10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

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

For the quarterly period ended September 30, 2020

OR

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

For the transition period from ________ to ________

Commission File Number 000-52004

FEDERAL HOME LOAN BANK OF TOPEKA

(Exact name of registrant as specified in its charter)

Federally chartered corporation	48-0561319
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
500 SW Wanamaker Road,  Topeka, KS	66606
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 785.233.0507

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

Title of each class	Trading symbol(s)	Name of each exchange on which registered
None	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ☒ Yes  ☐ No

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

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

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

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

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

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

	Shares outstanding as of
	November 3, 2020
Class A Stock, par value $100 per share	3,454,177
Class B Stock, par value $100 per share	11,978,572

.FEDERAL HOME LOAN BANK OF TOPEKA

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION	6
Item 1.	Financial Statements	6
	Statements of Condition	7
	Statements of Income	9
	Statements of Comprehensive Income	11
	Statements of Capital	12
	Statements of Cash Flows	14
	Notes to Financial Statements	17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	53
	Executive Level Overview	53
	Financial Market Trends	57
	Critical Accounting Policies and Estimates	58
	Results of Operations	59
	Financial Condition	74
	Liquidity and Capital Resources	91
	Risk Management	95
	Recently Issued Accounting Standards	102
	Legislative and Regulatory Developments	103
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	104
Item 4.	Controls and Procedures	110
Part II	OTHER INFORMATION	110
Item 1.	Legal Proceedings	110
Item 1A.	Risk Factors	110
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	111
Item 3.	Defaults Upon Senior Securities	111
Item 4.	Mine Safety Disclosures	111
Item 5.	Other Information	111
Item 6.	Exhibits	112

2

Important Notice about Information in this Quarterly Report

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

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

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

Special Cautionary Notice Regarding Forward-looking Statements

The information in this Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements describing the objectives, projections, estimates or future predictions of FHLBank’s operations. These statements may be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “is likely,” “could,” “estimate,” “expect,” “will,” “intend,” “probable,” “project,” “should,” or their negatives or other variations of these terms. FHLBank cautions that by their nature forward-looking statements involve risks or uncertainties and that actual results may differ materially from those expressed in any forward-looking statements as a result of such risks and uncertainties, including but not limited to:

•Changes in economic and market conditions, including conditions in our district and the U.S. and global economy, as well as the mortgage, housing and capital markets;

•The impact of the Coronavirus Disease 2019 (COVID-19) pandemic or other pandemics on our members and our business;

•Governmental actions, including legislative, regulatory, judicial or other developments that affect FHLBank; its members, counterparties or investors; housing government-sponsored enterprises (GSE); or the FHLBank System in general;

•Effects of derivative accounting treatment and other accounting rule requirements, or changes in such requirements;

•Competitive forces, including competition for loan demand, purchases of mortgage loans and access to funding;

•The ability of FHLBank to introduce new products and services to meet market demand and to manage successfully the risks associated with all products and services;

•Changes in demand for FHLBank products and services or consolidated obligations of the FHLBank System;

•Membership changes, including changes resulting from member failures or mergers, changes due to member eligibility, or changes in the principal place of business of members;

•Changes in the U.S. government’s long-term debt rating and the long-term credit rating of the senior unsecured debt issues of the FHLBank System;

•Soundness of other financial institutions, including FHLBank members, non-member borrowers, counterparties, and the other FHLBanks;

•The ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which FHLBank has joint and several liability;

•The volume and quality of eligible mortgage loans originated and sold by participating members to FHLBank through its various mortgage finance products (Mortgage Partnership Finance® (MPF®) Program). “Mortgage Partnership Finance,” “MPF,” “MPF Xtra,” and “MPF Direct” are registered trademarks of FHLBank Chicago.

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

•Changes in the value or liquidity of collateral underlying advances to FHLBank members or non-member borrowers or collateral pledged by reverse repurchase and derivative counterparties;

•Volatility of market prices, changes in interest rates and indices and the timing and volume of market activity;

•Gains/losses on derivatives or on trading investments and the ability to enter into effective derivative instruments on acceptable terms;

•The effects of amortization/accretion;

•The upcoming discontinuance of the London Interbank Offered Rate (LIBOR) and the related effect on FHLBank's LIBOR-based financial products, investments, and contracts;

•Changes in FHLBank’s capital structure;

•FHLBank's ability to declare dividends or to pay dividends at rates consistent with past practices; and

•The ability of FHLBank to keep pace with technological changes and the ability to develop and support technology and information systems, including the ability to securely access the internet and internet-based systems and services, sufficient to effectively manage the risks of FHLBank’s business.

3

Readers of this quarterly report should not rely solely on the forward-looking statements and should consider all risks and uncertainties addressed throughout this quarterly report, as well as those discussed under Part II Item lA – Risk Factors and Item 1A – Risk Factors in our annual report on Form 10-K for the fiscal year ended December 31, 2019, incorporated by reference herein.

