank's business. Our executive compensation program provides total remuneration, which includes base salary, short- and long-term cash incentive compensation, and retirement benefits.

The Bank's Executive Compensation Philosophy states that total compensation is intended to align the interests of the executives and key employees with the short-term and long-term interests of the Bank, to ensure an appropriate level of competitiveness within the marketplace from which the Bank recruits executive talent, and to encourage the executives and other key employees to remain employed with the Bank. The Bank's Executive Compensation Philosophy provides that total remuneration (base salary, short- and long-term cash incentives, and retirement benefits) is also intended to motivate executives to deliver exceptional performance without encouraging unnecessary or excessive risk-taking.

Total Compensation is Intended to Reward Contribution to the Bank's Corporate Goals and Performance Targets and Achievement of Individual Performance Goals. We have structured our executive compensation program to reward contributions in support of the Bank's corporate goals and performance targets, including those set forth in the Bank's strategic plan, and achievement of individual performance goals. In addition to base salary, our cash incentive compensation plans create an award program for executives who contribute to and influence the achievement of the Bank's mission and other key objectives contained in the Bank's strategic plans and who are responsible for the Bank's performance. The Bank's overall executive compensation programs reward sustained performance through the balanced use of short- and long-term incentives, which represent a substantial portion of pay at-risk, and through competitive retirement benefits, which promote the alignment of executive and Bank interests over the long term.

Beginning with 2017, the Board replaced the Bank’s traditional short- and long-term executive incentive plans as part of the Bank’s overall compensation program and effectively combined short-term and long-term executive incentive programs into one omnibus incentive plan for all senior executive officers (the Executive Incentive Plan, “EIP”). See “Executive Incentive Plan” below for a discussion of the EIP for 2017. For information regarding the Bank’s traditional short-term executive incentive plans (e.g., the 2016 President’s Incentive Plan and the 2016 Executive Incentive Plan) and traditional long-term executive incentive plan (e.g., the 2016 Executive Performance Unit Plan), see the discussion in “Item 11. Executive Compensation – Compensation Discussion and Analysis – Elements of Our Executive Compensation Program – Short-Term Cash Incentive Plans: President's Incentive Plan and Executive Incentive Plan” and “Long-Term Cash Incentive Plan: Executive Performance Unit Plan” in the Bank’s Annual Report on Form 10-K for the year ended December 31, 2016.

Each Year, the Bank Establishes Specific Corporate Goals Consistent with the Bank's Strategic Plan. For 2017, the Board adopted four corporate goals: the Risk Management goal, the Franchise Enhancement goal, the Community Investment goal, and the Organizational Health/Diversity and Inclusion goal.

For 2017, the Risk Management goal focused management on the Bank’s Technology Resiliency initiative with the objective of implementing critical business process applications and mitigating certain physical location risks. In addition, the Risk Management goal focused management on business continuity and crisis management by continuing to enhance the Bank’s recovery resilience by further maturing the enterprise crisis management framework through increased crisis team member preparedness, along with continued integration of the Bank’s

199

information services disaster recovery and information security incident response protocols to ensure a cohesive recovery.

The Franchise Enhancement goal for 2017 had three components. The first was a financial performance goal component, measuring the adjusted return on capital spread to a designated benchmark. This goal component recognized that among the many attributes of Bank membership, an adequate financial return on the private capital that members contribute to the cooperative is important to the members as shareholders. The financial performance goal component was expressed as a target adjusted return on capital spread (AROCS), which is the adjusted return on capital less the benchmark yield on capital. This goal component was based on the 2017 financial plan. Achievement of the Meets (100% of target) level of 3.06% AROCS required that the Bank:

• price advances such that balances are maintained without diluting financial return;

• generate $280 million in spread earnings from the Bank’s portfolio of mortgage-backed securities and mortgage loans; and

• manage operating costs within 2017 budget levels while continuing to meet all strategic and operating objectives.

This goal component was designed to be reasonably challenging to accomplish because, among other things, it required the Bank to generate pre-assessment net income (excluding the impact of other-than-temporary impairment charges and gains on litigation settlements) significantly higher than 2017 projections to reach and exceed the target levels. Given the limited options the Bank has to increase earnings while staying within the Bank’s risk tolerances, the achievement levels above target represented significant stretch objectives.

The second component of the Franchise Enhancement goal was to implement the Bank’s operating cost efficiency initiative, which required the Bank to perform analyses and develop preliminary objectives and operational plans leading to improved operating efficiency and meaningful and sustainable long-term annual run-rate operating expense reductions, relative to the 2016 operating expense budget.

The third component of the 2017 Franchise Enhancement goal was designed to focus management on member business by: (i) achieving advances and letters of credit targeted volumes; and (ii) increasing member engagement. The Board set the target achievement levels for the targeted advances and letters of credit volumes based on various assumptions, such as economic forecasts, member information, potential member business, historical goal performance, industry trends and events, and current market environment and conditions, such that the relative difficulty of achieving the target level was commensurate with extending credit to members in a safe and sound manner.

Consistent with the Bank's public policy purposes, the Community Investment goal for 2017 focused management on meeting the Bank's objective to make available advances and credit programs that promote and assist housing and community economic development activities and to provide resources and assistance to members in achieving their community lending goals. These efforts both complement and constitute elements of the Bank's core business and mission endeavors. The Community Investment goal for 2017 included achievement levels for the number of members that used an advance or letter of credit under the Community Investment Program (CIP) or Advances for Community Enterprise (ACE) Program and the number of members that participated in the Access to Housing and Economic Assistance for Development (AHEAD) Program during 2017.

The Organizational Health/Diversity and Inclusion goal recognized that organizational health and culture play an important role in maximizing the long-term performance and success of the Bank and that promoting diversity and inclusion is integral to achieving this objective. This goal specifically recognized that placing a high value on the individual skills, talents, ideas, viewpoints, and experiences of the Bank’s team members helps the Bank gain a broader perspective when it comes to meeting the diverse and changing needs of our members and the communities the Bank serves and that promoting vendor and supplier diversity at all levels of the Bank directly contributes to the Bank’s mission of fostering strong and vibrant communities through economic development opportunities. For 2017, this goal focused the Bank on: providing diversity and inclusion training to all employees, developing and implementing a formal supplier diversity program, presenting a “Leadership Series” for key groups of women and m

200

inorities in Bank leadership positions (Women in Leadership Series and Minorities in Leadership Series), and developing and implementing a formal minority, women, and disabled internship program.

Each Year, the Bank Establishes Individual Goals for Executives Consistent with the Bank's Strategic Plan. The individual performance goals established for executive officers are generally based on the Bank's strategic plan and reflect the strategic objectives that will enable the Bank to successfully achieve its mission. The strategic objectives for 2017 were intended to: strengthen the Bank's financial and member services franchise; reduce the Bank’s core operating expenses relative to the 2016 Budget to a sustainable and scale-appropriate level while retaining and enhancing the Bank’s ability to efficiently and effectively deliver value to members, manage risks, and satisfy compliance obligations; promote and enhance the effectiveness of the Bank’s Affordable Housing Program and Community Investment Programs; strengthen the Bank’s organizational effectiveness by enhancing the Bank’s working environment and advancing diversity and inclusion; and position the Bankas a proactive thought-leader for members and the FHLBank System.

The Bank's Executive Incentive Compensation Plans were Designed to Calculate Executive Officers' Achievement Levels on a Weighted Basis to Ensure a Proper Balance in Achieving the Bank's Mission in a Safe and Sound Manner. With respect to each of the named executive officers for 2017, the achievement levels of each of the four Bank corporate goals (the Risk Management goal, the Franchise Enhancement goal, the Community Investment goal, and the Organizational Health/Diversity and Inclusion goal) were weighted for each officer type (president, executive vice president, senior vice president, and senior vice president and chief risk officer) based on their respective roles and areas of oversight. The four Bank corporate goals were weighted at 90% in the aggregate and the individual goal weighted at 10% of the total weighted achievement level for each officer.

The weightings of the Bank's corporate goals were approved by the Board and were designed to appropriately focus senior management on accomplishing the Bank's mission and strategic plan. See “Executive Incentive Plan” below for a discussion of the relative weights given to corporate goals and individual goals for each component of the Executive Incentive Plan for 2017 for the named executive officers.

Our Executive Compensation Program is Designed to Enable the Bank to Compete for Highly Qualified Executive Talent. Our members are best served when we attract and retain talented executives with competitive and fair compensation packages. In 2017, our objective was to create an executive compensation program that delivered total compensation packages that generally fell around the median (50th percentile) of the total remuneration in the financial services marketplace from which the Bank recruits executive talent, which may include regional and community banks and diversified financial institutions, while maintaining an appropriate alignment with the practices of other FHLBanks.

The Compensation Committee recognized that comparing our compensation practices to a group of other financial services and banking firms that are similar in total assets presents some challenges because of the special nature of our business and our cooperative ownership structure. We believe that the executive roles of our named executive officers are somewhat comparable to those in the comparison group, although the Bank may have a narrower business focus.

Our named executive officers are required to have the same depth of knowledge and experience that is required by comparable financial services and banking firms, but unlike some of these comparable companies with multiple lines of business, our lines of business are limited. For example, in certain areas of the Bank our focus is more like that of a specific subsidiary, division, or business unit of comparable financial institutions with multiple lines of business.

For purposes of developing comparative compensation information, the companies with comparable positions were financial services and banking firms with similar business sophistication and complexity. In supporting compensation decisions, the Compensation Committee uses and considers compensation information about the comparable positions at these companies. Each element of compensation may vary somewhat above or below the market median of the related comparisons. Furthermore, compensation levels for individual levels may recognize

201

additional factors, such as regional salary differences, recruitment or retention, special duties or responsibilities, sustained performance results, leadership succession planning, and/or internal equity considerations.

Since 2014, the Compensation Committee has engaged McLagan Partners, Inc. (McLagan), a leading global management consulting firm providing consulting and benchmarking services for the financial services industry, for the purpose of providing the Compensation Committee with annual competitive market compensation reference and comparative information. During 2017, McLagan also provided advice to the Compensation Committee on amendments to the Bank’s Supplemental Executive Retirement Plan and on director compensation. McLagan does not currently provide any other services to the Bank. In September 2017, McLagan assessed the Bank’s competitive market position with respect to its executive compensation program. McLagan used market data collected from its compensation surveys and publicly available proxy data. McLagan used standardized peer group data from three groups: commercial banks with incumbents located in metro San Francisco and metro New York; metro Federal Home Loan Banks (Atlanta, Chicago, and New York); and public proxy peers with assets between $10 billion and $20 billion. When comparing Bank executives using commercial banks, specific job positions were used. When comparing Bank executives to other Federal Home Loan Banks, overall functional heads were used. When using the $10 billion to $20 billion peer group, a direct comparison of top paid executives was made regardless of position. The Compensation Committee used the McLagan market data as a reference point for evaluating 2017 executive compensation levels and to check and compare the reasonableness and appropriateness of the levels of compensation provided to our senior executives.

Allocation of Short-Term Cash Incentive Compensation and Long-Term Cash Incentive Compensation. Our objective is to compensate our senior executives, including our named executive officers, with a balanced combination of base salary and short- and long-term cash incentive compensation.

We believe that a balanced approach in delivering short- and long-term cash incentive compensation is most appropriate for the Bank because we believe our executives should be focused on achievement of both short- and long-term goals. Consistent with the Bank's three-year strategic plans and its Executive Compensation Philosophy, long-term cash incentive compensation helps provide a competitive total cash compensation package and enhances the Bank's ability to attract and retain key executives.

The Bank’s short-term cash incentive compensation rewards the named executive officers and other executive officers for the Bank's achievement of its annual corporate goals and performance targets and for the officer's achievement of his or her individual goals. The Bank’s long-term cash incentive compensation rewards the named executive officers and other executive officers for the Bank's achievement of its goals and performance targets over a three-year period.

Beginning in 2017 under the EIP, we restructured the traditional long-term cash incentive component of our compensation program to tie long-term cash incentive rewards to the sustainability of goal achievements over a long-term period, rather than to the achievement of goals over a prospective three-year period. This change was made to promote the Bank’s long-term health by deterring behavior or inappropriate risk-taking that could lead to material financial loss at the Bank. This approach and design for long-term compensation is consistent with developing practices to better recognize risk outcomes in incentive-based compensation decision making and to better balance risk and reward.

Elements of Our Executive Compensation Program

Base Salary Compensation

Base salary compensation is a key component of the Bank's executive compensation program and helps the Bank successfully attract and retain executive talent. Base salary for the named executive officers is based on a combination of factors, including comparative salary information from industry salary surveys that include the financial institutions in the Bank's peer groups. Other factors include the named executive officer's relevant experience and accomplishments, level of responsibility at the Bank, and perceived market competition for

202

executives with comparable levels of experience. The Board considers any base salary adjustments for the named executive officers at the beginning of each year based on the individual's performance and contributions to the Bank's achievements, or to help more appropriately align total remuneration with comparable positions in the financial services marketplace.

Executive Incentive Plan

Beginning with 2017, the Board adopted the Executive Incentive Plan (EIP), which provides for an annual total incentive award (Annual Award) for a one-year performance period. Fifty percent (50%) of the Annual Award is earned and vested after the last day of the one-year performance period (Year-End Award). The remaining fifty percent (50%) of the Annual Award is deferred for a three-year performance period (Deferred Award). The EIP also provides for a one-time incentive award to address a payment gap in long-term executive incentive compensation in 2020 for the performance period from 2017-2019 (Gap Year Award), which arises because of the discontinuation in 2017 of the Bank’s traditional long-term executive incentive plan. The EIP replaces the Bank’s traditional short-term and long-term executive incentive plans as part of the Bank’s overall compensation program and effectively combines short-term and long-term executive incentive programs into one omnibus incentive plan for all senior executive officers.

The EIP is designed to attract and retain senior executive officers and to motivate and focus their efforts on achieving the Bank’s business plan and accomplishing its goals and objectives while maintaining the safety and soundness of the Bank. The EIP is a cash-based incentive plan that provides award opportunities based on achievement of performance goals and the satisfaction of certain qualifiers. The EIP is for the Bank's senior executive officers (specifically for 2017, the president, executive vice president, and each senior vice president, excluding the Chief Audit Executive, who participates in the Bank's Audit Executive Incentive Plan).

The deferral component of the EIP ties long-term cash incentive rewards to the sustainability of goal achievements over a three-year period, which is intended to, among other things, promote the Bank’s long-term health by deterring behavior or inappropriate risk-taking that could lead to material financial loss to the Bank. Under the Deferred Award provisions of the EIP, payment of fifty percent (50%) of the total Annual Award is deferred for a three-year period, during which payment is conditioned upon the satisfaction of certain “qualifiers” that recognize the risk outcomes of executive decision making. Deferred Awards may be reduced or subject to forfeiture if qualifiers are not met during the Deferral Performance Period (defined below).

The EIP provides that the Board will establish award levels prior to each of the performance periods for the Annual Awards and Deferred Awards. A performance period for an Annual Award is the one-calendar-year period over which fifty percent (50%) of the Annual Award can be earned and vested, i.e., the Year-End Award, (Annual Performance Period). The related Deferred Award can vest following the three-calendar-year performance period (Deferral Performance Period). For the Gap Year Award, the performance period is the three-year period beginning on January 1, 2017, and ending on December 31, 2019 (Gap Year Performance Period).

Performance goals and qualifiers are the factors established by the Board for each performance period and are taken into consideration in determining the amount of an award. The Board will define “Threshold,” “Meets,” “Exceeds,” and “Far Exceeds” achievement levels for each performance goal to determine the amount of the award. The Board may adjust the performance goals and qualifiers for any performance period to ensure the purposes of the EIP are served. The EIP provides that in determining the appropriate performance goals and qualifiers, the Board will, among other things: balance risk and financial results in a manner that does not encourage participants to expose the Bank to imprudent risks; make such a determination in a manner designed to ensure that a participant’s overall compensation is balanced and not excessive in amount and that the awards are consistent with the Bank’s policies regarding compensation arrangements; and monitor the success of the performance goals and qualifiers taking into account weighting established in prior years and making appropriate adjustments in the future, as needed, so that payments appropriately incentivize participants, appropriately reflect risk, and align with regulatory guidance.

203

Under the EIP for 2017, the Board established 2017 performance goals for the Annual Award which are the: Risk Management goal, Franchise Enhancement goal, Community Investment goal, and Organizational Health/Diversity and Inclusion goal.

For the 2017 performance goals, the following table shows the goal weights for different categories of officers.

	CEO/EVP/SVPs				SVP, Chief Risk Officer
	Corporate Goal Weight		Goal Weight (includes individual goals)		Corporate Goal Weight		Goal Weight (includes individual goals)
Individual	N/A		10.0	%	N/A		10.0	%
Risk Management	20.0	%	18.0	%	50.0	%	45.0	%
Franchise Enhancement	40.0	%	36.0	%	30.0	%	27.0	%
Community Investment	20.0	%	18.0	%	10.0	%	9.0	%
Organizational Health/Diversity and Inclusion	20.0	%	18.0	%	10.0	%	9.0	%
Total	100.0	%	100.0	%	100.0	%	100.0	%

For the Gap Year Award, executives are rewarded for the achievement of performance goals over a three-year performance period like the Bank’s traditional long-term cash incentive plans (i.e., the Bank’s Executive Performance Unit Plan or EPUP). For the Gap Year Award, the Gap Year Performance Period is from January 1, 2017, to December 31, 2019. The Gap Year Award performance goals, which are weighted and measured based on a 3-year average, relate to the (AROCS) and risk management.

The following table shows the performance goals and goal weights for the Gap Year Award.

Goals	Goal Weight		Threshold		Meets (Target)		Exceeds		Far Exceeds
AROCS Goal (3-Year Average Spread Over Benchmark)	30	%	2.18	%	2.43	%	2.68	%	2.93	%
Risk Management	70	%	Based on the 3-year average of the actual Risk Management goal achievement levels for 2017, 2018, and 2019

For the EIP for 2017, performance goal measures range from 75% of target (threshold) to 150% of target (far exceeds).

The target achievement levels in the EIP for 2017 were designed to reward officers for achievement of the Bank's corporate goals and objectives as described above, based on a target level of achievement for all corporate goals and the officer's individual goal(s). The exceeds and far exceeds achievement levels were designed to reward officers when the Bank and the individual officer achievements exceed the target level. The exceeds achievement level is an optimistic achievement level relative to the target level, and the far exceeds achievement level as the most optimistic achievement level based on reasonable business, market, and economic assumptions and conditions.

The performance goal measures and plan design were intended to appropriately motivate and reward the Bank’s senior executive officers based on the total achievement of all goals, taking into account each senior executive officer’s role in the Bank's performance. Setting the performance goal measure ranges based on a percentage of base salary for 2017 is intended to be consistent with our Executive Compensation Philosophy of delivering total cash compensation at target levels generally around the median (50^th percentile) of the total remuneration in the financial services marketplace from which the Bank recruits executive talent.

The total incentive awards under the EIP are determined by multiplying the percentage of achievement for each goal by the respective performance goal weights to arrive at each participating officer's total weighted achievement level. Each participating officer's total weighted achievement level is then used to determine each participating officer's cash incentive compensation award under the EIP.

204

The following table shows the total incentive award opportunities for the Annual Awards and the allocation of the Annual Award opportunities between the Year-End Awards and the Deferred Awards for 2017.

	Annual Award as % of Compensation (Base Salary)								Year-End Award as % of Compensation (Base Salary)								Deferred Award as % of Compensation (Base Salary)
	Threshold		Meets (Target)		Exceeds		Far Exceeds		Threshold		Meets (Target)		Exceeds		Far Exceeds		Threshold		Meets (Target)		Exceeds		Far Exceeds
CEO/EVP/SVPs	40	%	80	%	96	%	100	%	20	%	40	%	48	%	50	%	20	%	40	%	48	%	50	%

The following table shows the total incentive award opportunities for the Gap Year Award.

	Long-Term Incentive Award as a % of Compensation (Base Salary effective February 1, 2017)
Position	Threshold		Meets (Target)		Exceeds		Far Exceeds
CEO/EVP/SVPs	20	%	40	%	48	%	50	%

Fifty percent (50%) of the Annual Award, i.e., the Year-End Award, will become vested on the last day of the Annual Performance Period (as mentioned above) and the remaining fifty percent (50%) of the Annual Award that is treated as the Deferred Award will become vested on the last day of the Deferral Performance Period, provided that the Board determines that the performance goals for the Annual Award are achieved and the qualifiers for the Annual Performance Period are satisfied; and with respect to the Deferred Award only, the qualifiers for the Deferral Performance Period are satisfied. The Gap Year Award will become vested over a three-year Gap Year Performance Period (i.e., beginning on January 1, 2017, and ending on December 31, 2019), to the extent the Board determines the performance goals for the Gap Year Award are achieved and the qualifiers are satisfied.

Vesting of any award is subject to the participant receiving a satisfactory performance rating and being actively employed on the last day of the relevant performance period, except in certain cases such as termination because of death or disability, retirement, reduction in force, department reorganization, or substantial job modification, or termination for “Good Reason” or without “Cause.” In the case of termination of employment because of death or disability, the EIP provides that a Deferred Award will be treated as fully vested as of the date of termination and the relevant pro rata portion of the Annual Award or Gap Year Award will be treated as vested for that portion of the relevant performance period based on the assumption that the Bank would have achieved the applicable performance goals at the target level and satisfied the qualifiers for the relevant performance period. In all other such cases of termination of employment, the EIP provides that a Deferred Award will be treated as fully vested as of the date of termination of employment and the relevant pro rata portion of the Annual Award or Gap Year Award will be treated as vested for that portion of the relevant performance period to the extent determined by the Board that the applicable performance goals are achieved and the qualifiers are satisfied.

If a “Change in Control” occurs prior to the date of vesting of an award, then an Annual Award or Gap Year Award will be paid on a pro rata basis based on the assumption the Bank would have achieved the applicable performance goals at the target level and satisfied the qualifiers for the relevant performance period, while any Deferred Award will be treated as vested effective as of the date of the Change in Control.

The following are the performance qualifiers for 2017 for any awards under the EIP: (i) no submission of material information to a regulatory or a reporting agency is significantly past due; (ii) the Bank makes sufficient progress, as determined by the Board, in the timely remediation of significant examination, monitoring, and other supervisory findings; (iii) no material risk management deficiency exists at the Bank; (iv) no operational errors or omissions result in material revisions to the financial results, information submitted to the Finance Agency, or data used to determine incentive payouts; and (v) the Bank has sufficient capital to pay dividends and the ability to repurchase or redeem capital stock.

The EIP provides that awards may be reduced, eliminated, or forfeited in certain circumstances. Under the EIP, the Board may reduce or eliminate any award not yet paid if the Board finds that a serious, material safety and

205

soundness issue or a serious, material risk management deficiency exists at the Bank, or if: (i) errors or omissions result in material revisions to the Bank’s financial results, information submitted to a regulatory or a reporting agency, or information used to determine incentive compensation payouts; (ii) information submitted to a regulatory or a reporting agency is untimely; or, (iii) the Bank does not make appropriate progress, as determined by the Board, in the timely remediation of examination, monitoring, or other supervisory findings and matters requiring attention.

In addition, if the Bank realizes actual losses during the Deferral Performance Period, or other measures or aspects of performance related to the annual Performance Period or Deferral Performance Period are realized that would have caused a reduction in the amount of the final award (i.e., the amount of the earned and vested award that, after any adjustments, is approved by the Board for payment) calculated for the Annual Performance Period or Deferral Performance Period, then the remaining amount of the final award may be reduced to reflect this additional information. Furthermore, if a participant breaches the terms of a non-solicitation and non-disclosure agreement with the Bank executed as a condition to participating in the EIP, all of the participant’s unpaid vested and unvested awards may be forfeited.

Finally, if during the most recent examination of the Bank by the Finance Agency, the Finance Agency identifies an unsafe or unsound practice or condition that is material to the financial operation of the Bank within the participant’s area(s) of responsibility, and such unsafe or unsound practice or condition is not subsequently resolved to the satisfaction of the Board, then all or a portion of a participant’s unpaid award (vested and unvested) may be forfeited as determined in the sole discretion of the Board. Any future payments for a vested award will cease, and the Bank will have no further obligation to make such payments.

The amount of any award will be determined at the sole discretion of the Board. If the qualifiers are satisfied, an annual compounding interest rate of 6% is applied to any Deferred Awards. Awards, if any, under the EIP are to be paid in accordance with the terms of the EIP following Board approval and completion of any required regulatory review.

The amount of any earned and vested Annual Award, Deferred Award, or Gap Year Award may be modified at the Board’s discretion to account for performance that is not captured in the relevant performance goals and qualifiers. The Board, in its discretion, may also consider “extraordinary occurrences” when assessing performance results and determining any of the awards. “Extraordinary Occurrences” mean those events that, in the opinion and discretion of the Board, are outside the significant influence of the participant or the Bank and are likely to have a significant unanticipated effect, whether positive or negative, on the Bank’s operating or financial results.

For additional information regarding awards granted under the EIP for 2017, see the discussion in “Compensation Tables – Narrative to Summary Compensation Table and Grants of Non-Equity Incentive Plan-Based Awards Table – Non-Equity Incentive Payments and Non-Equity Long-Term Incentive Payouts,” which discussion is herein incorporated by reference.

Traditional Long-Term Cash Incentive Plan: Executive Performance Unit Plan

The Bank’s traditional long-term cash incentive plan is the Executive Performance Unit Plan (EPUP). For 2017, the 2015 EPUP for the performance period 2015 through 2017 and the 2016 EPUP for the performance period 2016 through 2018 were in effect. For 2018, the 2016 EPUP remains in effect. As discussed above, beginning in 2017, the Bank discontinued offering its traditional long-term executive incentive plan (i.e., the EPUPs) and instead included the long-term cash incentive component of the Bank’s compensation program in the EIP.

The EPUPs were designed to reward our senior executives who are substantially responsible for the Bank's overall long-term performance and who significantly contribute to and influence the Bank's long-term goal achievements, which directly support the Bank's three-year strategic plans. The purpose of the EPUP was also to attract and retain outstanding executives as part of a competitive total compensation program.

206

The EPUP awards are based on the total weighted achievement level of the three-year average achievement levels of two annual Bank corporate goals during the relevant three-year performance period based on a scale of 0% to 150%, with 100% as the target achievement level. The Bank's corporate goals for the 2016 and 2015 EPUPs include the adjusted return on capital spread goal (weighted at 30%) and the Risk Management goal (weighted at 70%).

The 2016 and 2015 EPUPs identified specific adjusted return on capital spread goal targets for each achievement level and provide that the adjusted return on capital spread goal achievement levels will be based on a comparison of the actual three-year average results with the three-year projected results from the Bank's 2016 and 2015 Strategic Plans, respectively. They also provide that the Risk Management goal achievement levels will be based on the three-year average of the actual Risk Management goal achievement levels under each of the three annual executive incentive plans in effect during the performance period, and will be measured at the end of the performance period.

To calculate an EPUP award, the total weighted achievement level for the two Bank corporate goals is multiplied by the officer's target award percentage (the range of awards as a percentage of base salary, discussed below), which is then multiplied by the officer's base salary in the first year of the three-year performance period.

For the 2016 and 2015 EPUPs, total weighted achievement levels range from 75% of target (threshold) to 150% of target (far exceeds), and the awards as a percentage of base salary for the president, executive vice president, and senior vice presidents, based on the total weighted achievement level of Bank goals, are as follows: achievement level 150% of target: 50% of base salary; achievement level 125% of target: 48% of base salary; achievement level 100% of target: 40% of base salary; and achievement level 75% of target: 20% of base salary.

Under the 2016 and 2015 EPUPs, performance below the aggregate threshold achievement level normally will not result in an incentive award. The Board has discretion to modify any and all goal achievement levels, award determinations, and incentive payments to account for matters not specifically addressed in the plan. Under the 2016 and 2015 EPUPs, incentive compensation reductions may be made in, but are not limited to, the following circumstances: (i) if errors or omissions result in material revisions to the Bank's financial results, information submitted to a regulatory or reporting agency, or information used to determine incentive compensation payouts; (ii) if information submitted to a regulatory or reporting agency is untimely; or (iii) if the Bank does not make appropriate progress in the timely remediation of examination, monitoring, or other supervisory findings and matters requiring attention.

The actual achievement of Bank goals for the 2016 and 2015 EPUPs is subject to adjustment for changes in financial strategies or policies, any significant change in Bank membership, and other factors determined by the Board.

The 2016 and 2015 EPUPs provide that the impacts of credit-related other-than-temporary impairment charges are excluded from the adjusted return on capital spread goal target, but the impacts of actual credit-related other-than-temporary impairment charges are included in the adjusted return on capital spread goal performance measurement, and the impacts of dividend benchmark variances-to-plan are excluded from the adjusted return on capital spread goal performance measurement.

The potential target award ranges as a percentage of base salary are intended to be consistent with delivering total compensation packages at target levels generally around the median (50th percentile) of the total remuneration in the financial services marketplace from which the Bank recruits executive talent.

The awards under the EPUPs are designed to be based in large part on the executive's ability to affect the Bank's long-term performance. For additional information, see discussion in “Compensation Tables – Narrative to Summary Compensation Table and Grants of Non-Equity Incentive Plan-Based Awards Table – Non-Equity Incentive Payments and Non-Equity Long-Term Incentive Payouts,” which discussion is herein incorporated by reference.

207

The EPUPs provide that executive officers whose Bank employment is terminated because of voluntary normal retirement, disability, or death may receive a prorated award. In January 2017, the 2016 and 2015 EPUPs were amended to allow a pro rata portion of any award to be paid upon termination of employment during the relevant performance period due to: (a) “Retirement;” (b) a termination by participant for “Good Reason;” (c) a termination by the Bank without “Cause" due to the elimination of an individual job or position; (d) the elimination of one or more jobs or positions as a result of a reduction in force or department reorganization; or (e) a substantial job modification resulting in the incumbent being, in the judgment of the Bank, unqualified for or unable to perform the revised job. A pro rata portion of a plan award may be paid for the portion of the relevant performance period during which the participant was employed to the extent determined by the Board that the applicable performance metrics are satisfied. The amendments also provide that if a participant incurs a termination of employment during a performance period due to death or disability, a plan award will be paid for the portion of the relevant performance period during which the participant was employed based on the assumption the Bank would have achieved the “Meets” achievement level for the relevant performance period. The amendments further provide that if a “Change in Control” of the Bank occurs prior to the payment date of a plan award, then a final award will be paid on a prorated basis based on the assumption the Bank would have achieved the performance metrics at the “Meets” achievement level for the relevant performance period. The terms “Retirement,” “Good Reason,” “Meets” and “Change in Control” all have the meanings set forth in the EIP.

Except for payments in the case of death, disability or change in control, any awards are paid following Board approval after the end of the three-year performance period and any required regulatory review period.

Savings Plan

The Bank's Savings 401(k) Plan (Savings Plan) is a tax-qualified defined contribution 401(k) retirement benefit plan that is available to all eligible employees, including the named executive officers. Each eligible employee may contribute between 2% and 20% of base salary to the Savings Plan. For employees who have completed six months of service, the Bank matches a portion of the employee's contribution (50% for employees with less than three years of service, 75% for employees with at least three years of service but less than five years of service, and 100% for employees following five years of service), up to a maximum of 6% of base salary. Employees are fully vested in employer matching contributions at all times.

For 2017, the maximum annual before-tax employee contribution to the Savings Plan was limited to $18,000 (or $24,000 for participants age 50 and over), and no more than $270,000 of annual compensation could be taken into account in computing an employee's benefits under the Savings Plan.

Cash Balance Plan and the Financial Institutions Retirement Fund

We began offering benefits under the Cash Balance Plan on January 1, 1996. The Cash Balance Plan is a tax-qualified defined benefit pension plan that covers employees who have completed a minimum of six months of service, including the named executive officers. Each year, eligible employees accrue benefits equal to 6% of their total annual compensation (which includes base salary and short-term cash incentive compensation) plus interest equal to 6% of their account balances accrued through the prior year, referred to as the annual benefit component of the Cash Balance Plan. For 2017, the Internal Revenue Code (IRC) limited the amount of annual compensation that could be considered in calculating an employee's benefits under the Cash Balance Plan to $270,000.

The benefits under the Cash Balance Plan annual benefit component are fully vested after an employee completes three years of service. Vested amounts are generally payable in a lump sum or as an annuity when the employee leaves the Bank.

Prior to offering benefits under the Cash Balance Plan, we participated in the Financial Institutions Retirement Fund (FIRF). The FIRF is a multiple-employer tax-qualified defined benefit pension plan. We withdrew from the FIRF on December 31, 1995.

208

When we withdrew from the FIRF, benefits earned under the FIRF as of December 31, 1995, were fully vested and the value of those benefits was then frozen. As of December 31, 1995, the FIRF calculated each participant's FIRF benefit based on the participant's then-highest three consecutive years' average pay multiplied by the participant's years of service multiplied by 2%, referred to as the frozen FIRF benefit. Upon retirement, participants will be eligible to receive their frozen FIRF benefits.

In addition, to preserve some of the value of the participant's frozen FIRF benefit, we maintain the ratio of each participant's frozen FIRF age 65 annuity to the participant's highest three consecutive years' average pay as of December 31, 1995 (annuity ratio), which we refer to as the net transition benefit component of the Cash Balance Plan. Upon retirement, each participant with a frozen FIRF benefit will receive a net transition benefit under the Cash Balance Plan that equals his or her highest three consecutive years' average pay at retirement multiplied by his or her annuity ratio minus the frozen FIRF benefit.

Benefit Equalization Plan

The Benefit Equalization Plan (BEP) is an unfunded and non-tax-qualified plan that is designed to restore retirement benefits lost under the Savings Plan and Cash Balance Plan because of compensation and benefits limitations imposed on the Savings Plan and the Cash Balance Plan under the IRC.

Annual compensation is determined based on the definition of compensation provided in the respective tax-qualified plans. Participation in the BEP is available to all employees, including the named executive officers, whose benefits under the tax-qualified plans are restricted because of the IRC limitations discussed above.

An employee's benefits that would have been credited under the Cash Balance Plan but for the limitations imposed on the plan under the IRC are credited as Supplemental Cash Balance Benefits under the BEP and the credits accrue interest at an annual rate of 6% until distributed. Each year, employees may also elect to defer compensation earned over the IRC compensation limits to the BEP. For each year that a participant makes deferrals to the BEP, if the amount of the Bank's matching contribution to a participant's account under the Savings Plan is limited because of the IRC compensation limitations, then the Bank will credit to the participant's BEP account an amount equal to the lost matching contribution (up to a maximum of 6% of base salary in the aggregate) under the Savings Plan (participant deferrals and Bank matching contributions are referred to herein as Supplemental BEP Savings Benefits). The make-up benefits under the BEP vest according to the corresponding provisions of the Savings Plan and the Cash Balance Plan.

Effective January 1, 2005, in response to IRC Section 409A, we froze the then-existing BEP (now referred to as the Original BEP) and implemented a new BEP conforming to IRC Section 409A and applicable notices and regulations, which changed the participant election process relating to the time and form of benefit payments (referred to herein as the New BEP).

Under the New BEP, a participant's Supplemental Cash Balance Benefits are payable in the form of a lump sum, single life annuity, 50% survivor annuity, or 75% survivor annuity upon termination of employment, a set date or age after termination of employment, becoming disabled after termination of employment, or death. Under the New BEP, a participant's Supplemental BEP Savings Benefits are payable in a lump sum or two to ten annual installments, and payments may commence at termination of employment, retirement, disability, death, or a specific date after termination of employment. In addition, a participant's elections with respect to the time and form of benefit payments are irrevocable unless the election is made 12 months prior to the scheduled distribution date and the new scheduled distribution date is delayed at least five years. If a participant does not elect the time or form of payment, his or her distribution will be a lump sum at termination of employment.

Under the Original BEP, a participant's Supplemental Cash Balance Benefits are paid in a single life annuity commencing at the later of age 65 or termination of employment, unless the participant elects an optional time and form of payment. The optional forms of payment are a lump sum or any other optional form then permitted under the Cash Balance Plan. Under the Original BEP, a participant's Supplemental BEP Savings Benefits are payable in a

209

lump sum or two to ten installments upon retirement, termination of employment, death, or a specific date after termination of employment. Also, a participant can change the time and form of payment for the Supplemental Cash Balance Benefit at any time, but if the election provides for payment prior to age 65, then payment will not be made until 12 months after the date the Bank receives the new written election unless the participant elects an immediate lump sum distribution subject to forfeiture of 10% of the lump sum payment. Similarly, a participant may elect at any time to change the payout schedule of one or more of the participant's Supplemental BEP Savings Benefit accounts, provided that no payments will be made according to the new election until 12 months after the date the Bank receives the new written election, unless the participant elects an immediate lump sum distribution subject to forfeiture of 10% of the lump sum payment.

Participants are permitted to make five separate payout elections (a payout date and form of payment) with respect to the Supplemental BEP Savings Benefit under the Original BEP and under the New BEP.

Deferred Compensation Plan

Our Deferred Compensation Plan (DCP) is an unfunded and non-tax-qualified deferred compensation plan, consisting of three components for employees: (1) employee deferral of current compensation; (2) make-up matching contributions that would have been made by the Bank under the Savings Plan had the base salary compensation not been deferred; and (3) make-up pension benefits that would have been earned under the Cash Balance Plan had any amount of total annual compensation (base salary and short-term cash incentive compensation) not been deferred. See discussion in “Compensation Tables – Narrative to Non-Qualified Deferred Compensation Table.”

The DCP is available to all officers of the Bank, including the named executive officers. Directors are also able to defer their director fees under the DCP. The make-up benefits for employee participants under the DCP vest according to the corresponding provisions of the Savings Plan and the Cash Balance Plan.

Effective January 1, 2005, in response to IRC Section 409A, we froze the then-existing DCP (now referred to as the Original DCP) and implemented a new DCP, conforming to IRC Section 409A, which changed the participant election process related to the time and form of benefit payments (referred to herein as the New DCP).

Under the New DCP, participants' make-up Cash Balance Plan benefits are payable in the form of a lump sum, single life annuity, 50% survivor annuity, or 75% survivor annuity upon termination of employment, a set date or age after termination of employment, becoming disabled after termination of employment, or death. If a participant does not elect a time or form of payment, the benefit is paid in a lump sum upon termination of employment. However, if the participant elects to receive his or her distribution at death and survives to the later of age 70½ or termination of employment, the benefit is paid upon the later of the two events in the form of a lump sum. Only a single time and form of distribution may be elected with respect to both the make-up Cash Balance Plan benefits under the New DCP and the make-up Cash Balance Plan benefits under the New BEP.

A participant's deferred compensation and the Bank's make-up Savings Plan matching contributions credited under the New DCP (including earnings on such amounts) are payable in a lump sum or two to ten annual installments, and payments may commence at termination of employment, retirement, disability, death, or a specific date no earlier than one year from the end of the deferral period. Participant elections with respect to the time and form of Savings Plan-related benefit payments from the New DCP are irrevocable unless the election is made 12 months prior to the scheduled distribution date and the new scheduled distribution date is delayed at least five years. If a participant does not elect the time or form of payment, his or her distribution will be a lump sum at termination of employment.

For participant-deferred compensation and make-up Bank matching contributions credited under the Original DCP, a participant may elect at any time to change the payout schedule of one or more of the participant's accounts, provided that no payments will be made according to the new election until 12 months after the date the Bank

210

receives the new written election unless the participant elects an immediate lump sum distribution subject to forfeiture of 10% of the lump sum payment.

Participants are permitted to make five separate payout elections (a payout date and form of payment) under each of the New DCP and the Original DCP for distribution of participant deferrals and Bank matching contribution credits.

Under the Original DCP, participants' make-up Cash Balance Plan benefits are payable in the same form and at the same time as the participants' related benefits under the Cash Balance Plan.

Supplemental Executive Retirement Plan

Effective January 1, 2003, we began providing a Supplemental Executive Retirement Plan (SERP) to the Bank's senior officers, including the named executive officers. This plan is an unfunded and non-tax-qualified retirement benefit plan that provides a cash balance style benefit to the Bank's senior officers (including the named executive officers) that is in addition to the tax-qualified benefits under the Cash Balance Plan.

The SERP supplements the Cash Balance Plan benefits to provide a competitive postretirement compensation package that is intended to help the Bank attract and retain key senior officers who are critical to the success of the Bank.

Benefits under the SERP are based on total annual compensation (base salary and short-term cash incentive compensation, including any deferrals under the Savings Plan, BEP, or DCP) and years of credited service as presented in the table below. In addition, participants accrue annual interest equal to 6% of balances accrued through the prior yearend. In addition, SERP benefits are limited to the extent that any participant's total pension retirement income exceeds fifty percent (50%) of the participant's final average pay. Final average pay is defined as a participant's highest average annual compensation during any three consecutive years during which he or she is a participant in the SERP. Annual benefits accrued under the SERP for any plan year that commenced before January 1, 2018, vest at the earlier of three years after they are earned, five years of employment with the Bank, or when the participant reaches age 62.

Years of Credited Service (As Defined in the Plan)	Amount of Contribution for President (Percentage of Total Annual Compensation)		Amount of Contribution for Other Participants (Percentage of Total Annual Compensation)
Fewer than 10	10	%	8	%
10 or more but less than 15	15	%	12	%
15 or more	20	%	16	%

The normal form and time of payment of benefits under the SERP is a lump sum upon the earlier of termination of employment, disability, or death. Upon a timely election, a participant may elect optional forms of payment to commence after termination of employment as specified in the plan.

No benefits are paid under the SERP if a participant's employment is terminated for cause (as defined in the plan). In January 2018, the SERP was amended to provide that in the event of termination for cause, only the unvested portion of the participant’s SERP account would be forfeited.

The SERP was also amended in January 2018 to revise: (1) Schedule A to the SERP to provide that beginning with 2018, the amounts of the contribution (Contribution Credit) to be credited to the account of a participant covered by Schedule A to the SERP will be 20% of a participant’s total annual compensation for fewer than five years of credited service (Credited Service) and 25% of a participant’s total annual compensation for five years or more of Credited Service; and (2) Schedule C to the SERP to provide that beginning with 2018, the amounts of the Contribution Credit to be credited to the account of a participant in Schedule C will be 25% of a participant’s total annual compensation for fewer than five years of Credited Service and 35% of a participant’s total annual compensation for five years or more of Credited Service. Annual benefits accrued under the SERP for any plan year

211

commencing after January 1, 2018, will vest at the earlier of five years of employment with the Bank or when the participant reaches age 62. The Bank’s senior officers, including the named executive officers, are participants in Schedule A and the president and chief executive officer is a participant in Schedule C. At the same time, the SERP was also amended to provide the Board with discretionary authority for approving special contribution credits (Special Contribution Credits), which are additional credits to a participant’s account in an amount that may not exceed the participant’s target annualized compensation plus target Deferred Award and Gap Year Award under the EIP and any other long-term incentive compensation (the “pay limitation”) for the applicable calendar year. At any time, no more than three Special Contribution Credits may be approved for a single participant, and the pay limitation for each participant is adjusted annually for annual increases in the participant’s target compensation and long-term incentive pay. The Special Contribution Credits are not subject to the SERP’s total retirement income limitation described above.

Other Elements of Compensation

We provide to all employees, including the named executive officers, health, dental, and vision insurance, and an employee assistance program for the employees and their spouses/partners and children, for which we pay approximately 80% of the premiums and the employee pays approximately 20%. In addition, we provide long-term disability and basic life insurance coverage to all employees at no cost to the employees.

The Bank makes available limited retiree health care benefits for eligible employees who retire from the Bank. To be classified as a Bank retiree eligible to enroll for retiree health care benefits, a Bank employee must be 55 years of age with a minimum of 10 years of Bank service on the date that his or her employment with the Bank terminates.

Perquisites

On occasion, the Bank may pay for resort activities for employees, including our named executive officers, in connection with business-related meetings; and in some cases, the Bank may pay the expenses for spouses/partners accompanying employees to these meetings or other Bank-sponsored events. The president and chief executive officer receives use of a designated building parking space. Perquisites are valued at the actual amounts paid to the provider of the perquisites.

212

COMPENSATION COMMITTEE REPORT

The Compensation and Human Resources Committee (Compensation Committee) acts as the compensation committee on behalf of the Bank's Board of Directors. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth in this annual report on Form 10-K.

Based on the Compensation Committee's review of the Compensation Discussion and Analysis and the discussions the Compensation Committee has had with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this annual report on Form 10-K, which will be filed with the Securities and Exchange Commission.

Compensation and Human Resources Committee

John T. Wasley, Chair

Bradley W. Beal, Vice Chair

Melinda Guzman

Joan C. Opp

Scott C. Syphax

213

COMPENSATION TABLES

Summary Compensation Table
(In whole dollars)
Name and Principal Position	Year	Salary			Bonus (1)		Non-Equity Incentive Payment(2)		Non-Equity LTIP Payout(3)		Change in Pension Value and Non-Qualified Deferred Compensation(4)			All Other(5)(6) Compensation			Total
J. Gregory Seibly(7)	2017	$	850,000		$	300,000	$	418,900	$	217,800	$	590,814		$	29,149		$	2,406,663
President and	2016	506,665			—		297,600		99,100		335,768			447,105		(8)	1,686,238
Chief Executive Officer
Lisa B. MacMillen(9)	2017	188,541		(10)	—		67,150		197,900		—		(11)	567,813		(12)	1,021,404
Executive Vice President and	2016	557,200			—		275,200		262,800		193,400			39,893			1,328,493
Chief Operating Officer	2015	546,300			22,763		270,100		256,300		49,211			40,295			1,184,969
Kenneth C. Miller	2017	466,533			—		229,900		214,900		293,857			37,017			1,242,207
Senior Vice President and	2016	458,100			—		227,200		214,000		236,083			37,239			1,172,622
Chief Financial Officer	2015	444,800			18,533		219,900		208,600		202,885			35,534			1,130,252
Lawrence H. Parks	2017	484,605		(13)	—		227,850		213,000		322,988			34,047			1,282,490
Senior Vice President,	2016	478,009		(14)	—		225,200		212,100		169,090			33,601			1,118,000
External and Legislative Affairs	2015	461,376		(15)	18,367		217,900		206,800		184,575			32,703			1,121,721
Suzanne Titus-Johnson	2017	454,337		(16)	—		204,250		190,900		382,333			33,063			1,264,883
Senior Vice President and	2016	422,653		(17)	—		201,900		190,100		233,358			33,092			1,081,103
General Counsel and	2015	395,100			116,463		195,300		185,300		122,730			31,914			1,046,807
Corporate Secretary
Stephen P. Traynor(18)	2017	419,292			—		199,700		190,400		255,726			32,952			1,098,070
Senior Vice President and
Chief Banking Officer

(1) The amount for Mr. Seibly in 2017 represents payment of a sign-on bonus in accordance with his employment agreement. The amounts in 2015 represent a Board-approved special award, consisting of an amount equal to one additional semi-monthly paycheck for all Bank employees to recognize Bankwide teamwork and its contribution to the Bank’s exceptional overall performance in 2015. In addition, the amount for Ms. Titus-Johnson in 2015 represents a $100,000 discretionary cash incentive compensation award under the 2015 EIP.

(2) Represents the Year-End Awards in 2017 earned and vested under the EIP for 2017, awards in 2016 earned under the 2016 President’s Incentive Plan and 2016 Executive Incentive Plan, and awards earned in 2015 under the 2015 Executive Incentive Plan. For the Year-End Awards in 2017 under the EIP for 2017, see the discussion in “Narrative to Summary Compensation Table and Grants of Non-Equity Incentive Plan-Based Awards Table – Non-Equity Incentive Payments and Non-Equity Long-Term Incentive Payouts.”

(3) Represents awards earned under the 2015, 2014, and 2013 EPUPs. For the awards in 2017 under the 2015 EPUP, see the discussion in “Narrative to Summary Compensation Table and Grants of Non-Equity Incentive Plan-Based Awards Table – Non-Equity Incentive Payments and Non-Equity Long-Term Incentive Payouts.”

(4) Represents the aggregate change in actuarial present value of each of the named executive officers' accumulated benefits under the Bank's qualified and non-qualified defined benefit pension plans (Cash Balance Plan; frozen FIRF, if applicable; restored pension benefit under the Benefit Equalization Plan (BEP); make-up pension benefit under the Deferred Compensation Plan (DCP); and Supplemental Executive Retirement Plan (SERP)). There are no above-market or preferential earnings on the named executive officers' DCP accounts.

(5) Includes perquisites and premiums for disability and life insurance paid by the Bank. On occasion, the Bank pays for resort activities for employees in connection with Board meetings and other business-related meetings; and, in some cases, the Bank may pay the expenses for spouses accompanying employees to these meetings or other Bank-sponsored events. Perquisites are valued at the actual amounts paid to the provider of the perquisites. The value of some perquisites is not reasonably quantifiable, but is known to be de minimis.

(6) Includes the Bank’s matching contributions under the Savings Plan and the Bank’s restored and make-up matching amounts credited under the BEP and DCP.

(7) Mr. Seibly became president and chief executive officer effective May 12, 2016.

(8) Of this amount, $224,791 represents reimbursement of relocation costs to Mr. Seibly, and $217,135 represents the related tax gross-ups to Mr. Seibly.

(9) Ms. MacMillen served as chief operating officer until March 31, 2017.

(10) Of this amount, $49,241 represents a vacation cash-out payment.

214

(11) In accordance with SEC rules, negative changes in pension value are not included in this table. The negative change in pension value for Ms. MacMillen is $188,233 which primarily results from payments from the BEP, DCP and the SERP.

(12) Of this amount, $557,200 represents a severance payment.

(13) Of this amount, $22,264 represents a vacation cash-out payment.

(14) Of this amount, $24,009 represents a vacation cash-out payment.

(15) Of this amount, $20,576 represents a vacation cash-out payment.

(16) Of this amount, $39,912 represents a vacation cash-out payment.

(17) Of this amount, $15,653 represents a vacation cash-out payment.

(18) Mr. Traynor who previously served as Senior Vice President, Member Financial Services and Community Investment, became Chief Banking Officer in March 2017.

Grants of Non-Equity Incentive Plan-Based Awards
(In whole dollars)				Estimated Payout Ranges(1)
Name	EIP for 2017	Plan Period	Payout Date	Threshold		Target		Maximum
J. Gregory Seibly	Year-End Award	2017	February 2018	$	170,000	$	340,000	$	425,000
	Deferred Award	2018-2020	February 2021	170,000		340,000		425,000
	Gap Year Award	2017-2019	February 2020	170,000		340,000		425,000
Lisa B. MacMillen(2)	Year-End Award	2017	February 2018	27,478		54,957		68,696
	Deferred Award	2018-2020	February 2021	27,478		54,957		68,696
	Gap Year Award	2017-2019	February 2020	9,159		18,319		22,899
Kenneth C. Miller	Year-End Award	2017	February 2018	93,460		186,920		233,650
	Deferred Award	2018-2020	February 2021	93,460		186,920		233,650
	Gap Year Award	2017-2019	February 2020	93,460		186,920		233,650
Lawrence H. Parks	Year-End Award	2017	February 2018	92,620		185,240		231,550
	Deferred Award	2018-2020	February 2021	92,620		185,240		231,550
	Gap Year Award	2017-2019	February 2020	92,620		185,240		231,550
Suzanne Titus-Johnson	Year-End Award	2017	February 2018	83,020		166,040		207,550
	Deferred Award	2018-2020	February 2021	83,020		166,040		207,550
	Gap Year Award	2017-2019	February 2020	83,020		166,040		207,550
Stephen P. Traynor	Year-End Award	2017	February 2018	81,180		162,360		202,950
	Deferred Award	2018-2020	February 2021	81,180		162,360		202,950
	Gap Year Award	2017-2019	February 2020	81,180		162,360		202,950

(1) The estimated payouts for the 2017 Year-End Awards represent 50% of the Annual Award under the EIP for 2017 that could have been earned by the respective executive officers for 2017. Actual amounts of the Year-End Awards earned and vested under the EIP for 2017 are included in the Summary Compensation Table. Estimated payouts for the Deferred Awards represent 50% of the Annual Award under the EIP for 2017 that could be vested by the respective executive officers at the end of the three-year deferral performance period. Estimated payouts for the Gap Year Award under the EIP are what could be earned at the end of the three-year performance period and are calculated using the base salaries in effect at the beginning of the three-year performance period. Any Gap Year Award is subject to the achievement of performance goals and satisfaction of certain qualifiers, and any Deferred Award under the EIP is subject to the satisfaction of certain qualifiers. Both of the Deferred Award and Gap Year Award are payable following the completion of regulatory review. See discussion in “Compensation Discussion and Analysis – Elements of our Executive Compensation Program – Executive Incentive Plan.”

(2) Year-End Awards, Deferred Awards, and Gap Year Awards, if any, for Ms. MacMillen are prorated.

Narrative to Summary Compensation Table and Grants of Non-Equity Incentive Plan-Based Awards Table

At Will Employees

All employees of the Bank are “at will” employees, including the named executive officers. The named executive officers may resign at any time, and the Bank may terminate their employment at any time, for any reason or no reason, with or without cause and with or without notice.

The 2017 base salaries as of December 31, 2017, for the current named executive officers were as follows: J. Gregory Seibly, $850,000; Kenneth C. Miller, $467,300; Lawrence H. Parks, $463,100; Suzanne Titus-Johnson, $415,100; and Stephen P. Traynor, $423,151. For 2018, the base salaries of the current named executive officers are

215

as follows: J. Gregory Seibly, $900,000; Kenneth C. Miller, $481,319; Lawrence H. Parks, $476,993; Suzanne Titus-Johnson, $427,553; and Stephen P. Traynor, $435,846.

Corporate Senior Officer Severance Policy. The Corporate Senior Officer Severance Policy (Senior Officers' Policy) is applicable to the president, executive vice president, and senior vice presidents. The Senior Officers' Policy provides severance benefits in the event that the employee's employment is terminated because the employee's job or position is eliminated or because the job or position is substantially modified so that the employee is no longer qualified or cannot perform the revised job. For these officers, severance under the Senior Officers' Policy is equal to the greater of (i) 12 weeks of the officer's base salary, or (ii) the sum of three weeks of the officer's base salary, plus three weeks of the officer's base salary for each full year of service and three weeks of base salary prorated for each partial year of service at the Bank to a maximum of 52 weeks of base salary. The Senior Officers' Policy also provides one month of continued health and life insurance benefits and, at the Bank's discretion, outplacement assistance.

The Senior Officers' Policy provides that in the event a senior vice president is involuntarily terminated without “Cause” under certain circumstances or voluntarily terminated with “Good Reason” (as defined by the Senior Officers' Policy) in connection with a Change in Control, upon the Bank's timely receipt of a separation agreement and release, these executive officers will receive severance pay in a lump sum equal to one year of base salary.

In addition, under the Senior Officers' Policy, in the event of a qualifying termination in connection with a Change in Control, each senior vice president will be entitled to continued health and life insurance coverage under the Bank's group health and life insurance policies, at the Bank's expense, for a period of 12 months immediately following the effective date of separation. However, the Bank will immediately cease paying such premiums prior to the end of the 12-month period if the executive officer accepts employment with another employer that provides comparable benefits in terms of cost and scope of coverage during the 12-month period. If the Bank is not in compliance with any applicable regulatory capital or regulatory leverage requirement or if any of the payments required to be made to senior vice presidents pursuant to the Senior Officers' Policy would cause the Bank to fall below such applicable regulatory requirements, such payment will be delayed until the Bank achieves compliance with its regulatory capital requirements.

The Senior Officers' Policy also provides that, in the event the former executive vice president experienced a termination of employment in connection with a Change in Control, severance and benefits would have been payable pursuant to a Change in Control Severance Agreement, described below.

The Board believes that the level of severance benefits for each named executive officer is appropriate because it is reasonable to believe that finding a comparable position at another institution at a comparable compensation level could take up to one year, and possibly longer, depending on the economic environment at the time, and that the distraction of this uncertainty may have a detrimental impact on the executive's performance. If the employment of any of the current named executive officers had been terminated on December 31, 2017, because the employee's job or position had been eliminated or because the job or position had been substantially modified so that the employee was no longer qualified or could not perform the revised job, the approximate value of the severance benefits payable to the executive (subject to Finance Agency regulatory review) applying the Senior Officers’ Policy would have been as follows: J. Gregory Seibly, $199,273; Kenneth C. Miller, $470,465; Lawrence H. Parks, $464,242; Suzanne Titus-Johnson, $418,255; and Stephen P. Traynor, $426,289.

Change in Control Agreement. The Board had approved a Change in Control Severance Agreement for the former executive vice president and chief operating officer, Lisa B. MacMillen. This agreement provided for a severance payment and continued benefits if the executive terminated her employment for “Good Reason” (as defined in the agreement) in connection with a “Change in Control” (as defined in the agreement) of the Bank. In particular, she would have been entitled to receive, in lieu of any severance benefits to which the executive may otherwise be entitled under any severance plan or program of the Bank, the following: (i) the executive's fully earned but unpaid base salary through the date of termination (together with all other amounts and benefits to which the executive was entitled under any benefit plan or practice of the Bank other than the Bank's Senior Officers' Policy); (ii) severance

216

pay in an amount equal to the sum of two times the executive's annual base salary plus two times the executive's “Annual Incentive Amounts” (as defined in the agreement); (iii) continued health and life insurance coverage for up to 180 days after the first anniversary of the date of termination of the executive's employment (or if earlier, the date the executive accepts employment from an employer with comparable benefits); and (iv) executive-level outplacement services at the Bank's expense, not to exceed $25,000.

Employment Agreement. In April 2016, the Bank entered into an employment agreement with Mr. Seibly with an initial term of three years and one-year terms thereafter, unless terminated at any time by either the Bank or Mr. Seibly. Under the terms of the agreement, Mr. Seibly initially received a base annual salary of $800,000 and a sign-on payment of $600,000 to be received in two equal installments within 30 days of each of the first and second anniversaries of Mr. Seibly’s employment start date, and subject to clawback in certain circumstances. The base annual salary is subject to review at the Board’s discretion. The employment agreement provides for a severance payment equal to (i) two times his “Base Salary” (as defined in his employment agreement); and (ii) two times his “Annual Incentive Amounts” (as defined in his employment agreement) and continued benefits if Mr. Seibly’s employment is terminated under certain circumstances in connection with a “Change in Control” (as defined in his employment agreement) of the Bank. Had Mr. Seibly’ s employment been terminated in connection with a Change in Control on December 31, 2017, the approximate value of the benefits, excluding amounts of any outplacement services, payable to Mr. Seibly would have been $2,561,241.

Mr. Seibly is also eligible to participate in the Bank’s various executive incentive and employee benefit plans, including the Bank’s SERP, 2016 President’s Incentive Plan, and the 2014-2016, 2015-2017, and 2016-2018 EPUPs. Under Mr. Seibly’s employment agreement, the years of credited service and the amount of Bank contribution credits under the SERP, prior to its amendment effective January 2018, were as follows: 10% of total annual compensation for less than 4 years of credited service; 15% of total annual compensation for 4 or more years but less than 9 years of credited service; and 20% of total annual compensation for 9 or more years of credited service. In addition, Mr. Seibly’s employment agreement provides that he will receive a supplemental SERP contribution credit in the amount of $600,000, to be credited in three equal installments over two years, with the first installment credited at the time his employment began and the second and third installments credited on the first and second anniversaries of his employment commencement, respectively. These supplemental SERP contribution credits will vest immediately when credited. Mr. Seibly’s employment agreement also provides for reimbursement of his relocation cost up to $250,000 and payment to the appropriate taxing authorities of up to $220,000 of any relocation tax obligations.

The employment agreement also provides that if Mr. Seibly’s employment is terminated due to the expiration of the initial three-year term and the Board decides not to extend his employment for any additional term, Mr. Seibly shall be entitled to receive a severance payment equal to twelve (12) months of base salary and a pro-rata portion of the president’s incentive plan (Severance Payment). The employment agreement further provides that if Mr. Seibly is terminated without “Cause” (as defined in his employment agreement) or if he terminates his employment for “Good Reason” (as defined in his employment agreement) any time during the initial three-year term, Mr. Seibly shall be entitled to receive severance payments equal to: the Severance Payment; all “Accrued Benefits” (as defined in his employment agreement); and all unpaid sign-on benefits. Had Mr. Seibly terminated his employment under these circumstances on December 31, 2017, the approximate value of the benefits, payable to Mr. Seibly, excluding amounts of any Accrued Benefits, would have been $1,568,900. In the event Mr. Seibly receives any severance benefits under the Senior Officers’ Policy, any severance payments to be payable to Mr. Seibly under his employment agreement shall be reduced by such severance benefits received under the Senior Officers’ Policy.

Non-Equity Incentive Payments and Non-Equity Long-Term Incentive Payouts

For 2017, J. Gregory Seibly, president and chief executive officer, was awarded a Year-End Award under the Executive Incentive Plan (EIP) of $418,900. Mr. Seibly’s award was based on the Bank's 2017 achievement level of: 138% for the Risk Management goal; 144% for the Franchise Enhancement goal; 150.0% for the Community Investment goal; and 125% for the Organizational Health/Diversity and Inclusion goal, and his 2017 achievement level for his individual goal.

217

Based on the achievement levels for the Bank's four corporate goals and the achievement levels of named executive officers for their respective individual goals, the following Year-End Awards under the EIP for 2017 were made: Lisa B. MacMillen, $67,150 (prorated from January 1, 2017, to March 31, 2017); Kenneth C. Miller, $229,900; Lawrence H. Parks, $227,850; Suzanne Titus-Johnson, $204,250; and Stephen P. Traynor $199,700.

The Year-End award amounts above reflect fifty percent (50%) of the total Annual Awards approved by the Board under the EIP for 2017. The payment of the other fifty percent (50%) of the total Annual Award, i.e., the Deferred Award, is deferred for the three-year performance period and is subject to applicable qualifiers as described in “Compensation Discussion and Analysis – Elements of Our Executive Compensation Program – Executive Incentive Plan,” which discussion is herein incorporated by reference.

The following table shows the two components of the Annual Awards for the named executive officers approved by the Board under the EIP for 2017.

	EIP for 2017
Named Executive Officers	Yearend Awards(1)		Deferred Awards(2)		Annual Awards
J. Gregory Seibly	$	418,900	$	418,900	$	837,800
Lisa B. MacMillen(3)	67,150		67,150		134,300
Kenneth C. Miller	229,900		229,900		459,800
Lawrence H. Parks	227,850		227,850		455,700
Suzanne Titus-Johnson	204,250		204,250		408,500
Stephen P. Traynor	199,700		199,700		399,400
Total					$	2,695,500

(1) The Year-End Award is 50 percent of the Annual Award and included in the Summary Compensation Table.

(2) The Deferred Award is 50 percent of the Annual Award and remain subject to the satisfaction of applicable qualifiers and will not be paid until 2021. The Deferred Awards are also subject to modification and forfeiture under the terms of the EIP.

(3) Ms. MacMillen’s awards are prorated.

In reviewing the Bank's 2017 performance, the Board recognized the president’s leadership and the other named executive officers' management in addressing risk management, business, financial, operational efficiency, and regulatory challenges and issues, while achieving all performance goals and objectives at a very high level. With respect to Mr. Seibly in particular, the Board recognized the president’s achievements with respect to his efforts in connection with enhancing constituent relations, the commitment to safe and sound practices, financial management practices, and employee engagement. Last, the Board acknowledged the president’s efforts in creating a Bank culture committed to operational and financial efficiency and effectiveness.

The Risk Management goal, which consisted of two goal components (technology resiliency and business continuity/crisis management), was measured at an aggregate achievement level of 138%. In determining the level of achievement for the first component, the Board recognized management's accomplishments and achievements in migrating the Bank’s environment to the new data centers and efforts in rolling out the Bank’s end-user computing modernization initiative in a safe and sound manner. With respect to the second goal component, achievement was based on management enhancing the Bank’s recovery resilience by further maturing the Bank’s enterprise crisis management framework through increased crisis team member preparedness, along with continued integration of Information Services Disaster Recovery and Information Security incident response protocols to ensure a cohesive recovery. In particular, the Board recognized the Bank’s level of achievement through completion of crisis management team exercises and cyber response team exercises.

The Bank's Franchise Enhancement goal, which consisted of three goal components, was measured at an aggregate achievement level of 144%. The Board recognized the Bank's financial performance in 2017 for the financial performance goal component (which excluded the impact of other-than-temporary impairment charges, litigation settlements gains, and contributions made in connection with the Bank’s Quality Jobs Initiative), and the

218

achievements relating to the Bank’s operating cost efficiency and the member business goal components. With respect to the financial performance goal component, the adjusted return on capital spread goal target level for 2017 was 3.06% and the Bank achieved a spread of 3.95% (net of adjustments). For the operating cost efficiency goal component, the Bank took several organizational actions to reduce run-rate operating expenses and improve organizational and operational efficiency, including significant restructuring of the Bank’s leadership team and reporting structure to broaden leadership span-of-control and sharpen role clarity. Regarding the member business goal component, the Board noted the Bank’s achievements in slowing the pace of advances runoff as well as increasing the use of Bank credit to help offset maturing advances to large and former members; and the Bank’s implementation of a program to elevate and expand the level of contact with members and prospective members, which has helped promote the Bank as a valued business partner.

The Board further noted the Bank's strong performance on its Community Investment goal, which was measured at an achievement level of 150.0% for 2017. The Bank far exceeded the Community Investment goal focused on the number of members using the CIP and ACE Program or participating in the AHEAD Program.

The Organizational Health and Diversity/Inclusion goal was measured at an achievement level of 125%. The Board noted the Bank’s achievements in workforce and supplier diversity training and the development and implementation of a supplier program, and successfully planning and holding diversity events and activities during 2017.

For the 2015 EPUP, covering the three-year period 2015 through 2017, long-term cash incentive compensation awards to the named executive officers were based on the achievement levels for the Bank's adjusted return on capital spread goal and Risk Management goal over the three-year performance period from 2015 through 2017. The overall achievement level for the goals over this period was 147%, reflecting the effect of above-target performance on the adjusted return on capital spread goal in 2015, 2016, and 2017. The target level for the three-year period 2015 through 2017 was 2.84%, and the Bank achieved a spread of 3.72% (net of adjustments), which represents 150% achievement. The overall achievement level also reflected an achievement level for the Risk Management goal component of 146%, which was the average of the actual Risk Management goal achievement levels under the 2015 and 2016 Executive Incentive Plans and the EIP for 2017.

The awards approved by the Board under the 2015 EPUP were as follows: J. Gregory Seibly, $217,800 (prorated); Lisa B. MacMillen, $197,900 (prorated); Kenneth C. Miller, $214,900; Lawrence H. Parks, $213,000; Suzanne Titus-Johnson, $190,900; and Stephen P. Traynor, $190,400.

Pension Benefits Table

The following table provides the present value of accumulated pension and pension-related benefits payable as of December 31, 2017, to each of the named executive officers upon the normal retirement age of 65 under the Bank's qualified and non-qualified defined benefit pension plans.

219

(In whole dollars)
Name	Plan Name	Years of Credited Service	Present Value of Accumulated Benefits(1)		Payments During Last Fiscal Year
J. Gregory Seibly	Cash Balance Plan	1.083	$	26,660	$	—
	Financial Institutions Retirement Fund	N/A	—		—
	Benefit Equalization Plan	1.083	93,654		—
	Deferred Compensation Plan	1.083	—		—
	Supplemental Executive Retirement Plan(2)	1.583	806,268		—
Lisa B. MacMillen(3)	Cash Balance Plan	30.667	713,941		—
	Financial Institutions Retirement Fund	9.417	143,256		—
	Benefit Equalization Plan	30.667	—		642,885
	Deferred Compensation Plan	30.667	775,067		136,823
	Supplemental Executive Retirement Plan(2)	14.250	—		871,249
Kenneth C. Miller	Cash Balance Plan	22.917	600,318		—
	Financial Institutions Retirement Fund	0.917	26,244		—
	Benefit Equalization Plan	22.917	434,932		—
	Deferred Compensation Plan	22.917	22,315		—
	Supplemental Executive Retirement Plan(2)	15.000	1,507,771		—
Lawrence H. Parks	Cash Balance Plan	20.333	630,000		—
	Financial Institutions Retirement Fund	N/A	—		—
	Benefit Equalization Plan	20.333	535,462		—
	Deferred Compensation Plan	20.333	127,836		—
	Supplemental Executive Retirement Plan(2)	15.000	1,695,835		—
Suzanne Titus-Johnson	Cash Balance Plan	31.333	918,724		—
	Financial Institutions Retirement Fund	9.333	150,373		—
	Benefit Equalization Plan	31.333	890,021		—
	Deferred Compensation Plan	31.333	150,200		—
	Supplemental Executive Retirement Plan(2)	12.750	1,162,157		—
Stephen P. Traynor	Cash Balance Plan	22.250	610,143		—
	Financial Institutions Retirement Fund	0.250	5,412		—
	Benefit Equalization Plan	22.250	238,107		—
	Deferred Compensation Plan	22.250	161,619		—
	Supplemental Executive Retirement Plan(2)	15.000	1,524,867		—

(1) For purposes of this table, the present value of accumulated benefits as of December 31, 2017 (measured December 31, 2017) was calculated using a discount rate of 3.25%, which is consistent with the assumptions used in the Bank's financial statements. Actual benefit payments under each plan may differ based on the applicable discount rate under the terms of the relevant plan. The Bank withdrew from the FIRF, a multiple-employer tax-qualified defined benefit plan, on December 31, 1995. Amounts under the BEP and the DCP represent the present value of only the pension-related benefits accumulated for the named executive officer.

(2) For the purposes of this table, the years of credited service for the SERP represent the years of participation since the inception of the SERP in 2003 or the first year in which the participant initially became active in the SERP. For purposes of determining the amount of Bank contribution in the SERP table, the years of credited service are defined in the SERP.

(3) Ms. MacMillen served as chief operating officer until March 31, 2017.

220

Narrative to Pension Benefits Table

For information regarding the plans in the table, see the discussion in our Compensation Discussion and Analysis under “Cash Balance Plan and the Financial Institutions Retirement Fund,” “Benefit Equalization Plan,” “Deferred Compensation Plan,” and “Supplemental Executive Retirement Plan.” The valuation method and material assumptions used in quantifying the present value of the current accrued benefits in the table are consistent with the assumptions used in the Bank's financial statements. See the discussion in “Item 8. Financial Statements and Supplementary Data – Note 16 – Employee Retirement Plans and Incentive Compensation Plans.”

Non-Qualified Deferred Compensation Table

The following table reflects the non-qualified Deferred Compensation Plan balances as of December 31, 2017, for the named executive officers.

(In whole dollars)
Name and Principal Position	Last Fiscal Year	Beginning of Year Balance		2017 Executive Contributions(1)		2017 Bank Contributions(2)		Aggregate Earnings/ (Losses) in 2017			Aggregate (Withdrawals)/ Distributions in 2017			Yearend 2017 Aggregate Balance(3)
J. Gregory Seibly	2017	$	—	$	—	$	—	$	—		$	—		$	—
President and
Chief Executive Officer
Lisa B. MacMillen	2017	5,762,930		515,037		—		920,785			—			7,198,752
Executive Vice President and
Chief Operating Officer
Kenneth C. Miller	2017	—		—		—		—			—			—
Senior Vice President and
Chief Financial Officer
Lawrence H. Parks	2017	560,029		102,000		6,120		417		—	—			668,566
Senior Vice President,
External and Legislative Affairs
Suzanne Titus-Johnson	2017	132,590		216,190		—		52,147			—			400,927
Senior Vice President and
General Counsel and Corporate Secretary
Stephen P. Traynor	2017	2,291,417		479,700		7,200		279,631			(87,321		)	2,970,627
Senior Vice President and
Chief Banking Officer

(1) The 2017 executive contributions made by Ms. MacMillen and Ms. Titus-Johnson are included in the "Non-Equity Incentive Payment" and "Non-Equity LTIP Payout" columns in the Summary Compensation Table (SCT); the 2017 executive contributions made by Mr. Parks are included in the "Salary" column for 2017 in the SCT; and the 2017 executive contributions for Mr. Traynor include $120,000 reported in the “Salary” column for 2017 in the SCT.

(2) Represents make-up Bank matching contributions lost under the Savings Plan as a result of deferring compensation. The 2017 Bank contribution made to Mr. Parks and Mr. Traynor are included in the “All Other Compensation" column for 2017 in the SCT.

(3) The yearend 2017 aggregate balance for Mr. Parks includes $96,000 and $90,000 reported in the "Salary" Column for 2016 and 2015 in the SCT, respectively, and includes $5,760 and $5,400 reported in the "All Other Compensation" column for 2016 and 2015 in the SCT, respectively. The yearend 2017 aggregate balance for Ms. Titus-Johnson includes $120,000 in the "Salary" column for 2016 in the SCT, and includes $7,200 reported in the "All Other Compensation" column for 2016 in the SCT. The yearend 2017 aggregate balance for Ms. MacMillen includes $260,000 and $244,666 reported in the “Non-Equity Incentive Payment” and “Non-Equity LTIP Payout” columns, respectively, for 2016 in the SCT.

221

Narrative to Non-Qualified Deferred Compensation Table

The Non-Qualified Deferred Compensation Table presents information about our Deferred Compensation Plan (DCP), which is designed to allow Bank officers to defer up to 100% of base salary and short- and long-term incentive cash compensation awards, as applicable. Directors may also participate in the DCP to defer up to 100% of their director fees.

In addition, since one of the factors involved in determining benefits under the Bank's Savings Plan is an officer's annual base salary compensation, this table also presents make-up matching contributions that would have been made by the Bank under the Savings Plan had the annual base salary compensation not been deferred.

The Bank's matching contribution under the Savings Plan is calculated on the basis of an officer's base salary after deferring base salary compensation under the DCP. As a result, an officer who defers base salary compensation forgoes the Bank's matching contribution on the portion of compensation that is deferred. To compensate for this, the Bank makes a contribution credit to the officer's DCP balance to restore the benefit under the Savings Plan that would otherwise be lost as a result of deferring base salary compensation.

Participants may direct the investments of deferred amounts into core mutual funds or into a brokerage account. Participants may change these investment directions at any time. All investment earnings accumulate to the benefit of the participants on a tax-deferred basis. Brokerage fees relating to purchases and sales are charged against the value of the participant's deferred balance in the plan. The Bank pays all set-up and annual account administration fees.

Income taxes are deferred until a participant receives payment of funds from the plan. Participants may elect payouts in a lump sum or over a payout period from 2 to 10 years. A participant may change any previously elected payment schedule by submitting a written election. Any written election to change the payment schedule must be made at least 12 months prior to the original payout date, and the new payout date, in most cases, must be at least 5 years from the original payout date.

222

CHIEF EXECUTIVE OFFICER PAY RATIO

For the year ended December 31, 2017, the ratio of the Bank’s chief executive officer’s total compensation for 2017 to the Bank’s median of the annual total compensation for 2017 of all our employees, except the chief executive officer (Median Employee) is 12.86:1. For total compensation for the Bank’s chief executive officer and the Median Employee, we used the same elements of compensation presented in the Summary Compensation Table and calculated total compensation in the same manner total compensation is calculated for the Summary Compensation Table for both employees, which includes among other things, amounts attributable to the change in pension value, which will vary among employees based upon their tenure at the Bank. For 2017, the total compensation of the Median Employee was $187,108, and the total compensation of the CEO, as reported in the Total Compensation column in the Summary Compensation Table, was $2,406,663.

We identified the Median Employee by calculating the 2017 total compensation (using the same elements of compensation in the Summary Compensation Table and in the same manner total compensation is calculated for the Summary Compensation Table) for each of the employees who were employed by the Bank on December 31, 2017, and ranking the 2017 total compensation for all such employees (a list of 285 employees) from lowest to highest, excluding the chief executive officer. The employees in the calculation included all full-time and part-time employees and we annualized compensation for all such employees.

223

DIRECTOR COMPENSATION

We provide our directors with compensation for the performance of their duties as members of the Board of Directors and for the amount of time spent on the Bank’s business.

Director Compensation Table For the Year Ended December 31, 2017
(In whole dollars)
Name of Directors serving during 2017	Fees Earned or Paid in Cash
Douglas H. (Tad) Lowrey(1)	$	125,000
Melinda Guzman(2)	120,000
Bradley W. Beal	105,000
Craig G. Blunden	95,000
Steven R. Gardner(3)	95,000
Richard A. Heldebrant(4)	105,000
Simone Lagomarsino	110,000
John F. Luikart	105,000
Kevin Murray	110,000
Robert F. Nielsen	95,000
Brian M. Riley	105,000
John F. Robinson	105,000
F. Daniel Siciliano	95,000
Scott C. Syphax	105,000
John T. Wasley	105,000
Total	$	1,580,000

(1) Mr. Lowrey served as Chair during 2017. Mr. Lowrey’s term as director expired December 31, 2017.

(2) Ms. Guzman served as Vice Chair during 2017.

(3) Mr. Gardner’s term as director expired December 31, 2017.

(4) Mr. Heldebrant resigned as director from the Board effective December 31, 2017, upon his retirement from Star One Credit Union.

On occasion, the Bank pays for resort activities for directors in connection with Board meetings and other business-related meetings, and, in some cases, the Bank may pay the expenses for spouses accompanying directors to these meetings or other Bank-sponsored events. The value of these perquisites are considered de minimis and not included in the table above.

The Board of Directors Compensation and Expense Reimbursement Policy for 2017 (2017 Directors Compensation Policy) provided the directors with compensation for the performance of their duties as members of the Board of Directors and the amount of time spent on official Bank business, as set forth below.

224

(In whole dollars)
Position	Maximum Annual Service Fee		Maximum Annual  Meeting Fees		Total Maximum Annual Compensation
Chair	$	77,500	$	47,500	$	125,000
Vice Chair	72,500		47,500		120,000
Audit and Risk Committee Chairs	62,500		47,500		110,000
All Other Committee Chairs	57,500		47,500		105,000
Directors on Audit Committee	52,500		47,500		100,000
Other Directors	47,500		47,500		95,000

Under the 2017 Directors Compensation Policy, service fees for the above positions were paid for serving as a director during and between regularly scheduled meetings of the Board. The maximum annual service fee was prorated and paid with the meeting fee, if applicable, at the conclusion of each two-month service period on the Board of Directors (monthend February, April, June, August, October, and December). In addition, each director received a fee of $9,500 for attending any portion of five of the six regularly scheduled two-day Board meetings, subject to the annual maximum of $47,500.

The 2017 Directors Compensation Policy provided that a director could receive a meeting fee for participation in one regularly scheduled Board meeting by telephone. No other fee was paid for participation in meetings of the Board or committees by telephone or participation in other Bank or FHLBank System activities. The president of the Bank was authorized to interpret the 2017 Directors Compensation Policy, as necessary, according to applicable statutory, regulatory, and policy limits.

Under the 2017 Directors Compensation Policy, the final prorated service fee was to be withheld if a director did not attend at least 75% of all regular and special meetings of the Board and the director's assigned committees for the year, or if the Board determined a director had consistently demonstrated a lack of engagement and participation in meetings attended. In addition, the meeting fee attendance requirement provided that a director would receive a meeting fee only if he or she attended the regular Board meeting as well as at least one assigned committee meeting during the Board's regularly scheduled two-day meetings.

Under the 2017 Directors Compensation Policy, the Bank reimbursed directors for necessary and reasonable travel, subsistence, and other related expenses incurred in connection with the performance of their official duties, which may have included participation in meetings or activities for which no fee was paid.

For expense reimbursement purposes, directors' official duties included:

• Meetings of the Board and Board committees,

• Meetings requested by the Finance Agency and FHLBank System committees,

• Meetings of the Council of FHLBanks and its committees,

• Meetings of the Bank's Affordable Housing Advisory Council,

• Events attended on behalf of the Bank when requested by the president in consultation with the chair,

• Other events attended on behalf of the Bank with the prior approval of the chair,

• Director education events attended with the prior approval of the chair, and

• National Association of Corporate Directors Annual Meeting.

The 2017 Directors Compensation Policy also provides that directors may receive up to an additional $1,500 in compensation in the form of expense reimbursement for meals and travel for a spouse or significant other.

The Board adopted a Board of Directors Compensation and Expense Reimbursement Policy for 2018, which is substantially similar to the 2017 Directors Compensation Policy except that the maximum total service fees were increased by $10,000 for all director positions on the Board, including Board Chair and Vice Chair, all committee chairs, and all other directors, such that the total maximum compensation for 2018 was increased by $10,000 for all

225

directors. Director fees were increased to more closely align with relevant market benchmarks for director compensation and trends at other FHLBanks.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information about those stockholders that are beneficial owners of more than 5% of the Federal Home Loan Bank of San Francisco’s outstanding capital stock, including mandatorily redeemable capital stock, as of February 28, 2018.

Name and Address of Beneficial Owner	Number of Shares Held	Percentage of Outstanding Shares
Charles Schwab Bank	4,050,000	10.8	%
2360 Corporate Circle
Henderson, NV 89074
MUFG Union Bank, NA	3,240,000	8.7
400 California Street
San Francisco, CA 94104
JPMorgan Chase Bank, National Association(1)	3,068,088	8.2
1111 Polaris Parkway
Columbus, OH 43240
First Republic Bank	2,848,500	7.6
111 Pine Street
San Francisco, CA 94111
Bank of the West	2,331,550	6.2
180 Montgomery Street
San Francisco, CA 94104
Total	15,538,138	41.5	%

(1) Nonmember institution.

The following table sets forth information about those members (or their holding companies) with officers or directors serving as directors of the Federal Home Loan Bank of San Francisco as of February 28, 2018.

Director Name	Name of Institution	City	State	Number of Shares Held	Percentage of Outstanding Shares
Jeffrey K. Ball	Friendly Hills Bank	Whittier	CA	8,346	—	%
Bradley W. Beal	One Nevada Credit Union	Las Vegas	NV	14,561	—
Craig G. Blunden	Provident Savings Bank	Riverside	CA	81,078	0.2
Marangal (Marito) Domingo	First Technology Federal Credit Union	Mountain View	CA	667,316	1.8
Simone Lagomarsino	Pacific Premier Bank	Irvine	CA	172,500	0.5
Joan C. Opp	Stanford Federal Credit Union	Palo Alto	CA	142,616	0.4
Brian M. Riley	Mohave State Bank	Lake Havasu City	AZ	29,674	0.1
John F. Robinson	Silicon Valley Bank	Santa Clara	CA	189,000	0.5
Total				1,305,091	3.5	%

226

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Capital stock ownership is a prerequisite to transacting any member business with the Federal Home Loan Bank of San Francisco (Bank). The members, former members, and certain other nonmembers own all the capital stock of the Bank, the majority of the directors of the Bank are officers or directors of members, and the Bank conducts its advances and purchased mortgage loan business almost exclusively with members or member successors. The Bank extends credit in the ordinary course of business to members with officers or directors who serve as directors of the Bank and to members owning more than 5% of the Bank's capital stock (5% shareholders) on market terms that are no more favorable to them than the terms of comparable transactions with other members. In addition, the Bank may transact short-term investments, Federal funds sold, and mortgage-backed securities (MBS) with members and their affiliates that have officers or directors who serve as directors of the Bank or with 5% shareholders. All investments are market rate transactions, and all MBS are purchased through securities brokers or dealers. The Bank may also be the primary obligor on debt issued in the form of Federal Home Loan Bank (FHLBank) System consolidated obligations using underwriters and dealers, and may enter into interest rate exchange agreements with counterparties, that may be affiliates of Bank members with officers or directors who serve as directors of the Bank or affiliates of members and nonmembers owning more than 5% of the Bank's capital stock, which are transactions in the ordinary course of the Bank's business and are market rate transactions.

The FHLBank Act requires the Bank to establish an Affordable Housing Program (AHP). The Bank provides subsidies to members, which use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Subsidies may be in the form of direct grants or below-market interest rate advances. Only Bank members, along with their nonmember AHP project sponsors, may submit AHP applications. All AHP subsidies are made in the ordinary course of business.

The FHLBank Act also requires the Bank to establish a Community Investment Program (CIP) and authorizes the Bank to offer additional Community Investment Cash Advance (CICA) programs. Under these programs, the Bank provides subsidies in the form of grants and below-market interest rate advances or standby letters of credit to members for community lending and economic development projects. Only Bank members may submit applications for these credit program subsidies. All CICA subsidies are made in the ordinary course of business.

In instances where an AHP or CICA transaction involves a member that owns more than 5% of the Bank's capital stock (or an affiliate of such a member), a member with an officer or director who is a director of the Bank, or an entity with an executive officer, director, controlling shareholder, or general partner who serves as a director of the Bank (and that has a direct or indirect interest in the subsidy), the transaction is subject to the same eligibility and other program criteria and requirements as all other comparable transactions and to the regulations governing the operations of the relevant program.

The Bank may also use members that have officers or directors who serve as directors of the Bank or 5% shareholders or their affiliates as securities custodians and derivative dealer counterparties. These financial relationships are conducted in the ordinary course of business on terms and conditions similar to those that would be available for comparable services if provided by unaffiliated entities.