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

4

PART I

Item 1: Financial Statements

5

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION - Unaudited
(In thousands, except par value)
	09/30/2020		12/31/2019
ASSETS
Cash and due from banks	$	22,704	$	1,917,166
Interest-bearing deposits	499,662		921,453
Securities purchased under agreements to resell (Note 9)	4,600,000		4,750,000
Federal funds sold	1,435,000		850,000
Investment securities:
Trading securities (Note 3)	3,117,935		2,812,562
Available-for-sale securities (Note 3)	7,290,611		7,182,500
Held-to-maturity securities, fair value of $2,975,782 and $3,556,938 (Note 3)	2,973,976		3,569,958
Total investment securities	13,382,522		13,565,020
Advances (Note 4)	22,616,252		30,241,315
Mortgage loans held for portfolio, net of allowance for credit losses of $7,926 and $985 (Note 5)	10,093,466		10,633,009
Accrued interest receivable	108,532		143,765
Derivative assets, net (Notes 6, 9)	162,501		154,804
Other assets	90,735		100,122
TOTAL ASSETS	$	53,011,374	$	63,276,654
LIABILITIES
Deposits (Note 7)	$	1,016,316	$	790,640
Consolidated obligations, net:
Discount notes (Note 8)	11,936,214		27,447,911
Bonds (Note 8)	37,294,169		32,013,314
Total consolidated obligations, net	49,230,383		59,461,225
Mandatorily redeemable capital stock (Note 10)	1,914		2,415
Accrued interest payable	54,913		117,580
Affordable Housing Program payable	39,350		43,027
Derivative liabilities, net (Notes 6, 9)	173		202
Other liabilities	68,389		70,514
TOTAL LIABILITIES	50,411,438		60,485,603
Commitments and contingencies (Note 13)

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

6

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION - Unaudited
(In thousands, except par value)
	09/30/2020		12/31/2019
CAPITAL
Capital stock outstanding - putable:
Class A ($100 par value; 3,872 and 4,476 shares issued and outstanding) (Note 10)	$	387,207	$	447,610
Class B ($100 par value; 11,935 and 13,188 shares issued and outstanding) (Note 10)	1,193,534		1,318,846
Total capital stock	1,580,741		1,766,456
Retained earnings:
Unrestricted	773,640		765,295
Restricted	248,926		234,514
Total retained earnings	1,022,566		999,809
Accumulated other comprehensive income (loss) (Note 11)	(3,371)		24,786
TOTAL CAPITAL	2,599,936		2,791,051
TOTAL LIABILITIES AND CAPITAL	$	53,011,374	$	63,276,654

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

7

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME - Unaudited
(In thousands)
	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
INTEREST INCOME:
Interest-bearing deposits	$	471	$	5,300	$	5,736	$	15,518
Securities purchased under agreements to resell	1,378		26,768		16,906		84,266
Federal funds sold	575		8,179		4,517		28,058
Trading securities	18,099		20,342		56,371		68,211
Available-for-sale securities	9,588		47,811		43,753		78,694
Held-to-maturity securities	4,540		24,337		29,024		84,469
Advances	38,848		186,431		230,000		563,602
Mortgage loans held for portfolio	64,192		76,546		222,962		225,015
Other	286		346		940		1,097
Total interest income	137,977		396,060		610,209		1,148,930
INTEREST EXPENSE:
Deposits	76		2,540		1,707		7,701
Consolidated obligations:
Discount notes	5,674		133,680		120,385		433,473
Bonds	67,142		185,096		310,628		519,967
Mandatorily redeemable capital stock (Note 10)	12		30		50		113
Other	285		299		888		1,016
Total interest expense	73,189		321,645		433,658		962,270
NET INTEREST INCOME	64,788		74,415		176,551		186,660
Provision (reversal) for credit losses on mortgage loans (Note 5)	116		393		717		509
NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)	64,672		74,022		175,834		186,151
OTHER INCOME (LOSS):
Net gains (losses) on trading securities (Note 3)	(6,995)		16,186		92,769		86,784
Net gains (losses) on sale of available-for-sale securities (Note 3)	—		—		1,523		—
Net gains (losses) on sale of held-to-maturity securities (Note 3)	—		—		—		(46)
Net gains (losses) on derivatives and hedging activities (Note 6)	2,026		(20,386)		(135,581)		(78,939)
Standby bond purchase agreement commitment fees	560		566		1,660		1,685
Letters of credit fees	1,663		1,190		4,705		3,581
Other	1,112		937		(191)		2,470
Total other income (loss)	(1,634)		(1,507)		(35,115)		15,535

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

8

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME - Unaudited
(In thousands)
	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
OTHER EXPENSES:
Compensation and benefits	$	10,014	$	9,781	$	29,533	$	28,598
Other operating	4,365		5,031		13,840		14,331
Federal Housing Finance Agency	1,023		812		3,068		2,437
Office of Finance	1,036		972		2,889		2,717
Mortgage loans transaction service fees	1,946		1,775		6,029		5,010
Other	226		262		5,290		843
Total other expenses	18,610		18,633		60,649		53,936
INCOME BEFORE ASSESSMENTS	44,428		53,882		80,070		147,750
Affordable Housing Program	4,444		5,391		8,012		14,786
NET INCOME	$	39,984	$	48,491	$	72,058	$	132,964

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

9

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF COMPREHENSIVE INCOME - Unaudited
(In thousands)
	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Net income	$	39,984	$	48,491	$	72,058	$	132,964
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities	30,295		(17,324)		(28,239)		(1,249)
Defined benefit pension plan	28		95		82		240
Total other comprehensive income (loss)	30,323		(17,229)		(28,157)		(1,009)
TOTAL COMPREHENSIVE INCOME	$	70,307	$	31,262	$	43,901	$	131,955

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

10

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CAPITAL - Unaudited
(In thousands)
	Capital Stock1									Retained Earnings						Accumulated		Total Capital
																Other
	Class A			Class B			Total									Comprehensive
	Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)
Balance at June 30, 2019	2,155	$	215,536	13,830	$	1,382,968	15,985	$	1,598,504	$	735,915	$	214,361	$	950,276	$	31,913	$	2,580,693
Comprehensive income										38,792		9,699		48,491		(17,229)		31,262
Proceeds from issuance of capital stock	—	—		3,974	397,429		3,974	397,429										397,429
Repurchase/redemption of capital stock	(721)	(72,148)		(1,191)	(119,069)		(1,912)	(191,217)										(191,217)
Net reclassification of shares to mandatorily redeemable capital stock	(253)	(25,225)		(1,345)	(134,550)		(1,598)	(159,775)										(159,775)
Net transfer of shares between Class A and Class B	2,263	226,290		(2,263)	(226,290)		—	—										—
Dividends on capital stock (Class A - 2.5%, Class B - 7.5%):
Cash payment										(70)				(70)				(70)
Stock issued				257	25,749		257	25,749		(25,749)				(25,749)				—
Balance at September 30, 2019	3,444	$	344,453	13,262	$	1,326,237	16,706	$	1,670,690	$	748,888	$	224,060	$	972,948	$	14,684	$	2,658,322
	Capital Stock1									Retained Earnings						Accumulated		Total Capital
																Other
	Class A			Class B			Total									Comprehensive
	Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)
Balance at June 30, 2020	5,007	$	500,679	8,913	$	891,324	13,920	$	1,392,003	$	755,700	$	240,929	$	996,629	$	(33,694)	$	2,354,938
Comprehensive income										31,987		7,997		39,984		30,323		70,307
Proceeds from issuance of capital stock	2	222		8,208	820,820		8,210	821,042										821,042
Repurchase/redemption of capital stock	—	—		(257)	(25,724)		(257)	(25,724)										(25,724)
Net reclassification of shares to mandatorily redeemable capital stock	(1,987)	(198,626)		(4,219)	(421,935)		(6,206)	(620,561)										(620,561)
Net transfer of shares between Class A and Class B	850	84,932		(850)	(84,932)		—	—										—
Dividends on capital stock (Class A - 0.3%, Class B - 5.2%):
Cash payment										(66)				(66)				(66)
Stock issued				140	13,981		140	13,981		(13,981)				(13,981)				—
Balance at September 30, 2020	3,872	$	387,207	11,935	$	1,193,534	15,807	$	1,580,741	$	773,640	$	248,926	$	1,022,566	$	(3,371)	$	2,599,936

1    Putable

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

11

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CAPITAL - Unaudited
(In thousands)
	Capital Stock1									Retained Earnings						Accumulated		Total Capital
																Other
	Class A			Class B			Total									Comprehensive
	Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)
Balance at December 31, 2018	2,473	$	247,361	12,772	$	1,277,176	15,245	$	1,524,537	$	716,555	$	197,467	$	914,022	$	15,693	$	2,454,252
Comprehensive income										106,371		26,593		132,964		(1,009)		131,955
Proceeds from issuance of capital stock	12	1,171		11,601	1,160,158		11,613	1,161,329										1,161,329
Repurchase/redemption of capital stock	(6,450)	(645,039)		(2,256)	(225,555)		(8,706)	(870,594)										(870,594)
Net reclassification of shares to mandatorily redeemable capital stock	(778)	(77,763)		(1,406)	(140,648)		(2,184)	(218,411)										(218,411)
Net transfer of shares between Class A and Class B	8,187	818,723		(8,187)	(818,723)		—	—										—
Dividends on capital stock (Class A - 2.4%, Class B - 7.5%):
Cash payment										(209)				(209)				(209)
Stock issued				738	73,829		738	73,829		(73,829)				(73,829)				—
Balance at September 30, 2019	3,444	$	344,453	13,262	$	1,326,237	16,706	$	1,670,690	$	748,888	$	224,060	$	972,948	$	14,684	$	2,658,322
	Capital Stock1									Retained Earnings						Accumulated		Total Capital
																Other
	Class A			Class B			Total									Comprehensive
	Shares	Par Value		Shares	Par Value		Shares	Par Value		Unrestricted		Restricted		Total		Income (Loss)
Balance at December 31, 2019	4,476	$	447,610	13,188	$	1,318,846	17,664	$	1,766,456	$	765,295	$	234,514	$	999,809	$	24,786	$	2,791,051
Adjustment for cumulative effect of accounting change										(6,123)		—		(6,123)				(6,123)
Comprehensive income										57,646		14,412		72,058		(28,157)		43,901
Proceeds from issuance of capital stock	10	1,035		13,713	1,371,346		13,723	1,372,381										1,372,381
Repurchase/redemption of capital stock	—	—		(843)	(84,358)		(843)	(84,358)										(84,358)
Net reclassification of shares to mandatorily redeemable capital stock	(8,608)	(860,766)		(6,664)	(666,486)		(15,272)	(1,527,252)										(1,527,252)
Net transfer of shares between Class A and Class B	7,994	799,328		(7,994)	(799,328)		—	—										—
Partial recovery of prior capital distribution to Financing Corporation										10,543		—		10,543				10,543
Dividends on capital stock (Class A - 0.9%, Class B - 6.1%):
Cash payment										(207)				(207)				(207)
Stock issued				535	53,514		535	53,514		(53,514)				(53,514)				—
Balance at September 30, 2020	3,872	$	387,207	11,935	$	1,193,534	15,807	$	1,580,741	$	773,640	$	248,926	$	1,022,566	$	(3,371)	$	2,599,936