The Bank does not have a written policy to have the Board of Directors (Board) review, approve, or ratify transactions with members that are outside the ordinary course of business because such transactions rarely occur. However, it has been the Bank's practice to report to the Board all transactions between the Bank and its members that are outside the ordinary course of business, and, on a case-by-case basis, seek Board approval or ratification.

227

Director Independence

General

Under the rules of the Securities and Exchange Commission (SEC), the Bank is required to identify directors who are independent, and members of the Board's Audit Committee and Compensation and Human Resources Committee and any committee performing similar functions to a nominating committee who are not independent, using the independence definition of a national securities exchange or automated quotation system. The Bank's capital stock is not listed on a national securities exchange or automated quotation system, and the Bank's Board of Directors is not subject to the independence requirement of any such exchange or automated quotation system. The Bank is subject to the independence standards for directors serving on the Bank's Audit Committee set forth in the rules of the Federal Housing Finance Agency (Finance Agency), and looks to the Finance Agency independence standards to determine independence for all directors, whether or not they serve on the Audit Committee. In addition, for purposes of compliance with the SEC's disclosure rules only, the Board has evaluated director independence using the definition of independence articulated in the rules of the National Association of Securities Dealers Automated Quotations (NASDAQ).

In addition to the independence rules and standards above, the FHLBanks are required to comply with the rules issued by the SEC under Section 10A(m) of the Securities Exchange Act of 1934, which includes a substantive independence rule prohibiting a director from being a member of the Audit Committee if he or she, other than in his or her capacity as a member of the Audit Committee, the Bank's Board of Directors, or any other Board committee, accepts any consulting, advisory, or other compensatory fee from the Bank or is an “affiliated person” of the Bank as defined by the SEC rules (the person controls, is controlled by, or is under common control with the Bank).

Director Independence under the Finance Agency Regulations

The Finance Agency director independence rule provides that a director is sufficiently independent to serve as a member of the Bank's Audit Committee if that director does not have a disqualifying relationship with the Bank or its management that would interfere with the exercise of that director's independent judgment. Disqualifying relationships under the Finance Agency independence standards include, but are not limited to: (i) employment with the Bank at any time during the last five years; (ii) acceptance of compensation from the Bank other than for service as a director; (iii) being a consultant, advisor, promoter, underwriter, or legal counsel for the Bank at any time within the last five years; and (iv) being an immediate family member of an individual who is or who has been a Bank executive officer within the past five years.

Although the Finance Agency's independence standard only applies by regulation to members of the Bank's Audit Committee, the Bank's Board looks to this standard for purposes of determining independence of all Bank directors.

The independence standard imposed on the Audit Committee under the Finance Agency regulations takes into account the fact that the Bank was created by Congress; the Bank has a cooperative ownership structure; the Bank is statutorily required to have member directors who are either an officer or director of a Bank member; the Bank was created to provide its members with products and services; and the Bank's Board of Directors is statutorily required to administer the affairs of the Bank fairly and impartially and without discrimination in favor of or against any member borrower. The Finance Agency's independence standards do not include as a disqualifying relationship any business relationships between a director's member institution and the Bank. Consistent with the rule, the Bank's Board does not believe that the statutorily prescribed business relationships between a director's member institution and the Bank interfere with the director's exercise of his or her independent judgment. The national securities exchanges' independence definition, including those of the NASDAQ, do not generally take into account the cooperative nature of the Bank. Accordingly, the Bank's Board believes that the appropriate standard for measuring director independence is the Finance Agency's independence standards.

Applying the Finance Agency independence standards, the Board has determined that all directors who served in 2017 were, and all current directors are, independent.

228

Director Independence under the NASDAQ Rules

If the Bank uses the NASDAQ standard for purposes of complying with the SEC disclosure rules, the Board must make an affirmative determination that the director does not have a relationship with the Bank that would impair his or her independence.“Independent director” under the NASDAQ rules means a person other than an executive officer or employee of the company or any other individual having a relationship which, in the opinion of the issuer's board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

In addition, the NASDAQ rules set forth seven relationships that automatically preclude a determination of director independence. Among other things, a director is not considered to be independent if the director is, or has a family member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the Bank made, or from which the Bank received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient's consolidated gross revenues for that year, or $200,000, whichever is more. This particular relationship is referred to below as the payments/revenues relationship.

Using the NASDAQ rules, the Board affirmatively determined that in its opinion Ms. Guzman, Mr. Luikart, Mr. Murray, Mr. Nielsen, Mr. Siciliano, Mr. Syphax, and Mr. Wasley, who are current nonmember directors and are not employed by and do not serve as a director of any member institution, are independent and, to the extent they served as nonmember directors in 2017, were independent in 2017 under the NASDAQ rules because they have no relationship with the Bank that would interfere with their exercise of independent judgment in carrying out their responsibilities.

Using the NASDAQ rules, the Board affirmatively determined that in its opinion the following current member directors are independent and, to the extent they served as member directors in 2017, were independent in 2017 under the NASDAQ rules because they have no relationship with the Bank that would interfere with their exercise of independent judgment in carrying out their responsibilities as directors: Mr. Ball, Mr. Beal, Mr. Blunden, Mr. Domingo, Ms. Lagomarsino, Ms. Opp, Mr. Riley, and Mr. Robinson.

In making these determinations, the Board recognized that during their directorships the member directors were employed by or served as a director of a member institution that may have conducted business with the Bank in the ordinary course of the Bank's and the member institution’s respective businesses. The Board determined that these ordinary course customer relationships with the member institutions that had or have member directors on the Board would not interfere with the member directors' exercise of independent judgment or their independence from management under the NASDAQ rules. This determination is based on the fact that the Bank was created by Congress, the Bank has a cooperative ownership structure, the Bank is statutorily required to have member directors who are either an officer or director of a Bank member, the Bank was created to provide its members with products and services, and the Board is statutorily required to administer the affairs of the Bank fairly and impartially and without discrimination in favor of or against any member borrower.

Audit Committee Independence

The Board has an Audit Committee. Under the Finance Agency's independence standards and NASDAQ rules, all Audit Committee members who served in 2017 were independent and all current Audit Committee members are independent.

All Audit Committee members who served in 2017 and all current Audit Committee members met the substantive independence rules under Section 10A(m) of the 1934 Act.

229

Compensation and Human Resources Committee Independence

The Board has a Compensation and Human Resources Committee. Using the Finance Agency's director independence standards and under the NASDAQ rules, all Compensation and Human Resources Committee members who served in 2017 were independent, and all current Compensation and Human Resources Committee members are independent.

Under the NASDAQ rules, to be considered an independent compensation committee member, a director must meet the definition under the general NASDAQ independence rules, and the board of directors must affirmatively determine the independence of any director who will serve on the company’s compensation committee and must consider all factors specifically relevant to determining whether such a director has a relationship to the company that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member. Relevant factors must include the source of compensation of directors, including any consulting, advisory, or other compensatory fee paid by the company to the directors and whether the director is affiliated with the company.

Governance Committee

The Board has a Governance Committee that performs certain functions that are similar to those of a nominating committee with respect to the nomination of nonmember independent directors. Using the Finance Agency’s director independence standards, all Governance Committee members who served in 2017 were independent and all current Governance Committee members are independent.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table sets forth the aggregate fees billed to the Federal Home Loan Bank of San Francisco (Bank) for the years ended December 31, 2017 and 2016, by its external accounting firm, PricewaterhouseCoopers LLP.

(In millions)	2017		2016
Audit fees	$	1.0	$	1.0
All other fees	—		—
Total	$	1.0	$	1.0

Audit Fees. Audit fees during 2017 and 2016 were for professional services rendered in connection with the audits of the Bank's annual financial statements, the review of the Bank's quarterly financial statements included in each Quarterly Report on Form 10-Q, and the audit of the Bank's internal control over financial reporting.

All Other Fees. All other fees for 2017 and 2016 were for consulting and advisory services. The Bank is exempt from all federal, state, and local taxation, and no tax consulting fees were paid during 2017 and 2016.

Audit Committee Pre-Approval Policy

In accordance with the Securities and Exchange Commission rules and regulations implementing the Securities Exchange Act of 1934 (SEC rules), all audit, audit-related, and non-audit services proposed to be performed by the Bank's independent auditor must be pre-approved by the Audit Committee to ensure that they do not impair the auditor's independence. The SEC rules require that proposed services either be specifically pre-approved on a case-by-case basis (specific pre-approval services) or be pre-approved without case-by-case review under policies and procedures established by the Audit Committee that are detailed as to the particular service and do not delegate Audit Committee responsibilities to management (general pre-approval services).

The Bank's Audit Committee has adopted a policy, the Independent Auditor Services Pre-Approval Policy (Policy), setting forth the procedures and conditions pursuant to which services proposed to be performed by the Bank's

230

independent auditor may be approved. Under the Policy, unless services to be provided by the independent auditor have received general pre-approval, they require specific pre-approval by the Audit Committee. Any proposed services exceeding the pre-approved maximum fee amounts set forth in the appendices to the Policy will also require specific pre-approval by the Audit Committee.

The Policy is designed to be detailed as to the particular services that may be provided by the independent auditor and to provide for the Audit Committee to be informed of each service provided by the independent auditor. The Policy is also intended to ensure that the Audit Committee does not delegate to management its responsibilities in connection with the approval of services to be provided by the independent auditor.

For both specific pre-approval and general pre-approval of services, the Audit Committee considers whether the proposed services are consistent with the SEC rules on auditor independence and whether the provision of the services by the independent auditor would impair the independent auditor's independence. The Audit Committee also considers (i) whether the independent auditor is positioned to provide effective and efficient services, given its familiarity with the Bank's business, management, culture, accounting systems, risk profile, and other factors, and (ii) whether having the independent auditor provide the service may enhance the Bank's ability to manage or control risk or improve audit quality. The Audit Committee also considers the total amounts of fees for audit, audit-related, and non-audit services for a given calendar year in deciding whether to pre-approve any such services and may choose to determine, for a particular calendar year, the appropriate ratio between the total amount of fees for audit and audit-related services and the total amount of fees for permissible non-audit services.

The Audit Committee annually reviews and pre-approves the services that may be provided by the independent auditor during a given calendar year without specific pre-approval from the Audit Committee.

The Audit Committee has delegated to its chair and vice chair individually specific pre-approval authority for additional audit or audit-related services to be provided by the independent auditor, provided that the estimated fee for each type of proposed service does not exceed $50,000 and the total aggregated fees for all services pre-approved by each individual under this delegated authority do not exceed $100,000 in a calendar year. The chair or vice chair, as the case may be, is required to report to the Audit Committee any services pre-approved under the delegated authority.

In 2017 and 2016, 100% of the audit-related fees and all other fees were pre-approved by the Audit Committee.

PART IV.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) (1) Financial Statements

The financial statements included as part of this Form 10-K are identified in the Index to Audited Financial Statements appearing in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K, which is incorporated in this Item 15 by reference.

(2) Financial Statement Schedules

All financial statement schedules are omitted because they are either not applicable or the required information is shown in the financial statements or the notes thereto.

(b)Exhibits

Exhibit No.	Description
3.1	Organization Certificate and resolutions relating to the organization of the Federal Home Loan Bank of San Francisco incorporated by reference to Exhibit 3.1 to the Bank's Registration Statement on Form 10 filed with the Securities and Exchange Commission on June 30, 2005 (Commission File No. 000-51398)

231

3.2	Bylaws of the Federal Home Loan Bank of San Francisco, as amended and restated on January 26, 2018
4.1	Capital Plan, as amended and restated effective April 1, 2015, and updated August 3, 2015, to reflect adjustments to activity-based stock requirements, incorporated by reference to Exhibit 4.1 to the Bank's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 11, 2016 (Commission File No. 000-51398)
10.1	Summary Sheet: Terms of Employment for Named Executive Officers for 2018
10.2	Form of Director Indemnification Agreement, incorporated by reference to Exhibit 10.2 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2017 (Commission File No. 000-51398)
10.3	Form of Senior Officer Indemnification Agreement, incorporated by reference to Exhibit 10.3 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2017 (Commission File No. 000-51398)
10.4	Employment Agreement by and among the Federal Home Loan Bank of San Francisco and John Gregory Seibly, dated April 26, 2016, as amended, incorporated by reference to Exhibit 10.1 to the Bank's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 4, 2016 (Commission File No. 000-51398)
10.5	Change in Control Severance Agreement for Lisa B. MacMillen, incorporated by reference to Exhibit 99.2 to the Bank's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 7, 2011 (Commission File No. 000-51398)
10.6	Board Resolution for 2018 Board of Directors Compensation and Expense Reimbursement Policy
10.7	Executive Incentive Plan, Appendices I-III, as approved December 23, 2016 and Appendix IV, as approved December 1, 2017
10.8	2016 Executive Performance Unit Plan, as amended, incorporated by reference to Exhibit 10.13 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2017 (Commission File No. 000-51398)
10.9	2016 Executive Performance Unit Plan Summary Description, as amended, incorporated by reference to Exhibit 10.14 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2017 (Commission File No. 000-51398)
10.10	2015 Executive Performance Unit Plan, as amended, incorporated by reference to Exhibit 10.15 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2017 (Commission File No. 000-51398)
10.11	2015 Executive Performance Unit Plan Summary Description, as amended, incorporated by reference to Exhibit 10.16 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2017 (Commission File No. 000-51398)
10.12	Supplemental Executive Retirement Plan, as amended and restated effective January 1, 2018
10.13	Executive Benefit Plan, incorporated by reference to Exhibit 10.11 to the Bank's Registration Statement on Form 10 filed with the Securities and Exchange Commission on June 30, 2005 (Commission File No. 000-51398)
10.14	Original Deferred Compensation Plan, as restated, incorporated by reference to Exhibit 10.13 to Bank's Registration Statement on Form 10 filed with the Securities and Exchange Commission on June 30, 2005 (Commission File No. 000-51398)
10.15	Deferred Compensation Plan Amended and Restated Effective January 1, 2009, incorporated by reference to Exhibit 10.14 to the Bank's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 23, 2011 (Commission File No. 000-51398)
10.16	Corporate Senior Officer Severance Policy, as amended and restated on August 14, 2013, incorporated by reference to Exhibit 10.16 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2014 (Commission File No. 000-51398)
10.17	Amended and Restated Federal Home Loan Bank P&I Funding and Contingency Plan Agreement, effective as of January 1, 2017, by and among the Office of Finance and each of the Federal Home Loan Banks, incorporated by reference to Exhibit 10.23 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2017 (Commission File No. 000-51398)
10.18	Joint Capital Enhancement Agreement, as amended August 5, 2011, with the other 11 Federal Home Loan Banks, incorporated by reference to Exhibit 99.1 to the Bank's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2011 (Commission File No. 000-51398)

232

12.1	Computation of Ratio of Earnings to Fixed Charges – December 31, 2017
31.1	Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1++	Audit Committee Report
101	Pursuant to Rule 405 of Regulation S-T, the following financial information from the Bank's annual report on Form 10-K for the period ended December 31, 2016, is formatted in XBRL interactive data files: (i) Statements of Condition at December 31, 2017 and 2016; (ii) Statements of Income for the Years Ended December 31, 2017, 2016, and 2015; (iii) Statements of Comprehensive Income for the Years Ended December 31, 2017, 2016, and 2015; (iv) Statements of Capital Accounts for the Years Ended December 31, 2017, 2016, and 2015; (v) Statements of Cash Flows for the Years Ended December 31, 2017, 2016, and 2015; and (vi) Notes to Financial Statements.

++ The report contained in Exhibit 99.1 is being furnished and will not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

233

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, on March 9, 2018.

FEDERAL HOME LOAN BANK OF SAN FRANCISCO

/S/ J. GREGORY SEIBLY

J. Gregory Seibly

President and Chief Executive Officer

March 9, 2018

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, on March 9, 2018.

/S/ J. GREGORY SEIBLY

J. Gregory Seibly

President and Chief Executive Officer

(Principal executive officer)

/S/ KENNETH C. MILLER

Kenneth C. Miller

Senior Vice President and Chief Financial Officer

(Principal financial officer and Principal accounting officer)

/S/ JOHN F. LUIKART  

John F. Luikart

Chair of the Board of Directors

/S/ BRIAN M. RILEY

Brian M. Riley

Vice Chair of the Board of Directors

/S/ JEFFREY K. BALL

Jeffrey K. Ball

Director

/S/ BRADLEY W. BEAL

Bradley W. Beal

Director

/S/ CRAIG G. BLUNDEN

Craig G. Blunden Director

/S/ MARANGAL I. DOMINGO

Marangal I. Domingo

Director

234

/S/ MELINDA GUZMAN

Melinda Guzman

Director

/S/ SIMONE LAGOMARSINO

Simone Lagomarsino

Director

/S/ KEVIN MURRAY

Kevin Murray

Director

/S/ ROBERT F. NIELSEN

Robert F. Nielsen

Director

/S/ JOAN C. OPP

Joan C. Opp

Director

/S/ JOHN F. ROBINSON

John F. Robinson

Director

/S/ F. DANIEL SICILIANO

F. Daniel Siciliano

Director

/S/ SCOTT C. SYPHAX 

Scott C. Syphax

 Director

/S/ JOHN T. WASLEY

John T. Wasley

Director

235

EX-3.2

EXHIBIT 3.2

BYLAWS

of the

FEDERAL HOME LOAN BANK OF SAN FRANCISCO

As Amended and Restated on January 26, 2018

CONTENTS

Article I	OFFICES
	Sec. 1	Principal Office
	Sec. 2	Other Offices
Article II	MEMBER MEETINGS
	Sec. 1	Meetings
	Sec. 2	Member Voting
Article III	BOARD OF DIRECTORS
	Sec. 1	Board Composition and Director Elections
	Sec. 2	Regular Meetings
	Sec. 3	Special Meetings
	Sec. 4	Quorum; Voting
	Sec. 5	Officers of the Board of Directors
	Sec. 6	Presiding Officers; Acting Officers
	Sec. 7	Removal of Officers of the Board of Directors
	Sec. 8	Order of Business; Minutes
	Sec. 9	Bank Policies and Plans
	Sec. 10	Action by Written Consent
	Sec. 11	Vacancies
	Sec. 12	Director Compensation
Article IV	COMMITTEES OF THE BOARD OF DIRECTORS
	Sec. 1	General Provisions
	Sec. 2	Audit Committee
	Sec. 3	Risk Committee
	Sec. 4	Meetings
Article V	OFFICERS AND EMPLOYEES
	Sec. 1	Officers
	Sec. 2	Employees
	Sec. 3	Compensation
	Sec. 4	Acting President
Article VI	CAPITAL STOCK
	Sec. 1	Manner of Executing
	Sec. 2	Transfers
	Sec. 3	Dividends

i

Article VII	GENERAL PROVISIONS
	Sec. 1	Budgets
	Sec. 2	Bonds and Insurance
	Sec. 3	Indemnification
	Sec. 4	Limitation of Liability
	Sec. 5	Signing of Papers
	Sec. 6	Operations; Federal Housing Finance Agency Approval
	Sec. 7	Fiscal Year
	Sec. 8	Amendment of Bylaws
	Sec. 9	Corporate Seal
	Sec. 10	Designation of Law for Corporate Governance and Indemnification Practices and Procedures
Article VIII	EMERGENCY BYLAWS
	Sec. 1	Emergency
	Sec. 2	Meetings
	Sec. 3	Quorum
	Sec. 4	Bylaws
	Sec. 5	Liability
	Sec. 6	Repeal or Change

ii

FEDERAL HOME LOAN BANK OF SAN FRANCISCO

BYLAWS

ARTICLE I

Offices

Section 1.    Principal Office: The principal office of the Federal Home Loan Bank of San Francisco (Bank) is to be located in the City and County of San Francisco, State of California.

Section 2.    Other Offices: In addition to its principal office, the Bank may maintain offices at any other place or places, as may be designated from time to time by the Board of Directors.

ARTICLE II

Member Meetings

Section 1.    Meetings: Meetings of the members of the Bank shall be called upon the written request of the chief executive officer of the Bank or any eight members of the Board of Directors. The Board of Directors shall designate the time and place for such meeting, to be held not less than fifteen days nor more than sixty days after such request. Should the Board of Directors fail to act for a period of thirty days after the request for such meeting, the Secretary of the Bank shall designate a time and place. The Secretary of the Bank shall mail a notice of such meeting to each member of the Bank at its last known address as shown on the records of the Bank. Such notice shall be sent at least ten days before such meeting and shall contain a statement of the purpose and the time and place of the meeting.

The chair of the Board of Directors, or in his or her absence the vice chair, or in the absence of both of these officers, the President of the Bank, shall preside at each meeting of the members. Minutes of each meeting of the members shall be prepared by the Secretary of the Bank and shall be approved by the Board of Directors.

Section 2.Member Voting: The members shall be entitled to vote in connection with the election of directors in accordance with the provisions of the Federal Home Loan Bank Act, as amended, the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended, (together, the Acts) and the rules and regulations of the Federal Housing Finance Agency as in effect from time to time (Rules and Regulations), and the director election procedures as established by the Board of Directors in accordance with the requirements of the Acts and the Rules and Regulations. The members shall also be entitled to vote on such other matters as expressly provided for in the Acts and the Rules and Regulations, in accordance with the requirements of the Acts and the Rules and Regulations.

1

ARTICLE III

Board of Directors

Section 1.    Board Composition and Director Elections

(a)    Number, Qualifications, and Eligibility: The Board of Directors shall consist of thirteen members or such other number of members as established by the Federal Housing Finance Agency, from time to time, each of whom shall at all times meet the standards for eligibility set forth in the Acts and the Rules and Regulations. The directors shall be nominated and elected in such manner and for such terms of office as provided by the Acts and the Rules and Regulations. Directors are divided into two classes: (1) those who are officers or directors of a member of the Bank (“member directors”); and (2) those who are not member directors, but are elected by a plurality of the votes of the members of the Bank from among eligible persons nominated by the Board of Directors after consultation with the Affordable Housing Advisory Council of the Bank (“independent directors”). Member directors must constitute at least a majority, but no more than sixty percent, of the members of the Board of Directors, and independent directors must constitute at least forty percent of the members of the Board of Directors. At least two independent directors must also qualify as public interest directors. Annually, the Board shall determine how many, if any, of the independent director positions with terms beginning the following January 1 shall be public interest director positions, provided the Bank at all times has at least two public interest director positions. Independent directors shall be elected in an at-large election by a plurality of the members entitled to vote, with each member having the same number of votes as it has with respect to the election of member directors, determined as specified in the Acts and the Rules and Regulations. Member directors shall be elected as representing members located in a particular State, in the manner and with the number of votes specified in the Acts and the Rules and Regulations.

(b)    Nominations for Independent Director Positions: The committee of the Board of Directors responsible for corporate governance (“Governance Committee”) shall make recommendations to the Board of Directors regarding nominations for independent director positions. The Bank may solicit potential nominees for independent director positions from members; trade groups; organizations representing affordable housing, economic development, consumer or community interests; or other interested parties. The Governance Committee shall review applications and other information submitted by potential nominees, and shall consider for nomination only those individuals who meet the eligibility requirements and knowledge or experience qualifications for the independent director positions as set forth in the Acts and Rules and Regulations. Before recommending for nomination any individual for an independent director position, the Governance Committee shall review the potential nominees with the Affordable Housing Advisory Council and shall consider the Council’s comments in making a recommendation to the Board of Directors. The Board of Directors, by a majority vote of the Directors present at a meeting, a quorum being present (excluding any Director who is not disinterested), shall nominate at least as many qualified individuals as there are independent director positions to be filled in that election.

Section 2.    Regular Meetings: Regular meetings of the Board of Directors may be held at such time and place as shall be determined from time to time by resolution of the Board of Directors; provided, however, that regular meetings shall be held at least six times a year. Regular

2

meetings may be held without notice thereof, or the Board of Directors by resolution may direct the Secretary of the Bank to give three days' notice of each regular meeting to each director.

Section 3.    Special Meetings: Special meetings of the Board of Directors may be called by the chair of the Board of Directors or the chief executive officer of the Bank on at least forty-eight hours’ written notice (which may be by facsimile or email) to each director, and shall be called upon like notice by the Secretary of the Bank on the written request of four members of the Board of Directors (or the written request of two members of the Board of Directors, in the case of a special meeting to be held by telephone conference call) stating the reasons therefor. The notice of such special meeting shall designate the time and place of such meeting and shall contain a statement of the purpose or purposes of such meeting. Special meetings may be held without previous notice if all of the directors are actually present, or notice may be waived by any director before or after any such meeting. For any meeting held by telephone conference call, all members of the Board of Directors participating in the meeting must be able to hear and be heard by all other persons participating in the meeting.

Section 4.    Quorum; Voting: At any regular or special meeting of the Board of Directors, a majority of those authorized to act as directors shall constitute a quorum for the transaction of business. The majority of the directors present at any meeting, a quorum being present, shall conduct the business of the Board of Directors.

Section 5.    Officers of the Board of Directors: The officers of the Board of Directors shall be a chair and a vice chair, each of whom shall be elected for a two-year term by a majority of the directors from among the directors. The officers shall have such duties as are usually incident to their respective offices and such as may be assigned to them by the Board of Directors.

Section 6.    Presiding Officers; Acting Officers: At all meetings of the Board of Directors, the chair, or in his or her absence the vice chair, or in the absence of both of these officers, a chair pro tempore selected by vote of a majority of the directors present at the meeting, shall preside. If the position of chair is vacant or if a majority of the directors determines by action of the Board of Directors that the chair is more than temporarily unable to carry out the duties of office, the vice chair shall act as chair until the next regular or special meeting of the Board of Directors, at which meeting the Board of Directors shall by majority vote elect a new chair to complete the chair’s term. If the position of vice chair is vacant or if a majority of the directors determines by action of the Board of Directors that the vice chair is more than temporarily unable to carry out the duties of office, the chair of the Finance and Strategic Planning Committee of the Board of Directors shall serve as the acting vice chair until the next regular or special meeting of the Board of Directors, at which meeting the Board of Directors shall by majority vote elect a new vice chair to complete the vice chair’s term. An acting officer of the Board of Directors shall have all the powers of the incumbent office.

Section 7.    Removal of Officers of the Board of Directors: A chair, vice chair, or acting chair or vice chair of the Board of Directors may be removed from his or her position as an officer of the Board of Directors for good cause by vote of a majority of the directors. A successor to the officer being removed shall then be elected by a majority of the directors from among the directors to complete the officer’s remaining term.

Section 8.    Order of Business; Minutes: At meetings of the Board of Directors, business shall be transacted in such order as,from time to time, the Board of Directors may determine. Minutes

3

of each meeting of the Board of Directors shall be prepared by the Secretary of the Bank and shall be approved by the Board of Directors.

Section 9.    Bank Policies and Plans: In accordance with the Acts and the Rules and Regulations, the Board of Directors shall adopt and review from time to time such Bank policies and plans as may be required by the Acts and the Rules and Regulations to be approved by the Board of Directors.

Section 10.    Action by Written Consent: Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing (which may be by facsimile or email) and the writing is maintained as a record of the Bank with the minutes of the proceedings of the Board of Directors.

Section 11.Vacancies: When any vacancy in a director position occurs, including as a result of a determination by the Bank or the Federal Housing Finance Agency that any director of the Bank no longer satisfies the eligibility requirements set forth in the Acts and the Rules and Regulations, or that a director has failed to comply with the reporting requirements of the Acts and the Rules and Regulations, the Board of Directors of the Bank shall select, by a majority vote of the remaining Bank directors sitting as a board, an individual to fill the unexpired term of vacant director position, regardless of whether the remaining Bank directors constitute a quorum of the Bank’s Board of Directors. The Board of Directors of the Bank shall select to a vacant director position an individual who satisfies all of the eligibility requirements and any of the qualification requirements set forth in the Acts and the Rules and Regulations, except that if the vacant director position is a public interest director position and the Bank has at least two other public interest director positions that are not vacant, the Board of Directors may select any individual who is eligible and qualified for any independent director position. Prior to the Board of Director’s selection of any individual to fill a vacancy on the Board of Directors, the Bank must verify an individual’s eligibility to serve in the manner required by the Federal Housing Finance Agency before allowing such individual to assume the director position.

Section 12.    Director Compensation: The Board of Directors shall annually adopt a written policy to provide for payment of compensation and expenses to the directors in accordance with the Acts and the Rules and Regulations.

ARTICLE IV

Committees of the Board of Directors

Section 1.General Provisions: The Board of Directors shall establish such committees of the Board as are required by the Acts and the Rules and Regulations, and may establish such other committees, including an executive committee, as the Board of Directors deems necessary or appropriate, each committee to consist of three or more directors. The Board of Directors shall designate the chair, vice chair and other members of each committee. Each committee shall have and may exercise such power and authority as may be established by the Board of Directors and, if applicable, specified in the Acts and the Rules and Regulations. For each committee, the Board of Directors shall adopt a charter that sets forth the purpose and operations of the committee and meets such other criteria as may be specified in the Acts and the Rules and Regulations.

4

Section 2.    Audit Committee: The Board of Directors shall establish an Audit Committee, which shall consist of at least five directors meeting the criteria established by the Acts and the Rules and Regulations. The Board of Directors may by resolution from time to time change the members of the Audit Committee. The Audit Committee shall have and may exercise such power and authority as may be established by the Board of Directors and as specified in the Acts and the Rules and Regulations.

Section 3.     Risk Committee: The Board of Directors shall establish a Risk Committee, which shall consist of three or more directors meeting the criteria established by the Acts and the Rules and Regulations. The Board of Directors may by resolution from time to time change the members of the Risk Committee. The Risk Committee shall have and may exercise such power and authority as may be established by the Board of Directors and as specified in the Acts and the Rules and Regulations.

Section 4.    Meetings: The business of each committee of the Board of Directors shall be conducted in all material respects in the same manner as provided in these Bylaws for the conduct of business by the Board of Directors. Regular meetings of a committee may be held at such time and place as shall be determined by the Board of Directors or the committee upon at least forty-eight hours’ written notice (which may be by facsimile or email) to each member of the committee. Special meetings of a committee may be called by the Board of Directors or the chair of the committee or the chief executive officer of the Bank on at least forty-eight hours’ written notice (which may be by facsimile or email) to each member of the committee, such notice designating the time and place of such meeting and containing a statement of the purpose of the meeting. Special meetings of a committee may be held without previous notice if all of the members of the committee are actually present, or notice may be waived by any committee member before or after any such meeting. Any regular or special committee meeting may be held by telephone conference call during which all members of the committee participating in the meeting are able to hear and be heard by all other persons participating in the meeting. For any committee meeting, a majority of directors who are members of the committee shall constitute a quorum for the transaction of business; the majority of the committee members present at any meeting, a quorum being present, shall conduct the business of the committee. Any action required or permitted to be taken at any meeting of a committee may be taken without a meeting if all members of the committee consent thereto in writing (which may be by facsimile or email), and the writing is maintained as a record of the Bank with the minutes of the proceedings of the committee. Minutes of each committee meeting shall be prepared by the Secretary of the Bank and shall be approved by the Board of Directors.

ARTICLE V

Officers and Employees

Section 1.    Officers: The corporate officers of the Bank shall be a President, one or more Vice Presidents (including any Senior Vice President or Vice President, but not including any Assistant Vice President), and a Secretary, and such other corporate officers, who shall have such authority and shall perform such duties as are usually incident to their respective offices and as the Board of Directors shall prescribe. The President shall be the chief executive officer of the Bank and shall be primarily responsible for the operation and management of the Bank. To the extent not inconsistent with the Acts and the Rules and Regulations, one person may hold any two offices. The Board of Directors shall elect corporate officers at the level of Senior Vice President

5

and above. The President may appoint any Vice President (but not any Senior Vice President) as a corporate officer, and may also appoint additional officers, including any Assistant Vice President, as functional officers. Functional officers shall hold management positions that report directly to a corporate officer and shall have such powers and duties as are usually incident to their respective offices and as may be assigned to them by the President or by the corporate officers. Each officer of the Bank shall serve at the pleasure of the Bank and shall devote his or her time, skill and energy to the business of the Bank, unless the contrary is expressly approved by the Board of Directors. The corporate officers of the Bank may extend or deny credit and take such other action as is in conformity with the policies of the Bank, the Acts and the Rules and Regulations.

Section 2.    Employees: The Bank shall also have such other employees as the Board of Directors may authorize or whose appointment the Board of Directors may ratify. Employees of the Bank shall serve at the pleasure of the Bank and shall have such duties as are usually incident to their respective positions and as may be assigned to them by the President or other officers of the Bank.

Section 3.    Compensation: The Board of Directors shall fix the compensation of the President and other officers at the level of Senior Vice President and above. The compensation of all other officers and employees of the Bank shall be fixed by the President and shall be within the annual operating expense budgets approved for the Bank by the Board of Directors.

Section 4.    Acting President: The Board of Directors may from time to time designate an individual to act as President in the event of the resignation, removal, death or incapacity of the elected President. Such acting President shall have all of the powers conferred upon the President under these Bylaws, by resolution of the Board of Directors or any committee or by applicable law, and shall hold such position until such time as the elected President shall no longer be incapacitated or until such time as the Board of Directors shall elect a successor President.

ARTICLE VI

Capital Stock

Section 1.    Manner of Executing: The Bank may issue or cause to be issued to each member a certificate or written verification in such form as the Bank may determine certifying the number of shares of Bank stock owned by the member.

Section 2.    Transfers: Subject to the provisions of the Acts and the Rules and Regulations, and the Bank’s Capital Plan, Bank stock shall be transferable only upon the records of the Bank upon the request of a duly authorized representative of the holder. Each transfer shall be recorded and a record of each transfer shall be maintained as a record of the Bank.

Section 3.    Dividends: Dividends may be declared by the Board of Directors at its discretion, provided that such dividends shall be declared and paid in the manner prescribed by the Acts and the Rules and Regulations, and the Bank’s Capital Plan.

6

ARTICLE VII

General Provisions

Section 1.    Budgets: The Board of Directors shall annually adopt an operating expense budget and a capital expenditures budget (subject to amendment from time to time, as determined by the Board of Directors) and shall take such actions with respect to such budgets as are required by the Acts and the Rules and Regulations.

Section 2.    Bonds and Insurance: The Bank shall maintain adequate financial institution crime or fidelity bonds or similar bonds or insurance covering all officers, employees, attorneys, or agents having control over or access to monies or securities owned by the Bank or in its possession.

Section 3.Indemnification:

(a)    Actions Other than By or in the Right of the Bank. The Bank shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal (other than an action by or in the right of the Bank) by reason of the fact that he or she is or was a director, officer, employee, manager, trustee or agent of the Bank, or is or was serving at the request of the Bank as a director, officer, employee, manager, trustee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise, or any joint office (including the Office of Finance), committee or council of the Federal Home Loan Banks, the Financing Corporation, the Resolution Funding Corporation or any other instrumentality or agency of the United States government, against expenses (including costs and attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Bank, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Bank, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

(b)    Actions By or in the Right of the Bank. The Bank shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Bank to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee, manager, trustee or agent of the Bank, or is or was serving at the request of the Bank as a director, officer, employee, manager, trustee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise, or any joint office (including the Office of Finance), committee or council of the Federal Home Loan Banks, the Financing Corporation, the Resolution Funding Corporation or any other instrumentality or agency of the United States government, against expenses (including costs and attorneys' fees) actually and reasonably incurred by him or her or in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the

7

Bank, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Bank, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. As used in this paragraph, the term "expenses" includes, without limitation, attorneys' fees and any expenses of successfully establishing a right to indemnification under this section.

(c)    Entitlement to Indemnification. To the extent that a current or former director, officer, employee, manager, trustee or agent of the Bank has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including costs and attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

(d)    Authorization of Indemnification under paragraphs (a) and (b). Except as provided in paragraph (c), any indemnification under paragraphs (a) and (b) (unless ordered by a court) shall be made by the Bank only as authorized in the specific case upon a determination that indemnification of the current or former director, officer, employee, manager, trustee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in paragraphs (a) and (b). Such determination shall be made (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion.

(e)    Right of Indemnitees to Bring Suit. In the event any indemnification provided by paragraphs (a) and (b) of this section is not made in full within ninety days after a written claim therefor has been received by the Bank from a director, officer, employee, manager, trustee or agent entitled to indemnification pursuant to paragraph (c) of this section or as to whom indemnification has been authorized pursuant to paragraph (d) of this section, the claimant may at any time thereafter, subject to any arbitration or other agreement between the claimant and the Bank, bring suit against the Bank to recover the unpaid amount of the claim for indemnification and, if successful in whole or in part, the claimant shall be entitled to recover also the expense of prosecuting such claim for indemnification.

(f)    Advance Payment of Expenses. Expenses (including costs and attorneys’ fees) incurred by a director, officer, employee, manager, trustee or agent in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Bank in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Bank as authorized in this section. Such expenses (including costs and attorneys’ fees) incurred by former directors and officers or other employees and agents and trustees may be so paid upon such terms and conditions, if any, as the Bank deems appropriate. Without limiting the foregoing, an unsecured undertaking to repay the Bank in the event such person is ultimately determined not to be entitled to indemnification shall be considered a reasonable condition upon which to advance such costs and expenses.

8

(g)    Rights Not Exclusive. The indemnification and advancement of expenses provided by this section shall not be deemed exclusive of any other rights to which anyone seeking indemnification or advancement of expenses may be entitled under any other provisions of these Bylaws, any agreement providing for indemnification or advancement of expenses, any vote of disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office. A right to indemnification or to advancement of expenses arising under these Bylaws shall not be eliminated or impaired by an amendment to these Bylaws after the occurrence of the act or omission that is the subject of the action, suit or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal, for which indemnification or advancement of expenses is sought.

(h)    Insurance. The Bank shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, manager, trustee or agent of the Bank, or is or was serving at the request of the Bank as a director, officer, employee, manager, trustee or agent of another corporation, partnership, limited liability company, joint venture, trust or other enterprise, or any joint office (including the Office of Finance), committee or council of the Federal Home Loan Banks, the Financing Corporation, the Resolution Funding Corporation or any other instrumentality or agency of the United States government, against any liability asserted against and incurred by such person in any such capacity or arising out of his or her status as such, whether or not the Bank would have the power to indemnify such person against such liability under the provisions of this section.

(i)    Certain Definitions. For purposes of this section, references to: (1) "other enterprises" shall include employee benefit plans; (2) "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and (3) "serving at the request of the Bank" shall include any service as a director, officer, employee, manager, trustee or agent of the Bank which imposes duties on, or involves services by, such director, officer, employee, manager, trustee or agent with respect to an employee benefit plan, its participants or beneficiaries. A person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Bank" as set forth in this section. References to "action," "suit" or "proceeding" shall include any appeal or other proceeding for review.

(j)    Successors to Indemnitees. The indemnification and advancement of expenses provided by this section or otherwise granted by the Bank shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee, manager, trustee or agent and shall inure to the benefit of the heirs, executors, administrators and other legal representatives of such person.

(k)    Prohibited Payments. The Bank shall not make any indemnification payments to any person under paragraphs (a), (b) or (c) of this section if such payment is prohibited by an order issued by the Director of the Federal Housing Finance Agency.

Section 4.    Limitation of Liability. To the fullest extent permitted by Delaware statutory and decisional law, as amended or interpreted, no current or former director shall be personally liable to the Bank or its shareholders for monetary damages for breach of fiduciary duty as a director of the Bank.

9

Section 5.    Signing of Papers: All agreements, instruments, and other documents binding the Bank, except checks and agreements relating to real property leases, shall be signed in the name of the Bank by the President or any Senior Vice President, or by any two employees authorized for that purpose by the President, at least one of whom shall be an officer or a manager, administrator or other employee of equal or greater rank. Checks, orders for payment, notes or other evidences of indebtedness issued in the name of the Bank shall be signed in the name of the Bank as determined by the Board of Directors from time to time. Real property leases, real property lease extensions, and other lease amendments shall be signed by the President or the Chief Financial Officer.

Section 6.    Operations; Federal Housing Finance Agency Approval: The Bank shall operate and do business within the provisions of the Acts and the Rules and Regulations, its certificate of organization, and these Bylaws. Where these Bylaws require or permit an action to be taken by the Bank, the Board of Directors or any of the Bank’s officers or employees, which action requires the prior approval or notice without objection of the Federal Housing Finance Agency under the provisions of the Acts and the Rules and Regulations or the policies of the Federal Housing Finance Agency, such approval or notice without objection of the Federal Housing Finance Agency shall be obtained or given, as appropriate, prior to such action taking effect.

Section 7.    Fiscal Year: The fiscal year of the Bank shall begin on the first day of January.

Section 8.    Amendment of Bylaws: These Bylaws may be amended by the affirmative vote of a majority of the Board of Directors at any regular or special meeting of the Board of Directors, provided that each director shall have been given notice of the proposed amendment and of the form of such amendment at least five days preceding any meeting called for such purpose. The Bylaws may be amended by the affirmative vote of a majority of the Board of Directors at any regular meeting without written notice of the proposed amendment and of the form of the amendment being given to each director, provided that the form of the proposed amendment has been submitted to the Board for consideration at the previous regular meeting of the Board of Directors and has been incorporated in the minutes of said meeting.

Section 9.    Corporate Seal: The seal of the Bank shall be in the charge of the Secretary of the Bank and may be used, as needed, by the Secretary and such Bank officer(s) as may be designated in writing by the Secretary.

Section 10.    Designation of Law for Corporate Governance and Indemnification Practices and Procedures: To the extent not inconsistent with applicable federal law, including, but not limited to, the Acts and the Rules and Regulations, and pursuant and subject to 12 C.F.R. Part 1239 (or applicable successor provisions), the Bank has elected to follow the corporate governance and indemnification practices and procedures of the Delaware General Corporation Law and as provided by Delaware decisional law, as the same may be amended or interpreted. The rights of Bank members and shareholders are conferred by the Acts and the Rules and Regulations, not by any provision of state law. Nothing in these Bylaws shall create or be deemed to create any rights under the laws of Delaware or otherwise, in any third party, including any member or shareholder of the Bank, including without limitation, rights with respect to shareholder procedures, shareholder actions, dividends, stock, assets, liabilities, business combinations, stock ownership, director nominations, elections, removals and vacancies, liquidations, derivative actions, Bylaw amendments, voting, inspection, meeting mechanics, or other shareholder procedural provisions,

10

nor shall anything in these Bylaws cause or be deemed to cause the Bank, or its directors, officers or employees to become subject to the jurisdiction of any state court.

ARTICLE VIII

Emergency Bylaws

Section 1.    Emergency: This Article VIII shall be operative if a meeting or action of the Board of Directors is requested or required during the existence of any catastrophe or other similar emergency conditionas a result of which a meeting consisting of a quorum of the Board of Directors cannot be readily convened as provided in Article III of these Bylaws (an “emergency”), notwithstanding any different or conflicting provision in the preceding Articles of these Bylaws. An emergency may be declared by any director, or the President calling a meeting under Section 2 of this Article VIII, and such declaration shall be ratified by the act of a majority of the directors, present at such meeting at which a quorum, pursuant to Section 3 of this Article VIII, is present. Such emergency shall terminate by the act of a majority of the directors present at any meeting at which a quorum, pursuant to Section 3 of this Article VIII, or pursuant to Article III of these Bylaws, is present. To the extent not inconsistent with the provisions of this Article VIII, the Bylaws provided in the preceding Articles shall remain in effect during such emergency, and upon termination of such emergency, the provisions of this Article VIII shall cease to be operative.

Section 2.    Meetings: During any emergency, a meeting of the Board of Directors may be called by any director, or the President with notice of the time and place of the meeting attempted to all directors, by any available means of communication, by the person calling the meeting at such time in advance of the meeting as circumstances permit, in the judgment of the person calling the meeting.

Section 3.    Quorum: At any meeting of the Board of Directors called in accordance with Section 2 of this Article VIII, the presence or participation of five directors shall constitute a quorum for the transaction of business.

Section 4.    Bylaws: At any meeting called in accordance with Section 2 of this Article, the Board of Directors may modify, amend or add to the provisions of this Article VIII so as to make any provision that may be practical or necessary under the circumstances of the emergency.

Section 5.    Liability: No director, officer, employee, or agent of the Bank acting in accordance with the provisions of this Article VIII shall be liable except for willful misconduct.

Section 6.    Repeal or Change: The provisions of this Article VIII shall be subject to repeal or change by further action of the Board of Directors, but no such repeal or change shall modify the provisions of Section 5 of this Article with regard to action taken prior to the time of such repeal or change.

11

EX-10.1

EXHIBIT 10.1

Summary Sheet: Terms of Employment for Named Executive Officers for 2018

Employment Status

Pursuant to the Federal Home Loan Bank Act, the employees of the Federal Home Loan Bank of San Francisco (the "Bank"), including the Bank's chief executive officer, the chief financial officer and other current named executive officers as of December 31, 2017 (J. Gregory Seibly, Kenneth C. Miller, Lawrence H. Parks, Suzanne Titus-Johnson and Stephen P. Traynor) (the “named executive officers”), are “at will” employees. The named executive officers may resign at any time and the Bank may terminate their employment at any time for any reason or no reason, with or without cause and with or without notice.

Each of the named executive officers receives a base salary and is eligible to participate in the Bank's executive incentive compensation plans and comprehensive benefit programs, including both qualified and nonqualified retirement benefit plans. For 2018, the base salaries of the current named executive officers are as follows: J. Gregory Seibly, $900,000; Kenneth C. Miller, $481,319; Lawrence H. Parks, $476,993; Stephen P. Traynor, $435,846; and Suzanne Titus-Johnson, $427,553.

On occasion, the Bank may pay for resort activities for employees, including our named executive officers, in connection with business-related meetings; and in some cases, the Bank may pay the expenses for spouses/partners accompanying employees to these meetings or other Bank-sponsored events.

The Board adopted the Corporate Senior Officer Severance Policy (Senior Officers' Policy) applicable to the president and senior vice presidents. The Senior Officers' Policy provides severance benefits in the event that the employee's employment is terminated because the employee's job or position is eliminated or because the job or position is substantially modified so that the employee is no longer qualified or cannot perform the revised job. For these officers, severance under the Senior Officers' Policy is equal to the greater of (i) 12 weeks of the officer's base salary, or (ii) the sum of three weeks of the officer's base salary, plus three weeks of the officer's base salary for each full year of service and three weeks of base salary prorated for each partial year of service at the Bank to a maximum of 52 weeks of base salary. The Senior Officers' Policy also provides one month of continued health and life insurance benefits and, at the Bank's discretion, outplacement assistance. The Senior Officers' Policy also provides severance payments in connection with a "Change in Control" (as defined by the Senior Officers' Policy).

In April 2016, the Bank entered into an employment agreement with Mr. Seibly with an initial term of three years and one-year terms thereafter, unless terminated at any time by either the Bank or Mr. Seibly. Under the terms of the agreement, Mr. Seibly initially received a base annual salary of $800,000 and a sign-on payment of $600,000 to be received in two equal installments within 30 days of each of the first and second anniversaries of Mr. Seibly’s employment start date, and subject to clawback in certain circumstances. The base annual salary is subject to review at the Board’s discretion. The employment agreement provides for a severance payment equal to (i) two times his “Base Salary” (as defined in his employment agreement); and (ii) two times his “Annual Incentive Amounts” (as defined in his employment agreement) and continued benefits if Mr. Seibly’s employment is terminated under certain circumstances in connection with a “Change in Control” (as defined in his employment agreement) of the Bank.

Mr. Seibly is also eligible to participate in the Bank’s various executive incentive and employee benefit plans, including the Bank’s Supplemental Executive Retirement Plan (SERP), 2016 President's Incentive Plan, and the 2014-2016, 2015-2017, and 2016-2018 Executive Performance Unit Plans. Under Mr. Seibly’s employment agreement, the years of credited service and the amount of Bank contribution credits under the SERP, prior to its amendment effective January 2018, were as follows: 10% of total annual compensation for less than 4 years of credited service; 15% of total annual compensation for 4 or more years but less than 9 years of credited service; and 20% of total annual compensation for 9 or more years of credited service. In addition, Mr. Seibly’s employment agreement provides that he will receive a supplemental SERP contribution credit in the amount of $600,000, to be

1

credited in three equal installments over two years, with the first installment credited at the time his employment began and the second and third installments credited on the first and second anniversaries of his employment commencement, respectively. These supplemental SERP contribution credits will vest immediately when credited. Mr. Seibly’s employment agreement also provides for reimbursement of his relocation cost up to $250,000 and payment to the appropriate taxing authorities of up to $220,000 of any relocation tax obligations.

The employment agreement also provides that if Mr. Seibly’s employment is terminated due to the expiration of the initial three-year term and the Board decides not to extend his employment for any additional term, Mr. Seibly shall be entitled to receive a severance payment equal to twelve (12) months of base salary and a pro-rata portion of the president’s incentive plan (Severance Payment). The employment agreement further provides that if Mr. Seibly is terminated without “Cause” (as defined in his employment agreement) or if he terminates his employment for “Good Reason” (as defined in his employment agreement) any time during the initial three-year term, Mr. Seibly shall be entitled to receive severance payments equal to: the Severance Payment; all “Accrued Benefits” (as defined in his employment agreement); and all unpaid sign-on benefits.

2

EX-10.6

EXHIBIT 10.6

FEDERAL HOME LOAN BANK OF SAN FRANCISCO

RESOLUTION

September 29, 2017

RESOLVED, that the Board of Directors of the Federal Home Loan Bank of San Francisco hereby approves the 2018 Director Compensation and Expense Reimbursement Policy attached as Exhibit M, subject to completion of any applicable review period by the Federal Housing Finance Agency.

I certify that this is a true and correct copy of a resolution adopted by the Board of Directors of the Federal Home Loan Bank of San Francisco at its meeting on September 29, 2017.

/s/ Suzanne Titus-Johnson

Suzanne Titus-Johnson, Senior Vice President and

General Counsel-Corporate Secretary

EXHIBIT M

FEDERAL HOME LOAN BANK OF SAN FRANCISCO

Board of Directors

Compensation and Expense Reimbursement Policy

2018

The Board of Directors of the Federal Home Loan Bank of San Francisco hereby establishes the following Compensation and Expense Reimbursement Policy for 2018.

Compensation

To provide the Directors with reasonable compensation for the performance of their duties as members of the Board of Directors and the amount of time spent on official Bank business, the Bank will pay service and meeting fees to each member of the Board of Directors in accordance with the applicable position held by the Directoras set forth below.

Position	Maximum Annual Service Fee	Maximum Annual Meeting Fees	Total Maximum Annual Compensation1
Chair	$87,500	$47,500	$135,000
Vice Chair	$82,500	$47,500	$130,000
Audit and Risk Committee Chairs	$72,500	$47,500	$120,000
All Other Committee Chairs	$67,500	$47,500	$115,000
Directors on Audit Committee	$62,500	$47,500	$110,000
Other Directors	$57,500	$47,500	$105,000

In determining Total Maximum Annual Compensation, the Board considered compensation levels and practices at other Federal Home Loan Banks, the Directors Compensation Analysis—May 2017 report prepared by McLagan, and trends in the financial services market generally.

Service Fees

Service fees for the above positions compensate Directors for their continuous service as Bank directors, including for their time attending special Board and Committee meetings held during the year as needed, preparing for Board and Committee meetings, reviewing materials sent periodically between meetings, attending Director training and educational briefings, and all other activities outside the regularly scheduled two-day Board and Committee meetings, which may include attending Affordable Housing Advisory Council and Federal Home Loan Bank System meetings. Directors are expected to attend all Board meetings and meetings of the Committees on which they serve, and to remain engaged and actively participate in all meetings.

¹In addition to the Total Maximum Annual Compensation set forth in this table, Directors may receive up to an additional $1,500 in the form of expense reimbursement in accordance with the provisions on spouse/significant other and guest expenses, as set forth below.

Approved 9/29/2017 Page 1

The maximum annual service fee will be pro-rated and paid with the meeting fee, if applicable, at the conclusion of each two-month service period on the Board of Directors (i.e., month-end February, April, June, August, October and December). A Director will not be paid the final two-month service fee for the year if the Director has not attended (in person or by telephone) at least 75% of all regular and special meetings of the Board and the Committees on which the Director served during the year (adjusted as needed for partial year service), or if the Board, in its discretion, determines at any time that the Director has consistently demonstrated a lack of engagement and participation in meetings attended.

If a Director holds more than one position on the Board, during any applicable payment period, the Director’s service fee for that period will be calculated based on the position that pays the highest service fee, and will be pro-rated for the number of days the Director held that position during the applicable payment period. Any Director who joins or leaves the Board between service fee payments will receive a pro rata service fee for the number of days the Director was on the Board during the service period.

Meeting Fees

Each Director will receive a meeting fee of $9,500 for attending any portion of five of the six regularly scheduled two-day Board and Committee meetings, so long as the Director’s attendance includes the Board meeting and at least one Committee on which the Director serves. A Director may receive a meeting fee for participation in one regularly-scheduled Board and Committee meeting by telephone.

No meeting fee will be paid for participation in special meetings of the Board or Committees (in person or by telephone) or for participation in other Bank or Federal Home Loan Bank System activities.

The President and Chief Executive Officer of the Bank is authorized to interpret this Policy, as necessary, according to applicable statutory, regulatory and policy limits.

Expense Reimbursement

The Bank will reimburse Directors for necessary and reasonable travel, subsistence and other related expenses incurred in connection with the performance of their official duties, which may include participation in meetings or activities for which no fee is paid.

For expense reimbursement purposes, Directors’ “official duties” include:

1) Meetings of the Board and Board Committees

2) Meetings requested by the Federal Housing Finance Agency and Federal Home Loan Bank System Committees

3)    Meetings of the Council of Federal Home Loan Banks and its Committees

4) Meetings of the Bank's Affordable Housing Advisory Council

5) Events attended on behalf of the Bank when requested by the President in consultation with the Chair

Approved 9/29/2017 Page 2

6) Other events attended on behalf of the Bank with the prior approval of the Chair

7) Director education events attended with the prior approval of the Chair

8) National Association of Corporate Directors Annual Meeting

Each Director is responsible for making his or her own travel arrangements to attend meetings and other events for which expenses may be reimbursed.

Expenses reimbursable for Directors are the same as the expenses reimbursable for senior officers under the Bank’s Reimbursement and Travel Expense Policy, except that Directors may not be reimbursed for gift or entertainment expenses.

To be reimbursed for allowable expenses, a Director must submit the related receipts to the Bank, itemizing the expenses, within 30 days of completion of any covered trip or activity, and must include the following information:

1) Meeting(s) or event(s) attended, with dates and locations

2) Itemization of reimbursable expenses, with supporting receipts for any expense exceeding $50.00

3) Ticket receipt or e-ticket confirmation for airline travel

Spouse/Significant Other and Guest Expenses

In addition to the Total Maximum Annual Compensation set forth above, the Bank will pay (or reimburse) each Director up to an annual amount of $1,500 for (i) travel and group meal/function related expenses of spouses/significant others or a guest (collectively “approved guests”) accompanying Directors to the annual off-site Strategic Board Meeting; and/or, (ii) occasional attendance by approved guests at Board group dinners during regular Board meetings in San Francisco. The opportunity for approved guests to accompany Directors to the meeting and attend group dinners/meals/functions contributes to and enhances collegiality among the Board members and management, and their attendance is considered important and reasonable.

The cost of approved guests’ travel and meals paid (or reimbursed) by the Bank may be considered by the IRS to be taxable income and will appear on Directors’ Form 1099.

Records

The Bank will maintain records of (i) Directors’ attendance at meetings of the Board and Board committees; (ii) total compensation paid; and (iii) expenses reimbursed. The Bank will report this information to the Federal Housing Finance Agency as required.

Approved 9/29/2017 Page 3

EX-10.7

EXHIBIT 10.7

FHLBANK SAN FRANCISCO

EXECUTIVE INCENTIVE PLAN

Approved 12/23/2016

FEDERAL HOME LOAN BANK OF SAN FRANCISCO

EXECUTIVE INCENTIVE PLAN

TABLE OF CONTENTS

		PAGE
Article I	INTRODUCTION	1
Section 1.1	Purpose	1
Section 1.2	Effective Date	1
Section 1.3	Supplements	1
Article II	ELIGIBILITY AND PARTICIPATION	1
Section 2.1	Eligibility	1
Section 2.2	Participation	1
Article III	AWARDS	2
Section 3.1	Awards	2
Section 3.2	Performance Goals and Qualifiers	2
Section 3.3	Vesting of Awards for Participants	3
Section 3.4	Gap Year Awards for Participants	4
Section 3.5	Effect of Termination of Employment	5
Section 3.6	Effect of Change in Control	8
Section 3.7	Payment of Awards	8
Section 3.8	Reduction or Forfeiture of Awards	9
Article IV	ADMINISTRATION	10
Section 4.1	Appointment of the President and CEO	10
Section 4.2	Powers and Responsibilities of the Administrator	10
Section 4.3	Income and Employment Tax Withholding	11
Section 4.4	Plan Expenses	11
Article V	BENEFIT CLAIMS	11
Article VI	AMENDMENT AND TERMINATION OF THE PLAN	11
Section 6.1	Amendment of the Plan	11
Section 6.2	Termination of the Plan	11
Article VII	MISCELLANEOUS	12

Approved 12/23/2016 i

Section 7.1	Governing Law	12
Section 7.2	Headings and Gender	12
Section 7.3	Spendthrift Clause	12
Section 7.4	Counterparts	12
Section 7.5	No Enlargement of Employment Rights	12
Section 7.6	Limitations on Liability	12
Section 7.7	Incapacity of Participant	13
Section 7.8	Evidence	13
Section 7.9	Action by Bank	13
Section 7.10	Severability	13
Section 7.11	Information to be Furnished by a Participant	13
Section 7.12	Attorneys’ Fees	13
Section 7.13	Binding on Successors	14
APPENDIX I: 2017 Performance Period Goals & Qualifiers & Awards Scale/Awards
APPENDIX II: Awards and Goals Applicable to 2020 Gap Year (2017-2019 LTIP)
APPENDIX III: Form of Non-Solicitation and Non-Disclosure Agreement

Approved 12/23/2016 ii

ARTICLE I

INTRODUCTION

Section 1.1Purpose. The purpose of the Federal Home Loan Bank of San Francisco Executive Incentive Plan (the “Plan”) is to attract and retain key executives of the Federal Home Loan Bank of San Francisco (the “Bank”) and to motivate and focus their efforts on achieving the Bank’s business plan and accomplish its goals and objectives while maintaining the safety and soundness of the Bank. The Plan is a cash-based incentive plan that provides award opportunities based on achievement of performance goals.

Section 1.2Effective Date. The “Effective Date” of the Plan is January 1, 2017.

Section 1.3Supplements. The provisions of the Plan may be modified by supplements to the Plan that are approved by the Board or a committee delegated by the Board. The terms and provisions of each supplement are a part of the Plan and supersede any other provisions of the Plan to the extent necessary to eliminate any inconsistencies between the supplement and any other Plan provisions.

ARTICLE II

ELIGIBILITY AND PARTICIPATION

Section 2.1Eligibility. Any senior executive officer (specifically, the President and CEO, Executive Vice President and each Senior Vice President) of the Bank, hired/employed as a regular full-time employee before October 1st of the calendar year, will become a “Participant” in the Plan on a prorated basis for that calendar year, excluding the Senior Vice President and Director of Internal Audit, who participates in the Federal Home Loan Bank of San Francisco Executive Internal Audit Incentive Plan. Participants must have an executed agreement on file with the Bank containing non-disclosure, non-disparagement, and non-solicitation provisions in a form similar to the form provided in Appendix III to the Plan (“Non-Solicitation Agreement”).

Section 2.2Participation. A senior executive officer will become a Participant as of the later of the Effective Date, the senior executive officer’s date of hire/employment, or the date on or after the Effective Date the senior executive officer satisfies the automatic eligibility provisions described in Section 2.1. Any Participant may be removed as an active Participant by the Board effective as of any date.

Approved 12/23/2016 1

ARTICLE III

AWARDS

Section 3.1Awards. No later than the beginning of each Performance Period, the Board will establish Award Levels (as defined in Section 3.1(b) for eligible Participants. For each Performance Period, the Award Levels established by the Board will be set forth in Appendices to the Plan, each of which shall be incorporated into the Plan. As described in this Article, Awards may be Annual Awards (as defined in subsection 3.3(a)), Deferred Awards (as defined in subsection 3.3(b)), or Gap Year Awards (as defined in subsection 3.4(a)). Each Award will be equal to a percentage of the Participant’s annual Compensation. “Compensation” means the Participant’s annual base salary as of February 1 of the first calendar year in each Performance Period.

(a)Performance Periods. A “Performance Period” is the one-calendar year period over which an Annual Award can be earned and vested pursuant to subsection 3.3(a). A “Deferral Performance Period” is the three-calendar year period over which a Deferred Award can be vested pursuant to subsection 3.3(b). A Deferral Performance Period begins on the January 1st immediately following the applicable Performance Period.

(b)Award Levels. Participants are eligible to receive Awards for each Performance Period, subject to deferral of fifty percent (50%) of the Annual Award (the Deferred Award) over the Deferral Performance Period.

(c)Final Award. The “Final Award” is the amount of an earned and vested Annual Award, Deferred Award, and Gap Year Award, as may be adjusted based upon the level at which the Performance Goals and Qualifiers have been achieved, that is ultimately paid to a Participant under the Plan. The amount of a Final Award may be modified at the Board’s discretion to account for performance that is not captured in the relevant Performance Goals and Qualifiers for the applicable Award. The Board, in its discretion, may also consider Extraordinary Occurrences when assessing performance results and determining Final Awards. “Extraordinary Occurrences” mean those events that, in the opinion and discretion of the Board, are outside the significant influence of the Participant or the Bank and are likely to have a significant unanticipated effect, whether positive or negative, on the Bank’s operating and/or financial results.

Section 3.2Performance Goals and Qualifiers. “Performance Goals and Qualifiers” are the factors established by the Board for each Performance Period, Deferral Performance Period and Gap Year Performance Period, as set forth in the applicable Appendices to the Plan, which are taken into consideration in determining the amount of an Annual Award, Deferred Award or Gap Year Award. The Board may adjust the Performance Goals and Qualifiers for a Performance Period, Deferral Performance Period or Gap Year Performance Period to ensure the purposes of the Plan are served.

Approved 12/23/2016 2

(a)Establishment of Performance Goals and Qualifiers. Performance Goals and Qualifiers for Performance Periods, Deferral Performance Periods and the Gap Year Performance Period commencing on and after January 1, 2017, will be communicated to Participants following approval by the Board.

(b)Achievement Levels. Four achievement levels will be defined for each Performance Goal in determining how much of an Award is earned.

(i)    Threshold (75% of Target). Minimum level of performance that must be achieved for awards to be paid.

(ii)Meets (Target – 100% of Plan). Performance that is expected under the Bank’s Plan.

(iii)Exceeds (125% of Target). An optimistic achievement level that exceeds expected performance.

(iv)Far Exceeds (150% of Target). The most optimistic achievement level that far exceeds expected performance.

(c)Interpolation. Achievement levels between Threshold – Target; Target – Exceeds; and, Exceeds – Far Exceeds will be interpolated in a manner as determined at the sole discretion of the Board.

(d)Considerations in Establishing Performance Goals and Qualifiers. In determining appropriate Performance Goals and Qualifiers and the relative weight of each Performance Goal, the Board will:

(i)Balance risk and financial results in a manner that does not encourage Participants to expose the Bank to imprudent risks;

(ii)Make such determination in a manner designed to ensure that a Participant’s overall compensation is balanced and not excessive in amount and that the Annual Awards, Deferred Awards and Gap Year Awards are consistent with the Bank’s policies regarding such compensation arrangements; and

(iii)Monitor the success of the Performance Goals and Qualifiers and weighting established in prior years, alone and in combination with other incentive compensation awarded to the same Participants, and make appropriate adjustments in future calendar years as needed so that payments appropriately incentivize Participants, appropriately reflect risk and align with regulatory guidance.

Section 3.3Vesting of Awards for Participants.

(a)Vesting of Annual Awards. For each Performance Period, except the Gap Performance Period, fifty percent (50%) of an Annual Award to a Participant will become vested on the last day of the Performance Period, provided the Board determines the following requirements are met (an “Annual Award”):

Approved 12/23/2016 3

(i)The applicable Performance Goals and Qualifiers for the Performance Period are achieved;

(ii)The Participant received a satisfactory (at least meets expectations) performance rating for the Performance Period; and,

(iii)The Participant is actively employed on the last day of the Performance Period, except as otherwise provided in subsection 3.5(b) or 3.5(c) or Section 3.6.

(b)Vesting of Deferred Awards. The remaining fifty percent (50%) of an Award to a Participant will become vested on the last day of the Deferral Performance Period, provided the Board determines that the following requirements are met (a “Deferred Award”):

(i)The applicable Qualifiers for the Deferral Performance Period are satisfied;

(ii)The Participant received a satisfactory (at least meets expectations) performance rating for the Deferral Performance Period, and

(iii)The Participant is actively employed on the last day of the Deferral Performance Period, unless otherwise provided in subsection 3.5(b) or 3.5(c) or Section 3.6.

(c)Calculation of Awards. The amount of Awards to Participants will be determined at the sole discretion of the Board in accordance with the applicable Appendix to the Plan. If the Qualifiers are achieved an annual compounding interest rate of 6% is applied to Deferred Awards.

Section 3.4Gap Year Awards for Participants.

(a)Background. The Board has determined it is appropriate to establish a Gap Year Award for Participants for long-term performance during the calendar years 2017 through 2019 (a “Gap Year Award”) to address a gap in payment of deferred incentive compensation during calendar year 2020 which arises as a result of the discontinuation in 2017 of the Executive Performance Unit Plan (the “Long-Term Incentive Plan”) and the implementation of this Plan.

(b)Vesting of Gap Year Award. A Gap Year Award will become vested over a three-year period beginning on January 1, 2017 and ending on December 31, 2019 (the “Gap Year Performance Period”) to the extent the Board determines that:

(i)The Performance Goals and Qualifiers for the Gap Year Performance Period, as set forth in the applicable Appendix to the Plan, are satisfied;

(ii)The Participant received a satisfactory (meets expectations) performance rating for the Gap Year Performance Period, and

Approved 12/23/2016 4

(iii)The Participant is actively employed on the last day of the Gap Year Performance Period, except as otherwise provided in subsection 3.5(b) or 3.5(c) or Section 3.6.

(c)Calculation of Awards. The amount of Gap Year Awards will be calculated in the sole discretion of the Board in accordance with the applicable Appendix to the Plan.

Section 3.5Effect of Termination of Employment.

(a)In General. If a Participant incurs a Termination of Employment for any reason other than a reason set forth in subsection 3.5(b) or 3.5(c) or Section 3.6, the Participant’s unvested Awards will be forfeited effective as of the date of such Termination of Employment and the Bank will have no obligation to pay the Participant any portion of such forfeited, unvested Award amount.

(b)Termination Due to Death or Disability.

(i)Notwithstanding the provisions of Sections 3.3 and 3.4 and subsection 3.5(a), if a Participant incurs a Termination of Employment due to death or Disability during a Deferral Performance Period, then the Participant’s Deferred Awards will be treated as vested and shall be paid pursuant to Section 3.7(a)(i).

(ii)Notwithstanding the provisions of Sections 3.3 and 3.4 and subsection 3.5(a), if a Participant incurs a Termination of Employment during a Performance Period or Gap Year Performance Period due to death or Disability, any Annual Award or Gap Year Award which has not been vested for the year of the Participant’s Termination of Employment due to death or Disability, will be treated as vested for the portion of the Performance Period or Gap Year Performance Period during which the Participant was employed based on the assumption the Bank would have achieved the Performance Goals and Qualifiers at the Target achievement level for the Performance Period or Gap Year Performance Period.

(c)Termination Due to Other Events.

(i)Subject to Section 3.7(a)(ii), but notwithstanding the provisions of Sections 3.3 and 3.4 and subsection 3.5(a), if a Participant incurs a Termination of Employment during a Performance Period, Deferral Performance Period or Gap Year Performance Period due to:

(A)Retirement;

(B)a termination by Participant for Good Reason;

(C)a termination by the Bank without Cause due to the elimination of an individual job or position;

Approved 12/23/2016 5

(D)the elimination of one or more jobs or positions as a result of a reduction in force or department reorganization; or

(E)a substantial job modification resulting in the incumbent being, in the judgment of the Bank, unqualified for or unable to perform the revised job;

then the relevant pro rata portion of an Annual Award or Gap Year Award will be treated as vested for the portion of the Performance Period or Gap Year Performance Period during which the Participant was employed to the extent determined by the Board that the Performance Goals and Qualifiers for the Performance Period or Gap Year Performance Period are satisfied and a Deferred Award will be treated as fully vested as of the date of Termination of Employment. Any Payment of any Award pursuant to this Section 3.5(c) will be made according to the normal scheduled date under Section 3.7(b).

(d)Definitions.

(i)“Cause” means (A) continued failure of a Participant to perform his or her duties with the Bank (other than any such failure resulting from Disability), (B) personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, or willful violation of any law, rule or regulation (other than -traffic infractions or similar non-violent infractions), or (C) removal of the Participant for cause by the Federal Housing Finance Agency (“FHFA”) or at the direction of the FHFA pursuant to 12 U.S.C. 1422b(a)(2), or by any successor agency to the FHFA pursuant to a similar statute.

(ii)“Disability” means the Participant is: (A) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (B) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under the Bank’s long-term disability plan. Medical determination of Disability under (A) shall be made by the Social Security Administration. The Participants may be required to submit proof of the determination by the Social Security Administration or the Bank’s insurer, as applicable, upon the request of the Bank.

(iii) “Good Reason” means a Termination of Employment by a Participant under any of the following circumstances:

(A)a material change in the Participant’s status, position and job title or principal duties and responsibilities as a key employee of the Bank which does not represent a promotion from the Participant’s status and position as in effect as of the date hereof (“Position”);

Approved 12/23/2016 6

(B)the assignment to the Participant of any duties or responsibilities (or removal of any duties or responsibilities), which assignment or removal is materially inconsistent with such Position;

(C)any removal of the Participant from such Position (including, without limitation, all demotions), except in connection with the termination of the Participant’s employment for Cause or Disability, or as a result of the Participant’s death; or

(D)any material breach by the Bank of any provisions of this Plan or any agreement under which the Participant provides services to the Bank.

Notwithstanding the foregoing in this Section 3.5(d)(iii), a Participant shall not be considered to have a Termination of Employment for Good Reason unless the Participant provides the Bank with written notice no later than 90 days after the first occurrence of an event listed above and the Bank has a period of 30 days to cure such event.

(iv)    “Reduction in Force” means an involuntary Termination of Employment of a Participant by the Bank in connection with a financial and/or strategic decision by the Bank to reduce the number of Bank employees and not due to the Participant’s performance.

(v)“Retirement” means the Participant’s planned and voluntary termination of employment on or after the Participant has either: (A) attained age 55 with 10 years of service or (B) attained age 65 with 5 years of service.

(vi) “Termination of Employment or Terminates Employment” Participant’s separation from service within the meaning of Treasury Regulation Section 1.409A-1(h). Whether a Termination of Employment has occurred is based on whether the facts and circumstances indicate that the Participant and the Bank reasonably anticipated that no further services would be performed after a certain date. A Termination of Employment will not be deemed to have occurred if a Participant continues to provide services to the Bank as an employee, independent contractor or otherwise, and if the Participant is providing such services at an annual rate that is fifty percent (50%) or more of the services rendered, on average, during the immediate preceding 36 months with the Bank (or if less, such lesser period); provided, however, that a Termination of Employment will be deemed to have occurred if a Participant’s service with the Bank is reduced to an annual rate that is equal to or less than twenty percent (20%) of the services rendered, on average, during the immediately preceding 36 months with the Bank (or if less, such lesser period). In addition to the foregoing, the employment of a Participant shall not be deemed to be terminated while the Participant is on military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed six (6) months, or if longer, so long as the Participant’s right to reemployment with the Bank is provided by either statute or contract. If the period of leave exceeds six (6) months and the Participant’s right to reemployment is not provided by either statute or contract, then the Participant is deemed to have a Termination of Employment on the first day immediately following such six-month period.

Approved 12/23/2016 7

Section 3.6Effect of Change in Control.

(a)Notwithstanding the provisions of Sections 3.3 and 3.5, if a Change in Control of the Bank occurs prior to the date of vesting of an Award, then an Annual Award or Gap Year Award will be paid on a pro-rated basis based on the assumption the Bank would have achieved the Performance Goals and Qualifiers at the Target achievement level for the Performance Period and/or the Gap Year Performance Period, while any Deferred Award which has not otherwise become vested as of the date of the Change in Control will be treated as one hundred percent (100%) vested effective as of the date of the Change in Control. Any interest accrued on the Deferred Award through the Change in Control date will be added to the Final Award.

(b)“Change in Control” of the Bank will mean the occurrence at any time of any of the following events:

(i)The merger, reorganization, or consolidation of the Bank with or into another Federal Home Loan Bank or other entity;

(ii)The sale or transfer of all or substantially all of the business or assets of the Bank to another Federal Home Loan Bank or other entity;

(iii)The purchase by the Bank or transfer to the Bank of all or substantially all of the business or assets of another Federal Home Loan Bank; or

(iv)The liquidation of the Bank.

The term “reorganization” shall not include any reorganization that is mandated by federal statute, rule, regulation, or directive, including 12 U.S.C. § 1421, et seq., as amended, and 12 U.S.C. § 4501 et seq., as amended, and which the Director of the FHFA (or successor agency) has determined should not be a basis for making payment under this Plan, by reason of the capital condition of the Bank or because of unsafe or unsound acts, practices, or condition ascertained in the course of the Agency's supervision of the Bank or because any of the conditions identified in 12 U.S.C. § 4617(a)(3) are met with respect to the Bank (which conditions do not result solely from the mandated reorganization itself, or from action that the Agency has required the Bank to take under 12 U.S.C. § 1431(d)).

Section 3.7Payment of Awards.

(a)Payments Related to Termination of Employment. The following provisions apply to Final Awards payable as a result of a Termination of Employment.

Approved 12/23/2016 8

(i)In the event of a Termination of Employment due to death or Disability, one hundred percent (100%) of a Final Award will be paid in a single sum within 74 days of the date of Termination of Employment.

(ii)In the event of a Termination of Employment Due to Other Events, payment of a Final Award will be made in a single sum within 74 days following the end of the Performance Period, Deferral Performance Period or Gap Year Performance Period, as applicable. Notwithstanding the foregoing, in the event of an elimination of an individual job or position, a reduction in force or department reorganization, or a substantial job modification resulting in the incumbent being unqualified for or unable to perform the revised job, a Participant must execute the severance agreement offered by the Bank in order to be eligible to receive payment.

(b)Payments Not Related to a Termination of Employment. Final Awards which become vested for reasons other than a Termination of Employment will be paid in a single sum within 74 days following the end of the Performance Period, Deferral Performance Period or Gap Year Performance Period, as applicable.

(c)Notwithstanding the foregoing provisions of this Section, Final Awards will be paid upon approval by the Board. However, in the event of a Change in Control, payment of a Final Award will be made in a single sum on the date on which the Change in Control occurs; provided however, if a Participant is eligible for Retirement as of the date of a Change in Control, then the Final Award of such Participant shall be made no sooner than the earliest to occur of (i) a change in the ownership or effective control of the Bank, or in the ownership of a substantial portion of the assets of the Bank, as defined under Treasury Regulation Section 1.409A-3(i)(5); (ii) the Participant’s Termination of Employment; or (iii) the payment date under Section 3.7(b) of this Plan.

Section 3.8Reduction or Forfeiture of Awards.

(a)By resolution, the Board may reduce or eliminate any Award not yet paid, if the Board finds that a serious, material safety-soundness problem, or a serious, material risk-management deficiency exists at the Bank, or if: (i) errors or omissions result in material revisions to the Bank’s financial results, information submitted to a regulatory or a reporting agency, or information used to determine incentive compensation payouts; (ii) information submitted to a regulatory or a reporting agency is untimely; or, (iii) the Bank does not make appropriate progress, as determined by the Board, in the timely remediation of examination, monitoring, or other supervisory findings and matters requiring attention.

(b)If during the Deferral Performance Period actual losses or other measures or aspects of performance related to the Performance Period or Deferral Performance Period are realized which would have caused a reduction in amount of the Final Award calculated for the Performance Period or Deferral Performance Period, then the remaining amount of the Final Award to be paid at the end of the Deferral Performance Period may be reduced to reflect this additional information.

Approved 12/23/2016 9

(c)Notwithstanding any other provision of the Plan, if a Participant breaches the terms of a Non-Solicitation Agreement, all of his/her unpaid vested and unvested Awards may be forfeited as of the effective date of the Board’s determination that such breach has occurred, which effective date shall be no sooner than the expiration of the cure period under Section 3.8(e) below. Any future payments for a vested Award will cease and the Bank will have no further obligation to make such payments.

(d)Notwithstanding any other provision of the Plan, if during the most recent examination of the Bank by the FHFA, the FHFA identified an unsafe or unsound practice or condition that is material to the financial operation of the Bank within the Participant’s area(s) of responsibility and such unsafe or unsound practice or condition is not subsequently resolved to the satisfaction of the Board, then upon expiration of the cure period under Section 3.8(e) below all or a portion of a Participant’s vested and unvested Awards may be forfeited as determined in the sole discretion of the Board. Any future payments for a vested Award will cease and the Bank will have no further obligation to make such payments.

(e)Notwithstanding any provision of this Section 3.8 to the contrary, prior to any reduction, elimination or forfeiture of any Participant Award, the applicable Participant shall be given notice of the determination under this Section 3.8 to reduce, eliminate or forfeit the Award and such Participant shall have a period of no less than 30 days to present information contrary to such decision or information showing that the issue or event causing the reduction, elimination or forfeiture has been cured to the satisfaction of the Board.

ARTICLE IV

ADMINISTRATION

Section 4.1Appointment of the President and CEO. Except for those powers expressly reserved to the Board, including determinations regarding eligibility and the amount of all Awards, under the Plan, the President and CEO, or a duly authorized officer of the Bank delegated by the President and CEO to act on his or her behalf, is hereby appointed to administer the Plan (the “Administrator”), and the President and the Administrator will be charged with the full power and the responsibility for administering the Plan in all its details.

Section 4.2Powers and Responsibilities of the Administrator. The Administrator will have all powers necessary to administer the Plan, including the power to construe and interpret the Plan document; to determine the manner and timing of any distribution of benefits under the Plan; to resolve any claim for benefits in accordance with Article V, and to appoint or engage advisors, including legal counsel, to render advice with respect to any of the Administrator’s responsibilities under the Plan. Any construction, interpretation, or application of the Plan by the Administrator will be final, conclusive and binding.

(a)Records and Reports. The Bank will be responsible for maintaining sufficient records to determine each Participant’s eligibility to participate in the Plan.

Approved 12/23/2016 10

(b)Rules and Decisions. The Bank may adopt such rules as it deems necessary, desirable, or appropriate in the administration of the Plan. All rules and decisions of the Bank will be applied uniformly and consistently to all Participants in similar circumstances. When making a determination or calculation, the Board and the Bank will be entitled to rely upon information furnished by a Participant, the Bank or the legal counsel of the Bank.

(c)Application for Benefits. The Bank may require a Participant to complete and file with it an application for a benefit, and to furnish all pertinent information requested by it. The Bank may rely upon all such information so furnished to it, including the Participant’s current mailing address. Any notice or document required to be given or filed with the Bank will be properly given or filed if delivered to or mailed by registered mail, postage paid, to the Director of Human Resources, Federal Home Loan Bank of San Francisco, P.O. Box 7948, San Francisco, CA 94120.

Section 4.3Income and Employment Tax Withholding. The Bank will withhold from payments to Participants of their Awards, to the extent required by law, all applicable federal, state, city and local taxes.

Section 4.4Plan Expenses. The expenses incurred for the administration and maintenance of the Plan will be paid by the Bank.

ARTICLE V

BENEFIT CLAIMS

While a Participant need not file a claim to receive his or her Award under the Plan, if he/she wishes to do so, a claim must be made in writing and filed with the Administrator (a claim by the President and CEO shall be filed with the Board). If a claim is denied, the Administrator will furnish the claimant with written notice of its decision. A claimant may request a full and fair review of the denial of a claim for awards by filing a written request with the Administrator.

ARTICLE VI

AMENDMENT AND TERMINATION OF THE PLAN

Section 6.1Amendment of the Plan. The Bank, acting through the Board, may amend the Plan at any time in its sole discretion. Notwithstanding the foregoing, the Bank may not amend the Plan to reduce a Participant’s vested Award as determined on the day preceding the effective date of the amendment or to otherwise retroactively impair or adversely affect the rights of a Participant.

Section 6.2Termination of the Plan. The Bank, acting through the Board, may terminate the Plan at any time in its sole discretion. Absent an amendment to the contrary, Plan benefits that were earned and vested prior to the termination will be paid at the times and in the manner provided for by the Plan at the time of the termination.

Approved 12/23/2016 11

ARTICLE VII

MISCELLANEOUS

Section 7.1Governing Law. Except to the extent superseded by laws of the United States, the laws of California will be controlling in all matters relating to the Plan without regard to the choice of law principles therein.

The Plan shall be construed in a manner that is consistent and compliant with, or exempt from, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and any regulations promulgated thereunder. Any provision that is noncompliant with Section 409A of the Code is void or deemed amended to comply with Section 409A of the Code. The Plan is to be construed as a totally discretionary plan. This Plan shall be administered and interpreted to maximize the short-term deferral exemption to Code Section 409A, and a Participant shall not, directly or indirectly, designate the taxable year of an award payment under this Plan. The portion of any payment under this Plan that is paid within the short-term deferral period (within the meaning of Code Section 409A) shall be treated as a short-term deferral and not aggregated with other payments. To the extent applicable, any payment dates or events provided for in this Plan shall be deemed to incorporate any “grace periods” within the meaning of Code Section 409A. The Bank does not guarantee or warrant the tax consequences of the Plan, and the Participants shall in all cases be liable for any taxes due with respect to the Plan.

Section 7.2Headings and Gender. The headings and subheadings in the Plan have been inserted for convenience of reference only and will not affect the construction of the Plan provisions. In any necessary construction, the masculine will include the feminine and the singular the plural, and vice versa.

Section 7.3Spendthrift Clause. No benefit or interest available under the Plan will be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or attachment by creditors of a Participant, either voluntarily or involuntarily.

Section 7.4Counterparts. This Plan may be executed in any number of counterparts, each one constituting but one and the same instrument, and may be sufficiently evidenced by any one counterpart.

Section 7.5No Enlargement of Employment Rights. Nothing contained in the Plan is intended to alter a Participant’s “at will” employment and is not to be construed as a contract of employment between the Bank and any person, nor may the Plan be deemed to give any person the right to be retained in the employ of the Bank or limit the right of the Bank to employ or discharge any person with or without cause.

Section 7.6Limitations on Liability. The individual members of the Board will, in accordance with the Bank’s by-laws, be indemnified and held harmless by the Bank with respect to any alleged breach of responsibilities performed or to be performed hereunder. In addition, notwithstanding any other provision of the Plan, neither the Bank nor any individual acting as an employee or agent of the Bank will be liable to a Participant for any claim, loss, liability or expense incurred in connection with the Plan, except when the

Approved 12/23/2016 12

same has been affirmatively determined by a court order or by the affirmative and binding determination of an arbitrator, to be due to the gross negligence or willful misconduct of that person.

Section 7.7Incapacity of Participant. If any person entitled to receive a distribution under the Plan is physically or mentally incapable of personally receiving and giving a valid receipt for any payment due (unless a prior claim for the distribution has been made by a duly qualified guardian or other legal representative), then, unless and until a claim for the distribution has been made by a duly appointed guardian or other legal representative of the person, the distribution may be made to any other individual or institution then contributing toward or providing for the care and maintenance of the person. Any payment made for the benefit of the person under this Section will be a payment for the account of such person and a complete discharge of any liability of the Bank and the Plan.

Section 7.8Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person relying on the evidence considers pertinent and reliable, and signed, made or presented by the proper party or parties.

Section 7.9Action by Bank. Any action required of or permitted by the Bank under the Plan will be by resolution of the Board or by a person or persons authorized by resolution of the Board.

Section 7.10Severability. In the event any provisions of the Plan are held to be illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and endorsed as if the illegal or invalid provisions had never been contained in the Plan.

Section 7.11Information to be Furnished by a Participant. A Participant, or any other person entitled to benefits under the Plan, must furnish the Bank with any and all documents, evidence, data or other information the Bank considers necessary or desirable for the purpose of overseeing and administering the Plan. Benefit payments under the Plan are conditioned on a Participant (or other person who is entitled to benefits) furnishing full, true and complete data, evidence or other information to the Bank, and on the prompt execution of any document reasonably related to the administration of the Plan requested by the Bank.

Section 7.12Attorneys’ Fees. If any action is commenced to enforce the provisions of the Plan, payment of attorneys’ fees will be governed by the terms set forth in the “Agreement to Arbitrate” entered into between the Bank and the Participant.