1    Putable

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

12

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS - Unaudited
(In thousands)
	Nine Months Ended
	09/30/2020		09/30/2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	72,058	$	132,964
Adjustments to reconcile income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization:
Premiums and discounts on consolidated obligations, net	(50,162)		738
Concessions on consolidated obligations	24,029		10,128
Premiums and discounts on investments, net	14,556		6,246
Premiums, discounts and commitment fees on advances, net	(3,385)		(1,379)
Premiums, discounts and deferred loan costs on mortgage loans, net	47,349		18,542
Fair value adjustments on hedged assets or liabilities	3,568		2,948
Premises, software and equipment	2,498		2,331
Other	82		240
Provision (reversal) for credit losses on mortgage loans	717		509
Non-cash interest on mandatorily redeemable capital stock	49		111
Net realized (gains) losses on sale of available-for-sale securities	(1,523)		—
Net realized (gains) losses on sale of held-to-maturity securities	—		46
Net realized (gains) losses on disposal of premises, software and equipment	3,471		(3)
Other adjustments	4,366		(272)
Net (gains) losses on trading securities	(92,769)		(86,784)
Net change in derivatives and hedging activities	(288,215)		(144,589)
(Increase) decrease in accrued interest receivable	36,037		(41,801)
Change in net accrued interest included in derivative assets	30,973		(1,254)
(Increase) decrease in other assets	1,407		3,056
Increase (decrease) in accrued interest payable	(63,193)		28,372
Change in net accrued interest included in derivative liabilities	(117)		4,332
Increase (decrease) in Affordable Housing Program liability	(3,677)		(1,777)
Increase (decrease) in other liabilities	(1,849)		(1,682)
Total adjustments	(335,788)		(201,942)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	(263,730)		(68,978)

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

13

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS - Unaudited
(In thousands)
	Nine Months Ended
	09/30/2020		09/30/2019
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits	$	145,874	$	(32,829)
Net (increase) decrease in securities purchased under resale agreements	150,000		(886,278)
Net (increase) decrease in Federal funds sold	(585,000)		(850,000)
Proceeds from sale of trading securities	275,186		429
Proceeds from maturities of and principal repayments on trading securities	337,209		3,015,268
Purchases of trading securities	(825,000)		(3,679,375)
Proceeds from sale of available-for-sale securities	289,045		—
Proceeds from maturities of and principal repayments on available-for-sale securities	300,801		8,732
Purchases of available-for-sale securities	(430,610)		(4,180,862)
Proceeds from sale of held-to-maturity securities	—		9,442
Proceeds from maturities of and principal repayments on held-to-maturity securities	594,829		716,417
Advances repaid	252,632,071		279,880,008
Advances originated	(244,759,865)		(281,623,825)
Principal collected on mortgage loans	2,878,144		1,011,265
Purchases of mortgage loans	(2,401,848)		(2,451,132)
Proceeds from sale of foreclosed assets	793		1,965
Other investing activities	2,481		2,320
Purchases of premises, software and equipment	(568)		(1,037)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	8,603,542		(9,059,492)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	225,977		205,498
Net proceeds from issuance of consolidated obligations:
Discount notes	500,327,628		633,162,917
Bonds	34,971,746		20,517,358
Payments for maturing and retired consolidated obligations:
Discount notes	(515,803,859)		(632,736,460)
Bonds	(29,717,000)		(12,082,800)
Proceeds from financing derivatives	3,470		—
Net interest payments received (paid) for financing derivatives	(12,793)		652
Proceeds from issuance of capital stock	1,372,381		1,161,329
Payments for repurchase/redemption of capital stock	(84,358)		(870,594)
Payments for repurchase of mandatorily redeemable capital stock	(1,527,802)		(219,642)
Cash dividends paid	(207)		(209)
Partial recovery of prior capital distribution to Financing Corporation	10,543		—
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(10,234,274)		9,138,049
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(1,894,462)		9,579
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	1,917,166		15,060
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	22,704	$	24,639

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

14

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS - Unaudited
(In thousands)
	Nine Months Ended
	09/30/2020		09/30/2019
Supplemental disclosures:
Interest paid	$	523,348	$	919,428
Affordable Housing Program payments	$	11,783	$	16,859
Net transfers of mortgage loans to other assets	$	670	$	627

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

15

FEDERAL HOME LOAN BANK OF TOPEKA

Notes to Financial Statements - Unaudited

September 30, 2020

NOTE 1 – BASIS OF PRESENTATION

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

FHLBank’s significant accounting policies and certain other disclosures are set forth in the notes to the audited financial statements for the year ended December 31, 2019. The interim financial statements presented herein should be read in conjunction with FHLBank’s audited financial statements and notes thereto, which are included in FHLBank’s annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 20, 2020 (annual report on Form 10-K). The notes to the interim financial statements highlight significant changes to the notes included in the annual report on Form 10-K.

Out-of-Period Adjustment: Included in net income for the three months ended September 30, 2019 was an out-of-period adjustment of $14,336,000, of which $2,545,000 and $11,791,000 related to income that should have been recorded during the three months ended March 31, 2019 and June 30, 2019, respectively. The out-of-period adjustment related to hedged item valuations for certain available-for-sale securities in fair value hedging relationships and resulted in an increase in available-for-sale interest income and a reduction in other comprehensive income. Consequently, available-for-sale interest income was understated by $11,791,000 and $14,336,000 for the three and six months ended June 30, 2019. FHLBank has assessed the impact of this error and concluded that the amounts were not material, either individually or in the aggregate, to any prior period financial statements.