Approved 12/23/2016 13

Section 7.13Binding on Successors. The Plan will be binding upon and inure to the benefit of the Bank and its successors and assigns, and the successors, assigns, designees and estates of a Participant. The Plan will also be binding upon and inure to the benefit of any successor organization succeeding to substantially all of the assets and business of the Bank, but nothing in the Plan will preclude the Bank from merging or consolidating into or with, or transferring all or substantially all of its assets to, another organization which assumes the Plan and all obligations of the Bank hereunder. The Bank agrees that it will make appropriate provision for the preservation of a Participant’s rights under the Plan in any agreement or plan which it may enter into to effect any merger, consolidation, reorganization or transfer of assets. Upon such a merger, consolidation, reorganization or transfer of assets and assumption of Plan obligations of the Bank, the term “Bank” will refer to such other organization and the Plan will continue in full force and effect.

Approved 12/23/2016 14

APPENDIX I 2017 PERFORMANCE PERIOD GOALS & QUALIFIERS & AWARDS SCALE/AWARDS
2017 Goals	2017 Goal Components	Goal Weight	Goal Component Weight	2017 Goal Measures
1) RISK MANAGEMENT		20%		In the event of a Significant Deficiency or Material Weakness in internal control over financial reporting, a significant operations loss, or a significant noncompliance with Bank policy as described in the Bank’s Risk Management Policy, the Board of Directors will assess the impact and appropriate adjustment to the Risk Management goal achievement level, if any.
	A) Technology Resiliency		50%	75%: Complete the End User Computing Modernization initiative, which moves             Microsoft Windows and Office platforms to the cloud (Office 365) to increase             resiliency as well as productivity 100%: Certify that the build of the data center infrastructure servicing the Bank has been              completed 125%: Migrate 50% of the Bank’s environment to the new data center 150%: Migrate 100% of the Bank’s environment to the new data center
	B) Business Continuity /      Crisis Management		50%	75%: 1 Crisis Mgmt. Team Tabletop (1 external threat scenario) 100%: 2 Crisis Mgmt. Team Tabletops (1 Cyber & 1 external threat scenario) 125%: 3 Crisis Mgmt. Team Tabletops (1 Cyber & 2 external threats) and 1 Cyber             Incident Response Team Tabletop scenario 150%: 3 Crisis Mgmt. Team Tabletops (1 Cyber & 2 external threats) and 2 Cyber             Incident Response Team Tabletop scenarios
2) FRANCHISE ENHANCEMENT		40%
	A) Financial Performance		25%	Adjusted Return on Capital Spread (AROC)
				75%	100%	125%	150%
				2.81%	3.06%	3.31%	3.56%
				[Achievement level targets and measured performance exclude OTTI charges]
	B) Operating Cost      Efficiency Initiative		25%	75%: 100%: 125%: 150%:	} Subjective assessment by the Board of Directors
	C) Member Business		25%	Member Advances and Letters of Credit (LC) Volume
				75%	100%	125%	150%
				$53.7	$60.0	$62.0	$64.0
			25%	Member Engagement
				75%	100%	125%	150%
				40%	45%	50%	55%
3) COMMUNITY INVESTMENT		20%
	A) CIP/ACE/HPA      Advances, Letters of      Credit & AHEAD       (# of Members)		100%	(# of Members)
				75%	100%	125%	150%
				38	41	44	47
4) ORG. HEALTH / DIVERSITY & INCLUSION		20%
	A) Diversity &      Inclusion		100%	75%: Provide two (semi-annual) Bank-wide D&I training events [e.g., workplace,             supplier/contracting diversity] 100%: Develop and implement a formal supplier diversity program 125%: Present Leadership Series for key groups of women and minorities in Bank leadership              positions •Women in Leadership Series and Minorities in Leadership Series            Provide 2 events in each series for a total of 4 events 150%: Develop and implement a formal MWD internship program

Approved 12/23/2016 1

Incentive Award Opportunities

	Total Incentive Award as % of Compensation (Base Salary)				Year-End Incentive Award as % of Compensation (Base Salary)				Deferred Incentive Award as % of Compensation (Base Salary)
	Threshold	Meets (Target)	Exceeds	Far Exceeds	Threshold	Meets (Target)	Exceeds	Far Exceeds	Threshold	Meets (Target)	Exceeds	Far Exceeds
CEO/EVP/SVPs	40%	80%	96%	100%	20%	40%	48%	50%	20%	40%	48%	50%

Goal Weights

	CEO/EVP/SVPs		SVP, Chief Risk Officer
	Corporate Goal Weights	Goal Weight (includes individual goals)	Corporate Goal Weights	Goal Weight (includes individual goals)
Individual	N/A	10.0%	N/A	10.0%
Risk Management	20.0%	18.0%	50.0%	45.0%
Franchise Enhancement	40.0%	36.0%	30.0%	27.0%
Community Investment	20.0%	18.0%	10.0%	9.0%
Organizational Health / Diversity and Inclusion	20.0%	18.0%	10.0%	9.0%
Total	100.0%	100.0%	100.0%	100.0%

Qualifiers

The following are the performance qualifiers for any Award: (i) no submission of material information to a regulatory or a reporting agency is significantly past due; (ii) the Bank makes sufficient progress, as determined by the Board, in the timely remediation of significant examination, monitoring and other supervisory findings; (iii) no material risk-management deficiency exists at the Bank; (iv) no operational errors or omissions result in material revisions to the financial results, information submitted to the FHFA, or data used to determine incentive payouts; (v) the Bank has sufficient capital to pay dividends and the ability to repurchase member stock.

Approved 12/23/2016 2

APPENDIX IIAWARDS AND GOALS APPLICABLE TO 2020 GAP YEAR (2017-2019 LTIP)

Incentive Award Opportunities

	Long-Term Incentive Award as a % of Compensation (Base Salary effective February 1, 2017)
Position	Threshold	Meets (Target)	Exceeds	Far Exceeds
CEO/EVP/SVPs	20%	40%	48%	50%

Awards are based on the level at which the following three-year performance goals and metrics have been achieved.

Goals

1. 3-Year Average Adjusted Return on Capital Spread: Adjusted Return on Capital Spread (AROCS) is the primary measure the Bank uses to determine total rate of return to shareholders. The Meets (Target) AROCS achievement level has been set at 2.43% and represents the projected average for the performance period (January 1, 2017 through December 31, 2019) and is consistent with the Bank’s Strategic Plan forecast. Threshold AROCS has been set at 2.18%, Exceeds achievement level has been set at 2.68% and Far Exceeds achievement level has been set at 2.93%.

2. 3-Year Average Risk Management: Risk Management is based on the 3-year average of the actual Risk Management goal achievement levels for 2017, 2018, and 2019, and will be set at the end of the performance period.

Goals / Weights / Measures

Goals	Goal Weight	Threshold	Meets (Target)	Exceeds	Far Exceeds
AROCS Goal (3-Year Average Spread Over Benchmark	30%	2.18%	2.43%	2.68%	2.93%
Risk Management	70%	Based on the 3-year average of the actual Risk Management goal achievement levels for 2017, 2018, and 2019

Approved 12/23/2016

APPENDIX III

FORM OF NON-SOLICITATION AND NON-DISCLOSURE AGREEMENT

This Agreement is entered into as of the ____ day of _____________, 201_, by and between the FEDERAL HOME LOAN BANK OF SAN FRANCISCO, a corporation organized under the laws of the United States (the “Bank”) and ____________________ (the “Executive”).

WHEREAS, the Bank sponsors the Federal Home Loan Bank of San Francisco Executive Incentive Plan (the “Plan”); and

WHEREAS, as a condition of participation in the Plan, the Bank requires that the Executive agree to the terms and conditions found within this Agreement;

NOW, THEREFORE, in consideration of the premises and of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt, legal adequacy and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.Non-Disclosure; Return of Confidential Information and Other Property.

(a)Access to Confidential Information. The Executive understands, acknowledges and agrees that during the course of his or her employment with the Bank he or she has gained or will gain information regarding, knowledge of, and familiarity with, the Confidential Information of the Bank (as defined in subsection (c)) that would cause irreparable damage and harm to the Bank if it was disclosed. The Executive understands, acknowledges and agrees that the Confidential Information has substantial economic value because it is not known or readily ascertainable by proper means by others who could obtain economic value from it. The Executive also acknowledges and agrees that the Bank uses reasonable means to maintain the secrecy and confidentiality of the Confidential Information.

(b)Non-Disclosure. At all times while the Executive is employed by the Bank, and at all times thereafter, the Executive will not (i) directly or indirectly disclose, provide or discuss any Confidential Information with or to any Person (as defined in subsection (d)) other than those directors, officers, employees, representatives and agents of the Bank who need to know such Confidential Information for a proper corporate purpose, and (ii) directly or indirectly use any Confidential Information (A) to compete against the Bank, or (B) for the Executive’s own benefit, or for the benefit of any Person other than the Bank.

(c)Confidential Information Defined. For purposes of this Agreement, the term “Confidential Information” means any and all:

(i)materials, records, data, documents, lists, writings and information (in each case, whether in writing, printed, verbal, electronic, computerized or otherwise) (A) relating or referring in any manner to the business, operations, affairs, financial condition, results of operation, cash flow, assets, liabilities, sales, revenues, income, estimates, projections, policies, strategies, techniques, methods, products, developments, suppliers, regulators, members, relationships and/or customers of the Bank that are confidential, proprietary or not otherwise publicly available, in any event not without a breach of this Agreement, or (B) that the Bank has deemed confidential, proprietary, nonpublic or not otherwise publicly available without breaching this Agreement;

(ii)trade secrets of the Bank, as defined in California Civil Code Section 3426.1(d), as amended, or any successor statute; and

Approved 12/23/2016 1

(iii)any and all copies, summaries, analyses and extracts which relate or refer to or reflect any of the items set forth in (i) or (ii) above. The Executive agrees that all Confidential Information is confidential and is and at all times will remain the property of the Bank.

(d)Person Defined. For purposes of this Agreement, the term “Person” will mean any natural person, proprietorship, partnership, corporation, limited liability company, bank, organization, firm, business, joint venture, association, trust or other entity and any government agency, body or authority.

(e)Return of Confidential Information and Other Property. The Executive covenants and agrees:

(i)to keep all Confidential Information subject to the Bank’s custody and control and to promptly return to the Bank all Confidential Information that is still in the Executive’s possession or control at the termination of the Executive’s employment with the Bank; and

(ii)promptly upon termination of the Executive’s employment with the Bank, to return to the Bank, at the Bank’s principal office, all vehicles, equipment, computers, credit cards and other property of the Bank and to cease using any of the foregoing.

(f)Exceptions from Confidentiality Obligations. Section 1 shall not be deemed to prevent the Executive from making disclosures required or made permissible by applicable statute or regulation. Section 1 shall also not be deemed to prevent the Executive from making disclosure required by agency or court order, to the extent that prior to disclosure, the Executive provides the Bank with timely written notice of order , to the extent such prior notice is not prohibited, so as to allow the Bank to contest the order.

2.Non-Disparagement. The Executive agrees to not communicate disparaging remarks to third parties about the Bank, its directors, officers or employees. Likewise, the Bank agrees not to disparage the Executive or his or her skills or job performance to third parties. However, nothing in this paragraph shall prohibit the Bank or the Executive from testifying truthfully under oath. In addition, Section 2 shall not be deemed to prevent the Executive from making disclosures required or made permissible by applicable statute or regulation. Section 2 shall also not be deemed to prevent the Executive from making disclosure required by agency or court order, to the extent that prior to disclosure, the Executive provides the Bank with timely written notice of order, to the extent such prior notice is not prohibited, so as to allow the Bank to contest the order.

3.Non-Solicitation. The Executive hereby understands, acknowledges and agrees that, by virtue of his or her position with the Bank, the Executive has and will have advantageous familiarity and personal contacts with the employees of the Bank and has and will have advantageous familiarity with the business, operations and affairs of the Bank. In addition, the Executive understands, acknowledges and agrees that the business of the Bank is highly competitive. Accordingly, at all times while the Executive is employed by the Bank and for a twelve-month period following termination of employment, the Executive will not, directly or indirectly, or individually or together with any other Person, as owner, shareholder, investor, member, partner, proprietor, principal, director, officer, Executive, manager, agent, representative, independent contractor, consultant or otherwise induce, request or attempt to influence any Bank employee who was employed by the Bank during the twelve-month period prior to termination of employment, to terminate his or her employment with the Bank.

4.Periods of Noncompliance and Reasonableness of Periods. The restrictions and covenants contained in Section 3 will not run during all periods of noncompliance and will apply during the Term of this Agreement and for the full periods specified in Section 3. The Bank and the Executive understand, acknowledge and agree that the restrictions and covenants contained in Section 3 are reasonable in view of the nature of the business in which the Bank is engaged, the Executive’s position with the Bank and the Executive’s advantageous knowledge and familiarity with, the Bank’s employees, business, operations, affairs and customers.

Approved 12/23/2016 2

The Bank’s obligation to pay an award to the Executive pursuant to the Federal Home Loan Bank of San Francisco Incentive Plan will immediately terminate in the event the Executive breaches any of the provisions of Section 1 or 3 and all outstanding awards will be forfeited. Notwithstanding the foregoing:

(a)the Executive’s covenants set forth in Sections 1 or 3 will continue in full force and effect and be binding upon the Executive;

(b)the Bank will be entitled to the remedies specified in Section 6; and

(c)the Bank will be entitled to its damages, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) resulting from or relating to the successful prosecution of the Executive’s breach of any of the provisions of Section 1 or 3.

5.Survival of Certain Provisions. Upon any termination of the Executive’s employment with the Bank, the Executive and the Bank hereby expressly agree that the provisions of Sections 1, 3, 4 and 6 will continue to be in full force and effect and binding upon the Executive and the Bank in accordance with the applicable respective provisions of such Sections.

6.Remedies. The Executive agrees that the Bank will suffer irreparable damage and injury and will not have an adequate remedy at law in the event of any actual, threatened or attempted breach by the Executive of any provision of Section 1 or 3. Accordingly, in the event of a threatened, attempted or actual breach by the Executive of any provision of Section 1 or 3, in addition to all other remedies to which the Bank is entitled at law, in equity or otherwise, the Bank may be entitled to a temporary restraining order and a permanent injunction or a decree of specific performance of any provision of Section 1 or 3. The foregoing remedies will not be deemed to be the exclusive rights or remedies of the Bank for any breach of or noncompliance with this Agreement by the Executive but will be in addition to all other rights and remedies available to the Bank at law, in equity or otherwise.

7.Severability. In case any one or more of the provisions (or any portion thereof) contained herein will, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision of this Agreement, but this Agreement will be construed as if such invalid, illegal or unenforceable provision or provisions (or portion thereof) had never been contained herein. If any provision of this Agreement will be determined by a court of competent jurisdiction to be unenforceable because of the provision’s scope, duration or other factor, then such provision will be considered divisible and the court making such determination will have the power to reduce or limit (but not increase or make greater) such scope, duration or other factor or to reform (but not increase or make greater) such provision to make it enforceable to the maximum extent permitted by law, and such provision will then be enforceable against the appropriate party hereto in its reformed, reduced or limited form; provided, however, that a provision will be enforceable in its reformed, reduced or limited form only in the particular jurisdiction in which a court of competent jurisdiction makes such determination.

8.Entire Agreement. This Agreement sets forth the entire understanding of the parties hereto with respect to its subject matter, merges and supersedes all prior and contemporaneous understandings with respect to its subject matter, and may not be waived or modified, in whole or in part, except in writing signed by each of the parties hereto. No waiver of any provision of this Agreement in any instance will be deemed to be a waiver of the same or any other provision in any other instance. The recitals set forth above are incorporated herein by this reference.

9.Effect and Modification. No statement or promise, except as set forth herein, has been made with respect to the subject matter of this Agreement. No modification or amendment will be effective unless in writing and signed by the Executive and an officer of the Bank (other than the Executive).

Approved 12/23/2016 3

10.Non-Waiver. The Bank’s or the Executive’s failure or refusal to enforce all or any part of, or the Bank’s or the Executive’s waiver of any breach of this Agreement, will not be a waiver of the Bank’s or the Executive’s continuing or subsequent rights under this Agreement, nor will such failure or refusal or waiver have any effect on the subsequent enforceability of this Agreement.

11.Non-Assignability. This Agreement contemplates that the Executive will personally provide the services described herein, and accordingly, the Executive may not assign the Executive’s rights or obligations hereunder, whether by operation of law or otherwise, in whole or in part, without the prior written consent of the Bank.

12.Notice. Any notice, request, instruction or other document to be given hereunder to any party will be in writing and delivered by hand, telegram, registered or certified United States mail return receipt requested, or other form of receipted delivery, with all expenses of delivery prepaid, as follows:

If to the Executive
If to the Bank
	Federal Home Loan Bank of San Francisco
	c/o General Counsel and Corporate Secretary
	P.O. Box 7948
	San Francisco, CA 94120

13.Governing Law. This Agreement is being delivered in and will be governed by the laws of the State of California without regard to the choice of law principles thereof. Any dispute regarding this Agreement will be brought in any California state or federal court having jurisdiction in the matter and the Executive expressly consents to the jurisdiction of such courts.

14.Prior Agreements. The Executive represents and warrants to the Bank that the Executive is not a party to or otherwise bound by any agreement that would restrict in any way the performance by the Executive of the Executive’s duties, services and obligations under this Agreement, that the Executive has disclosed to the Bank all employment type agreements to which the Executive has been bound, including without limitation employment agreements, consulting agreements, non-compete agreements or covenants, confidentiality or non-disclosure agreements or covenants, and intellectual property assignment agreements, and that the Bank will not have any liability to any third party arising out of the Executive entering into this Agreement or performing hereunder.

15.Effect of Headings. The descriptive headings of the Sections and, where applicable, subsections, of this Agreement are inserted for convenience and identification only and do not constitute a part of this Agreement for purposes of interpretation.

16.Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which collectively will constitute one and the same instrument.

17.Miscellaneous. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Plan.

Approved 12/23/2016 4

IN WITNESS WHEREOF, the Bank, by its officer thereunder duly authorized, and the Executive, have caused this Non-Solicitation and Non-Disclosure Agreement to be executed as of the day and year first above written.

FEDERAL HOME LOAN BANK
OF SAN FRANCISCO	EXECUTIVE
By:
Its:
By:
Its:

Approved 12/23/2016 5

FEDERAL HOME LOAN BANK OF SAN FRANCISCO Executive Incentive Plan APPENDIX IV 2018 Performance Period Goals, Qualifiers, and Awards Scale
2018 Goals	2018 Goal Components	Goal Weight	Goal Component Weight	2018 Goal Measures
1) Risk Management		20%		In the event of a significant deficiency or material weakness in internal control over financial reporting, a significant operational loss, or a significant noncompliance with Bank policy as described in the Bank’s Risk Management Policy, the Board of Directors will assess the impact and will make appropriate adjustments to the Risk Management goal achievement level.
	Cyber-security Threat Management		100%	75%: Enhance cyber-security threat metrics 100%: Threshold plus conduct one internal and one external cyber-security threat table top exercise 125%: Meets plus operationalize system hardening 150%: Exceeds plus meet SLA for critical vulnerabilities with public exploits, and reduce backlog of critical vulnerabilities by 80%
2) Franchise Enhancement		40%
	A) Financial Performance		25%	Adjusted Return on Capital Spread
				75%	100%	125%	150%
				2.13%	2.43%	2.73%	3.03%
	B) Operating Expense Efficiency		25%	Actual 2018 Core Operating Expenses ($Mils.)
				75%	100%	125%	150%
				$128.4	$127.4	$126.4	$125.4
	C) Advances and Letters of Credit		25%	Member Advances and Letters of Credit (Average Daily Balance ($Bils.)
				75%	100%	125%	150%
				$69.1	$77.5	$80.0	$82.5
	D) Member Engagement (RMS and Specialists - Total)		12.5%	Count
				75%	100%	125%	150%
				132	149	165	182
	(Specialists-15% of Total)		12.5%	20	22	25	27
3) Community Investment		20%
	CIP/ACE/HPA Advances, Letters of Credit & AHEAD		100%	Number of Members
				75%	100%	125%	150%
				39	47	50	55
4) Diversity & Inclusion		20%
	Diversity and Inclusion Strategic Plan		100%	75%: Develop 2018-2020 Diversity and Inclusion (D&I Strategic Plan) 100%: Threshold plus target (100%) level of achievement against D&I initiatives 125%: Meets plus Exceed level of achievement against D&I initiatives 150%:  Exceeds plus deliver Capital markets hosted outreach seminar for diverse broker/dealers and complete one diverse supplier incubator partnership

Approved 12/1/2017 1

Incentive Award Opportunities

	Total Incentive Award as % of Compensation (Base Salary)				Year-End Incentive Award as % of Compensation (Base Salary)				Deferred Incentive Award as % of Compensation (Base Salary)
	Threshold	Meets (Target)	Exceeds	Far Exceeds	Threshold	Meets (Target)	Exceeds	Far Exceeds	Threshold	Meets (Target)	Exceeds	Far Exceeds
CEO/EVP/SVPs	40%	80%	96%	100%	20%	40%	48%	50%	20%	40%	48%	50%

Goal Weights

	CEO/SVPs		SVP, Chief Risk Officer
	Corporate Goal Weights	Goal Weight (includes individual goals)	Corporate Goal Weights	Goal Weight (includes individual goals)
Individual	N/A	20.0%*	N/A	20.0%*
Risk Management	20.0%	16.0%	50.0%	40.0%
Franchise Enhancement	40.0%	32.0%	25.0%	20.0%
Community Investment	20.0%	16.0%	10.0%	8.0%
Diversity and Inclusion	20.0%	16.0%	15.0%	12.0%
Total	100.0%	100.0%	100.0%	100.0%

Qualifiers

The following are the performance qualifiers for any Award: (i) no submission of material information to a regulatory or a reporting agency is significantly past due; (ii) the Bank makes sufficient progress, as determined by the Board, in the timely remediation of significant examination, monitoring and other supervisory findings; (iii) no material risk-management deficiency exists at the Bank; (iv) no operational errors or omissions result in material revisions to the financial results, information submitted to the FHFA, or data used to determine incentive payouts; (v) the Bank has sufficient capital to pay dividends and the ability to repurchase member stock.

* In support of the 20 percent goal weights, management is developing individual goal descriptions and quantifying measures for EIP participants, which will be presented to the Board for review and approval in January 2018, subject to Finance Agency review.

Approved 12/1/2017 2

EX-10.12

EXHIBIT 10.12

FEDERAL HOME LOAN BANK OF SAN FRANCISCO
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Amended and Restated Effective January 1, 2018

TABLE OF CONTENTS

ARTICLE 1.  INTRODUCTION		1
1.1	Establishment of Plan	1
1.2	Purpose of the Plan	1
ARTICLE 2.  DEFINITIONS		2
2.1	Definitions	2
2.2	Number and Gender	8
ARTICLE 3.  PARTICIPATION AND SERVICE		9
3.1	General	9
3.2	Date of Participation	9
3.3	Duration; Rehire	9
3.4	Contribution Credit Service	10
3.5	Vesting Service	10
ARTICLE 4.   RETIREMENT BENEFITS		11
4.1	Account	11
4.2	Contribution Credits and Special Contribution Credits	12
4.3	Annual Indexation Credits	13
4.4	Special Rules For Determining Balance of Accounts and for Crediting Contribution Credits and Annual Indexation Credits	14
4.5	Vesting	16
4.6	Forfeiture	17
ARTICLE 5.   PAYMENT OF BENEFITS; DEATH BENEFITS		18
5.1	Amount of Benefit	18
5.2	Automatic Form of Benefit Payment	18
5.3	Optional Forms of Benefit Payments	18
5.4	Automatic Time of Benefit Payment	20
5.5	Optional Time of Benefit Payment	20
5.6	Manner and Time of Elections	21
5.7	Death Benefits	22
5.8	Beneficiary Designation	23
ARTICLE 6.   SOURCE OF PAYMENTS		24
ARTICLE 7.   ADMINISTRATION		24
7.1	Committee	24
7.2	Procedures for Requesting Benefit Payments	26
ARTICLE 8.   AMENDMENT AND TERMINATION		26
8.1	Amendment of the Plan	26
8.2	Termination of the Plan	27
8.3	Change in Control	28
8.4	Dissolution or Bankruptcy	28
ARTICLE 9.   MISCELLANEOUS PROVISIONS		29
9.1	Employment Rights	29

i

9.2	No Examination or Accounting	29
9.3	Records Conclusive	29
9.4	Severability	29
9.5	Counterparts	30
9.6	Taxes	30
9.7	Binding Effect	30
9.8	Assignment	31
9.9	Incapacity	31
9.10	Unsecured Creditors	32
9.11	Notice	32
9.12	Benefits Not Salary	32
9.13	Captions	33
9.14	Governing Law	33
9.15	Addresses	33
FEDERAL HOME LOAN BANK OF SAN FRANCISCO SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Schedule A		A-1
FEDERAL HOME LOAN BANK OF SAN FRANCISCO SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Schedule B		B-1
FEDERAL HOME LOAN BANK OF SAN FRANCISCO SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN Schedule C		C-1

ii

ARTICLE 1. INTRODUCTION

1.1 Establishment of Plan

Federal Home Loan Bank of San Francisco, incorporated under the laws of the United States, first established the Federal Home Loan Bank of San Francisco Supplemental Executive Retirement Plan effective January 1, 2003, then amended and restated the Plan effective January 1, 2005, January 1, 2009, and July 1, 2013. This is an amendment and restatement of the Plan effective January 1, 2018.

1.2 Purpose of the Plan

The purpose of this Plan is to provide supplemental retirement benefits for a select group of management or highly compensated employees of the Bank. Payments under the Plan shall be made from the general assets of the Bank or from the assets of the trust, if any, established as part of the Plan. It is intended that the Plan remain at all times a nonqualified plan and that the trust, if any, shall constitute a grantor trust under Sections 671 through 679 of the Code. Until paid, any and all assets of any vehicle used for payment of benefits under this Plan shall remain owned by the Bank, subject to the claims of its general creditors in the event of the Bank’s insolvency.

This Plan, as amended and restated, is intended to meet the requirements of Code Section 409A and the Treasury Regulations issued thereunder.

1

ARTICLE 2. DEFINITIONS

2.1 Definitions

Whenever used in this Plan, the following words and phrases shall have the meanings set forth below unless a different meaning is expressly provided or plainly required by the context:

(a)    “Account” means the account established for a Participant pursuant to Section 4.1 of the Plan.

(b)    “Actuarial Equivalent” means a benefit having the same value as the benefit for which it is substituted. The determination of the Actuarial Equivalent of any benefit as provided for under this Plan shall be made based on the factors specified in the definition of Actuarial Equivalent in the Cash Balance Plan.

(c)    “Annual Indexation Credit” means the credit to an Account described in Section 4.3.

(d)    “Bank” means Federal Home Loan Bank of San Francisco and any successor thereto that agrees to assume the duties and obligations of the Bank hereunder.

(e)    “Beneficiary” means the person or entity designated by a Participant or Former Participant pursuant to Section 5.8 to receive any death benefit payable under this Plan. If no Beneficiary is properly designated at the time of the Participant’s or Former Participant’s death, or if no person so designated shall have survived the Participant or Former Participant, the Beneficiary shall be the surviving spouse, or if there is no surviving spouse, the Participant’s or Former Participant’s estate. A Beneficiary designation will not become effective unless it is made on the form designated by the Bank and it is received by the Bank prior to the Participant’s death.

2

(f)    “Benefit Equalization Plan” means the Federal Home Loan Bank of San Francisco Benefit Equalization Plan, as amended from time to time.

(g)    “Board of Directors” means the Board of Directors of the Bank.

(h)    “Cash Balance Plan” means the Federal Home Loan Bank of San Francisco Cash Balance Plan, as amended from time to time.

(i)    “Cause” means any of the following:

(1)    Criminal or other willful misconduct of the Participant or Former Participant that materially violates any laws, regulations or orders of any government agency, including without limitation any laws, regulations or orders applicable to the Bank; or

(2)    Deliberate material failures of the Participant or Former Participant to comply with the Bank’s policies and procedures or with any directive of the Board of Directors.

(j)    “Code” means the Internal Revenue Code of 1986, as amended from time to time.

(k)    “Change in Control” means a transaction described in 12 United States Code Section 1446(26), so long as that transaction also qualifies as a change in ownership or effective control or a change in ownership of a substantial portion of assets under Code Section 409A and the regulations promulgated thereunder.

(l)    “Committee” means the committee appointed by the Board of Directors in accordance with Section 7.1 of this Plan.

(m)    “Compensation” means the base salary and other wages, “Annual Award” as defined under the Federal Home Loan Bank of San Francisco Executive Incentive Plan (“EIP”), any other short-term incentive compensation, commissions, and other taxable remuneration payable to a

3

Participant by the Bank for a Plan Year or other period taken into account in making the determination. In applying this definition, Compensation shall also include any salary reduction elected by the Participant under Code Sections 125, 401(k) and 132(f)(4), and any deferrals or contributions made by the Participant under any nonqualified deferred compensation or excess benefit plans maintained by the Bank, including, without limitation, the Deferred Compensation Plan and the Benefit Equalization Plan. The foregoing notwithstanding, in determining a Participant’s Compensation, all “Deferred Awards” and “Gap Year Awards” as defined under the EIP, any other long-term incentive compensation, reimbursements and expense allowances, moving expenses, fringe benefits, income attributable to group-term life insurance, long-term disability payments, meals and lodging, contributions made by the Bank on behalf of the Participant to, and all distributions from, qualified plans, nonqualified deferred compensation plans, and excess benefit plans (including, without limitation, the Cash Balance Plan, the Savings Plan, the Deferred Compensation Plan and the Benefit Equalization Plan) shall be excluded.

(n)    “Contribution Credit” means the credit to an Account described in Section 4.2(a).

(o)    “Contribution Credit Service” means the service described in Section 3.4.

(p)    “Deferred Compensation Plan” means the Federal Home Loan Bank of San Francisco Deferred Compensation Plan, as amended from time to time.

(q)    “Disability” means that a Participant:

(1)    is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or

4

(2)    is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under any accident and health plan covering employees of the Participant’s employer.

The determination of the existence of a Disability shall be made by the Bank in accordance with Code Section 409A.

(r)    “Final Average Pay” means the highest average annual Compensation of a Participant during any three (3) consecutive calendar years completed during which an individual is a Participant in the period preceding the determination date. If the Participant received Compensation for fewer than three (3) consecutive complete calendar years while a Participant, Final Average Pay shall be determined taking into account either the Participant’s last three (3) completed calendar years as a Participant, or, if fewer than three (3) calendar years have been completed as a Participant, the Participant’s entire completed service with the Bank.

(s)    “Former Participant” means either:

(1)    Any former employee of the Bank who has a vested Account under the Plan; or

(2)    Any current employee of the Bank who was a Participant under the Plan without regard to whether such individual’s Account is vested or nonvested.

(t)    “Participant” means an employee who becomes a Participant as provided in Article 3.

(u)    “Pay Limitation” means the target annualized Compensation plus target Deferred Award and Gap Year Award under the EIP and any other target long-term incentive compensation of a Participant on the Participant’s date of hire by the Bank, and adjusted for annual increases in target

5

Compensation and target Deferred Award and Gap Award and any other target long-term incentive compensation, all as determined in the sole discretion of the Board of Directors.

(v)    “Plan” means the Federal Home Loan Bank of San Francisco Supplemental Executive Retirement Plan, as established by this document and as amended from time to time.

(w)    “Plan Year” means the calendar year.

(x)    “Savings Plan” means the Federal Home Loan Bank of San Francisco Savings Plan, as amended from time to time.

(y)    “Special Contribution Credits” means the credit to an Account described in Section 4.2(b).

(z)    “Spouse” means:

(a) The person to whom a Participant is legally married under the laws of any state or other jurisdiction; or

(b) A person of the same gender as the Participant with whom the Participant has entered into a valid domestic partnership pursuant to the laws of the state of California.

All uses of the word “spouse” (including a surviving spouse) in this Plan document are deemed to be capitalized and to refer to this defined term “Spouse.”

(aa)    “Termination of Employment” means the Participant (or Former Participant) ceasing to be employed in any capacity by the Bank for any reason whatsoever, voluntary or involuntary, including by reason of death. Whether a Termination of Employment has occurred is based on whether the facts and circumstances indicate that the Member and the Bank reasonably anticipated

6

that no further services would be performed after a certain date. A Termination of Employment will not be deemed to have occurred if a Participant (or Former Participant) continues to provide services to the Bank as an employee, independent contractor or otherwise, at an annual rate that is fifty percent (50%) or more of the services rendered, on average, during the immediate preceding 36 months with the Bank (or if less, such lesser period); provided, however, that a Termination of Employment will be deemed to have occurred if the Participant’s (or Former Participant’s) service with the Bank, as an employee, independent contractor or otherwise, is reduced to an annual rate that is less than twenty percent (20%) of the services rendered, on average, during the immediately preceding 36 months with the Bank (or if less, such lesser period).

In addition to the foregoing, the employment of a Participant (or Former Participant) shall not be deemed to be terminated while the Participant (or Former Participant) is on military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed six (6) months or, if longer, so long as the Participant’s (or Former Participant’s) right to reemployment with the Bank is provided by either statute or contract. If the period of leave exceeds six (6) months and the Participant’s (or Former Participant’s) right to reemployment is not provided by either statute or contract, then the employee is deemed to have a Termination of Employment on the first day immediately following such six (6) month period.

For the purposes of this definition only, the term Bank includes Federal Home Loan Bank of San Francisco and its entire controlled group within the meaning of Code Section 414(b) and 414(c), using the 80% standard instead of the 50% standard outlined in Treasury Regulations interpreting Code Section 409A.

7

(bb)    “Total Retirement Income” means the amount determined under (1) and (2) below projected using the assumptions, and in the manner, set forth in Section 4.4 below, determined as the Actuarial Equivalent of a single life annuity commencing at the later of the Participant’s Normal Retirement Date (as defined in the Cash Balance Plan) and the date of Termination of Employment with the Bank.

(1)    all benefits accrued by a Participant or Former Participant under the Cash Balance Plan, the Financial Institutions Retirement Fund and this Plan (excluding any Special Contribution Credits and Annual Indexation Credits related to any Special Contribution Credits), plus

(2)    all benefits contributed by the Bank on behalf of a Participant or Former Participant under the Deferred Compensation Plan and the Benefit Equalization Plan with the exception of any matching contributions contributed by the Bank on behalf of a Participant or Former Participant and any deferrals or contributions made at the direction of the Participant or Former Participant.

(cc)    “Vesting Service” means the service described in Section 3.5.

2.2 Number and Gender

Except when otherwise indicated by the context, any use of any term in the singular or plural shall also include the opposite number. As used in the Plan, the masculine gender shall be deemed to refer to the feminine whenever appropriate.

8

ARTICLE 3. PARTICIPATION AND SERVICE

3.1 General

Participation in the Plan is limited solely to a select group of management or highly compensated employees who hold positions that are designated by the Board of Directors as covered under the Plan.

3.2 Date of Participation

An individual shall automatically become a Participant on the later of:

(a)    January 1, 2003, or

(b)    the date that the individual first begins service in a position that the Board of Directors has designated as covered under the Plan.

3.3 Duration; Rehire

(a)    Participant. An employee who becomes a Participant shall continue to be a Participant until the employee has a Termination of Employment with the Bank or until the employee no longer serves in a position which the Board of Directors has designated as covered under the Plan.

(b)    Former Participant. An individual shall continue to be a Former Participant until payment of his or her Account is made in full, begins, is forfeited pursuant to Section 4.6, or unless he or she once again becomes a Participant pursuant to Section 3.3(c).

(c)    Rehire. A former employee who was a Participant in the Plan and is subsequently rehired by the Bank shall once again become a Participant on the date he or she begins service in a position

9

that the Board of Directors has designated as covered under the Plan. Such individual’s Contribution Credit Service and Vesting Service shall be determined in accordance with the provisions of Sections 3.4 and 3.5.

3.4 Contribution Credit Service

Except as otherwise provided in this Section, Contribution Credit Service shall include the Participant’s aggregate periods of employment (including years and fractions thereof) with the Bank or with an entity covered by the Financial Institutions Retirement Fund on and after January 1, 1996. Notwithstanding the foregoing, for Plan Years commencing before January 1, 2018, all employment with the Bank necessary to complete six (6) months of Vesting Service as defined in, and required for participation under, the Cash Balance Plan shall be excluded from Contribution Credit Service for purposes of this Plan.

3.5 Vesting Service

Vesting Service with respect to any Contribution Credit or Special Contribution Credit and the Annual Indexation Credits associated therewith shall include a Participant’s aggregate periods of employment (including years and fractions thereof) with the Bank from the date such Participant became a Participant under the Plan; provided, however, that for Plan Years commencing prior to January 1, 2018, Vesting Service with respect to a particular Contribution Credit and the Annual Indexation Credits associated therewith shall include a Participant’s aggregate periods of employment (including years and fractions thereof) with the Bank from the date such Contribution Credit is credited to the Participant’s Account.

10

ARTICLE 4. RETIREMENT BENEFITS

4.1 Account

(a)    The Bank shall establish and maintain an Account on its books for each Participant (and Former Participant) in the Plan. The balance of a Participant’s (or Former Participant’s) Account as of any date shall be equal to the sum of the Participant’s (or Former Participant’s) (i) Contribution Credits and related Annual Indexation Credits, if any, as of that date, as adjusted pursuant to Sections 4.4(b) and 4.4(c) below and, if applicable, Section 4.1(b) and (ii) Special Contribution Credits and related Annual Indexation Credits, if any, as of that date, as adjusted, if applicable, under Section 4.1(b), but without adjustments under Sections 4.4(b) and (c). As of the date payment of benefits is made or commences under this Plan, the Participant’s or Former Participant’s Account shall be reduced to zero (0), such individual shall cease to be a Participant or Former Participant, and, subject to other applicable provisions of the Plan, benefits shall be paid under the automatic form of benefit payment provided under Section 5.2 or, if applicable, the optional form of benefit payment elected by the Participant or Former Participant under Section 5.3.

(b)    Rehired Individuals. If an individual, in accordance with the provisions of Section 3.3(c), once again becomes a Participant, then such individual’s Account shall be determined as follows: upon the date such individual once again becomes a Participant such individual’s Account shall be redetermined (without regard to any distribution previously made or scheduled to be made) and shall be credited only with those amounts which were unvested at the time of the earlier termination and which were not a part of any distribution or scheduled distribution. Any such unvested amounts shall be subject to the vesting requirements set forth in Section 4.5.

11

4.2 Contribution Credits and Special Contribution Credits

(a)    Crediting Accounts. A Contribution Credit shall be credited to the Account of each Participant as follows:

(1)    The Contribution Credit for a Plan Year shall be credited to the Account of each Participant as of the last day of each Plan Year, beginning in 2003. No Contribution Credit shall be credited to the Account of any Participant for, or with respect to, any year prior to 2003.

(2)    A Contribution Credit shall be credited to a Participant who has a Termination of Employment or who ceases to be a Participant but otherwise remains employed by the Bank during the course of a Plan Year solely for that portion of Plan Year during which the individual was a Participant. The Contribution Credit for a Participant who has a Termination of Employment shall be credited as of the date of termination. The Contribution Credit for a Participant who ceases to be a Participant but otherwise remains employed by the Bank shall be credited as of December 31 of the applicable Plan Year.

(3)    Subject to Section 4.4 and other applicable provisions of the Plan, the amount of the Contribution Credit credited to the Account of Participants shall be determined in accordance with Schedule A attached hereto unless the Board of Directors specifically provides that the amount of the Contribution Credit to a particular Participant’s Account shall be determined in accordance with Schedule B or Schedule C attached hereto. Additionally, the Board of Directors may, in its discretion and from time to time, designate that the amount of the Contribution Credit credited to the Account of a particular Participant or Participants for a Plan Year shall be determined in accordance with a separate Schedule, which Schedule shall be attached hereto. In no circumstances, however, shall the Account of a Participant be credited with Contribution Credits for a Plan Year under more than

12

one Schedule. The Board of Directors must designate any such alternative schedule (other than Schedules A, B or C attached hereto) on or before December 31 of the Plan Year to which the schedule will apply to any Participant or group of Participants.

(b)    Special Contribution Credits. The Board of Directors may, in its sole discretion, approve up to three Special Contribution Credits to be credited to a Participant’s Account. Except as otherwise provided in Schedule C, the amount of all Special Contribution Credits for a single Participant credited to such Participant’s Account may not exceed the Participant’s Pay Limitation for the applicable Plan Year.

(c)    Former Participants. No Contribution Credits or Special Contribution Credits shall be credited to the Account of any Former Participant with respect to any period of time such individual was not a Participant.

4.3 Annual Indexation Credits

(a)    Crediting Accounts. Annual Indexation Credits shall be credited to the Accounts of Participants and Former Participants as follows:

(1)    The Annual Indexation Credit for a Plan Year shall be credited to the Account of Participants and Former Participants as of the last day of each Plan Year beginning in 2004. No Annual Indexation Credit shall be credited to the Account of any Participant or Former Participant or with respect to any year prior to 2004.

(2)    Subject to Section 4.4 and other applicable provisions of the Plan, the amount of the Annual Indexation Credit credited to the Account of Participants and Former Participants shall be

13

six percent (6%) of the balance of the Account determined as of the first day of the applicable Plan Year.

(b)    Proration; Cessation of Annual Indexation Credits. The Annual Indexation Credit for the Plan Year in which a Participant or Former Participant receives, or begins receiving, payment of his or her benefit under this Plan shall be prorated as provided in Section 4.4(a) below and no further Annual Indexation Credits shall be credited to such Participant or Former Participant.

4.4 Special Rules For Determining Balance of Accounts and for Crediting Contribution Credits and Annual Indexation Credits

(a)    Proration. If the Account of a Participant or Former Participant is determined as of a date during the Plan Year, the rules set forth in Section 4.2 and 4.3 shall be applied by treating the date of determination as the end of a short Plan Year. In such a case, the Participant’s Compensation for the Plan Year to the calculation date shall be used in determining Compensation and the Contribution Credit, and the Annual Indexation Credit shall be prorated to reflect the portion of the year that has been completed as of the date of determination.

(b)    Total Retirement Income – Current Limitation. Notwithstanding anything in this Plan to the contrary, the Total Retirement Income of a Participant or Former Participant shall be limited to fifty percent (50%) of the Participant’s or Former Participant’s Final Average Pay, and a Participant’s or Former Participant’s Contribution Credits and/or Annual Indexation Credits, as applicable, under this Plan shall be adjusted as set forth in Section 4.4(d) below in order to ensure that such limit is observed. For this purpose Total Retirement Income shall be determined as of the earlier of the last day of the current Plan Year and the date payments begin, and Final Average

14

Pay shall be determined as of the earliest of the last day of the current Plan Year, Termination of Employment (if any), and the date the Participant ceases to be a Participant (if any).

(c)    Total Retirement Income – Projected Limitation. Notwithstanding anything in this Plan to the contrary, the projected Total Retirement Income of a Participant shall be limited to fifty percent (50%) of the Participant’s projected Final Average Pay, and a Participant’s Contribution Credits and/or Annual Indexation Credits, as applicable, under this Plan shall be adjusted as set forth in Section 4.4(d) below in order to ensure that such limit is observed. For this purpose, in the case of a Participant who has not yet attained age 65, Total Retirement Income and Final Average Pay shall be projected from the last day of the current Plan Year to the date the Participant attains age 65 by assuming four percent (4%) annual pay increases and that the Participant remains a Participant until such projected date. The projected limitation under this Section 4.4(c) shall not apply unless the Participant remains a Participant until the last day of the Plan Year.

(d)    If, pursuant to Section 4.4(b), a Participant’s or Former Participant’s Total Retirement Income exceeds the fifty percent (50%) limits set forth in Sections 4.4(b), then Contribution Credits and/or Annual Indexation Credits related to Contribution Credits, as applicable, for the current and, if necessary, prior Plan Years shall be reduced as necessary to limit Total Retirement Income accordingly. If such Participant’s or Former Participant’s Total Retirement Income subsequently falls below the fifty percent (50%) limits set forth in Section 4.4(b), then any Contribution Credits and/or Annual Indexation Credits related to such Contribution Credits previously reduced shall be restored as necessary. For purposes of clarity, Section 4.4(d) does not at any time reduce any Special Contribution Credits and/or Annual Indexation Credits related to such Special Contribution Credits that have been credited to a Participant’s Account.

15

(e)    If, pursuant to Section 4.4(c), a Participant’s or Former Participant’s Total Retirement Income is projected to exceed the fifty percent (50%) limits set forth in Section 4.4(c), then the projected future Contribution Credits and/or Annual Indexation Credits related to such Contribution Credits, as applicable, shall be reduced, and, if necessary, Contribution Credits and/or Annual Indexation Credits related to such Contribution Credits for the current Plan Year, and then any prior Plan Years, shall be reduced to the extent required to limit the projected Total Retirement Income accordingly. If such Participant’s or Former Participant’s Total Retirement Income subsequently is projected to fall below the fifty percent (50%) limits set forth in 4.4(c), then any Contribution Credits and/or Annual Indexation Credits related to such Contribution Credits previously reduced shall be restored as necessary, first with respect to any prior Plan Years in order of the most recently reduced, and second with respect to projected Plan Years. For purposes of clarity, Section 4.4(d) does not at any time reduce any Special Contribution Credits and/or Annual Indexation Credits related to such Special Contribution Credits that have been credited to a Participant’s Account.

4.5    Vesting

The interest of each Participant in his or her Account shall vest as follows:

(a)    Vesting of Contribution Credits. Each Participant shall become fully vested in all Contribution Credits in the Participant’s Account upon the completion of five (5) years of Vesting Service; provided, however, that for Contribution Credits made to a Participant’s Account for any Plan Year that commenced before January 1, 2018, each Participant shall become fully vested in a particular Contribution Credit upon the completion of three (3) years of Vesting Service following

16

the beginning of the Plan Year (or portion thereof) with respect to which such Contribution Credit is credited to the Participant’s Account.

(b)    Special Contribution Credits. Each Participant shall become fully vested in all Special Contribution Credits in the Participant’s Account upon the completion of three (3) years of Vesting Service.

(c)    Vesting of Annual Indexation Credits. Each Participant shall become fully vested in that portion of each Annual Indexation Credit which has been credited to his or her Account with respect to a particular Contribution Credit or Special Contribution Credit at the same time such Participant becomes fully vested in such Contribution Credit or Special Contribution Credit and all further Annual Indexation Credits with respect to a particular vested Contribution Credit or Special Contribution Credit shall be fully vested.

(d)    Attainment of Age 62. Notwithstanding any other provision of this Plan to the contrary, each Participant shall become fully vested in his or her Account on the date such Participant attains age 62 and all further Contribution Credits, Special Contribution Credits and Annual Indexation Credits to such Participant’s Account shall be fully vested.

4.6 Forfeiture

Notwithstanding any other provision of this Plan to the contrary, each Participant shall forfeit his or her entire unvested Account if the Participant has a Termination of Employment for Cause. For purposes of the Plan, Cause shall be determined by the Bank in its sole discretion using the definition set forth in Section 2.1(i).

17

ARTICLE 5. PAYMENT OF BENEFITS; DEATH BENEFITS

5.1 Amount of Benefit

The benefit payable under this Plan to a Participant or Former Participant shall be equal to such individual’s vested Account balance at the time payment is made or commences.

5.2 Automatic Form of Benefit Payment

Unless a Participant or Former Participant elects, in the manner prescribed in Section 5.6, an optional form of benefit payment set forth in Section 5.3 within 30 days of first becoming a Participant, the automatic form of benefit payment under the Plan shall be a single lump sum.

5.3 Optional Forms of Benefit Payments

A Participant or Former Participant may elect in accordance with Sections 5.5 and 5.6 to receive his or her benefits in one of the following optional forms of payment (which shall be the Actuarial Equivalent of the automatic form provided in Section 5.2) to the extent applicable:

(a)    A Life Annuity Option. A life annuity payable to the Participant or Former Participant as of the first day of each month until (and including) the month in which the Participant or Former Participant dies.

(b)    A Life Annuity Option with 20-Year Certain Guarantee. An annuity payable to the Participant or Former Participant as of the first day of each month until (and including) the later of the month in which the Participant or Former Participant dies or two hundred and forty (240) months.

18

(c)    A Life Annuity Option with 10-Year Certain Guarantee. An annuity payable to the Participant or Former Participant as of the first day of each month until (and including) the later of the month in which the Participant or Former Participant dies or one hundred and twenty (120) months.

(d)    A One-Half Life Annuity and One-Half Lump Sum. One half of the value of the Participant’s Account is paid in a single lump sum and the remaining value of the Participant’s Account is paid in a life annuity payable to the Participant or Former Participant as of the first day of each month until (and including) the month in which the Participant or Former Participant dies.

(e)    A One-Half Life Annuity and One-Half Fixed Ten-Year Payout. One half of the value of the Participant’s Account is paid in fixed equal monthly installments over of period of one hundred and twenty (120) months, and the remaining value of the Participant’s Account is paid in a life annuity payable to the Participant or Former Participant as of the first day of each month until (and including) the month in which the Participant or Former Participant dies.

(f)    A Contingent fifty Percent (50%) Annuitant Option. An annuity payable as of the first day of each month to the Participant or Former Participant, for life, with a continuing annuity to the Beneficiary if the Beneficiary survives the Participant or Former Participant, in an amount which is fifty percent (50%) of the monthly annuity payable to the Participant or Former Participant, beginning with the first day of the month following the Participant’s or Former Participant’s death and continuing for the Beneficiary’s lifetime.

19

5.4 Automatic Time of Benefit Payment

(a)    Automatic Time. Unless a Participant or Former Participant elects, in the manner prescribed in Section 5.6, an optional time of benefit payment within 30 days of first becoming a Participant, the automatic time of payment of a benefit under the Plan shall be the earlier of the Participant’s Termination of Employment, death or Disability.

(b)    Date Payment is Made. Payment of a benefit under the Plan shall begin as soon as administratively practicable, but not later than 90 days, following Termination of Employment, death or Disability. The Bank shall decide, in its sole discretion, when the exact date payment shall begin within such 90-day period.

5.5 Optional Time of Benefit Payment

Notwithstanding Section 5.4(b) above, if a Participant has a Termination of Employment at age 45 or older he may elect to defer payment of benefits under the Plan beyond such Termination of Employment, provided such election is made in accordance with Section 5.6 and the distribution is to be made on a specified date, death or Disability.No payment of benefits may be made under this Plan prior to Termination of Employment, death or Disability. Notwithstanding the foregoing, distributions shall commence no later than the April 1 following the end of the calendar year in which the later of the two following events occur: (1) the Participant reaches age 70 ½, or (2) the Participant has a Termination of Employment.

20

5.6 Manner and Time of Elections

(a)    The election of an optional form or time of benefit payment shall be made on such forms as may be prescribed by the Bank. Except as provided in Section 5.6(b), a Participant must make an election regarding the optional form of benefit and the optional time of benefit payment within 30 days of first becoming a Participant and such election shall be irrevocable on the beginning of the 31st day after becoming a Participant. If no election is made within such 30 days, the automatic form of benefit payment and automatic time of benefit payment rules will apply. A Participant (or Former Participant) may modify his election or the automatic form and time of benefit but the date the modification is submitted to the administrator must be at least twelve (12) months prior to the Participant’s (or Former Participant’s) scheduled distribution date, the modification shall not be effective for twelve (12) months after it becomes irrevocable and the first payment under the modified distribution date must occur at least five (5) years after the date such payment would have been made absent the modification; provided, however, that the additional five (5) years shall not apply to payments elected to be made upon death or to any change in the form of payment between annuities that are Actuarial Equivalents. The election to modify in the preceding sentence shall be irrevocable twelve (12) months prior to the scheduled distribution date absent the modification.

(b)    The rules regarding elections apply to rehired employees described in Section 4.1(b), in the same way it applies to newly eligible employees.

(c)    Notwithstanding any other provision in the Plan to the contrary, during 2008 a Participant may modify the form of distribution and the distribution date elected under Section 5.6(a), provided

21

that the election is made not later than December 31, 2008. No election under this Section shall: (1) change the payment date of any distribution otherwise scheduled to be paid in 2008 or cause a payment to be paid in 2008, or (2) be permitted after December 31, 2008.

(d)    Notwithstanding any other provision of the Plan to the contrary, no distribution shall be made from the Plan that would constitute an impermissible acceleration of payment as defined in Section 409A(a)(3) of the Code and the regulations promulgated thereunder.

(e)    The Committee may delay any payment to a Participant or Former Participant upon the Committee’s reasonable anticipation of one or more of the following: (i) making such payment would jeopardize the Bank’s ability to continue as a going concern and the payment is made to the Participant during the first taxable year in which making the payment would not have such effect on the Bank; or (ii) making such payment would violate Federal securities laws or other applicable law.

5.7 Death Benefits

(a)    In the case of a Participant or Former Participant:

(1)    who has a vested interest in his or her Account balance; and

(2)    who dies before benefit payment has been made in the case of the lump sum automatic form of payment pursuant to Section 5.2, or who has elected an optional form of payment pursuant to Section 5.3 (other than 5.3(f)) and dies before any payment has begun, the amount of the vested Account balance shall be paid in a lump sum to the Participant’s or Former Participant’s Beneficiary eighteen (18) months after the death of the Participant or Former Participant. In order to change the form or the time of the payment, the Beneficiary must make an election within six (6) months

22

after the Participant’s or Former Participant’s death to receive a distribution in a form that is available to Beneficiaries under Section 5.3, such election shall be irrevocable on the six (6) month anniversary of the Participant’s death and shall not be effective for twelve (12) months after the date such election becomes irrevocable. If the Beneficiary fails to make a timely election, the Beneficiary will receive the benefit in the form of a lump sum at the end of the eighteen (18) month period. The Beneficiary cannot elect to receive: (1) payment past the date that is the April 1 following the end of the calendar year in which the Participant would have attained age 70 ½, (2) benefits in a form not allowed under the Cash Balance Plan and (3) benefits before the end of the eighteen (18) month period.

(b)    In the case of a Participant or Former Participant:

(1)    who has a vested interest in his or her Account balance; and

(2)    who has elected the contingent fifty percent (50%) annuitant option pursuant to Section 5.3(b) and who dies either before or after benefit payment has begun, the amount of the vested Account balance shall be paid or continue to be paid in the form of the contingent fifty percent (50%) annuitant option described in Section 5.3(f).

(c)    In no other case shall any amount be paid to a Participant’s or Former Participant’s Beneficiary.

5.8 Beneficiary Designation

A Participant or Former Participant may designate a person or other entity as the Beneficiary to receive any death benefit payable under the Plan. Each Beneficiary designation shall be in the form prescribed by the Bank, shall be effective only when properly filed in writing with the Bank

23

before the earlier of the Participant’s or Former Participant’s death or the time payment is made or commences, and shall revoke all prior designations by the Participant or Former Participant.

ARTICLE 6. SOURCE OF PAYMENTS

All benefits payable under the Plan shall be paid as they become due and payable by the Bank out of its general assets. Nothing contained in this Plan shall be deemed to create a trust of any kind for the benefit of Participants, Former Participants or their Beneficiaries or create a fiduciary relationship between the Bank and the Participants, Former Participants or their Beneficiaries. To the extent that any person acquires a right to receive benefits under the Plan, such rights shall be no greater than the right of any unsecured general creditors of the Bank. Notwithstanding the foregoing, the Bank may, in its sole discretion, execute a trust agreement with a trustee, or enter into one or more contracts with an insurance company or companies, or adopt a combination of both methods of funding. Any such trust so established shall be a “rabbi” grantor trust under Sections 671 through 679.

ARTICLE 7. ADMINISTRATION

7.1 Committee

(a)    General. The Committee, subject to those powers which the Board of Directors has reserved as described in Article 8 below, shall have general authority over, and responsibility for, the administration and interpretation of the Plan. The Committee shall have full power, authority and discretion to interpret and construe the Plan, to make all determinations considered necessary or advisable for the administration of the Plan and the trust, if any, the calculation of the amount of benefits payable under the Plan, and to review claims for benefits

24

under the Plan. The Committee’s interpretations and constructions of the Plan and its decisions or actions thereunder shall be binding and conclusive on all persons for all purposes.

(b)    Composition. The Committee shall consist of at least three individuals, each of whom shall be appointed by the Board of Directors. Any Committee member may resign by delivering his or her written resignation to the Committee no later than fifteen (15) days before the effective date of the resignation. The Board of Directors may remove any member of the Committee at any time and for any reason with or without advance written notice. Vacancies in the Committee arising by resignation, death, removal or otherwise shall be filled by the Board of Directors.

(c)    Committee Procedures. The Committee shall elect or designate one of its own members as Chair, establish its own procedures and the time and place for its meetings and provide for the keeping of minutes of all meetings. A majority of the members of the Committee shall constitute a quorum for the transaction of business by the Committee. Any action of the Committee may be taken upon the affirmative vote of a majority of the members at a meeting or, at the direction of its Chair, without a meeting by mail or telephone, provided that all of the Committee members are informed in writing of the matter to be voted upon. The Committee may establish procedures pursuant to which a Committee member may elect not to participate in a Committee proceeding in which such member has an interest. No Committee member shall be entitled to act on or decide any matters relating solely to such Committee member as a Participant or any of his or her rights or benefits under the Plan.

(d)    Expenses. All expenses incurred by the Committee in its administration of the Plan shall be paid by the Bank. The Committee members shall not receive any special compensation for

25

serving in such capacity but shall be reimbursed for any reasonable expenses actually incurred in connection therewith. No bond or other security is required of the Committee or any member thereof in any jurisdiction.

(e)    Liability; Indemnification. No Committee member shall be personally liable by reason of any instrument executed by such Committee member, or action taken by the member in his or her capacity as a Committee member, acting in good faith and exercising reasonable care, nor for any mistake of judgment made in good faith. Committee members may be entitled to indemnification for certain costs, expenses and liabilities to the fullest extent permitted by applicable law and regulations and the charter and bylaws of the Bank, and subject to the terms and conditions set forth in such bylaws.

7.2 Procedures for Requesting Benefit Payments

To obtain Plan benefits, a Participant, Former Participant or Beneficiary must file a written application with the Bank. Procedures for filing a claim in the event that Plan benefits are denied in whole or in part may be obtained from the Bank.

ARTICLE 8. AMENDMENT AND TERMINATION

8.1 Amendment of the Plan

The Bank reserves the right to amend the Plan at any time and in any respect whatsoever by action of its Board of Directors or by such other means as may be prescribed by the Board of Directors. The President of the Bank shall have authority to make administrative and other amendments to the Plan as may be necessary or appropriate to facilitate the administration, management, and interpretation of the Plan or to conform the Plan thereto (including any such

26

amendments as necessary or appropriate from time to time to conform the Plan to changes in applicable laws), provided that any such amendment or action does not have a material effect on the then currently estimated cost to the Bank of maintaining the Plan. All amendments to the Plan that have a material effect on the then currently estimated cost to the Bank of maintaining the Plan must be approved by the Board of Directors. Retroactive Plan amendments may not decrease the Account balance of any Participant or Former Participant determined as of the time the amendment is adopted, unless the Participant or Former Participant consents in writing.

8.2 Termination of the Plan

While it is the intent of the Bank to maintain the Plan indefinitely, it reserves the right to terminate the Plan in whole or in part by action of the Board of Directors (or by such other means as may be prescribed by the Board of Directors) at any time.

Upon termination of the Plan, no further benefits shall accrue under the Plan to any Participant or Former Participant. In the event of a termination of the Plan, the Bank may determine that the Accounts will be distributed. If the Board of Directors determines that the Plan is to be terminated and distributions are to be made, the Accounts will be distributed within the period beginning twelve (12) months after the date the Plan was terminated and ending twenty-four (24) months after the date the Plan was terminated, or pursuant to Article 5 of the Plan, if earlier, and otherwise in accordance with Treasury Regulation § 1.409A-3(j)(4)(ix)(C). Any liquidation and termination of the Plan will not occur proximate to a downturn in the financial health of the Bank, as prohibited by Code Section 409A. If the Plan is terminated and Accounts are distributed, the Bank shall: (1) terminate all arrangements for Participants that are required to be aggregated with the Plan under Code Section 409A and (2) not adopt a new plan for Participants that would be

27

aggregated with the Plan under Code Section 409A, at any time within three (3) years following the date of the termination of the Plan.

8.3 Change in Control

The Bank may terminate the Plan within 30 days prior to or twelve (12) months following a Change in Control and distribute the Accounts of the Participants or Former Participants within the twelve (12) month period following a termination of the Plan and otherwise in accordance with Treasury Regulation § 1.409A-3(j)(4)(ix)(B). If the Plan is terminated and Accounts are distributed in connection with a Change in Control, the Bank shall: (1) terminate all arrangements for Participants that are required to be aggregated with the Plan under Code Section 409A and (2) not adopt a new plan for Participants that would be aggregated with the Plan under Code Section 409A, at any time within three years following the date of the termination of the Plan.

8.4Dissolution or Bankruptcy

The Plan shall automatically terminate upon a corporate dissolution or bankruptcy provided that Participants’ (or Former Participant’s) Accounts are distributed and included in the gross income of the Participants (or Former Participants) by the latest of: (i) the Plan Year in which the Plan termination, (ii) the first Plan Year in which payment of the Accounts is administratively practicable, or (iii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture and otherwise in accordance with Treasury Regulation § 1.409A-3(j)(4)(ix)(C). A corporate dissolution or bankruptcy will have occurred only if the transaction qualifies as both a liquidation or reorganization under 12 United States Code Section 1446(26) and a dissolution or bankruptcy under Code Section 409A and the regulations promulgated thereunder.

28

ARTICLE 9. MISCELLANEOUS PROVISIONS

9.1 Employment Rights

Nothing contained in this Plan or any modification of the Plan or act done in pursuance of this Plan shall be construed as giving any Participant or Former Participant any legal or equitable right with respect to his or her employment against the Bank (or any director, officer or employee thereof), unless specifically provided in this Plan or under applicable law, or as giving any person a right to be retained in the employ of the Bank. All employees shall remain subject to assignment, reassignment, promotion, transfer, layoff, reduction, suspension, and discharge to the same extent as if this Plan had never been established.

9.2 No Examination or Accounting

Neither this Plan nor any action taken under it shall be construed as giving any person the right to an accounting or to examine the books or affairs of the Bank, the Plan, or the Committee, except to the extent required by law.

9.3 Records Conclusive

The records of the Bank and the Committee shall be conclusive in respect to all matters involved in the administration of the Plan to the extent permitted by applicable law.

9.4 Severability

In the event any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of this Plan, and it shall be construed and enforced as if such illegal or invalid provision had never been included.

29

9.5 Counterparts

This Plan may be executed in any number of counterparts, each of which shall be deemed to be an original. All the counter parts shall constitute but one and the same instrument and may be sufficiently evidenced by any one counterpart.

9.6 Taxes

The Bank shall withhold, or cause to be withheld, from all benefits payable under the Plan all federal, state, local or other taxes required by applicable law be withheld with respect to such payment.

9.7 Binding Effect

The Plan shall be binding upon and inure to the benefit of the Bank and its successors and assigns and the Participants, Former Participants, their Beneficiaries and estates. The Plan shall also be binding upon and inure to the benefit of any successor organization succeeding to substantially all of the assets and business of the Bank, but nothing in the Plan shall preclude the Bank from merging or consolidating into or with, or transferring all or substantially all of its assets to, another organization which assumes the Plan and all obligations of the Bank thereunder.

In any agreement or plan which the Bank may enter into to effect any merger, consolidation, reorganization, or transfer of assets, except as provided in Section 8.3, the Bank agrees that it shall make appropriate provision for the preservation of the Participants’ and Former Participants’ benefits accrued under the Plan prior to such merger, consolidation, reorganization or transfer of assets. Upon such a merger, consolidation, reorganization, or transfer of assets and assumption of the Plan

30

obligations of the Bank, the term “Bank” shall refer to such other organization and the Plan shall continue in full force and effect.

9.8 Assignment

No Participant or Former Participant or Beneficiary shall have the right to assign, transfer, hypothecate, encumber or anticipate his or her benefits under the Plan, nor shall the benefits under this Plan be subject to any legal process to levy upon or attach the benefits for payment of any claim against the Participant or Former Participant or his or her Beneficiary. In the event of any attempted assignment or transfer, the Bank shall have no further liability hereunder. The foregoing notwithstanding, in accordance with procedures that are established by the Committee (including procedures requiring prompt notification to the affected Participant or Former Participant and each alternate payee of the receipt by the Plan or the Bank of a domestic relations order and its procedures for determining the qualified status of such order) and subject to Code Section 409A, a judicial order for purposes of or pertaining to domestic relations (which orders do not alter the amount, timing, or form of benefit other than to have it commence at the earliest permissible date) shall be honored by the Plan and the Bank if the Committee or its designee determines that such order would constitute a qualified domestic relations order (within the meaning of Section 414(p)(1)(B) of the Code) if the Plan were a qualified retirement plan under Section 401(a) of the Code.

9.9 Incapacity

If the Committee is presented with credible evidence that any person to whom any amount is or was payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment, or any part thereof, due to such person or his or her estate (unless a prior claim therefor has been made by a duly appointed legal representative), may,

31

if the Committee is so inclined, be paid to such person’s spouse, child, or other relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. In making such a finding the Committee may rely on the advice of experts chosen by the Committee in its sole discretion. Any payment consequent on such finding shall be in complete discharge of the liability of the Plan and the Bank therefor.

9.10 Unsecured Creditor

To the extent that any person acquires a right to receive payments from the Bank under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Bank.

9.11 Notice

Any election, application, claim, designation, request, notice, instruction or other communication required or permitted to be made by a Participant, Former Participant, Beneficiary, or other person to the Committee shall be made in writing and in such form as is prescribed from time to time by the Committee and shall be mailed by first-class mail, postage pre-paid or delivered to such location as shall be specified by the Committee and shall be deemed to have been given and delivered only upon receipt thereof at such location.

9.12 Benefits Not Salary

The benefits payable under the Plan shall be independent of, and in addition to, any other benefits provided by the Bank and shall not be deemed salary or other remuneration by the Bank for the purpose of computing benefits to which any Participant or Former Participant may be entitled under any other plan or arrangement of the Bank.

32

9.13 Captions

The captions preceding the sections of the Plan have been inserted solely as a matter of convenience and shall not in any manner define or limit the scope or intent of any provisions of the Plan.

9.14 Governing Law

The Plan is intended to constitute an unfunded Plan for a select group of employees and rights thereunder shall be construed according to the laws of the State of California, without giving effect to the choice of law principles thereof, and the laws of the United States, as applicable. The Plan shall be construed in a manner that is consistent and compliant with Section 409A of the Code, and any regulations promulgated thereunder. Any provision that is noncompliant with Section 409A of the Code is void or deemed amended to comply with Section 409A of the Code. The Bank does not guarantee or warrant the tax consequences of the Plan, and the Participants shall in all cases be liable for any taxes due with respect to the Plan.

9.15 Addresses

Each Participant or Former Participant must file with the Bank from time to time in writing his or her post office address and each change of post office address. The communication, statement or notice addressed to a Participant or Former Participant at the last post office address filed with the Bank, or if no address is filed with the Bank, then at the last post office address as shown on the records of the Bank, shall be binding on the Participant or Former Participant and his or her Beneficiaries for all purposes of the Plan. The Bank shall not be required to search for or locate a Participant, Former Participant or his or her Beneficiary.

33

IN WITNESS WHEREOF, the Federal Home Loan Bank of San Francisco has caused this amendment and restatement to the Federal Home Loan Bank of San Francisco Supplemental Executive Retirement Plan, effective January 1, 2018, to be executed by its duly authorized officers, this 27th day of February, 2018.

FEDERAL HOME LOAN BANK OF SAN FRANCISCO
Signature:	/s/ J. Gregory Seibly
Name:	J. Gregory Seibly
Title:	President and Chief Executive Officer
Signature:	/s/ Janet M. Homan
Name:	Janet M. Homan
Title:	Senior Vice President, Chief Human Resources Officer

34

FEDERAL HOME LOAN BANK OF SAN FRANCISCO
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Schedule A

Subject to Sections 3.4, 4.2 and other applicable provisions of the Plan, for the Plan Year beginning in 2018 and for subsequent Plan Years, Contribution Credits shall be credited to the Account of each Participant as follows (unless the Board of Directors specifically designates that a different Schedule is applicable to such Participant):

A.1 20% of Compensation for Contribution Credit Service less than 5 years.

A.2 25% of Compensation for Contribution Credit Service of 5 or more.

Subject to Sections 3.4, 4.2 and other applicable provisions of the Plan, for the Plan Years beginning in 2003 and ending in 2017, Contribution Credits for Participants designated under Schedule A shall be credited to the Account of each Participant as follows:

A.1    8% of Compensation for Contribution Credit Service less than 10 years.

A.2    12% of Compensation for Contribution Credit Service of 10 or more but less than 15 years.

A.3    16% of Compensation for Contribution Credit Service of 15 years or more.

For purposes of this Schedule A, Compensation shall include only Compensation earned by the Participant during the applicable Plan Year while a Participant in the Plan. Additionally, for purposes of this Schedule, Contribution Credit Service shall be determined as of the first day of the applicable Plan Year. No Contribution Credits shall be credited to the Account of any Participant under this Schedule A for, or with respect to, any year prior to 2003.

A-1

FEDERAL HOME LOAN BANK OF SAN FRANCISCO
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Schedule B

Subject to Sections 3.4, 4.2 and other applicable provisions of the Plan, for the Plan Year beginning in 2003 and for subsequent Plan Years, the Account of each Participant to whom the Board of Directors has specifically designated this Schedule B applies shall be credited with Contribution Credits as follows:

B.1 10% of Compensation for Contribution Credit Service less than 10 years.

B.2 15% of Compensation for Contribution Credit Service of 10 or more but less than 15 years.

B.3 20% of Compensation for Contribution Credit Service of 15 years or more.

For purposes of this Schedule, Compensation shall include only Compensation earned by the Participant during the applicable Plan Year while a Participant in the Plan. Additionally, for purposes of this Schedule, Contribution Credit Service shall be determined as of the first day of the applicable Plan Year. No Contribution Credits shall be credited to the Account of any Participant under this Schedule B for or with respect to any year prior to 2003.

B-1

FEDERAL HOME LOAN BANK OF SAN FRANCISCO
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANScheduleC

Subject to Sections 3.4, 4.2 and other applicable provisions of the Plan, for the Plan Year beginning in 2018 and for subsequent Plan Years, the Account of each Participant to whom the Board of Directors has specifically designated this Schedule C applies shall be credited with Contribution Credits as follows:

C.1    25% of Compensation for Contribution Credit Service less than 5 years.

C.2    35% of Compensation for Contribution Credit Service more than 5 years.

Subject to Sections 3.4, 4.2 and other applicable provisions of the Plan, for the Plan Year beginning in 2016 and ending in 2017, the Account of each Participant to whom the Board of Directors has specifically designated this Schedule C applies shall be credited with Contribution Credits as follows:

C.1    10% of Compensation for Contribution Credit Service less than 4 years.

C.2    15% of Compensation for Contribution Credit Service of 4 or more but less than 9 years.

C.3    20% of Compensation for Contribution Credit Service of 9 years or more.

For purposes of this Schedule, Compensation shall include only Compensation earned by the Participant during the applicable Plan Year while a Participant in the Plan. No Contribution Credits shall be credited to the Account of any Participant under this Schedule C for or with respect to any year prior to 2016.

C-1

Additional Discretionary Contribution Credit

The amount of all Special Contribution Credits credited to the Account of a Participant, whom the Board of Directors has specifically designated that this Schedule C applies, may not exceed twice the Participant’s Pay Limitation for the applicable Plan Year.

Supplemental Three Year Contribution Credit

Subject to applicable provisions of the Plan and subject to prior review and non-objection by the Federal Housing Finance Agency, the Account of a Participant to whom the Board of Directors has specifically designated that the Supplemental Three Year Contribution Credit set forth on this Schedule C applies shall be credited with additional Contribution Credits as follows:

$200,000 Contribution Credit on the thirtieth (30^th day) following the Participant’s employment commencement date with the Bank.

$200,000 Contribution Credit on the first anniversary of the Participant’s employment commencement date with the Bank.

$200,000 Contribution Credit on the second anniversary of the Participant’s employment commencement date with the Bank.

No Contribution Credit shall be made under this Supplemental Three Year Contribution Credit schedule on any date set forth herein if the Participant has a Termination of Employment prior to such date; provided, however, if the Participant has a Termination of Employment prior to the second anniversary of the Participant’s employment commencement date with the Bank solely by reason of the Participant’s death, Disability, or involuntary termination by the Bank without Cause, then on the Participant’s date of Termination of Employment the Participant’s Account will

C-2

be credited with a pro rata portion of the next scheduled $200,000 Contribution Credit only, with such proration based on the ratio of (i) the number of days of the Participant’s employment with the Bank following the then most recent anniversary of the Participant’s employment commencement date with the Bank (or the employment commencement date itself if the Participant has not reached the Participant’s first anniversary) to (ii) 365 days.

Notwithstanding Section 4.5 of the Plan, each Contribution Credit under this Supplemental Three Year Contribution Credit schedule only shall be fully vested immediately upon its crediting date.

C-3

EX-12.1

EXHIBIT 12.1

Federal Home Loan Bank of San Francisco

Computation of Ratio of Earnings to Fixed Charges

(Unaudited)

(Dollars in millions)	2017		2016		2015		2014		2013
Earnings:
Income before assessments	$	421	$	798	$	716	$	241	$	360
Fixed charges	1,035		608		430		467		605
Total earnings	$	1,456	$	1,406	$	1,146	$	708	$	965
Fixed charges:
Interest expense	$	1,033	$	607	$	429	$	466	$	604
Estimated rental expense based on an interest factor	2		1		1		1		1
Total fixed charges	$	1,035	$	608	$	430	$	467	$	605
Ratio of earnings to fixed charges	1.41		2.31		2.67		1.52		1.59

EX-31.1

EXHIBIT 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

for the President and Chief Executive Officer

I, J. Gregory Seibly, certify that:

1. I have reviewed this annual report on Form 10-K for the period ended December 31, 2017, of the Federal Home Loan Bank of San Francisco;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 9, 2018	/S/ J. GREGORY SEIBLY
	J. Gregory Seibly President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

for the Chief Financial Officer

I, Kenneth C. Miller, certify that:

1. I have reviewed this annual report on Form 10-K for the period ended December 31, 2017, of the Federal Home Loan Bank of San Francisco;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 9, 2018	/S/ KENNETH C. MILLER
	Kenneth C. Miller Senior Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification by the President and Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, J. Gregory Seibly, President and Chief Executive Officer of the Federal Home Loan Bank of San Francisco (“Registrant”), certify that, to the best of my knowledge:

1. The Registrant's Annual Report on Form 10-K for the period ended December 31, 2017, (“Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: March 9, 2018	/S/ J. GREGORY SEIBLY
	J. Gregory Seibly President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Federal Home Loan Bank of San Francisco and will be retained by the Federal Home Loan Bank of San Francisco and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

Certification by the Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Kenneth C. Miller, Senior Vice President and Chief Financial Officer of the Federal Home Loan Bank of San Francisco (“Registrant”), certify that, to the best of my knowledge:

1. The Registrant's Annual Report on Form 10-K for the period ended December 31, 2017, (“Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: March 9, 2018	/S/ KENNETH C. MILLER
	Kenneth C. Miller Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Federal Home Loan Bank of San Francisco and will be retained by the Federal Home Loan Bank of San Francisco and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

EXHIBIT 99.1

Audit Committee Report

The Audit Committee (Committee) of the Board of Directors of the Federal Home Loan Bank of San Francisco for 2018 is currently composed of five directors. The Committee is governed by a written charter approved by the Board of Directors.

The Committee has reviewed and discussed the audited financial statements with management. The Committee has discussed with the independent auditor, PricewaterhouseCoopers LLP, the matters required to be discussed in accordance with the standards of the Public Company Accounting Oversight Board (including Auditing Standard No. 1301, Communications with Audit Committees, as modified, reorganized or supplemented). The Committee has also received the written disclosures and the letter from PricewaterhouseCoopers LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the audit committee concerning independence, and has discussed the auditor's independence with PricewaterhouseCoopers LLP.

Based on the review and discussions referred to above, the Audit Committee recommends to the Board of Directors that the 2017 financial statements be included in the Form 10-K filed with the Securities and Exchange Commission.

Simone Lagomarsino, Chair

Joan C. Opp, Vice Chair

Jeffrey K. Ball

Brian M. Riley

F. Daniel Siciliano

March 9, 2018

XML

Document and Entity Information Document - USD ($)	12 Months Ended
	Dec. 31, 2017	Feb. 28, 2018	Jun. 30, 2017
Document and Entity Information [Line Items]
Entity Registrant Name	FEDERAL HOME LOAN BANK OF SAN FRANCISCO
Entity Central Index Key	0001316944
Document Type	10-K
Document Period End Date	Dec. 31, 2017
Amendment Flag	false
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		37,340,430
Entity Public Float			$ 0

XML

Statements of Condition - USD ($) $ in Millions		Dec. 31, 2017	Dec. 31, 2016
Assets:
Cash and due from banks		$ 31	$ 2
Interest-bearing deposits		1,115	590
Securities purchased under agreements to resell		11,750	15,500
Federal funds sold		11,028	4,214
Trading securities	[1]	1,164	2,066
Available-for-sale (AFS) securities	[1]	3,833	4,489
Held-to-maturity (HTM) securities (fair values were $14,704 and $14,141, respectively)	[1],[2]	14,680	14,127
Advances (includes $6,431 and $3,719 at fair value under the fair value option, respectively)		77,382	49,845
Mortgage loans held for portfolio, net of allowance for credit losses of $0 and $0, respectively		2,076	826
Accrued interest receivable		119	79
Premises, software, and equipment, net		29	33
Derivative assets, Net		83	66
Other assets		95	104
Total Assets		123,385	91,941
Liabilities:
Deposits		281	169
Consolidated obligations:
Bonds (includes $949 and $1,507 at fair value under the fair value option, respectively)		85,063	50,224
Discount Notes		30,440	33,506
Total consolidated obligations		115,503	83,730
Mandatorily redeemable capital stock		309	457
Borrowings from other Federal Home Loan Banks		0	1,345
Accrued interest payable		116	67
Affordable Housing Program (AHP) payable		204	205
Derivative liabilities, Net		1	2
Other liabilities		165	429
Total Liabilities		116,579	86,404
Commitments and Contingencies (Note 17)
Capital:
Capital stock-Class B-Putable ($100 par value) issued and outstanding: 32 shares and 24 shares, respectively		3,243	2,370
Unrestricted retained earnings		2,670	888
Restricted retained earnings		575	2,168
Total Retained Earnings		3,245	3,056
Accumulated Other Comprehensive Income (Loss) (AOCI)		318	111
Total Capital		6,806	5,537
Total Liabilities and Capital		$ 123,385	$ 91,941

[1] At December 31, 2017 and 2016, none of these securities were pledged as collateral that may be repledged.

[2] Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

XML

Statements of Condition (Parenthetical) - USD ($) shares in Millions, $ in Millions	Dec. 31, 2017		Dec. 31, 2016
Trading securities pledged as collateral that may be repledged	$ 0		$ 0
Available-for-sale securities pledged as collateral that may be repledged	0		0
Held-to-maturity securities pledged as collateral that may be repledged	0		0
Assets:
Fair Value of Held-to-maturity securities	14,704		14,141
Fair Value of Advances Under the Fair Value Option	6,431	[1]	3,719
Allowance for credit losses on mortgage loans	$ 0		$ 0
Capital:
Common stock, par value	$ 100
Common Class B [Member]
Capital:
Common stock, par value	$ 100		$ 100
Common stock, shares issued	32		24
Common stock, shares outstanding	32		24
Consolidated obligation bonds [Member]
Liabilities:
Fair Value of Bonds Under the Fair Value Option	$ 949		$ 1,507

[1] At December 31, 2017 and 2016, none of these advances were 90 days or more past due or had been placed on nonaccrual status.