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

Allowance for Credit Losses: Beginning January 1, 2020, FHLBank adopted new accounting guidance pertaining to the measurement of credit losses on financial instruments that requires a financial asset or group of financial assets measured at amortized cost to be presented at the net amount expected to be collected. The new guidance also requires credit losses relating to these financial instruments as well as available-for-sale securities to be recorded through an allowance for credit losses. Key changes as compared to prior accounting guidance are detailed below. Consistent with the modified retrospective method of adoption, the prior period has not been revised to conform to the new basis of accounting. See Note 1 of the Notes to the Financial Statements included in the annual report on Form 10-K for information on the prior accounting treatment.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold: FHLBank invests in interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold. These investments provide short-term liquidity and are carried at amortized cost. Accrued interest receivable is recorded separately on the Statements of Condition.

These investments are evaluated quarterly for expected credit losses. If applicable, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. FHLBank uses the collateral maintenance provision practical expedient for securities purchased under agreements to resell. Consequently, a credit loss would be recognized if there is a collateral shortfall which FHLBank does not believe the counterparty will replenish in accordance with its contractual terms. The credit loss would be limited to the difference between the fair value of the collateral and the investment’s amortized cost. See Note 3 for details on the allowance methodologies relating to these investments.

16

Investment Securities:

Available-for-Sale: For securities classified as available-for-sale, FHLBank evaluates an individual security for impairment on a quarterly basis by comparing the security’s fair value to its amortized cost. Accrued interest receivable is recorded separately on the Statements of Condition. Impairment exists when the fair value of the investment is less than its amortized cost (i.e., in an unrealized loss position). In assessing whether a credit loss exists on an impaired security, FHLBank considers whether there would be a shortfall in receiving all cash flows contractually due. When a shortfall is considered possible, FHLBank compares the present value of cash flows to be collected from the security with the amortized cost basis of the security. If the present value of cash flows is less than amortized cost, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance is limited by the amount of the unrealized loss. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately.

If management intends to sell an impaired security classified as available-for-sale, or more likely than not will be required to sell the security before expected recovery of its amortized cost basis, any allowance for credit losses is written off and the amortized cost basis is written down to the security’s fair value at the reporting date with any incremental impairment reported in earnings as net gains (losses) on available-for-sale securities. If management does not intend to sell an impaired security classified as available-for-sale and it is not more likely than not that management will be required to sell the debt security, then the credit portion of the difference is recognized as an allowance for credit losses and any remaining difference between the security’s fair value and amortized cost is recorded to net unrealized gains (losses) on available-for-sale securities within other comprehensive income (loss) (OCI).

Held-to-Maturity: Securities that FHLBank has both the ability and intent to hold to maturity are classified as held-to-maturity and are carried at amortized cost, adjusted for periodic principal repayments, amortization of premiums, and accretion of discounts. Accrued interest receivable is recorded separately on the Statements of Condition.

Held-to-maturity securities are evaluated quarterly for expected credit losses on a pool basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. An allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately.

See Note 3 for details on the allowance methodologies relating to available-for-sale and held-to-maturity securities.

Advances: Advances are carried at amortized cost, which is original cost adjusted for periodic principal repayments, amortization of premiums, accretion of discounts, and fair value hedge adjustments. Accrued interest receivable is recorded separately on the Statements of Condition. Advances are evaluated quarterly for expected credit losses. If deemed necessary, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. See Note 4 for details on the allowance methodology relating to advances.

Mortgage Loans Held for Portfolio: Mortgage loans held for portfolio are recorded at amortized cost, which is original cost adjusted for periodic principal repayments, amortization of premiums, accretion of discounts, hedging adjustments, other fees, and direct write-downs. Accrued interest receivable is recorded separately on the Statements of Condition. FHLBank performs a quarterly assessment of its mortgage loans held for portfolio to estimate expected credit losses. An allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses.

FHLBank measures expected credit losses on mortgage loans on a collective basis, pooling loans with similar risk characteristics. If a mortgage loan no longer shares risk characteristics with other loans, it is removed from the pool and evaluated for expected credit losses on an individual basis.

When developing the allowance for credit losses, FHLBank measures the estimated loss over the remaining life of a mortgage loan, which also considers how credit enhancements mitigate credit losses. If a loan is purchased at a discount, the discount does not offset the allowance for credit losses. The allowance excludes uncollectible accrued interest receivable, as FHLBank writes off accrued interest receivable by reversing interest income if a mortgage loan is placed on nonaccrual status.

FHLBank does not purchase mortgage loans with credit deterioration present at the time of purchase. FHLBank includes estimates of expected recoveries within the allowance for credit losses. See Note 5 for details on the allowance methodologies relating to mortgage loans.

17

Off-Balance Sheet Credit Exposures: FHLBank evaluates off-balance sheet credit exposures on a quarterly basis for expected credit losses. If deemed necessary, an allowance for expected credit losses on these off-balance sheet exposures is recorded in other liabilities with a corresponding adjustment to the provision (reversal) for credit losses. See Note 13 for details on the allowance methodologies relating to off-balance sheet credit exposures.