XML

Statements of Income - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Interest Income:
Advances		$ 874	$ 477	$ 291
Prepayment fees on advances, net		1	5	8
Interest bearing deposits		8	2	0
Securities purchased under agreements to resell		9	12	3
Federal funds sold		115	29	9
Trading securities		17	10	5
AFS securities		239	262	264
HTM securities		285	251	293
Mortgage loans held for portfolio		52	30	33
Total Interest Income		1,600	1,078	906
Interest Expense:
Consolidated Obligations: Bonds		713	410	317
Consolidated Obligations: Discount notes		285	136	46
Deposits		3	1	1
Mandatorily redeemable capital stock	[1]	32	60	65
Total Interest Expense		1,033	607	429
Net Interest Income		567	471	477
Provision for/(reversal of) credit losses on mortgage loans		0	0	1
Net Interest Income After Mortgage Loan Loss Provision		567	471	476
Other Income/(Loss):
Total other-than-temporary impairment (OTTI) loss		(10)	(26)	(31)
Net amount of OTTI loss reclassified to/(from) AOCI		(6)	10	16
Net OTTI loss, credit-related		(16)	(16)	(15)
Net gain/(loss) on trading securities		0	4	(2)
Net gain/(loss) on advances and consolidated obligation bonds held under fair value option		(31)	(40)	(50)
Net gain/(loss) on derivatives and hedging activities		(14)	9	(16)
Gains on litigation settlements, net		119	510	459
Other		20	18	12
Total Other Income/(Loss)		78	485	388
Other Expense:
Compensation and benefits		76	74	67
Other operating expense		70	74	71
Federal Housing Finance Agency		6	6	6
Office of Finance		5	4	4
Quality Jobs Fund expense		60	0	0
Other		7	0	0
Total Other Expense		224	158	148
Income/(Loss) Before Assessments		421	798	716
AHP Assessment		45	86	78
Net Income/(Loss)		$ 376	$ 712	$ 638

[1] The Bank excludes interest expense on mandatorily redeemable capital stock from adjusted net interest income in its analysis of financial performance for its two operating segments

XML

Statements of Comprehensive Income - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Net Income/(Loss)	$ 376	$ 712	$ 638
Other Comprehensive Income/(Loss):
Net change in pension and postretirement benefits	3	(2)	(2)
Net non-credit-related OTTI gain/(loss) on AFS securities:
Other than Temporary Impairment Losses, Investments, Reclassification Adjustment of Noncredit Portion from Held-to-maturity to Available-for-sale Securities, before Tax	0	0	(1)
Other Comprehensive Income (Loss), Financial Liability, Fair Value Option, before Tax, after Reclassification Adjustment, Attributable to Parent	195	103	(29)
Net amount of OTTI loss reclassified to/(from) other income/(loss)	6	(10)	(15)
Total net non-credit-related OTTI gain/(loss) on AFS securities	201	93	(45)
Net non-credit-related OTTI gain/(loss) on HTM securities:
Other Comprehensive Loss, Held-to-maturity Security, Reclassification Adjustment from AOCI for Noncredit Portion of OTTI, before Tax	0	0	(1)
Other Comprehensive Loss, Held-to-maturity Security, Adjustment from AOCI for Accretion of Noncredit Portion of OTTI, before Tax	3	5	6
Other Comprehensive Income (Loss), Transfers from Held-to-maturity to Available-for-Sale Securities, before Tax	0	0	1
Total net non-credit-related OTTI gain/(loss) on HTM securities	3	5	6
Total other comprehensive income/(loss)	207	96	(41)
Total Comprehensive Income (Loss)	$ 583	$ 808	$ 597

XML

Statements of Capital Accounts - USD ($) shares in Millions, $ in Millions	Total	Retained Earnings [Member]	Retained Earnings [Member]	Unrestricted [Member]	Accumulated Other Comprehensive Income/(Loss) [Member]	Common Class B - Putable [Member] Common Stock [Member]
Balance, Shares at Dec. 31, 2014						33
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of capital stock, shares						8
Repurchase of capital stock, shares						(14)
Net Shares Reclassified from/(to) Mandatorily Redeemable Capital Stock, Shares						(4)
Balance, Shares at Dec. 31, 2015						23
Balance at Dec. 31, 2014	$ 5,693	$ 2,359	$ 2,065	$ 294	$ 56	$ 3,278
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive Income (Loss)	597	638	103	535	(41)
Issuance of capital stock, value	829					829
Repurchase of capital stock, value	(1,439)					(1,439)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net, value	(415)					(415)
Cash dividends paid on capital stock	(369)	(369)		(369)
Balance at Dec. 31, 2015	4,896	2,628	2,018	610	15	$ 2,253
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Retained Earnings, Appropriated, Transfers To (From)	0	0	(150)	150
Issuance of capital stock, shares						9
Repurchase of capital stock, shares						(7)
Net Shares Reclassified from/(to) Mandatorily Redeemable Capital Stock, Shares						(1)
Balance, Shares at Dec. 31, 2016						24
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive Income (Loss)	808	712	150	562	96
Issuance of capital stock, value	926					$ 926
Repurchase of capital stock, value	(753)					(753)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net, value	(56)					(56)
Cash dividends paid on capital stock	(284)	(284)		(284)
Balance at Dec. 31, 2016	5,537	3,056	2,168	888	111	$ 2,370
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of capital stock, shares						12
Repurchase of capital stock, shares						(4)
Net Shares Reclassified from/(to) Mandatorily Redeemable Capital Stock, Shares						0
Balance, Shares at Dec. 31, 2017						32
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Comprehensive Income (Loss)	583	376	178	198	207
Issuance of capital stock, value	1,214					$ 1,214
Repurchase of capital stock, value	(339)					(339)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net, value	(2)					(2)
Cash dividends paid on capital stock	(187)	(187)		(187)
Balance at Dec. 31, 2017	6,806	3,245	575	2,670	$ 318	$ 3,243
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Retained Earnings, Appropriated, Transfers To (From)	$ 0	$ 0	$ (1,771)	$ 1,771

XML

Statements of Capital Accounts (Parenthetical)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Annualized Dividend Rate on Capital Stock	7.50%	12.33%	12.39%

XML

Statements of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Net Cash Provided by (Used in) Operating Activities [Abstract]
Net Income/(Loss)	$ 376	$ 712	$ 638
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and amortization	(62)	(82)	(80)
Provision for Loan Losses Expensed	0	0	1
Change in net fair value of trading securities	0	(4)	2
Change in net fair value adjustment on advances and consolidated obligation bonds held under fair value option	31	40	50
Change in net derivatives and hedging activities	(8)	(24)	(33)
Net OTTI loss, credit-related	16	16	15
Net change in:
Accrued interest receivable	(45)	(22)	16
Other assets	6	(21)	(9)
Accrued interest payable	50	(17)	(20)
Other liabilities	(22)	(16)	109
Total adjustments	(34)	(130)	51
Net Cash Provided by (Used in) Operating Activities	342	582	689
Interest-bearing deposits	(514)	294	(404)
Securities purchased under agreements to resell	3,750	(5,500)	(9,000)
Federal funds sold	(6,814)	412	2,877
Premises, software, and equipment	(12)	(13)	(12)
Trading securities:
Proceeds from maturities of long-term	902	277	2,339
Purchases of long-term	0	(1,155)	0
AFS securities:
Proceeds from maturities of long-term	933	1,104	996
HTM securities:
Net (increase)/decrease in short-term	850	(1,350)	0
Proceeds from maturities of long-term	3,240	2,927	2,746
Purchases of long-term	(4,901)	(4,639)	0
Advances:
Principal collected	1,575,597	1,414,120	1,057,469
Made to members	(1,603,226)	(1,413,136)	(1,069,480)
Mortgage loans held for portfolio:
Principal collected	184	175	184
Purchases	(1,413)	(343)	(131)
Proceeds from sale of foreclosed assets	3	3	4
Net Cash Provided by (Used in) Investing Activities	(31,421)	(6,824)	(12,412)
Proceeds from (Payments for) Other Financing Activities	114	(923)	262
Borrowings from Federal Home Loan Banks	(1,345)	1,345	0
Net (payments)/proceeds on derivative contracts with financing elements	0	(9)	(17)
Net proceeds from issuance of consolidated obligations:
Bonds	80,506	40,041	38,935
Discount notes	165,408	136,608	106,536
Payments for matured and retired consolidated obligations:
Bonds	(45,622)	(41,514)	(33,968)
Discount notes	(168,491)	(130,761)	(100,717)
Proceeds from issuance of capital stock	1,214	926	829
Payments for repurchase/redemption of mandatorily redeemable capital stock	(150)	(87)	(646)
Payments for repurchase of capital stock	(339)	(753)	(1,439)
Cash dividends paid	(187)	(284)	(369)
Net Cash Provided by (Used in) Financing Activities	31,108	4,607	9,440
Net increase/(decrease) in cash and due from banks	29	(1,635)	(2,283)
Cash and due from banks at beginning of the period	2	1,637	3,920
Cash and due from banks at end of period	31	2	1,637
Supplemental Disclosures:
Interest paid	990	578	412
AHP payments	53	53	53
Supplemental Disclosures of Noncash Investing and Financing Activities:
Real Estate Owned, Transfer to Real Estate Owned	1	1	2
Transfers of other-than-temporarily impaired HTM securities to AFS securities	0	0	15
Transfers of Capital to Mandatorily Redeemable Capital Stock	$ 2	$ 56	$ 415

XML

Background Information

12 Months Ended

Dec. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations [Text Block]

The Federal Home Loan Bank of San Francisco (Bank), a federally chartered corporation exempt from ordinary federal, state, and local taxation except real property taxes, is one of 11 regional Federal Home Loan Banks (FHLBanks). The FHLBanks are government-sponsored enterprises (GSEs) that serve the public by enhancing the availability of credit for residential mortgages and targeted community development by providing a readily available, competitively priced source of funds to their member institutions. Each FHLBank is operated as a separate entity with its own management, employees, and board of directors. The Bank does not have any special purpose entities or any other type of off-balance sheet conduits. The Bank has a cooperative ownership structure. Regulated financial depositories and insurance companies engaged in residential housing finance, with principal places of business located in Arizona, California, and Nevada, are eligible to apply for membership. In addition, authorized community development financial institutions are eligible to be members of the Bank. All members are required to purchase capital stock in the Bank. State and local housing authorities that meet certain statutory criteria may also borrow from the Bank. While eligible to borrow, these housing authorities are not members of the Bank, and, as such, are not required to hold capital stock. To access the Bank's products and services, a financial institution must be approved for membership and purchase capital stock in the Bank. The member's capital stock requirement is generally based on its use of Bank products, subject to a minimum asset-based membership requirement that is intended to reflect the value to the member of having ready access to the Bank as a reliable source of competitively priced funds. Bank capital stock is issued, transferred, redeemed, and repurchased at its par value of $100 per share, subject to certain regulatory and statutory limits. It is not publicly traded. All shareholders may receive dividends on their capital stock, to the extent declared by the Bank's Board of Directors.

The Bank conducts business with members in the ordinary course of business. See Note 21 – Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks for more information.

The Federal Housing Finance Agency (Finance Agency), an independent federal agency in the executive branch of the United States government, supervises and regulates the FHLBanks and the FHLBanks' Office of Finance.

The Office of Finance is a joint office of the FHLBanks that facilitates the issuance and servicing of the debt instruments (consolidated obligations) of the FHLBanks and prepares the combined quarterly and annual financial reports of the FHLBanks.

The primary source of funds for the FHLBanks is the proceeds from the sale to the public of the FHLBanks' consolidated obligations through the Office of Finance using authorized securities dealers. As provided by the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), or regulations governing the operations of the FHLBanks, all the FHLBanks have joint and several liability for all FHLBank consolidated obligations. Other funds are provided by deposits, other borrowings, and the issuance of capital stock to members. The Bank primarily uses these funds to provide advances to members.

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

Summary of Significant Accounting Policies

The information about the Federal Home Loan Bank of San Francisco (Bank) included in these unaudited financial

statements reflects all adjustments that, in the opinion of the Bank, are necessary for a fair statement of results for

the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed. The results of

operations in these interim statements are not necessarily indicative of the results to be expected for any subsequent

period or for the entire year ending December 31, 2017. These unaudited financial statements should be read in

conjunction with the Bank’s Annual Report on Form 10-K for the year ended December 31, 2016 (2016 Form

10-K).

Use of Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make a number of judgments, estimates, and assumptions that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income, expenses, gains, and losses during the reporting period. The most significant of these estimates include estimating the allowance for credit losses on the advances and mortgage loan portfolios; accounting for derivatives; estimating fair values of investments classified as trading and available-for-sale, derivatives and associated hedged items carried at fair value in accordance with the accounting for derivative instruments and associated hedging activities, and financial instruments carried at fair value under the fair value option, and accounting for other-than-temporary impairment (OTTI) for investment securities; and estimating the prepayment speeds on mortgage-backed securities (MBS) and mortgage loans for the accounting of amortization of premiums and accretion of discounts on MBS and mortgage loans. Actual results could differ significantly from these estimates.

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

The net exposure for these financial instruments can change on a daily basis; therefore, there may be a delay between the time this exposure change is identified and additional collateral is requested, and the time this collateral is received or pledged. Likewise, there may be a delay for excess collateral to be returned. For derivative instruments that meet the netting requirements, any excess cash collateral received or pledged is recognized as a derivative liability or derivative asset. Additional information regarding these agreements is provided in Note 18 – Derivatives and Hedging Activities. Based on the fair value of the related collateral held, the securities purchased under agreements to resell were fully collateralized for the periods presented.

Variable Interest Entities. The Bank’s investments in variable interest entities (VIEs) are limited to private-label residential mortgage-backed securities (PLRMBS). On an ongoing basis, the Bank performs a quarterly evaluation

to determine whether it is the primary beneficiary in any VIE. The Bank evaluated its investments in VIEs as of December 31, 2017, to determine whether it is a primary beneficiary of any of these investments. The primary beneficiary is required to consolidate a VIE. The Bank determined that consolidation accounting is not required because the Bank is not the primary beneficiary of these VIEs for the periods presented. The Bank does not have the power to significantly affect the economic performance of any of these investments because it does not act as a key decision maker nor does it have the unilateral ability to replace a key decision maker. In addition, the Bank does not design, sponsor, transfer, service, or provide credit or liquidity support in any of its investments in VIEs. The Bank’s maximum loss exposure for these investments is limited to the carrying value.

Descriptions of the Bank’s significant accounting policies are included in “Item 8. Financial Statements and

Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank’s 2016 Form 10-K. Other

changes to these policies as of December 31, 2017, are discussed in Note 2 – Recently Issued and Adopted Accounting Guidance.

Summary of Significant Accounting Policies

Use of Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make a number of judgments, estimates, and assumptions that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income, expenses, gains, and losses during the reporting period. The most significant of these estimates include estimating the allowance for credit losses on the advances and mortgage loan portfolios; accounting for derivatives; estimating fair values of investments classified as trading and available-for-sale, derivatives and associated hedged items carried at fair value in accordance with the accounting for derivative instruments and associated hedging activities, and financial instruments carried at fair value under the fair value option, and accounting for other-than-temporary impairment (OTTI) for investment securities; and estimating the prepayment speeds on mortgage-backed securities (MBS) and mortgage loans for the accounting of amortization of premiums and accretion of discounts on MBS and mortgage loans. Actual results could differ significantly from these estimates.

Estimated Fair Values. Many of the Bank's financial instruments lack an available liquid trading market as characterized by frequent exchange transactions between a willing buyer and willing seller. Therefore, the Bank uses financial models employing significant assumptions and present value calculations for the purpose of determining estimated fair values. Thus, the fair values may not represent the actual values of the financial instruments that could have been realized as of yearend or that will be realized in the future.

Fair values for certain financial instruments are based on quoted prices, market rates, or replacement rates for similar financial instruments as of the last business day of the year. The estimated fair values of the Bank's financial instruments and related assumptions are detailed in Note 19 – Fair Value.

Securities Purchased under Agreements to Resell. These investments provide short-term liquidity and are carried at cost. The Bank treats securities purchased under agreements to resell as collateralized financing arrangements because they effectively represent short-term loans to counterparties that are considered by the Bank to be of investment quality, which are classified as assets in the Statements of Condition. Securities purchased under agreements to resell are held in safekeeping in the name of the Bank by third-party custodians approved by the Bank. In accordance with the terms of these loans, if the market value of the underlying securities decreases below the market value required as collateral, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash. If an agreement to resell is deemed to be impaired, the difference between the fair value of the collateral and the amortized cost of the agreement is charged to earnings.

Federal Funds Sold. These investments provide short-term liquidity and are carried at cost. The Bank invests in Federal funds sold with counterparties that are considered by the Bank to be of investment quality.

Interest-bearing Deposits. This investment provides short-term liquidity and is carried at cost. Interest-bearing deposits includeinterest-bearing deposits in banks not meeting the definition of a security. Interest income on interest-bearing deposits is accrued as earned and recorded in interest income on the Statements of Income.

Investment Securities. The Bank classifies investments as trading, available-for-sale (AFS), or held-to-maturity (HTM) at the date of acquisition. Purchases and sales of securities are recorded on a trade date basis.

The Bank classifies certain investments as trading. These securities are held for liquidity purposes and carried at fair value with changes in the fair value of these investments recorded in other income. The Bank does not participate in speculative trading practices and holds these investments indefinitely as the Bank periodically evaluates its liquidity needs.

The Bank classifies certain securities as AFS and carries these securities at their fair value. Unrealized gains and losses on these securities are recognized in accumulated other comprehensive income (AOCI).

HTM securities are carried at cost, adjusted for periodic principal repayments; amortization of premiums and accretion of discounts; and previous OTTI recognized in net income and AOCI. The Bank classifies these investments as HTM securities because the Bank has the positive intent and ability to hold these securities until maturity.

Certain changes in circumstances may cause the Bank to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future. Thus, the sale or transfer of an HTM security because of certain changes in circumstances, such as evidence of significant deterioration in the issuer's creditworthiness or changes in regulatory requirements, is not considered to be inconsistent with its original classification. Other events that are isolated, nonrecurring, and unusual for the Bank that could not have been reasonably anticipated may cause the Bank to sell or transfer an HTM security without necessarily calling into question its intent to hold other debt securities to maturity. In addition, sales of debt securities that meet either of the following two conditions may be considered as maturities for purposes of the classification of securities: (i) the sale occurs near enough to its maturity date (or call date if exercise of the call is probable) that interest rate risk is substantially eliminated as a pricing factor and changes in market interest rates would not have a significant effect on the security's fair value, or (ii) the sale occurs after the Bank has already collected a substantial portion (at least 85%) of the principal outstanding at acquisition because of prepayments on the debt security or scheduled payments on a debt security payable in equal installments (both principal and interest) over its term.

The Bank calculates the amortization of purchase premiums and accretion of purchase discounts on investments using the level-yield method on a retrospective basis over the estimated life of the securities. This method requires a retrospective adjustment of the effective yield each time the Bank changes the estimated life as if the new estimate had been known since the original acquisition date of the securities. The Bank uses nationally recognized, market-based, third-party prepayment models to project estimated lives.

On a quarterly basis, the Bank evaluates its individual AFS and HTM investment securities in an unrealized loss position for OTTI. A security is considered impaired when its fair value is less than its amortized cost basis. For impaired debt securities, an entity is required to assess whether: (i) it has the intent to sell the debt security; (ii) it is more likely than not that it will be required to sell the debt security before its anticipated recovery of the remaining amortized cost basis of the security; or (iii) it does not expect to recover the entire amortized cost basis of the impaired debt security. If any of these conditions is met, an OTTI on the security must be recognized.

With respect to any debt security, a credit loss is defined as the amount by which the amortized cost basis exceeds the present value of the cash flows expected to be collected. If a credit loss exists but the entity does not intend to sell the debt security and it is not more likely than not that the entity will be required to sell the debt security before the anticipated recovery of its remaining amortized cost basis (the amortized cost basis less any current-period credit loss), the carrying value of the debt security is adjusted to its fair value. However, instead of recognizing the entire difference between the amortized cost basis and fair value in earnings, only the amount of the impairment representing the credit loss is recognized in earnings, while the amount of non-credit-related impairment is recognized in AOCI. The total OTTI is presented in the Statements of Income with an offset for the amount of the total OTTI that is recognized in AOCI. This presentation provides additional information about the amounts that the entity does not expect to collect related to a debt security. The credit loss on a debt security is limited to the amount of that security's unrealized losses.

For subsequent accounting of other-than-temporarily impaired securities, if the present value of cash flows expected to be collected is less than the amortized cost basis, the Bank records an additional OTTI. The amount of total OTTI for a security that was previously impaired is calculated as the difference between its amortized cost less the amount of OTTI recognized in AOCI prior to the determination of OTTI and its fair value. For an other-than-temporarily impaired security that was previously impaired and has subsequently incurred an additional OTTI related to credit loss (limited to that security's unrealized losses), this additional credit-related OTTI, up to the amount in AOCI, would be reclassified out of non-credit-related OTTI in AOCI and charged to earnings. Any credit loss in excess of the related AOCI is charged to earnings.

Subsequent related increases and decreases (if not an OTTI) in the fair value of AFS securities will be netted against the non-credit component of OTTI previously recognized in AOCI.

For securities classified as HTM, the OTTI recognized in AOCI is accreted to the carrying value of each security on a prospective basis, based on the amount and timing of future estimated cash flows (with no effect on earnings unless the security is subsequently sold or there are additional decreases in cash flows expected to be collected). For securities classified as AFS, the Bank does not accrete the OTTI recognized in AOCI to the carrying value because the subsequent measurement basis for these securities is fair value.

For securities previously identified as other-than-temporarily impaired, the Bank updates its estimate of future estimated cash flows on a regular basis. If there is no additional impairment on the security, any improvement in expected cash flows is accreted into interest income in the Statements of Income.

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

The net exposure for these financial instruments can change on a daily basis; therefore, there may be a delay between the time this exposure change is identified and additional collateral is requested, and the time this collateral is received or pledged. Likewise, there may be a delay for excess collateral to be returned. For derivative instruments that meet the netting requirements, any excess cash collateral received or pledged is recognized as a derivative liability or derivative asset. Additional information regarding these agreements is provided in Note 18 – Derivatives and Hedging Activities. Based on the fair value of the related collateral held, the securities purchased under agreements to resell were fully collateralized for the periods presented.

Variable Interest Entities. The Bank’s investments in variable interest entities (VIEs) are limited to private-label residential mortgage-backed securities (PLRMBS). On an ongoing basis, the Bank performs a quarterly evaluation

to determine whether it is the primary beneficiary in any VIE. The Bank evaluated its investments in VIEs as of December 31, 2017, to determine whether it is a primary beneficiary of any of these investments. The primary beneficiary is required to consolidate a VIE. The Bank determined that consolidation accounting is not required because the Bank is not the primary beneficiary of these VIEs for the periods presented. The Bank does not have the power to significantly affect the economic performance of any of these investments because it does not act as a key decision maker nor does it have the unilateral ability to replace a key decision maker. In addition, the Bank does not design, sponsor, transfer, service, or provide credit or liquidity support in any of its investments in VIEs. The Bank’s maximum loss exposure for these investments is limited to the carrying value.

Advances. The Bank reports advances (loans to members, former members or their successors, or housing associates) either at amortized cost or at fair value when the fair value option is elected. Advances carried at amortized cost are reported net of premiums, discounts (including discounts related to the Affordable Housing Program), and hedging adjustments. The Bank amortizes premiums and accretes discounts and recognizes hedging adjustments resulting from the discontinuation of a hedging relationship to interest income using a level-yield methodology. Interest on advances is credited to income as earned. For advances carried at fair value, the Bank recognizes contractual interest in interest income.

Advance Modifications. In cases in which the Bank funds an advance concurrent with or within a short period of time before or after the prepayment of a previous advance to the same member, the Bank evaluates whether the subsequent advance meets the accounting criteria to qualify as a modification of an existing advance or whether it constitutes a new advance. The Bank compares the present value of the cash flows on the subsequent advance to the present value of the cash flows remaining on the previous advance. If there is at least a 10% difference in the present value of the cash flows or if the Bank concludes that the difference between the advances is more than minor based on a qualitative assessment of the modifications made to the previous advance's contractual terms, then the subsequent advance is accounted for as a new advance. In all other instances, the subsequent advance is accounted for as a modification.

Prepayment Fees. When a borrower prepays certain advances prior to the original maturity, the Bank may charge the borrower a prepayment fee. For certain advances with partial prepayment symmetry, the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid.

For prepaid advances that are hedged and meet the hedge accounting requirements, the Bank terminates the hedging relationship upon prepayment and records the associated fair value gains and losses, adjusted for the prepayment fees, in interest income. If a new advance represents a modification of an original hedged advance, the fair value gains or losses on the advance and the prepayment fees are included in the carrying amount of the modified advance, and gains or losses and prepayment fees are amortized in interest income over the life of the modified advance using the level-yield method. If the modified advance is also hedged and the hedge meets the hedge accounting requirements, the modified advance is marked to fair value after the modification, and subsequent fair value changes are recorded in other income. If the prepayment represents an extinguishment of the original hedged advance, the prepayment fee and any fair value gain or loss are immediately recognized in interest income.

For prepaid advances that are not hedged or that are hedged but do not meet the hedge accounting requirements, the Bank records prepayment fees in interest income unless the Bank determines that the new advance represents a modification of the original advance. If the new advance represents a modification of the original advance, the prepayment fee on the original advance is deferred, recorded in the basis of the modified advance, and amortized over the life of the modified advance using the level-yield method. This amortization is recorded in interest income.

Mortgage Loans Held in Portfolio. Under the Mortgage Partnership Finance® (MPF®) Program, the Bank may purchase from members, for its own portfolio, conventional conforming fixed rate residential mortgage loans under the MPF Original product and mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) from its participating members under the MPF Government product. (“Mortgage Partnership Finance” and “MPF” are registered trademarks of the FHLBank of Chicago.) Participating members originate or purchase the mortgage loans, credit-enhance them and sell them to the Bank, and generally retain the servicing of the loans. The Bank manages the interest rate risk, prepayment risk, and liquidity risk of each loan in its portfolio. The Bank and the participating financial institution (either the original participating member that sold the loans to the Bank or a successor to that member) share in the credit risk of the loans, with the Bank assuming the first loss obligation limited by the first loss account, and the participating financial institution assuming credit losses in excess of the first loss account, up to the amount of the credit enhancement obligation specified in the master agreement. The amount of the credit enhancement is calculated so that any Bank credit losses (excluding special hazard losses) in excess of the first loss account are limited to those that would be expected from an equivalent investment with a long-term credit rating of AA for loans purchased prior to April 2017 and BBB for loans purchased thereafter, as determined by the MPF Program methodology.

In addition, the Bank may facilitate the purchase of conforming fixed rate mortgage loans from members for concurrent sale to Fannie Mae under the MPF Xtra® product; of jumbo fixed rate mortgage loans for concurrent sale to Redwood Residential Acquisition Corporation, a subsidiary of Redwood Trust, Inc., a real estate investment trust, under the MPF Direct product; and of government-insured or government-guaranteed mortgage loans that will be packaged into securities backed by the mortgage loans and guaranteed by Ginnie Mae under the MPF Government MBS product. When members sell mortgage loans under the MPF Xtra, MPF Direct, and MPF Government MBS products, the loans are sold to a third-party investor and are not recorded on the Bank’s Statements of Condition. (“MPF Xtra” is a registered trademark of the FHLBank of Chicago.)

For taking on the credit enhancement obligation, the Bank pays the participating financial institution a credit enhancement fee, which is calculated on the remaining unpaid principal balance of the mortgage loans. Depending on the specific MPF product, all or a portion of the credit enhancement fee is typically paid monthly beginning with the month after each delivery of loans. The MPF Original product provides participating financial institutions the option to receive credit enhancement fees on a monthly basis or in an upfront lump sum amount that is included in the purchase price at the time loans are sold to the Bank. The lump sum amount is approximately equivalent to the present value of the monthly credit enhancement fees that the Bank would otherwise be expected to pay over the life of the loans. The MPF Plus product provides for a performance-based credit enhancement fee, which accrues monthly, beginning with the month after each delivery of loans, and is paid to the participating financial institution beginning 12 months later. The performance-based credit enhancement fee will be reduced by an amount equivalent to loan losses up to the amount of the first loss account established for each master commitment. The participating financial institutions obtain supplemental mortgage insurance (SMI) to cover their credit enhancement obligations under this product. If the SMI provider's claims-paying ability rating falls below a specified level, the participating financial institution has six months to either replace the SMI policy or assume the credit enhancement obligation and fully collateralize the obligation; otherwise the Bank may choose not to pay the participating financial institution its performance-based credit enhancement fee.

The Bank classifies mortgage loans as held for investment and, accordingly, reports them at their principal amount outstanding net of unamortized premiums, unamortized credit enhancement fees paid as a lump sum at the time loans are purchased, discounts, and unrealized gains and losses from loans initially classified as mortgage loan commitments. The Bank defers and amortizes these amounts as interest income using the level-yield method on a retrospective basis over the estimated life of the related mortgage loan. Actual prepayment experience and estimates of future principal prepayments are used in calculating the estimated life of the mortgage loans. The Bank aggregates the mortgage loans by similar characteristics (type, maturity, note rate, and acquisition date) in determining prepayment estimates. A retrospective adjustment is required each time the Bank changes the estimated amounts as if the new estimate had been known since the original acquisition date of the assets. The Bank uses nationally recognized, market-based, third-party prepayment models to project estimated lives.

The Bank records credit enhancement fees as a reduction to interest income.

Allowance for Credit Losses. An allowance for credit losses is a valuation allowance separately established for each identified portfolio segment, if it is probable that impairment has occurred in the Bank's portfolio as of the Statements of Condition date and the amount of loss can be reasonably estimated. To the extent necessary, an allowance for credit losses for off-balance sheet credit exposures is recorded as a liability.

Portfolio Segments.A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. The Bank has developed and documented a systematic methodology for determining an allowance for credit losses for each applicable portfolio segment.

See Note 10 – Allowance for Credit Losses for more information.

Impairment Methodology on Mortgage Loans. A mortgage loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the mortgage loan agreement.

Loans that are on non-accrual status and that are considered collateral-dependent are measured for impairment based on the fair value of the underlying property less estimated selling costs. Loans are considered collateral-dependent if repayment is expected to be provided solely by the sale of the underlying property, that is, there is no other available and reliable source of repayment. Collateral-dependent loans are impaired if the fair value of the underlying collateral less estimated selling costs is insufficient to recover the unpaid principal balance on the loan. Interest income on impaired loans is recognized in the same manner as interest income on non-accrual loans noted below.

The Bank places a mortgage loan on nonaccrual status when the collection of the contractual principal or interest from the participating financial institution is reported 90 days or more past due or when the loan is in foreclosure. When a mortgage loan is placed on nonaccrual status, accrued but uncollected interest is reversed against interest income. The Bank records cash payments received on nonaccrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful. If the collection of the remaining principal amount due is considered doubtful, then cash payments received would be applied first solely to principal until the remaining principal amount due is expected to be collected and then as a recovery of any charge-off, if applicable, followed by recording interest income. A loan on non-accrual status may be restored to accrual when (1) none of its contractual principal and interest is due and unpaid, and the Bank expects repayment of the remaining contractual interest and principal, or (2) it otherwise becomes well secured and in the process of collection. For any mortgage loans that are more than 180 days past due and that have any outstanding balance in excess of the fair value of the property, less cost to sell, this excess is charged off as a loss by the end of the month in which the applicable time period elapses. Likewise, when a borrower is in bankruptcy, loans are written down to the fair value of the collateral, less cost to sell, in general within 60 days of receipt of the notification of filing from the bankruptcy court, unless it can be clearly demonstrated and documented that repayment is likely to occur.

Real Estate Owned. Real estate owned (REO) includes assets that have been received in satisfaction of debt through foreclosures. REO is initially recorded at fair value less estimated selling costs and is subsequently carried at the lower of that amount or current fair value less estimated selling costs. The Bank recognizes a charge-off to the allowance for credit losses if the fair value of the REO less estimated selling costs is less than the recorded investment in the loan at the date of transfer from loans to REO. Any subsequent realized gains, realized or unrealized losses, and carrying costs are included in other non-interest expense in the Statements of Income. REO is recorded in “Other assets” in the Statements of Condition. At December 31, 2017, the Bank’s other assets included $1 of REO resulting from foreclosure of 11 mortgage loans held by the Bank. At December 31, 2016, the Bank’s other assets included $1 of REO resulting from foreclosure of 12 mortgage loans held by the Bank.

Other Fees. Letter of credit fees are recorded as other income over the term of the letter of credit.

Derivatives. All derivatives are recognized on the Statements of Condition at their fair value. The Bank has elected to report derivative assets and derivative liabilities net of cash collateral, including initial and variation margin, and accrued interest received from or pledged to futures commission merchants (clearing agents) or counterparties. The fair values of derivatives are netted by clearing agent or counterparty when the netting requirements have been met. If these netted amounts are positive, they are classified as an asset, and if negative, they are classified as a liability. Cash flows associated with derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be a financing derivative.

Each derivative is designated as one of the following:

(1) a qualifying hedge of the change in fair value of (i) a recognized asset or liability or (ii) an unrecognized firm commitment (a fair value hedge);

(2) a qualifying hedge of (i) a forecasted transaction or (ii) the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a cash flow hedge);

(3) a non-qualifying hedge of an asset or liability for asset-liability management purposes or of certain advances and consolidated obligation bonds for which the Bank elected the fair value option (an economic hedge); or

(4) a non-qualifying hedge of another derivative (an intermediation hedge) that is offered as a product to members or used to offset other derivatives with nonmember counterparties.

If hedging relationships meet certain criteria, including but not limited to formal documentation of the hedging relationship and an expectation to be hedge effective, they are eligible for hedge accounting, and the offsetting changes in fair value of the hedged items attributable to the hedged risk may be recorded in earnings. The application of hedge accounting generally requires the Bank to evaluate the effectiveness of the hedging relationships at inception and on an ongoing basis and to calculate the changes in fair value of the derivatives and the related hedged items independently. This is known as the “long-haul” method of hedge accounting. Transactions that meet certain criteria qualify for the “short-cut” method of hedge accounting, in which an assumption can be made that the change in the fair value of a hedged item, because of changes in the benchmark rate, exactly offsets the change in the value of the related derivative. Under the shortcut method, the entire change in fair value of the interest rate swap is considered to be effective at achieving offsetting changes in fair values or cash flows of the hedged asset or liability.

Derivatives are typically executed at the same time as the hedged item, and the Bank designates the hedged item in a qualifying hedge relationship as of the trade date. In many hedging relationships, the Bank may designate the hedging relationship upon its commitment to disburse an advance or trade a consolidated obligation in which settlement occurs within the shortest period of time possible for the type of instrument based on market settlement conventions. The Bank records the changes in the fair value of the derivatives and the hedged item beginning on the trade date.

Changes in the fair value of a derivative that qualifies as a fair value hedge and is designated as a fair value hedge, along with changes in the fair value of the hedged asset or liability (hedged item) that are attributable to the hedged risk (including changes that reflect losses or gains on firm commitments), are recorded in other income as “Net gain/(loss) on derivatives and hedging activities.”

Changes in the fair value of a derivative that qualifies as a cash flow hedge and is designated as a cash flow hedge, to the extent that the hedge is effective, are recorded in AOCI, a component of capital, until earnings are affected by the variability of the cash flows of the hedged transaction (until the periodic recognition of interest on a variable rate asset or liability is recorded in earnings).

For both fair value and cash flow hedges, any hedge ineffectiveness (which represents the amount by which the change in the fair value of the derivative differs from the change in the fair value of the hedged item or the variability in the cash flows of the forecasted transaction) is recorded in other income as “Net gain/(loss) on derivatives and hedging activities.”

Changes in the fair value of a derivative designated as an economic hedge or an intermediation hedge are recorded in current period earnings with no fair value adjustment to an asset or liability. An economic hedge is defined as a derivative hedging certain advances and consolidated obligation bonds for which the Bank elected the fair value option, or hedging specific or non-specific underlying assets, liabilities, or firm commitments, that does not qualify or was not designated for fair value or cash flow hedge accounting, but is an acceptable hedging strategy under the Bank's risk management program. These economic hedging strategies also comply with Finance Agency regulatory requirements prohibiting speculative hedge transactions. An economic hedge introduces the potential for earnings variability caused by the changes in fair value of the derivatives that are recorded in the Bank's income but are not offset by corresponding changes in the value of the economically hedged assets, liabilities, or firm commitments. The derivatives used in intermediary activities do not qualify for hedge accounting treatment and are separately marked to market through earnings. The net result of the accounting for these derivatives does not significantly affect the operating results of the Bank. Changes in the fair value of these non-qualifying hedges are recorded in other income as “Net gain/(loss) on derivatives and hedging activities.” In addition, the net settlements associated with these non-qualifying hedges are recorded in other income as “Net gain/(loss) on derivatives and hedging activities.” Cash flows associated with these stand-alone derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be designated as a financing derivative.

The net settlements of interest receivables and payables on derivatives designated as fair value or cash flow hedges are recognized as adjustments to the interest income or interest expense of the designated underlying hedged item. The net settlements of interest receivables and payables on intermediated derivatives for members and other economic hedges are recognized in other income as “Net gain/(loss) on derivatives and hedging activities.”

The Bank discontinues hedge accounting prospectively when: (i) it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (ii) the derivative and/or the hedged item expires or is sold, terminated, or exercised; (iii) it is no longer probable that the forecasted transaction will occur in the originally expected period; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; (v) it determines that designating the derivative as a hedging instrument is no longer appropriate; or (vi) it decides to use the derivative to offset changes in the fair value of other derivatives or instruments carried at fair value.

When hedge accounting is discontinued, the Bank either terminates the derivative or continues to carry the derivative on the Statements of Condition at its fair value, ceases to adjust the hedged asset or liability for changes in fair value, and amortizes the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using a level-yield methodology.

When hedge accounting is discontinued because the Bank determines that the derivative no longer qualifies as an effective cash flow hedge of an existing hedged item, the Bank continues to carry the derivative on the Statements of Condition at its fair value and reclassifies the AOCI adjustment into earnings when earnings are affected by the existing hedged item (the original forecasted transaction).

Under limited circumstances, when the Bank discontinues cash flow hedge accounting because it is no longer probable that the forecasted transaction will occur by the end of the originally specified time period, or within the following two months, but it is probable the transaction will still occur in the future, the gain or loss on the derivative remains in AOCI and is recognized in earnings when the forecasted transaction affects earnings. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within the following two months, the gains and losses that were recorded in AOCI are recognized immediately in earnings.

When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the Bank continues to carry the derivative on the Statements of Condition at its fair value, removing from the Statements of Condition any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.

The Bank may be the primary obligor on consolidated obligations and may make advances in which derivative instruments are embedded. Upon execution of these transactions, the Bank assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance or debt (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that: (i) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and designated as a stand-alone derivative instrument equivalent to an economic hedge. However, the entire contract is carried on the Statements of Condition at fair value and no portion of the contract is designated as a hedging instrument if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current period earnings (such as an investment security classified as trading, as well as hybrid financial instruments that are eligible for the fair value option), or if the Bank cannot reliably identify and measure the embedded derivative for purposes of separating the derivative from its host contract.

Premises, Software, and Equipment. The Bank records premises, software, and equipment at cost less accumulated depreciation and amortization.The Bank's accumulated depreciation and amortization related to premises, software, and equipment totaled $74 and $61 at December 31, 2017 and 2016, respectively. Improvements and major renewals are capitalized; ordinary maintenance and repairs are expensed as incurred. Depreciation is computed on the straight-line method over the estimated useful lives of assets ranging from 3 to 10 years, and leasehold improvements are amortized on the straight-line method over the estimated useful life of the improvement or the remaining term of the lease, whichever is shorter. Depreciation and amortization expense was $16 for 2017, $12 for 2016, and $8 for 2015.

The cost of computer software developed or obtained for internal use is capitalized and depreciated over future periods. At December 31, 2017 and 2016, the Bank had $10 and $17 in unamortized computer software costs respectively. Depreciation of computer software costs charged to expense was $9, $8, and $6 in 2017, 2016, and 2015, respectively.

Consolidated Obligations. Consolidated obligations are recorded at amortized cost unless the Bank has elected the fair value option, in which case the consolidated obligations are carried at fair value.

Concessions on Consolidated Obligations. Concessions are paid to dealers in connection with the issuance of consolidated obligations for which the Bank is the primary obligor. The amount of the concession is allocated to the Bank by the Office of Finance based on the percentage of the debt issued for which the Bank is the primary obligor. Concessions paid on consolidated obligations designated under the fair value option are expensed as incurred in non-interest expense. Concessions paid on consolidated obligations not designated under the fair value option are deferred and amortized to expense using the level-yield method over the remaining contractual life or on a retrospective basis over the estimated life of the consolidated obligations. Amortization of concessions is included in consolidated obligation interest expense and totaled $6, $13, and $7, in 2017, 2016, and 2015, respectively.

Discounts and Premiums on Consolidated Obligations. The discounts on consolidated obligation discount notes for which the Bank is the primary obligor are amortized to expense using the level-yield method over the term to maturity. The discounts and premiums on consolidated obligation bonds for which the Bank is the primary obligor are amortized to expense using the level-yield method over the remaining contractual life or on a retrospective basis over the estimated life of the consolidated obligation bonds.

Mandatorily Redeemable Capital Stock. The Bank reclassifies the capital stock subject to redemption from capital to a liability after a member provides the Bank with a written notice of redemption; gives notice of intention to withdraw from membership; or attains nonmember status by merger or acquisition, charter termination, or other involuntary membership termination; or after a receiver or other liquidating agent for a member transfers the member's Bank capital stock to a nonmember entity, resulting in the member's shares then meeting the definition of a mandatorily redeemable financial instrument. Shares meeting this definition are reclassified to a liability at fair value. Dividends declared on shares classified as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments (by repurchase or redemption of the shares) is reflected as a financing cash outflow in the Statements of Cash Flows once settled. See Note 15 – Capital for more information.

If a member cancels its written notice of redemption or notice of withdrawal or if the Bank allows the transfer of mandatorily redeemable capital stock to a member, the Bank reclassifies mandatorily redeemable capital stock from a liability to capital. After the reclassification, dividends on the capital stock are no longer classified as interest expense.

Finance Agency Expenses. The FHLBanks fund a portion of the costs of operating the Finance Agency, and each FHLBank is assessed a proportionate share of those costs. The Finance Agency allocates its expenses and working capital fund among the FHLBanks based on the ratio between each FHLBank's minimum required regulatory capital and the aggregate minimum required regulatory capital of all the FHLBanks.

Office of Finance Expenses. Each FHLBank is assessed a proportionate share of the cost of operating the Office of Finance, which facilitates the issuance and servicing of consolidated obligations. The Office of Finance allocates its operating and capital expenditures among the FHLBanks as follows: (1) two-thirds of the assessment is based on each FHLBank's share of total consolidated obligations outstanding, and (2) one-third of the assessment is based on an equal pro rata allocation.

Affordable Housing Program. As more fully discussed in Note 13 – Affordable Housing Program, the FHLBank Act requires each FHLBank to establish and fund an Affordable Housing Program (AHP). The Bank charges the required funding for the AHP to earnings and establishes a liability. The AHP funds provide subsidies to members to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Subsidies may be in the form of direct grants or below-market interest rate advances.

Gains on Litigation Settlements, Net. Litigation settlement gains, net of related legal expenses, are recorded in Other Income/(Loss) in “Gains on litigation settlements, net” in the Statements of Income. A litigation settlement gain is considered realized and recorded when the Bank receives cash or assets that are readily convertible to known amounts of cash or claims to cash. In addition, a litigation settlement gain is considered realizable and recorded when the Bank enters into a signed agreement that is not subject to appeal, where the counterparty has the ability to pay, and the amount to be received can be reasonably estimated. Prior to being realized or realizable, the Bank considers potential litigation settlement gains to be gain contingencies, and therefore they are not recorded in the Statements of Income. The related legal expenses are contingent-based fees and are only incurred and recorded upon a litigation settlement gain.

XML

Recently Issued and Adopted Accounting Guidance

12 Months Ended

Dec. 31, 2017

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recently Issued and Adopted Accounting Guidance

Recently Issued and Adopted Accounting Guidance

Targeted Improvements to Accounting for Hedging Activities. On August 28, 2017, the Financial Accounting Standards Board (FASB) issued amended guidance to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. This guidance requires that, for fair value hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness be presented in the same income statement line that is used to present the earnings effect of the hedged item. For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness must be recorded in other comprehensive income. In addition, the amendments include certain targeted improvements to the assessment of hedge effectiveness and permit, among other things, the following:

• Measurement of the change in fair value of the hedged item on the basis of the benchmark rate component of the contractual coupon cash flows determined at hedge inception.

• Measurement of the hedged item in a partial-term fair value hedge of interest rate risk by assuming the hedged item has a term that reflects only the designated cash flows being hedged.

• Consideration only of how changes in the benchmark interest rate affect a decision to settle a prepayable instrument before its scheduled maturity in calculating the change in the fair value of the hedged item attributable to interest rate risk.

• For a cash flow hedge of interest rate risk of a variable-rate financial instrument, an entity could designate as the hedged risk the variability in cash flows attributable to the contractually specified interest rate.

This guidance becomes effective for the Bank for interim and annual periods beginning on January 1, 2019, and early adoption is permitted. The amended presentation and disclosure guidance is required only prospectively. The Bank does not intend to adopt this guidance early. The Bank is in the process of evaluating this guidance, and its effect on the Bank’s financial condition, results of operations, cash flows, and financial statement disclosures has not yet been determined.

Premium Amortization on Purchased Callable Debt Securities. On March 30, 2017, the FASB issued amended guidance to shorten the amortization period for certain purchased callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. This guidance affects all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date (that is, at a premium). This guidance is effective for the Bank for interim and annual periods beginning on January 1, 2019, and early adoption is permitted. This guidance should be applied using a modified retrospective method through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The adoption of this guidance is not expected to have any effect on the Bank’s financial condition, results of operations, or cash flows.

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. On March 10, 2017, the FASB issued amended guidance to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments require that employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the Statements of Income. This guidance became effective for the Bank for interim and annual periods beginning on January 1, 2018, and was adopted retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the Statements of Income. The adoption of this guidance did not have a material effect on the Bank’s financial condition, results of operations, cash flows, and financial statement disclosures.

Classification of Certain Cash Receipts and Cash Payments. On August 26, 2016, the FASB issued amendments to clarify guidance on the classification of certain cash receipts and payments in the Statements of Cash Flows. This guidance is intended to reduce existing diversity in practice in how certain cash receipts and cash payments are presented and classified on the Statements of Cash Flows. This guidance became effective for the Bank for interim and annual periods beginning on January 1, 2018. The adoption of this guidance did not have any effect on the Bank’s financial condition, results of operations, or cash flows.

Measurement of Credit Losses on Financial Instruments. On June 16, 2016, the FASB issued amended guidance for the accounting for credit losses on financial instruments. The amendments require entities to measure expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate under the circumstances. In addition, under the new guidance, a financial asset, or a group of financial assets, is required to be measured at its amortized cost to be presented at the net amount expected to be collected over the contractual term of the financial assets. Among other things, the guidance also requires:

• The Statement of Income to reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period.

• The entities to determine the allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis in a similar manner to other financial assets measured at amortized cost basis. The initial allowance for credit losses is required to be added to the purchase price.

• Credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The amendments limit the allowance for credit losses to the amount by which fair value is below amortized cost.

• Public entities to further disaggregate the current disclosure of credit quality indicators in relation to the amortized cost of financing receivables by the year of origination (i.e., vintage).

The guidance is effective for the Bank for interim and annual periods beginning on January 1, 2020. Early application is permitted as of the interim and annual reporting periods beginning after December 15, 2018. The guidance should be applied using a modified-retrospective approach, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. In addition, the entities are required to use a prospective transition approach for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination and for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The Bank does not intend to adopt the guidance early. The Bank is in the process of evaluating this guidance and expects the adoption of the guidance may result in an increase in the allowance for credit losses given the requirement to assess losses for the entire estimated life of the financial asset, including an allowance for debt securities. The effect on the Bank’s financial condition, results of operations, and cash flows will depend on the composition of financial assets held by the Bank at the adoption date, as well as on economic conditions and forecasts at that time.

Contingent Put and Call Options in Debt Instruments. On March 14, 2016, the FASB issued amendments to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The guidance requires entities to apply only the four-step decision sequence when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks. This guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2017. The adoption of this guidance had no effect on the Bank’s financial condition, results of operations, and cash flows.

Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. On March 10, 2016, the FASB issued amendments to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under U.S. GAAP does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. This guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2017, and early adoption was permitted. The amendments provide entities with the option to apply the guidance using either a prospective approach or a modified retrospective approach, retrospectively applied to all derivative instruments that meet the specific conditions. The Bank elected to early adopt the guidance prospectively on January 1, 2016. The adoption of this guidance had no effect on the Bank’s financial condition, results of operations, and cash flows.

Recognition of Lease Assets and Lease Liabilities. On February 25, 2016, the FASB issued guidance that requires recognition of lease assets and lease liabilities on the Statements of Condition and disclosure of key information about leasing arrangements. In particular, this guidance requires a lessee of operating or finance leases to recognize on the Statements of Condition a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. However, for leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. Under previous U.S. GAAP, a lessee was not required to recognize lease assets and lease liabilities arising from operating leases on the Statements of Condition. While this guidance does not fundamentally change lessor accounting, some changes have been made to align that guidance with the lessee guidance and other areas within U.S. GAAP.

The guidance becomes effective for the Bank for the interim and annual periods beginning on January 1, 2019, and early application is permitted. The guidance requires lessors and lessees to recognize and measure leases at the beginning of the earliest period presented in the financial statements using a modified retrospective approach. The Bank does not intend to adopt this guidance early. Upon adoption, the Bank expects to report higher assets and liabilities as a result of recording right-of-use assets and lease liabilities for its existing leases on the Statements of Condition. The Bank is in the process of evaluating this guidance, but its effect on the Bank’s financial condition, results of operations, and cash flows is not expected to be material.

Recognition and Measurement of Financial Assets and Financial Liabilities. On January 5, 2016, the FASB issued amended guidance on certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance includes, but is not limited to, the following:

• Requires equity investments (with certain exceptions) to be measured at fair value with changes in fair value recognized in net income;

• Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments;

• Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the Statement of Condition or in the accompanying notes to the financial statements;

• Eliminates the requirement for public entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the Statement of Condition.

The guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2018. The adoption of this guidance affected the Bank’s disclosures. However, the requirement to present the instrument-specific credit risk in other comprehensive income did not have any effect on the Bank’s financial condition, results of operations, and cash flows.

Revenue from Contracts with Customers. On May 28, 2014, the FASB issued its guidance on revenue from contracts with customers. This guidance outlines a comprehensive model for recognizing revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In addition, this guidance amends the existing requirements for the recognition of a gain or loss on the transfer of non-financial assets that are not in a contract with a customer. This guidance applies to all contracts with customers except those that are within the scope of certain other standards, such as financial instruments, certain guarantees, insurance contracts, and lease contracts.

The guidance provides entities with the option of using either of the following adoption methods: a full retrospective method, applied retrospectively to each prior reporting period presented; or a modified retrospective method, with the cumulative effect of retrospectively applying this guidance recognized at the date of initial application.

On August 12, 2015, the FASB issued an amendment to defer the effective date of the guidance issued in May 2014 by one year. In 2016 and 2017, the FASB issued additional amendments to clarify certain aspects of the new revenue guidance. However, the amendments do not change the core principle in the new revenue standard. The guidance became effective for the Bank for interim and annual periods beginning on January 1, 2018. Given that the majority of the Bank’s financial instruments and other contractual rights that generate revenue are covered by other accounting guidance under U.S. GAAP, the effect of this guidance on the Bank’s financial condition, results of operations, and cash flows was not material.

XML

Cash and Due from Banks

12 Months Ended

Dec. 31, 2017

Cash and Due from Banks [Abstract]

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Bank are included in Cash and due from banks on the Statements of Condition.

Cash and due from banks includes certain compensating balances, wherethe Bank maintains collected cash balances with commercial banks in consideration for certain services.

Cash and Cash Equivalents Disclosure [Text Block]

Cash and Due from Banks

Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Bank are included in Cash and due from banks on the Statements of Condition.

Cash and due from banks includes certain compensating balances, wherethe Bank maintains collected cash balances with commercial banks in consideration for certain services. There are no legal restrictions under these agreements on the withdrawal of these funds. The average collected cash balances were approximately $30 for 2017 and $44 for 2016.

XML

Trading Securities

12 Months Ended

Dec. 31, 2017

Trading Securities [Abstract]

Trading Securities

Trading Securities

The estimated fair value of trading securities as of December 31, 2017 and 2016, was as follows:

	December 31, 2017		December 31, 2016
Government-Sponsored Enterprises (GSEs) – Federal Farm Credit Bank (FFCB) bonds	$	1,158	$	2,058
MBS – Other U.S. obligations – Ginnie Mae	6		8
Total	$	1,164	$	2,066

The net unrealized gain/(loss) on trading securities was de minimis, $4, and $(2) for the years ended December 31, 2017, and 2016, and 2015, respectively. These amounts represent the changes in the fair value of the securities during the reported periods.

XML

Available-for-Sale Securities

12 Months Ended

Dec. 31, 2017

Available-for-sale Securities [Abstract]

Available-for-Sale Securities

Available-for-Sale Securities

Available-for-sale (AFS) securities by major security type as of December 31, 2017 and 2016, were as follows:

December 31, 2017
	Amortized Cost(1)		OTTI Recognized in AOCI			Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
PLRMBS:
Prime	$	335	$	—		$	29	$	—	$	364
Alt-A, option ARM	714		(10		)	130		—		834
Alt-A, other	2,447		(23		)	211		—		2,635
Total	$	3,496	$	(33	)	$	370	$	—	$	3,833

December 31, 2016
	Amortized Cost(1)		OTTI Recognized in AOCI			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
PLRMBS:
Prime	$	413	$	(1	)	$	22	$	—		$	434
Alt-A, option ARM	853		(31		)	77		(2		)	897
Alt-A, other	3,087		(82		)	154		(1		)	3,158
Total	$	4,353	$	(114	)	$	253	$	(3	)	$	4,489

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings.

Expected maturities of PLRMBS will differ from contractual maturities because borrowers generally have the right to prepay the underlying obligations without prepayment fees.

At December 31, 2017, the amortized cost of the Bank’s PLRMBS classified as AFS included credit-related OTTI of $801. At December 31, 2016, the amortized cost of the Bank’s PLRMBS classified as AFS included credit-related OTTI of $941.

The following table summarizes the AFS securities with unrealized losses as of December 31, 2017 and 2016. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position. Total unrealized losses in the following table will not agree to total gross unrealized losses in the table above. The unrealized losses in the following table also include non-credit-related OTTI losses recognized in AOCI. For OTTI analysis of AFS securities, see Note 7 – Other-Than-Temporary Impairment Analysis.

December 31, 2017
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
PLRMBS:
Prime	$	—	$	—	$	11	$	—	$	11	$	—
Alt-A, option ARM	—		—		144		10		144		10
Alt-A, other	5		—		356		23		361		23
Total	$	5	$	—	$	511	$	33	$	516	$	33

December 31, 2016
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
PLRMBS:
Prime	$	—	$	—	$	14	$	1	$	14	$	1
Alt-A, option ARM	14		—		249		33		263		33
Alt-A, other	57		—		1,048		83		1,105		83
Total	$	71	$	—	$	1,311	$	117	$	1,382	$	117

As indicated in the tables above, as of December 31, 2017, the Bank’s investments classified as AFS had unrealized losses related to PLRMBS, which were primarily due to illiquidity in the PLRMBS market and market expectations of the credit performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost.

See Note 7 – Other-Than-Temporary Impairment Analysis for information on the transfers of securities between the AFS portfolio and the HTM portfolio.

XML

Held-to-Maturity Securities

12 Months Ended

Dec. 31, 2017

Held-to-maturity Securities, Unclassified [Abstract]

Held-to-maturity Securities

Held-to-Maturity Securities

The Bank classifies the following securities as HTM because the Bank has the positive intent and ability to hold these securities to maturity:

December 31, 2017
	Amortized Cost(1)		OTTI Recognized in AOCI(1)			Carrying Value(1)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Estimated Fair Value
Certificates of deposit	$	500	$	—		$	500	$	—	$	—		$	500
Housing finance agency bonds:
California Housing Finance Agency (CalHFA) bonds	187		—			187		—		(9		)	178
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	751		—			751		1		(1		)	751
GSEs – single-family:
Freddie Mac	2,039		—			2,039		12		(15		)	2,036
Fannie Mae	3,600		—			3,600		34		(8		)	3,626
Subtotal GSEs – single-family	5,639		—			5,639		46		(23		)	5,662
GSEs – multifamily:
Freddie Mac	4,651		—			4,651		6		(6		)	4,651
Fannie Mae	2,131		—			2,131		2		—			2,133
Subtotal GSEs – multifamily	6,782		—			6,782		8		(6		)	6,784
Subtotal GSEs	12,421		—			12,421		54		(29		)	12,446
PLRMBS:
Prime	521		—			521		5		(6		)	520
Alt-A, other	306		(6		)	300		11		(2		)	309
Subtotal PLRMBS	827		(6		)	821		16		(8		)	829
Total MBS	13,999		(6		)	13,993		71		(38		)	14,026
Total	$	14,686	$	(6	)	$	14,680	$	71	$	(47	)	$	14,704

December 31, 2016
	Amortized Cost(1)		OTTI Recognized in AOCI(1)			Carrying Value(1)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Estimated Fair Value
Certificates of deposit	$	1,350	$	—		$	1,350	$	—	$	—		$	1,350
Housing finance agency bonds:
California Housing Finance Agency (CalHFA) bonds	225		—			225		—		(18		)	207
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	951		—			951		5		(1		)	955
GSEs – single-family:
Freddie Mac	2,793		—			2,793		23		(15		)	2,801
Fannie Mae	5,037		—			5,037		47		(14		)	5,070
Subtotal GSEs – single-family	7,830		—			7,830		70		(29		)	7,871
GSEs – multifamily:
Freddie Mac	1,556		—			1,556		—		(1		)	1,555
Fannie Mae	1,058		—			1,058		—		(1		)	1,057
Subtotal GSEs – multifamily	2,614		—			2,614		—		(2		)	2,612
Subtotal GSEs	10,444		—			10,444		70		(31		)	10,483
PLRMBS:
Prime	707		—			707		2		(15		)	694
Alt-A, other	459		(9		)	450		11		(9		)	452
Subtotal PLRMBS	1,166		(9		)	1,157		13		(24		)	1,146
Total MBS	12,561		(9		)	12,552		88		(56		)	12,584
Total	$	14,136	$	(9	)	$	14,127	$	88	$	(74	)	$	14,141

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

At December 31, 2017, the amortized cost of the Bank’s MBS classified as HTM included premiums of $19, discounts of $24, and credit-related OTTI of $7. At December 31, 2016, the amortized cost of the Bank’s MBS classified as HTM included premiums of $29, discounts of $34, and credit-related OTTI of $8.

The following tables summarize the HTM securities with unrealized losses as of December 31, 2017 and 2016. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position. Total unrealized losses in the following table will not agree to the total gross unrecognized holding losses in the table above. The unrealized losses in the following table also include non-credit-related OTTI losses recognized in AOCI. For OTTI analysis of HTM securities, see Note 7 – Other-Than-Temporary Impairment Analysis.

December 31, 2017
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Housing finance agency bonds:
CalHFA bonds	$	—	$	—	$	178	$	9	$	178	$	9
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	406		1		—		—		406		1
GSEs – single-family:
Freddie Mac	895		9		323		6		1,218		15
Fannie Mae	702		4		205		4		907		8
Subtotal GSEs – single-family	1,597		13		528		10		2,125		23
GSEs – multifamily:
Freddie Mac	1,058		6		—		—		1,058		6
Fannie Mae	456		—		—		—		456		—
Subtotal GSEs – multifamily	1,514		6		—		—		1,514		6
Subtotal GSEs	3,111		19		528		10		3,639		29
PLRMBS:
Prime	2		—		202		6		204		6
Alt-A, other	15		—		191		8		206		8
Subtotal PLRMBS	17		—		393		14		410		14
Total MBS	3,534		20		921		24		4,455		44
Total	$	3,534	$	20	$	1,099	$	33	$	4,633	$	53

December 31, 2016
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Housing finance agency bonds:
CalHFA bonds	$	—	$	—	$	193	$	18	$	193	$	18
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	190		1		—		—		190		1
GSEs – single-family:
Freddie Mac	1,498		15		3		—		1,501		15
Fannie Mae	2,665		12		96		2		2,761		14
Subtotal GSEs – single-family	4,163		27		99		2		4,262		29
GSEs – multifamily:
Freddie Mac	1,007		1		—		—		1,007		1
Fannie Mae	387		1		—		—		387		1
Subtotal GSEs – multifamily	1,394		2		—		—		1,394		2
Subtotal GSEs	5,557		29		99		2		5,656		31
PLRMBS:
Prime	1		—		517		15		518		15
Alt-A, other	—		—		452		18		452		18
Subtotal PLRMBS	1		—		969		33		970		33
Total MBS	5,748		30		1,068		35		6,816		65
Total	$	5,748	$	30	$	1,261	$	53	$	7,009	$	83

As indicated in the tables above, the Bank’s investments classified as HTM had unrealized losses on CalHFA bonds and MBS. The unrealized losses associated with the CalHFA bonds were mainly due to an illiquid market, credit concerns regarding the underlying mortgage collateral, and credit concerns regarding the monoline insurance providers, causing these investments to be valued at a discount to their acquisition cost. For its agency MBS, the Bank expects to recover the entire amortized cost basis of these securities because the Bank determined that the strength of the issuers’ guarantees through direct obligations or support from the U.S. government is sufficient to protect the Bank from losses. The unrealized losses associated with the PLRMBS were primarily due to illiquidity in the PLRMBS market and market expectations of the credit performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost.

Redemption Terms. The amortized cost, carrying value, and estimated fair value of non-MBS securities by contractual maturity (based on contractual final principal payment) and of MBS as of December 31, 2017 and 2016, are shown below. Expected maturities of MBS will differ from contractual maturities because borrowers generally have the right to prepay the underlying obligations without prepayment fees.

December 31, 2017
Year of Contractual Maturity	Amortized Cost(1)		Carrying Value(1)		Estimated Fair Value
HTM securities other than MBS:
Due in 1 year or less	$	500	$	500	$	500
Due after 5 years through 10 years	12		12		12
Due after 10 years	175		175		166
Subtotal	687		687		678
MBS	13,999		13,993		14,026
Total	$	14,686	$	14,680	$	14,704

December 31, 2016
Year of Contractual Maturity	Amortized Cost(1)		Carrying Value(1)		Estimated Fair Value
HTM securities other than MBS:
Due in 1 year or less	$	1,350	$	1,350	$	1,350
Due after 5 years through 10 years	35		35		34
Due after 10 years	190		190		173
Subtotal	1,575		1,575		1,557
MBS	12,561		12,552		12,584
Total	$	14,136	$	14,127	$	14,141

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

See Note 7 – Other-Than-Temporary Impairment Analysis for information on the transfers of securities between the AFS portfolio and the HTM portfolio.

XML

Other-Than-Temporary Impairment Analysis

12 Months Ended

Dec. 31, 2017

Other than Temporary Impairment Losses, Investments [Abstract]

Other-than-Temporary Impairment Analysis

Other-Than-Temporary Impairment Analysis

On a quarterly basis, the Bank evaluates its individual AFS and HTM investment securities in an unrealized loss position for OTTI.

PLRMBS. To assess whether it expects to recover the entire amortized cost basis of its PLRMBS, the Bank performed a cash flow analysis for all of its PLRMBS as of December 31, 2017, using two third-party models. The OTTI Governance Committee of the Federal Home Loan Banks (FHLBanks) developed a short-term housing price forecast with projected changes ranging from a decrease of 5.0% to an increase of 12.0% over the 12-month period beginning October 1, 2017. For the vast majority of markets, the projected short-term housing price changes range from an increase of 2.0% to an increase of 6.0%. Thereafter, a unique path is projected for each geographic area based on an internally developed framework derived from historical data.

The projected cash flows are based on a number of assumptions and expectations, and the results of these models can vary significantly with changes in assumptions and expectations. The scenario of cash flows determined reflects a best-estimate scenario and includes a base case housing price forecast that reflects the expectations for near- and long-term housing price behavior.

At each quarter end, the Bank compares the present value of the cash flows expected to be collected on its PLRMBS to the amortized cost basis of the securities to determine whether a credit loss exists. The Bank then uses the effective interest rate for the security prior to impairment for determining the present value of the future estimated cash flows.

For all the PLRMBS in its AFS and HTM portfolios, the Bank does not intend to sell any security and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.

For securities determined to be other-than-temporarily impaired as of December 31, 2017 (securities for which the Bank determined that it does not expect to recover the entire amortized cost basis), the following table presents a summary of the significant inputs used in measuring the amount of credit loss recognized in earnings during the year ended December 31, 2017, and the related current credit enhancement for the Bank.

December 31, 2017
	Significant Inputs for Other-Than-Temporarily Impaired PLRMBS			Current
	Prepayment Rates	Default Rates	Loss Severities	Credit Enhancement
Year of Securitization	Weighted Average % (1)	Weighted Average % (1)	Weighted Average % (1)	Weighted Average % (1)
Alt-A, other
2007	10.4	29.5	39.4	0.7
2006	10.8	20.2	39.2	25.0
2005	13.5	17.8	34.6	2.9
2004 and earlier	14.0	1.7	31.4	9.3
Total Alt-A, other	11.5	23.4	37.8	7.5
Total	11.5	23.4	37.8	7.5

(1) Weighted average percentage is based on unpaid principal balance.

Credit enhancement is defined as the percentage of subordinated tranches, excess spread, and over-collateralization, if any, in a security structure that will generally absorb losses before the Bank will experience a loss on the security. The calculated averages represent the dollar-weighted averages of all the PLRMBS investments in each category shown. The classification is based on the model used to run the estimated cash flows for the CUSIP, which may not necessarily be the same as the classification at the time of origination.

The following table presents the credit-related OTTI, which is recognized in earnings, for the years ended December 31, 2017, 2016, and 2015.

	2017			2016			2015
Balance, beginning of the period	$	1,183		$	1,255		$	1,314
Additional charges on securities for which OTTI was previously recognized(1)	16			16			15
Securities matured during the period(2)	(1		)	(7		)	—
Accretion of yield adjustments resulting from improvement of expected cash flows that are recognized over the remaining life of the securities(3)	(69		)	(81		)	(74		)
Balance, end of the period	$	1,129		$	1,183		$	1,255

(1) For the years ended December 31, 2017, 2016, and 2015, “securities for which OTTI was previously recognized” represents all securities that were also other-than-temporarily impaired prior to January 1, 2017, 2016, and 2015, respectively.

(2) Represents reductions related to securities having reached final maturity during the period, which therefore are no longer held by the Bank at the end of the period.

(3) The total net accretion/(amortization) associated with other-than-temporarily impaired PLRMBS (amount recognized in interest income) totaled $93, $101, and $82 for the years ended December 31, 2017, 2016, and 2015, respectively.

Changes in circumstances may cause the Bank to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future. The sale or transfer of an HTM security because of certain changes in circumstances, such as evidence of significant deterioration in the issuers’ creditworthiness, is not considered to be inconsistent with its original classification. In addition, other events that are isolated, nonrecurring, or unusual for the Bank that could not have been reasonably anticipated may cause the Bank to sell or transfer an HTM security without necessarily calling into question its intent to hold other debt securities to maturity.

The Bank elected to transfer any PLRMBS that incurred a credit-related OTTI charge during the applicable period from the Bank’s held-to-maturity portfolio to its available-for-sale portfolio at their fair values. The Bank recognized an OTTI credit loss on these held-to-maturity PLRMBS, which the Bank believes is evidence of a significant decline in the issuers’ creditworthiness. The decline in the issuers’ creditworthiness is the basis for the transfers to the available-for-sale portfolio. These transfers allow the Bank the option to sell these securities prior to maturity in view of changes in interest rates, changes in prepayment risk, or other factors, while recognizing the Bank’s intent to hold these securities for an indefinite period of time. The Bank does not intend to sell its other-than-temporarily impaired securities and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.

The Bank did not transfer any PLRMBS from its HTM portfolio to its AFS portfolio during the years ended December 31, 2017 and 2016.

The following tables present the Bank’s AFS and HTM PLRMBS that incurred OTTI losses anytime during the life of the securities at December 31, 2017 and 2016, by loan collateral type:

December 31, 2017
	Available-for-Sale Securities						Held-to-Maturity Securities
	Unpaid Principal Balance		Amortized Cost		Estimated Fair Value		Unpaid Principal Balance		Amortized Cost		Carrying Value		Estimated Fair Value
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	$	405	$	335	$	364	$	—	$	—	$	—	$	—
Alt-A, option ARM	953		714		834		—		—		—		—
Alt-A, other	2,927		2,447		2,635		64		59		53		63
Total	$	4,285	$	3,496	$	3,833	$	64	$	59	$	53	$	63

December 31, 2016
	Available-for-Sale Securities						Held-to-Maturity Securities
	Unpaid Principal Balance		Amortized Cost		Estimated Fair Value		Unpaid Principal Balance		Amortized Cost		Carrying Value		Estimated Fair Value
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	$	498	$	413	$	434	$	—	$	—	$	—	$	—
Alt-A, option ARM	1,134		853		897		—		—		—		—
Alt-A, other	3,650		3,087		3,158		93		88		79		91
Total	$	5,282	$	4,353	$	4,489	$	93	$	88	$	79	$	91

For the Bank’s PLRMBS that were not other-than-temporarily impaired as of December 31, 2017, the Bank has experienced net unrealized losses primarily because of illiquidity in the PLRMBS market and market expectations of the credit performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost. The Bank does not intend to sell these securities, it is not more likely than not that the Bank will be required to sell these securities before its anticipated recovery of the remaining amortized cost basis, and the Bank expects to recover the entire amortized cost basis of these securities. As a result, the Bank determined that, as of December 31, 2017, all of the gross unrealized losses on these PLRMBS are temporary. These securities were included in the securities that the Bank reviewed and analyzed for OTTI as discussed above, and the analyses performed indicated that these securities were not other-than-temporarily impaired.

All Other Available-for-Sale and Held-to-Maturity Investments. For the Bank’s investments in housing finance agency bonds, which were issued by CalHFA, the gross unrealized losses were mainly due to an illiquid market, credit concerns regarding the underlying mortgage collateral, and credit concerns regarding the monoline insurance providers, causing these investments to be valued at a discount to their acquisition cost. The Bank independently modeled cash flows for the underlying collateral, using assumptions for default rates and loss severity that a market participant would deem reasonable, and concluded that the available credit support within the CalHFA structure more than offset the projected underlying collateral losses. The Bank determined that, as of December 31, 2017, all of the gross unrealized losses on the bonds are temporary because the underlying collateral and credit enhancements were sufficient to protect the Bank from losses. As a result, the Bank expects to recover the entire amortized cost basis of these securities.

For its agency MBS, the Bank expects to recover the entire amortized cost basis of these securities because the Bank determined that the strength of the issuers’ guarantees through direct obligations or support from the U.S. government is sufficient to protect the Bank from losses. As a result, the Bank determined that, as of December 31, 2017, all of the gross unrealized losses on its agency MBS are temporary.

XML

Advances

12 Months Ended

Dec. 31, 2017

Federal Home Loan Banks [Abstract]

Advances

Advances

The Bank offers a wide range of fixed and adjustable rate advance products with different maturities, interest rates, payment characteristics, and option features. Fixed rate advances generally have maturities ranging from one day to 30 years. Adjustable rate advances generally have maturities ranging from less than 30 days to 10 years, with the interest rates resetting periodically at a fixed spread to LIBOR or to another specified index.

Redemption Terms. The Bank had advances outstanding, excluding overdrawn demand deposit accounts, at interest rates ranging from 0.79% to 8.57% at December 31, 2017, and 0.43% to 8.57% at December 31, 2016, as summarized below.

	2017					2016
Contractual Maturity	Amount Outstanding			Weighted Average Interest Rate		Amount Outstanding			Weighted Average Interest Rate
Within 1 year	$	46,403		1.46	%	$	22,902		0.78	%
After 1 year through 2 years	16,287			1.61		7,608			1.36
After 2 years through 3 years	5,423			1.73		9,410			1.22
After 3 years through 4 years	6,719			1.69		2,083			1.39
After 4 years through 5 years	1,741			2.10		6,423			1.24
After 5 years	913			3.13		1,431			2.60
Total par value	77,486			1.57	%	49,857			1.09	%
Valuation adjustments for hedging activities	(88		)			(22		)
Valuation adjustments under fair value option	(16		)			10
Total	$	77,382				$	49,845

Many of the Bank’s advances are prepayable at the borrower’s option. However, when advances are prepaid, the borrower is generally charged a prepayment fee intended to make the Bank financially indifferent to the prepayment. In addition, for certain advances with partial prepayment symmetry, the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. The Bank had advances with partial prepayment symmetry outstanding totaling $4,619 at December 31, 2017, and $3,647 at December 31, 2016. Some advances may be repaid on pertinent call dates without prepayment fees (callable advances). The Bank had callable advances outstanding totaling $18,373 at December 31, 2017, and $15,505 at December 31, 2016.

The Bank’s advances at December 31, 2017 and 2016, included $0 and $125 of putable advances, respectively. At the Bank’s discretion, the Bank may terminate these advances on predetermined exercise dates and offer replacement funding at prevailing market rates, subject to certain conditions. The Bank would typically exercise such termination rights when interest rates increase relative to contractual rates.

The following table summarizes advances at December 31, 2017 and 2016, by the earlier of the year of contractual maturity or next call date for callable advances and by the earlier of the year of contractual maturity or next put date for putable advances.

	Earlier of Contractual Maturity or Next Call Date				Earlier of Contractual Maturity or Next Put Date
	2017		2016		2017		2016
Within 1 year	$	52,624	$	25,784	$	46,403	$	22,927
After 1 year through 2 years	12,593		11,078		16,287		7,583
After 2 years through 3 years	7,973		4,465		5,423		9,410
After 3 years through 4 years	1,719		5,782		6,719		2,083
After 4 years through 5 years	1,729		1,421		1,741		6,423
After 5 years	848		1,327		913		1,431
Total par value	$	77,486	$	49,857	$	77,486	$	49,857

Credit and Concentration Risk. The following tables present the concentration in advances to the top five borrowers and their affiliates at December 31, 2017 and 2016. The tables also present the interest income from

these advances before the impact of interest rate exchange agreements associated with these advances for the years ended December 31, 2017 and 2016.

December 31, 2017

Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
Charles Schwab Bank	$	15,000	19	%	$	40	5	%
JPMorgan Chase Bank, National Association(2)	11,363		15		174		19
First Republic Bank	8,400		11		112		12
MUFG Union Bank, National Association	7,250		9		48		5
Bank of the West	6,409		8		87		10
Subtotal	48,422		62		461		51
Others	29,064		38		438		49
Total par value	$	77,486	100	%	$	899	100	%

December 31, 2016

Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
JPMorgan Chase Bank, National Association(2)	$	14,807	30	%	$	119	23	%
Bank of the West	7,305		14		49		9
First Republic Bank	5,900		12		70		13
CIT Bank, N.A.	2,411		5		28		5
Star One Credit Union	2,024		4		27		5
Subtotal	32,447		65		293		55
Others	17,410		35		240		45
Total par value	$	49,857	100	%	$	533	100	%

(1) Interest income amounts exclude the interest effect of interest rate exchange agreements with derivative counterparties; as a result, the total interest income amounts will not agree to the Statements of Income. The amount of interest income from advances can vary depending on the amount outstanding, terms to maturity, interest rates, and repricing characteristics.

(2) Nonmember institution.

The Bank held a security interest in collateral from each of the top five advances borrowers and their affiliates sufficient to support their respective advances outstanding, and the Bank does not expect to incur any credit losses on these advances.

For information related to the Bank’s credit risk on advances and allowance methodology for credit losses, see Note 10 – Allowance for Credit Losses.

Interest Rate Payment Terms. Interest rate payment terms for advances at December 31, 2017 and 2016, are detailed below:

	2017		2016
Par value of advances:
Fixed rate:
Due within 1 year	$	31,767	$	13,486
Due after 1 year	13,022		10,845
Total fixed rate	44,789		24,331
Adjustable rate:
Due within 1 year	14,636		9,416
Due after 1 year	18,061		16,110
Total adjustable rate	32,697		25,526
Total par value	$	77,486	$	49,857

The Bank may use derivatives to adjust the repricing and options characteristics of advances to more closely match the characteristics of the Bank’s funding liabilities. In general, whenever a member executes a fixed or variable rate advance with embedded options, the Bank will simultaneously execute an interest rate exchange agreement with terms that offset the terms and embedded options in the advance. The combination of the advance and the interest rate exchange agreement effectively creates a variable rate asset. This type of hedge relationship receives fair value option accounting treatment. In addition, for certain advances for which the Bank has elected the fair value option, the Bank will simultaneously execute an interest rate exchange agreement with terms that economically offset the terms of the advance. However, this type of hedge is treated as an economic hedge because these combinations generally do not meet the requirements for fair value hedge accounting treatment. For more information, see Note 18 – Derivatives and Hedging Activities and Note 19 – Fair Value.

The Bank did not have any advances with embedded features that met the requirements to separate the embedded feature from the host contract and designate the embedded feature as a stand-alone derivative at December 31, 2017 or 2016. The Bank has generally elected to account for certain advances with embedded features under the fair value option, and these advances are carried at fair value on the Statements of Condition. For more information, see Note 19 – Fair Value.

Prepayment Fees, Net. The Bank charges borrowers prepayment fees or pays borrowers prepayment credits when the principal on certain advances is paid prior to original maturity. The Bank records prepayment fees net of any associated fair value adjustments related to prepaid advances that were hedged. The net amount of prepayment fees is reflected as interest income in the Statements of Income for the years ended December 31, 2017, 2016, and 2015, as follows:

	2017		2016			2015
Prepayment fees received	$	1	$	6		$	28
Fair value adjustments	—		(1		)	(20		)
Net	$	1	$	5		$	8
Advance principal prepaid	$	8,469	$	3,459		$	2,229

XML

Mortgage Loans Held for Portfolio

12 Months Ended

Dec. 31, 2017

Mortgage Loans on Real Estate [Abstract]

Mortgage Loans Held for Portfolio

Mortgage Loans Held for Portfolio

Under the MPF® Program, the Bank may purchase from members, for its own portfolio, conventional conforming fixed rate mortgage loans under the MPF Original product and mortgage loans insured by the FHA or guaranteed by the Department of VA under the MPF Government product. In addition, the Bank may facilitate the purchase of conforming fixed rate mortgage loans from members for concurrent sale to Fannie Mae under the MPF Xtra® product; of jumbo fixed rate mortgage loans for concurrent sale to Redwood Residential Acquisition Corporation, a subsidiary of Redwood Trust, Inc., a real estate investment trust, under the MPF Direct product; and of government-insured or government-guaranteed mortgage loans that will be packaged into securities backed by the mortgage loans and guaranteed by Ginnie Mae under the MPF Government MBS product. When members sell mortgage loans under the MPF Xtra, MPF Direct, and MPF Government MBS products, the loans are sold to a third-party investor and are not recorded on the Bank’s Statements of Condition. As of December 31, 2017, the Bank had approved 23 members as participating financial institutions since renewing its participation in the MPF Program in 2013.

From May 2002 through October 2006, the Bank purchased conventional conforming fixed rate mortgage loans from its participating financial institutions under the MPF Original and MPF Plus products. Participating members originated or purchased the mortgage loans, credit-enhanced them and sold them to the Bank, and generally retained the servicing of the loans.

The following table presents information as of December 31, 2017 and 2016, on mortgage loans, all of which are secured by one- to four-unit residential properties and single-unit second homes.

	2017			2016
Fixed rate medium-term mortgage loans	$	32		$	55
Fixed rate long-term mortgage loans	1,973			759
Subtotal	2,005			814
Unamortized premiums	76			18
Unamortized discounts	(5		)	(6		)
Mortgage loans held for portfolio	2,076			826
Less: Allowance for credit losses	—			—
Total mortgage loans held for portfolio, net	$	2,076		$	826

Medium-term loans have original contractual terms of 15 years or less, and long-term loans have contractual terms of more than 15 years.

The participating financial institution and the Bank share the risk of credit losses on conventional MPF loan products by structuring potential losses on conventional MPF loans into layers with respect to each master commitment. After any primary mortgage insurance, the Bank is obligated to incur the first layer or portion of credit losses not absorbed by the liquidation value of the real property securing the loan. Under the MPF Program, the participating financial institution’s credit enhancement protection consists of the credit enhancement amount, which may be a direct obligation of the participating financial institution or may be a supplemental mortgage insurance policy paid for by the participating financial institution, and may include a contingent performance-based credit enhancement fee payable to the participating financial institution. The participating financial institution is required to pledge collateral to secure any portion of its credit enhancement amount that is a direct obligation.

For taking on the credit enhancement obligation, the Bank pays the participating financial institution or any successor a credit enhancement fee, typically 10 basis points per annum, which is calculated on the remaining unpaid principal balance of the mortgage loans. A participating financial institution may elect to receive the credit enhancement fees monthly over the life of the loans or as an upfront lump sum amount that is included in the purchase price at the time loans are sold to the Bank. The lump sum amount is approximately equivalent to the present value of the monthly credit enhancement fees that the Bank would otherwise be expected to pay over the life of the loans. The Bank records credit enhancement fees as a reduction to interest income. The Bank reduced net interest income for credit enhancement fees totaling $1 million in 2017 and de minimis amounts in 2016 and 2015.

For information related to the Bank’s credit risk on mortgage loans and allowance methodology for credit losses, see Note 10 – Allowance for Credit Losses.

XML

Allowance for Credit Losses

12 Months Ended

Dec. 31, 2017

Loans and Leases Receivable Disclosure [Abstract]

Allowance for Credit Losses

Allowance for Credit Losses

An allowance for credit losses is a valuation allowance separately established for each identified portfolio segment, if it is probable that impairment has occurred in the Bank's portfolio as of the Statements of Condition date and the amount of loss can be reasonably estimated. To the extent necessary, an allowance for credit losses for off-balance sheet credit exposures is recorded as a liability.

Portfolio Segments.A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. The Bank has developed and documented a systematic methodology for determining an allowance for credit losses for each of the following portfolio segments:

• advances, letters of credit, and other extensions of credit, collectively referred to as “credit products,”

• MPF loans held for portfolio,

• term securities purchased under agreements to resell, and

• term Federal funds sold.

Classes of Financing Receivables.Classes of financing receivables generally are a disaggregation of a portfolio segment to the extent needed to understand the exposure to credit risk arising from these financing receivables. The Bank determined that no further disaggregation of the portfolio segments identified above is needed because the credit risk arising from these financing receivables is assessed and measured by the Bank at the portfolio segment level.

Credit Products. The Bank lends to member financial institutions that have a principal place of business in Arizona, California, or Nevada. Under the FHLBank Act, the Bank is required to obtain sufficient collateral for credit products to protect the Bank from credit losses. Collateral eligible to secure credit products includes certain investment securities, residential mortgage loans, cash or deposits with the Bank, and other eligible real estate-related assets. The capital stock of the Bank owned by each borrowing member is pledged as additional collateral for the member's indebtedness to the Bank. The Bank may also accept secured small business, small farm, and small agribusiness loans, and securities representing a whole interest in such secured loans, as collateral from members that are community financial institutions. The Housing and Economic Recovery Act of 2008 (Housing Act) added secured loans for community development activities as collateral that the Bank may accept from community financial institutions. In addition, the Bank has advances outstanding to former members and member successors, which are also subject to these security terms.

The Bank requires each borrowing member to execute a written Advances and Security Agreement, which describes the lending relationship between the Bank and the borrower. At December 31, 2017 and 2016, the Bank had a perfected security interest in collateral pledged by each borrowing member, or by the member's affiliate on behalf of the member, and by each nonmember borrower, with an estimated value in excess of the outstanding credit products for that borrower. Based on the financial condition of the borrower, the Bank may either (i) allow the borrower or the pledging affiliate to retain physical possession of loan collateral pledged to the Bank, provided that the borrower or the pledging affiliate agrees to hold the collateral for the benefit of the Bank, or (ii) require the borrower or the pledging affiliate to deliver physical possession of loan collateral to the Bank or its custodial agent. All securities collateral is required to be delivered to the Bank's custodial agent. All loan collateral pledged to the Bank is subject to a UCC-1 financing statement.

Section 10(e) of the FHLBank Act affords any security interest granted to the Bank by a member or any affiliate of the member or any nonmember borrower priority over claims or rights of any other party, except claims or rights that (i) would be entitled to priority under otherwise applicable law and (ii) are held by bona fide purchasers for value or secured parties with perfected security interests.

The Bank classifies as impaired any advance with respect to which it is probable that all principal and interest due will not be collected according to its contractual terms. Impaired advances are valued using the present value of expected future cash flows discounted at the advance's effective interest rate, the advance's observable market price or, if collateral-dependent, the fair value of the advance's underlying collateral. When an advance is classified as impaired, the accrual of interest is discontinued and unpaid accrued interest is reversed. Advances do not return to accrual status until they are brought current with respect to both principal and interest and until the future principal payments are no longer in doubt. No advances were classified as impaired during the periods presented.

The Bank manages its credit exposure related to credit products through an integrated approach that generally provides for a credit limit to be established for each borrower, includes an ongoing review of each borrower’s financial condition, and is coupled with conservative collateral and lending policies to limit the risk of loss while taking into account borrowers’ needs for a reliable funding source. At December 31, 2017 and 2016, none of the Bank’s credit products were past due, on nonaccrual status, or considered impaired. There were no troubled debt restructurings related to credit products during December 31, 2017 and 2016.

Based on the collateral pledged as security for advances, the Bank’s credit analyses of borrowers’ financial condition, and the Bank’s credit extension and collateral policies as of December 31, 2017, the Bank expects to collect all amounts due according to the contractual terms. Therefore, no allowance for losses on credit products was deemed necessary by the Bank. The Bank has never experienced any credit losses on its credit products.

Nomember institutions were placed into receivership during 2017 or from January 1, 2018 to February 28, 2018.

Mortgage Loans Held for Portfolio. A mortgage loan is considered to be impaired when it is reported 90 days or more past due (nonaccrual) or when it is probable, based on current information and events, that the Bank will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreement.

Loans that are on nonaccrual status and that are considered collateral-dependent are measured for impairment based on the fair value of the underlying property less estimated selling costs. Loans are considered collateral-dependent if repayment is expected to be provided solely by the sale of the underlying property, that is, if it is considered likely that the borrower will default and there is no credit enhancement to offset losses under the master commitment, or the collectability or availability of credit enhancement is deemed to be uncertain. Collateral-dependent loans are impaired if the fair value of the underlying collateral less estimated selling costs is insufficient to recover the unpaid principal balance on the loan. Interest income on impaired loans is recognized in the same manner as interest income on nonaccrual loans, as noted below.

The Bank places a mortgage loan on nonaccrual status when the collection of the contractual principal or interest from the participating financial institution is reported 90 days or more past due or when the loan is in foreclosure. When a mortgage loan is placed on nonaccrual status, accrued but uncollected interest is reversed against interest income. The Bank records cash payments received on nonaccrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful.

The following table presents information on delinquent mortgage loans as of December 31, 2017 and 2016.

	2017			2016
	Recorded Investment(1)			Recorded Investment(1)
30 – 59 days delinquent	$	8		$	7
60 – 89 days delinquent	2			3
90 days or more delinquent	12			15
Total past due	22			25
Total current loans	2,065			805
Total mortgage loans	$	2,087		$	830
In process of foreclosure, included above(2)	$	3		$	5
Nonaccrual loans	$	12		$	15
Loans past due 90 days or more and still accruing interest	$	—		$	—
Serious delinquencies as a percentage of total mortgage loans outstanding(3)	0.59		%	1.79		%

(1) The recorded investment in a loan is the unpaid principal balance of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs. The recorded investment is not net of any valuation allowance.

(2) Includes loans for which the servicer has reported a decision to foreclose or to pursue a similar alternative, such as deed-in-lieu. Loans in process of foreclosure are included in past due or current loans depending on their delinquency status.

(3) Represents loans that are 90 days or more past due or in the process of foreclosure as a percentage of the recorded investment of total mortgage loans outstanding.

Mortgage Loans Evaluated at the Individual Master Commitment Level – The credit risk analysis of all conventional MPF loans is performed at the individual master commitment level to determine the credit enhancements available to recover losses on MPF loans under each individual master commitment.

Individually Evaluated Mortgage Loans – Certain conventional mortgage loans, primarily impaired mortgage loans that are considered collateral-dependent, may be specifically identified for purposes of calculating the allowance for credit losses. The estimated credit losses on impaired collateral-dependent loans may be separately determined because sufficient information exists to make a reasonable estimate of the inherent loss on those loans on an individual loan basis. The Bank estimates the fair value of collateral using real estate broker price opinions or automated valuation models (AVMs) based on property characteristics as well as recent market sales and current listings. The resulting incurred loss, if any, is equal to the difference between the carrying value of the loan and the estimated fair value of the collateral less estimated selling costs.

Collectively Evaluated Mortgage Loans – The credit risk analysis of conventional loans collectively evaluated for impairment considers loan pool-specific attribute data, applies estimated loss severities, and considers the associated credit enhancements to determine the Bank's best estimate of probable incurred losses. The analysis includes estimating projected cash flows that the Bank is likely to collect based on an assessment of all available information, including prepayment speeds, default rates, and loss severity for the mortgage loans based on underlying loan-level borrower and loan characteristics; expected housing price changes; and interest rate assumptions. In performing a detailed cash flow analysis, the Bank develops its best estimate of the cash flows expected to be collected using a third-party model to project prepayments, default rates, and loss severities based on borrower characteristics and the particular attributes of the mortgage loans, in conjunction with assumptions related primarily to future changes in housing prices and interest rates. The assumptions used as inputs to the model, including the forecast of future housing price changes, are consistent with assumptions used for the Bank's evaluation of its PLRMBS for OTTI.

The amounts of charge-offs and recoveries of allowance for credit losses on the mortgage loan portfolio were de minimis during the years ended December 31, 2017 and 2016. Net charge-offs of allowance for credit losses on the mortgage loan portfolio were $2 during the year ended December 31, 2015.

The allowance for credit losses and recorded investment by impairment methodology for individually and collectively evaluated impaired loans are as follows:

(In millions)	2017		2016
Allowance for credit losses, end of the period:
Individually evaluated for impairment	$	—	$	—
Collectively evaluated for impairment	—		—
Total allowance for credit losses	$	—	$	—
Recorded investment, end of the period:
Individually evaluated for impairment	$	9	$	12
Collectively evaluated for impairment	2,078		818
Total recorded investment	$	2,087	$	830

The recorded investment, unpaid principal balance, and related allowance of impaired loans individually evaluated for impairment are as follows:

	2017						2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance	$	9	$	9	$	—	$	12	$	12	$	—
With an allowance	—		—		—		—		—		—
Total	$	9	$	9	$	—	$	12	$	12	$	—

The average recorded investment on impaired loans individually evaluated for impairment is as follows:

	2017		2016
With no related allowance	$	10	$	12
With an allowance	—		—
Total	$	10	$	12

The Bank and any participating financial institution share in the credit risk of the loans sold by that institution as specified in a master agreement. Loans purchased under the MPF Program generally had a credit risk exposure at the time of purchase that, as determined by the MPF Program methodology, would be expected from an equivalent investment rated AA if purchased prior to April 2017, or rated BBB if purchased since April 2017, taking into consideration the credit risk sharing structure mandated by the Finance Agency’s acquired member assets (AMA) regulation. The MPF Program structures potential credit losses on conventional MPF loans into layers with respect to each pool of loans purchased by the Bank under a single master commitment, as follows:

1. The first layer of protection against loss is the liquidation value of the real property securing the loan.

2. The next layer of protection comes from the primary mortgage insurance that is required for loans with a loan-to-value ratio greater than 80%, if still in place.

3. Losses that exceed the liquidation value of the real property and any primary mortgage insurance, up to an agreed-upon amount called the first loss account for each master commitment, are incurred by the Bank.

4. Losses in excess of the first loss account for each master commitment, up to an agreed-upon amount called the credit enhancement amount, are covered by the participating financial institution’s credit enhancement obligation at the time losses are incurred.

5. Losses in excess of the first loss account and the participating financial institution’s remaining credit enhancement for the master commitment, if any, are incurred by the Bank.

The Bank calculates its estimated allowance for credit losses on mortgage loans acquired under the MPF Original and MPF Plus products as described below. Effective January 1, 2015, the Bank implemented the accounting requirements of regulatory Advisory Bulletin 2012-02. As a result, for any mortgage loans that are more than 180 days past due and that have any outstanding balance in excess of the fair value of the property, less cost to sell, this excess is charged off as a loss by the end of the month in which the applicable time period elapses. Likewise, when a borrower is in bankruptcy, loans are written down to the fair value of the collateral, less cost to sell, in general within 60 days of receipt of the notification of filing from the bankruptcy court, unless it can be clearly demonstrated and documented that repayment is likely to occur. As a result of these charge-offs, corresponding Allowance for Credit Losses on MPF Loans, which had previously provided for most of these expected losses, was reduced accordingly.

Allowance for Credit Losses on MPF Loans –The Bank evaluates the allowance for credit losses on MPF mortgage loans based on two components. The first component applies to each individual loan that is specifically identified as impaired. The Bank evaluates the exposure on these loans by considering the first layer of loss protection (the liquidation value of the real property securing the loan) and the availability and collectability of credit enhancements under the terms of each master commitment and records a provision for credit losses. For this component, the Bank established a de minimis allowance for credit losses for MPF Original and MPF Plus loans as of December 31, 2017 and 2016.

The second component applies to loans that are not specifically identified as impaired and is based on the Bank’s estimate of probable credit losses on those loans as of the financial statement date. The Bank evaluates the credit loss exposure on a loan pool basis considering various observable data, such as delinquency statistics, past performance, current performance, loan portfolio characteristics, collateral valuations, industry data, and prevailing economic conditions. The Bank also considers the availability and collectability of credit enhancements from participating financial institutions or from mortgage insurers under the terms of each master commitment. For this component, the Bank established an allowance for credit losses for MPF Original and MPF Plus loans totaling de minimis amounts as of December 31, 2017 and 2016.

Troubled Debt Restructurings –Troubled debt restructuring (TDR) is considered to have occurred when a concession is granted to the debtor for economic or legal reasons related to the debtor’s financial difficulties and that concession would not have been considered otherwise. An MPF loan considered a TDR is individually evaluated for impairment when determining its related allowance for credit losses. Credit loss is measured by factoring in expected cash flow shortfalls incurred as of the reporting date as well as the economic loss attributable to delaying the original contractual principal and interest due dates, if applicable.

The recorded investment of the Bank's nonperforming MPFloans classified as TDRs totaled $3 as of December 31, 2017, and $3 as of December 31, 2016. During 2017 and 2016, the difference between the pre- and post-modification recorded investment in TDRs that occurred during the year was de minimis. None of the MPF loans classified as TDRs within the previous 12 months experienced a payment default.

Term Federal Funds Sold. The Bank invests in Federal funds sold with counterparties that are considered by the Bank to be of investment quality, and these investments are evaluated for purposes of an allowance for credit losses only if the investment is not paid when due. All investments in Federal funds sold as of December 31, 2017 and 2016, were repaid or are expected to be repaid according to the contractual terms.

XML

Deposits

12 Months Ended

Dec. 31, 2017

Deposits [Abstract]

Deposits

Deposits

The Bank maintains demand deposit accounts that are directly related to the extension of credit to members and offers short-term deposit programs to members and qualifying nonmembers. In addition, a member that services mortgage loans may deposit in the Bank funds collected in connection with the mortgage loans, pending disbursement of these funds to the owners of the mortgage loans. The Bank classifies these types of deposits as non-interest-bearing deposits.

Deposits as of December 31, 2017 and 2016, were as follows:

	2017		2016
Interest-bearing deposits:
Demand and overnight	$	263	$	167
Total interest-bearing deposits	263		167
Non-interest-bearing deposits	18		2
Total	$	281	$	169

Interest Rate Payment Terms. Deposits classified as demand, overnight, and other pay interest based on a daily interest rate. Term deposits pay interest based on a fixed rate determined at the issuance of the deposit. Interest rate payment terms for deposits at December 31, 2017 and 2016, are detailed in the following table:

	2017				2016
	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate
Interest-bearing deposit – Adjustable rate	$	263	1.10	%	$	167	0.01	%
Non-interest-bearing deposits	18				2
Total	$	281			$	169

XML

Consolidated Obligations

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Consolidated Obligations

Consolidated Obligations

Consolidated obligations, consisting of consolidated obligation bonds and discount notes, are jointly issued by the FHLBanks through the Office of Finance, which serves as the FHLBanks’ agent. As provided by the FHLBank Act or by regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. For a discussion of the joint and several liability regulation, see Note 20 – Commitments and Contingencies. In connection with each issuance of consolidated obligations, each FHLBank specifies the type, term, and amount of debt it requests to have issued on its behalf. The Office of Finance tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks and records as a liability its specific portion of the consolidated obligations issued and is the primary obligor for that portion of the consolidated obligations issued. The Finance Agency and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office of Finance.

Consolidated obligation bonds may be issued to raise short-, intermediate-, and long-term funds for the FHLBanks. The maturity of consolidated obligation bonds generally ranges from 6 months to 15 years, but the maturity is not subject to any statutory or regulatory limits. Consolidated obligation discount notes are primarily used to raise short-term funds. These notes are issued at less than their face amount and redeemed at par value when they mature.

The par value of the outstanding consolidated obligations of the FHLBanks was $1,034,260 at December 31, 2017, and $989,311 at December 31, 2016. Regulations require the FHLBanks to maintain, for the benefit of investors in consolidated obligations, in the aggregate, unpledged qualifying assets in an amount equal to the consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; assets with an assessment or credit rating at least equivalent to the current assessment or credit rating of the consolidated obligations; obligations, participations, mortgages, or other securities of or issued by the United States or an agency of the United States; and such securities as fiduciary and trust funds may invest in under the laws of the state in which the FHLBank is located. Any assets subject to a lien or pledge for the benefit of holders of any issue of consolidated obligations are treated as if they were free from lien or pledge for the purposes of compliance with these regulations. At December 31, 2017, the Bank had qualifying assets totaling $123,177, and the Bank's participation in consolidated obligations outstanding was $115,503.

General Terms. Consolidated obligations are generally issued with either fixed rate payment terms or adjustable rate payment terms. In addition, to meet the specific needs of certain investors, fixed rate and adjustable rate consolidated obligation bonds may contain certain embedded features, such as call options and complex coupon payment terms. In general, when such consolidated obligation bonds are issued for which the Bank is the primary obligor, the Bank simultaneously enters into interest rate exchange agreements containing offsetting features to, in effect, convert the terms of the bond to the terms of a simple adjustable rate bond.

In addition to having fixed rate or simple adjustable rate coupon payment terms, consolidated obligations may include:

• Callable bonds, which the Bank may call in whole or in part at its option on predetermined call dates according to the terms of the bond offerings;

• Step-up callable bonds, which pay interest at increasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-up dates according to the terms of the bond offerings;

• Step-down callable bonds, which pay interest at decreasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-down dates according to the terms of the bond offerings;

• Conversion callable bonds, which have coupon rates that convert from fixed to adjustable or from adjustable to fixed on predetermined dates and can generally be called at the Bank’s option on predetermined call dates according to the terms of the bond offerings;

• Range bonds, which have coupons at fixed or variable rates and pay the fixed or variable rate as long as a reference rate is within an established range, but generally pay zero percent or a minimal interest rate if the specified reference rate is outside the established range.

Redemption Terms. The following is a summary of the Bank’s participation in consolidated obligation bonds at December 31, 2017 and 2016.

	2017					2016
Contractual Maturity	Amount Outstanding			Weighted Average Interest Rate		Amount Outstanding			Weighted Average Interest Rate
Within 1 year	$	69,734		1.33	%	$	33,879		0.82	%
After 1 year through 2 years	6,461			1.42		10,597			0.99
After 2 years through 3 years	2,785			1.74		1,318			1.32
After 3 years through 4 years	2,058			1.78		1,055			1.84
After 4 years through 5 years	1,994			2.15		1,350			1.59
After 5 years	2,076			2.80		2,021			2.42
Total par value	85,108			1.41	%	50,220			0.98	%
Unamortized premiums	9					15
Unamortized discounts	(11		)			(9		)
Valuation adjustments for hedging activities	(37		)			6
Fair value option valuation adjustments	(6		)			(8		)
Total	$	85,063				$	50,224

The Bank’s participation in consolidated obligation bonds outstanding includes callable bonds of $9,612 at December 31, 2017, and $4,670 at December 31, 2016. When a callable bond for which the Bank is the primary obligor is issued, the Bank may simultaneously enter into an interest rate swap (in which the Bank pays a variable rate and receives a fixed rate) with a call feature that mirrors the call option embedded in the bond (a sold callable swap). The Bank had notional amounts of interest rate exchange agreements hedging callable bonds of $6,406 at December 31, 2017, and $2,125 at December 31, 2016. The combined sold callable swaps and callable bonds enable the Bank to meet its funding needs at costs not otherwise directly attainable solely through the issuance of non-callable debt, while effectively converting the Bank’s net payment to an adjustable rate.

The Bank’s participation in consolidated obligation bonds at December 31, 2017 and 2016, was as follows:  

	2017		2016
Par value of consolidated obligation bonds:
Non-callable	$	75,496	$	45,550
Callable	9,612		4,670
Total par value	$	85,108	$	50,220

The following is a summary of the Bank’s participation in consolidated obligation bonds outstanding at December 31, 2017 and 2016, by the earlier of the year of contractual maturity or next call date.

Earlier of Contractual Maturity or Next Call Date	2017		2016
Within 1 year	$	78,606	$	38,099
After 1 year through 2 years	5,326		10,747
After 2 years through 3 years	935		743
After 3 years through 4 years	85		455
After 4 years through 5 years	55		85
After 5 years	101		91
Total par value	$	85,108	$	50,220

Consolidated obligation discount notes are consolidated obligations issued to raise short-term funds. These notes are issued at less than their face value and redeemed at par value when they mature. The Bank’s participation in consolidated obligation discount notes, all of which are due within one year, was as follows:

	2017					2016
	Amount Outstanding			Weighted Average Interest Rate (1)		Amount Outstanding			Weighted Average Interest Rate (1)
Par value	$	30,494		1.24	%	$	33,529		0.46	%
Unamortized discounts	(54		)			(23		)
Total	$	30,440				$	33,506

(1) Represents yield to maturity excluding concession fees.

Interest Rate Payment Terms. Interest rate payment terms for consolidated obligations at December 31, 2017 and 2016, are detailed in the following table.

	2017		2016
Par value of consolidated obligations:
Bonds:
Fixed rate	$	17,967	$	15,960
Adjustable rate	66,276		33,435
Step-up	565		515
Step-down	200		200
Fixed rate that converts to adjustable rate	—		10
Range bonds	100		100
Total bonds, par value	85,108		50,220
Discount notes, par value	30,494		33,529
Total consolidated obligations, par value	$	115,602	$	83,749

Consolidated obligation bonds may be structured to meet the Bank's or the investors' needs. Common structures include fixed rate bonds with or without call options and adjustable rate bonds with or without embedded options. In general, when bonds are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that offset the terms and embedded options, if any, of the consolidated obligation bond. This combination of the consolidated obligation bond and the interest rate exchange agreement effectively creates an adjustable rate bond. The cost of this funding combination is generally lower than the cost that would be available through the issuance of an adjustable rate bond alone. These transactions generally receive fair value hedge accounting treatment. In addition, when certain consolidated obligation bonds for which the Bank has elected the fair value option are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that economically offset the terms of the consolidated obligation bond. However, this type of hedge is treated as an economic hedge because these combinations generally do not meet the requirements for fair value hedge accounting treatment. For more information, see Note 18 – Derivatives and Hedging Activities and Note 19 – Fair Value.

The Bank did not have any bonds with embedded features that met the requirements to separate the embedded feature from the host contract and designate the embedded feature as a stand-alone derivative at December 31, 2017 or 2016. The Bank has generally elected to account for certain bonds with embedded features under the fair value option, and these bonds are carried at fair value on the Statements of Condition. For more information, see Note 19 – Fair Value.

XML

Affordable Housing Program

12 Months Ended

Dec. 31, 2017

Federal Home Loan Banks [Abstract]

Affordable Housing Program [Text Block]

Affordable Housing Program

The FHLBank Act requires each FHLBank to establish an Affordable Housing Program (AHP). Each FHLBank provides subsidies to members, which use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Subsidies may be in the form of direct grants or below-market interest rate advances. Annually, the FHLBanks must set aside for their AHPs, in the aggregate, the greater of $100 or 10% of the current year's net earnings (income before interest expense related to dividends paid on mandatorily redeemable capital stock and the assessment for AHP).

The Bank accrues its AHP assessment monthly based on its net earnings. If the Bank experienced a net loss during a quarter but still had net earnings for the year, the Bank's obligation to the AHP would be calculated based on the Bank's year-to-date net earnings. If the Bank had net earnings in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. If the Bank experienced a net loss for a full year, the amount of the AHP liability would be equal to zero, since each FHLBank's required annual AHP contribution is limited to its annual net earnings. However, if the result of the aggregate 10% calculation is less than $100 for the FHLBanks combined, then the FHLBank Act requires that each FHLBank contribute such prorated sums as may be required to ensure that the aggregate contribution of the FHLBanks equals $100. The proration would be made on the basis of an FHLBank's income in relation to the income of all the FHLBanks for the previous year. There was no AHP shortfall, as described above, in 2017, 2016, or 2015. If an FHLBank finds that its required AHP assessments are contributing to the financial instability of that FHLBank, it may apply to the Finance Agency for a temporary suspension of its contributions. The Bank did not make such an application in 2017, 2016, or 2015.

The Bank's total AHP assessments equaled $45, $86, and $78 during 2017, 2016, and 2015, respectively. These amounts were charged to earnings each year and recognized as a liability. As subsidies are disbursed, the AHP liability is reduced. The AHP liability was as follows:

	2017			2016			2015
Balance, beginning of the period	$	205		$	172		$	147
AHP assessments	45			86			78
AHP voluntary contributions	7			—			—
AHP grant payments	(53		)	(53		)	(53		)
Balance, end of the period	$	204		$	205		$	172

All subsidies were distributed in the form of direct grants in 2017, 2016, and 2015.

XML

Accumulated Other Comprehensive Income (Loss)

12 Months Ended

Dec. 31, 2017

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Income/(Loss)

Accumulated Other Comprehensive Income/(Loss)

The following table summarizes the changes in AOCI for the years ended December 31, 2017, 2016, and 2015:

	Net Non-Credit-Related OTTI Loss on AFS Securities			Net Non-Credit-Related OTTI Loss on HTM Securities			Pension and Postretirement Benefits			Total AOCI
Balance, December 31, 2014	$	88		$	(20	)	$	(12	)	56
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits							(2		)	(2		)
Non-credit-related OTTI loss	(18		)	(1		)				(19		)
Non-credit-related OTTI loss transferred	(1		)	1						—
Net change in fair value	(29		)							(29		)
Accretion of non-credit-related OTTI loss				6						6
Reclassification from other comprehensive income/(loss) to net income/(loss):
Non-credit-related OTTI to credit-related OTTI	3			—						3
Net current period other comprehensive income/(loss)	(45		)	6			(2		)	(41		)
Balance, December 31, 2015	$	43		$	(14	)	$	(14	)	15
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits							(2		)	(2		)
Non-credit-related OTTI loss	(17		)	—						(17		)
Net change in fair value	103									103
Accretion of non-credit-related OTTI loss				5						5
Reclassification from other comprehensive income/(loss) to net income/(loss):
Non-credit-related OTTI to credit-related OTTI	7			—						7
Net current period other comprehensive income/(loss)	93			5			(2		)	96
Balance, December 31, 2016	$	136		$	(9	)	$	(16	)	$	111
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits							3			3
Non-credit-related OTTI loss	(4		)	—						(4		)
Net change in fair value	195									195
Accretion of non-credit-related OTTI loss				3						3
Reclassification from other comprehensive income/(loss) to net income/(loss):
Non-credit-related OTTI to credit-related OTTI	10			—						10
Net current period other comprehensive income/(loss)	201			3			3			207
Balance, December 31, 2017	$	337		$	(6	)	$	(13	)	$	318

XML

Capital

12 Months Ended

Dec. 31, 2017

Capital [Abstract]

Capital

Capital

Capital Requirements. The Bank issues only one class of capital stock, Class B stock, with a par value of one hundred dollars per share, which may be redeemed (subject to certain conditions) upon five years' notice by the member to the Bank. In addition, at its discretion, under certain conditions, the Bank may repurchase excess capital stock at any time. (See “Excess Capital Stock” below for more information.) The capital stock may be issued, redeemed, and repurchased only at its stated par value, subject to certain statutory and regulatory requirements. The Bank may only redeem or repurchase capital stock from a shareholder if, following the redemption or repurchase, the shareholder will continue to meet its minimum capital stock requirement and the Bank will continue to meet its regulatory requirements for total capital, leverage capital, and risk-based capital.

Under the Housing Act, the Director of the Finance Agency is responsible for setting the risk-based capital standards for the FHLBanks. The FHLBank Act and regulations governing the operations of the FHLBanks require that the Bank’s minimum capital stock requirement for shareholders must be sufficient to enable the Bank to meet its regulatory requirements for total capital, leverage capital, and risk-based capital. The Bank must maintain: (i) total regulatory capital in an amount equal to at least 4% of its total assets, (ii) leverage capital in an amount equal to at least 5% of its total assets, and (iii) permanent capital in an amount that is greater than or equal to its risk-based capital requirement. Because the Bank issues only Class B stock, regulatory capital and permanent capital for the Bank are both composed of retained earnings and Class B stock, including mandatorily redeemable capital stock (which is classified as a liability for financial reporting purposes). Regulatory capital and permanent capital do not include AOCI. Leverage capital is defined as the sum of permanent capital, weighted by a 1.5 multiplier, plus non-permanent capital.

The risk-based capital requirement is equal to the sum of the Bank’s credit risk, market risk, and operations risk capital requirements, all of which are calculated in accordance with the rules and regulations of the Finance Agency. The Finance Agency may require an FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined.

As of December 31, 2017 and 2016, the Bank was in compliance with these capital rules and requirements as shown in the following table.

	2017						2016
	Required			Actual			Required			Actual
Risk-based capital	$	2,023		$	6,797		$	2,241		$	5,883
Total regulatory capital	$	4,935		$	6,797		$	3,678		$	5,883
Total regulatory capital ratio	4.00		%	5.51		%	4.00		%	6.40		%
Leverage capital	$	6,169		$	10,195		$	4,597		$	8,825
Leverage ratio	5.00		%	8.26		%	5.00		%	9.60		%

The Bank's capital plan requires each member to own capital stock in an amount equal to the greater of its membership capital stock requirement or its activity-based capital stock requirement. The Bank may adjust these requirements from time to time within limits established in the capital plan. Any changes to the capital plan must be approved by the Bank's Board of Directors and the Finance Agency.

A member's membership capital stock requirement is 1.0% of its membership asset value. The membership capital stock requirement for a member is capped at $15. The Bank may adjust the membership capital stock requirement for all members within a range of 0.5% to 1.5% of a member's membership asset value and may adjust the cap for all members within an authorized range of $10 to $50. A member's membership asset value is determined by multiplying the amount of the member's membership assets by the applicable membership asset factors. Membership assets are generally defined as assets (other than Bank capital stock) of a type that could qualify as collateral to secure a member's indebtedness to the Bank under applicable law, whether or not the assets are pledged to the Bank or accepted by the Bank as eligible collateral. The membership asset factors were initially based on the typical borrowing capacity percentages generally assigned by the Bank to the same types of assets when pledged to the Bank (although the factors may differ from the actual borrowing capacities, if any, assigned to particular assets pledged by a specific member at any point in time).

A member's activity-based capital stock requirement is the sum of 2.7% of the member's outstanding advances plus 0.0% of any portion of any mortgage loan purchased and held by the Bank. The Bank may adjust the activity-based capital stock requirement for all members within a range of 2.0% to 5.0% of the member's outstanding advances and a range of 0.0% to 5.0% of any portion of any mortgage loan purchased and held by the Bank.

Any member may withdraw from membership and, subject to certain statutory and regulatory restrictions, have its capital stock redeemed after giving the required notice. Members that withdraw from membership may not reapply for membership for five years, in accordance with Finance Agency rules.

Mandatorily Redeemable Capital Stock. The Bank reclassifies the capital stock subject to redemption from capital to a liability after a member provides the Bank with a written notice of redemption; gives notice of intention to withdraw from membership; or attains nonmember status by merger or acquisition, charter termination, or other involuntary membership termination; or after a receiver or other liquidating agent for a member transfers the member's Bank capital stock to a nonmember entity, resulting in the member's shares then meeting the definition of a mandatorily redeemable financial instrument. Shares meeting this definition are reclassified to a liability at fair value. Dividends declared on shares classified as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments (by repurchase or redemption of the shares) is reflected as a financing cash outflow in the Statements of Cash Flows once settled.

The Bank has a cooperative ownership structure under which members, former members, and certain other nonmembers own the Bank's capital stock. Former members and certain other nonmembers are required to maintain their investment in the Bank's capital stock until their outstanding transactions are paid off or until their capital stock is redeemed following the relevant five-year redemption period for capital stock or is repurchased by the Bank, in accordance with the Bank's capital requirements. Capital stock cannot be issued, repurchased, redeemed, or transferred except between the Bank and its members (or their affiliates and successors) at the capital stock's par value of one hundred dollars per share. If a member cancels its written notice of redemption or notice of withdrawal or if the Bank allows the transfer of mandatorily redeemable capital stock to a member, the Bank reclassifies mandatorily redeemable capital stock from a liability to capital. After the reclassification, dividends on the capital stock are no longer classified as interest expense.

The Bank will not redeem or repurchase capital stock required to meet the minimum capital stock requirement until five years after the member's membership is terminated or after the Bank receives notice of the member's withdrawal, and the Bank will redeem or repurchase only the amounts that are in excess of the capital stock required to support activity (advances and mortgage loans) that may remain outstanding after the five-year redemption period has expired. In both cases, the Bank will only redeem or repurchase capital stock if certain statutory and regulatory conditions are met. In accordance with the Bank's current practice, if activity-based capital stock becomes excess capital stock because an activity no longer remains outstanding, the Bank may repurchase the excess activity-based capital stock at its discretion, subject to certain statutory and regulatory conditions, on a scheduled quarterly basis.

The Bank had mandatorily redeemable capital stock totaling $309 outstanding to seven institutions at December 31, 2017, and $457 outstanding to six institutions at December 31, 2016. The change in mandatorily redeemable capital stock for the years ended December 31, 2017, 2016, and 2015, was as follows:

	2017			2016			2015
Balance at the beginning of the period	$	457		$	488		$	719
Reclassified from/(to) capital during the period(1)	2			56			415
Redemption of mandatorily redeemable capital stock	(75		)	(28		)	(53		)
Repurchase of excess mandatorily redeemable capital stock	(75		)	(59		)	(593		)
Balance at the end of the period	$	309		$	457		$	488

(1) The Bank reclassified $403 of capital stock to mandatorily redeemable capital stock (a liability) on September 1, 2015, as a result of the merger of JPMorgan B&T with an into JPMorgan Chase, a nonmember of the Bank.

Cash dividends on mandatorily redeemable capital stock were recorded as interest expense in the amount of $32, $60, and $65 for the years ended December 31, 2017, 2016, and 2015, respectively.

The following table presents mandatorily redeemable capital stock amounts by contractual redemption period at December 31, 2017 and 2016.

Contractual Redemption Period	2017		2016
After 2 years through 3 years	$	306	$	—
After 3 years through 4 years	—		379
Past contractual redemption date because of remaining activity(1)	3		78
Total	$	309	$	457

(1) Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because of outstanding activity.

A member may cancel its notice of redemption or notice of withdrawal from membership by providing written notice to the Bank prior to the end of the relevant five-year redemption period or the membership termination date. If the Bank receives the notice of cancellation within 30 months following the notice of redemption or notice of withdrawal, the member is charged a fee equal to fifty cents multiplied by the number of shares of capital stock affected. If the Bank receives the notice of cancellation more than 30 months following the notice of redemption or notice of withdrawal (or if the Bank does not redeem the member's capital stock because following the redemption the member would fail to meet its minimum capital stock requirement), the member is charged a fee equal to one dollar multiplied by the number of shares of capital stock affected. In certain cases the Board of Directors may waive a cancellation fee for bona fide business purposes.

The Bank's capital stock is considered putable by the shareholder. There are significant statutory and regulatory restrictions on the Bank's obligation or ability to redeem outstanding capital stock, which include the following:

• The Bank may not redeem any capital stock if, following the redemption, the Bank would fail to meet its minimum capital requirements for total capital, leverage capital, and risk-based capital. All of the Bank's capital stock immediately becomes nonredeemable if the Bank fails to meet its minimum capital requirements.

• The Bank may not be able to redeem any capital stock if either its Board of Directors or the Finance Agency determines that it has incurred or is likely to incur losses resulting in or expected to result in a charge against capital that would have any of the following effects: cause the Bank not to comply with its regulatory capital requirements, result in negative retained earnings, or otherwise create an unsafe and unsound condition at the Bank.

• In addition to being able to prohibit capital stock redemptions, the Bank's Board of Directors has a right to call for additional capital stock purchases by its members, as a condition of continuing membership, as needed for the Bank to satisfy its statutory and regulatory capital requirements.

• If, during the period between receipt of a capital stock redemption notice and the actual redemption (a period that could last indefinitely), the Bank becomes insolvent and is either liquidated or merged with another FHLBank, the redemption value of the capital stock will be established either through the liquidation or the merger process. If the Bank is liquidated, after satisfaction of the Bank's obligations to creditors and to the extent funds are then available, each shareholder will be entitled to receive the par value of its capital stock as well as any retained earnings in an amount proportional to the shareholder's share of the total shares of capital stock, subject to any limitations that may be imposed by the Finance Agency. In the event of a merger or consolidation, the Board of Directors will determine the rights and preferences of the Bank's shareholders, subject to any terms and conditions imposed by the Finance Agency.

• The Bank may not redeem any capital stock if the principal or interest due on any consolidated obligations issued by the Office of Finance has not been paid in full.

• The Bank may not redeem any capital stock if the Bank fails to provide the Finance Agency with the quarterly certification required by Finance Agency rules prior to declaring or paying dividends for a quarter.

• The Bank may not redeem any capital stock if the Bank is unable to provide the required quarterly certification, projects that it will fail to comply with statutory or regulatory liquidity requirements or will be unable to fully meet all of its obligations on a timely basis, actually fails to satisfy these requirements or obligations, or negotiates to enter or enters into an agreement with another FHLBank to obtain financial assistance to meet its current obligations.

Mandatorily redeemable capital stock is considered capital for determining the Bank's compliance with its regulatory capital requirements. Based on Finance Agency interpretation, the classification of certain shares of the Bank's capital stock as mandatorily redeemable does not affect the definition of total capital for purposes of: determining the Bank's compliance with its regulatory capital requirements, calculating its mortgage-backed securities investment authority (300% of total capital), calculating its unsecured credit exposure to other GSEs (limited to 100% of total capital), or calculating its unsecured credit limits to other counterparties (various percentages of total capital depending on the rating of the counterparty).

Excess Stock Repurchase, Retained Earnings, and Dividend Framework. By Finance Agency regulation, dividends may be paid only out of current net earnings or previously retained earnings. As required by the Finance Agency, the Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) summarizes the Bank’s capital management principles and objectives, as well as its policies and practices, with respect to retained earnings, dividend payments, and the repurchase of excess capital stock.The Bank may be restricted from paying dividends if the Bank is not in compliance with any of its minimum capital requirements or if payment would cause the Bank to fail to meet any of its minimum capital requirements. In addition, the Bank may not pay dividends if any principal or interest due on any consolidated obligations has not been paid in full or is not expected to be paid in full, or, under certain circumstances, if the Bank fails to satisfy certain liquidity requirements under applicable Finance Agency regulations.

The Bank’s Board of Directors reviews the Framework at least annually and may amend the Framework from time to time. In January 2017, the Framework was amended and approved by the Bank’s Board of Directors to include a dividend philosophy to endeavor to pay a quarterly dividend at an annualized rate between 5% and 7%, which was intended to be considered by the Bank’s Board of Directors beginning with the Bank’s second quarter 2017 dividend declaration. The decision to declare any dividend and the dividend rate are at the discretion of the Bank’s Board of Directors, which may choose to follow the dividend philosophy as guidance in the dividend declaration.

The Bank’s Risk Management Policy limits the payment of dividends if the ratio of the Bank’s estimated market value of total capital to par value of capital stock falls below certain levels. If this ratio at the end of any quarter is less than 100% but greater than or equal to 70%, any dividend would be limited to an annualized rate no greater than the daily average of the three-month LIBOR for the applicable quarter (subject to certain conditions), and if this ratio is less than 70%, the Bank would be restricted from paying a dividend. The ratio of the Bank’s estimated market value of total capital to par value of capital stock was 207% as of December 31, 2017.

In addition, the Bank monitors the condition of its PLRMBS portfolio, the ratio of the Bank’s estimated market value of total capital to par value of capital stock, its overall financial performance and retained earnings, developments in the mortgage and credit markets, and other relevant information as the basis for determining the payment of dividends and the repurchase of excess capital stock each quarter.

The Bank’s Framework assesses the level and adequacy of retained earnings and establishes amounts to be retained in restricted retained earnings, which are not made available in the current dividend period, and maintains an amount of total retained earnings at least equal to its required retained earnings as described in the Framework. Prior to July 2017, the Bank’s Framework had three categories of restricted retained earnings: Valuation Adjustments, Other (which represented a targeted amount), and the Joint Capital Enhancement (JCE Agreement). Under the Framework, the Bank’s required amount of restricted retained earnings was determined using the Bank’s retained earnings methodology. As determined using the Bank’s methodology, from July 2015 to January 2017, the Bank’s restricted retained earnings requirement was $2,000, and from January 2017 to July 2017, the Bank’s restricted retained earnings requirement was $2,300.

In July 2017, the Bank’s Board of Directors approved the transfer of all amounts classified as restricted retained earnings, other than the amounts related to the JCE Agreement, to unrestricted retained earnings. As a conforming change related to the transfer, the Bank’s Board of Directors amended the Framework to eliminate two of the categories of restricted retained earnings (Valuation Adjustments and Other) and approved revisions to the Bank’s retained earnings methodology to provide for a required level of total retained earnings of $2,300 for loss protection, capital compliance, and business growth. In January 2018, the methodology was further revised to provide a required level of total retained earnings of $2,500. The Bank satisfies its retained earnings requirement with both restricted retained earnings (i.e., amounts related to the JCE Agreement) and unrestricted retained earnings.

The Bank’s retained earnings requirement may be changed at any time. The Board of Directors periodically reviews the retained earnings methodology and analysis to determine whether any adjustments are appropriate.

The JCE Agreement is intended to enhance the capital position of each FHLBank. In accordance with the JCE Agreement, each FHLBank is required to allocate 20% of its net income each quarter to a separate restricted retained earnings account until the balance of the account equals at least 1% of that FHLBank's average balance of outstanding consolidated obligations for the previous quarter. Under the JCE Agreement, these restricted retained earnings will not be available to pay dividends.

The following tables summarize the activity related to retained earnings for the years ended December 31, 2017 and 2016:

				Restricted Retained Earnings Related to:
	Unrestricted Retained Earnings			Valuation Adjustments			Other			Joint Capital Enhancement Agreement		Total Restricted Retained Earnings			Total Retained Earnings
Balance, December 31, 2015	$	610		$	10		$	1,650		$	358	$	2,018		$	2,628
Net income	562			8			—			142		150			712
Cash dividends on capital stock	(284		)												(284		)
Balance, December 31, 2016	$	888		$	18		$	1,650		$	500	$	2,168		$	3,056
Net income	198			3			100			75		178			376
Cash dividends on capital stock	(187		)												(187		)
Transfers from restricted retained earnings	1,771			(21		)	(1,750		)	—		(1,771		)	—
Balance, December 31, 2017	$	2,670		$	—		$	—		$	575	$	575		$	3,245

Dividend Payments – Finance Agency rules state that FHLBanks may declare and pay dividends only from previously retained earnings or current net earnings, and may not declare or pay dividends based on projected or anticipated earnings. There is no requirement that the Board of Directors declare and pay any dividend. A decision by the Board of Directors to declare or not declare a dividend is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks.

In addition, Finance Agency rules do not permit the Bank to pay dividends in the form of capital stock if its excess

capital stock exceeds 1% of its total assets. Excess capital stock is defined as the aggregate of the capital stock held by each shareholder in excess of its minimum capital stock requirement, as established by the Bank’s capital plan. As of December 31, 2017, the Bank’s excess capital stock totaled $493, or 0.40% of total assets.

In 2017, the Bank paid dividends at an annualized rate of 7.50%, totaling $219, including $187 in dividends on capital stock and $32 in dividends on mandatorily redeemable capital stock. In 2016, the Bank paid dividends at an annualized rate of 12.33%, totaling $344, including $284 in dividends on capital stock and $60 in dividends on mandatorily redeemable capital stock. The dividends paid in 2016 included four quarterly dividends and a special dividend in the amount of $100, including $83 on capital stock and $17 in dividends on mandatorily redeemable capital stock.

For the periods referenced above, the Bank paid dividends in cash. Dividends on capital stock are recognized as dividends on the Statements of Capital Accounts, and dividends on mandatorily redeemable capital stock are recognized as interest expense on the Statements of Income.

On February 21, 2018, the Bank’s Board of Directors declared a cash dividend on the capital stock outstanding during the fourth quarter of 2017 at an annualized rate of 7.00%, totaling $59, including $53 in dividends on capital stock and $6 in dividends on mandatorily redeemable capital stock. The Bank recorded the dividend on February 21, 2018. The Bank expects to pay the dividend on March 15, 2018. Dividends on mandatorily redeemable capital stock will be recognized as interest expense in the first quarter of 2018.

Excess Capital Stock – The Bank may repurchase some or all of a shareholder’s excess capital stock, including any excess mandatorily redeemable capital stock, at the Bank’s discretion, subject to certain statutory and regulatory requirements. The Bank must give the shareholder 15 days’ written notice; however, the shareholder may waive this notice period. The Bank may also repurchase all of a member’s excess capital stock at a member’s request, at the Bank’s discretion, subject to certain statutory and regulatory requirements. A shareholder’s excess capital stock is defined as any capital stock holdings in excess of the shareholder’s minimum capital stock requirement, as established by the Bank’s capital plan. The Bank repurchased $414 and $812 in excess capital stock during 2017 and 2016, respectively.

The Bank is required to redeem any mandatorily redeemable capital stock that is in excess of a former member’s minimum stock requirement on or after the expiration of the five-year redemption date. During 2017 and 2016, the Bank redeemed $75 and $28, respectively, in mandatorily redeemable capital stock, for which the five-year redemption period had expired, at its $100 par value. The stock was redeemed on the scheduled redemption dates or, for stock that was not excess stock on its scheduled redemption date because of outstanding activity with the Bank, on the first available repurchase date after the stock was no longer required to support outstanding activity with the Bank.

The Framework sets forth the Bank’s practice of repurchasing the surplus capital stock of all members and the excess capital stock of all nonmember shareholders on a regular quarterly basis, at the Bank’s discretion and subject to certain statutory and regulatory requirements and to the Bank’s Risk Management Policy and capital plan limitations. Surplus capital stock is defined as any stock holdings in excess of 115% of a member’s minimum stock requirement. In addition, at the Bank’s discretion, all of the excess stock held by a member may be repurchased upon request of a member, subject to the requirements and limitations mentioned above. In accordance with the Framework, each quarter Bank management evaluates and determines the amount of capital stock to be repurchased in that quarter, if any, giving consideration to certain capital metrics and capital management objectives and strategies, and subject to the requirements and limitations mentioned above. At least 15 calendar days before any repurchase, the Bank will notify shareholders of its intention to repurchase capital stock and of the scheduled repurchase date. On the scheduled repurchase date, the Bank will calculate the amount of stock to be repurchased to ensure that each member and nonmember shareholder will continue to meet its minimum stock requirement after the repurchase.

On February 21, 2018, the Bank announced that it plans to repurchase the surplus capital stock of all members and the excess capital stock of all nonmember shareholders on March 16, 2018.

Excess capital stock totaled $493 as of December 31, 2017, which included surplus capital stock of $317. Excess capital stock totaled $488 as of December 31, 2016, which included surplus capital stock of $325.

Concentration. The following table presents the concentration in capital stock held by institutions whose capital stock ownership represented 10% or more of the Bank’s outstanding capital stock, including mandatorily redeemable capital stock, as of December 31, 2017 or 2016.

	2017				2016
Name of Institution	Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding		Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding
Charles Schwab Bank	$	405	11	%	$	81	3	%
JPMorgan Chase Bank, National Association(1)	307		9		400		14
Subtotal	712		20		481		17
Others	2,840		80		2,346		83
Total	$	3,552	100	%	$	2,827	100	%

(1) The capital stock held by this nonmember institution is classified as mandatorily redeemable capital stock.

XML

Employee Retirement Plans and Incentive Compensation Plans

12 Months Ended

Dec. 31, 2017

Retirement Benefits [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

Employee Retirement Plans and Incentive Compensation Plans

Defined Benefit Plans

Qualified Defined Benefit Plan. The Bank provides retirement benefits through a Bank-sponsored Cash Balance Plan, a qualified defined benefit plan. The Cash Balance Plan is provided to all employees who have completed six months of Bank service. Under the plan, each eligible Bank employee accrues benefits annually equal to 6% of the employee's annual compensation, plus 6% interest on the benefits accrued to the employee through the prior yearend. The Cash Balance Plan is funded through a qualified trust established by the Bank.

Non-Qualified Defined Benefit Plans. The Bank sponsors the following non-qualified defined benefit retirement plans:

• Benefit Equalization Plan, a non-qualified retirement plan restoring benefits offered under the Cash Balance Plan that are limited by laws governing the plan. See below for further discussion of the defined contribution portion of the Benefit Equalization Plan.

• Supplemental Executive Retirement Plan (SERP),a non-qualified unfunded retirement benefit plan available to the Bank's eligible senior officers, which generally provides a service-linked supplemental cash balance annual contribution credit to SERP participants and an annual interest credit of 6% on the benefits accrued to the SERP participants through the prior yearend.

• Deferred Compensation Plan, a non-qualified retirement plan available to all eligible Bank officers, which provides make-up pension benefits that would have been earned under the Cash Balance Plan had the compensation not been deferred. The make-up benefits vest according to the corresponding provisions of the Cash Balance Plan. See below for further discussion of the defined contribution portion of the Deferred Compensation Plan.

Postretirement Health Benefit Plan. The Bank provides a postretirement health benefit plan to employees hired before January 1, 2003. The Bank's costs are capped at 1998 health care premium amounts. As a result, changes in health care cost trend rates will have no effect on the Bank's accumulated postretirement benefit obligation or service and interest costs.

The following table summarizes the changes in the benefit obligations, plan assets, and funded status of the defined benefit Cash Balance Plan, non-qualified defined benefit plans, and postretirement health benefit plan for the years ended December 31, 2017 and 2016.

	2017									2016
	Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan			Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan
Change in benefit obligation
Benefit obligation, beginning of the period	$	51		$	21		$	2		$	46		$	24		$	2
Service cost	3			2			—			3			1			—
Interest cost	2			1			—			1			1			—
Actuarial (gain)/loss	2			—			—			2			1			—
Settlements	—			(3		)	—			—			(6		)	—
Benefits paid	(1		)	—			—			(1		)	—			—
Benefit obligation, end of the period	57			21			2			51			21			2
Change in plan assets
Fair value of plan assets, beginning of the period	53			—			—			43			—			—
Actual return on plan assets	9			—			—			3			—			—
Settlements	—			(3		)	—			—			(6		)	—
Employer contributions	2			3			—			8			6			—
Benefits paid	(1		)	—			—			(1		)	—			—
Fair value of plan assets, end of the period	63			—			—			53			—			—
Funded status at the end of the period	$	6		$	(21	)	$	(2	)	$	2		$	(21	)	$	(2	)

Amounts recognized in the Statements of Condition at December 31, 2017 and 2016, consist of:

	2017								2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan			Cash Balance Plan		Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan
Other assets/(liabilities)	$	6	$	(21	)	$	(2	)	$	2	$	(21	)	$	(2	)

Amounts recognized in AOCI at December 31, 2017 and 2016, consist of:

	2017							2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan			Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Net loss/(gain)	$	11	$	3	$	(1	)	$	14	$	3	$	(1	)

The following table presents information for pension plans with assets in excess of benefit obligations and for pension plans with benefit obligations in excess of plan assets at December 31, 2017 and 2016.

	2017						2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Projected benefit obligation	$	57	$	21	$	2	$	51	$	21	$	2
Accumulated benefit obligation	56		20		2		50		21		2
Fair value of plan assets	63		—		—		53		—		—

Components of the net periodic benefit costs and other amounts recognized in other comprehensive income for the years ended December 31, 2017, 2016, and 2015, were as follows:

	2017							2016								2015
	Cash Balance Plan			Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan		Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan
Net periodic benefit cost/(income)
Service cost	$	3		$	2	$	—	$	3		$	1		$	—	$	3		$	1		$	—
Interest cost	2			1		—		1			1			—		2			1			—
Expected return on plan assets	(4		)	—		—		(3		)	—			—		(3		)	—			—
Amortization of net loss/(gain)	1			—		—		1			—			—		—			1			(1		)
Settlement loss	—			—		—		—			1			—		—			—			—
Net periodic benefit cost	2			3		—		2			3			—		2			3			(1		)
Other changes in plan assets and benefit obligations recognized in other comprehensive income
Net loss/(gain)	(2		)	—		—		3			1			—		3			(1		)	—
Amortization of net loss/(gain)	(1		)	—		—		(1		)	—			—		—			(1		)	1
Prior service cost recognized due to settlement loss	—			—		—		—			(1		)	—		—			—			—
Total recognized in other comprehensive income	(3		)	—		—		2			—			—		3			(2		)	1
Total recognized in net periodic benefit cost and other comprehensive income	$	(1	)	$	3	$	—	$	4		$	3		$	—	$	5		$	1		$	—

The amounts in AOCI expected to be recognized as components of net periodic benefit cost in 2018 are de minimis.

Weighted average assumptions used to determine the benefit obligations at December 31, 2017 and 2016, for the Cash Balance Plan, non-qualified defined benefit plans, and postretirement health benefit plan were as follows:

	2017						2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post- retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Discount rate	3.25	%	3.25	%	3.50	%	3.50	%	3.50	%	4.00	%
Rate of salary increase	3.00% through 2018, 4.00% thereafter		3.00% through 2018, 4.00% thereafter		—		3.00% through 2017 4.00% thereafter		3.00% through 2017 4.00% thereafter		—

Weighted average assumptions used to determine the net periodic benefit costs for the years ended December 31, 2017, 2016, and 2015, for the Cash Balance Plan, non-qualified defined benefit plans, and postretirement health benefit plan were as follows:

	2017						2016						2015
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Discount rate	3.50	%	3.50	%	4.00	%	3.75	%	3.75	%	4.00	%	3.50	%	3.50	%	3.75	%
Rate of salary increase	3.00% through 2017, 4.00% thereafter		3.00% through 2017, 4.00% thereafter		—		3.00% through 2016 4.00% thereafter		3.00% through 2016 4.00% thereafter		—		3.00% through 2015 4.00% thereafter		3.00% through 2015 4.00% thereafter		—
Expected return on plan assets	7.75	%	—		—		7.75	%	—		—		8.00	%	—		—

The Bank uses a discount rate to determine the present value of its future benefit obligations. The discount rate was determined based on the Citigroup Pension Discount Curve at the measurement date. The Citigroup Pension Discount Curve is a yield curve that reflects the market-observed yields for high-quality fixed income securities for each maturity. The projected benefit payments for each year from the plan are discounted using the spot rates on the yield curve to derive a single equivalent discount rate. The discount rate is reset annually on the measurement date.

The expected return on plan assets was determined based on: (i) the historical returns for each asset class, (ii) the expected future long-term returns for these asset classes, and (iii) the plan's target asset allocation.

The table below presents the fair values of the Cash Balance Plan's assets as of December 31, 2017 and 2016, by asset category. See Note 19 – Fair Value for further information regarding the three levels of fair value measurement.

	2017								2016
	Fair Value Measurement Using:								Fair Value Measurement Using:
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	1	$	—	$	—	$	1	$	1	$	—	$	—	$	1
Equity mutual funds	40		—		—		40		32		—		—		32
Fixed income mutual funds	18		—		—		18		16		—		—		16
Real estate mutual funds	2		—		—		2		2		—		—		2
Other mutual funds	2		—		—		2		2		—		—		2
Total	$	63	$	—	$	—	$	63	$	53	$	—	$	—	$	53

The Cash Balance Plan is administered by the Bank's Retirement Committee, which establishes the plan's Statement of Investment Policy and Objectives. The Retirement Committee has adopted a strategic asset allocation based on a stable distribution of assets among major asset classes. These asset classes include domestic large-, mid-, and small-capitalization equity investments; international equity investments; real return investments; and fixed income investments. The Retirement Committee has set the Cash Balance Plan's target allocation percentages for a mix of 60% equity, 10% real return, and 30% fixed income. The Retirement Committee reviews the performance of the Cash Balance Plan on a regular basis.

The Cash Balance Plan's weighted average asset allocation at December 31, 2017 and 2016, by asset category was as follows:

Asset Category	2017		2016
Cash and cash equivalents	2	%	3	%
Equity mutual funds	63		61
Fixed income mutual funds	28		29
Real estate mutual funds	4		4
Other mutual funds	3		3
Total	100	%	100	%

The Bank contributed $2 in 2017 and expects to contribute $3 in 2018 to the Cash Balance Plan. The Bank contributed $3 in 2017 and expects to contribute a de minimis amount in 2018 to the non-qualified defined benefit plans and postretirement health benefit plan.

The following are the estimated future benefit payments, which reflect expected future service, as appropriate:

Year	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Postretirement Health Benefit Plan
2018	$	4	$	—	$	—
2019	4		5		—
2020	4		—		—
2021	4		1		—
2022	16		6		—
2023 – 2027	20		14		1

Defined Contribution Plans

Retirement Savings Plan. The Bank sponsors a qualified defined contribution retirement 401(k) savings plan, the Federal Home Loan Bank of San Francisco Savings Plan (Savings Plan). Contributions to the Savings Plan consist of elective participant contributions of up to 20% of each participant's base compensation and a Bank matching contribution of up to 6% of each participant's base compensation. The Bank contributed approximately $2, $2, and $2 during the years ended December 31, 2017, 2016, and 2015, respectively.

Benefit Equalization Plan. The Bank sponsors a non-qualified retirement plan restoring benefits offered under the Savings Plan that have been limited by laws governing the plan. Contributions made during the years ended December 31, 2017, 2016, and 2015, were de minimis.

Deferred Compensation Plan. The Bank maintains a deferred compensation plan that is available to all eligible Bank officers. The defined contribution portion of the plan is comprised of two components: (i) officer or director deferral of current compensation, and (ii) make-up matching contributions for officers that would have been made by the Bank under the Savings Plan had the compensation not been deferred. The make-up benefits under the Deferred Compensation Plan vest according to the corresponding provisions of the Savings Plan. The Deferred Compensation Plan liability consists of the accumulated compensation deferrals and accrued earnings on the deferrals, as well as the make-up matching contributions and any accrued earnings on the contributions. The Bank's obligation for this plan at December 31, 2017, 2016, and 2015, was $44, $37, and $35, respectively.

Incentive Compensation Plans

The Bank provides incentive compensation plans for many of its employees, including senior officers. Other liabilities include $13 and $13 for incentive compensation at December 31, 2017 and 2016, respectively.

XML

Segment Information

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Segment Information

Segment Information

The Bank uses an analysis of financial results based on the financial components and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and determine financial management strategies related to the operations of these two business segments. For purposes of segment reporting, adjusted net interest income includes income and expense associated with net settlements from economic hedges that are recorded in “Net gain/(loss) on derivatives and hedging activities” in other income and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” Other key financial information, such as any credit-related OTTI losses on the Bank’s PLRMBS, other expenses, and assessments, is not included in the segment reporting analysis, but is incorporated into the Bank’s overall assessment of financial performance.

The advances-related business consists of advances and other credit products, related financing and hedging

instruments, other non-MBS investments associated with the Bank's role as a liquidity provider, and capital.

Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield

on all assets associated with the business activities in this segment and the cost of funding those activities, including

the net settlements from associated interest rate exchange agreements, and from earnings on invested capital.

The mortgage-related business consists of MBS investments, mortgage loans acquired through the MPF Program,

the consolidated obligations specifically identified as funding those assets, and related hedging instruments.

Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield

on the MBS and mortgage loans and the cost of the consolidated obligations funding those assets. This includes the net settlements from associated interest rate exchange agreements and net accretion related income, which is a result of improvement in expected cash flows on certain other-than-temporarily-impaired PLRMBS, less the provision for credit losses on mortgage loans.

The following table presents the Bank’s adjusted net interest income by operating segment and reconciles total adjusted net interest income to income before the AHP assessment for the years ended December 31, 2017, 2016, and 2015.

	Advances- Related Business		Mortgage- Related Business(1)		Adjusted Net Interest Income		Amortization of Basis Adjustments(2)			Income/(Expense) on Economic Hedges(3)			Interest Expense on Mandatorily Redeemable Capital Stock(4)		Net Interest Income After Mortgage Loan Loss Provision		Other Income/ (Loss)		Other Expense		Income Before AHP Assessment
2017	$	234	$	325	$	559	$	—		$	(40	)	$	32	$	567	$	78	$	224	$	421
2016	154		338		492		(7		)	(32		)	60		471		485		158		798
2015	155		351		506		(17		)	(18		)	65		476		388		148		716

(1) The mortgage-related business includes total accretion or amortization associated with other-than-temporarily impaired PLRMBS, which are recognized in interest income, totaled $93, $101, and $82 for the years ended December 31, 2017, 2016, and 2015, respectively. The mortgage-related business does not include credit-related OTTI losses of $16, $16, and $15 for the years ended December 31, 2017, 2016, and 2015, respectively.

(2) Represents amortization of amounts deferred for adjusted net interest income purposes only, in accordance with the Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework.

(3) The Bank includes income and expense associated with net settlements from economic hedges in adjusted net interest income in its analysis of financial performance for its two operating segments. For financial reporting purposes, the Bank does not include these amounts in net interest income in the Statements of Income, but instead records them in other income in “Net gain/(loss) on derivatives and hedging activities.”

(4) The Bank excludes interest expense on mandatorily redeemable capital stock from adjusted net interest income in its analysis of financial performance for its two operating segments.

The following table presents total assets by operating segment at December 31, 2017, 2016, and 2015.

	Advances- Related Business		Mortgage- Related Business		Total Assets
2017	$	103,426	$	19,959	$	123,385
2016	74,018		17,923		91,941
2015	69,047		16,651		85,698

XML

Derivatives and Hedging Activities

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

Derivatives and Hedging Activities

General. The Bank may enter into interest rate swaps (including callable, putable, and basis swaps); and cap and floor agreements (collectively, interest rate exchange agreements or derivatives). Most of the Bank’s interest rate exchange agreements are executed in conjunction with the origination of advances or the issuance of consolidated obligation bonds to create variable rate structures. The interest rate exchange agreements are generally executed at the same time the advances and bonds are transacted and generally have the same maturity dates as the related advances and bonds. The Bank transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. Over-the-counter derivatives may be either uncleared or cleared. In an uncleared derivative transaction, the Bank’s counterparty is the executing bank or broker-dealer. In a cleared derivative transaction, the Bank may execute the transaction either directly with the executing bank or broker-dealer or on a swap execution facility, but in either case, the Bank’s counterparty is a derivatives clearing organization or clearinghouse once the derivative transaction has been accepted for clearing. The Bank is not a derivatives dealer and does not trade derivatives for short-term profit.

Additional uses of interest rate exchange agreements include: (i) offsetting embedded features in assets and liabilities, (ii) hedging anticipated issuance of debt, (iii) matching against consolidated obligation discount notes or bonds to create the equivalent of callable or non-callable fixed rate debt, (iv) modifying the repricing frequency of assets and liabilities, (v) matching against certain advances and consolidated obligations for which the Bank elected the fair value option, and (vi) exactly offsetting other derivatives cleared at a derivatives clearing organization. The Bank’s use of interest rate exchange agreements results in one of the following classifications: (i) a fair value hedge of an underlying financial instrument, (ii) an economic hedge of assets or liabilities, or (iii) an intermediary transaction for members.

The Bank primarily uses the following derivative instruments:

Interest Rate Swaps – An interest rate swap is an agreement between two entities to exchange cash flows in the future. The agreement sets the dates on which the cash flows will be paid and the manner in which the cash flows will be calculated. One of the simplest forms of an interest rate swap involves the promise by one party to pay cash flows equivalent to the interest on a notional principal amount at a predetermined fixed rate for a given period of time. In return for this promise, the party receives cash flows equivalent to the interest on the same notional principal amount at a variable rate for the same period of time. The variable rate received or paid by the Bank in most interest rate exchange agreements is either indexed to LIBOR or to the overnight index swap rate.

Interest Rate Caps and Floors – In a cap agreement, additional cash flow is generated if the price or interest rate of an underlying variable rate rises above a certain threshold (or cap) price. In a floor agreement, additional cash flow is generated if the price or interest rate of an underlying variable rate falls below a certain threshold (or floor) price. Caps and floors may be used in conjunction with assets or liabilities. In general, caps and floors are designed as protection against the interest rate on a variable rate asset or liability rising above or falling below a certain level.

Hedging Activities. The Bank documents at inception all relationships between derivatives designated as hedging instruments and hedged items, its risk management objectives and strategies for undertaking various hedge transactions, and its method of assessing hedge effectiveness. Derivatives designated as fair value hedges may be transacted to hedge: (i) assets and liabilities on the Statement of Condition, (ii) firm commitments, or (iii) forecasted transactions. The Bank also formally assesses (both at hedge inception and on an ongoing basis) whether the hedging derivatives have been effective in offsetting changes in the fair value of hedged items attributable to the hedged risk and whether those derivatives may be expected to remain effective hedges in future periods. The Bank typically uses regression analyses or other statistical analyses to assess the effectiveness of its hedges. When it is determined that a derivative has not been or is not expected to be effective as a hedge, the Bank discontinues hedge accounting prospectively.

The Bank discontinues hedge accounting prospectively when: (i) it determines that the derivative is no longer effective in offsetting changes in the fair value of a hedged item (including hedged items such as firm commitments or forecasted transactions); (ii) the derivative and/or the hedged item expires or is sold, terminated, or exercised; (iii) it is no longer probable that the forecasted transaction will occur in the originally expected period; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; (v) it determines that designating the derivative as a hedging instrument is no longer appropriate; or (vi) it decides to use the derivative to offset changes in the fair value of other derivatives or instruments carried at fair value.

The Bank may have the following types of hedged items:

Investments–The Bank may invest in U.S. Treasury and agency obligations, agency MBS, and the taxable portion of highly rated state or local housing finance agency obligations. In the past, the Bank has also invested in PLRMBS rated AAA at the time of acquisition. The interest rate and prepayment risk associated with these investment securities is managed through a combination of debt issuance and derivatives. The Bank may manage prepayment risk and interest rate risk by funding investment securities with consolidated obligations that have call features or by hedging the prepayment risk with a combination of consolidated obligations and callable swaps. The Bank may execute callable swaps in conjunction with the issuance of certain liabilities to create funding that is economically equivalent to fixed rate callable debt. Although these derivatives are economic hedges against prepayment risk and are designated to individual liabilities, they do not receive either fair value or cash flow hedge accounting treatment. Investment securities may be classified as trading, AFS, or HTM.

The Bank may also manage the risk arising from changing market prices or cash flows of investment securities classified as trading by entering into interest rate exchange agreements (economic hedges) that offset the changes in fair value or cash flows of the securities. The market value changes of both the trading securities and the associated interest rate exchange agreements are included in other income in the Statements of Income.

Advances– The Bank offers a wide range of advances structures to meet members’ funding needs. These advances may have maturities up to 30 years with fixed or adjustable rates and may include early termination features or options. The Bank may use derivatives to adjust the repricing and options characteristics of advances to more closely match the characteristics of the Bank’s funding liabilities. In general, whenever a member executes a fixed or variable rate advance with embedded options, the Bank will simultaneously execute an interest rate exchange agreement with terms that offset the terms and embedded options in the advance. The combination of the advance and the interest rate exchange agreement effectively creates a variable rate asset.

In addition, for certain advances for which the Bank has elected the fair value option, the Bank will simultaneously execute an interest rate exchange agreement with terms that economically offset the terms of the advance.

Mortgage Loans–The Bank’s investment portfolio includes fixed rate mortgage loans. The prepayment options embedded in mortgage loans can result in extensions or contractions in the expected repayment of these investments, depending on changes in estimated prepayment speeds. The Bank manages the interest rate risk and prepayment risk associated with fixed rate mortgage loans through a combination of debt issuance and derivatives. The Bank uses both callable and non-callable debt to achieve cash flow patterns and market value sensitivities for liabilities similar to those expected on the mortgage loans. Net income could be reduced if the Bank replaces prepaid mortgage loans with lower-yielding assets and the Bank’s higher funding costs are not reduced accordingly.

The Bank executes callable swaps in conjunction with the issuance of certain consolidated obligations to create funding that is economically equivalent to fixed rate callable bonds. Although these derivatives are economic hedges against the prepayment risk of specific loan pools and are referenced to individual liabilities, they do not receive either fair value or cash flow hedge accounting treatment.

Consolidated Obligations – Consolidated obligation bonds may be structured to meet the Bank’s or the investors’ needs. Common structures include fixed rate bonds with or without call options and adjustable rate bonds with or without embedded options. In general, when bonds are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that offset the terms and embedded options, if any, of the consolidated obligation bond. This combination of the consolidated obligation bond and the interest rate exchange agreement effectively creates an adjustable rate bond. The cost of this funding combination is generally lower than the cost that would be available through the issuance of an adjustable rate bond alone. These transactions generally receive fair value hedge accounting treatment.

When the Bank issues consolidated obligation discount notes, it may also simultaneously enter into an interest rate exchange agreement to convert the fixed rate discount note to an adjustable rate discount note. This type of hedge is treated as an economic hedge.

In addition, when certain consolidated obligation bonds for which the Bank has elected the fair value option are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that economically offset the terms of the consolidated obligation bond. However, this type of hedge is treated as an economic hedge because these combinations do not meet the requirements for fair value hedge accounting treatment.

Intermediation and Offsetting Derivatives– As an additional service to its members, the Bank has in the past entered into offsetting interest rate exchange agreements, acting as an intermediary between offsetting derivative transactions with members and other counterparties. This intermediation allows members indirect access to the derivatives market. The Bank also enters into derivatives to offset the economic effect of other derivatives that are no longer designated to advances, investments, or consolidated obligations. Neither type of offsetting derivatives receives hedge accounting treatment and both are separately marked to market through earnings. The net result of the accounting for these derivatives does not significantly affect the operating results of the Bank.

The notional principal of the interest rate exchange agreements associated with derivatives with members or offsetting derivatives with other counterparties was $14 and $89, at December 31, 2017 and 2016, respectively.

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

The following table summarizes the notional amount and fair value of derivative instruments, including the effect of netting adjustments and cash collateral as of December 31, 2017 and 2016. For purposes of this disclosure, the derivative values include the fair value of derivatives and related accrued interest.

	2017								2016
	Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	24,270	$	92		$	27		$	20,741	$	67		$	32
Total	24,270		92			27			20,741		67			32
Derivatives not designated as hedging instruments:
Interest rate swaps	73,760		81			57			42,135		67			49
Interest rate caps and floors	1,563		1			1			2,180		6			—
Mortgage delivery commitments	16		—			—			13		—			—
Total	75,339		82			58			44,328		73			49
Total derivatives before netting and collateral adjustments	$	99,609	174			85			$	65,069	140			81
Netting adjustments and cash collateral(1)			(91		)	(84		)			(74		)	(79		)
Total derivative assets and total derivative liabilities			$	83		$	1				$	66		$	2

(1) Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met. Cash collateral posted and related accrued interest was $10 and $22 at December 31, 2017 and 2016, respectively. Cash collateral received and related accrued interest was $18 and $16 at December 31, 2017 and 2016, respectively.

The following table presents the components of net gain/(loss) on derivatives and hedging activities as presented in the Statements of Income for the years ended December 31, 2017, 2016, and 2015.

	2017			2016			2015
	Gain/(Loss)			Gain/(Loss)			Gain/(Loss)
Derivatives designated as hedging instruments:
Interest rate swaps	$	(1	)	$	(2	)	$	(10	)
Total net gain/(loss) related to fair value hedge ineffectiveness	(1		)	(2		)	(10		)
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps	8			39			13
Interest rate caps and floors	(5		)	(1		)	(3		)
Net settlements	(40		)	(32		)	(18		)
Mortgage delivery commitments	24			5			2
Total net gain/(loss) related to derivatives not designated as hedging instruments	(13		)	11			(6		)
Net gain/(loss) on derivatives and hedging activities	$	(14	)	$	9		$	(16	)

The following tables present, by type of hedged item, the gains and losses on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on the Bank’s net interest income for the years ended December 31, 2017, 2016, and 2015.

Hedged Item Type	Gain/(Loss) on Derivatives			Gain /(Loss) on Hedged Item			Net Fair Value Hedge Ineffectiveness			Effect of Derivatives on Net Interest Income(1)
Year ended December 31, 2017:
Advances	$	63		$	(66	)	$	(3	)	$	(27	)
Consolidated obligation bonds	(41		)	43			2			27
Total	$	22		$	(23	)	$	(1	)	$	—
Year ended December 31, 2016:
Advances	$	63		$	(62	)	$	1		$	(55	)
Consolidated obligation bonds	(135		)	132			(3		)	180
Total	$	(72	)	$	70		$	(2	)	$	125
Year ended December 31, 2015:
Advances	$	19		$	(20	)	$	(1	)	$	(106	)
Consolidated obligation bonds	(170		)	161			(9		)	257
Total	$	(151	)	$	141		$	(10	)	$	151

(1) The net interest on derivatives in fair value hedge relationships is presented in the interest income/expense line item of the respective hedged item.

Credit Risk – The Bank is subject to credit risk as a result of potential nonperformance by counterparties to the interest rate exchange agreements. All of the Bank’s agreements governing uncleared derivative transactions contain master netting provisions to help mitigate the credit risk exposure to each counterparty. The Bank manages counterparty credit risk through credit analyses and collateral requirements and by following the requirements of the Bank’s risk management policies, credit guidelines, and Finance Agency and other regulations. The Bank also requires credit support agreements on all uncleared derivatives.

For cleared derivatives, the clearinghouse is the Bank’s counterparty. The requirement that the Bank post initial and variation margin through a clearing agent, to the clearinghouse, exposes the Bank to institutional credit risk in the event that the clearing agent or the clearinghouse fails to meet its obligations. The use of cleared derivatives, however, mitigates the Bank’s overall credit risk exposure because a central counterparty is substituted for individual counterparties and variation margin is posted daily for changes in the value of cleared derivatives through a clearing agent. The Bank has analyzed the enforceability of offsetting rights applicable to 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 bankruptcy law and Commodity Futures Trading Commission rules in the event of a clearinghouse or clearing agent insolvency and under applicable clearinghouse rules upon a non-insolvency-based event of default of the clearinghouse or clearing agent. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular clearinghouse.

Based on the Bank’s credit analyses and the collateral requirements, the Bank does not expect to incur any credit losses on its derivative transactions.

The Bank’s agreements for uncleared derivative transactions contain provisions that link the Bank’s credit rating from Moody’s Investors Service and S&P Global Ratings to various rights and obligations. Certain of these derivative agreements provide that, if the Bank’s long-term debt rating falls below a specified rating (ranging from A3/A- to Baa3/BBB-), the Bank’s counterparty would have the right, but not the obligation, to terminate all of its outstanding derivative transactions with the Bank; the Bank’s agreements with its clearing agents for cleared derivative transactions have similar provisions with respect to the debt rating of FHLBank System consolidated bonds. If this occurs, the Bank may choose to enter into replacement hedges, either by transferring the existing transactions to another counterparty or entering into new replacement transactions, based on prevailing market rates. The aggregate fair value of all uncleared derivative instruments with credit risk-related contingent features that were in a net derivative liability position (before cash collateral and related accrued interest) at December 31, 2017, was $6, for which the Bank had posted cash collateral of $6 in the ordinary course of business.

The Bank may present derivative instruments, related cash collateral received or pledged, and associated accrued interest by clearing agent or by counterparty when the netting requirements have been met.

The following table presents separately the fair value of derivative assets and derivative liabilities that have met the netting requirements, including the related collateral received from or pledged to counterparties as of December 31, 2017 and 2016.

	December 31, 2017							December 31, 2016
	Derivative Instruments Meeting Netting Requirements							Derivative Instruments Meeting Netting Requirements
	Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral			Total Derivative Assets and Total Derivative Liabilities		Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral			Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Uncleared	$	35	$	(33	)	$	2	$	41	$	(37	)	$	4
Cleared	139		(58		)	81		99		(37		)	62
Total						$	83						$	66
Derivative Liabilities
Uncleared	$	29	$	(28	)	$	1	$	37	$	(35	)	$	2
Cleared	56		(56		)	—		44		(44		)	—
Total						$	1						$	2

XML

Fair Value

12 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value

Fair Value

The following fair value amounts have been determined by the Bank using available market information and the Bank’s best judgment of appropriate valuation methods. These estimates are based on pertinent information available to the Bank at December 31, 2017 and 2016. Although the Bank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a portion of the Bank’s financial instruments, in certain cases fair values cannot be precisely quantified or verified and may change as economic and market factors and evaluation of those factors change. The Bank continues to refine its valuation methodologies as markets and products develop and the pricing for certain products becomes more or less transparent. While the Bank believes that its valuation methodologies are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a materially different estimate of fair value as of the reporting date. Therefore, the fair values are not necessarily indicative of the amounts that would be realized in current market transactions, although they do reflect the Bank’s judgment as to how a market participant would estimate the fair values. The fair value summary table does not represent an estimate of the overall market value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of total assets and liabilities.

The following tables present the carrying value, the estimated fair value, and the fair value hierarchy level of the Bank’s financial instruments at December 31, 2017 and 2016.

	December 31, 2017
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments(1)
Assets
Cash and due from banks	$	31	$	31	$	31	$	—	$	—	$	—
Interest-bearing deposits	1,115		1,115		1,115		—		—		—
Securities purchased under agreements to resell	11,750		11,750		—		11,750		—		—
Federal funds sold	11,028		11,029		—		11,029		—		—
Trading securities	1,164		1,164		—		1,164		—		—
AFS securities	3,833		3,833		—		—		3,833		—
HTM securities	14,680		14,704		—		13,697		1,007		—
Advances	77,382		77,437		—		77,437		—		—
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	2,076		2,075		—		2,075		—		—
Accrued interest receivable	119		119		—		119		—		—
Derivative assets, net(1)	83		83		—		174		—		(91		)
Other assets(2)	9		9		9		—		—		—
Liabilities
Deposits	281		281		—		281		—		—
Consolidated obligations:
Bonds	85,063		84,938		—		84,938		—		—
Discount notes	30,440		30,437		—		30,437		—		—
Total consolidated obligations	115,503		115,375		—		115,375		—		—
Mandatorily redeemable capital stock	309		309		309		—		—		—
Accrued interest payable	116		116		—		116		—		—
Derivative liabilities, net(1)	1		1		—		85		—		(84		)
Other
Standby letters of credit	19		19		—		19		—		—

	December 31, 2016
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments(1)
Assets
Cash and due from banks	$	2	$	2	$	2	$	—	$	—	$	—
Interest-bearing deposits	590		590		590		—		—		—
Securities purchased under agreements to resell	15,500		15,500		—		15,500		—		—
Federal funds sold	4,214		4,214		—		4,214		—		—
Trading securities	2,066		2,066		—		2,066		—		—
AFS securities	4,489		4,489		—		—		4,489		—
HTM securities	14,127		14,141		—		12,788		1,353		—
Advances	49,845		49,921		—		49,921		—		—
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	826		845		—		845		—		—
Accrued interest receivable	79		79		—		79		—		—
Derivative assets, net(1)	66		66		—		140		—		(74		)
Other assets(2)	11		11		11		—		—		—
Liabilities
Deposits	169		169		—		169		—		—
Consolidated obligations:
Bonds	50,224		50,188		—		50,188		—		—
Discount notes	33,506		33,505		—		33,505		—		—
Total consolidated obligations	83,730		83,693		—		83,693		—		—
Mandatorily redeemable capital stock	457		457		457		—		—		—
Borrowings from other FHLBanks	1,345		1,345		—		1,345		—		—
Accrued interest payable	67		67		—		67		—		—
Derivative liabilities, net(1)	2		2		—		81		—		(79		)
Other
Standby letters of credit	24		24		—		24		—		—

(1) Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met.

(2) Represents publicly traded mutual funds held in a grantor trust.

Fair Value Hierarchy. The fair value hierarchy is used to prioritize the fair value methodologies and valuation techniques as well as the inputs to the valuation techniques used to measure fair value for assets and liabilities carried at fair value on the Statements of Condition. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of market observability of the fair value measurement for the asset or liability. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). An entity must disclose the level within the fair value hierarchy in which the measurements are classified for all financial assets and liabilities measured on a recurring or non-recurring basis.

The application of the fair value hierarchy to the Bank’s financial assets and financial liabilities that are carried at fair value either on a recurring or non-recurring basis is as follows:

• Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in an active market that the reporting entity can access on the measurement date.

• Level 2 – Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets or liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals, and implied volatilities); and (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3 – Unobservable inputs for the asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following assets and liabilities, including those for which the Bank has elected the fair value option, are carried at fair value on the Statements of Condition as of December 31, 2017:

• Trading securities

• AFS securities

• Certain advances

• Derivative assets and liabilities

• Certain consolidated obligation bonds

• Certain other assets

For instruments carried at fair value, the Bank reviews the fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. Such reclassifications are reported as transfers in or out as of the beginning of the quarter in which the changes occur. For the periods presented, the Bank did not have any reclassifications for transfers in or out of the fair value hierarchy levels.

Summary of Valuation Methodologies and Primary Inputs.

Cash and Due from Banks–The estimated fair value equals the carrying value.

Federal Funds Sold and Securities Purchased Under Agreements to Resell – The estimated fair value of overnight Federal funds sold and securities purchased under agreements to resell approximates the carrying value. The estimated fair value of term Federal funds sold and term securities purchased under agreements to resell has been determined by calculating the present value of expected cash flows for the instruments and reducing the amount for accrued interest receivable. The discount rates used in these calculations are the replacement rates for comparable instruments with similar terms.

Interest-Bearing Deposits –The fair value of deposits is generally equal to the carrying value of the deposits because the deposits are primarily overnight deposits or due on demand. The Bank determines the fair values of term deposits by calculating the present value of expected future cash flows from the deposits and reducing the amount for accrued interest receivable. The discount rates used in these calculations are the cost of deposits with similar terms.

Investment Securities – MBS – To value its MBS, the Bank obtains prices from multiple designated third-party pricing vendors when available. The pricing vendors use various proprietary models to price these securities. The inputs to those models are derived from various sources including, but not limited to: benchmark yields, reported trades, dealer estimates, issuer spreads, prices on benchmark securities, bids, offers, and other market-related data. Since many securities do not trade on a daily basis, the pricing vendors use available information as applicable, such as benchmark yield curves, benchmarking of like securities, sector groupings, and matrix pricing, to determine the prices for individual securities. Each pricing vendor has an established challenge process in place for all security valuations, which facilitates resolution of price discrepancies identified by the Bank.

At least annually, the Bank conducts reviews of the multiple pricing vendors to update and confirm its understanding of the vendors’ pricing processes, methodologies, and control procedures.

The Bank’s valuation technique for estimating the fair values of its MBS first requires the establishment of a median vendor price for each security. If three prices are received, the middle price is the median price; if two prices are received, the average of the two prices is the median price; and if one price is received, it is the median price (and also the default fair value) subject to additional validation. All vendor prices that are within a specified tolerance threshold of the median price are included in the cluster of vendor prices that are averaged to establish a default fair value. All vendor prices that are outside the threshold (outliers) are subject to further analysis including, but not limited to, comparison to prices provided by an additional third-party valuation service, prices for similar securities and/or dealer estimates, or use of internal model prices, which are deemed to be reflective of all relevant facts and circumstances that a market participant would consider. Such analysis is also applied in those limited instances where no third-party vendor price or only one third-party vendor price is available in order to arrive at an estimated fair value. If an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair value, then the outlier (or the other price, as appropriate) is used as the fair value rather than the default fair value. If, instead, the analysis confirms that an outlier is (or outliers are) not representative of fair value and the default fair value is the best estimate, then the default fair value is used as the fair value.

If all vendor prices received for a security are outside the tolerance threshold level of the median price, then there is no default fair value, and the fair value is determined by an evaluation of all outlier prices (or the other prices, as appropriate) as described above.

As of December 31, 2017, multiple vendor prices were received for most of the Bank’s MBS, and the fair value estimates for most of those securities were determined in accordance with the Bank’s valuation technique based on these vendor prices. Based on the Bank’s reviews of the pricing methods employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or, in those instances in which there were outliers, the Bank’s additional analyses), the Bank believes that its fair value estimates are reasonable and that the fair value measurements are classified appropriately in the fair value hierarchy. Based on limited market liquidity for PLRMBS, the fair value measurements for these securities were classified as Level 3 within the fair value hierarchy.

Investment Securities – FFCB Bonds and CalHFA Bonds –The Bank estimates the fair values of these securities using the methodology described above for Investment Securities – MBS.

Advances –Because quoted prices are not available for advances, the fair values are measured using model-based valuation techniques (such as calculating the present value of future cash flows and reducing the amount for accrued interest receivable).

The Bank’s primary inputs for measuring the fair value of advances are market-based consolidated obligation yield curve (CO Curve) inputs obtained from the Office of Finance. The CO Curve is then adjusted to reflect the rates on replacement advances with similar terms and collateral. These spread adjustments are not market-observable and are evaluated for significance in the overall fair value measurement and the fair value hierarchy level of the advance. The Bank obtains market-observable inputs for complex advances. These inputs may include volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew). The discount rates used in these calculations are the replacement advance rates for advances with similar terms. Pursuant to the Finance Agency’s advances regulation, advances with an original term to maturity or repricing period greater than six months generally require a prepayment fee sufficient to make the Bank financially indifferent to the borrower’s decision to prepay the advances. The Bank determined that no adjustment is required to the fair value measurement of advances for prepayment fees. In addition, the Bank did not adjust its fair value measurement of advances for creditworthiness primarily because advances were fully collateralized.

Mortgage Loans Held for Portfolio – The estimated fair value for seasoned mortgage loans represents modeled prices based on observable market prices for seasoned agency mortgage-backed passthrough securities adjusted for differences in coupon, average loan rate, credit, and cash flow remittance between the Bank’s mortgage loans and the referenced instruments, while the estimated fair value for newly originated mortgage loans represents modeled prices based on MPF commitment rates. Market prices are highly dependent on the underlying prepayment assumptions. Changes in the prepayment speeds often have a material effect on the fair value estimates. These underlying prepayment assumptions are susceptible to material changes in the near term because they are made at a specific point in time.

Loans to and from Other FHLBanks –Because these are overnight transactions, the estimated fair value approximates the recorded carrying value.

Accrued Interest Receivable and Payable – The estimated fair value approximates the carrying value of accrued interest receivable and accrued interest payable.

Other Assets – The estimated fair value of grantor trust assets is based on quoted market prices.

Derivative Assets and Liabilities –In general, derivative instruments transacted and held by the Bank for risk management activities are traded in over-the-counter markets where quoted market prices are not readily available. These derivatives are interest rate-related. For these derivatives, the Bank measures fair value using internally developed discounted cash flow models that use market-observable inputs, such as the overnight index swap (OIS) curve and volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew), adjusted for counterparty credit risk, as necessary.

The Bank is subject to credit risk because of the risk of potential nonperformance by its derivative counterparties. To mitigate this risk, the Bank executes uncleared derivative transactions only with highly rated derivative dealers and major banks (derivative dealer counterparties) that meet the Bank’s eligibility criteria. In addition, the Bank has entered into master netting agreements and bilateral credit support agreements with all active derivative dealer counterparties that provide for delivery of collateral at specified levels to limit the Bank’s net unsecured credit exposure to these counterparties. Under these policies and agreements, the amount of unsecured credit exposure to an individual derivative dealer counterparty is either (i) limited to an absolute dollar credit exposure limit according to the counterparty’s long-term debt or deposit credit rating, as determined by rating agencies or (ii) set at zero (subject to a minimum transfer amount). The Bank clears its cleared derivative transactions only through clearing agents that meet the Bank’s eligibility requirements, and the Bank’s credit exposure to the clearinghouse is secured by variation margin received from the clearinghouse. All credit exposure from derivative transactions entered into by the Bank with member counterparties that are not derivative dealers must be fully secured by eligible collateral. The Bank evaluated the potential for the fair value of the instruments to be affected by counterparty credit risk and determined that no adjustments to the overall fair value measurements were required.

The fair values of the derivative assets and liabilities include accrued interest receivable/payable and cash collateral remitted to/received from counterparties. The estimated fair values of the accrued interest receivable/payable and cash collateral approximate their carrying values because of their short-term nature. The fair values of derivatives that met the netting requirements are presented on a net basis. If these netted amounts are positive, they are classified as an asset and, if negative, they are classified as a liability.

Deposits –The fair value of deposits is generally equal to the carrying value of the deposits because the deposits are primarily overnight deposits or due on demand. The Bank determines the fair values of term deposits by calculating the present value of expected future cash flows from the deposits and reducing the amount for accrued interest payable. The discount rates used in these calculations are the cost of deposits with similar terms.

Consolidated Obligations –Because quoted prices in active markets are not generally available for identical liabilities, the Bank measures fair values using internally developed models that use primarily market-observable inputs. The Bank’s primary input for measuring the fair value of consolidated obligation bonds is a market-based CO Curve obtained from the Office of Finance. The Office of Finance constructs the CO Curve using the Treasury yield curve as a base curve, which is adjusted by indicative consolidated obligation spreads obtained from market-observable sources. These market indications are generally derived from pricing indications from dealers, historical pricing relationships, and market activity for similar liabilities, such as recent GSE issuances or secondary market activity. For consolidated obligation bonds with embedded options, the Bank also obtains market-observable inputs, such as volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew).

Adjustments may be necessary to reflect the Bank’s credit quality or the credit quality of the FHLBank System when valuing consolidated obligation bonds measured at fair value. The Bank monitors its own creditworthiness and the creditworthiness of the other FHLBanks and the FHLBank System to determine whether any adjustments are necessary for creditworthiness in its fair value measurement of consolidated obligation bonds. The credit ratings of the FHLBank System and any changes to the credit ratings are the basis for the Bank to determine whether the fair values of consolidated obligations have been significantly affected during the reporting period by changes in the instrument-specific credit risk.

Mandatorily Redeemable Capital Stock –The estimated fair value of capital stock subject to mandatory redemption is generally at par value as indicated by contemporaneous purchases, redemptions, and repurchases at par value. Fair value includes estimated dividends earned at the time of reclassification from capital to liabilities, until such amount is paid, and any subsequently declared capital stock dividend. The Bank’s capital stock can only be acquired by members at par value and redeemed or repurchased at par value, subject to statutory and regulatory requirements. The Bank’s capital stock is not traded, and no market mechanism exists for the exchange of Bank capital stock outside the cooperative ownership structure.

Commitments – The estimated fair value of standby letters of credit is based on the present value of fees currently charged for similar agreements and is recorded in other liabilities. The estimated fair value of off-balance sheet fixed rate commitments to fund advances and commitments to issue consolidated obligations takes into account the difference between current and committed interest rates.

Subjectivity of Estimates Related to Fair Values of Financial Instruments. Estimates of the fair value of financial assets and liabilities using the methodologies described above 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. Changes in these judgments often have a material effect on the fair value estimates.

Fair Value Measurements. The tables below present the fair value of assets and liabilities, which are recorded on a recurring or nonrecurring basis at December 31, 2017 and 2016, by level within the fair value hierarchy.

December 31, 2017
	Fair Value Measurement Using:						Netting
	Level 1		Level 2		Level 3		Adjustments(1)			Total
Recurring fair value measurements – Assets:
Trading securities:
GSEs – FFCB bonds	$	—	$	1,158	$	—	$	—		$	1,158
MBS:
Other U.S. obligations – Ginnie Mae	—		6		—		—			6
Total trading securities	—		1,164		—		—			1,164
AFS securities:
PLRMBS	—		—		3,833		—			3,833
Total AFS securities	—		—		3,833		—			3,833
Advances(2)	—		6,431		—		—			6,431
Derivative assets, net: interest rate-related	—		174		—		(91		)	83
Other assets	9		—		—		—			9
Total recurring fair value measurements – Assets	$	9	$	7,769	$	3,833	$	(91	)	$	11,520
Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)	$	—	$	949	$	—	$	—		$	949
Derivative liabilities, net: interest rate-related	—		85		—		(84		)	1
Total recurring fair value measurements – Liabilities	$	—	$	1,034	$	—	$	(84	)	$	950
Nonrecurring fair value measurements – Assets:(4)
Impaired mortgage loans held for portfolio	$	—	$	—	$	3	$	—		$	3
Total nonrecurring fair value measurements – Assets	$	—	$	—	$	3	$	—		$	3

December 31, 2016
	Fair Value Measurement Using:						Netting
	Level 1		Level 2		Level 3		Adjustments(1)			Total
Recurring fair value measurements – Assets:
Trading securities:
GSEs – FFCB bonds	$	—	$	2,058	$	—	$	—		$	2,058
MBS:
Other U.S. obligations – Ginnie Mae	—		8		—		—			8
Total trading securities	—		2,066		—		—			2,066
AFS securities:
PLRMBS	—		—		4,489		—			4,489
Total AFS securities	—		—		4,489		—			4,489
Advances(2)	—		3,719		—		—			3,719
Derivative assets, net: interest rate-related	—		140		—		(74		)	66
Other assets	11		—		—		—			11
Total recurring fair value measurements – Assets	$	11	$	5,925	$	4,489	$	(74	)	$	10,351
Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)	$	—	$	1,507	$	—	$	—		$	1,507
Derivative liabilities, net: interest rate-related	—		81		—		(79		)	2
Total recurring fair value measurements – Liabilities	$	—	$	1,588	$	—	$	(79	)	$	1,509
Nonrecurring fair value measurements – Assets:(4)
Impaired mortgage loans held for portfolio	$	—	$	—	$	5	$	—		$	5
Total nonrecurring fair value measurements – Assets	$	—	$	—	$	5	$	—		$	5

(1) Amounts represent the netting of derivative assets and liabilities by counterparty, including cash collateral, where the netting requirements have been met.