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

Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In March 2020, the CARES Act was signed into law to provide relief from the economic impact of the COVID-19 pandemic to a variety of sectors of the U.S. economy, including businesses, individuals, health care, education, and state and local governments. The CARES Act also includes provisions that provide optional relief from certain accounting and reporting requirements related to troubled debt restructurings (TDRs). TDR relief applies to COVID-19-related modifications made from March 1, 2020 until the earlier of December 31, 2020 or 60 days following the termination of the national emergency declared by the President of the United States for borrowers that were current as of December 31, 2019. FHLBank has elected the optional relief but does not expect it to have a material effect on FHLBank's financial condition, results of operations, cash flows, or disclosures.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Accounting Standard Update (ASU) 2020-04). In March 2020, the Financial Accounting Standards Board (FASB) issued temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The transactions primarily include: (1) contract modifications; (2) hedging relationships; and (3) sale or transfer of debt securities classified as held-to-maturity. This guidance was effective immediately for FHLBank, and the amendments may be applied prospectively through December 31, 2022. FHLBank is in the process of evaluating the guidance, and its effect on FHLBank's financial condition, results of operations and cash flows has not yet been determined.

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU 2018-15). In August 2018, the FASB issued an amendment to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the amendments in this ASU require an entity in a hosting arrangement that is a service contract to follow existing guidance relating to internal-use software to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Costs to develop or obtain internal-use software that cannot be capitalized also cannot be capitalized for a hosting arrangement that is a service contract. Therefore, an entity in a hosting arrangement that is a service contract determines to which project stage (that is, preliminary project stage, application development stage, or post-implementation stage) an implementation activity relates. Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed. The amendments in this ASU also require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments in this ASU were effective January 1, 2020 for FHLBank. The adoption of this guidance did not materially impact FHLBank's financial condition, results of operations or cash flows.

Changes to the Disclosure Requirements for Defined Benefit Plans (ASU 2018-14). In August 2018, the FASB issued an amendment modifying the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans to improve disclosure effectiveness. The amendments in the ASU remove disclosures that are no longer considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this ASU are effective for annual periods ending after December 15, 2020, which is the year ending December 31, 2020 for FHLBank, and will be applied retrospectively for all comparative periods presented. The adoption of this guidance will not have a material impact on the disclosures related to defined benefit plans and will not impact FHLBank’s financial condition, results of operations or cash flows.

18

Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). In August 2018, the FASB issued an amendment that modifies the disclosure requirements for fair value measurements. This ASU removes the requirement to disclose: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; and (3) the valuation processes for Level 3 fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in OCI for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this ASU were effective January 1, 2020 for FHLBank. The adoption of this guidance did not have an impact on the disclosures related to fair value measurements and did not impact FHLBank’s financial condition, results of operations or cash flows.

Measurement of Credit Losses on Financial Instruments, as amended (ASU 2016-13). In June 2016, the FASB issued amended guidance for the accounting of 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 in its circumstances. Additionally, under the new guidance, a financial asset, or a group of financial assets, measured at amortized cost basis is required to be presented at the net amount expected to be collected.

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; and

▪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 became effective for FHLBank on January 1, 2020 and was applied using a modified-retrospective approach, through a cumulative-effect adjustment to retained earnings. Adoption of this guidance did not materially impact FHLBank’s financial condition, results of operations, or cash flows.

NOTE 3 – INVESTMENTS

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

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold: FHLBank invests in interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received a credit rating of triple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO). These may differ from internal ratings of the investments, if applicable. As of September 30, 2020, approximately 70 percent of these overnight investments were with counterparties not rated by an NRSRO. All transactions with unrated counterparties are secured transactions.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. Federal Housing Finance Agency (FHFA) regulations include a limit on the amount of unsecured credit FHLBank may extend to a counterparty. As of September 30, 2020 and December 31, 2019, all investments in interest-bearing deposits and Federal funds sold were repaid or expected to be repaid according to the contractual terms. No allowance for credit losses was recorded for these assets as of September 30, 2020 and December 31, 2019. Carrying values of interest-bearing deposits and Federal funds sold exclude accrued interest receivable of $83,000 and $3,000, respectively, as of September 30, 2020, and $589,000 and $30,000, respectively, as of December 31, 2019.

19

Securities purchased under agreements to resell are short-term and are structured such that they are evaluated regularly to determine if the market value of the underlying securities decreases below the market value required as collateral (i.e., subject to collateral maintenance provisions). If so, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash, generally by the next business day. Based upon the collateral held as security and collateral maintenance provisions with its counterparties, FHLBank determined that no allowance for credit losses was needed for its securities purchased under agreements to resell as of September 30, 2020 and December 31, 2019. The carrying value of securities purchased under agreements excludes accrued interest receivable of $15,000 and $424,000 as of September 30, 2020 and December 31, 2019, respectively.

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

FHLBank's debt securities include the following major security types, which are based on the issuer and the risk characteristics of the security:

▪Certificates of deposit - unsecured negotiable promissory notes issued by banks;

▪U.S. Treasury obligations - sovereign debt of the United States;

▪GSE obligations - debentures issued by other FHLBanks, Federal National Mortgage Association (Fannie Mae), Federal Farm Credit Bank and Federal Agricultural Mortgage Corporation. GSE securities are not guaranteed by the U.S. government;

▪State or local housing agency obligations - municipal bonds issued by housing finance agencies;

▪U.S. obligation MBS - single-family MBS issued by Government National Mortgage Association (Ginnie Mae), which are guaranteed by the U.S. government; and

▪GSE MBS - single-family and multifamily MBS issued by Fannie Mae and Federal Home Loan Mortgage Corporation (Freddie Mac).