(2) Represents advances recorded under the fair value option at December 31, 2017 and 2016.

(3) Represents consolidated obligation bonds recorded under the fair value option at December 31, 2017 and 2016.

(4) The fair value information presented is as of the date the fair value adjustment was recorded during the years ended December 31, 2017 and 2016.

The following tables present a reconciliation of the Bank’s AFS PLRMBS that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2017, 2016, and 2015.

	2017			2016			2015
Balance, beginning of the period	$	4,489		$	5,414		$	6,371
Total gain/(loss) realized and unrealized included in:
Interest income	92			102			83
Net OTTI loss, credit-related	(16		)	(16		)	(15		)
Unrealized gain/(loss) of other-than-temporarily impaired securities included in AOCI	195			103			(29		)
Net amount of OTTI loss reclassified to/(from) other income/(loss)	6			(10		)	(15		)
Settlements	(933		)	(1,104		)	(996		)
Transfers of HTM securities to AFS securities	—			—			15
Balance, end of the period	$	3,833		$	4,489		$	5,414
Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets and liabilities still held at the end of the period	$	75		$	84		$	68

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

The Bank elected the fair value option for certain financial instruments as follows:

• Adjustable rate advances with embedded options (excluding call and put options)

• Callable fixed rate advances

• Putable fixed rate advances

• Putable fixed rate advances with embedded options

• Fixed rate advances with partial prepayment symmetry

• Callable or non-callable capped floater consolidated obligation bonds

• Convertible consolidated obligation bonds

• Adjustable or fixed rate range accrual consolidated obligation bonds

• Ratchet consolidated obligation bonds

• Adjustable rate advances indexed to non-LIBOR indices such as the Prime Rate, U.S. Treasury bill, and Federal funds effective rate

• Adjustable rate consolidated obligation bonds indexed to non-LIBOR indices such as the Prime Rate and U.S. Treasury bill

• Step-up callable bonds, which pay interest at increasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-up dates

• Step-down callable bonds, which pay interest at decreasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-down dates

The Bank has elected the fair value option for certain financial instruments to assist in mitigating potential earnings volatility that can arise from economic hedging relationships in which the carrying value of the hedged item is not adjusted for changes in fair value. The potential earnings volatility associated with using fair value only for the derivative is the Bank’s primary reason for electing the fair value option for financial assets and liabilities that do not qualify for hedge accounting or that have not previously met or may be at risk for not meeting the hedge effectiveness requirements.

The following tables summarize the activity related to financial assets and liabilities for which the Bank elected the fair value option during the years ended December 31, 2017, 2016, and 2015:

	2017						2016						2015
	Advances			Consolidated Obligation Bonds			Advances			Consolidated Obligation Bonds			Advances			Consolidated Obligation Bonds
Balance, beginning of the period	$	3,719		$	1,507		$	3,677		$	4,233		$	5,137		$	6,717
New transactions elected for fair value option	3,657			1,185			947			685			1,018			2,585
Maturities and terminations	(918		)	(1,745		)	(878		)	(3,420		)	(2,442		)	(5,083		)
Net gain/(loss) on advances and net (gain)/loss on consolidated obligation bonds held under fair value option	(31		)	—			(27		)	13			(31		)	19
Change in accrued interest	4			2			—			(4		)	(5		)	(5		)
Balance, end of the period	$	6,431		$	949		$	3,719		$	1,507		$	3,677		$	4,233

For instruments for which the fair value option has been elected, the related contractual interest income and contractual interest expense are recorded as part of net interest income on the Statements of Income. The remaining changes in fair value for instruments for which the fair value option has been elected are recorded as net gains/ (losses) on financial instruments held under the fair value option in the Statements of Income. The change in fair value does not include changes in instrument-specific credit risk. For advances and consolidated obligations recorded under the fair value option, the Bank determined that no adjustments to the fair values of these instruments for instrument-specific credit risk were necessary for the years ended December 31, 2017, 2016, and 2015.

The following table presents the difference between the aggregate remaining contractual principal balance outstanding and aggregate fair value of advances and consolidated obligation bonds for which the Bank elected the fair value option at December 31, 2017 and 2016:

	2017							2016
	Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance			Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance
Advances(1)	$	6,447	$	6,431	$	(16	)	$	3,709	$	3,719	$	10
Consolidated obligation bonds	955		949		(6		)	1,515		1,507		(8		)

(1) At December 31, 2017 and 2016, none of these advances were 90 days or more past due or had been placed on nonaccrual status.

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The regulations provide a general framework for addressing the possibility that an FHLBank may be unable to repay the consolidated obligations for which it is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of December 31, 2017, and through the filing date of this report, does not believe that it is probable that it will be asked to do so.

The par value of the outstanding consolidated obligations of the FHLBanks was $1,034,260 at December 31, 2017, and $989,311 at December 31, 2016. The par value of the Bank’s participation in consolidated obligations was $115,602 at December 31, 2017, and $83,749 at December 31, 2016.

The joint and several liability regulation provides a general framework for addressing the possibility that an FHLBank may be unable to repay its participation in the consolidated obligations for which it is the primary obligor. In accordance with this regulation, the president of each FHLBank is required to provide a quarterly certification that, among other things, the FHLBank will remain capable of making full and timely payment of all its current obligations, including direct obligations.

In addition, the regulation requires that an FHLBank must provide written notice to the Finance Agency if at any time the FHLBank is unable to provide the quarterly certification; projects that it will be unable to fully meet all of its current obligations, including direct obligations, on a timely basis during the quarter; or negotiates or enters into an agreement with another FHLBank for financial assistance to meet its obligations. If an FHLBank gives any one of these notices (other than in a case of a temporary interruption in the FHLBank's debt servicing operations resulting from an external event such as a natural disaster or a power failure), it must promptly file a consolidated obligations payment plan for Finance Agency approval specifying the measures the FHLBank will undertake to make full and timely payments of all its current obligations.

Notwithstanding any other provisions in the regulation, the regulation provides that the Finance Agency in its discretion may at any time order any FHLBank to make any principal or interest payment due on any consolidated obligation. To the extent an FHLBank makes any payment on any consolidated obligation on behalf of another FHLBank, the paying FHLBank is entitled to reimbursement from the FHLBank that is the primary obligor, which will have a corresponding obligation to reimburse the FHLBank for the payment and associated costs, including interest.

The regulation also provides that the Finance Agency may allocate the outstanding liability of an FHLBank for consolidated obligations among the other FHLBanks on a pro rata basis in proportion to each FHLBank's participation in all consolidated obligations outstanding or in any other manner it may determine to ensure that the FHLBanks operate in a safe and sound manner.

Off-balance sheet commitments as of December 31, 2017 and 2016, were as follows:

	2017						2016
	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	$	12,910	$	3,240	$	16,150	$	11,094	$	4,066	$	15,160
Commitments to fund additional advances	1		—		1		5		1		6
Commitments to issue consolidated obligation discount notes, par	134		—		134		846		—		846
Commitments to issue consolidated obligation bonds, par	595		—		595		655		—		655
Commitments to purchase mortgage loans	16		—		16		13		—		13

Standby letters of credit are generally issued for a fee on behalf of members to support their obligations to third parties. If the Bank is required to make a payment for a beneficiary’s drawing under a letter of credit, the amount is immediately due and payable by the member to the Bank and is charged to the member’s demand deposit account with the Bank. The original terms of these standby letters of credit range from 14 days to 15 years, including a final expiration in 2032. The Bank monitors the creditworthiness of members that have standby letters of credit. The value of the Bank’s obligations related to standby letters of credit is recorded in other liabilities and amounted to $19 at December 31, 2017, and $24 at December 31, 2016. Standby letters of credit are fully collateralized at the time of issuance. Based on the Bank’s credit analyses of members’ financial condition and collateral requirements, the Bank deemed it unnecessary to record any additional liability on the letters of credit outstanding as of December 31, 2017 and 2016.

Commitments to fund advances totaled $1 at December 31, 2017, and $6 at December 31, 2016. Advances funded under advance commitments are fully collateralized at the time of funding (see Note 10 – Allowance for Credit Losses). Based on the Bank’s credit analyses of members’ financial condition and collateral requirements, the Bank deemed it unnecessary to record any additional liability on the advance commitments outstanding as of December 31, 2017 and 2016.

The Bank may enter into commitments that unconditionally obligate it to purchase mortgage loans from its members. Commitments are generally for periods not exceeding 60 days. Delivery commitments are recorded at fair value as derivative assets or derivative liabilities in the Statements of Condition.

The Bank executes over-the-counter uncleared interest rate exchange agreements with major banks and derivative entities affiliated with broker-dealers and has executed uncleared interest rate exchange agreements in the past with the Bank’s members. The Bank enters into master agreements with netting provisions and into bilateral credit support agreements with all active derivative dealer counterparties. All member counterparty master agreements, excluding those with derivative dealers, are subject to the terms of the Bank’s Advances and Security Agreement with members, and all member counterparties (except for those that are derivative dealers) must fully collateralize the Bank’s net credit exposure. For cleared derivatives, the clearinghouse is the Bank’s counterparty, and the Bank has clearing agreements with clearing agents that provide for delivery of initial margin to, and exchange of variation margin with, the clearinghouse. See Note 18 – Derivatives and Hedging Activities for additional information about the Bank’s pledged collateral and other credit-risk-related contingent features.

The Bank charged operating expenses for net rental and related costs of approximately $7, $6, and $5 for the years ended December 31, 2017, 2016, and 2015, respectively. Future minimum rentals at December 31, 2017, were as follows:

Year	Equipment Capital Leases		Premises Operating Leases
2018	$	2	$	5
2019	2		4
2020	2		2
2021	2		—
2022	1		—
Total	$	9	$	11

Lease agreements for Bank premises generally provide for increases in the basic rentals resulting from increases in property taxes and maintenance expenses. Such increases are not expected to have a material effect on the Bank's financial condition or results of operations.

The Bank may be subject to various pending legal proceedings that may arise in the ordinary course of business. After consultation with legal counsel, the Bank does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on its financial condition or results of operations.

Other commitments and contingencies are discussed in Note 1 – Summary of Significant Accounting Policies, Note 8 – Advances, Note 9 – Mortgage Loans Held for Portfolio, Note 12 – Consolidated Obligations, Note 13 – Affordable Housing Program, Note 15 – Capital, Note 16 – Employee Retirement Plans and Incentive Compensation Plans, and Note 18 – Derivatives and Hedging Activities.

XML

Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks

12 Months Ended

Dec. 31, 2017

Related Party Transactions [Abstract]

Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks

Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks

Transactions with Members and Nonmembers. The Bank has a cooperative ownership structure under which current member institutions, certain former members, and certain other nonmembers own the capital stock of the Bank. Former members and nonmembers that have outstanding transactions with the Bank are required to maintain their investment in the Bank's capital stock until their outstanding transactions mature or are paid off or until their capital stock is redeemed following the five-year redemption period for capital stock or is repurchased by the Bank, in accordance with the Bank's capital requirements. (For further information on concentration risk, see Note 15 – Capital and Note 8 – Advances).

Under the FHLBank Act and Finance Agency regulations, each member eligible to vote is entitled to cast by ballot one vote for each share of stock that it was required to hold as of the record date, which is December 31, of the year prior to each election, subject to the limitation that no member may cast more votes than the average number of shares of the Bank’s stock that are required to be held by all members located in such member's state. As of and for the three-year period ending December 31, 2017, no shareholder owned 10% or more of the total voting interests in the Bank because of this statutory limit on members' voting rights.

All advances are made to members, and all mortgage loans held for portfolio were purchased from members. The Bank also maintains deposit accounts for members, certain former members, and certain other nonmembers primarily to facilitate settlement activities that are directly related to advances and mortgage loan purchases. All transactions with members and their affiliates are entered into in the ordinary course of business.

The Bank may invest in Federal funds sold, interest-bearing deposits, commercial paper, and MBS and executes derivative transactions with members or their affiliates. The Bank purchases MBS through securities brokers or dealers and executes all MBS investments without preference to the status of the counterparty or the issuer of the investment as a nonmember, member, or affiliate of a member. When the Bank executes non-MBS investments with a member, the Bank may give consideration to the member’s secured credit and the Bank's advances pricing. As an additional service to its members, the Bank has in the past entered into offsetting interest rate exchange agreements, acting as an intermediary between exactly offsetting derivative transactions with members and other counterparties. These transactions were executed at market rates.

The FHLBank Act requires the Bank to establish an AHP. The Bank provides subsidies to members, which use the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Subsidies may be in the form of direct grants or below-market interest rate advances. Only Bank members, along with their nonmember AHP project sponsors, may submit AHP applications. All AHP subsidies are made in the ordinary course of business.

The FHLBank Act also requires the Bank to establish a Community Investment Program (CIP) and authorizes the Bank to offer additional Community Investment Cash Advance (CICA) programs. Under these programs, the Bank provides subsidies in the form of grants and below-market interest rate advances to members or standby letters of credit for members for community lending and economic development projects. Only Bank members may submit applications for CICA subsidies. All CICA subsidies are made in the ordinary course of business.

In instances where the member has an officer or director serving on the Bank’s Board of Directors, all of the aforementioned transactions with the member are subject to the same eligibility and credit criteria, as well as the same conditions, as comparable transactions with all other members, in accordance with regulations governing the operations of the FHLBanks. The following tables set forth information at the dates and for the periods indicated with respect to transactions with members that have an officer or director serving on the Bank’s Board of Directors.

	December 31, 2017		December 31, 2016
Assets:
Advances	$	3,072	$	3,756
Mortgage loans held for portfolio	13		17
Accrued interest receivable	5		4
Liabilities:
Deposits	$	3	$	3
Capital:
Capital Stock	$	126	$	129

	For the Years Ended December 31,
	2017		2016		2015
Interest Income:
Advances	$	41	$	35	$	35
Mortgage loans held for portfolio	1		1		1

Transactions with Other FHLBanks. The Bank may occasionally enter into transactions with other FHLBanks. These transactions are summarized below.

Deposits with other FHLBanks. The Bank may, from time to time, maintain deposits with other FHLBanks. Deposits with other FHLBanks totaled de minimis amounts at December 31, 2017 and 2016, which were recorded in the Statements of Condition in the Cash and due from banks line item.

Overnight Funds. The Bank may borrow or lend unsecured overnight funds from or to other FHLBanks. All such transactions are at current market rates. Interest income and interest expense related to these transactions with other FHLBanks are included in other interest income and interest expense from other borrowings in the Statements of Income. Balances outstanding at period end with other FHLBanks, if any, are identified in the Bank’s financial statements. During the years ended December 31, 2017, 2016, and 2015, the Bank extended overnight loans to other FHLBanks for $1,505, $505, and $1,805 respectively. During the years ended December 31, 2017, 2016, and 2015, the Bank borrowed $240, $2,490, and $4,812 respectively, from other FHLBanks. The impact to net interest income related to these transactions was de minimis in any period in this report.

MPF Mortgage Loans. The Bank pays a transaction services fee to the FHLBank of Chicago for its participation in the MPF program. This fee is assessed monthly and is based on the amount of mortgage loans in which the Bank invested and which remain outstanding on its Statements of Condition. For the years ended December 31, 2017 and 2016, the Bank recorded $1 and $1, respectively, in MPF transaction services fee expense to the FHLBank of Chicago, which was recorded in the Statements of Income as other expense. For the year ended December 31, 2015, the Bank recorded de minimis amounts in MPF transaction services fee expense to the FHLBank of Chicago.

In addition, the Bank receives a counterparty fee from the FHLBank of Chicago for facilitating the sale of loans under the MPF program. For the years ended December 31, 2017 and 2016, the Bank recorded a de minimis amount in MPF counterparty fee income from the FHLBank of Chicago, which was recorded in the Statements of Income as other income. For the year ended December 31, 2015, the Bank had no MPF counterparty fee income from the FHLBank of Chicago.

Consolidated Obligations. The Bank may, from time to time, transfer to or assume from another FHLBank the outstanding primary liability for FHLBank consolidated obligations. During the years ended December 31, 2017 and 2016, the Bank did not transfer any debt to other FHLBanks or assume any debt from other FHLBanks.

Transactions with the Office of Finance. The Bank’s proportionate share of the cost of operating the Office of Finance is identified in the Statements of Income.

XML

Other

12 Months Ended

Dec. 31, 2017

Other Income and Expenses [Abstract]

Other Income and Other Expense Disclosure [Text Block]

Other

The table below discloses the categories included in other operating expense for the years ended December 31, 2017, 2016, and 2015.

	2017		2016		2015
Professional and contract services	$	39	$	47	$	50
Travel	2		2		2
Occupancy	7		6		5
Equipment	16		13		10
Other	6		6		4
Total	$	70	$	74	$	71

XML

Subsequent Events

12 Months Ended

Dec. 31, 2017

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

There were no material subsequent events identified, subsequent to December 31, 2017, until the time of the Form 10-K filing with the Securities and Exchange Commission.

XML

Summary of Significant Accounting Policies / Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make a number of judgments, estimates, and assumptions that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income, expenses, gains, and losses during the reporting period. The most significant of these estimates include estimating the allowance for credit losses on the advances and mortgage loan portfolios; accounting for derivatives; estimating fair values of investments classified as trading and available-for-sale, derivatives and associated hedged items carried at fair value in accordance with the accounting for derivative instruments and associated hedging activities, and financial instruments carried at fair value under the fair value option, and accounting for other-than-temporary impairment (OTTI) for investment securities; and estimating the prepayment speeds on mortgage-backed securities (MBS) and mortgage loans for the accounting of amortization of premiums and accretion of discounts on MBS and mortgage loans. Actual results could differ significantly from these estimates.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make a number of judgments, estimates, and assumptions that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income, expenses, gains, and losses during the reporting period. The most significant of these estimates include estimating the allowance for credit losses on the advances and mortgage loan portfolios; accounting for derivatives; estimating fair values of investments classified as trading and available-for-sale, derivatives and associated hedged items carried at fair value in accordance with the accounting for derivative instruments and associated hedging activities, and financial instruments carried at fair value under the fair value option, and accounting for other-than-temporary impairment (OTTI) for investment securities; and estimating the prepayment speeds on mortgage-backed securities (MBS) and mortgage loans for the accounting of amortization of premiums and accretion of discounts on MBS and mortgage loans. Actual results could differ significantly from these estimates.

Fair Value Measurement, Policy [Policy Text Block]

Many of the Bank's financial instruments lack an available liquid trading market as characterized by frequent exchange transactions between a willing buyer and willing seller. Therefore, the Bank uses financial models employing significant assumptions and present value calculations for the purpose of determining estimated fair values. Thus, the fair values may not represent the actual values of the financial instruments that could have been realized as of yearend or that will be realized in the future.

Fair values for certain financial instruments are based on quoted prices, market rates, or replacement rates for similar financial instruments as of the last business day of the year. The estimated fair values of the Bank's financial instruments and related assumptions are detailed in Note 19 – Fair Value.

Reclassification, Policy [Policy Text Block]

Repurchase and Resale Agreements Policy [Policy Text Block]

These investments provide short-term liquidity and are carried at cost. The Bank treats securities purchased under agreements to resell as collateralized financing arrangements because they effectively represent short-term loans to counterparties that are considered by the Bank to be of investment quality, which are classified as assets in the Statements of Condition. Securities purchased under agreements to resell are held in safekeeping in the name of the Bank by third-party custodians approved by the Bank. In accordance with the terms of these loans, if the market value of the underlying securities decreases below the market value required as collateral, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash. If an agreement to resell is deemed to be impaired, the difference between the fair value of the collateral and the amortized cost of the agreement is charged to earnings.

Investment, Policy [Policy Text Block]

Federal Funds Sold. These investments provide short-term liquidity and are carried at cost. The Bank invests in Federal funds sold with counterparties that are considered by the Bank to be of investment quality.

Interest-bearing Deposits. This investment provides short-term liquidity and is carried at cost. Interest-bearing deposits includeinterest-bearing deposits in banks not meeting the definition of a security. Interest income on interest-bearing deposits is accrued as earned and recorded in interest income on the Statements of Income.

Investment Securities. The Bank classifies investments as trading, available-for-sale (AFS), or held-to-maturity (HTM) at the date of acquisition. Purchases and sales of securities are recorded on a trade date basis.

The Bank classifies certain investments as trading. These securities are held for liquidity purposes and carried at fair value with changes in the fair value of these investments recorded in other income. The Bank does not participate in speculative trading practices and holds these investments indefinitely as the Bank periodically evaluates its liquidity needs.

The Bank classifies certain securities as AFS and carries these securities at their fair value. Unrealized gains and losses on these securities are recognized in accumulated other comprehensive income (AOCI).

HTM securities are carried at cost, adjusted for periodic principal repayments; amortization of premiums and accretion of discounts; and previous OTTI recognized in net income and AOCI. The Bank classifies these investments as HTM securities because the Bank has the positive intent and ability to hold these securities until maturity.

Certain changes in circumstances may cause the Bank to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future. Thus, the sale or transfer of an HTM security because of certain changes in circumstances, such as evidence of significant deterioration in the issuer's creditworthiness or changes in regulatory requirements, is not considered to be inconsistent with its original classification. Other events that are isolated, nonrecurring, and unusual for the Bank that could not have been reasonably anticipated may cause the Bank to sell or transfer an HTM security without necessarily calling into question its intent to hold other debt securities to maturity. In addition, sales of debt securities that meet either of the following two conditions may be considered as maturities for purposes of the classification of securities: (i) the sale occurs near enough to its maturity date (or call date if exercise of the call is probable) that interest rate risk is substantially eliminated as a pricing factor and changes in market interest rates would not have a significant effect on the security's fair value, or (ii) the sale occurs after the Bank has already collected a substantial portion (at least 85%) of the principal outstanding at acquisition because of prepayments on the debt security or scheduled payments on a debt security payable in equal installments (both principal and interest) over its term.

The Bank calculates the amortization of purchase premiums and accretion of purchase discounts on investments using the level-yield method on a retrospective basis over the estimated life of the securities. This method requires a retrospective adjustment of the effective yield each time the Bank changes the estimated life as if the new estimate had been known since the original acquisition date of the securities. The Bank uses nationally recognized, market-based, third-party prepayment models to project estimated lives.

On a quarterly basis, the Bank evaluates its individual AFS and HTM investment securities in an unrealized loss position for OTTI. A security is considered impaired when its fair value is less than its amortized cost basis. For impaired debt securities, an entity is required to assess whether: (i) it has the intent to sell the debt security; (ii) it is more likely than not that it will be required to sell the debt security before its anticipated recovery of the remaining amortized cost basis of the security; or (iii) it does not expect to recover the entire amortized cost basis of the impaired debt security. If any of these conditions is met, an OTTI on the security must be recognized.

With respect to any debt security, a credit loss is defined as the amount by which the amortized cost basis exceeds the present value of the cash flows expected to be collected. If a credit loss exists but the entity does not intend to sell the debt security and it is not more likely than not that the entity will be required to sell the debt security before the anticipated recovery of its remaining amortized cost basis (the amortized cost basis less any current-period credit loss), the carrying value of the debt security is adjusted to its fair value. However, instead of recognizing the entire difference between the amortized cost basis and fair value in earnings, only the amount of the impairment representing the credit loss is recognized in earnings, while the amount of non-credit-related impairment is recognized in AOCI. The total OTTI is presented in the Statements of Income with an offset for the amount of the total OTTI that is recognized in AOCI. This presentation provides additional information about the amounts that the entity does not expect to collect related to a debt security. The credit loss on a debt security is limited to the amount of that security's unrealized losses.

For subsequent accounting of other-than-temporarily impaired securities, if the present value of cash flows expected to be collected is less than the amortized cost basis, the Bank records an additional OTTI. The amount of total OTTI for a security that was previously impaired is calculated as the difference between its amortized cost less the amount of OTTI recognized in AOCI prior to the determination of OTTI and its fair value. For an other-than-temporarily impaired security that was previously impaired and has subsequently incurred an additional OTTI related to credit loss (limited to that security's unrealized losses), this additional credit-related OTTI, up to the amount in AOCI, would be reclassified out of non-credit-related OTTI in AOCI and charged to earnings. Any credit loss in excess of the related AOCI is charged to earnings.

Subsequent related increases and decreases (if not an OTTI) in the fair value of AFS securities will be netted against the non-credit component of OTTI previously recognized in AOCI.

For securities classified as HTM, the OTTI recognized in AOCI is accreted to the carrying value of each security on a prospective basis, based on the amount and timing of future estimated cash flows (with no effect on earnings unless the security is subsequently sold or there are additional decreases in cash flows expected to be collected). For securities classified as AFS, the Bank does not accrete the OTTI recognized in AOCI to the carrying value because the subsequent measurement basis for these securities is fair value.

For securities previously identified as other-than-temporarily impaired, the Bank updates its estimate of future estimated cash flows on a regular basis. If there is no additional impairment on the security, any improvement in expected cash flows is accreted into interest income in the Statements of Income.

To assess whether it expects to recover the entire amortized cost basis of its PLRMBS, the Bank performed a cash flow analysis for all of its PLRMBS as of December 31, 2017, using two third-party models. The OTTI Governance Committee of the Federal Home Loan Banks (FHLBanks) developed a short-term housing price forecast with projected changes ranging from a decrease of 5.0% to an increase of 12.0% over the 12-month period beginning October 1, 2017. For the vast majority of markets, the projected short-term housing price changes range from an increase of 2.0% to an increase of 6.0%. Thereafter, a unique path is projected for each geographic area based on an internally developed framework derived from historical data.

The projected cash flows are based on a number of assumptions and expectations, and the results of these models can vary significantly with changes in assumptions and expectations. The scenario of cash flows determined reflects a best-estimate scenario and includes a base case housing price forecast that reflects the expectations for near- and long-term housing price behavior.

At each quarter end, the Bank compares the present value of the cash flows expected to be collected on its PLRMBS to the amortized cost basis of the securities to determine whether a credit loss exists. The Bank then uses the effective interest rate for the security prior to impairment for determining the present value of the future estimated cash flows.

For all the PLRMBS in its AFS and HTM portfolios, the Bank does not intend to sell any security and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.

Changes in circumstances may cause the Bank to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future. The sale or transfer of an HTM security because of certain changes in circumstances, such as evidence of significant deterioration in the issuers’ creditworthiness, is not considered to be inconsistent with its original classification. In addition, other events that are isolated, nonrecurring, or unusual for the Bank that could not have been reasonably anticipated may cause the Bank to sell or transfer an HTM security without necessarily calling into question its intent to hold other debt securities to maturity.

The Bank elected to transfer any PLRMBS that incurred a credit-related OTTI charge during the applicable period from the Bank’s held-to-maturity portfolio to its available-for-sale portfolio at their fair values. The Bank recognized an OTTI credit loss on these held-to-maturity PLRMBS, which the Bank believes is evidence of a significant decline in the issuers’ creditworthiness. The decline in the issuers’ creditworthiness is the basis for the transfers to the available-for-sale portfolio. These transfers allow the Bank the option to sell these securities prior to maturity in view of changes in interest rates, changes in prepayment risk, or other factors, while recognizing the Bank’s intent to hold these securities for an indefinite period of time. The Bank does not intend to sell its other-than-temporarily impaired securities and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.

Derivatives, Offsetting Fair Value Amounts, Policy [Policy Text Block]

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

The net exposure for these financial instruments can change on a daily basis; therefore, there may be a delay between the time this exposure change is identified and additional collateral is requested, and the time this collateral is received or pledged. Likewise, there may be a delay for excess collateral to be returned. For derivative instruments that meet the netting requirements, any excess cash collateral received or pledged is recognized as a derivative liability or derivative asset. Additional information regarding these agreements is provided in Note 18 – Derivatives and Hedging Activities. Based on the fair value of the related collateral held, the securities purchased under agreements to resell were fully collateralized for the periods presented.

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

The net exposure for these financial instruments can change on a daily basis; therefore, there may be a delay between the time this exposure change is identified and additional collateral is requested, and the time this collateral is received or pledged. Likewise, there may be a delay for excess collateral to be returned. For derivative instruments that meet the netting requirements, any excess cash collateral received or pledged is recognized as a derivative liability or derivative asset. Additional information regarding these agreements is provided in Note 18 – Derivatives and Hedging Activities. Based on the fair value of the related collateral held, the securities purchased under agreements to resell were fully collateralized for the periods presented.

The Bank may present derivative instruments, related cash collateral received or pledged, and associated accrued interest by clearing agent or by counterparty when the netting requirements have been met.

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

The Bank’s investments in variable interest entities (VIEs) are limited to private-label residential mortgage-backed securities (PLRMBS). On an ongoing basis, the Bank performs a quarterly evaluation

to determine whether it is the primary beneficiary in any VIE. The Bank evaluated its investments in VIEs as of December 31, 2017, to determine whether it is a primary beneficiary of any of these investments. The primary beneficiary is required to consolidate a VIE. The Bank determined that consolidation accounting is not required because the Bank is not the primary beneficiary of these VIEs for the periods presented. The Bank does not have the power to significantly affect the economic performance of any of these investments because it does not act as a key decision maker nor does it have the unilateral ability to replace a key decision maker. In addition, the Bank does not design, sponsor, transfer, service, or provide credit or liquidity support in any of its investments in VIEs. The Bank’s maximum loss exposure for these investments is limited to the carrying value.

The Bank’s investments in variable interest entities (VIEs) are limited to private-label residential mortgage-backed securities (PLRMBS). On an ongoing basis, the Bank performs a quarterly evaluation

to determine whether it is the primary beneficiary in any VIE. The Bank evaluated its investments in VIEs as of December 31, 2017, to determine whether it is a primary beneficiary of any of these investments. The primary beneficiary is required to consolidate a VIE. The Bank determined that consolidation accounting is not required because the Bank is not the primary beneficiary of these VIEs for the periods presented. The Bank does not have the power to significantly affect the economic performance of any of these investments because it does not act as a key decision maker nor does it have the unilateral ability to replace a key decision maker. In addition, the Bank does not design, sponsor, transfer, service, or provide credit or liquidity support in any of its investments in VIEs. The Bank’s maximum loss exposure for these investments is limited to the carrying value.

Federal Home Loan Bank, Advances, Receivables Policy [Policy Text Block]

The Bank reports advances (loans to members, former members or their successors, or housing associates) either at amortized cost or at fair value when the fair value option is elected. Advances carried at amortized cost are reported net of premiums, discounts (including discounts related to the Affordable Housing Program), and hedging adjustments. The Bank amortizes premiums and accretes discounts and recognizes hedging adjustments resulting from the discontinuation of a hedging relationship to interest income using a level-yield methodology. Interest on advances is credited to income as earned. For advances carried at fair value, the Bank recognizes contractual interest in interest income.

Advance Modifications. In cases in which the Bank funds an advance concurrent with or within a short period of time before or after the prepayment of a previous advance to the same member, the Bank evaluates whether the subsequent advance meets the accounting criteria to qualify as a modification of an existing advance or whether it constitutes a new advance. The Bank compares the present value of the cash flows on the subsequent advance to the present value of the cash flows remaining on the previous advance. If there is at least a 10% difference in the present value of the cash flows or if the Bank concludes that the difference between the advances is more than minor based on a qualitative assessment of the modifications made to the previous advance's contractual terms, then the subsequent advance is accounted for as a new advance. In all other instances, the subsequent advance is accounted for as a modification.

Prepayment Fees. When a borrower prepays certain advances prior to the original maturity, the Bank may charge the borrower a prepayment fee. For certain advances with partial prepayment symmetry, the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid.

For prepaid advances that are hedged and meet the hedge accounting requirements, the Bank terminates the hedging relationship upon prepayment and records the associated fair value gains and losses, adjusted for the prepayment fees, in interest income. If a new advance represents a modification of an original hedged advance, the fair value gains or losses on the advance and the prepayment fees are included in the carrying amount of the modified advance, and gains or losses and prepayment fees are amortized in interest income over the life of the modified advance using the level-yield method. If the modified advance is also hedged and the hedge meets the hedge accounting requirements, the modified advance is marked to fair value after the modification, and subsequent fair value changes are recorded in other income. If the prepayment represents an extinguishment of the original hedged advance, the prepayment fee and any fair value gain or loss are immediately recognized in interest income.

For prepaid advances that are not hedged or that are hedged but do not meet the hedge accounting requirements, the Bank records prepayment fees in interest income unless the Bank determines that the new advance represents a modification of the original advance. If the new advance represents a modification of the original advance, the prepayment fee on the original advance is deferred, recorded in the basis of the modified advance, and amortized over the life of the modified advance using the level-yield method. This amortization is recorded in interest income.

The Bank charges borrowers prepayment fees or pays borrowers prepayment credits when the principal on certain advances is paid prior to original maturity. The Bank records prepayment fees net of any associated fair value adjustments related to prepaid advances that were hedged. The net amount of prepayment fees is reflected as interest income in the Statements of Income

Loans and Leases Receivable, Mortgage Banking Activities, Policy [Policy Text Block]

Under the Mortgage Partnership Finance® (MPF®) Program, the Bank may purchase from members, for its own portfolio, conventional conforming fixed rate residential mortgage loans under the MPF Original product and mortgage loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) from its participating members under the MPF Government product. (“Mortgage Partnership Finance” and “MPF” are registered trademarks of the FHLBank of Chicago.) Participating members originate or purchase the mortgage loans, credit-enhance them and sell them to the Bank, and generally retain the servicing of the loans. The Bank manages the interest rate risk, prepayment risk, and liquidity risk of each loan in its portfolio. The Bank and the participating financial institution (either the original participating member that sold the loans to the Bank or a successor to that member) share in the credit risk of the loans, with the Bank assuming the first loss obligation limited by the first loss account, and the participating financial institution assuming credit losses in excess of the first loss account, up to the amount of the credit enhancement obligation specified in the master agreement. The amount of the credit enhancement is calculated so that any Bank credit losses (excluding special hazard losses) in excess of the first loss account are limited to those that would be expected from an equivalent investment with a long-term credit rating of AA for loans purchased prior to April 2017 and BBB for loans purchased thereafter, as determined by the MPF Program methodology.

In addition, the Bank may facilitate the purchase of conforming fixed rate mortgage loans from members for concurrent sale to Fannie Mae under the MPF Xtra® product; of jumbo fixed rate mortgage loans for concurrent sale to Redwood Residential Acquisition Corporation, a subsidiary of Redwood Trust, Inc., a real estate investment trust, under the MPF Direct product; and of government-insured or government-guaranteed mortgage loans that will be packaged into securities backed by the mortgage loans and guaranteed by Ginnie Mae under the MPF Government MBS product. When members sell mortgage loans under the MPF Xtra, MPF Direct, and MPF Government MBS products, the loans are sold to a third-party investor and are not recorded on the Bank’s Statements of Condition. (“MPF Xtra” is a registered trademark of the FHLBank of Chicago.)

Under the MPF® Program, the Bank may purchase from members, for its own portfolio, conventional conforming fixed rate mortgage loans under the MPF Original product and mortgage loans insured by the FHA or guaranteed by the Department of VA under the MPF Government product. In addition, the Bank may facilitate the purchase of conforming fixed rate mortgage loans from members for concurrent sale to Fannie Mae under the MPF Xtra® product; of jumbo fixed rate mortgage loans for concurrent sale to Redwood Residential Acquisition Corporation, a subsidiary of Redwood Trust, Inc., a real estate investment trust, under the MPF Direct product; and of government-insured or government-guaranteed mortgage loans that will be packaged into securities backed by the mortgage loans and guaranteed by Ginnie Mae under the MPF Government MBS product. When members sell mortgage loans under the MPF Xtra, MPF Direct, and MPF Government MBS products, the loans are sold to a third-party investor and are not recorded on the Bank’s Statements of Condition.

Finance, Loan and Lease Receivables, Held-for-investment, Policy [Policy Text Block]

For taking on the credit enhancement obligation, the Bank pays the participating financial institution a credit enhancement fee, which is calculated on the remaining unpaid principal balance of the mortgage loans. Depending on the specific MPF product, all or a portion of the credit enhancement fee is typically paid monthly beginning with the month after each delivery of loans. The MPF Original product provides participating financial institutions the option to receive credit enhancement fees on a monthly basis or in an upfront lump sum amount that is included in the purchase price at the time loans are sold to the Bank. The lump sum amount is approximately equivalent to the present value of the monthly credit enhancement fees that the Bank would otherwise be expected to pay over the life of the loans. The MPF Plus product provides for a performance-based credit enhancement fee, which accrues monthly, beginning with the month after each delivery of loans, and is paid to the participating financial institution beginning 12 months later. The performance-based credit enhancement fee will be reduced by an amount equivalent to loan losses up to the amount of the first loss account established for each master commitment. The participating financial institutions obtain supplemental mortgage insurance (SMI) to cover their credit enhancement obligations under this product. If the SMI provider's claims-paying ability rating falls below a specified level, the participating financial institution has six months to either replace the SMI policy or assume the credit enhancement obligation and fully collateralize the obligation; otherwise the Bank may choose not to pay the participating financial institution its performance-based credit enhancement fee.

The Bank classifies mortgage loans as held for investment and, accordingly, reports them at their principal amount outstanding net of unamortized premiums, unamortized credit enhancement fees paid as a lump sum at the time loans are purchased, discounts, and unrealized gains and losses from loans initially classified as mortgage loan commitments. The Bank defers and amortizes these amounts as interest income using the level-yield method on a retrospective basis over the estimated life of the related mortgage loan. Actual prepayment experience and estimates of future principal prepayments are used in calculating the estimated life of the mortgage loans. The Bank aggregates the mortgage loans by similar characteristics (type, maturity, note rate, and acquisition date) in determining prepayment estimates. A retrospective adjustment is required each time the Bank changes the estimated amounts as if the new estimate had been known since the original acquisition date of the assets. The Bank uses nationally recognized, market-based, third-party prepayment models to project estimated lives.

The Bank records credit enhancement fees as a reduction to interest income.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

An allowance for credit losses is a valuation allowance separately established for each identified portfolio segment, if it is probable that impairment has occurred in the Bank's portfolio as of the Statements of Condition date and the amount of loss can be reasonably estimated. To the extent necessary, an allowance for credit losses for off-balance sheet credit exposures is recorded as a liability.

Portfolio Segments.A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. The Bank has developed and documented a systematic methodology for determining an allowance for credit losses for each applicable portfolio segment.

See Note 10 – Allowance for Credit Losses for more information.

The Bank invests in Federal funds sold with counterparties that are considered by the Bank to be of investment quality, and these investments are evaluated for purposes of an allowance for credit losses only if the investment is not paid when due

The Bank and any participating financial institution share in the credit risk of the loans sold by that institution as specified in a master agreement. Loans purchased under the MPF Program generally had a credit risk exposure at the time of purchase that, as determined by the MPF Program methodology, would be expected from an equivalent investment rated AA if purchased prior to April 2017, or rated BBB if purchased since April 2017, taking into consideration the credit risk sharing structure mandated by the Finance Agency’s acquired member assets (AMA) regulation. The MPF Program structures potential credit losses on conventional MPF loans into layers with respect to each pool of loans purchased by the Bank under a single master commitment, as follows:

1. The first layer of protection against loss is the liquidation value of the real property securing the loan.

2. The next layer of protection comes from the primary mortgage insurance that is required for loans with a loan-to-value ratio greater than 80%, if still in place.

3. Losses that exceed the liquidation value of the real property and any primary mortgage insurance, up to an agreed-upon amount called the first loss account for each master commitment, are incurred by the Bank.

4. Losses in excess of the first loss account for each master commitment, up to an agreed-upon amount called the credit enhancement amount, are covered by the participating financial institution’s credit enhancement obligation at the time losses are incurred.

5. Losses in excess of the first loss account and the participating financial institution’s remaining credit enhancement for the master commitment, if any, are incurred by the Bank.

The Bank calculates its estimated allowance for credit losses on mortgage loans acquired under the MPF Original and MPF Plus products as described below. Effective January 1, 2015, the Bank implemented the accounting requirements of regulatory Advisory Bulletin 2012-02. As a result, for any mortgage loans that are more than 180 days past due and that have any outstanding balance in excess of the fair value of the property, less cost to sell, this excess is charged off as a loss by the end of the month in which the applicable time period elapses. Likewise, when a borrower is in bankruptcy, loans are written down to the fair value of the collateral, less cost to sell, in general within 60 days of receipt of the notification of filing from the bankruptcy court, unless it can be clearly demonstrated and documented that repayment is likely to occur. As a result of these charge-offs, corresponding Allowance for Credit Losses on MPF Loans, which had previously provided for most of these expected losses, was reduced accordingly.

Allowance for Credit Losses on MPF Loans –The Bank evaluates the allowance for credit losses on MPF mortgage loans based on two components. The first component applies to each individual loan that is specifically identified as impaired. The Bank evaluates the exposure on these loans by considering the first layer of loss protection (the liquidation value of the real property securing the loan) and the availability and collectability of credit enhancements under the terms of each master commitment and records a provision for credit losses.

The second component applies to loans that are not specifically identified as impaired and is based on the Bank’s estimate of probable credit losses on those loans as of the financial statement date. The Bank evaluates the credit loss exposure on a loan pool basis considering various observable data, such as delinquency statistics, past performance, current performance, loan portfolio characteristics, collateral valuations, industry data, and prevailing economic conditions. The Bank also considers the availability and collectability of credit enhancements from participating financial institutions or from mortgage insurers under the terms of each master commitment.

Finance, Loan and Lease Receivables, Held-for-investment, Allowance and Nonperforming Loans, Allowance Policy [Policy Text Block]

A mortgage loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the mortgage loan agreement.

Loans that are on non-accrual status and that are considered collateral-dependent are measured for impairment based on the fair value of the underlying property less estimated selling costs. Loans are considered collateral-dependent if repayment is expected to be provided solely by the sale of the underlying property, that is, there is no other available and reliable source of repayment. Collateral-dependent loans are impaired if the fair value of the underlying collateral less estimated selling costs is insufficient to recover the unpaid principal balance on the loan. Interest income on impaired loans is recognized in the same manner as interest income on non-accrual loans noted below.

The Bank places a mortgage loan on nonaccrual status when the collection of the contractual principal or interest from the participating financial institution is reported 90 days or more past due or when the loan is in foreclosure. When a mortgage loan is placed on nonaccrual status, accrued but uncollected interest is reversed against interest income. The Bank records cash payments received on nonaccrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful. If the collection of the remaining principal amount due is considered doubtful, then cash payments received would be applied first solely to principal until the remaining principal amount due is expected to be collected and then as a recovery of any charge-off, if applicable, followed by recording interest income. A loan on non-accrual status may be restored to accrual when (1) none of its contractual principal and interest is due and unpaid, and the Bank expects repayment of the remaining contractual interest and principal, or (2) it otherwise becomes well secured and in the process of collection. For any mortgage loans that are more than 180 days past due and that have any outstanding balance in excess of the fair value of the property, less cost to sell, this excess is charged off as a loss by the end of the month in which the applicable time period elapses. Likewise, when a borrower is in bankruptcy, loans are written down to the fair value of the collateral, less cost to sell, in general within 60 days of receipt of the notification of filing from the bankruptcy court, unless it can be clearly demonstrated and documented that repayment is likely to occur.

A mortgage loan is considered to be impaired when it is reported 90 days or more past due (nonaccrual) or when it is probable, based on current information and events, that the Bank will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreement.

Loans that are on nonaccrual status and that are considered collateral-dependent are measured for impairment based on the fair value of the underlying property less estimated selling costs. Loans are considered collateral-dependent if repayment is expected to be provided solely by the sale of the underlying property, that is, if it is considered likely that the borrower will default and there is no credit enhancement to offset losses under the master commitment, or the collectability or availability of credit enhancement is deemed to be uncertain. Collateral-dependent loans are impaired if the fair value of the underlying collateral less estimated selling costs is insufficient to recover the unpaid principal balance on the loan. Interest income on impaired loans is recognized in the same manner as interest income on nonaccrual loans, as noted below.

The Bank places a mortgage loan on nonaccrual status when the collection of the contractual principal or interest from the participating financial institution is reported 90 days or more past due or when the loan is in foreclosure. When a mortgage loan is placed on nonaccrual status, accrued but uncollected interest is reversed against interest income. The Bank records cash payments received on nonaccrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful.

An allowance for credit losses is a valuation allowance separately established for each identified portfolio segment, if it is probable that impairment has occurred in the Bank's portfolio as of the Statements of Condition date and the amount of loss can be reasonably estimated. To the extent necessary, an allowance for credit losses for off-balance sheet credit exposures is recorded as a liability.

Portfolio Segments.A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. The Bank has developed and documented a systematic methodology for determining an allowance for credit losses for each of the following portfolio segments:

• advances, letters of credit, and other extensions of credit, collectively referred to as “credit products,”

• MPF loans held for portfolio,

• term securities purchased under agreements to resell, and

• term Federal funds sold.

Classes of Financing Receivables.Classes of financing receivables generally are a disaggregation of a portfolio segment to the extent needed to understand the exposure to credit risk arising from these financing receivables. The Bank determined that no further disaggregation of the portfolio segments identified above is needed because the credit risk arising from these financing receivables is assessed and measured by the Bank at the portfolio segment level.

Credit Products. The Bank lends to member financial institutions that have a principal place of business in Arizona, California, or Nevada. Under the FHLBank Act, the Bank is required to obtain sufficient collateral for credit products to protect the Bank from credit losses. Collateral eligible to secure credit products includes certain investment securities, residential mortgage loans, cash or deposits with the Bank, and other eligible real estate-related assets. The capital stock of the Bank owned by each borrowing member is pledged as additional collateral for the member's indebtedness to the Bank. The Bank may also accept secured small business, small farm, and small agribusiness loans, and securities representing a whole interest in such secured loans, as collateral from members that are community financial institutions. The Housing and Economic Recovery Act of 2008 (Housing Act) added secured loans for community development activities as collateral that the Bank may accept from community financial institutions. In addition, the Bank has advances outstanding to former members and member successors, which are also subject to these security terms.

The Bank requires each borrowing member to execute a written Advances and Security Agreement, which describes the lending relationship between the Bank and the borrower. At December 31, 2017 and 2016, the Bank had a perfected security interest in collateral pledged by each borrowing member, or by the member's affiliate on behalf of the member, and by each nonmember borrower, with an estimated value in excess of the outstanding credit products for that borrower. Based on the financial condition of the borrower, the Bank may either (i) allow the borrower or the pledging affiliate to retain physical possession of loan collateral pledged to the Bank, provided that the borrower or the pledging affiliate agrees to hold the collateral for the benefit of the Bank, or (ii) require the borrower or the pledging affiliate to deliver physical possession of loan collateral to the Bank or its custodial agent. All securities collateral is required to be delivered to the Bank's custodial agent. All loan collateral pledged to the Bank is subject to a UCC-1 financing statement.

Section 10(e) of the FHLBank Act affords any security interest granted to the Bank by a member or any affiliate of the member or any nonmember borrower priority over claims or rights of any other party, except claims or rights that (i) would be entitled to priority under otherwise applicable law and (ii) are held by bona fide purchasers for value or secured parties with perfected security interests.

The Bank classifies as impaired any advance with respect to which it is probable that all principal and interest due will not be collected according to its contractual terms. Impaired advances are valued using the present value of expected future cash flows discounted at the advance's effective interest rate, the advance's observable market price or, if collateral-dependent, the fair value of the advance's underlying collateral. When an advance is classified as impaired, the accrual of interest is discontinued and unpaid accrued interest is reversed. Advances do not return to accrual status until they are brought current with respect to both principal and interest and until the future principal payments are no longer in doubt. No advances were classified as impaired during the periods presented.

The Bank manages its credit exposure related to credit products through an integrated approach that generally provides for a credit limit to be established for each borrower, includes an ongoing review of each borrower’s financial condition, and is coupled with conservative collateral and lending policies to limit the risk of loss while taking into account borrowers’ needs for a reliable funding source.

The Bank manages its credit exposure related to credit products through an integrated approach that generally provides for a credit limit to be established for each borrower, includes an ongoing review of each borrower’s financial condition, and is coupled with conservative collateral and lending policies to limit the risk of loss while taking into account borrowers’ needs for a reliable funding source. At December 31, 2017 and 2016, none of the Bank’s credit products were past due, on nonaccrual status, or considered impaired. There were no troubled debt restructurings related to credit products during December 31, 2017 and 2016.

Finance, Loan and Lease Receivables, Held for Investments, Foreclosed Assets Policy [Policy Text Block]

Real estate owned (REO) includes assets that have been received in satisfaction of debt through foreclosures. REO is initially recorded at fair value less estimated selling costs and is subsequently carried at the lower of that amount or current fair value less estimated selling costs. The Bank recognizes a charge-off to the allowance for credit losses if the fair value of the REO less estimated selling costs is less than the recorded investment in the loan at the date of transfer from loans to REO. Any subsequent realized gains, realized or unrealized losses, and carrying costs are included in other non-interest expense in the Statements of Income. REO is recorded in “Other assets” in the Statements of Condition. At December 31, 2017, the Bank’s other assets included $1 of REO resulting from foreclosure of 11 mortgage loans held by the Bank. At December 31, 2016, the Bank’s other assets included $1 of REO resulting from foreclosure of 12 mortgage loans held by the Bank.

Derivatives, Policy [Policy Text Block]

All derivatives are recognized on the Statements of Condition at their fair value. The Bank has elected to report derivative assets and derivative liabilities net of cash collateral, including initial and variation margin, and accrued interest received from or pledged to futures commission merchants (clearing agents) or counterparties. The fair values of derivatives are netted by clearing agent or counterparty when the netting requirements have been met. If these netted amounts are positive, they are classified as an asset, and if negative, they are classified as a liability. Cash flows associated with derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be a financing derivative.

Each derivative is designated as one of the following:

(1) a qualifying hedge of the change in fair value of (i) a recognized asset or liability or (ii) an unrecognized firm commitment (a fair value hedge);

(2) a qualifying hedge of (i) a forecasted transaction or (ii) the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a cash flow hedge);

(3) a non-qualifying hedge of an asset or liability for asset-liability management purposes or of certain advances and consolidated obligation bonds for which the Bank elected the fair value option (an economic hedge); or

(4) a non-qualifying hedge of another derivative (an intermediation hedge) that is offered as a product to members or used to offset other derivatives with nonmember counterparties.

If hedging relationships meet certain criteria, including but not limited to formal documentation of the hedging relationship and an expectation to be hedge effective, they are eligible for hedge accounting, and the offsetting changes in fair value of the hedged items attributable to the hedged risk may be recorded in earnings. The application of hedge accounting generally requires the Bank to evaluate the effectiveness of the hedging relationships at inception and on an ongoing basis and to calculate the changes in fair value of the derivatives and the related hedged items independently. This is known as the “long-haul” method of hedge accounting. Transactions that meet certain criteria qualify for the “short-cut” method of hedge accounting, in which an assumption can be made that the change in the fair value of a hedged item, because of changes in the benchmark rate, exactly offsets the change in the value of the related derivative. Under the shortcut method, the entire change in fair value of the interest rate swap is considered to be effective at achieving offsetting changes in fair values or cash flows of the hedged asset or liability.

Derivatives are typically executed at the same time as the hedged item, and the Bank designates the hedged item in a qualifying hedge relationship as of the trade date. In many hedging relationships, the Bank may designate the hedging relationship upon its commitment to disburse an advance or trade a consolidated obligation in which settlement occurs within the shortest period of time possible for the type of instrument based on market settlement conventions. The Bank records the changes in the fair value of the derivatives and the hedged item beginning on the trade date.

Changes in the fair value of a derivative that qualifies as a fair value hedge and is designated as a fair value hedge, along with changes in the fair value of the hedged asset or liability (hedged item) that are attributable to the hedged risk (including changes that reflect losses or gains on firm commitments), are recorded in other income as “Net gain/(loss) on derivatives and hedging activities.”

Changes in the fair value of a derivative that qualifies as a cash flow hedge and is designated as a cash flow hedge, to the extent that the hedge is effective, are recorded in AOCI, a component of capital, until earnings are affected by the variability of the cash flows of the hedged transaction (until the periodic recognition of interest on a variable rate asset or liability is recorded in earnings).

For both fair value and cash flow hedges, any hedge ineffectiveness (which represents the amount by which the change in the fair value of the derivative differs from the change in the fair value of the hedged item or the variability in the cash flows of the forecasted transaction) is recorded in other income as “Net gain/(loss) on derivatives and hedging activities.”

Changes in the fair value of a derivative designated as an economic hedge or an intermediation hedge are recorded in current period earnings with no fair value adjustment to an asset or liability. An economic hedge is defined as a derivative hedging certain advances and consolidated obligation bonds for which the Bank elected the fair value option, or hedging specific or non-specific underlying assets, liabilities, or firm commitments, that does not qualify or was not designated for fair value or cash flow hedge accounting, but is an acceptable hedging strategy under the Bank's risk management program. These economic hedging strategies also comply with Finance Agency regulatory requirements prohibiting speculative hedge transactions. An economic hedge introduces the potential for earnings variability caused by the changes in fair value of the derivatives that are recorded in the Bank's income but are not offset by corresponding changes in the value of the economically hedged assets, liabilities, or firm commitments. The derivatives used in intermediary activities do not qualify for hedge accounting treatment and are separately marked to market through earnings. The net result of the accounting for these derivatives does not significantly affect the operating results of the Bank. Changes in the fair value of these non-qualifying hedges are recorded in other income as “Net gain/(loss) on derivatives and hedging activities.” In addition, the net settlements associated with these non-qualifying hedges are recorded in other income as “Net gain/(loss) on derivatives and hedging activities.” Cash flows associated with these stand-alone derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be designated as a financing derivative.

The net settlements of interest receivables and payables on derivatives designated as fair value or cash flow hedges are recognized as adjustments to the interest income or interest expense of the designated underlying hedged item. The net settlements of interest receivables and payables on intermediated derivatives for members and other economic hedges are recognized in other income as “Net gain/(loss) on derivatives and hedging activities.”

The Bank discontinues hedge accounting prospectively when: (i) it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (ii) the derivative and/or the hedged item expires or is sold, terminated, or exercised; (iii) it is no longer probable that the forecasted transaction will occur in the originally expected period; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; (v) it determines that designating the derivative as a hedging instrument is no longer appropriate; or (vi) it decides to use the derivative to offset changes in the fair value of other derivatives or instruments carried at fair value.

When hedge accounting is discontinued, the Bank either terminates the derivative or continues to carry the derivative on the Statements of Condition at its fair value, ceases to adjust the hedged asset or liability for changes in fair value, and amortizes the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using a level-yield methodology.

When hedge accounting is discontinued because the Bank determines that the derivative no longer qualifies as an effective cash flow hedge of an existing hedged item, the Bank continues to carry the derivative on the Statements of Condition at its fair value and reclassifies the AOCI adjustment into earnings when earnings are affected by the existing hedged item (the original forecasted transaction).

Under limited circumstances, when the Bank discontinues cash flow hedge accounting because it is no longer probable that the forecasted transaction will occur by the end of the originally specified time period, or within the following two months, but it is probable the transaction will still occur in the future, the gain or loss on the derivative remains in AOCI and is recognized in earnings when the forecasted transaction affects earnings. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within the following two months, the gains and losses that were recorded in AOCI are recognized immediately in earnings.

When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the Bank continues to carry the derivative on the Statements of Condition at its fair value, removing from the Statements of Condition any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.

The Bank may be the primary obligor on consolidated obligations and may make advances in which derivative instruments are embedded. Upon execution of these transactions, the Bank assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance or debt (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that: (i) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and designated as a stand-alone derivative instrument equivalent to an economic hedge. However, the entire contract is carried on the Statements of Condition at fair value and no portion of the contract is designated as a hedging instrument if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current period earnings (such as an investment security classified as trading, as well as hybrid financial instruments that are eligible for the fair value option), or if the Bank cannot reliably identify and measure the embedded derivative for purposes of separating the derivative from its host contract.

The Bank is subject to credit risk as a result of potential nonperformance by counterparties to the interest rate exchange agreements. All of the Bank’s agreements governing uncleared derivative transactions contain master netting provisions to help mitigate the credit risk exposure to each counterparty. The Bank manages counterparty credit risk through credit analyses and collateral requirements and by following the requirements of the Bank’s risk management policies, credit guidelines, and Finance Agency and other regulations. The Bank also requires credit support agreements on all uncleared derivatives.

For cleared derivatives, the clearinghouse is the Bank’s counterparty. The requirement that the Bank post initial and variation margin through a clearing agent, to the clearinghouse, exposes the Bank to institutional credit risk in the event that the clearing agent or the clearinghouse fails to meet its obligations. The use of cleared derivatives, however, mitigates the Bank’s overall credit risk exposure because a central counterparty is substituted for individual counterparties and variation margin is posted daily for changes in the value of cleared derivatives through a clearing agent. The Bank has analyzed the enforceability of offsetting rights applicable to 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 bankruptcy law and Commodity Futures Trading Commission rules in the event of a clearinghouse or clearing agent insolvency and under applicable clearinghouse rules upon a non-insolvency-based event of default of the clearinghouse or clearing agent. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular clearinghouse.

Property, Plant and Equipment, Policy [Policy Text Block]

The Bank records premises, software, and equipment at cost less accumulated depreciation and amortization.The Bank's accumulated depreciation and amortization related to premises, software, and equipment totaled $74 and $61 at December 31, 2017 and 2016, respectively. Improvements and major renewals are capitalized; ordinary maintenance and repairs are expensed as incurred. Depreciation is computed on the straight-line method over the estimated useful lives of assets ranging from 3 to 10 years, and leasehold improvements are amortized on the straight-line method over the estimated useful life of the improvement or the remaining term of the lease, whichever is shorter.

Internal Use Software, Policy [Policy Text Block]

The cost of computer software developed or obtained for internal use is capitalized and depreciated over future periods.

Debt, Policy [Policy Text Block]

Discounts and Premiums on Consolidated Obligations. The discounts on consolidated obligation discount notes for which the Bank is the primary obligor are amortized to expense using the level-yield method over the term to maturity. The discounts and premiums on consolidated obligation bonds for which the Bank is the primary obligor are amortized to expense using the level-yield method over the remaining contractual life or on a retrospective basis over the estimated life of the consolidated obligation bonds.

Consolidated obligations are recorded at amortized cost unless the Bank has elected the fair value option, in which case the consolidated obligations are carried at fair value.

Concessions on Consolidated Obligations. Concessions are paid to dealers in connection with the issuance of consolidated obligations for which the Bank is the primary obligor. The amount of the concession is allocated to the Bank by the Office of Finance based on the percentage of the debt issued for which the Bank is the primary obligor. Concessions paid on consolidated obligations designated under the fair value option are expensed as incurred in non-interest expense. Concessions paid on consolidated obligations not designated under the fair value option are deferred and amortized to expense using the level-yield method over the remaining contractual life or on a retrospective basis over the estimated life of the consolidated obligations.

Shares Subject to Mandatory Redemption, Changes in Redemption Value, Policy [Policy Text Block]

The Bank reclassifies the capital stock subject to redemption from capital to a liability after a member provides the Bank with a written notice of redemption; gives notice of intention to withdraw from membership; or attains nonmember status by merger or acquisition, charter termination, or other involuntary membership termination; or after a receiver or other liquidating agent for a member transfers the member's Bank capital stock to a nonmember entity, resulting in the member's shares then meeting the definition of a mandatorily redeemable financial instrument. Shares meeting this definition are reclassified to a liability at fair value. Dividends declared on shares classified as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments (by repurchase or redemption of the shares) is reflected as a financing cash outflow in the Statements of Cash Flows once settled. See Note 15 – Capital for more information.

If a member cancels its written notice of redemption or notice of withdrawal or if the Bank allows the transfer of mandatorily redeemable capital stock to a member, the Bank reclassifies mandatorily redeemable capital stock from a liability to capital. After the reclassification, dividends on the capital stock are no longer classified as interest expense.

Regulator Expenses, Cost Assessed on Federal Home Loan Bank, Policy [Policy Text Block]

The FHLBanks fund a portion of the costs of operating the Finance Agency, and each FHLBank is assessed a proportionate share of those costs. The Finance Agency allocates its expenses and working capital fund among the FHLBanks based on the ratio between each FHLBank's minimum required regulatory capital and the aggregate minimum required regulatory capital of all the FHLBanks.

Office of Finance Cost Assessed on Federal Home Loan Bank, Policy [Policy Text Block]

Each FHLBank is assessed a proportionate share of the cost of operating the Office of Finance, which facilitates the issuance and servicing of consolidated obligations. The Office of Finance allocates its operating and capital expenditures among the FHLBanks as follows: (1) two-thirds of the assessment is based on each FHLBank's share of total consolidated obligations outstanding, and (2) one-third of the assessment is based on an equal pro rata allocation.

Federal Home Loan Bank Assessments, Policy [Policy Text Block]

As more fully discussed in Note 13 – Affordable Housing Program, the FHLBank Act requires each FHLBank to establish and fund an Affordable Housing Program (AHP). The Bank charges the required funding for the AHP to earnings and establishes a liability. The AHP funds provide subsidies to members to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. Subsidies may be in the form of direct grants or below-market interest rate advances.

The Bank accrues its AHP assessment monthly based on its net earnings. If the Bank experienced a net loss during a quarter but still had net earnings for the year, the Bank's obligation to the AHP would be calculated based on the Bank's year-to-date net earnings. If the Bank had net earnings in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. If the Bank experienced a net loss for a full year, the amount of the AHP liability would be equal to zero, since each FHLBank's required annual AHP contribution is limited to its annual net earnings. However, if the result of the aggregate 10% calculation is less than $100 for the FHLBanks combined, then the FHLBank Act requires that each FHLBank contribute such prorated sums as may be required to ensure that the aggregate contribution of the FHLBanks equals $100. The proration would be made on the basis of an FHLBank's income in relation to the income of all the FHLBanks for the previous year.

Revenue Recognition Accounting Policy [Policy Text Block]

Letter of credit fees are recorded as other income over the term of the letter of credit.

Litigation settlement gains, net of related legal expenses, are recorded in Other Income/(Loss) in “Gains on litigation settlements, net” in the Statements of Income. A litigation settlement gain is considered realized and recorded when the Bank receives cash or assets that are readily convertible to known amounts of cash or claims to cash. In addition, a litigation settlement gain is considered realizable and recorded when the Bank enters into a signed agreement that is not subject to appeal, where the counterparty has the ability to pay, and the amount to be received can be reasonably estimated. Prior to being realized or realizable, the Bank considers potential litigation settlement gains to be gain contingencies, and therefore they are not recorded in the Statements of Income. The related legal expenses are contingent-based fees and are only incurred and recorded upon a litigation settlement gain.

New Accounting Pronouncements, Policy [Policy Text Block]

Premium Amortization on Purchased Callable Debt Securities. On March 30, 2017, the FASB issued amended guidance to shorten the amortization period for certain purchased callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. This guidance affects all entities that hold investments in callable debt securities that have an amortized cost basis in excess of the amount that is repayable by the issuer at the earliest call date (that is, at a premium). This guidance is effective for the Bank for interim and annual periods beginning on January 1, 2019, and early adoption is permitted. This guidance should be applied using a modified retrospective method through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The adoption of this guidance is not expected to have any effect on the Bank’s financial condition, results of operations, or cash flows.

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. On March 10, 2017, the FASB issued amended guidance to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments require that employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components of net benefit cost in the Statements of Income. This guidance became effective for the Bank for interim and annual periods beginning on January 1, 2018, and was adopted retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the Statements of Income. The adoption of this guidance did not have a material effect on the Bank’s financial condition, results of operations, cash flows, and financial statement disclosures.

Classification of Certain Cash Receipts and Cash Payments. On August 26, 2016, the FASB issued amendments to clarify guidance on the classification of certain cash receipts and payments in the Statements of Cash Flows. This guidance is intended to reduce existing diversity in practice in how certain cash receipts and cash payments are presented and classified on the Statements of Cash Flows. This guidance became effective for the Bank for interim and annual periods beginning on January 1, 2018. The adoption of this guidance did not have any effect on the Bank’s financial condition, results of operations, or cash flows.

Measurement of Credit Losses on Financial Instruments. On June 16, 2016, the FASB issued amended guidance for the accounting for credit losses on financial instruments. The amendments require entities to measure expected credit losses based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate under the circumstances. In addition, under the new guidance, a financial asset, or a group of financial assets, is required to be measured at its amortized cost to be presented at the net amount expected to be collected over the contractual term of the financial assets. Among other things, the guidance also requires:

• The Statement of Income to reflect the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expected credit losses that have taken place during the period.

• The entities to determine the allowance for credit losses for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination that are measured at amortized cost basis in a similar manner to other financial assets measured at amortized cost basis. The initial allowance for credit losses is required to be added to the purchase price.

• Credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses. The amendments limit the allowance for credit losses to the amount by which fair value is below amortized cost.

• Public entities to further disaggregate the current disclosure of credit quality indicators in relation to the amortized cost of financing receivables by the year of origination (i.e., vintage).

The guidance is effective for the Bank for interim and annual periods beginning on January 1, 2020. Early application is permitted as of the interim and annual reporting periods beginning after December 15, 2018. The guidance should be applied using a modified-retrospective approach, through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. In addition, the entities are required to use a prospective transition approach for purchased financial assets with a more-than-insignificant amount of credit deterioration since origination and for debt securities for which an other-than-temporary impairment had been recognized before the effective date. The Bank does not intend to adopt the guidance early. The Bank is in the process of evaluating this guidance and expects the adoption of the guidance may result in an increase in the allowance for credit losses given the requirement to assess losses for the entire estimated life of the financial asset, including an allowance for debt securities. The effect on the Bank’s financial condition, results of operations, and cash flows will depend on the composition of financial assets held by the Bank at the adoption date, as well as on economic conditions and forecasts at that time.

Contingent Put and Call Options in Debt Instruments. On March 14, 2016, the FASB issued amendments to clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The guidance requires entities to apply only the four-step decision sequence when assessing whether the economic characteristics and risks of call (put) options are clearly and closely related to the economic characteristics and risks of their debt hosts. Consequently, when a call (put) option is contingently exercisable, an entity does not have to assess whether the event that triggers the ability to exercise a call (put) option is related to interest rates or credit risks. This guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2017. The adoption of this guidance had no effect on the Bank’s financial condition, results of operations, and cash flows.

Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships. On March 10, 2016, the FASB issued amendments to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under U.S. GAAP does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. This guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2017, and early adoption was permitted. The amendments provide entities with the option to apply the guidance using either a prospective approach or a modified retrospective approach, retrospectively applied to all derivative instruments that meet the specific conditions. The Bank elected to early adopt the guidance prospectively on January 1, 2016. The adoption of this guidance had no effect on the Bank’s financial condition, results of operations, and cash flows.

Recognition of Lease Assets and Lease Liabilities. On February 25, 2016, the FASB issued guidance that requires recognition of lease assets and lease liabilities on the Statements of Condition and disclosure of key information about leasing arrangements. In particular, this guidance requires a lessee of operating or finance leases to recognize on the Statements of Condition a liability to make lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. However, for leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election not to recognize lease assets and lease liabilities. Under previous U.S. GAAP, a lessee was not required to recognize lease assets and lease liabilities arising from operating leases on the Statements of Condition. While this guidance does not fundamentally change lessor accounting, some changes have been made to align that guidance with the lessee guidance and other areas within U.S. GAAP.

The guidance becomes effective for the Bank for the interim and annual periods beginning on January 1, 2019, and early application is permitted. The guidance requires lessors and lessees to recognize and measure leases at the beginning of the earliest period presented in the financial statements using a modified retrospective approach. The Bank does not intend to adopt this guidance early. Upon adoption, the Bank expects to report higher assets and liabilities as a result of recording right-of-use assets and lease liabilities for its existing leases on the Statements of Condition. The Bank is in the process of evaluating this guidance, but its effect on the Bank’s financial condition, results of operations, and cash flows is not expected to be material.

Recognition and Measurement of Financial Assets and Financial Liabilities. On January 5, 2016, the FASB issued amended guidance on certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. This guidance includes, but is not limited to, the following:

• Requires equity investments (with certain exceptions) to be measured at fair value with changes in fair value recognized in net income;

• Requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments;

• Requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the Statement of Condition or in the accompanying notes to the financial statements;

• Eliminates the requirement for public entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the Statement of Condition.

The guidance became effective for the Bank for the interim and annual periods beginning on January 1, 2018. The adoption of this guidance affected the Bank’s disclosures. However, the requirement to present the instrument-specific credit risk in other comprehensive income did not have any effect on the Bank’s financial condition, results of operations, and cash flows.

Revenue from Contracts with Customers. On May 28, 2014, the FASB issued its guidance on revenue from contracts with customers. This guidance outlines a comprehensive model for recognizing revenue arising from contracts with customers and supersedes most current revenue recognition guidance. In addition, this guidance amends the existing requirements for the recognition of a gain or loss on the transfer of non-financial assets that are not in a contract with a customer. This guidance applies to all contracts with customers except those that are within the scope of certain other standards, such as financial instruments, certain guarantees, insurance contracts, and lease contracts.

The guidance provides entities with the option of using either of the following adoption methods: a full retrospective method, applied retrospectively to each prior reporting period presented; or a modified retrospective method, with the cumulative effect of retrospectively applying this guidance recognized at the date of initial application.

On August 12, 2015, the FASB issued an amendment to defer the effective date of the guidance issued in May 2014 by one year. In 2016 and 2017, the FASB issued additional amendments to clarify certain aspects of the new revenue guidance. However, the amendments do not change the core principle in the new revenue standard. The guidance became effective for the Bank for interim and annual periods beginning on January 1, 2018. Given that the majority of the Bank’s financial instruments and other contractual rights that generate revenue are covered by other accounting guidance under U.S. GAAP, the effect of this guidance on the Bank’s financial condition, results of operations, and cash flows was not material

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Bank are included in Cash and due from banks on the Statements of Condition.

Cash and due from banks includes certain compensating balances, wherethe Bank maintains collected cash balances with commercial banks in consideration for certain services.

Loans and Leases Receivable, Origination Fees, Discounts or Premiums, and Direct Costs to Acquire Loans Policy [Policy Text Block]

The participating financial institution and the Bank share the risk of credit losses on conventional MPF loan products by structuring potential losses on conventional MPF loans into layers with respect to each master commitment. After any primary mortgage insurance, the Bank is obligated to incur the first layer or portion of credit losses not absorbed by the liquidation value of the real property securing the loan. Under the MPF Program, the participating financial institution’s credit enhancement protection consists of the credit enhancement amount, which may be a direct obligation of the participating financial institution or may be a supplemental mortgage insurance policy paid for by the participating financial institution, and may include a contingent performance-based credit enhancement fee payable to the participating financial institution. The participating financial institution is required to pledge collateral to secure any portion of its credit enhancement amount that is a direct obligation.

For taking on the credit enhancement obligation, the Bank pays the participating financial institution or any successor a credit enhancement fee, typically 10 basis points per annum, which is calculated on the remaining unpaid principal balance of the mortgage loans. A participating financial institution may elect to receive the credit enhancement fees monthly over the life of the loans or as an upfront lump sum amount that is included in the purchase price at the time loans are sold to the Bank. The lump sum amount is approximately equivalent to the present value of the monthly credit enhancement fees that the Bank would otherwise be expected to pay over the life of the loans. The Bank records credit enhancement fees as a reduction to interest income.

Derivatives, Methods of Accounting, Hedging Derivatives [Policy Text Block]

The Bank may use derivatives to adjust the repricing and options characteristics of advances to more closely match the characteristics of the Bank’s funding liabilities. In general, whenever a member executes a fixed or variable rate advance with embedded options, the Bank will simultaneously execute an interest rate exchange agreement with terms that offset the terms and embedded options in the advance. The combination of the advance and the interest rate exchange agreement effectively creates a variable rate asset. This type of hedge relationship receives fair value option accounting treatment. In addition, for certain advances for which the Bank has elected the fair value option, the Bank will simultaneously execute an interest rate exchange agreement with terms that economically offset the terms of the advance. However, this type of hedge is treated as an economic hedge because these combinations generally do not meet the requirements for fair value hedge accounting treatment.

The Bank documents at inception all relationships between derivatives designated as hedging instruments and hedged items, its risk management objectives and strategies for undertaking various hedge transactions, and its method of assessing hedge effectiveness. Derivatives designated as fair value hedges may be transacted to hedge: (i) assets and liabilities on the Statement of Condition, (ii) firm commitments, or (iii) forecasted transactions. The Bank also formally assesses (both at hedge inception and on an ongoing basis) whether the hedging derivatives have been effective in offsetting changes in the fair value of hedged items attributable to the hedged risk and whether those derivatives may be expected to remain effective hedges in future periods. The Bank typically uses regression analyses or other statistical analyses to assess the effectiveness of its hedges. When it is determined that a derivative has not been or is not expected to be effective as a hedge, the Bank discontinues hedge accounting prospectively.

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

The Bank may enter into interest rate swaps (including callable, putable, and basis swaps); and cap and floor agreements (collectively, interest rate exchange agreements or derivatives). Most of the Bank’s interest rate exchange agreements are executed in conjunction with the origination of advances or the issuance of consolidated obligation bonds to create variable rate structures. The interest rate exchange agreements are generally executed at the same time the advances and bonds are transacted and generally have the same maturity dates as the related advances and bonds. The Bank transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. Over-the-counter derivatives may be either uncleared or cleared. In an uncleared derivative transaction, the Bank’s counterparty is the executing bank or broker-dealer. In a cleared derivative transaction, the Bank may execute the transaction either directly with the executing bank or broker-dealer or on a swap execution facility, but in either case, the Bank’s counterparty is a derivatives clearing organization or clearinghouse once the derivative transaction has been accepted for clearing. The Bank is not a derivatives dealer and does not trade derivatives for short-term profit.

Additional uses of interest rate exchange agreements include: (i) offsetting embedded features in assets and liabilities, (ii) hedging anticipated issuance of debt, (iii) matching against consolidated obligation discount notes or bonds to create the equivalent of callable or non-callable fixed rate debt, (iv) modifying the repricing frequency of assets and liabilities, (v) matching against certain advances and consolidated obligations for which the Bank elected the fair value option, and (vi) exactly offsetting other derivatives cleared at a derivatives clearing organization. The Bank’s use of interest rate exchange agreements results in one of the following classifications: (i) a fair value hedge of an underlying financial instrument, (ii) an economic hedge of assets or liabilities, or (iii) an intermediary transaction for members.

The Bank primarily uses the following derivative instruments:

Interest Rate Swaps – An interest rate swap is an agreement between two entities to exchange cash flows in the future. The agreement sets the dates on which the cash flows will be paid and the manner in which the cash flows will be calculated. One of the simplest forms of an interest rate swap involves the promise by one party to pay cash flows equivalent to the interest on a notional principal amount at a predetermined fixed rate for a given period of time. In return for this promise, the party receives cash flows equivalent to the interest on the same notional principal amount at a variable rate for the same period of time. The variable rate received or paid by the Bank in most interest rate exchange agreements is either indexed to LIBOR or to the overnight index swap rate.

Interest Rate Caps and Floors – In a cap agreement, additional cash flow is generated if the price or interest rate of an underlying variable rate rises above a certain threshold (or cap) price. In a floor agreement, additional cash flow is generated if the price or interest rate of an underlying variable rate falls below a certain threshold (or floor) price. Caps and floors may be used in conjunction with assets or liabilities. In general, caps and floors are designed as protection against the interest rate on a variable rate asset or liability rising above or falling below a certain level.

The Bank may have the following types of hedged items:

Investments–The Bank may invest in U.S. Treasury and agency obligations, agency MBS, and the taxable portion of highly rated state or local housing finance agency obligations. In the past, the Bank has also invested in PLRMBS rated AAA at the time of acquisition. The interest rate and prepayment risk associated with these investment securities is managed through a combination of debt issuance and derivatives. The Bank may manage prepayment risk and interest rate risk by funding investment securities with consolidated obligations that have call features or by hedging the prepayment risk with a combination of consolidated obligations and callable swaps. The Bank may execute callable swaps in conjunction with the issuance of certain liabilities to create funding that is economically equivalent to fixed rate callable debt. Although these derivatives are economic hedges against prepayment risk and are designated to individual liabilities, they do not receive either fair value or cash flow hedge accounting treatment. Investment securities may be classified as trading, AFS, or HTM.

The Bank may also manage the risk arising from changing market prices or cash flows of investment securities classified as trading by entering into interest rate exchange agreements (economic hedges) that offset the changes in fair value or cash flows of the securities. The market value changes of both the trading securities and the associated interest rate exchange agreements are included in other income in the Statements of Income.

Advances– The Bank offers a wide range of advances structures to meet members’ funding needs. These advances may have maturities up to 30 years with fixed or adjustable rates and may include early termination features or options. The Bank may use derivatives to adjust the repricing and options characteristics of advances to more closely match the characteristics of the Bank’s funding liabilities. In general, whenever a member executes a fixed or variable rate advance with embedded options, the Bank will simultaneously execute an interest rate exchange agreement with terms that offset the terms and embedded options in the advance. The combination of the advance and the interest rate exchange agreement effectively creates a variable rate asset.

In addition, for certain advances for which the Bank has elected the fair value option, the Bank will simultaneously execute an interest rate exchange agreement with terms that economically offset the terms of the advance.

Mortgage Loans–The Bank’s investment portfolio includes fixed rate mortgage loans. The prepayment options embedded in mortgage loans can result in extensions or contractions in the expected repayment of these investments, depending on changes in estimated prepayment speeds. The Bank manages the interest rate risk and prepayment risk associated with fixed rate mortgage loans through a combination of debt issuance and derivatives. The Bank uses both callable and non-callable debt to achieve cash flow patterns and market value sensitivities for liabilities similar to those expected on the mortgage loans. Net income could be reduced if the Bank replaces prepaid mortgage loans with lower-yielding assets and the Bank’s higher funding costs are not reduced accordingly.

The Bank executes callable swaps in conjunction with the issuance of certain consolidated obligations to create funding that is economically equivalent to fixed rate callable bonds. Although these derivatives are economic hedges against the prepayment risk of specific loan pools and are referenced to individual liabilities, they do not receive either fair value or cash flow hedge accounting treatment.

Consolidated Obligations – Consolidated obligation bonds may be structured to meet the Bank’s or the investors’ needs. Common structures include fixed rate bonds with or without call options and adjustable rate bonds with or without embedded options. In general, when bonds are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that offset the terms and embedded options, if any, of the consolidated obligation bond. This combination of the consolidated obligation bond and the interest rate exchange agreement effectively creates an adjustable rate bond. The cost of this funding combination is generally lower than the cost that would be available through the issuance of an adjustable rate bond alone. These transactions generally receive fair value hedge accounting treatment.

When the Bank issues consolidated obligation discount notes, it may also simultaneously enter into an interest rate exchange agreement to convert the fixed rate discount note to an adjustable rate discount note. This type of hedge is treated as an economic hedge.

In addition, when certain consolidated obligation bonds for which the Bank has elected the fair value option are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that economically offset the terms of the consolidated obligation bond. However, this type of hedge is treated as an economic hedge because these combinations do not meet the requirements for fair value hedge accounting treatment.

Intermediation and Offsetting Derivatives– As an additional service to its members, the Bank has in the past entered into offsetting interest rate exchange agreements, acting as an intermediary between offsetting derivative transactions with members and other counterparties. This intermediation allows members indirect access to the derivatives market. The Bank also enters into derivatives to offset the economic effect of other derivatives that are no longer designated to advances, investments, or consolidated obligations. Neither type of offsetting derivatives receives hedge accounting treatment and both are separately marked to market through earnings. The net result of the accounting for these derivatives does not significantly affect the operating results of the Bank.

Loans and Leases Receivable, Troubled Debt Restructuring Policy [Policy Text Block]

Troubled debt restructuring (TDR) is considered to have occurred when a concession is granted to the debtor for economic or legal reasons related to the debtor’s financial difficulties and that concession would not have been considered otherwise. An MPF loan considered a TDR is individually evaluated for impairment when determining its related allowance for credit losses. Credit loss is measured by factoring in expected cash flow shortfalls incurred as of the reporting date as well as the economic loss attributable to delaying the original contractual principal and interest due dates, if applicable.

Derivatives, Embedded Derivatives [Policy Text Block]

The Bank did not have any bonds with embedded features that met the requirements to separate the embedded feature from the host contract and designate the embedded feature as a stand-alone derivative at December 31, 2017 or 2016. The Bank has generally elected to account for certain bonds with embedded features under the fair value option, and these bonds are carried at fair value on the Statements of Condition.

hen a callable bond for which the Bank is the primary obligor is issued, the Bank may simultaneously enter into an interest rate swap (in which the Bank pays a variable rate and receives a fixed rate) with a call feature that mirrors the call option embedded in the bond (a sold callable swap).

Stockholders' Equity, Policy [Policy Text Block]

Dividends on capital stock are recognized as dividends on the Statements of Capital Accounts, and dividends on mandatorily redeemable capital stock are recognized as interest expense on the Statements of Income.

The Bank issues only one class of capital stock, Class B stock, with a par value of one hundred dollars per share, which may be redeemed (subject to certain conditions) upon five years' notice by the member to the Bank. In addition, at its discretion, under certain conditions, the Bank may repurchase excess capital stock at any time. (See “Excess Capital Stock” below for more information.) The capital stock may be issued, redeemed, and repurchased only at its stated par value, subject to certain statutory and regulatory requirements. The Bank may only redeem or repurchase capital stock from a shareholder if, following the redemption or repurchase, the shareholder will continue to meet its minimum capital stock requirement and the Bank will continue to meet its regulatory requirements for total capital, leverage capital, and risk-based capital.

Under the Housing Act, the Director of the Finance Agency is responsible for setting the risk-based capital standards for the FHLBanks. The FHLBank Act and regulations governing the operations of the FHLBanks require that the Bank’s minimum capital stock requirement for shareholders must be sufficient to enable the Bank to meet its regulatory requirements for total capital, leverage capital, and risk-based capital. The Bank must maintain: (i) total regulatory capital in an amount equal to at least 4% of its total assets, (ii) leverage capital in an amount equal to at least 5% of its total assets, and (iii) permanent capital in an amount that is greater than or equal to its risk-based capital requirement. Because the Bank issues only Class B stock, regulatory capital and permanent capital for the Bank are both composed of retained earnings and Class B stock, including mandatorily redeemable capital stock (which is classified as a liability for financial reporting purposes). Regulatory capital and permanent capital do not include AOCI. Leverage capital is defined as the sum of permanent capital, weighted by a 1.5 multiplier, plus non-permanent capital.

The risk-based capital requirement is equal to the sum of the Bank’s credit risk, market risk, and operations risk capital requirements, all of which are calculated in accordance with the rules and regulations of the Finance Agency. The Finance Agency may require an FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined.

The Bank reclassifies the capital stock subject to redemption from capital to a liability after a member provides the Bank with a written notice of redemption; gives notice of intention to withdraw from membership; or attains nonmember status by merger or acquisition, charter termination, or other involuntary membership termination; or after a receiver or other liquidating agent for a member transfers the member's Bank capital stock to a nonmember entity, resulting in the member's shares then meeting the definition of a mandatorily redeemable financial instrument. Shares meeting this definition are reclassified to a liability at fair value. Dividends declared on shares classified as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments (by repurchase or redemption of the shares) is reflected as a financing cash outflow in the Statements of Cash Flows once settled.

The Bank has a cooperative ownership structure under which members, former members, and certain other nonmembers own the Bank's capital stock. Former members and certain other nonmembers are required to maintain their investment in the Bank's capital stock until their outstanding transactions are paid off or until their capital stock is redeemed following the relevant five-year redemption period for capital stock or is repurchased by the Bank, in accordance with the Bank's capital requirements. Capital stock cannot be issued, repurchased, redeemed, or transferred except between the Bank and its members (or their affiliates and successors) at the capital stock's par value of one hundred dollars per share. If a member cancels its written notice of redemption or notice of withdrawal or if the Bank allows the transfer of mandatorily redeemable capital stock to a member, the Bank reclassifies mandatorily redeemable capital stock from a liability to capital. After the reclassification, dividends on the capital stock are no longer classified as interest expense.

Pension and Other Postretirement Plans, Policy [Policy Text Block]

Qualified Defined Benefit Plan. The Bank provides retirement benefits through a Bank-sponsored Cash Balance Plan, a qualified defined benefit plan. The Cash Balance Plan is provided to all employees who have completed six months of Bank service. Under the plan, each eligible Bank employee accrues benefits annually equal to 6% of the employee's annual compensation, plus 6% interest on the benefits accrued to the employee through the prior yearend. The Cash Balance Plan is funded through a qualified trust established by the Bank.

Non-Qualified Defined Benefit Plans. The Bank sponsors the following non-qualified defined benefit retirement plans:

• Benefit Equalization Plan, a non-qualified retirement plan restoring benefits offered under the Cash Balance Plan that are limited by laws governing the plan. See below for further discussion of the defined contribution portion of the Benefit Equalization Plan.