Trading Securities: Trading securities by major security type as of September 30, 2020 and December 31, 2019 are summarized in Table 3.1 (in thousands):

Table 3.1

	Fair Value
	09/30/2020		12/31/2019
Non-mortgage-backed securities:
Certificates of deposit	$	225,053	$	—
U.S. Treasury obligations	1,557,412		1,530,518
GSE obligations	433,864		416,025
Non-mortgage-backed securities	2,216,329		1,946,543
Mortgage-backed securities:
GSE MBS	901,606		866,019
Mortgage-backed securities	901,606		866,019
TOTAL	$	3,117,935	$	2,812,562

Net gains (losses) on trading securities during the three and nine months ended September 30, 2020 and 2019 are shown in Table 3.2 (in thousands):

Table 3.2

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Net gains (losses) on trading securities held as of September 30, 2020	$	(6,995)	$	16,237	$	92,583	$	86,429
Net gains (losses) on trading securities sold or matured prior to September 30, 2020	—		(51)		186		355
NET GAINS (LOSSES) ON TRADING SECURITIES	$	(6,995)	$	16,186	$	92,769	$	86,784

20

Available-for-sale Securities: Available-for-sale securities by major security type as of September 30, 2020 are summarized in Table 3.3 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of $27,450,000 as of September 30, 2020.

Table 3.3

	09/30/2020
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
U.S. Treasury obligations	$	4,062,655	$	4,715	$	—	$	4,067,370
Non-mortgage-backed securities	4,062,655		4,715		—		4,067,370
Mortgage-backed securities:
GSE MBS	3,229,407		28,211		(34,377)		3,223,241
Mortgage-backed securities	3,229,407		28,211		(34,377)		3,223,241
TOTAL	$	7,292,062	$	32,926	$	(34,377)	$	7,290,611

Available-for-sale securities by major security type as of December 31, 2019 are summarized in Table 3.4 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of $30,321,000 as of December 31, 2019.

Table 3.4

	12/31/2019
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
U.S. Treasury obligations	$	4,258,608	$	3,580	$	(397)	$	4,261,791
Non-mortgage-backed securities	4,258,608		3,580		(397)		4,261,791
Mortgage-backed securities:
GSE MBS	2,897,104		28,353		(4,748)		2,920,709
Mortgage-backed securities	2,897,104		28,353		(4,748)		2,920,709
TOTAL	$	7,155,712	$	31,933	$	(5,145)	$	7,182,500

Table 3.5 summarizes the available-for-sale securities with unrealized losses as of September 30, 2020 (in thousands). The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table 3.5

	09/30/2020
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities:
GSE MBS	$	1,579,922	$	(30,449)	$	325,075	$	(3,928)	$	1,904,997	$	(34,377)
Mortgage-backed securities	1,579,922		(30,449)		325,075		(3,928)		1,904,997		(34,377)
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	1,579,922	$	(30,449)	$	325,075	$	(3,928)	$	1,904,997	$	(34,377)

21

Table 3.6 summarizes the available-for-sale securities with unrealized losses as of December 31, 2019 (in thousands). The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table 3.6

	12/31/2019
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Non-mortgage-backed securities:
U.S. Treasury obligations	$	1,579,004	$	(397)	$	—	$	—	$	1,579,004	$	(397)
Non-mortgage-backed securities	1,579,004		(397)		—		—		1,579,004		(397)
Mortgage-backed securities:
GSE MBS	787,809		(932)		301,161		(3,816)		1,088,970		(4,748)
Mortgage-backed securities	787,809		(932)		301,161		(3,816)		1,088,970		(4,748)
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	2,366,813	$	(1,329)	$	301,161	$	(3,816)	$	2,667,974	$	(5,145)

The amortized cost and fair values of available-for-sale securities by contractual maturity as of September 30, 2020 and December 31, 2019 are shown in Table 3.7 (in thousands). Expected maturities of MBS will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 3.7

	09/30/2020				12/31/2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	2,021,424	$	2,022,929	$	754,003	$	753,891
Due after one year through five years	2,041,231		2,044,441		3,504,605		3,507,900
Due after five years through ten years	—		—		—		—
Due after ten years	—		—		—		—
Non-mortgage-backed securities	4,062,655		4,067,370		4,258,608		4,261,791
Mortgage-backed securities	3,229,407		3,223,241		2,897,104		2,920,709
TOTAL	$	7,292,062	$	7,290,611	$	7,155,712	$	7,182,500

Net gains (losses) realized on the sale of available-for-sale securities are recorded in other income (loss) on the Statements of Income. Table 3.8 presents details of the sales for the three and nine months ended September 30, 2020 (in thousands). There were no sales of available-for-sale securities during the three and nine months ended September 30, 2019.

Table 3.8

	Three Months Ended		Nine Months Ended
	09/30/2020		09/30/2020
Proceeds from sale of available-for-sale securities	$	—	$	289,045
Gross gains on sale of available-for-sale securities	$	—	$	1,526
Gross losses on sale of available-for-sale securities	—		(3)
NET GAINS (LOSSES) ON SALE OF AVAILABLE-FOR-SALE SECURITIES	$	—	$	1,523

22

Held-to-maturity Securities: Held-to-maturity securities by major security type as of September 30, 2020 are summarized in Table 3.9 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of $1,147,000 as of September 30, 2020.

Table 3.9

	09/30/2020
	Amortized Cost		Net Carrying Value		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
State or local housing agency obligations	$	81,995	$	81,995	$	—	$	(3,491)	$	78,504
Non-mortgage-backed securities	81,995		81,995		—		(3,491)		78,504
Mortgage-backed securities:
U.S. obligation MBS	76,852		76,852		151		(60)		76,943
GSE MBS	2,815,129		2,815,129		10,503		(5,297)		2,820,335
Mortgage-backed securities	2,891,981		2,891,981		10,654		(5,357)		2,897,278
TOTAL	$	2,973,976	$	2,973,976	$	10,654	$	(8,848)	$	2,975,782

Held-to-maturity securities by major security type as of December 31, 2019 are summarized in Table 3.10 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of $4,324,000 as of December 31, 2019.