• Supplemental Executive Retirement Plan (SERP),a non-qualified unfunded retirement benefit plan available to the Bank's eligible senior officers, which generally provides a service-linked supplemental cash balance annual contribution credit to SERP participants and an annual interest credit of 6% on the benefits accrued to the SERP participants through the prior yearend.

• Deferred Compensation Plan, a non-qualified retirement plan available to all eligible Bank officers, which provides make-up pension benefits that would have been earned under the Cash Balance Plan had the compensation not been deferred. The make-up benefits vest according to the corresponding provisions of the Cash Balance Plan. See below for further discussion of the defined contribution portion of the Deferred Compensation Plan.

Postretirement Health Benefit Plan. The Bank provides a postretirement health benefit plan to employees hired before January 1, 2003. The Bank's costs are capped at 1998 health care premium amounts. As a result, changes in health care cost trend rates will have no effect on the Bank's accumulated postretirement benefit obligation or service and interest costs.

Retirement Savings Plan. The Bank sponsors a qualified defined contribution retirement 401(k) savings plan, the Federal Home Loan Bank of San Francisco Savings Plan (Savings Plan). Contributions to the Savings Plan consist of elective participant contributions of up to 20% of each participant's base compensation and a Bank matching contribution of up to 6% of each participant's base compensation.

The Bank uses a discount rate to determine the present value of its future benefit obligations. The discount rate was determined based on the Citigroup Pension Discount Curve at the measurement date. The Citigroup Pension Discount Curve is a yield curve that reflects the market-observed yields for high-quality fixed income securities for each maturity. The projected benefit payments for each year from the plan are discounted using the spot rates on the yield curve to derive a single equivalent discount rate. The discount rate is reset annually on the measurement date.

The expected return on plan assets was determined based on: (i) the historical returns for each asset class, (ii) the expected future long-term returns for these asset classes, and (iii) the plan's target asset allocation.

The Cash Balance Plan is administered by the Bank's Retirement Committee, which establishes the plan's Statement of Investment Policy and Objectives. The Retirement Committee has adopted a strategic asset allocation based on a stable distribution of assets among major asset classes. These asset classes include domestic large-, mid-, and small-capitalization equity investments; international equity investments; real return investments; and fixed income investments. The Retirement Committee has set the Cash Balance Plan's target allocation percentages for a mix of 60% equity, 10% real return, and 30% fixed income. The Retirement Committee reviews the performance of the Cash Balance Plan on a regular basis.

Deferred Compensation Plan. The Bank maintains a deferred compensation plan that is available to all eligible Bank officers. The defined contribution portion of the plan is comprised of two components: (i) officer or director deferral of current compensation, and (ii) make-up matching contributions for officers that would have been made by the Bank under the Savings Plan had the compensation not been deferred. The make-up benefits under the Deferred Compensation Plan vest according to the corresponding provisions of the Savings Plan. The Deferred Compensation Plan liability consists of the accumulated compensation deferrals and accrued earnings on the deferrals, as well as the make-up matching contributions and any accrued earnings on the contributions.

Benefit Equalization Plan. The Bank sponsors a non-qualified retirement plan restoring benefits offered under the Savings Plan that have been limited by laws governing the plan.

Segment Reporting, Policy [Policy Text Block]

The Bank uses an analysis of financial results based on the financial components and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and determine financial management strategies related to the operations of these two business segments. For purposes of segment reporting, adjusted net interest income includes income and expense associated with net settlements from economic hedges that are recorded in “Net gain/(loss) on derivatives and hedging activities” in other income and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” Other key financial information, such as any credit-related OTTI losses on the Bank’s PLRMBS, other expenses, and assessments, is not included in the segment reporting analysis, but is incorporated into the Bank’s overall assessment of financial performance.

The advances-related business consists of advances and other credit products, related financing and hedging

instruments, other non-MBS investments associated with the Bank's role as a liquidity provider, and capital.

Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield

on all assets associated with the business activities in this segment and the cost of funding those activities, including

the net settlements from associated interest rate exchange agreements, and from earnings on invested capital.

The mortgage-related business consists of MBS investments, mortgage loans acquired through the MPF Program,

the consolidated obligations specifically identified as funding those assets, and related hedging instruments.

Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield

on the MBS and mortgage loans and the cost of the consolidated obligations funding those assets. This includes the net settlements from associated interest rate exchange agreements and net accretion related income, which is a result of improvement in expected cash flows on certain other-than-temporarily-impaired PLRMBS, less the provision for credit losses on mortgage loans.

Derivatives, Hedge Discontinuances [Policy Text Block]

The Bank discontinues hedge accounting prospectively when: (i) it determines that the derivative is no longer effective in offsetting changes in the fair value of a hedged item (including hedged items such as firm commitments or forecasted transactions); (ii) the derivative and/or the hedged item expires or is sold, terminated, or exercised; (iii) it is no longer probable that the forecasted transaction will occur in the originally expected period; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; (v) it determines that designating the derivative as a hedging instrument is no longer appropriate; or (vi) it decides to use the derivative to offset changes in the fair value of other derivatives or instruments carried at fair value.

Fair Value of Financial Instruments, Policy [Policy Text Block]

The fair value option provides an entity with an irrevocable option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments not previously carried at fair value. It requires an entity to display the fair value of those assets and liabilities for which the entity has chosen to use fair value on the face of the Statements of Condition. Fair value is used for both the initial and subsequent measurement of the designated assets, liabilities, and commitments, with the changes in fair value recognized in net income. Interest income and interest expense on advances and consolidated bonds carried at fair value are recognized solely on the contractual amount of interest due or unpaid. Any transaction fees or costs are immediately recognized in non-interest income or non-interest expense.

The Bank elected the fair value option for certain financial instruments as follows:

• Adjustable rate advances with embedded options (excluding call and put options)

• Callable fixed rate advances

• Putable fixed rate advances

• Putable fixed rate advances with embedded options

• Fixed rate advances with partial prepayment symmetry

• Callable or non-callable capped floater consolidated obligation bonds

• Convertible consolidated obligation bonds

• Adjustable or fixed rate range accrual consolidated obligation bonds

• Ratchet consolidated obligation bonds

• Adjustable rate advances indexed to non-LIBOR indices such as the Prime Rate, U.S. Treasury bill, and Federal funds effective rate

• Adjustable rate consolidated obligation bonds indexed to non-LIBOR indices such as the Prime Rate and U.S. Treasury bill

• Step-up callable bonds, which pay interest at increasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-up dates

• Step-down callable bonds, which pay interest at decreasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-down dates

The Bank has elected the fair value option for certain financial instruments to assist in mitigating potential earnings volatility that can arise from economic hedging relationships in which the carrying value of the hedged item is not adjusted for changes in fair value. The potential earnings volatility associated with using fair value only for the derivative is the Bank’s primary reason for electing the fair value option for financial assets and liabilities that do not qualify for hedge accounting or that have not previously met or may be at risk for not meeting the hedge effectiveness requirements.

Cash and Due from Banks–The estimated fair value equals the carrying value.

Federal Funds Sold and Securities Purchased Under Agreements to Resell – The estimated fair value of overnight Federal funds sold and securities purchased under agreements to resell approximates the carrying value. The estimated fair value of term Federal funds sold and term securities purchased under agreements to resell has been determined by calculating the present value of expected cash flows for the instruments and reducing the amount for accrued interest receivable. The discount rates used in these calculations are the replacement rates for comparable instruments with similar terms.

Interest-Bearing Deposits –The fair value of deposits is generally equal to the carrying value of the deposits because the deposits are primarily overnight deposits or due on demand. The Bank determines the fair values of term deposits by calculating the present value of expected future cash flows from the deposits and reducing the amount for accrued interest receivable. The discount rates used in these calculations are the cost of deposits with similar terms.

Investment Securities – MBS – To value its MBS, the Bank obtains prices from multiple designated third-party pricing vendors when available. The pricing vendors use various proprietary models to price these securities. The inputs to those models are derived from various sources including, but not limited to: benchmark yields, reported trades, dealer estimates, issuer spreads, prices on benchmark securities, bids, offers, and other market-related data. Since many securities do not trade on a daily basis, the pricing vendors use available information as applicable, such as benchmark yield curves, benchmarking of like securities, sector groupings, and matrix pricing, to determine the prices for individual securities. Each pricing vendor has an established challenge process in place for all security valuations, which facilitates resolution of price discrepancies identified by the Bank.

At least annually, the Bank conducts reviews of the multiple pricing vendors to update and confirm its understanding of the vendors’ pricing processes, methodologies, and control procedures.

The Bank’s valuation technique for estimating the fair values of its MBS first requires the establishment of a median vendor price for each security. If three prices are received, the middle price is the median price; if two prices are received, the average of the two prices is the median price; and if one price is received, it is the median price (and also the default fair value) subject to additional validation. All vendor prices that are within a specified tolerance threshold of the median price are included in the cluster of vendor prices that are averaged to establish a default fair value. All vendor prices that are outside the threshold (outliers) are subject to further analysis including, but not limited to, comparison to prices provided by an additional third-party valuation service, prices for similar securities and/or dealer estimates, or use of internal model prices, which are deemed to be reflective of all relevant facts and circumstances that a market participant would consider. Such analysis is also applied in those limited instances where no third-party vendor price or only one third-party vendor price is available in order to arrive at an estimated fair value. If an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair value, then the outlier (or the other price, as appropriate) is used as the fair value rather than the default fair value. If, instead, the analysis confirms that an outlier is (or outliers are) not representative of fair value and the default fair value is the best estimate, then the default fair value is used as the fair value.

If all vendor prices received for a security are outside the tolerance threshold level of the median price, then there is no default fair value, and the fair value is determined by an evaluation of all outlier prices (or the other prices, as appropriate) as described above.

As of December 31, 2017, multiple vendor prices were received for most of the Bank’s MBS, and the fair value estimates for most of those securities were determined in accordance with the Bank’s valuation technique based on these vendor prices. Based on the Bank’s reviews of the pricing methods employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or, in those instances in which there were outliers, the Bank’s additional analyses), the Bank believes that its fair value estimates are reasonable and that the fair value measurements are classified appropriately in the fair value hierarchy. Based on limited market liquidity for PLRMBS, the fair value measurements for these securities were classified as Level 3 within the fair value hierarchy.

Investment Securities – FFCB Bonds and CalHFA Bonds –The Bank estimates the fair values of these securities using the methodology described above for Investment Securities – MBS.

Advances –Because quoted prices are not available for advances, the fair values are measured using model-based valuation techniques (such as calculating the present value of future cash flows and reducing the amount for accrued interest receivable).

The Bank’s primary inputs for measuring the fair value of advances are market-based consolidated obligation yield curve (CO Curve) inputs obtained from the Office of Finance. The CO Curve is then adjusted to reflect the rates on replacement advances with similar terms and collateral. These spread adjustments are not market-observable and are evaluated for significance in the overall fair value measurement and the fair value hierarchy level of the advance. The Bank obtains market-observable inputs for complex advances. These inputs may include volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew). The discount rates used in these calculations are the replacement advance rates for advances with similar terms. Pursuant to the Finance Agency’s advances regulation, advances with an original term to maturity or repricing period greater than six months generally require a prepayment fee sufficient to make the Bank financially indifferent to the borrower’s decision to prepay the advances. The Bank determined that no adjustment is required to the fair value measurement of advances for prepayment fees. In addition, the Bank did not adjust its fair value measurement of advances for creditworthiness primarily because advances were fully collateralized.

Mortgage Loans Held for Portfolio – The estimated fair value for seasoned mortgage loans represents modeled prices based on observable market prices for seasoned agency mortgage-backed passthrough securities adjusted for differences in coupon, average loan rate, credit, and cash flow remittance between the Bank’s mortgage loans and the referenced instruments, while the estimated fair value for newly originated mortgage loans represents modeled prices based on MPF commitment rates. Market prices are highly dependent on the underlying prepayment assumptions. Changes in the prepayment speeds often have a material effect on the fair value estimates. These underlying prepayment assumptions are susceptible to material changes in the near term because they are made at a specific point in time.

Loans to and from Other FHLBanks –Because these are overnight transactions, the estimated fair value approximates the recorded carrying value.

Accrued Interest Receivable and Payable – The estimated fair value approximates the carrying value of accrued interest receivable and accrued interest payable.

Other Assets – The estimated fair value of grantor trust assets is based on quoted market prices.

Derivative Assets and Liabilities –In general, derivative instruments transacted and held by the Bank for risk management activities are traded in over-the-counter markets where quoted market prices are not readily available. These derivatives are interest rate-related. For these derivatives, the Bank measures fair value using internally developed discounted cash flow models that use market-observable inputs, such as the overnight index swap (OIS) curve and volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew), adjusted for counterparty credit risk, as necessary.

The Bank is subject to credit risk because of the risk of potential nonperformance by its derivative counterparties. To mitigate this risk, the Bank executes uncleared derivative transactions only with highly rated derivative dealers and major banks (derivative dealer counterparties) that meet the Bank’s eligibility criteria. In addition, the Bank has entered into master netting agreements and bilateral credit support agreements with all active derivative dealer counterparties that provide for delivery of collateral at specified levels to limit the Bank’s net unsecured credit exposure to these counterparties. Under these policies and agreements, the amount of unsecured credit exposure to an individual derivative dealer counterparty is either (i) limited to an absolute dollar credit exposure limit according to the counterparty’s long-term debt or deposit credit rating, as determined by rating agencies or (ii) set at zero (subject to a minimum transfer amount). The Bank clears its cleared derivative transactions only through clearing agents that meet the Bank’s eligibility requirements, and the Bank’s credit exposure to the clearinghouse is secured by variation margin received from the clearinghouse. All credit exposure from derivative transactions entered into by the Bank with member counterparties that are not derivative dealers must be fully secured by eligible collateral. The Bank evaluated the potential for the fair value of the instruments to be affected by counterparty credit risk and determined that no adjustments to the overall fair value measurements were required.

The fair values of the derivative assets and liabilities include accrued interest receivable/payable and cash collateral remitted to/received from counterparties. The estimated fair values of the accrued interest receivable/payable and cash collateral approximate their carrying values because of their short-term nature. The fair values of derivatives that met the netting requirements are presented on a net basis. If these netted amounts are positive, they are classified as an asset and, if negative, they are classified as a liability.

Deposits –The fair value of deposits is generally equal to the carrying value of the deposits because the deposits are primarily overnight deposits or due on demand. The Bank determines the fair values of term deposits by calculating the present value of expected future cash flows from the deposits and reducing the amount for accrued interest payable. The discount rates used in these calculations are the cost of deposits with similar terms.

Consolidated Obligations –Because quoted prices in active markets are not generally available for identical liabilities, the Bank measures fair values using internally developed models that use primarily market-observable inputs. The Bank’s primary input for measuring the fair value of consolidated obligation bonds is a market-based CO Curve obtained from the Office of Finance. The Office of Finance constructs the CO Curve using the Treasury yield curve as a base curve, which is adjusted by indicative consolidated obligation spreads obtained from market-observable sources. These market indications are generally derived from pricing indications from dealers, historical pricing relationships, and market activity for similar liabilities, such as recent GSE issuances or secondary market activity. For consolidated obligation bonds with embedded options, the Bank also obtains market-observable inputs, such as volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew).

Adjustments may be necessary to reflect the Bank’s credit quality or the credit quality of the FHLBank System when valuing consolidated obligation bonds measured at fair value. The Bank monitors its own creditworthiness and the creditworthiness of the other FHLBanks and the FHLBank System to determine whether any adjustments are necessary for creditworthiness in its fair value measurement of consolidated obligation bonds. The credit ratings of the FHLBank System and any changes to the credit ratings are the basis for the Bank to determine whether the fair values of consolidated obligations have been significantly affected during the reporting period by changes in the instrument-specific credit risk.

Mandatorily Redeemable Capital Stock –The estimated fair value of capital stock subject to mandatory redemption is generally at par value as indicated by contemporaneous purchases, redemptions, and repurchases at par value. Fair value includes estimated dividends earned at the time of reclassification from capital to liabilities, until such amount is paid, and any subsequently declared capital stock dividend. The Bank’s capital stock can only be acquired by members at par value and redeemed or repurchased at par value, subject to statutory and regulatory requirements. The Bank’s capital stock is not traded, and no market mechanism exists for the exchange of Bank capital stock outside the cooperative ownership structure.

Commitments – The estimated fair value of standby letters of credit is based on the present value of fees currently charged for similar agreements and is recorded in other liabilities. The estimated fair value of off-balance sheet fixed rate commitments to fund advances and commitments to issue consolidated obligations takes into account the difference between current and committed interest rates.

The fair value hierarchy is used to prioritize the fair value methodologies and valuation techniques as well as the inputs to the valuation techniques used to measure fair value for assets and liabilities carried at fair value on the Statements of Condition. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of market observability of the fair value measurement for the asset or liability. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). An entity must disclose the level within the fair value hierarchy in which the measurements are classified for all financial assets and liabilities measured on a recurring or non-recurring basis.

The application of the fair value hierarchy to the Bank’s financial assets and financial liabilities that are carried at fair value either on a recurring or non-recurring basis is as follows:

• Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in an active market that the reporting entity can access on the measurement date.

• Level 2 – Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets or liabilities in active markets; (2) quoted prices for identical or similar assets or liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals, and implied volatilities); and (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3 – Unobservable inputs for the asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following assets and liabilities, including those for which the Bank has elected the fair value option, are carried at fair value on the Statements of Condition as of December 31, 2017:

• Trading securities

• AFS securities

• Certain advances

• Derivative assets and liabilities

• Certain consolidated obligation bonds

• Certain other assets

For instruments for which the fair value option has been elected, the related contractual interest income and contractual interest expense are recorded as part of net interest income on the Statements of Income. The remaining changes in fair value for instruments for which the fair value option has been elected are recorded as net gains/ (losses) on financial instruments held under the fair value option in the Statements of Income. The change in fair value does not include changes in instrument-specific credit risk.

Fair Value Transfer, Policy [Policy Text Block]

For instruments carried at fair value, the Bank reviews the fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. Such reclassifications are reported as transfers in or out as of the beginning of the quarter in which the changes occur. For the periods presented, the Bank did not have any reclassifications for transfers in or out of the fair value hierarchy levels.

Commitments and Contingencies, Policy [Policy Text Block]

Delivery commitments are recorded at fair value as derivative assets or derivative liabilities in the Statements of Condition.

XML

Trading Securities (Tables)

12 Months Ended

Dec. 31, 2017

Trading Securities [Abstract]

Trading Securities (and Certain Trading Assets) [Table Text Block]

The estimated fair value of trading securities as of December 31, 2017 and 2016, was as follows:

	December 31, 2017		December 31, 2016
Government-Sponsored Enterprises (GSEs) – Federal Farm Credit Bank (FFCB) bonds	$	1,158	$	2,058
MBS – Other U.S. obligations – Ginnie Mae	6		8
Total	$	1,164	$	2,066

XML

Available-for-Sale Securities (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Available-for-sale Securities [Line Items]

Available-for-sale Securities [Table Text Block]

Available-for-sale (AFS) securities by major security type as of December 31, 2017 and 2016, were as follows:

December 31, 2017
	Amortized Cost(1)		OTTI Recognized in AOCI			Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
PLRMBS:
Prime	$	335	$	—		$	29	$	—	$	364
Alt-A, option ARM	714		(10		)	130		—		834
Alt-A, other	2,447		(23		)	211		—		2,635
Total	$	3,496	$	(33	)	$	370	$	—	$	3,833

December 31, 2016
	Amortized Cost(1)		OTTI Recognized in AOCI			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
PLRMBS:
Prime	$	413	$	(1	)	$	22	$	—		$	434
Alt-A, option ARM	853		(31		)	77		(2		)	897
Alt-A, other	3,087		(82		)	154		(1		)	3,158
Total	$	4,353	$	(114	)	$	253	$	(3	)	$	4,489

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings.

Available-for-sale Securities [Member]

Schedule of Available-for-sale Securities [Line Items]

Schedule of Unrealized Loss on Investments [Table Text Block]

The following table summarizes the AFS securities with unrealized losses as of December 31, 2017 and 2016. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position. Total unrealized losses in the following table will not agree to total gross unrealized losses in the table above. The unrealized losses in the following table also include non-credit-related OTTI losses recognized in AOCI. For OTTI analysis of AFS securities, see Note 7 – Other-Than-Temporary Impairment Analysis.

December 31, 2017
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
PLRMBS:
Prime	$	—	$	—	$	11	$	—	$	11	$	—
Alt-A, option ARM	—		—		144		10		144		10
Alt-A, other	5		—		356		23		361		23
Total	$	5	$	—	$	511	$	33	$	516	$	33

December 31, 2016
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
PLRMBS:
Prime	$	—	$	—	$	14	$	1	$	14	$	1
Alt-A, option ARM	14		—		249		33		263		33
Alt-A, other	57		—		1,048		83		1,105		83
Total	$	71	$	—	$	1,311	$	117	$	1,382	$	117

XML

Held-to-Maturity Securities (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Held-to-maturity Securities [Line Items]

Held-to-maturity Securities [Table Text Block]

The Bank classifies the following securities as HTM because the Bank has the positive intent and ability to hold these securities to maturity:

December 31, 2017
	Amortized Cost(1)		OTTI Recognized in AOCI(1)			Carrying Value(1)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Estimated Fair Value
Certificates of deposit	$	500	$	—		$	500	$	—	$	—		$	500
Housing finance agency bonds:
California Housing Finance Agency (CalHFA) bonds	187		—			187		—		(9		)	178
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	751		—			751		1		(1		)	751
GSEs – single-family:
Freddie Mac	2,039		—			2,039		12		(15		)	2,036
Fannie Mae	3,600		—			3,600		34		(8		)	3,626
Subtotal GSEs – single-family	5,639		—			5,639		46		(23		)	5,662
GSEs – multifamily:
Freddie Mac	4,651		—			4,651		6		(6		)	4,651
Fannie Mae	2,131		—			2,131		2		—			2,133
Subtotal GSEs – multifamily	6,782		—			6,782		8		(6		)	6,784
Subtotal GSEs	12,421		—			12,421		54		(29		)	12,446
PLRMBS:
Prime	521		—			521		5		(6		)	520
Alt-A, other	306		(6		)	300		11		(2		)	309
Subtotal PLRMBS	827		(6		)	821		16		(8		)	829
Total MBS	13,999		(6		)	13,993		71		(38		)	14,026
Total	$	14,686	$	(6	)	$	14,680	$	71	$	(47	)	$	14,704

December 31, 2016
	Amortized Cost(1)		OTTI Recognized in AOCI(1)			Carrying Value(1)		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Estimated Fair Value
Certificates of deposit	$	1,350	$	—		$	1,350	$	—	$	—		$	1,350
Housing finance agency bonds:
California Housing Finance Agency (CalHFA) bonds	225		—			225		—		(18		)	207
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	951		—			951		5		(1		)	955
GSEs – single-family:
Freddie Mac	2,793		—			2,793		23		(15		)	2,801
Fannie Mae	5,037		—			5,037		47		(14		)	5,070
Subtotal GSEs – single-family	7,830		—			7,830		70		(29		)	7,871
GSEs – multifamily:
Freddie Mac	1,556		—			1,556		—		(1		)	1,555
Fannie Mae	1,058		—			1,058		—		(1		)	1,057
Subtotal GSEs – multifamily	2,614		—			2,614		—		(2		)	2,612
Subtotal GSEs	10,444		—			10,444		70		(31		)	10,483
PLRMBS:
Prime	707		—			707		2		(15		)	694
Alt-A, other	459		(9		)	450		11		(9		)	452
Subtotal PLRMBS	1,166		(9		)	1,157		13		(24		)	1,146
Total MBS	12,561		(9		)	12,552		88		(56		)	12,584
Total	$	14,136	$	(9	)	$	14,127	$	88	$	(74	)	$	14,141

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

Held-to-maturity Securities [Member]

Schedule of Held-to-maturity Securities [Line Items]

Schedule of Unrealized Loss on Investments [Table Text Block]

The following tables summarize the HTM securities with unrealized losses as of December 31, 2017 and 2016. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position. Total unrealized losses in the following table will not agree to the total gross unrecognized holding losses in the table above. The unrealized losses in the following table also include non-credit-related OTTI losses recognized in AOCI. For OTTI analysis of HTM securities, see Note 7 – Other-Than-Temporary Impairment Analysis.

December 31, 2017
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Housing finance agency bonds:
CalHFA bonds	$	—	$	—	$	178	$	9	$	178	$	9
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	406		1		—		—		406		1
GSEs – single-family:
Freddie Mac	895		9		323		6		1,218		15
Fannie Mae	702		4		205		4		907		8
Subtotal GSEs – single-family	1,597		13		528		10		2,125		23
GSEs – multifamily:
Freddie Mac	1,058		6		—		—		1,058		6
Fannie Mae	456		—		—		—		456		—
Subtotal GSEs – multifamily	1,514		6		—		—		1,514		6
Subtotal GSEs	3,111		19		528		10		3,639		29
PLRMBS:
Prime	2		—		202		6		204		6
Alt-A, other	15		—		191		8		206		8
Subtotal PLRMBS	17		—		393		14		410		14
Total MBS	3,534		20		921		24		4,455		44
Total	$	3,534	$	20	$	1,099	$	33	$	4,633	$	53

December 31, 2016
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Housing finance agency bonds:
CalHFA bonds	$	—	$	—	$	193	$	18	$	193	$	18
MBS:
Other U.S. obligations – single-family:
Ginnie Mae	190		1		—		—		190		1
GSEs – single-family:
Freddie Mac	1,498		15		3		—		1,501		15
Fannie Mae	2,665		12		96		2		2,761		14
Subtotal GSEs – single-family	4,163		27		99		2		4,262		29
GSEs – multifamily:
Freddie Mac	1,007		1		—		—		1,007		1
Fannie Mae	387		1		—		—		387		1
Subtotal GSEs – multifamily	1,394		2		—		—		1,394		2
Subtotal GSEs	5,557		29		99		2		5,656		31
PLRMBS:
Prime	1		—		517		15		518		15
Alt-A, other	—		—		452		18		452		18
Subtotal PLRMBS	1		—		969		33		970		33
Total MBS	5,748		30		1,068		35		6,816		65
Total	$	5,748	$	30	$	1,261	$	53	$	7,009	$	83

Investments Classified by Contractual Maturity Date [Table Text Block]

The amortized cost, carrying value, and estimated fair value of non-MBS securities by contractual maturity (based on contractual final principal payment) and of MBS as of December 31, 2017 and 2016, are shown below. Expected maturities of MBS will differ from contractual maturities because borrowers generally have the right to prepay the underlying obligations without prepayment fees.

December 31, 2017
Year of Contractual Maturity	Amortized Cost(1)		Carrying Value(1)		Estimated Fair Value
HTM securities other than MBS:
Due in 1 year or less	$	500	$	500	$	500
Due after 5 years through 10 years	12		12		12
Due after 10 years	175		175		166
Subtotal	687		687		678
MBS	13,999		13,993		14,026
Total	$	14,686	$	14,680	$	14,704

December 31, 2016
Year of Contractual Maturity	Amortized Cost(1)		Carrying Value(1)		Estimated Fair Value
HTM securities other than MBS:
Due in 1 year or less	$	1,350	$	1,350	$	1,350
Due after 5 years through 10 years	35		35		34
Due after 10 years	190		190		173
Subtotal	1,575		1,575		1,557
MBS	12,561		12,552		12,584
Total	$	14,136	$	14,127	$	14,141

(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

XML

Other-Than-Temporary Impairment Analysis (Tables)

12 Months Ended

Dec. 31, 2017

Other than Temporary Impairment Losses, Investments [Abstract]

Schedule of Significant Inputs In Measuring Other Than Temporary Impairments Recognized In Earnings [Table Text Block]

For securities determined to be other-than-temporarily impaired as of December 31, 2017 (securities for which the Bank determined that it does not expect to recover the entire amortized cost basis), the following table presents a summary of the significant inputs used in measuring the amount of credit loss recognized in earnings during the year ended December 31, 2017, and the related current credit enhancement for the Bank.

December 31, 2017
	Significant Inputs for Other-Than-Temporarily Impaired PLRMBS			Current
	Prepayment Rates	Default Rates	Loss Severities	Credit Enhancement
Year of Securitization	Weighted Average % (1)	Weighted Average % (1)	Weighted Average % (1)	Weighted Average % (1)
Alt-A, other
2007	10.4	29.5	39.4	0.7
2006	10.8	20.2	39.2	25.0
2005	13.5	17.8	34.6	2.9
2004 and earlier	14.0	1.7	31.4	9.3
Total Alt-A, other	11.5	23.4	37.8	7.5
Total	11.5	23.4	37.8	7.5

(1) Weighted average percentage is based on unpaid principal balance.

Other than Temporary Impairment, Credit Losses Recognized in Earnings [Table Text Block]

The following table presents the credit-related OTTI, which is recognized in earnings, for the years ended December 31, 2017, 2016, and 2015.

	2017			2016			2015
Balance, beginning of the period	$	1,183		$	1,255		$	1,314
Additional charges on securities for which OTTI was previously recognized(1)	16			16			15
Securities matured during the period(2)	(1		)	(7		)	—
Accretion of yield adjustments resulting from improvement of expected cash flows that are recognized over the remaining life of the securities(3)	(69		)	(81		)	(74		)
Balance, end of the period	$	1,129		$	1,183		$	1,255

(1) For the years ended December 31, 2017, 2016, and 2015, “securities for which OTTI was previously recognized” represents all securities that were also other-than-temporarily impaired prior to January 1, 2017, 2016, and 2015, respectively.

(2) Represents reductions related to securities having reached final maturity during the period, which therefore are no longer held by the Bank at the end of the period.

(3) The total net accretion/(amortization) associated with other-than-temporarily impaired PLRMBS (amount recognized in interest income) totaled $93, $101, and $82 for the years ended December 31, 2017, 2016, and 2015, respectively.

Schedule of Other Than Temporarily Impaired Charges Incurred During Life of the Securities [Table Text Block]

The following tables present the Bank’s AFS and HTM PLRMBS that incurred OTTI losses anytime during the life of the securities at December 31, 2017 and 2016, by loan collateral type:

December 31, 2017
	Available-for-Sale Securities						Held-to-Maturity Securities
	Unpaid Principal Balance		Amortized Cost		Estimated Fair Value		Unpaid Principal Balance		Amortized Cost		Carrying Value		Estimated Fair Value
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	$	405	$	335	$	364	$	—	$	—	$	—	$	—
Alt-A, option ARM	953		714		834		—		—		—		—
Alt-A, other	2,927		2,447		2,635		64		59		53		63
Total	$	4,285	$	3,496	$	3,833	$	64	$	59	$	53	$	63

December 31, 2016
	Available-for-Sale Securities						Held-to-Maturity Securities
	Unpaid Principal Balance		Amortized Cost		Estimated Fair Value		Unpaid Principal Balance		Amortized Cost		Carrying Value		Estimated Fair Value
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	$	498	$	413	$	434	$	—	$	—	$	—	$	—
Alt-A, option ARM	1,134		853		897		—		—		—		—
Alt-A, other	3,650		3,087		3,158		93		88		79		91
Total	$	5,282	$	4,353	$	4,489	$	93	$	88	$	79	$	91

XML

Advances (Tables)

12 Months Ended

Dec. 31, 2017

Federal Home Loan Banks [Abstract]

Federal Home Loan Bank, Advances [Table Text Block]

The following tables present the concentration in advances to the top five borrowers and their affiliates at December 31, 2017 and 2016. The tables also present the interest income from

these advances before the impact of interest rate exchange agreements associated with these advances for the years ended December 31, 2017 and 2016.

December 31, 2017

Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
Charles Schwab Bank	$	15,000	19	%	$	40	5	%
JPMorgan Chase Bank, National Association(2)	11,363		15		174		19
First Republic Bank	8,400		11		112		12
MUFG Union Bank, National Association	7,250		9		48		5
Bank of the West	6,409		8		87		10
Subtotal	48,422		62		461		51
Others	29,064		38		438		49
Total par value	$	77,486	100	%	$	899	100	%

December 31, 2016

Name of Borrower	Advances Outstanding		Percentage of Total Advances Outstanding		Interest Income from Advances(1)		Percentage of Total Interest Income from Advances
JPMorgan Chase Bank, National Association(2)	$	14,807	30	%	$	119	23	%
Bank of the West	7,305		14		49		9
First Republic Bank	5,900		12		70		13
CIT Bank, N.A.	2,411		5		28		5
Star One Credit Union	2,024		4		27		5
Subtotal	32,447		65		293		55
Others	17,410		35		240		45
Total par value	$	49,857	100	%	$	533	100	%

(1) Interest income amounts exclude the interest effect of interest rate exchange agreements with derivative counterparties; as a result, the total interest income amounts will not agree to the Statements of Income. The amount of interest income from advances can vary depending on the amount outstanding, terms to maturity, interest rates, and repricing characteristics.

(2) Nonmember institution.

The following table summarizes advances at December 31, 2017 and 2016, by the earlier of the year of contractual maturity or next call date for callable advances and by the earlier of the year of contractual maturity or next put date for putable advances.

	Earlier of Contractual Maturity or Next Call Date				Earlier of Contractual Maturity or Next Put Date
	2017		2016		2017		2016
Within 1 year	$	52,624	$	25,784	$	46,403	$	22,927
After 1 year through 2 years	12,593		11,078		16,287		7,583
After 2 years through 3 years	7,973		4,465		5,423		9,410
After 3 years through 4 years	1,719		5,782		6,719		2,083
After 4 years through 5 years	1,729		1,421		1,741		6,423
After 5 years	848		1,327		913		1,431
Total par value	$	77,486	$	49,857	$	77,486	$	49,857

The Bank had advances outstanding, excluding overdrawn demand deposit accounts, at interest rates ranging from 0.79% to 8.57% at December 31, 2017, and 0.43% to 8.57% at December 31, 2016, as summarized below.

	2017					2016
Contractual Maturity	Amount Outstanding			Weighted Average Interest Rate		Amount Outstanding			Weighted Average Interest Rate
Within 1 year	$	46,403		1.46	%	$	22,902		0.78	%
After 1 year through 2 years	16,287			1.61		7,608			1.36
After 2 years through 3 years	5,423			1.73		9,410			1.22
After 3 years through 4 years	6,719			1.69		2,083			1.39
After 4 years through 5 years	1,741			2.10		6,423			1.24
After 5 years	913			3.13		1,431			2.60
Total par value	77,486			1.57	%	49,857			1.09	%
Valuation adjustments for hedging activities	(88		)			(22		)
Valuation adjustments under fair value option	(16		)			10
Total	$	77,382				$	49,845

The net amount of prepayment fees is reflected as interest income in the Statements of Income for the years ended December 31, 2017, 2016, and 2015, as follows:

	2017		2016			2015
Prepayment fees received	$	1	$	6		$	28
Fair value adjustments	—		(1		)	(20		)
Net	$	1	$	5		$	8
Advance principal prepaid	$	8,469	$	3,459		$	2,229

Interest rate payment terms for advances at December 31, 2017 and 2016, are detailed below:

	2017		2016
Par value of advances:
Fixed rate:
Due within 1 year	$	31,767	$	13,486
Due after 1 year	13,022		10,845
Total fixed rate	44,789		24,331
Adjustable rate:
Due within 1 year	14,636		9,416
Due after 1 year	18,061		16,110
Total adjustable rate	32,697		25,526
Total par value	$	77,486	$	49,857

XML

Mortgage Loans Held for Portfolio (Tables)

12 Months Ended

Dec. 31, 2017

Mortgage Loans on Real Estate [Abstract]

Schedule of Participating Mortgage Loans [Table Text Block]

The following table presents information as of December 31, 2017 and 2016, on mortgage loans, all of which are secured by one- to four-unit residential properties and single-unit second homes.

	2017			2016
Fixed rate medium-term mortgage loans	$	32		$	55
Fixed rate long-term mortgage loans	1,973			759
Subtotal	2,005			814
Unamortized premiums	76			18
Unamortized discounts	(5		)	(6		)
Mortgage loans held for portfolio	2,076			826
Less: Allowance for credit losses	—			—
Total mortgage loans held for portfolio, net	$	2,076		$	826

XML

Allowance for Credit Losses (Tables)

12 Months Ended

Dec. 31, 2017

Loans and Leases Receivable Disclosure [Abstract]

Past Due Financing Receivables [Table Text Block]

The following table presents information on delinquent mortgage loans as of December 31, 2017 and 2016.

	2017			2016
	Recorded Investment(1)			Recorded Investment(1)
30 – 59 days delinquent	$	8		$	7
60 – 89 days delinquent	2			3
90 days or more delinquent	12			15
Total past due	22			25
Total current loans	2,065			805
Total mortgage loans	$	2,087		$	830
In process of foreclosure, included above(2)	$	3		$	5
Nonaccrual loans	$	12		$	15
Loans past due 90 days or more and still accruing interest	$	—		$	—
Serious delinquencies as a percentage of total mortgage loans outstanding(3)	0.59		%	1.79		%

(1) The recorded investment in a loan is the unpaid principal balance of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs. The recorded investment is not net of any valuation allowance.

(2) Includes loans for which the servicer has reported a decision to foreclose or to pursue a similar alternative, such as deed-in-lieu. Loans in process of foreclosure are included in past due or current loans depending on their delinquency status.

(3) Represents loans that are 90 days or more past due or in the process of foreclosure as a percentage of the recorded investment of total mortgage loans outstanding.

Other than Temporary Impairment, Credit Losses Recognized in Earnings [Table Text Block]

The following table presents the credit-related OTTI, which is recognized in earnings, for the years ended December 31, 2017, 2016, and 2015.

	2017			2016			2015
Balance, beginning of the period	$	1,183		$	1,255		$	1,314
Additional charges on securities for which OTTI was previously recognized(1)	16			16			15
Securities matured during the period(2)	(1		)	(7		)	—
Accretion of yield adjustments resulting from improvement of expected cash flows that are recognized over the remaining life of the securities(3)	(69		)	(81		)	(74		)
Balance, end of the period	$	1,129		$	1,183		$	1,255

(1) For the years ended December 31, 2017, 2016, and 2015, “securities for which OTTI was previously recognized” represents all securities that were also other-than-temporarily impaired prior to January 1, 2017, 2016, and 2015, respectively.

(2) Represents reductions related to securities having reached final maturity during the period, which therefore are no longer held by the Bank at the end of the period.

(3) The total net accretion/(amortization) associated with other-than-temporarily impaired PLRMBS (amount recognized in interest income) totaled $93, $101, and $82 for the years ended December 31, 2017, 2016, and 2015, respectively.

Schedule of Allowance for Credit Losses and Recorded Investment by Impairment Methodology [Table Text Block]

The allowance for credit losses and recorded investment by impairment methodology for individually and collectively evaluated impaired loans are as follows:

(In millions)	2017		2016
Allowance for credit losses, end of the period:
Individually evaluated for impairment	$	—	$	—
Collectively evaluated for impairment	—		—
Total allowance for credit losses	$	—	$	—
Recorded investment, end of the period:
Individually evaluated for impairment	$	9	$	12
Collectively evaluated for impairment	2,078		818
Total recorded investment	$	2,087	$	830

Schedule of Recorded Investment, Unpaid Principal Balance and Related Allowance of Impaired Loans [Table Text Block]

The recorded investment, unpaid principal balance, and related allowance of impaired loans individually evaluated for impairment are as follows:

	2017						2016
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
With no related allowance	$	9	$	9	$	—	$	12	$	12	$	—
With an allowance	—		—		—		—		—		—
Total	$	9	$	9	$	—	$	12	$	12	$	—

Schedule of Average Recorded Investment on Impaired Loans [Table Text Block]

The average recorded investment on impaired loans individually evaluated for impairment is as follows:

	2017		2016
With no related allowance	$	10	$	12
With an allowance	—		—
Total	$	10	$	12

XML

Deposits (Tables)

12 Months Ended

Dec. 31, 2017

Deposits [Abstract]

Schedule of Deposit Liabilities by Component [Table Text Block]

Deposits as of December 31, 2017 and 2016, were as follows:

	2017		2016
Interest-bearing deposits:
Demand and overnight	$	263	$	167
Total interest-bearing deposits	263		167
Non-interest-bearing deposits	18		2
Total	$	281	$	169

Schedule of Interest Rate Payment Terms On Deposit Liabilities [Table Text Block]

Deposits classified as demand, overnight, and other pay interest based on a daily interest rate. Term deposits pay interest based on a fixed rate determined at the issuance of the deposit. Interest rate payment terms for deposits at December 31, 2017 and 2016, are detailed in the following table:

	2017				2016
	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate
Interest-bearing deposit – Adjustable rate	$	263	1.10	%	$	167	0.01	%
Non-interest-bearing deposits	18				2
Total	$	281			$	169

XML

Consolidated Obligations (Tables)

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Schedule of Maturities of Long-term Debt [Table Text Block]

The following is a summary of the Bank’s participation in consolidated obligation bonds at December 31, 2017 and 2016.

	2017					2016
Contractual Maturity	Amount Outstanding			Weighted Average Interest Rate		Amount Outstanding			Weighted Average Interest Rate
Within 1 year	$	69,734		1.33	%	$	33,879		0.82	%
After 1 year through 2 years	6,461			1.42		10,597			0.99
After 2 years through 3 years	2,785			1.74		1,318			1.32
After 3 years through 4 years	2,058			1.78		1,055			1.84
After 4 years through 5 years	1,994			2.15		1,350			1.59
After 5 years	2,076			2.80		2,021			2.42
Total par value	85,108			1.41	%	50,220			0.98	%
Unamortized premiums	9					15
Unamortized discounts	(11		)			(9		)
Valuation adjustments for hedging activities	(37		)			6
Fair value option valuation adjustments	(6		)			(8		)
Total	$	85,063				$	50,224

Schedule of Long-term Debt by Call Feature [Table Text Block]

The Bank’s participation in consolidated obligation bonds at December 31, 2017 and 2016, was as follows:  

	2017		2016
Par value of consolidated obligation bonds:
Non-callable	$	75,496	$	45,550
Callable	9,612		4,670
Total par value	$	85,108	$	50,220

Schedule of Maturities of Long-term Debt by Contractual or Next Call Date [Table Text Block]

The following is a summary of the Bank’s participation in consolidated obligation bonds outstanding at December 31, 2017 and 2016, by the earlier of the year of contractual maturity or next call date.

Earlier of Contractual Maturity or Next Call Date	2017		2016
Within 1 year	$	78,606	$	38,099
After 1 year through 2 years	5,326		10,747
After 2 years through 3 years	935		743
After 3 years through 4 years	85		455
After 4 years through 5 years	55		85
After 5 years	101		91
Total par value	$	85,108	$	50,220

Schedule of Short-term Debt [Table Text Block]

The Bank’s participation in consolidated obligation discount notes, all of which are due within one year, was as follows:

	2017					2016
	Amount Outstanding			Weighted Average Interest Rate (1)		Amount Outstanding			Weighted Average Interest Rate (1)
Par value	$	30,494		1.24	%	$	33,529		0.46	%
Unamortized discounts	(54		)			(23		)
Total	$	30,440				$	33,506

Schedule of Interest Rate Payment Terms for Debt [Table Text Block]

Interest rate payment terms for consolidated obligations at December 31, 2017 and 2016, are detailed in the following table.

	2017		2016
Par value of consolidated obligations:
Bonds:
Fixed rate	$	17,967	$	15,960
Adjustable rate	66,276		33,435
Step-up	565		515
Step-down	200		200
Fixed rate that converts to adjustable rate	—		10
Range bonds	100		100
Total bonds, par value	85,108		50,220
Discount notes, par value	30,494		33,529
Total consolidated obligations, par value	$	115,602	$	83,749

XML

Affordable Housing Program (Tables)

12 Months Ended

Dec. 31, 2017

Federal Home Loan Banks [Abstract]

Activity in Affordable Housing Program Obligation [Table Text Block]

The Bank's total AHP assessments equaled $45, $86, and $78 during 2017, 2016, and 2015, respectively. These amounts were charged to earnings each year and recognized as a liability. As subsidies are disbursed, the AHP liability is reduced. The AHP liability was as follows:

	2017			2016			2015
Balance, beginning of the period	$	205		$	172		$	147
AHP assessments	45			86			78
AHP voluntary contributions	7			—			—
AHP grant payments	(53		)	(53		)	(53		)
Balance, end of the period	$	204		$	205		$	172

XML

Accumulated Other Comprehensive Income (Loss) (Tables)

12 Months Ended

Dec. 31, 2017

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The following table summarizes the changes in AOCI for the years ended December 31, 2017, 2016, and 2015:

	Net Non-Credit-Related OTTI Loss on AFS Securities			Net Non-Credit-Related OTTI Loss on HTM Securities			Pension and Postretirement Benefits			Total AOCI
Balance, December 31, 2014	$	88		$	(20	)	$	(12	)	56
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits							(2		)	(2		)
Non-credit-related OTTI loss	(18		)	(1		)				(19		)
Non-credit-related OTTI loss transferred	(1		)	1						—
Net change in fair value	(29		)							(29		)
Accretion of non-credit-related OTTI loss				6						6
Reclassification from other comprehensive income/(loss) to net income/(loss):
Non-credit-related OTTI to credit-related OTTI	3			—						3
Net current period other comprehensive income/(loss)	(45		)	6			(2		)	(41		)
Balance, December 31, 2015	$	43		$	(14	)	$	(14	)	15
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits							(2		)	(2		)
Non-credit-related OTTI loss	(17		)	—						(17		)
Net change in fair value	103									103
Accretion of non-credit-related OTTI loss				5						5
Reclassification from other comprehensive income/(loss) to net income/(loss):
Non-credit-related OTTI to credit-related OTTI	7			—						7
Net current period other comprehensive income/(loss)	93			5			(2		)	96
Balance, December 31, 2016	$	136		$	(9	)	$	(16	)	$	111
Other comprehensive income/(loss) before reclassifications:
Net change in pension and postretirement benefits							3			3
Non-credit-related OTTI loss	(4		)	—						(4		)
Net change in fair value	195									195
Accretion of non-credit-related OTTI loss				3						3
Reclassification from other comprehensive income/(loss) to net income/(loss):
Non-credit-related OTTI to credit-related OTTI	10			—						10
Net current period other comprehensive income/(loss)	201			3			3			207
Balance, December 31, 2017	$	337		$	(6	)	$	(13	)	$	318

XML

Capital (Tables)

12 Months Ended

Dec. 31, 2017

Capital [Abstract]

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

As of December 31, 2017 and 2016, the Bank was in compliance with these capital rules and requirements as shown in the following table.

	2017						2016
	Required			Actual			Required			Actual
Risk-based capital	$	2,023		$	6,797		$	2,241		$	5,883
Total regulatory capital	$	4,935		$	6,797		$	3,678		$	5,883
Total regulatory capital ratio	4.00		%	5.51		%	4.00		%	6.40		%
Leverage capital	$	6,169		$	10,195		$	4,597		$	8,825
Leverage ratio	5.00		%	8.26		%	5.00		%	9.60		%

Schedule of Mandatorily Redeemable Capital Stock [Table Text Block]

The Bank had mandatorily redeemable capital stock totaling $309 outstanding to seven institutions at December 31, 2017, and $457 outstanding to six institutions at December 31, 2016. The change in mandatorily redeemable capital stock for the years ended December 31, 2017, 2016, and 2015, was as follows:

	2017			2016			2015
Balance at the beginning of the period	$	457		$	488		$	719
Reclassified from/(to) capital during the period(1)	2			56			415
Redemption of mandatorily redeemable capital stock	(75		)	(28		)	(53		)
Repurchase of excess mandatorily redeemable capital stock	(75		)	(59		)	(593		)
Balance at the end of the period	$	309		$	457		$	488

(1) The Bank reclassified $403 of capital stock to mandatorily redeemable capital stock (a liability) on September 1, 2015, as a result of the merger of JPMorgan B&T with an into JPMorgan Chase, a nonmember of the Bank.

Schedule of Mandatorily Redeemable Capital Stock by Maturity Date [Table Text Block]

The following table presents mandatorily redeemable capital stock amounts by contractual redemption period at December 31, 2017 and 2016.

Contractual Redemption Period	2017		2016
After 2 years through 3 years	$	306	$	—
After 3 years through 4 years	—		379
Past contractual redemption date because of remaining activity(1)	3		78
Total	$	309	$	457

(1) Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because of outstanding activity.

Schedule of Restricted Retained Earnings [Table Text Block]

The following tables summarize the activity related to retained earnings for the years ended December 31, 2017 and 2016:

				Restricted Retained Earnings Related to:
	Unrestricted Retained Earnings			Valuation Adjustments			Other			Joint Capital Enhancement Agreement		Total Restricted Retained Earnings			Total Retained Earnings
Balance, December 31, 2015	$	610		$	10		$	1,650		$	358	$	2,018		$	2,628
Net income	562			8			—			142		150			712
Cash dividends on capital stock	(284		)												(284		)
Balance, December 31, 2016	$	888		$	18		$	1,650		$	500	$	2,168		$	3,056
Net income	198			3			100			75		178			376
Cash dividends on capital stock	(187		)												(187		)
Transfers from restricted retained earnings	1,771			(21		)	(1,750		)	—		(1,771		)	—
Balance, December 31, 2017	$	2,670		$	—		$	—		$	575	$	575		$	3,245

XML

Employee Retirement Plans and Incentive Compensation Plans (Tables)

12 Months Ended

Dec. 31, 2017

Retirement Benefits [Abstract]

Schedule of Changes in Projected Benefit Obligations [Table Text Block]

The following table summarizes the changes in the benefit obligations, plan assets, and funded status of the defined benefit Cash Balance Plan, non-qualified defined benefit plans, and postretirement health benefit plan for the years ended December 31, 2017 and 2016.

	2017									2016
	Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan			Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan
Change in benefit obligation
Benefit obligation, beginning of the period	$	51		$	21		$	2		$	46		$	24		$	2
Service cost	3			2			—			3			1			—
Interest cost	2			1			—			1			1			—
Actuarial (gain)/loss	2			—			—			2			1			—
Settlements	—			(3		)	—			—			(6		)	—
Benefits paid	(1		)	—			—			(1		)	—			—
Benefit obligation, end of the period	57			21			2			51			21			2
Change in plan assets
Fair value of plan assets, beginning of the period	53			—			—			43			—			—
Actual return on plan assets	9			—			—			3			—			—
Settlements	—			(3		)	—			—			(6		)	—
Employer contributions	2			3			—			8			6			—
Benefits paid	(1		)	—			—			(1		)	—			—
Fair value of plan assets, end of the period	63			—			—			53			—			—
Funded status at the end of the period	$	6		$	(21	)	$	(2	)	$	2		$	(21	)	$	(2	)

Schedule of Amounts Recognized in Balance Sheet [Table Text Block]

Amounts recognized in the Statements of Condition at December 31, 2017 and 2016, consist of:

	2017								2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan			Cash Balance Plan		Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan
Other assets/(liabilities)	$	6	$	(21	)	$	(2	)	$	2	$	(21	)	$	(2	)

Schedule of Net Periodic Benefit Cost Not yet Recognized [Table Text Block]

Amounts recognized in AOCI at December 31, 2017 and 2016, consist of:

	2017							2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan			Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Net loss/(gain)	$	11	$	3	$	(1	)	$	14	$	3	$	(1	)

Schedule of Benefit Obligations in Excess of Fair Value of Plan Assets [Table Text Block]

The following table presents information for pension plans with assets in excess of benefit obligations and for pension plans with benefit obligations in excess of plan assets at December 31, 2017 and 2016.

	2017						2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Projected benefit obligation	$	57	$	21	$	2	$	51	$	21	$	2
Accumulated benefit obligation	56		20		2		50		21		2
Fair value of plan assets	63		—		—		53		—		—

Schedule of Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block]

Components of the net periodic benefit costs and other amounts recognized in other comprehensive income for the years ended December 31, 2017, 2016, and 2015, were as follows:

	2017							2016								2015
	Cash Balance Plan			Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan		Cash Balance Plan			Non-Qualified Defined Benefit Plans			Post-retirement Health Benefit Plan
Net periodic benefit cost/(income)
Service cost	$	3		$	2	$	—	$	3		$	1		$	—	$	3		$	1		$	—
Interest cost	2			1		—		1			1			—		2			1			—
Expected return on plan assets	(4		)	—		—		(3		)	—			—		(3		)	—			—
Amortization of net loss/(gain)	1			—		—		1			—			—		—			1			(1		)
Settlement loss	—			—		—		—			1			—		—			—			—
Net periodic benefit cost	2			3		—		2			3			—		2			3			(1		)
Other changes in plan assets and benefit obligations recognized in other comprehensive income
Net loss/(gain)	(2		)	—		—		3			1			—		3			(1		)	—
Amortization of net loss/(gain)	(1		)	—		—		(1		)	—			—		—			(1		)	1
Prior service cost recognized due to settlement loss	—			—		—		—			(1		)	—		—			—			—
Total recognized in other comprehensive income	(3		)	—		—		2			—			—		3			(2		)	1
Total recognized in net periodic benefit cost and other comprehensive income	$	(1	)	$	3	$	—	$	4		$	3		$	—	$	5		$	1		$	—

Schedule of Assumptions Used [Table Text Block]

Weighted average assumptions used to determine the net periodic benefit costs for the years ended December 31, 2017, 2016, and 2015, for the Cash Balance Plan, non-qualified defined benefit plans, and postretirement health benefit plan were as follows:

	2017						2016						2015
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Discount rate	3.50	%	3.50	%	4.00	%	3.75	%	3.75	%	4.00	%	3.50	%	3.50	%	3.75	%
Rate of salary increase	3.00% through 2017, 4.00% thereafter		3.00% through 2017, 4.00% thereafter		—		3.00% through 2016 4.00% thereafter		3.00% through 2016 4.00% thereafter		—		3.00% through 2015 4.00% thereafter		3.00% through 2015 4.00% thereafter		—
Expected return on plan assets	7.75	%	—		—		7.75	%	—		—		8.00	%	—		—

Weighted average assumptions used to determine the benefit obligations at December 31, 2017 and 2016, for the Cash Balance Plan, non-qualified defined benefit plans, and postretirement health benefit plan were as follows:

	2017						2016
	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post- retirement Health Benefit Plan		Cash Balance Plan		Non-Qualified Defined Benefit Plans		Post-retirement Health Benefit Plan
Discount rate	3.25	%	3.25	%	3.50	%	3.50	%	3.50	%	4.00	%
Rate of salary increase	3.00% through 2018, 4.00% thereafter		3.00% through 2018, 4.00% thereafter		—		3.00% through 2017 4.00% thereafter		3.00% through 2017 4.00% thereafter		—

Schedule of Allocation of Plan Assets [Table Text Block]

The table below presents the fair values of the Cash Balance Plan's assets as of December 31, 2017 and 2016, by asset category. See Note 19 – Fair Value for further information regarding the three levels of fair value measurement.

	2017								2016
	Fair Value Measurement Using:								Fair Value Measurement Using:
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	1	$	—	$	—	$	1	$	1	$	—	$	—	$	1
Equity mutual funds	40		—		—		40		32		—		—		32
Fixed income mutual funds	18		—		—		18		16		—		—		16
Real estate mutual funds	2		—		—		2		2		—		—		2
Other mutual funds	2		—		—		2		2		—		—		2
Total	$	63	$	—	$	—	$	63	$	53	$	—	$	—	$	53

The Cash Balance Plan's weighted average asset allocation at December 31, 2017 and 2016, by asset category was as follows:

Asset Category	2017		2016
Cash and cash equivalents	2	%	3	%
Equity mutual funds	63		61
Fixed income mutual funds	28		29
Real estate mutual funds	4		4
Other mutual funds	3		3
Total	100	%	100	%

The Cash Balance Plan's weighted average asset allocation at December 31, 2017 and 2016, by asset category was as follows:

Asset Category	2017		2016
Cash and cash equivalents	2	%	3	%
Equity mutual funds	63		61
Fixed income mutual funds	28		29
Real estate mutual funds	4		4
Other mutual funds	3		3
Total	100	%	100	%

Schedule of Expected Benefit Payments [Table Text Block]

The following are the estimated future benefit payments, which reflect expected future service, as appropriate:

Year	Cash Balance Plan		Non-Qualified Defined Benefit Plans		Postretirement Health Benefit Plan
2018	$	4	$	—	$	—
2019	4		5		—
2020	4		—		—
2021	4		1		—
2022	16		6		—
2023 – 2027	20		14		1

XML

Segment Information (Tables)

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block]

The following table presents the Bank’s adjusted net interest income by operating segment and reconciles total adjusted net interest income to income before the AHP assessment for the years ended December 31, 2017, 2016, and 2015.

	Advances- Related Business		Mortgage- Related Business(1)		Adjusted Net Interest Income		Amortization of Basis Adjustments(2)			Income/(Expense) on Economic Hedges(3)			Interest Expense on Mandatorily Redeemable Capital Stock(4)		Net Interest Income After Mortgage Loan Loss Provision		Other Income/ (Loss)		Other Expense		Income Before AHP Assessment
2017	$	234	$	325	$	559	$	—		$	(40	)	$	32	$	567	$	78	$	224	$	421
2016	154		338		492		(7		)	(32		)	60		471		485		158		798
2015	155		351		506		(17		)	(18		)	65		476		388		148		716

(1) The mortgage-related business includes total accretion or amortization associated with other-than-temporarily impaired PLRMBS, which are recognized in interest income, totaled $93, $101, and $82 for the years ended December 31, 2017, 2016, and 2015, respectively. The mortgage-related business does not include credit-related OTTI losses of $16, $16, and $15 for the years ended December 31, 2017, 2016, and 2015, respectively.

(2) Represents amortization of amounts deferred for adjusted net interest income purposes only, in accordance with the Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework.

(3) The Bank includes income and expense associated with net settlements from economic hedges in adjusted net interest income in its analysis of financial performance for its two operating segments. For financial reporting purposes, the Bank does not include these amounts in net interest income in the Statements of Income, but instead records them in other income in “Net gain/(loss) on derivatives and hedging activities.”

(4) The Bank excludes interest expense on mandatorily redeemable capital stock from adjusted net interest income in its analysis of financial performance for its two operating segments.

Schedule of Segment Assets by Segment [Table Text Block]

The following table presents total assets by operating segment at December 31, 2017, 2016, and 2015.

	Advances- Related Business		Mortgage- Related Business		Total Assets
2017	$	103,426	$	19,959	$	123,385
2016	74,018		17,923		91,941
2015	69,047		16,651		85,698

XML

Derivatives and Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

The following table summarizes the notional amount and fair value of derivative instruments, including the effect of netting adjustments and cash collateral as of December 31, 2017 and 2016. For purposes of this disclosure, the derivative values include the fair value of derivatives and related accrued interest.

	2017								2016
	Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	24,270	$	92		$	27		$	20,741	$	67		$	32
Total	24,270		92			27			20,741		67			32
Derivatives not designated as hedging instruments:
Interest rate swaps	73,760		81			57			42,135		67			49
Interest rate caps and floors	1,563		1			1			2,180		6			—
Mortgage delivery commitments	16		—			—			13		—			—
Total	75,339		82			58			44,328		73			49
Total derivatives before netting and collateral adjustments	$	99,609	174			85			$	65,069	140			81
Netting adjustments and cash collateral(1)			(91		)	(84		)			(74		)	(79		)
Total derivative assets and total derivative liabilities			$	83		$	1				$	66		$	2

(1) Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met. Cash collateral posted and related accrued interest was $10 and $22 at December 31, 2017 and 2016, respectively. Cash collateral received and related accrued interest was $18 and $16 at December 31, 2017 and 2016, respectively.

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block]

The following table presents the components of net gain/(loss) on derivatives and hedging activities as presented in the Statements of Income for the years ended December 31, 2017, 2016, and 2015.

	2017			2016			2015
	Gain/(Loss)			Gain/(Loss)			Gain/(Loss)
Derivatives designated as hedging instruments:
Interest rate swaps	$	(1	)	$	(2	)	$	(10	)
Total net gain/(loss) related to fair value hedge ineffectiveness	(1		)	(2		)	(10		)
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps	8			39			13
Interest rate caps and floors	(5		)	(1		)	(3		)
Net settlements	(40		)	(32		)	(18		)
Mortgage delivery commitments	24			5			2
Total net gain/(loss) related to derivatives not designated as hedging instruments	(13		)	11			(6		)
Net gain/(loss) on derivatives and hedging activities	$	(14	)	$	9		$	(16	)

Schedule of Derivative Instruments By Type, Gain (Loss) in Statement of Financial Performance [Table Text Block]

The following tables present, by type of hedged item, the gains and losses on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on the Bank’s net interest income for the years ended December 31, 2017, 2016, and 2015.

Hedged Item Type	Gain/(Loss) on Derivatives			Gain /(Loss) on Hedged Item			Net Fair Value Hedge Ineffectiveness			Effect of Derivatives on Net Interest Income(1)
Year ended December 31, 2017:
Advances	$	63		$	(66	)	$	(3	)	$	(27	)
Consolidated obligation bonds	(41		)	43			2			27
Total	$	22		$	(23	)	$	(1	)	$	—
Year ended December 31, 2016:
Advances	$	63		$	(62	)	$	1		$	(55	)
Consolidated obligation bonds	(135		)	132			(3		)	180
Total	$	(72	)	$	70		$	(2	)	$	125
Year ended December 31, 2015:
Advances	$	19		$	(20	)	$	(1	)	$	(106	)
Consolidated obligation bonds	(170		)	161			(9		)	257
Total	$	(151	)	$	141		$	(10	)	$	151

(1) The net interest on derivatives in fair value hedge relationships is presented in the interest income/expense line item of the respective hedged item.

Schedule of Derivative Instruments, Offsetting Derivative Assets [Table Text Block]

The following table presents separately the fair value of derivative assets and derivative liabilities that have met the netting requirements, including the related collateral received from or pledged to counterparties as of December 31, 2017 and 2016.

	December 31, 2017							December 31, 2016
	Derivative Instruments Meeting Netting Requirements							Derivative Instruments Meeting Netting Requirements
	Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral			Total Derivative Assets and Total Derivative Liabilities		Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral			Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Uncleared	$	35	$	(33	)	$	2	$	41	$	(37	)	$	4
Cleared	139		(58		)	81		99		(37		)	62
Total						$	83						$	66
Derivative Liabilities
Uncleared	$	29	$	(28	)	$	1	$	37	$	(35	)	$	2
Cleared	56		(56		)	—		44		(44		)	—
Total						$	1						$	2

Schedule of Derivative Instruments, Offsetting Derivative Liabilities [Table Text Block]

The following table presents separately the fair value of derivative assets and derivative liabilities that have met the netting requirements, including the related collateral received from or pledged to counterparties as of December 31, 2017 and 2016.

	December 31, 2017							December 31, 2016
	Derivative Instruments Meeting Netting Requirements							Derivative Instruments Meeting Netting Requirements
	Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral			Total Derivative Assets and Total Derivative Liabilities		Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral			Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Uncleared	$	35	$	(33	)	$	2	$	41	$	(37	)	$	4
Cleared	139		(58		)	81		99		(37		)	62
Total						$	83						$	66
Derivative Liabilities
Uncleared	$	29	$	(28	)	$	1	$	37	$	(35	)	$	2
Cleared	56		(56		)	—		44		(44		)	—
Total						$	1						$	2

XML

Fair Value (Tables)

12 Months Ended

Dec. 31, 2017

Fair Value Disclosures [Abstract]

Fair Value, by Balance Sheet Grouping [Table Text Block]

The following tables present the carrying value, the estimated fair value, and the fair value hierarchy level of the Bank’s financial instruments at December 31, 2017 and 2016.

	December 31, 2017
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments(1)
Assets
Cash and due from banks	$	31	$	31	$	31	$	—	$	—	$	—
Interest-bearing deposits	1,115		1,115		1,115		—		—		—
Securities purchased under agreements to resell	11,750		11,750		—		11,750		—		—
Federal funds sold	11,028		11,029		—		11,029		—		—
Trading securities	1,164		1,164		—		1,164		—		—
AFS securities	3,833		3,833		—		—		3,833		—
HTM securities	14,680		14,704		—		13,697		1,007		—
Advances	77,382		77,437		—		77,437		—		—
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	2,076		2,075		—		2,075		—		—
Accrued interest receivable	119		119		—		119		—		—
Derivative assets, net(1)	83		83		—		174		—		(91		)
Other assets(2)	9		9		9		—		—		—
Liabilities
Deposits	281		281		—		281		—		—
Consolidated obligations:
Bonds	85,063		84,938		—		84,938		—		—
Discount notes	30,440		30,437		—		30,437		—		—
Total consolidated obligations	115,503		115,375		—		115,375		—		—
Mandatorily redeemable capital stock	309		309		309		—		—		—
Accrued interest payable	116		116		—		116		—		—
Derivative liabilities, net(1)	1		1		—		85		—		(84		)
Other
Standby letters of credit	19		19		—		19		—		—

	December 31, 2016
	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3		Netting Adjustments(1)
Assets
Cash and due from banks	$	2	$	2	$	2	$	—	$	—	$	—
Interest-bearing deposits	590		590		590		—		—		—
Securities purchased under agreements to resell	15,500		15,500		—		15,500		—		—
Federal funds sold	4,214		4,214		—		4,214		—		—
Trading securities	2,066		2,066		—		2,066		—		—
AFS securities	4,489		4,489		—		—		4,489		—
HTM securities	14,127		14,141		—		12,788		1,353		—
Advances	49,845		49,921		—		49,921		—		—
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	826		845		—		845		—		—
Accrued interest receivable	79		79		—		79		—		—
Derivative assets, net(1)	66		66		—		140		—		(74		)
Other assets(2)	11		11		11		—		—		—
Liabilities
Deposits	169		169		—		169		—		—
Consolidated obligations:
Bonds	50,224		50,188		—		50,188		—		—
Discount notes	33,506		33,505		—		33,505		—		—
Total consolidated obligations	83,730		83,693		—		83,693		—		—
Mandatorily redeemable capital stock	457		457		457		—		—		—
Borrowings from other FHLBanks	1,345		1,345		—		1,345		—		—
Accrued interest payable	67		67		—		67		—		—
Derivative liabilities, net(1)	2		2		—		81		—		(79		)
Other
Standby letters of credit	24		24		—		24		—		—

(1) Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met.

(2) Represents publicly traded mutual funds held in a grantor trust.

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis, Valuation Techniques [Table Text Block]

The tables below present the fair value of assets and liabilities, which are recorded on a recurring or nonrecurring basis at December 31, 2017 and 2016, by level within the fair value hierarchy.

December 31, 2017
	Fair Value Measurement Using:						Netting
	Level 1		Level 2		Level 3		Adjustments(1)			Total
Recurring fair value measurements – Assets:
Trading securities:
GSEs – FFCB bonds	$	—	$	1,158	$	—	$	—		$	1,158
MBS:
Other U.S. obligations – Ginnie Mae	—		6		—		—			6
Total trading securities	—		1,164		—		—			1,164
AFS securities:
PLRMBS	—		—		3,833		—			3,833
Total AFS securities	—		—		3,833		—			3,833
Advances(2)	—		6,431		—		—			6,431
Derivative assets, net: interest rate-related	—		174		—		(91		)	83
Other assets	9		—		—		—			9
Total recurring fair value measurements – Assets	$	9	$	7,769	$	3,833	$	(91	)	$	11,520
Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)	$	—	$	949	$	—	$	—		$	949
Derivative liabilities, net: interest rate-related	—		85		—		(84		)	1
Total recurring fair value measurements – Liabilities	$	—	$	1,034	$	—	$	(84	)	$	950
Nonrecurring fair value measurements – Assets:(4)
Impaired mortgage loans held for portfolio	$	—	$	—	$	3	$	—		$	3
Total nonrecurring fair value measurements – Assets	$	—	$	—	$	3	$	—		$	3

December 31, 2016
	Fair Value Measurement Using:						Netting
	Level 1		Level 2		Level 3		Adjustments(1)			Total
Recurring fair value measurements – Assets:
Trading securities:
GSEs – FFCB bonds	$	—	$	2,058	$	—	$	—		$	2,058
MBS:
Other U.S. obligations – Ginnie Mae	—		8		—		—			8
Total trading securities	—		2,066		—		—			2,066
AFS securities:
PLRMBS	—		—		4,489		—			4,489
Total AFS securities	—		—		4,489		—			4,489
Advances(2)	—		3,719		—		—			3,719
Derivative assets, net: interest rate-related	—		140		—		(74		)	66
Other assets	11		—		—		—			11
Total recurring fair value measurements – Assets	$	11	$	5,925	$	4,489	$	(74	)	$	10,351
Recurring fair value measurements – Liabilities:
Consolidated obligation bonds(3)	$	—	$	1,507	$	—	$	—		$	1,507
Derivative liabilities, net: interest rate-related	—		81		—		(79		)	2
Total recurring fair value measurements – Liabilities	$	—	$	1,588	$	—	$	(79	)	$	1,509
Nonrecurring fair value measurements – Assets:(4)
Impaired mortgage loans held for portfolio	$	—	$	—	$	5	$	—		$	5
Total nonrecurring fair value measurements – Assets	$	—	$	—	$	5	$	—		$	5

(1) Amounts represent the netting of derivative assets and liabilities by counterparty, including cash collateral, where the netting requirements have been met.

(2) Represents advances recorded under the fair value option at December 31, 2017 and 2016.

(3) Represents consolidated obligation bonds recorded under the fair value option at December 31, 2017 and 2016.

(4) The fair value information presented is as of the date the fair value adjustment was recorded during the years ended December 31, 2017 and 2016.

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

The following tables present a reconciliation of the Bank’s AFS PLRMBS that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2017, 2016, and 2015.

	2017			2016			2015
Balance, beginning of the period	$	4,489		$	5,414		$	6,371
Total gain/(loss) realized and unrealized included in:
Interest income	92			102			83
Net OTTI loss, credit-related	(16		)	(16		)	(15		)
Unrealized gain/(loss) of other-than-temporarily impaired securities included in AOCI	195			103			(29		)
Net amount of OTTI loss reclassified to/(from) other income/(loss)	6			(10		)	(15		)
Settlements	(933		)	(1,104		)	(996		)
Transfers of HTM securities to AFS securities	—			—			15
Balance, end of the period	$	3,833		$	4,489		$	5,414
Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets and liabilities still held at the end of the period	$	75		$	84		$	68

Fair Value, Option, Quantitative Disclosures [Table Text Block]

The following tables summarize the activity related to financial assets and liabilities for which the Bank elected the fair value option during the years ended December 31, 2017, 2016, and 2015:

	2017						2016						2015
	Advances			Consolidated Obligation Bonds			Advances			Consolidated Obligation Bonds			Advances			Consolidated Obligation Bonds
Balance, beginning of the period	$	3,719		$	1,507		$	3,677		$	4,233		$	5,137		$	6,717
New transactions elected for fair value option	3,657			1,185			947			685			1,018			2,585
Maturities and terminations	(918		)	(1,745		)	(878		)	(3,420		)	(2,442		)	(5,083		)
Net gain/(loss) on advances and net (gain)/loss on consolidated obligation bonds held under fair value option	(31		)	—			(27		)	13			(31		)	19
Change in accrued interest	4			2			—			(4		)	(5		)	(5		)
Balance, end of the period	$	6,431		$	949		$	3,719		$	1,507		$	3,677		$	4,233

The following table presents the difference between the aggregate remaining contractual principal balance outstanding and aggregate fair value of advances and consolidated obligation bonds for which the Bank elected the fair value option at December 31, 2017 and 2016:

	2017							2016
	Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance			Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance
Advances(1)	$	6,447	$	6,431	$	(16	)	$	3,709	$	3,719	$	10
Consolidated obligation bonds	955		949		(6		)	1,515		1,507		(8		)

(1) At December 31, 2017 and 2016, none of these advances were 90 days or more past due or had been placed on nonaccrual status.

XML

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Off-Balance Sheet Commitments [Table Text Block]

Off-balance sheet commitments as of December 31, 2017 and 2016, were as follows:

	2017						2016
	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	$	12,910	$	3,240	$	16,150	$	11,094	$	4,066	$	15,160
Commitments to fund additional advances	1		—		1		5		1		6
Commitments to issue consolidated obligation discount notes, par	134		—		134		846		—		846
Commitments to issue consolidated obligation bonds, par	595		—		595		655		—		655
Commitments to purchase mortgage loans	16		—		16		13		—		13

Contractual Obligation, Fiscal Year Maturity Schedule [Table Text Block]

The Bank charged operating expenses for net rental and related costs of approximately $7, $6, and $5 for the years ended December 31, 2017, 2016, and 2015, respectively. Future minimum rentals at December 31, 2017, were as follows:

Year	Equipment Capital Leases		Premises Operating Leases
2018	$	2	$	5
2019	2		4
2020	2		2
2021	2		—
2022	1		—
Total	$	9	$	11

XML

Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks (Tables)

12 Months Ended

Dec. 31, 2017

Related Party Transactions [Abstract]

Transactions with Certain Members and Nonmembers [Table Text Block]

In instances where the member has an officer or director serving on the Bank’s Board of Directors, all of the aforementioned transactions with the member are subject to the same eligibility and credit criteria, as well as the same conditions, as comparable transactions with all other members, in accordance with regulations governing the operations of the FHLBanks. The following tables set forth information at the dates and for the periods indicated with respect to transactions with members that have an officer or director serving on the Bank’s Board of Directors.

	December 31, 2017		December 31, 2016
Assets:
Advances	$	3,072	$	3,756
Mortgage loans held for portfolio	13		17
Accrued interest receivable	5		4
Liabilities:
Deposits	$	3	$	3
Capital:
Capital Stock	$	126	$	129

	For the Years Ended December 31,
	2017		2016		2015
Interest Income:
Advances	$	41	$	35	$	35
Mortgage loans held for portfolio	1		1		1

XML

Other (Tables)

12 Months Ended

Dec. 31, 2017

Other Income and Expenses [Abstract]

Schedule of Other Operating Cost and Expense, by Component [Table Text Block]

The table below discloses the categories included in other operating expense for the years ended December 31, 2017, 2016, and 2015.

	2017		2016		2015
Professional and contract services	$	39	$	47	$	50
Travel	2		2		2
Occupancy	7		6		5
Equipment	16		13		10
Other	6		6		4
Total	$	70	$	74	$	71

XML

Summary of Significant Accounting Policies Narrative (Details) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) loan	Dec. 31, 2016 USD ($) loan	Dec. 31, 2015 USD ($)
Property, Plant and Equipment [Line Items]
Accumulated Depreciation and Amortization, Property, Plant, and Equipment	$ 74	$ 61
Depreciation and Amortization	16	12	$ 8
Capitalized Computer Software, Net [Abstract]
Capitalized Computer Software, Net	10	17
Capitalized Computer Software, Amortization	$ 9	8	6
Held-to-maturity Securities, Sales or Transfers of Investments [Abstract]
Substantial Portion Collected, Percent	85.00%
Repossessed Assets [Abstract]
Real Estate Acquired Through Foreclosure	$ 1	$ 1
Real Estate Owned, Number of Loans | loan	11	12
Interest Expense [Abstract]
Amortization of Debt Issuance Costs	$ 6	$ 13	$ 7
Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Estimated Useful Lives	P3Y
Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Estimated Useful Lives	P10Y

XML

Cash and Due from Banks (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Cash and Due from Banks [Abstract]
Average Collected Cash Balances With Commercial Banks	$ 30	$ 44

XML

Trading Securities (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Schedule of Trading Securities and Other Trading Assets [Line Items]
Trading securities	[1]	$ 1,164	$ 2,066
Net unrealized gain/(loss) on trading securities		0	4	$ (2)
Non-MBS - GSE - FFCB bonds [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Trading securities		1,158	2,058
Single Family [Member] | MBS - Other US Obligations - Ginnie Mae [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Trading securities		$ 6	$ 8

[1] At December 31, 2017 and 2016, none of these securities were pledged as collateral that may be repledged.

XML

Available-for-Sale Securities (Narrative) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Schedule of Available-for-sale Securities [Line Items]
Credit-related OTTI	$ 1,129	$ 1,183	$ 1,255	$ 1,314
Available-for-sale Securities [Member] | Collateralized Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Credit-related OTTI	$ 801	$ 941

XML

Available-for-Sale Securities (AFS Securities by Major Security Type) (Details) - USD ($) $ in Millions		Dec. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	[1]	$ 3,496	$ 4,353
OTTI Recognized in AOCI		(33)	(114)
Gross Unrealized Gains		370	253
Gross Unrealized Losses		0	(3)
Estimated Fair Value	[2]	3,833	4,489
PLRMBS [Member] | Prime [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		335	413
OTTI Recognized in AOCI		0	(1)
Gross Unrealized Gains		29	22
Gross Unrealized Losses		0	0
Estimated Fair Value		364	434
PLRMBS [Member] | Alt-A, Option ARM [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		714	853
OTTI Recognized in AOCI		(10)	(31)
Gross Unrealized Gains		130	77
Gross Unrealized Losses		0	(2)
Estimated Fair Value		834	897
PLRMBS [Member] | Alt-A, other [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		2,447	3,087
OTTI Recognized in AOCI		(23)	(82)
Gross Unrealized Gains		211	154
Gross Unrealized Losses		0	(1)
Estimated Fair Value		$ 2,635	$ 3,158

[1] Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings.

[2] At December 31, 2017 and 2016, none of these securities were pledged as collateral that may be repledged.

XML

Available-for-Sale Securities (Summary of Securities with Unrealized Losses) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months: Estimated Fair Value	$ 5	$ 71
Less Than 12 Months: Unrealized Losses	0	0
12 Months or More: Estimated Fair Value	511	1,311
12 Months or More: Unrealized Losses	33	117
Estimated Fair Value	516	1,382
Unrealized Losses	33	117
Prime [Member] | PLRMBS [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months: Estimated Fair Value	0	0
Less Than 12 Months: Unrealized Losses	0	0
12 Months or More: Estimated Fair Value	11	14
12 Months or More: Unrealized Losses	0	1
Estimated Fair Value	11	14
Unrealized Losses	0	1
Alt-A, Option ARM [Member] | PLRMBS [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months: Estimated Fair Value	0	14
Less Than 12 Months: Unrealized Losses	0	0
12 Months or More: Estimated Fair Value	144	249
12 Months or More: Unrealized Losses	10	33
Estimated Fair Value	144	263
Unrealized Losses	10	33
Alt-A, other [Member] | PLRMBS [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Less Than 12 Months: Estimated Fair Value	5	57
Less Than 12 Months: Unrealized Losses	0	0
12 Months or More: Estimated Fair Value	356	1,048
12 Months or More: Unrealized Losses	23	83
Estimated Fair Value	361	1,105
Unrealized Losses	$ 23	$ 83

XML

Held-to-Maturity Securities (Classification of Held-to-Maturity Securities) (Details) - USD ($) $ in Millions		Dec. 31, 2017		Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	[1]	$ 14,686		$ 14,136
OTTI Recognized in AOCI	[1]	(6)		(9)
HTM securities, Carrying Value	[1],[2]	14,680		14,127
Gross Unrecognized Holding Gain		71		88
Gross Unrecognized Holding Loss		(47)		(74)
HTM Securities, Fair Value		14,704		14,141
Credit-related OTTI		1,129		1,183		$ 1,255	$ 1,314
Certificates of Deposit [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost		500	[1]	1,350
OTTI Recognized in AOCI		0	[1]	0
HTM securities, Carrying Value		500	[1]	1,350
Gross Unrecognized Holding Gain		0		0
Gross Unrecognized Holding Loss		0		0
HTM Securities, Fair Value		500		1,350
Housing finance agency bonds [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost		187	[1]	225
OTTI Recognized in AOCI		0	[1]	0
HTM securities, Carrying Value		187	[1]	225
Gross Unrecognized Holding Gain		0		0
Gross Unrecognized Holding Loss		(9)		(18)
HTM Securities, Fair Value		178		207
MBS - Other US Obligations - Ginnie Mae [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost		751	[1]	951
OTTI Recognized in AOCI		0	[1]	0
HTM securities, Carrying Value		751	[3]	951
Gross Unrecognized Holding Gain		1		5
Gross Unrecognized Holding Loss		(1)		(1)
HTM Securities, Fair Value		751		955
GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	[1]	12,421		10,444
OTTI Recognized in AOCI	[1]	0		0
HTM securities, Carrying Value	[1]	12,421		10,444
Gross Unrecognized Holding Gain		54		70
Gross Unrecognized Holding Loss		(29)		(31)
HTM Securities, Fair Value		12,446		10,483
PLRMBS [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	[1]	827		1,166
OTTI Recognized in AOCI	[1]	(6)		(9)
HTM securities, Carrying Value	[1]	821		1,157
Gross Unrecognized Holding Gain		16		13
Gross Unrecognized Holding Loss		(8)		(24)
HTM Securities, Fair Value		829		1,146
MBS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	[1]	13,999		12,561
OTTI Recognized in AOCI	[1]	(6)		(9)
HTM securities, Carrying Value	[1]	13,993		12,552
Gross Unrecognized Holding Gain		71		88
Gross Unrecognized Holding Loss		(38)		(56)
HTM Securities, Fair Value		14,026		12,584
Held-to-maturity Securities, Premiums		19		29
Held-to-maturity Securities, Discounts		24		34
MBS [Member] | Held-to-maturity Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Credit-related OTTI		7		8
Single Family [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	[1]	5,639		7,830
OTTI Recognized in AOCI	[1]	0		0
HTM securities, Carrying Value	[1]	5,639		7,830
Gross Unrecognized Holding Gain		46		70	[1]
Gross Unrecognized Holding Loss		(23)		(29)	[1]
HTM Securities, Fair Value		5,662		7,871	[1]
Single Family [Member] | Freddie Mac [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost		2,039	[1]	2,793
OTTI Recognized in AOCI		0	[1]	0
HTM securities, Carrying Value		2,039	[1]	2,793
Gross Unrecognized Holding Gain		12		23
Gross Unrecognized Holding Loss		(15)		(15)
HTM Securities, Fair Value		2,036		2,801
Single Family [Member] | Fannie Mae [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost		3,600	[1]	5,037
OTTI Recognized in AOCI		0	[1]	0
HTM securities, Carrying Value		3,600	[1]	5,037
Gross Unrecognized Holding Gain		34		47
Gross Unrecognized Holding Loss		(8)		(14)
HTM Securities, Fair Value		3,626		5,070
Multifamily [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	[1]	6,782		2,614
OTTI Recognized in AOCI	[1]	0		0
HTM securities, Carrying Value	[1]	6,782		2,614
Gross Unrecognized Holding Gain		8		0
Gross Unrecognized Holding Loss		(6)		(2)
HTM Securities, Fair Value		6,784		2,612
Multifamily [Member] | Freddie Mac [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost		4,651	[1]	1,556
OTTI Recognized in AOCI		0	[1]	0
HTM securities, Carrying Value		4,651	[1]	1,556
Gross Unrecognized Holding Gain		6		0
Gross Unrecognized Holding Loss		(6)		(1)
HTM Securities, Fair Value		4,651		1,555
Multifamily [Member] | Fannie Mae [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost		2,131	[1]	1,058
OTTI Recognized in AOCI		0	[1]	0
HTM securities, Carrying Value		2,131	[1]	1,058
Gross Unrecognized Holding Gain		2		0
Gross Unrecognized Holding Loss		0		(1)
HTM Securities, Fair Value		2,133		1,057
Prime [Member] | PLRMBS [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost		521	[1]	707
OTTI Recognized in AOCI		0	[1]	0
HTM securities, Carrying Value		521	[1]	707
Gross Unrecognized Holding Gain		5		2
Gross Unrecognized Holding Loss		(6)		(15)
HTM Securities, Fair Value		520		694
Alt-A, other [Member] | PLRMBS [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost		306	[1]	459
OTTI Recognized in AOCI		(6)	[1]	(9)
HTM securities, Carrying Value		300	[1]	450
Gross Unrecognized Holding Gain		11		11
Gross Unrecognized Holding Loss		(2)		(9)
HTM Securities, Fair Value		$ 309		$ 452

[1] Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

[2] At December 31, 2017 and 2016, none of these securities were pledged as collateral that may be repledged.

[3] Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

XML

Held-to-Maturity Securities (Securities with Unrealized Losses) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	$ 3,534	$ 5,748
Less Than 12 Months, Unrealized losses	20	30
12 Months or More, Estimated Fair Value	1,099	1,261
12 Months Or More, Unrealized losses	33	53
Total, Estimated Fair Value	4,633	7,009
Total, Unrealized Losses	53	83
CalHFA bonds [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	0	0
Less Than 12 Months, Unrealized losses	0	0
12 Months or More, Estimated Fair Value	178	193
12 Months Or More, Unrealized losses	9	18
Total, Estimated Fair Value	178	193
Total, Unrealized Losses	9	18
MBS - Other US Obligations - Ginnie Mae [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	406	190
Less Than 12 Months, Unrealized losses	1	1
12 Months or More, Estimated Fair Value	0	0
12 Months Or More, Unrealized losses	0	0
Total, Estimated Fair Value	406	190
Total, Unrealized Losses	1	1
GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	3,111	5,557
Less Than 12 Months, Unrealized losses	19	29
12 Months or More, Estimated Fair Value	528	99
12 Months Or More, Unrealized losses	10	2
Total, Estimated Fair Value	3,639	5,656
Total, Unrealized Losses	29	31
PLRMBS [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	17	1
Less Than 12 Months, Unrealized losses	0	0
12 Months or More, Estimated Fair Value	393	969
12 Months Or More, Unrealized losses	14	33
Total, Estimated Fair Value	410	970
Total, Unrealized Losses	14	33
MBS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	3,534	5,748
Less Than 12 Months, Unrealized losses	20	30
12 Months or More, Estimated Fair Value	921	1,068
12 Months Or More, Unrealized losses	24	35
Total, Estimated Fair Value	4,455	6,816
Total, Unrealized Losses	44	65
Single Family [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	1,597	4,163
Less Than 12 Months, Unrealized losses	13	27
12 Months or More, Estimated Fair Value	528	99
12 Months Or More, Unrealized losses	10	2
Total, Estimated Fair Value	2,125	4,262
Total, Unrealized Losses	23	29
Single Family [Member] | Freddie Mac [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	895	1,498
Less Than 12 Months, Unrealized losses	9	15
12 Months or More, Estimated Fair Value	323	3
12 Months Or More, Unrealized losses	6	0
Total, Estimated Fair Value	1,218	1,501
Total, Unrealized Losses	15	15
Single Family [Member] | Fannie Mae [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	702	2,665
Less Than 12 Months, Unrealized losses	4	12
12 Months or More, Estimated Fair Value	205	96
12 Months Or More, Unrealized losses	4	2
Total, Estimated Fair Value	907	2,761
Total, Unrealized Losses	8	14
Multifamily [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	1,514	1,394
Less Than 12 Months, Unrealized losses	6	2
12 Months or More, Estimated Fair Value	0	0
12 Months Or More, Unrealized losses	0	0
Total, Estimated Fair Value	1,514	1,394
Total, Unrealized Losses	6	2
Multifamily [Member] | Freddie Mac [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	1,058	1,007
Less Than 12 Months, Unrealized losses	6	1
12 Months or More, Estimated Fair Value	0	0
12 Months Or More, Unrealized losses	0	0
Total, Estimated Fair Value	1,058	1,007
Total, Unrealized Losses	6	1
Multifamily [Member] | Fannie Mae [Member] | GSEs [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	456	387
Less Than 12 Months, Unrealized losses	0	1
12 Months or More, Estimated Fair Value	0	0
12 Months Or More, Unrealized losses	0	0
Total, Estimated Fair Value	456	387
Total, Unrealized Losses	0	1
Prime [Member] | PLRMBS [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	2	1
Less Than 12 Months, Unrealized losses	0	0
12 Months or More, Estimated Fair Value	202	517
12 Months Or More, Unrealized losses	6	15
Total, Estimated Fair Value	204	518
Total, Unrealized Losses	6	15
Alt-A, other [Member] | PLRMBS [Member] | Residential Mortgage Backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Less Than 12 Months, Estimated Fair Value	15	0
Less Than 12 Months, Unrealized losses	0	0
12 Months or More, Estimated Fair Value	191	452
12 Months Or More, Unrealized losses	8	18
Total, Estimated Fair Value	206	452
Total, Unrealized Losses	$ 8	$ 18

XML

Held-to-Maturity Securities (Redemption Terms) (Details) - USD ($) $ in Millions		Dec. 31, 2017		Dec. 31, 2016
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	[1]	$ 14,686		$ 14,136
HTM securities, Carrying Value	[1],[2]	14,680		14,127
HTM Securities, Fair Value		14,704		14,141
Other Than Mortgage Backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Due in 1 year or less, Amortized Cost		500	[3]	1,350
Due in 1 year or less, Carrying Value		500	[3]	1,350
Due in 1 year or less, Fair Value		500		1,350
Due after 5 years through 10 years, Amortized Cost		12	[3]	35
Due after 5 years through 10 years, Carrying Value		12	[3]	35
Due after 5 years through 10 years, Estimated Fair Value		12		34
Due after 10 years, Amortized Cost		175	[3]	190
Due after 10 years, Carrying Value		175	[3]	190
Due after 10 years, Estimated Fair Value		166		173
Amortized Cost		687		1,575
HTM securities, Carrying Value		687		1,575
HTM Securities, Fair Value		678		1,557
Collateralized Mortgage Backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	[1]	13,999		12,561
HTM securities, Carrying Value	[1]	13,993		12,552
HTM Securities, Fair Value		$ 14,026		$ 12,584

[1] Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

[2] At December 31, 2017 and 2016, none of these securities were pledged as collateral that may be repledged.

[3] Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

XML

Other-Than-Temporary Impairment Analysis (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2017
Other than Temporary Impairment Losses, Investments [Abstract]
Period Assumed For Housing Markets That Have Reached Trough			12 months
Projected Change In The Twelve Month Housing Price Percentage Rate, Maximum Decrease	5.00%		5.00%
Projected Change In The Twelve Month Housing Price Percentage Rate, Maximum Increase	12.00%		12.00%
Projected Change In The Short-term Housing Price Percentage Rate, Minimum Increase In Vast Majority Of Markets	2.00%		2.00%
Projected Change In The Short-term Housing Price Percentage Rate, Maximum Increase In Vast Majority Of Markets	6.00%		6.00%
HTM Transferred to AFS, Amortized Cost	$ 0	$ 0

XML

Other-Than-Temporary Impairment Analysis (Significant Inputs for Other-Than-Temporarily Impaired PLRMBS) (Details) - Residential Mortgage Backed Securities [Member] - PLRMBS [Member]	12 Months Ended
	Dec. 31, 2017	[1]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Prepayment Weighted Average	11.50%
Default Rate Weighted Average	23.40%
Loss Severity Weighted Average	37.80%
Credit Enhancements Weighted Average	7.50%
Alt-A, other [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Prepayment Weighted Average	11.50%
Default Rate Weighted Average	23.40%
Loss Severity Weighted Average	37.80%
Credit Enhancements Weighted Average	7.50%
Securitization in 2007 [Member] | Alt-A, other [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Prepayment Weighted Average	10.40%
Default Rate Weighted Average	29.50%
Loss Severity Weighted Average	39.40%
Credit Enhancements Weighted Average	0.70%
Securitization in 2006 [Member] | Alt-A, other [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Prepayment Weighted Average	10.80%
Default Rate Weighted Average	20.20%
Loss Severity Weighted Average	39.20%
Credit Enhancements Weighted Average	25.00%
Securitization in 2005 [Member] | Alt-A, other [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Prepayment Weighted Average	13.50%
Default Rate Weighted Average	17.80%
Loss Severity Weighted Average	34.60%
Credit Enhancements Weighted Average	2.90%
Securitization in 2004 and Earlier [Member] | Alt-A, other [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
Prepayment Weighted Average	14.00%
Default Rate Weighted Average	1.70%
Loss Severity Weighted Average	31.40%
Credit Enhancements Weighted Average	9.30%

[1] Weighted average percentage is based on unpaid principal balance.

XML

Other-Than-Temporary Impairment Analysis (OTTI Rollforward) (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Other than Temporary Impairment Losses, Investments [Abstract]
OTTI PLRMBS, Total accretion or amortization recognized in interest income		$ 93	$ 101	$ 82
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward]
Balance, beginning of the period		1,183	1,255	1,314
Additional charges on securities for which OTTI was previously recognized	[1]	16	16	15
Securities matured during the period	[2]	(1)	(7)	0
Accretion of yield adjustments resulting from improvement of expected cash flows that are recognized over the remaining life of the securities	[3]	(69)	(81)	(74)
Balance, end of the period		$ 1,129	$ 1,183	$ 1,255

[1] For the years ended December 31, 2017, 2016, and 2015, “securities for which OTTI was previously recognized” represents all securities that were also other-than-temporarily impaired prior to January 1, 2017, 2016, and 2015, respectively.

[2] Represents reductions related to securities having reached final maturity during the period, which therefore are no longer held by the Bank at the end of the period.

[3] The total net accretion/(amortization) associated with other-than-temporarily impaired PLRMBS (amount recognized in interest income) totaled $93, $101, and $82 for the years ended December 31, 2017, 2016, and 2015, respectively.

XML

Other-Than-Temporary Impairment Analysis (Transfers) (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
HTM Transferred to AFS, Amortized Cost	$ 0	$ 0

XML

Other-Than-Temporary Impairment Analysis (OTTI Impaired PLRMBS) (Details) - PLRMBS [Member] - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Available-for-sale Securities [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
OTTI Securities, Unpaid Principal Balance	$ 4,285	$ 5,282
OTTI Securities, Amortized Cost	3,496	4,353
OTTI Securities, Fair Value	3,833	4,489
Held-to-maturity Securities [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
OTTI Securities, Unpaid Principal Balance	64	93
OTTI Securities, Amortized Cost	59	88
OTTI Securities, Fair Value	63	91
OTTI Securities, Carrying Value	53	79
Prime [Member] | Available-for-sale Securities [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
OTTI Securities, Unpaid Principal Balance	405	498
OTTI Securities, Amortized Cost	335	413
OTTI Securities, Fair Value	364	434
Prime [Member] | Held-to-maturity Securities [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
OTTI Securities, Unpaid Principal Balance	0	0
OTTI Securities, Amortized Cost	0	0
OTTI Securities, Fair Value	0	0
OTTI Securities, Carrying Value	0	0
Alt-A, Option ARM [Member] | Available-for-sale Securities [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
OTTI Securities, Unpaid Principal Balance	953	1,134
OTTI Securities, Amortized Cost	714	853
OTTI Securities, Fair Value	834	897
Alt-A, Option ARM [Member] | Held-to-maturity Securities [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
OTTI Securities, Unpaid Principal Balance	0	0
OTTI Securities, Amortized Cost	0	0
OTTI Securities, Fair Value	0	0
OTTI Securities, Carrying Value	0	0
Alt-A, other [Member] | Available-for-sale Securities [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
OTTI Securities, Unpaid Principal Balance	2,927	3,650
OTTI Securities, Amortized Cost	2,447	3,087
OTTI Securities, Fair Value	2,635	3,158
Alt-A, other [Member] | Held-to-maturity Securities [Member]
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Line Items]
OTTI Securities, Unpaid Principal Balance	64	93
OTTI Securities, Amortized Cost	59	88
OTTI Securities, Fair Value	63	91
OTTI Securities, Carrying Value	$ 53	$ 79

XML

Advances (Narrative) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Advances [Line Items]
Advances, Par Value	$ 77,486	$ 49,857
Advances With Partial Prepayment Symmetry Outstanding	$ 4,619	$ 3,647
Minimum [Member]
Advances [Line Items]
Advances, Maturity Period, Fixed Rate	1 day
Advances, Maturity Period, Variable Rate	30 days
Advances, Interest Rate	0.79%	0.43%
Maximum [Member]
Advances [Line Items]
Advances, Maturity Period, Fixed Rate	30 years
Advances, Maturity Period, Variable Rate	10 years
Advances, Interest Rate	8.57%	8.57%
Advances, Callable Option [Member]
Advances [Line Items]
Advances, Par Value	$ 18,373	$ 15,505
Advances, Putable Option [Member]
Advances [Line Items]
Advances, Par Value	$ 0	$ 125

XML

Advances (Redemption Terms) (Details) - USD ($) $ in Millions		Dec. 31, 2017	Dec. 31, 2016
Federal Home Loan Bank Advances, Maturities [Abstract]
Within 1 year		$ 46,403	$ 22,902
After 1 year through 2 years		16,287	7,608
After 2 years through 3 years		5,423	9,410
After 3 years through 4 years		6,719	2,083
After 4 years through 5 years		1,741	6,423
After 5 years		913	1,431
Total par amount		77,486	49,857
Valuation adjustments for hedging activities		(88)	(22)
Valuation adjustments under fair value option	[1]	(16)	10
Advances		$ 77,382	$ 49,845
Federal Home Loan Bank Advances, Weighted Average Interest Rate [Abstract]
Within 1 year		1.46%	0.78%
After 1 year through 2 years		1.61%	1.36%
After 2 years through 3 years		1.73%	1.22%
After 3 years through 4 years		1.69%	1.39%
After 4 years through 5 years		2.10%	1.24%
After 5 years		3.13%	2.60%
Total par value		1.57%	1.09%

[1] At December 31, 2017 and 2016, none of these advances were 90 days or more past due or had been placed on nonaccrual status.

XML

Advances (Earlier of Contractual Maturity or Next Call/Put Date) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Federal Home Loan Bank, Advances, Earlier of Contractual Maturity or Next Call Date, Rolling Year, Par Value [Abstract]
Within 1 year	$ 52,624	$ 25,784
After 1 year through 2 years	12,593	11,078
After 2 years through 3 years	7,973	4,465
After 3 years through 4 years	1,719	5,782
After 4 years through 5 years	1,729	1,421
After 5 years	848	1,327
Federal Home Loan Bank, Advances, Earlier of Contractual Maturity or Next Put or Convert Date, Rolling Year, Par Value [Abstract]
Within 1 year	46,403	22,927
After 1 year through 2 years	16,287	7,583
After 2 years through 3 years	5,423	9,410
After 3 years through 4 years	6,719	2,083
After 4 years through 5 years	1,741	6,423
After 5 years	913	1,431
Total par amount	$ 77,486	$ 49,857

XML

Advances (Credit and Concentration Risk) (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2017		Dec. 31, 2016
Advances [Line Items]
Advances Outstanding		$ 77,486		$ 49,857
Interest Income from Advances	[1]	$ 899		$ 533
Advances [Member]
Advances [Line Items]
Concentration Risk, Percentage		100.00%		100.00%
Interest Income [Member]
Advances [Line Items]
Concentration Risk, Percentage		100.00%		100.00%
Charles Schwab Bank [Member]
Advances [Line Items]
Advances Outstanding		$ 15,000
Interest Income from Advances	[1],[2]	40
JPMorgan Chase Bank National Association [Member]
Advances [Line Items]
Advances Outstanding	[2]	11,363		$ 14,807
Interest Income from Advances	[2]	174	[1]	119
First Republic Bank [Member]
Advances [Line Items]
Advances Outstanding		8,400		5,900
Interest Income from Advances	[1]	112		70
MUFG Union Bank, NA [Member]
Advances [Line Items]
Advances Outstanding	[2]	7,250
Interest Income from Advances	[1],[2]	48
Bank of the West [Member]
Advances [Line Items]
Advances Outstanding		6,409		7,305
Interest Income from Advances	[1]	87		49
CIT Bank N.A. [Member]
Advances [Line Items]
Advances Outstanding				2,411
Interest Income from Advances	[1]			28
Star One Credit Union [Member]
Advances [Line Items]
Advances Outstanding	[2]			2,024
Interest Income from Advances	[1],[2]			27
Top five borrowers [Member]
Advances [Line Items]
Advances Outstanding		48,422		32,447
Interest Income from Advances	[1]	$ 461		$ 293
Top five borrowers [Member] | Advances [Member]
Advances [Line Items]
Concentration Risk, Percentage		62.00%		65.00%
Top five borrowers [Member] | Interest Income [Member]
Advances [Line Items]
Concentration Risk, Percentage		51.00%		55.00%
Top five borrowers [Member] | Charles Schwab Bank [Member] | Advances [Member]
Advances [Line Items]
Concentration Risk, Percentage		19.00%
Top five borrowers [Member] | Charles Schwab Bank [Member] | Interest Income [Member]
Advances [Line Items]
Concentration Risk, Percentage	[2]	5.00%
Top five borrowers [Member] | JPMorgan Chase Bank National Association [Member] | Advances [Member]
Advances [Line Items]
Concentration Risk, Percentage	[2]	15.00%		30.00%
Top five borrowers [Member] | JPMorgan Chase Bank National Association [Member] | Interest Income [Member]
Advances [Line Items]
Concentration Risk, Percentage	[2]	19.00%		23.00%
Top five borrowers [Member] | First Republic Bank [Member] | Advances [Member]
Advances [Line Items]
Concentration Risk, Percentage		11.00%		12.00%
Top five borrowers [Member] | First Republic Bank [Member] | Interest Income [Member]
Advances [Line Items]
Concentration Risk, Percentage		12.00%		13.00%
Top five borrowers [Member] | MUFG Union Bank, NA [Member] | Advances [Member]
Advances [Line Items]
Concentration Risk, Percentage	[2]	9.00%
Top five borrowers [Member] | MUFG Union Bank, NA [Member] | Interest Income [Member]
Advances [Line Items]
Concentration Risk, Percentage	[2]	5.00%
Top five borrowers [Member] | Bank of the West [Member] | Advances [Member]
Advances [Line Items]
Concentration Risk, Percentage		8.00%		14.00%
Top five borrowers [Member] | Bank of the West [Member] | Interest Income [Member]
Advances [Line Items]
Concentration Risk, Percentage		10.00%		9.00%
Top five borrowers [Member] | CIT Bank N.A. [Member] | Advances [Member]
Advances [Line Items]
Concentration Risk, Percentage				5.00%
Top five borrowers [Member] | CIT Bank N.A. [Member] | Interest Income [Member]
Advances [Line Items]
Concentration Risk, Percentage				5.00%
Top five borrowers [Member] | Star One Credit Union [Member] | Advances [Member]
Advances [Line Items]
Concentration Risk, Percentage	[2]			4.00%
Top five borrowers [Member] | Star One Credit Union [Member] | Interest Income [Member]
Advances [Line Items]
Concentration Risk, Percentage	[2]			5.00%
Other Borrowers [Member]
Advances [Line Items]
Advances Outstanding		$ 29,064		$ 17,410
Interest Income from Advances	[1]	$ 438		$ 240
Other Borrowers [Member] | Advances [Member]
Advances [Line Items]
Concentration Risk, Percentage		38.00%		35.00%
Other Borrowers [Member] | Interest Income [Member]
Advances [Line Items]
Concentration Risk, Percentage		49.00%		45.00%

[1] Interest income amounts exclude the interest effect of interest rate exchange agreements with derivative counterparties; as a result, the total interest income amounts will not agree to the Statements of Income. The amount of interest income from advances can vary depending on the amount outstanding, terms to maturity, interest rates, and repricing characteristics.

[2] Nonmember institution.

XML

Advances (Interest Rate Payment Terms and Prepayment Fees) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Federal Home Loan Bank, Advances, Fixed Rate [Abstract]
Fixed Rate, due within 1 year	$ 31,767	$ 13,486
Fixed Rate, due after 1 year	13,022	10,845
Advances, Total Fixed Rate	44,789	24,331
Federal Home Loan Bank, Advances, Floating Rate [Abstract]
Adjustable Rate, due within 1 year	14,636	9,416
Adjustable Rate, due after 1 year	18,061	16,110
Advances, Total Adjustable Rate	32,697	25,526
Total par amount	77,486	49,857
Prepayment Fees [Abstract]
Prepayment Fees on Advances Received	1	6	$ 28
Fair Value Gain (Loss) Adjustments	0	(1)	(20)
Prepayment Fees on Advances, Net	1	5	8
Prepayments on Advances Principal	$ 8,469	$ 3,459	$ 2,229

XML

Mortgage Loans Held for Portfolio (Details) $ in Millions	12 Months Ended
	Dec. 31, 2017 USD ($) Institutions	Dec. 31, 2016 USD ($)
Mortgage Loans on Real Estate [Line Items]
Number of Institutions Participating in Renewed MPF Program | Institutions	23
Unpaid principal balance	$ 2,005	$ 814
Unamortized premiums	76	18
Unamortized discounts	(5)	(6)
Mortgage loans held for portfolio	2,076	826
Less: Allowance for credit losses	0	0
Total mortgage loans held for portfolio, net	$ 2,076	826
Fixed rate medium-term mortgage loans [Member] | Maximum [Member]
Mortgage Loans on Real Estate [Line Items]
Mortgage Loans on Real Estate, Original Contractual Terms	15 years
Fixed rate long-term mortgage loans [Member] | Minimum [Member]
Mortgage Loans on Real Estate [Line Items]
Mortgage Loans on Real Estate, Original Contractual Terms	15 years
Conventional Mortgage Loan [Member]
Mortgage Loans on Real Estate [Line Items]
Unpaid principal balance	$ 2,005	814
Single Family [Member] | Fixed rate medium-term mortgage loans [Member]
Mortgage Loans on Real Estate [Line Items]
Unpaid principal balance	32	55
Single Family [Member] | Fixed rate long-term mortgage loans [Member]
Mortgage Loans on Real Estate [Line Items]
Unpaid principal balance	$ 1,973	$ 759

XML

Allowance for Credit Losses (Narrative) (Details) $ in Millions	2 Months Ended	12 Months Ended
	Feb. 28, 2018 Institutions	Dec. 31, 2017 USD ($) Institutions	Dec. 31, 2016 USD ($)
Financing Receivable, Allowance for Credit Losses [Line Items]
Number of Member Institutions Placed Into Receivership or Liquidation | Institutions		0
Period Loan Receivable Becomes Nonaccrual Status		90 days
Loan to Value Ratio Above Which a Borrower is Required to Obtain Primary Mortgage Insurance		80.00%
Allowance for credit losses on mortgage loans		$ 0	$ 0
Subsequent Event [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Number of Member Institutions Placed Into Receivership or Liquidation | Institutions	0
Conventional Mortgage Loan [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for credit losses on mortgage loans		0	0
Nonperforming TDR [Member] | Conventional Mortgage Loan [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Troubled Debt Restructuring, Modifications, Recorded Investment		$ 3	$ 3

XML

Allowance for Credit Losses (Delinquent Mortgage Loans) (Details) - Conventional Mortgage Loan [Member] - USD ($) $ in Millions		Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses [Line Items]
Past due	[1]	$ 22	$ 25
Total current loans	[1]	2,065	805
Total mortgage loans, gross	[1]	2,087	830
In process of foreclosure, included above	[1],[2]	3	5
Nonaccrual loans	[1]	12	15
Loans Past Due 90 days or more and still accruing interest	[1]	$ 0	$ 0
Serious delinquencies as a percentage of total mortgage loans outstanding	[1],[3]	0.59%	1.79%
30 to 59 Days delinquent [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Past due	[1]	$ 8	$ 7
60 to 89 Days delinquent [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Past due	[1]	2	3
90 Days ore more delinquent [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Past due	[1]	$ 12	$ 15

[1] The recorded investment in a loan is the unpaid principal balance of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs. The recorded investment is not net of any valuation allowance.

[2] Includes loans for which the servicer has reported a decision to foreclose or to pursue a similar alternative, such as deed-in-lieu. Loans in process of foreclosure are included in past due or current loans depending on their delinquency status.

[3] Represents loans that are 90 days or more past due or in the process of foreclosure as a percentage of the recorded investment of total mortgage loans outstanding

XML

Allowance for Credit Losses (Rollforward) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Loan and Lease Losses Write-offs, Net	$ 0	$ 0	$ (2)
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of the period	0
Provision for/(reversal of) credit losses on mortgage loans	0	0	$ 1
Balance, end of the period	0	0
Conventional Mortgage Loan [Member]
Financing Receivable, Allowance for Credit Losses [Roll Forward]
Balance, beginning of the period	0
Balance, end of the period	$ 0	$ 0

XML

Allowance for Credit Losses (By Impairment Methodology) (Details) - USD ($) $ in Millions		Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses [Line Items]
Total Allowance for Credit Losses		$ 0	$ 0
Conventional Mortgage Loan [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment, Allowance for credit losses		0	0
Collectively Evaluated for Impairment, Allowance for credit losses		0	0
Total Allowance for Credit Losses		0	0
Individually evaluated for impairment, Recorded investment		9	12
Collectively evaluated for impairment, Recorded investment		2,078	818
Total mortgage loans, gross	[1]	$ 2,087	$ 830

[1] The recorded investment in a loan is the unpaid principal balance of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs. The recorded investment is not net of any valuation allowance.

XML

Allowance for Credit Losses (Recorded Investment, Average Recorded Investment, Unpaid Principal Balance and Related Allowance of Impaired Loans) (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Loans and Leases Receivable, Allowance		$ 0	$ 0
Conventional Mortgage Loan [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment		9	12
Impaired Financing Receivable, with Related Allowance, Recorded Investment		0	0
Impaired Financing Receivable, Recorded Investment		9	12
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance		9	12
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance		0	0
Impaired Financing Receivable, Unpaid Principal Balance		9	12
Impaired Financing Receivable, Related Allowance		0	0
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment		10	12
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment		0	0
Impaired Financing Receivable, Average Recorded Investment		10	12
Financing Receivable, Allowance for Credit Losses, Collectively Evaluated for Impairment		0	0
Loans and Leases Receivable, Allowance		0	0
Financing Receivable, Individually Evaluated for Impairment		9	12
Financing Receivable, Collectively Evaluated for Impairment		2,078	818
Financing Receivable, Gross	[1]	$ 2,087	$ 830

[1] The recorded investment in a loan is the unpaid principal balance of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs. The recorded investment is not net of any valuation allowance.

XML

Deposits (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Demand Deposits [Line Items]
Interest-bearing Deposit Liabilities, Domestic	$ 263	$ 167
Noninterest-bearing Domestic Deposit, Other	18	2
Noninterest-bearing Deposits	18	2
Deposits	281	169
Adjustable rate [Member]
Demand Deposits [Line Items]
Interest-bearing Deposit, Demand and Overnight	$ 263	$ 167
Weighted Average Rate, Interest-bearing Domestic Deposits, Point in Time	1.10%	0.01%

XML

Consolidated Obligations Narrative (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Obligation with Joint and Several Liability Arrangement, Amount Outstanding	$ 1,034,260	$ 989,311
Qualifying Asset Balance Requirement	123,177
Federal Home Loan Bank, Consolidated Obligations	$ 115,503	$ 83,730

XML

Consolidated Obligations (Redemption Terms) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Consolidated Obligations, Bonds, Par	$ 85,108	$ 50,220
Consolidated Obligations, Bonds	$ 85,063	$ 50,224
Weighted Average Interest Rate [Abstract]
Weighted Average Interest Rate, Maturing In Next Twelve Rolling Months	1.33%	0.82%
Weighted Average Interest Rate, Maturing In Rolling Year Two	1.42%	0.99%
Weighted Average Interest Rate, Maturing In Rolling Year Three	1.74%	1.32%
Weighted Average Interest Rate, Maturing In Rolling Year Four	1.78%	1.84%
Weighted Average Interest Rate, Maturing In Rolling Year Five	2.15%	1.59%
Weighted Average Interest Rate, Maturing After Rolling Year Five	2.80%	2.42%
Consolidated obligation bonds [Member]
Debt Instrument [Line Items]
Within 1 year	$ 69,734	$ 33,879
After 1 year through 2 years	6,461	10,597
After 2 years through 3 years	2,785	1,318
After 3 years through 4 years	2,058	1,055
After 4 years through 5 years	1,994	1,350
After 5 years	2,076	2,021
Unamortized premiums	9	15
Unamortized discounts	(11)	(9)
Valuation adjustments for hedging activities	(37)	6
Fair value option valuation adjustments	$ (6)	$ (8)
Weighted Average Interest Rate [Abstract]
Total par amount, Weighted Average Interest Rate	1.41%	0.98%

XML

Consolidated Obligations (Consolidated Obligation Bonds Noncallable and Callable) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Consolidated Obligations, Bonds, Par	$ 85,108	$ 50,220
Derivative, Notional Amount	99,609	65,069
Non-callable [Member]
Debt Instrument [Line Items]
Consolidated Obligations, Bonds, Par	75,496	45,550
Callable [Member]
Debt Instrument [Line Items]
Consolidated Obligations, Bonds, Par	9,612	4,670
Consolidated obligation bonds [Member] | Callable [Member]
Debt Instrument [Line Items]
Derivative, Notional Amount	$ 6,406	$ 2,125

XML

Consolidated Obligations (Consolidated Obligation Bonds by Earlier of Contractual Maturity or Next Call Date) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Consolidated Obligations, Bonds, Par	$ 85,108	$ 50,220
Earlier of Contractual Maturity or Next Call Date [Member]
Debt Instrument [Line Items]
Within 1 year	78,606	38,099
After 1 year through 2 years	5,326	10,747
After 2 years through 3 years	935	743
After 3 years through 4 years	85	455
After 4 years through 5 years	55	85
After 5 years	$ 101	$ 91

XML

Consolidated Obligations (Consolidated Obligation Discount Notes) (Details) - USD ($) $ in Millions		Dec. 31, 2017	Dec. 31, 2016
Short-term Debt [Line Items]
Consolidated Obligations, Discount Notes, Par		$ 30,494	$ 33,529
Consolidated Obligations, Discount Notes		$ 30,440	$ 33,506
Par amount, Weighted Average Interest Rate	[1]	1.24%	0.46%
Consolidated Obligation, Discount Notes [Member]
Short-term Debt [Line Items]
Unamortized discounts		$ (54)	$ (23)

[1] Represents yield to maturity excluding concession fees.

XML

Consolidated Obligations (Interest Rate Payment Terms) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
Fixed Rate	$ 17,967	$ 15,960
Adjustable Rate	66,276	33,435
Step-Up	565	515
Step-Down	200	200
Fixed Interest Rate That Converts to Adjustable Rate	0	10
Range Bonds	100	100
Consolidated Obligations, Bonds, Par	85,108	50,220
Consolidated Obligations, Discount Notes, Par	30,494	33,529
Total consolidated obligations, par	$ 115,602	$ 83,749

XML

Affordable Housing Program Narrative (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Federal Home Loan Banks [Abstract]
AHP, Contribution Requirement, Amount	$ 100
AHP, Contribution Requirement, Percentage	10.00%
Affordable Housing Program Assessment	$ 45	$ 86	$ 78

XML

Affordable Housing Program Schedule of Change in AHP Liability (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Federal Home Loan Banks [Abstract]
AHP, Contribution Requirement, Amount	$ 100
Affordable Housing Program [Roll Forward]
AHP Obligation, beginning of the period	205	$ 172	$ 147
AHP Assessment	45	86	78
Other Noninterest Expense	7	0	0
AHP Grant Payments	(53)	(53)	(53)
AHP Obligation, end of the period	$ 204	$ 205	$ 172
AHP, Contribution Requirement, Percentage	10.00%

XML

Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Accumulated Other Comprehensive Income (Loss) [Line Items]
Stockholders' Equity Attributable to Parent	$ 6,806	$ 5,537	$ 4,896	$ 5,693
Net change in pension and postretirement benefits	3	(2)	(2)
Other than Temporary Impairment Losses, Investments, Reclassification Adjustment of Noncredit Portion from Held-to-maturity to Available-for-sale Securities, before Tax	0	0	(1)
Other Comprehensive Income (Loss), Transfers from Held-to-maturity to Available-for-Sale Securities, before Tax	0	0	1
Reclassification from other comprehensive income/(loss) to net income/(loss) [Abstract]
Non-credit-related OTTI to credit-related OTTI, HTM	0	0	1
Accumulated Other-than-Temporary Impairment [Member] | Available-for-sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Stockholders' Equity Attributable to Parent	337	136	43	88
Non-credit-related OTTI loss, Available-for-sale Securities	(4)	(17)	(18)
Other than Temporary Impairment Losses, Investments, Reclassification Adjustment of Noncredit Portion from Held-to-maturity to Available-for-sale Securities, before Tax			(1)
Net change in fair value	195	103	(29)
Reclassification from other comprehensive income/(loss) to net income/(loss) [Abstract]
Non-credit-related OTTI to credit-related OTTI, AFS	10	7	3
Net current period other comprehensive income/(loss)	201	93	(45)
Accumulated Other-than-Temporary Impairment [Member] | Held-to-maturity Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Stockholders' Equity Attributable to Parent	(6)	(9)	(14)	(20)
Non-credit-related OTTI loss, Held-to-maturity Securities	0	0	(1)
Other Comprehensive Income (Loss), Transfers from Held-to-maturity to Available-for-Sale Securities, before Tax			1
Accretion of Noncredit Related OTTI Loss	3	5	6
Reclassification from other comprehensive income/(loss) to net income/(loss) [Abstract]
Non-credit-related OTTI to credit-related OTTI, HTM	0	0	0
Net current period other comprehensive income/(loss)	3	5	6
Accumulated Defined Benefit Plans Adjustment [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Stockholders' Equity Attributable to Parent	(13)	(16)	(14)	(12)
Net change in pension and postretirement benefits	3	(2)	(2)
Reclassification from other comprehensive income/(loss) to net income/(loss) [Abstract]
Net current period other comprehensive income/(loss)	3	(2)	(2)
Accumulated Other Comprehensive Income/(Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Stockholders' Equity Attributable to Parent	318	111	15	$ 56
Net change in pension and postretirement benefits	3	(2)	(2)
Other than Temporary Impairment Losses, Investments, Portion in Other Comprehensive Loss, before Tax, Portion Attributable to Parent	(4)	(17)	(19)
Other than Temporary Impairment Losses, Investments, Reclassification Adjustment of Noncredit Portion from Held-to-maturity to Available-for-sale Securities, before Tax			0
Net change in fair value	195	103	(29)
Accretion of Noncredit Related OTTI Loss	3	5	6
Reclassification from other comprehensive income/(loss) to net income/(loss) [Abstract]
Non-credit-related OTTI to credit-related OTTI, AFS	10	7	3
Net current period other comprehensive income/(loss)	$ 207	$ 96	$ (41)

XML

Capital (Capital Requirements) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Membership Capital Stock Requirement	1.00%
Membership Capital Stock Requirement Cap	$ 15
Risk-Based Capital, Required	2,023	$ 2,241
Risk-Based Capital, Actual	6,797	5,883
Regulatory Capital, Required	4,935	3,678
Regulatory Capital, Actual	$ 6,797	$ 5,883
Regulatory Capital Ratio, Required	4.00%	4.00%
Regulatory Capital Ratio, Actual	5.51%	6.40%
Leverage Capital, Required	$ 6,169	$ 4,597
Leverage Capital, Actual	$ 10,195	$ 8,825
Leverage ratio - Required	5.00%	5.00%
Leverage Ratio, Actual	8.26%	9.60%
Multiplier for Determining Permanent Capital in Leverage Capital Calculation	1.5
Minimum [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Membership Capital Stock Requirement	0.50%
Membership Capital Stock Requirement Cap	$ 10
Maximum [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Membership Capital Stock Requirement	1.50%
Membership Capital Stock Requirement Cap	$ 50
Advances [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Membership Activity-based Stock Requirement	2.70%
Advances [Member] | Minimum [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Membership Activity-based Stock Requirement	2.00%
Advances [Member] | Maximum [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Membership Activity-based Stock Requirement	5.00%
Mortgages [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Membership Activity-based Stock Requirement	0.00%
Mortgages [Member] | Minimum [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Membership Activity-based Stock Requirement	0.00%
Mortgages [Member] | Maximum [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Membership Activity-based Stock Requirement	5.00%

XML

Capital (Mandatorily Redeemable Capital Stock) (Details)		12 Months Ended
		Dec. 31, 2017 USD ($) Institutions	Dec. 31, 2016 USD ($) Institutions	Dec. 31, 2015 USD ($)
Capital [Line Items]
MBS Investment Authority		3.00
Financial Instruments Subject to Mandatory Redemption, Number of Stockholders | Institutions		7	6
Interest Expense on Mandatorily Redeemable Capital Stock	[1]	$ 32,000,000	$ 60,000,000	$ 65,000,000
Mandatorily Redeemable Capital Stock [Roll Forward]
Balance at the beginning of the period		457,000,000	488,000,000	719,000,000
Reclassified from/(to) capital during the period		2,000,000	56,000,000	415,000,000
Redemption of mandatorily redeemable capital stock		(75,000,000)	(28,000,000)	(53,000,000)
Repurchase of excess mandatorily redeemable capital stock		(75,000,000)	(59,000,000)	(593,000,000)
Balance at the end of the period		$ 309,000,000	$ 457,000,000	488,000,000
Unsecured Credit Exposure to other GSE		1.00
JPMorgan Chase Bank National Association [Member]
Mandatorily Redeemable Capital Stock [Roll Forward]
Reclassified from/(to) capital during the period				$ 403,000,000

[1] The Bank excludes interest expense on mandatorily redeemable capital stock from adjusted net interest income in its analysis of financial performance for its two operating segments

XML

Capital (By Redemption Period) (Details) - USD ($) $ in Millions		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Financial Instruments Subject to Mandatory Redemption, Settlement Terms, Share Value, Amount [Abstract]
After 2 years through 3 years		$ 306	$ 0
After 3 years through 4 years		0	379
Past Contractual Redemption Date Because of Remaining Activity	[1]	3	78
Total		$ 309	$ 457	$ 488	$ 719

[1] Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because of outstanding activity.

XML

Capital (Retained Earnings and Dividend Policy) (Details) - USD ($) $ in Millions			12 Months Ended
		Mar. 15, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Feb. 21, 2018	Jan. 01, 2018	Mar. 31, 2017
Capital [Line Items]
Restriction on Dividend Payment, Ratio of Market Value of Capital to Par Value of Capital Less than 70%			70.00%
Ratio of Market Value of Capital to Par Value of Capital Stock			207.00%
Retained Earnings, Set by the Board inc JCEA			$ 2,300					$ 2,000
Excess Capital			$ 493	$ 488
Excess Capital to Assets			0.40%
Dividends [Abstract]
Dividends, Cash, Annualized Rate			7.50%	12.33%	12.39%
Total dividends			$ 219	$ 344
Interest Expense on Mandatorily Redeemable Capital Stock	[1]		32	60	$ 65
Retained Earnings Activity [Roll Forward]
Balance			5,537	4,896	5,693
Balance at beginning of the period			2,168
Net Income/(Loss)			376	712	638
Cash dividends paid on capital stock			(187)	(284)	(369)
Balance at end of the period			575	2,168
Balance			6,806	5,537	4,896
Subsequent Events [Abstract]
Retained Earnings, Appropriated, Transfers To (From)			0		0
Amount of Excess Stock and Financial Instruments Subject to Mandatory Redemption, Repurchased During Period			414	812
Financial Instruments Subject to Mandatory Redemption, Redeemed			$ 75	28	53
Special Dividend in Cash [Member]
Dividends [Abstract]
Total dividends				100
Subsequent Event [Member]
Capital [Line Items]
Retained Earnings, Set by the Board inc JCEA							$ 2,500
Subsequent Events [Abstract]
Dividends, Cash Declared, Annualized Rate						7.00%
Interest and Dividends Payable, Current						$ 59
Dividends Payable						53
Interest Payable, Current						$ 6
Dividends Payable, Date to be Paid		Mar. 15, 2018
Minimum [Member]
Capital [Line Items]
Regulatory Restrictions on Payment of Capital Stock Dividends, Excess Stock to Assets, Percent			1.00%
Limit on Dividend Payment, Ratio of Market Value of Capital to Par Value of Capital			70.00%
Maximum [Member]
Capital [Line Items]
Limit on Dividend Payment, Ratio of Market Value of Capital to Par Value of Capital			100.00%
Retained Earnings, Unrestricted [Member]
Retained Earnings Activity [Roll Forward]
Balance			$ 888	610	294
Net Income/(Loss)			198	562
Cash dividends paid on capital stock			(187)	(284)	(369)
Balance			2,670	888	610
Subsequent Events [Abstract]
Retained Earnings, Appropriated, Transfers To (From)			1,771		150
Retained Earnings, Unrestricted [Member] | Special Dividend in Cash [Member]
Dividends [Abstract]
Interest Expense on Mandatorily Redeemable Capital Stock				17
Retained Earnings Activity [Roll Forward]
Cash dividends paid on capital stock				(83)
Retained Earnings [Member]
Retained Earnings Activity [Roll Forward]
Balance			2,168	2,018	2,065
Net Income/(Loss)			178	150
Balance			575	2,168	2,018
Subsequent Events [Abstract]
Retained Earnings, Appropriated, Transfers To (From)			(1,771)		(150)
Retained Earnings, Valuation Adjustments [Member]
Retained Earnings Activity [Roll Forward]
Balance			18	10
Net Income/(Loss)			3	8
Balance			0	18	10
Subsequent Events [Abstract]
Retained Earnings, Appropriated, Transfers To (From)			(21)
Retained Earnings, Other [Member]
Retained Earnings Activity [Roll Forward]
Balance			1,650	1,650
Net Income/(Loss)			100	0
Balance			0	1,650	1,650
Subsequent Events [Abstract]
Retained Earnings, Appropriated, Transfers To (From)			(1,750)
Retained Earnings, Joint Capital Enhancement Agreement [Member]
Retained Earnings Activity [Roll Forward]
Balance			500	358
Net Income/(Loss)			75	142
Balance			575	500	358
Subsequent Events [Abstract]
Retained Earnings, Appropriated, Transfers To (From)			0
Retained Earnings [Member]
Retained Earnings Activity [Roll Forward]
Balance			3,056	2,628	2,359
Net Income/(Loss)			376	712
Cash dividends paid on capital stock			(187)	(284)	(369)
Balance			3,245	$ 3,056	2,628
Subsequent Events [Abstract]
Retained Earnings, Appropriated, Transfers To (From)			$ 0		$ 0

[1] The Bank excludes interest expense on mandatorily redeemable capital stock from adjusted net interest income in its analysis of financial performance for its two operating segments

XML

Capital (Excess Capital Stock) (Details) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Capital [Line Items]
Amount of Excess Stock Repurchased During Period	$ 414	$ 812
Financial Instruments Subject to Mandatory Redemption, Redeemed	$ 75	28	$ 53
Common stock, par value	$ 100
Excess Capital	$ 493	488
Surplus capital stock	$ 317	$ 325
Excess Capital Stock and Excess Mandatorily Redeemable Capital Stock, Redemption, Period of Written Notice	15 days
Mandatorily Redeemable Capital Stock, Redemption Period	5 years

XML

Capital (Concentration) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Concentration Risk [Line Items]
Capital Stock Outstanding	$ 3,552	$ 2,827
Total Capital Stock, 10% or more [Member]
Concentration Risk [Line Items]
Capital Stock Outstanding	$ 712	$ 481
Concentration Risk, Percentage	100.00%	100.00%
Certain Members And Certain Nonmembers [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	20.00%	17.00%
Other Borrowers [Member]
Concentration Risk [Line Items]
Capital Stock Outstanding	$ 2,840	$ 2,346
Concentration Risk, Percentage	80.00%	83.00%
Charles Schwab Bank [Member]
Concentration Risk [Line Items]
Capital Stock Outstanding	$ 405	$ 81
Charles Schwab Bank [Member] | Total Capital Stock, 10% or more [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	11.00%	3.00%
JPMorgan Chase Bank National Association [Member]
Concentration Risk [Line Items]
Capital Stock Outstanding	$ 307	$ 400
JPMorgan Chase Bank National Association [Member] | Total Capital Stock, 10% or more [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	9.00%	14.00%

XML

Employee Retirement Plans and Incentive Compensation Plans (Changes in Benefit Obligation and Plan Assets) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash Balance Plan
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefit obligation, beginning of the year	$ 51	$ 46
Service cost	3	3	$ 3
Interest cost	2	1	2
Actuarial gain/(loss)	2	2
Settlements	0	0
Defined Benefit Plan, Benefit Obligation, Benefits Paid	1	1
Benefit obligation, end of the year	57	51	46
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Fair value of plan assets, beginning of the year	53	43
Actual return on plan assets	9	3
Settlements	0	0
Employer contributions	2	8
Defined Benefit Plan, Plan Assets, Benefits Paid	1	1
Fair value of plan assets, end of the year	63	53	43
Funded status at the end of the year	6	2
Non-Qualified Defined Benefit Plans
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefit obligation, beginning of the year	21	24
Service cost	2	1	1
Interest cost	1	1	1
Actuarial gain/(loss)	0	1
Settlements	(3)	(6)
Defined Benefit Plan, Benefit Obligation, Benefits Paid	0	0
Benefit obligation, end of the year	21	21	24
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Fair value of plan assets, beginning of the year	0	0
Actual return on plan assets	0	0
Settlements	(3)	(6)
Employer contributions	3	6
Defined Benefit Plan, Plan Assets, Benefits Paid	0	0
Fair value of plan assets, end of the year	0	0	0
Funded status at the end of the year	(21)	(21)
Qualified Plan [Member]
Defined Benefit Plan, Change in Benefit Obligation [Roll Forward]
Benefit obligation, beginning of the year	2	2
Service cost	0	0	0
Interest cost	0	0	0
Actuarial gain/(loss)	0	0
Settlements	0	0
Defined Benefit Plan, Benefit Obligation, Benefits Paid	0	0
Benefit obligation, end of the year	2	2	2
Defined Benefit Plan, Change in Fair Value of Plan Assets [Roll Forward]
Fair value of plan assets, beginning of the year	0	0
Actual return on plan assets	0	0
Settlements	0	0
Employer contributions	0	0
Defined Benefit Plan, Plan Assets, Benefits Paid	0	0
Fair value of plan assets, end of the year	0	0	$ 0
Funded status at the end of the year	$ (2)	$ (2)

XML

Employee Retirement Plans and Incentive Compensation Plans (Amounts recognized in Statements of Condition) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Other liabilities - accrued benefit asset	$ 6	$ 2
Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Other liabilities - accrued benefit liability	(21)	(21)
Post-retirement Health Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Other liabilities - accrued benefit liability	$ (2)	$ (2)

XML

Employee Retirement Plans and Incentive Compensation Plans (Amounts recognized in AOCI) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Net loss/(gain)	$ 11	$ 14
Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Net loss/(gain)	3	3
Qualified Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Net loss/(gain)	$ (1)	$ (1)

XML

Employee Retirement Plans and Incentive Compensation Plans (Benefit Obligations in Excess of Plan Assets) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Benefit Obligation	$ 57	$ 51	$ 46
Defined Benefit Plan, Accumulated Benefit Obligation	56	50
Fair value of plan assets	63	53	43
Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Benefit Obligation	21	21	24
Projected benefit obligation, Pension Plans with ABO in excess of Plan assets	21	21
Accumulated benefit obligation, Pension Plans with ABO in excess of Plan Assets	20	21
Fair value of plan assets	0	0	0
Post-retirement Health Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Benefit Obligation	2	2	2
Projected benefit obligation, Pension Plans with ABO in excess of Plan assets	2	2
Accumulated benefit obligation, Pension Plans with ABO in excess of Plan Assets	2	2
Fair value of plan assets	$ 0	$ 0	$ 0

XML

Employee Retirement Plans and Incentive Compensation Plans (Components of Net Periodic Benefit Costs) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
Total recognized in other comprehensive income	$ (3)	$ 2	$ 2
Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Service cost	3	3	3
Interest cost	2	1	2
Expected return on plan assets	(4)	(3)	(3)
Amortization of net loss/(gain)	1	1	0
Settlement loss	0	0	0
Net periodic benefit cost	2	2	2
Net loss/(gain)	(2)	3	3
Prior service cost recognized due to settlement loss	0	0	0
Total recognized in other comprehensive income	(3)	2	3
Total recognized in net periodic benefit cost and other comprehensive income	(1)	4	5
Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Service cost	2	1	1
Interest cost	1	1	1
Expected return on plan assets	0	0	0
Amortization of net loss/(gain)	0	0	1
Settlement loss	0	1	0
Net periodic benefit cost	3	3	3
Net loss/(gain)	0	1	(1)
Prior service cost recognized due to settlement loss	0	(1)	0
Total recognized in other comprehensive income	0	0	(2)
Total recognized in net periodic benefit cost and other comprehensive income	3	3	1
Post-retirement Health Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Service cost	0	0	0
Interest cost	0	0	0
Expected return on plan assets	0	0	0
Amortization of net loss/(gain)	0	0	(1)
Settlement loss	0	0	0
Net periodic benefit cost	0	0	(1)
Net loss/(gain)	0	0	0
Prior service cost recognized due to settlement loss	0	0	0
Total recognized in other comprehensive income	0	0	1
Total recognized in net periodic benefit cost and other comprehensive income	$ 0	$ 0	$ 0

XML

Employee Retirement Plans and Incentive Compensation Plans Amounts in AOCI expected to be Amortized for next year (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Accumulated Other Comprehensive Income (Loss), Gain (Loss), before Tax	$ 11	$ 14
Defined Benefit Plan, Expected Amortization of Gain (Loss), Next Fiscal Year	0
Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Accumulated Other Comprehensive Income (Loss), Gain (Loss), before Tax	3	3
Defined Benefit Plan, Expected Amortization of Gain (Loss), Next Fiscal Year	0
Other Postretirement Benefits Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Expected Amortization of Gain (Loss), Next Fiscal Year	0
Qualified Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Accumulated Other Comprehensive Income (Loss), Gain (Loss), before Tax	$ (1)	$ (1)
Equity Funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Allocation Percentage	60%
Real Estate [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Allocation Percentage	10%
Fixed Income Funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Allocation Percentage	30%

XML

Employee Retirement Plans and Incentive Compensation Plans (Weighted-Average Assumptions in Determining Benefit Obligations) (Details) - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016
Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Expected Amortization of Gain (Loss), Next Fiscal Year	$ 0
Discount rate	3.25%	3.50%
Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Expected Amortization of Gain (Loss), Next Fiscal Year	$ 0
Discount rate	3.25%	3.50%
Other Postretirement Benefits Plan [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Expected Amortization of Gain (Loss), Next Fiscal Year	$ 0
Post-retirement Health Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.50%	4.00%
Rate of salary increase	0.00%	0.00%
Minimum current rate | Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Rate of salary increase	3.00%	3.00%
Minimum current rate | Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Rate of salary increase	3.00%	3.00%
Thereafter | Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Rate of salary increase	4.00%	4.00%
Thereafter | Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Rate of salary increase	4.00%	4.00%

XML

Employee Retirement Plans and Incentive Compensation Plans (Weighted-Average Assumptions in Determining Net Periodic Benefit Cost) (Details)	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.50%	3.75%	3.50%
Expected return on plan assets	7.75%	7.75%	8.00%
Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.50%	3.75%	3.50%
Expected return on plan assets	0.00%	0.00%	0.00%
Post-retirement Health Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Discount rate	4.00%	4.00%	3.75%
Rate of salary increase	0.00%	0.00%	0.00%
Expected return on plan assets	0.00%	0.00%	0.00%
Minimum current rate | Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Rate of salary increase	3.00%	3.00%	3.00%
Minimum current rate | Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Rate of salary increase	3.00%	3.00%	3.00%
Thereafter | Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Rate of salary increase	4.00%	4.00%	4.00%
Thereafter | Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Rate of salary increase	4.00%	4.00%	4.00%

XML

Employee Retirement Plans and Incentive Compensation Plans (Fair Value of Cash Balance Plan) (Details) - Cash Balance Plan - USD ($) $ in Millions	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	$ 63	$ 53	$ 43
Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	63	53
Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	0	0
Fair Value, Inputs, Level 3 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	0	0
Cash and cash equivalents
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	1	1
Cash and cash equivalents | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	1	1
Cash and cash equivalents | Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	0	0
Cash and cash equivalents | Fair Value, Inputs, Level 3 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	0	0
Equity mutual funds
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	40	32
Equity mutual funds | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	40	32
Equity mutual funds | Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	0	0
Equity mutual funds | Fair Value, Inputs, Level 3 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	0	0
Fixed income mutual funds
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	18	16
Fixed income mutual funds | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	18	16
Fixed income mutual funds | Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	0	0
Fixed income mutual funds | Fair Value, Inputs, Level 3 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	0	0
Real estate mutual funds
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	2	2
Real estate mutual funds | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	2	2
Real estate mutual funds | Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	0	0
Real estate mutual funds | Fair Value, Inputs, Level 3 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	0	0
Other mutual funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	2	2
Other mutual funds [Member] | Fair Value, Inputs, Level 1 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	2	2
Other mutual funds [Member] | Fair Value, Inputs, Level 2 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	0	0
Other mutual funds [Member] | Fair Value, Inputs, Level 3 [Member]
Defined Benefit Plan Disclosure [Line Items]
Fair value of plan assets	$ 0	$ 0

XML

Employee Retirement Plans and Incentive Compensation Plans (Weighted-Average Asset Allocation of Cash Balance Plan) (Details) - Cash Balance Plan	Dec. 31, 2017	Dec. 31, 2016
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Actual Plan Asset Allocations	100.00%	100.00%
Cash and cash equivalents
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Actual Plan Asset Allocations	2.00%	3.00%
Equity mutual funds
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Actual Plan Asset Allocations	63.00%	61.00%
Fixed income mutual funds
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Actual Plan Asset Allocations	28.00%	29.00%
Real estate mutual funds
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Actual Plan Asset Allocations	4.00%	4.00%
Other mutual funds [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Actual Plan Asset Allocations	3.00%	3.00%

XML

Employee Retirement Plans and Incentive Compensation Plans (Future benefit payments) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Contributions by Employer	$ 2	$ 8
2017	4
2018	4
2019	4
2020	4
2021	16
2022 - 2026	20
Non-Qualified Defined Benefit Plans
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Contributions by Employer	3	6
2017	0
2018	5
2019	0
2020	1
2021	6
2022 - 2026	14
Post-retirement Health Benefit Plan
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Plan Assets, Contributions by Employer	0	$ 0
2017	0
2018	0
2019	0
2020	0
2021	0
2022 - 2026	$ 1

XML

Employee Retirement Plans and Incentive Compensation Plans (Narrative) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Defined Benefit Plan Disclosure [Line Items]
Defined Contribution Plan, Maximum Annual Contributions per Employee, Percent	20.00%
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay	6.00%
Defined Contribution Plan, Cost	$ 2	$ 2	$ 2
Deferred Compensation Arrangement with Individual, Recorded Liability	44	37	$ 35
Defined Contribution Plan, Employer Discretionary Contribution Amount Liability	$ 13	13
Cash Balance Plan
Defined Benefit Plan Disclosure [Line Items]
CBP Eligibility Required Service Period	6 months
Cash Balance Plan Defined Benefit Accrual Percentage	6.00%
Cash Balance Plan Defined Benefit Interest	6.00%
Employer contributions	$ 2	8
Cash Balance Plan, Expected Future Employer Contributions, Next Twelve Months	3
Defined Benefit Plan, Expected Future Benefit Payment, Next Twelve Months	$ 4
Non-Qualified Defined Benefit Plan - SERP
Defined Benefit Plan Disclosure [Line Items]
Supplemental Executive Retirement Plan Defined Benefit Interest	6.00%
Non-Qualified Defined Benefit Plans and Postretirement Health Benefit
Defined Benefit Plan Disclosure [Line Items]
Employer contributions	$ 3	$ 6
Defined Benefit Plan, Expected Future Benefit Payment, Next Twelve Months	$ 0
Equity mutual funds
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Allocation Percentage	60%
Real estate mutual funds
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Allocation Percentage	10%
Fixed income mutual funds
Defined Benefit Plan Disclosure [Line Items]
Defined Benefit Plan, Target Allocation Percentage	30%

XML

Segment Information (Details) $ in Millions		12 Months Ended
		Dec. 31, 2017 USD ($) segment	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Segment Reporting Information [Line Items]
Number of Operating Segments | segment		2
Adjusted Net Interest Income		$ 559	$ 492	$ 506
Amortization of Basis Adjustments	[1]	0	(7)	(17)
Income/ (Expense) on Economic Hedges	[2]	(40)	(32)	(18)
Interest Expense on Mandatorily Redeemable Capital Stock	[3]	32	60	65
Net Interest Income After Mortgage Loan Loss Provision		567	471	476
Other Income/(Loss)		78	485	388
Other Expense		224	158	148
Income Before AHP Assessments		421	798	716
OTTI PLRMBS, Total accretion or amortization recognized in interest income		93	101	82
Net OTTI loss, credit-related		(16)	(16)	(15)
Assets		123,385	91,941	85,698
Advances-Related Business [Member]
Segment Reporting Information [Line Items]
Adjusted Net Interest Income		234	154	155
Assets		103,426	74,018	69,047
Mortgage-Related Business [Member]
Segment Reporting Information [Line Items]
Adjusted Net Interest Income	[4]	325	338	351
Assets		$ 19,959	$ 17,923	$ 16,651

[1] Represents amortization of amounts deferred for adjusted net interest income purposes only, in accordance with the Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework.

[2] The Bank includes income and expense associated with net settlements from economic hedges in adjusted net interest income in its analysis of financial performance for its two operating segments. For financial reporting purposes, the Bank does not include these amounts in net interest income in the Statements of Income, but instead records them in other income in “Net gain/(loss) on derivatives and hedging activities.”

[3] The Bank excludes interest expense on mandatorily redeemable capital stock from adjusted net interest income in its analysis of financial performance for its two operating segments

[4] The mortgage-related business includes total accretion or amortization associated with other-than-temporarily impaired PLRMBS, which are recognized in interest income, totaled $93, $101, and $82 for the years ended December 31, 2017, 2016, and 2015, respectively. The mortgage-related business does not include credit-related OTTI losses of $16, $16, and $15 for the years ended December 31, 2017, 2016, and 2015, respectively.

XML

Derivatives and Hedging Activities (Narrative) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Derivative [Line Items]
Derivative, Notional Amount	$ 99,609	$ 65,069
Derivative, Net Liability Position, Aggregate Fair Value	6
Collateral Already Posted, Aggregate Fair Value	6
Derivatives With Intermediary Transactions and Offsetting Derivatives [Member]
Derivative [Line Items]
Derivative, Notional Amount	$ 14	$ 89
Maximum [Member]
Derivative [Line Items]
Advances, Maturity Term	30 years

XML

Derivatives and Hedging Activities (Derivatives in Statement of Condition) (Details) - USD ($) $ in Millions		Dec. 31, 2017	Dec. 31, 2016
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		$ 99,609	$ 65,069
Derivative Asset, Fair Value, Gross Asset		174	140
Netting Adjustments and Cash Collateral-Derivative Asset	[1]	(91)	(74)
Derivative Assets as reported on the Statements of Condition		83	66
Derivative Liability, Fair Value, Gross Liability		85	81
Netting Adjustments and Cash Collateral-Derivative Liability	[1]	84	79
Derivative Liabilities as reported on the Statements of Condition		1	2
Cash collateral posted and related accrued interest		10	22
Cash collateral received and related accrued interest		18	16
Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		24,270	20,741
Derivative Asset, Fair Value, Gross Asset		92	67
Derivative Liability, Fair Value, Gross Liability		27	32
Designated as Hedging Instrument [Member] | Interest rate swaps [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		24,270	20,741
Derivative Asset, Fair Value, Gross Asset		92	67
Derivative Liability, Fair Value, Gross Liability		27	32
Not Designated as Hedging Instrument, Economic Hedge [Member] | Interest rate swaps [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		73,760	42,135
Derivative Asset, Fair Value, Gross Asset		81	67
Derivative Liability, Fair Value, Gross Liability		57	49
Not Designated as Hedging Instrument, Economic Hedge [Member] | Interest rate caps and floors [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		1,563	2,180
Derivative Asset, Fair Value, Gross Asset		1	6
Derivative Liability, Fair Value, Gross Liability		1	0
Not Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		75,339	44,328
Derivative Asset, Fair Value, Gross Asset		82	73
Derivative Liability, Fair Value, Gross Liability		58	49
Mortgages [Member] | Not Designated as Hedging Instrument [Member] | Mortgage delivery commitments [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		16	13
Derivative Asset, Fair Value, Gross Asset		0	0
Derivative Liability, Fair Value, Gross Liability		$ 0	$ 0

[1] Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met. Cash collateral posted and related accrued interest was $10 and $22 at December 31, 2017 and 2016, respectively. Cash collateral received and related accrued interest was $18 and $16 at December 31, 2017 and 2016, respectively.

XML

Derivatives and Hedging Activities (Derivatives in Statement of Income) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Total net gain (loss) related to fair value hedge ineffectiveness	$ (1)	$ (2)	$ (10)
Total net gain/(loss) related to derivatives not designated as hedging instruments	(13)	11	(6)
Net gain/(loss) on derivatives and hedging activities	(14)	9	(16)
Interest rate swaps [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gain (loss) related to fair value hedge ineffectiveness	(1)	(2)	(10)
Not Designated as Hedging Instrument, Economic Hedge [Member] | Interest rate swaps [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gain/(loss) related to derivatives not designated as hedging instruments	8	39	13
Not Designated as Hedging Instrument, Economic Hedge [Member] | Interest rate caps and floors [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gain/(loss) related to derivatives not designated as hedging instruments	(5)	(1)	(3)
Not Designated as Hedging Instrument, Economic Hedge [Member] | Net settlements [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gain/(loss) related to derivatives not designated as hedging instruments	(40)	(32)	(18)
Not Designated as Hedging Instrument, Economic Hedge [Member] | Mortgages [Member] | Mortgage delivery commitments [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gain/(loss) related to derivatives not designated as hedging instruments	$ 24	$ 5	$ 2

XML

Derivatives and Hedging Activities (Derivatives in Statement of Income and Impact on Interest) (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Gain/(Loss) on Derivatives		$ 22	$ (72)	$ (151)
Gain/(Loss) on Hedged Item		(23)	70	141
Net Fair Value Hedge Ineffectiveness		(1)	(2)	(10)
Effect of Derivatives on Net Interest Income	[1]	0	125	151
Advances [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain/(Loss) on Derivatives		63	63	19
Gain/(Loss) on Hedged Item		(66)	(62)	(20)
Net Fair Value Hedge Ineffectiveness		(3)	1	(1)
Effect of Derivatives on Net Interest Income	[1]	(27)	(55)	(106)
Consolidated obligation bonds [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain/(Loss) on Derivatives		(41)	(135)	(170)
Gain/(Loss) on Hedged Item		43	132	161
Net Fair Value Hedge Ineffectiveness		2	(3)	(9)
Effect of Derivatives on Net Interest Income	[1]	$ 27	$ 180	$ 257

[1] The net interest on derivatives in fair value hedge relationships is presented in the interest income/expense line item of the respective hedged item.

XML

Derivatives and Hedging Activities (Offsetting of Derivative Assets and Derivative Liabilities) (Details) - USD ($) $ in Millions		Dec. 31, 2017	Dec. 31, 2016
Derivative [Line Items]
Derivative Assets as reported on the Statements of Condition		$ 83	$ 66
Netting Adjustments and Cash Collateral-Derivative Liability	[1]	(84)	(79)
Derivative Liabilities as reported on the Statements of Condition		1	2
Uncleared derivatives [Member]
Derivative [Line Items]
Derivative Asset, Fair Value, Gross Recognized Amount		35	41
Derivative Asset Fair Value Gross Liability and Right To Reclaim Cash Offset		(33)	(37)
Derivative Assets as reported on the Statements of Condition		2	4
Derivative Liability, Fair Value, Gross Recognized Amount		29	37
Netting Adjustments and Cash Collateral-Derivative Liability		(28)	(35)
Derivative Liabilities as reported on the Statements of Condition		1	2
Cleared derivatives [Member]
Derivative [Line Items]
Derivative Asset, Fair Value, Gross Recognized Amount		139	99
Derivative Asset Fair Value Gross Liability and Right To Reclaim Cash Offset		(58)	(37)
Derivative Assets as reported on the Statements of Condition		81	62
Derivative Liability, Fair Value, Gross Recognized Amount		56	44
Netting Adjustments and Cash Collateral-Derivative Liability		(56)	(44)
Derivative Liabilities as reported on the Statements of Condition		$ 0	$ 0

[1] Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met. Cash collateral posted and related accrued interest was $10 and $22 at December 31, 2017 and 2016, respectively. Cash collateral received and related accrued interest was $18 and $16 at December 31, 2017 and 2016, respectively.

XML

Fair Value (Carrying Value and Fair Value of Financial Instruments) (Details) - USD ($) $ in Millions		Dec. 31, 2017	Dec. 31, 2016		Dec. 31, 2015	Dec. 31, 2014
Assets
Cash and due from banks		$ 31	$ 2
Trading securities	[1]	1,164	2,066
Available-for-sale (AFS) securities	[1]	3,833	4,489
HTM securities, Carrying Value	[1],[2]	14,680	14,127
HTM Securities, Fair Value		14,704	14,141
Accrued interest receivable		119	79
Derivative assets, Net		83	66
Derivative Asset, Fair Value, Gross Asset		174	140
Derivative Asset, Netting adjustments	[3]	(91)	(74)
Liabilities
Federal Home Loan Bank, Consolidated Obligations		115,503	83,730
Mandatorily redeemable capital stock		309	457		$ 488	$ 719
Borrowings from other Federal Home Loan Banks		0	1,345
Accrued interest payable		116	67
Derivative liabilities, Net		1	2
Derivative Liability, Fair Value, Gross Liability		85	81
Derivative Liability, Netting adjustments	[3]	(84)	(79)
Carrying (Reported) Amount, Fair Value Disclosure [Member]
Assets
Cash and due from banks		31	2
Interest-bearing deposits		1,115	590
Securities purchased under agreements to resell		11,750	15,500
Federal funds sold		11,028	4,214
Trading securities		1,164	2,066
Available-for-sale (AFS) securities		3,833	4,489
HTM securities, Carrying Value		14,680	14,127
Advances		77,382	49,845
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans		2,076	826
Accrued interest receivable		119	79
Derivative assets, Net	[4]	83	66
Other Assets	[5]	9	11
Liabilities
Deposits		281	169
Federal Home Loan Bank, Consolidated Obligations			83,730
Total Consolidated Obligations		115,503
Mandatorily redeemable capital stock		309	457
Borrowings from other Federal Home Loan Banks			1,345
Accrued interest payable		116	67
Derivative liabilities, Net	[4]	1	2
Estimate of Fair Value, Fair Value Disclosure [Member]
Assets
Cash and due from banks		31	2
Interest-bearing deposits		1,115	590
Securities purchased under agreements to resell		11,750	15,500
Federal funds sold		11,029	4,214
Trading securities		1,164	2,066
Available-for-sale (AFS) securities		3,833	4,489
HTM Securities, Fair Value		14,704	14,141
Advances		77,437	49,921
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans		2,075	845
Accrued interest receivable		119	79
Derivative assets, Net	[4]	83	66
Other Assets	[5]	9	11
Liabilities
Deposits		281	169
Federal Home Loan Bank, Consolidated Obligations			83,693
Total Consolidated Obligations		115,375
Mandatorily redeemable capital stock		309	457
Borrowings from other Federal Home Loan Banks			1,345
Accrued interest payable		116	67
Derivative liabilities, Net	[4]	1	2
Fair Value, Inputs, Level 1 [Member]
Assets
Cash and due from banks		31	2
Interest-bearing deposits		1,115	590
Securities purchased under agreements to resell		0	0
Federal funds sold		0	0
Trading securities		0	0
Available-for-sale (AFS) securities		0	0
HTM Securities, Fair Value		0	0
Advances		0	0
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans		0	0
Accrued interest receivable		0	0
Derivative Asset, Fair Value, Gross Asset		0	0	[4]
Other Assets	[5]	9	11
Liabilities
Deposits		0	0
Federal Home Loan Bank, Consolidated Obligations			0
Total Consolidated Obligations		0
Mandatorily redeemable capital stock		309	457
Borrowings from other Federal Home Loan Banks			0
Accrued interest payable		0	0
Derivative Liability, Fair Value, Gross Liability		0	0	[4]
Fair Value, Inputs, Level 2 [Member]
Assets
Cash and due from banks		0	0
Interest-bearing deposits		0	0
Securities purchased under agreements to resell		11,750	15,500
Federal funds sold		11,029	4,214
Trading securities		1,164	2,066
Available-for-sale (AFS) securities		0	0
HTM Securities, Fair Value		13,697	12,788
Advances		77,437	49,921
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans		2,075	845
Accrued interest receivable		119	79
Derivative Asset, Fair Value, Gross Asset	[4]	174	140
Derivative Asset, Netting adjustments	[4]	(91)	(74)
Other Assets	[5]	0	0
Liabilities
Deposits		281	169
Federal Home Loan Bank, Consolidated Obligations			83,693
Total Consolidated Obligations		115,375
Mandatorily redeemable capital stock		0	0
Borrowings from other Federal Home Loan Banks			1,345
Accrued interest payable		116	67
Derivative Liability, Fair Value, Gross Liability	[4]	85	81
Derivative Liability, Netting adjustments	[4]	(84)	(79)
Fair Value, Inputs, Level 3 [Member]
Assets
Cash and due from banks		0	0
Interest-bearing deposits		0	0
Securities purchased under agreements to resell		0	0
Federal funds sold		0	0
Trading securities		0	0
Available-for-sale (AFS) securities		3,833	4,489
HTM Securities, Fair Value		1,007	1,353
Advances		0	0
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans		0	0
Accrued interest receivable		0	0
Derivative Asset, Fair Value, Gross Asset		0	0	[4]
Other Assets	[5]	0	0
Liabilities
Deposits		0	0
Federal Home Loan Bank, Consolidated Obligations			0
Total Consolidated Obligations		0
Mandatorily redeemable capital stock		0	0
Borrowings from other Federal Home Loan Banks			0
Accrued interest payable		0	0
Derivative Liability, Fair Value, Gross Liability		0	0	[4]
Consolidated Obligation, Discount Notes [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Liabilities
Discount notes		30,440	33,506
Consolidated Obligation, Discount Notes [Member] | Estimate of Fair Value, Fair Value Disclosure [Member]
Liabilities
Discount notes		30,437	33,505
Consolidated Obligation, Discount Notes [Member] | Fair Value, Inputs, Level 1 [Member]
Liabilities
Discount notes		0	0
Consolidated Obligation, Discount Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Liabilities
Discount notes		30,437	33,505
Consolidated Obligation, Discount Notes [Member] | Fair Value, Inputs, Level 3 [Member]
Liabilities
Discount notes		0	0
Standby Letters of Credit [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Other
Other commitments		19	24
Standby Letters of Credit [Member] | Estimate of Fair Value, Fair Value Disclosure [Member]
Other
Other commitments		19	24
Standby Letters of Credit [Member] | Fair Value, Inputs, Level 1 [Member]
Other
Other commitments		0	0
Standby Letters of Credit [Member] | Fair Value, Inputs, Level 2 [Member]
Other
Other commitments		19	24
Standby Letters of Credit [Member] | Fair Value, Inputs, Level 3 [Member]
Other
Other commitments		0	0
Consolidated obligation bonds [Member]
Liabilities
Consolidated obligation bonds		949	1,507
Consolidated obligation bonds [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Liabilities
Consolidated obligation bonds		85,063	50,224
Consolidated obligation bonds [Member] | Estimate of Fair Value, Fair Value Disclosure [Member]
Liabilities
Consolidated obligation bonds		84,938	50,188
Consolidated obligation bonds [Member] | Fair Value, Inputs, Level 1 [Member]
Liabilities
Consolidated obligation bonds		0	0
Consolidated obligation bonds [Member] | Fair Value, Inputs, Level 2 [Member]
Liabilities
Consolidated obligation bonds		84,938	50,188
Consolidated obligation bonds [Member] | Fair Value, Inputs, Level 3 [Member]
Liabilities
Consolidated obligation bonds		$ 0	$ 0

[1] At December 31, 2017 and 2016, none of these securities were pledged as collateral that may be repledged.

[2] Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings. The carrying value of HTM securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

[3] Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met. Cash collateral posted and related accrued interest was $10 and $22 at December 31, 2017 and 2016, respectively. Cash collateral received and related accrued interest was $18 and $16 at December 31, 2017 and 2016, respectively.

[4] Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met.

[5] Represents publicly traded mutual funds held in a grantor trust.

XML

Fair Value (Summary of Valuation Methodologies and Primary Inputs) (Details) - MBS [Member]	Dec. 31, 2017 price
Three vendor prices received [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis, Valuation Techniques [Line Items]
Number of third-party vendor prices received	3
Two vendor prices received [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis, Valuation Techniques [Line Items]
Number of third-party vendor prices received	2
Median price, number of prices	2
One vendor price received [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis, Valuation Techniques [Line Items]
Number of third-party vendor prices received	1

XML

Fair Value (Fair Value Measured on Recurring and Nonrecurring Basis) (Details) - USD ($) $ in Millions		Dec. 31, 2017		Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	[1]	$ 1,164		$ 2,066
Available-for-sale (AFS) securities	[1]	3,833		4,489
Advances, Fair Value Disclosure		6,431	[2]	3,719
Derivative Asset, Netting adjustments	[3]	(91)		(74)
Derivative assets, Net		83		66
Derivative Liability, Netting adjustments	[3]	(84)		(79)
Derivative liabilities, Net		1		2
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		0		0
Available-for-sale (AFS) securities		0		0
Other Assets	[4]	9		11
Mortgage loans held for portfolio		0		0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		1,164		2,066
Available-for-sale (AFS) securities		0		0
Derivative Asset, Netting adjustments	[5]	(91)		(74)
Other Assets	[4]	0		0
Derivative Liability, Netting adjustments	[5]	(84)		(79)
Mortgage loans held for portfolio		2,075		845
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		0		0
Available-for-sale (AFS) securities		3,833		4,489
Other Assets	[4]	0		0
Mortgage loans held for portfolio		0		0
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Advances, Fair Value Disclosure	[6]	6,431		3,719
Derivative Asset, Netting adjustments	[7]	(91)		(74)
Derivative Liability, Netting adjustments	[7]	(84)		(79)
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		0		0
Available-for-sale (AFS) securities		0		0
Advances, Fair Value Disclosure	[6]	0		0
Other Assets		9		11
Total fair value measurements – Assets		9		11
Total recurring fair value measurements – Liabilities		0		0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		1,164		2,066
Available-for-sale (AFS) securities		0		0
Advances, Fair Value Disclosure	[6]	6,431		3,719
Other Assets		0		0
Total fair value measurements – Assets		7,769		5,925
Total recurring fair value measurements – Liabilities		1,034		1,588
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		0		0
Available-for-sale (AFS) securities		3,833		4,489
Advances, Fair Value Disclosure	[6]	0		0
Other Assets		0		0
Total fair value measurements – Assets		3,833		4,489
Total recurring fair value measurements – Liabilities		0		0
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total fair value measurements – Assets	[8]	0		0
Mortgage loans held for portfolio		0		0	[8]
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total fair value measurements – Assets	[8]	0		0
Mortgage loans held for portfolio		0		0	[8]
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total fair value measurements – Assets	[8]	3		5
Mortgage loans held for portfolio	[8]	3		5
FFCB bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		1,158		2,058
FFCB bonds [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		0		0
FFCB bonds [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		1,158		2,058
FFCB bonds [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		0		0
Ginnie Mae | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		0		0
Ginnie Mae | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		6		8
Ginnie Mae | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		0		0
Consolidated obligation bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Consolidated obligation bonds		949		1,507
Consolidated obligation bonds [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Consolidated obligation bonds		0		0
Consolidated obligation bonds [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Consolidated obligation bonds		84,938		50,188
Consolidated obligation bonds [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Consolidated obligation bonds		0		0
Consolidated obligation bonds [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Consolidated obligation bonds	[9]	949		1,507
Consolidated obligation bonds [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Consolidated obligation bonds	[9]	0		0
Consolidated obligation bonds [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Consolidated obligation bonds	[9]	949		1,507
Consolidated obligation bonds [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Consolidated obligation bonds	[9]	0		0
Estimate of Fair Value Measurement [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		1,164		2,066
Available-for-sale (AFS) securities		3,833		4,489
Derivative assets, Net	[5]	83		66
Other Assets	[4]	9		11
Derivative liabilities, Net	[5]	1		2
Mortgage loans held for portfolio		2,075		845
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		1,164		2,066
Available-for-sale (AFS) securities		3,833		4,489
Other Assets		9		11
Total fair value measurements – Assets		11,520		10,351
Total recurring fair value measurements – Liabilities		950		1,509
Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total fair value measurements – Assets	[8]	3		5
Mortgage loans held for portfolio	[8]	3		5
Estimate of Fair Value Measurement [Member] | FFCB bonds [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		1,158		2,058
Estimate of Fair Value Measurement [Member] | Ginnie Mae | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		6		8
Estimate of Fair Value Measurement [Member] | Consolidated obligation bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Consolidated obligation bonds		84,938		50,188
Residential Mortgage Backed Securities [Member] | PLRMBS [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale (AFS) securities		0		0
Residential Mortgage Backed Securities [Member] | PLRMBS [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale (AFS) securities		0		0
Residential Mortgage Backed Securities [Member] | PLRMBS [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale (AFS) securities		3,833		4,489
Residential Mortgage Backed Securities [Member] | Estimate of Fair Value Measurement [Member] | PLRMBS [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale (AFS) securities		3,833		4,489
Interest rate swaps [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Asset, Netting adjustments	[7]	(91)		(74)
Derivative Liability, Netting adjustments	[7]	(84)		(79)
Interest rate swaps [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets, Net		0		0
Derivative liabilities, Net		0		0
Interest rate swaps [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets, Net		174		140
Derivative liabilities, Net		85		81
Interest rate swaps [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets, Net		0		0
Derivative liabilities, Net		0		0
Interest rate swaps [Member] | Estimate of Fair Value Measurement [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets, Net		83		66
Derivative liabilities, Net		$ 1		$ 2

[1] At December 31, 2017 and 2016, none of these securities were pledged as collateral that may be repledged.

[2] At December 31, 2017 and 2016, none of these advances were 90 days or more past due or had been placed on nonaccrual status.

[3] Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met. Cash collateral posted and related accrued interest was $10 and $22 at December 31, 2017 and 2016, respectively. Cash collateral received and related accrued interest was $18 and $16 at December 31, 2017 and 2016, respectively.

[4] Represents publicly traded mutual funds held in a grantor trust.

[5] Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral and related accrued interest, where the netting requirements have been met.

[6] Represents advances recorded under the fair value option at December 31, 2017 and 2016.

[7] Amounts represent the netting of derivative assets and liabilities by counterparty, including cash collateral, where the netting requirements have been met.

[8] The fair value information presented is as of the date the fair value adjustment was recorded during the years ended December 31, 2017

[9] Represents consolidated obligation bonds recorded under the fair value option at December 31, 2017 and 2016

XML

Fair Value (Level 3) (Details) - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Net OTTI loss, credit-related	[1]	$ (16)	$ (16)	$ (15)
Net amount of OTTI loss reclassified to/(from) other income/(loss)		6	(10)	(15)
Residential Mortgage Backed Securities [Member] | PLRMBS [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Available-for-sale Securities [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance, beginning of the period		4,489	5,414	6,371
Interest Income		92	102	83
Net OTTI loss, credit-related		(16)	(16)	(15)
Unrealized gain/(loss) of other-than temporarily impaired securities included in AOCI		195	103	(29)
Net amount of OTTI loss reclassified to/(from) other income/(loss)		6	(10)	(15)
Settlements		(933)	(1,104)	(996)
Transfers of HTM securities to AFS		0	0	15
Balance, end of the period		3,833	4,489	5,414
Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/losses relating to assets and liabilities still held at the end of the period		$ 75	$ 84	$ 68

[1] For the years ended December 31, 2017, 2016, and 2015, “securities for which OTTI was previously recognized” represents all securities that were also other-than-temporarily impaired prior to January 1, 2017, 2016, and 2015, respectively.

XML

Fair Value (Fair Value Option) (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017		Dec. 31, 2016	Dec. 31, 2015
Fair Value, Option, Quantitative Disclosures [Line Items]
Balance, beginning of the period	$ 3,719
Net gain/(loss) on advances and net (gain)/loss on consolidated obligation bonds held under fair value option	(31)		$ (40)	$ (50)
Balance, end of the period	6,431	[1]	3,719
Advances [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Balance, beginning of the period	3,719		3,677	5,137
New transactions elected for fair value option	3,657		947	1,018
Maturities and terminations	(918)		(878)	(2,442)
Net gain/(loss) on advances and net (gain)/loss on consolidated obligation bonds held under fair value option	(31)		(27)	(31)
Change in accrued interest	4		0	(5)
Balance, end of the period	6,431		3,719	3,677
Consolidated obligation bonds [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Net gain/(loss) on advances and net (gain)/loss on consolidated obligation bonds held under fair value option	0		13	19
Balance, beginning of the period	1,507		4,233	6,717
New transactions elected for fair value option	1,185		685	2,585
Maturities and terminations	(1,745)		(3,420)	(5,083)
Change in accrued interest	2		(4)	(5)
Balance, end of the period	$ 949		$ 1,507	$ 4,233

[1] At December 31, 2017 and 2016, none of these advances were 90 days or more past due or had been placed on nonaccrual status.

XML

Fair Value (Fair Value Difference Between Fair Value and Remaining Contractual Principal Balance Outstanding) (Details) - USD ($) $ in Millions		Dec. 31, 2017		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value Option, Principal Balance, Advances		$ 6,447	[1]	$ 3,709
Fair Value of Advances Under the Fair Value Option		6,431	[1]	3,719
Fair Value Over/(Under) Principal Balance, Advances	[1]	(16)		10
Consolidated obligation bonds [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value Option, Principal Balance, CO Bonds		955		1,515
Fair Value of Bonds Under the Fair Value Option		949		1,507
Fair Value Over/(Under) Principal Balance, CO Bonds		(6)		(8)
Advances [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value of Advances Under the Fair Value Option		6,431		3,719	$ 3,677	$ 5,137
Consolidated obligation bonds [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Fair Value of Bonds Under the Fair Value Option		$ 949		$ 1,507	$ 4,233	$ 6,717

[1] At December 31, 2017 and 2016, none of these advances were 90 days or more past due or had been placed on nonaccrual status.

XML

Commitments and Contingencies Off-Balance Sheet Commitments (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Loss Contingencies [Line Items]
Obligation with Joint and Several Liability Arrangement, Amount Outstanding	$ 1,034,260	$ 989,311
Standby Letters Of Credit, Final Expiration	2032
Other Liabilities	$ 165	429
Commitments to purchase mortgage loans, maximum term	60
Total consolidated obligations, par	$ 115,602	83,749
Standby letters of credit outstanding [Member]
Loss Contingencies [Line Items]
Expire Within One Year	12,910	11,094
Expire After One Year	3,240	4,066
Total	16,150	15,160
Other Liabilities	19	24
Commitments to fund advances [Member]
Loss Contingencies [Line Items]
Expire Within One Year	1	5
Expire After One Year	0	1
Total	1	6
Commitments to Issue consolidated obligations, discount notes [Member]
Loss Contingencies [Line Items]
Expire Within One Year	134	846
Expire After One Year	0	0
Total	134	846
Commitments to issue consolidated obligation bonds, par
Loss Contingencies [Line Items]
Expire Within One Year	595	655
Expire After One Year	0	0
Total	$ 595	655
Minimum [Member] | Standby letters of credit outstanding [Member]
Loss Contingencies [Line Items]
Guarantor Obligations, Term	P14D
Maximum [Member] | Standby letters of credit outstanding [Member]
Loss Contingencies [Line Items]
Guarantor Obligations, Term	P15Y
Guarantee of Indebtedness of Others [Member]
Loss Contingencies [Line Items]
Total consolidated obligations, par	$ 115,602	83,749
Mortgages [Member] | Commitments to purchase mortgage loans [Member]
Loss Contingencies [Line Items]
Expire Within One Year	16	13
Expire After One Year	0	0
Total	$ 16	$ 13

XML

Commitments and Contingencies Schedule of Future Minimum Rental Payments (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Operating Leased Assets [Line Items]
Commitments to purchase mortgage loans, maximum term	60
Operating Leases, Rent Expense, Net	$ 7	$ 6	$ 5
Capital Leases, Future Minimum Payments Due, Next Twelve Months	2
Capital Leases, Future Minimum Payments Due in Two Years	2
Capital Leases, Future Minimum Payments Due in Three Years	2
Capital Leases, Future Minimum Payments Due in Four Years	2
Capital Leases, Future Minimum Payments Due in Five Years	1
Capital Leases, Future Minimum Payments Due	9
Operating Leases, Future Minimum Payments Due, Next Twelve Months	5
Operating Leases, Future Minimum Payments, Due in Two Years	4
Operating Leases, Future Minimum Payments, Due in Three Years	2
Operating Leases, Future Minimum Payments, Due in Four Years	0
Operating Leases, Future Minimum Payments, Due in Five Years	0
Operating Leases, Future Minimum Payments Due	$ 11

XML

Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Related Party Transaction [Line Items]
Proceeds from Other FHLBank Borrowings	$ 240	$ 2,490	$ 4,812
Assets:
Advances	77,382	49,845
Mortgage loans held for portfolio	2,076	826
Accrued interest receivable	119	79
Liabilities:
Deposits	281	169
Capital [Abstract]
Capital stock	3,243	2,370
Interest Income:
Advances	874	477	291
Mortgage loans held for portfolio	52	30	33
MPF Service Fee Expense to FHLB Chicago	$ 1	1
Minimum [Member]
Related Party Transaction [Line Items]
Transactions with Certain Members and Nonmembers, Voting Interest, Percent	10.00%
FHLBanks [Member]
Related Party Transaction [Line Items]
Deposits with other FHLB	$ 0	0
Payments to Extend Overnight Loans to Other FHLBanks	(1,505)	(505)	(1,805)
Proceeds from Collection of Loans to Other FHLBanks	0	0
Transaction with Member Officer or Director [Member]
Assets:
Advances	3,072	3,756
Mortgage loans held for portfolio	13	17
Accrued interest receivable	5	4
Liabilities:
Deposits	3	3
Capital [Abstract]
Capital stock	126	129
Interest Income:
Advances	41	35	35
Mortgage loans held for portfolio	$ 1	$ 1	$ 1

XML

Other (Details) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Other Income and Expenses [Abstract]
Professional and Contract Services	$ 39	$ 47	$ 50
Travel	2	2	2
Occupancy	7	6	5
Equipment	16	13	10
Other	6	6	4
Total	$ 70	$ 74	$ 71