Table 3.10

	12/31/2019
	Amortized Cost		Carrying Value		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
State or local housing agency obligations	$	82,805	$	82,805	$	5	$	(1,956)	$	80,854
Non-mortgage-backed securities	82,805		82,805		5		(1,956)		80,854
Mortgage-backed securities:
U.S. obligation MBS	93,375		93,375		—		(496)		92,879
GSE MBS	3,393,778		3,393,778		6,558		(17,131)		3,383,205
Mortgage-backed securities	3,487,153		3,487,153		6,558		(17,627)		3,476,084
TOTAL	$	3,569,958	$	3,569,958	$	6,563	$	(19,583)	$	3,556,938

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The amortized cost, carrying value and fair values of held-to-maturity securities by contractual maturity as of September 30, 2020 and December 31, 2019 are shown in Table 3.11 (in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 3.11

	09/30/2020						12/31/2019
	Amortized Cost		Net Carrying Value		Fair Value		Amortized Cost		Carrying Value		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	—	$	—	$	—	$	—	$	—	$	—
Due after one year through five years	—		—		—		—		—		—
Due after five years through ten years	—		—		—		—		—		—
Due after ten years	81,995		81,995		78,504		82,805		82,805		80,854
Non-mortgage-backed securities	81,995		81,995		78,504		82,805		82,805		80,854
Mortgage-backed securities	2,891,981		2,891,981		2,897,278		3,487,153		3,487,153		3,476,084
TOTAL	$	2,973,976	$	2,973,976	$	2,975,782	$	3,569,958	$	3,569,958	$	3,556,938

Net gains (losses) were realized on the sale of held-to-maturity securities as presented below and are recorded as net gains (losses) on sale of held-to-maturity securities in other income (loss) on the Statements of Income. All securities sold had paid down below 15 percent of the principal outstanding at acquisition and were therefore considered maturities under GAAP. Table 3.12 presents details of the sales (in thousands). There were no sales of held-to-maturity securities during the three and nine months ended September 30, 2020.

Table 3.12

	Three Months Ended		Nine Months Ended
	09/30/2019		09/30/2019
Proceeds from sale of held-to-maturity securities	$	—	$	9,442
Carrying value of held-to-maturity securities sold	—		(9,488)
NET REALIZED GAINS (LOSSES)	$	—	$	(46)

Allowance for Credit Losses on Available-for-Sale and Held-to-Maturity Securities: FHLBank evaluates available-for-sale and held-to-maturity investment securities for credit losses on a quarterly basis. FHLBank adopted new accounting guidance for the measurement of credit losses on financial instruments on January 1, 2020. See Note 2 for additional information.

During the three and nine months ended September 30, 2020, FHLBank did not recognize a provision for credit losses associated with available-for-sale investments or held-to-maturity investments. To evaluate investment securities for credit loss as of September 30, 2020, FHLBank employed the following methodologies, based on the type of security.

FHLBank's available-for-sale and held-to-maturity securities are principally certificates of deposit, U.S. obligations, GSE obligations, state or local housing agency obligations, and MBS issued by Ginnie Mae, Freddie Mac, and Fannie Mae that are backed by single-family or multifamily mortgage loans. FHLBank only purchases securities considered investment quality. As of September 30, 2020, all of FHLBank's available-for-sale securities and held-to-maturity securities were rated single-A or above by an NRSRO, based on the lowest long-term credit rating for each security. These may differ from any internal ratings of the securities, if applicable.

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FHLBank evaluates available-for-sale securities for impairment by comparing the security’s fair value to its amortized cost. Impairment may exist when the fair value of the investment is less than its amortized cost (i.e., in an unrealized loss position). As of September 30, 2020, certain available-for-sale securities were in an unrealized loss position. These losses are considered temporary as FHLBank expects to recover the entire amortized cost basis on these available-for-sale investment securities. FHLBank neither intends to sell these securities nor considers it more likely than not that it will be required to sell these securities before its anticipated recovery of each security's remaining amortized cost basis. Further, FHLBank has not experienced any payment defaults on the instruments. In addition, all of these securities carry an implicit or explicit government guarantee. As a result, no allowance for credit losses was recorded on these available-for-sale securities as of September 30, 2020.

FHLBank evaluates its held-to-maturity securities for impairment on a collective or pooled basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. As of September 30, 2020, FHLBank had not established an allowance for credit loss on any held-to-maturity securities because the securities: (1) were all highly-rated and/or had short remaining terms to maturity; (2) had not experienced, nor did FHLBank expect, any payment default on the instruments; and (3) in the case of U.S. or GSE obligations, carry an implicit or explicit government guarantee such that FHLBank considers the risk of nonpayment to be zero.

NOTE 4 – ADVANCES

General Terms: FHLBank offers a wide range of fixed and variable rate advance products with different maturities, interest rates, payment characteristics and optionality. As of September 30, 2020 and December 31, 2019, FHLBank had advances outstanding at interest rates ranging from 0.14 percent to 7.20 percent and 0.96 percent to 7.41 percent, respectively, for traditional advances (excludes COVID-19 Relief Advances described below). Table 4.1 presents advances summarized by redemption term as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands). Carrying amounts exclude accrued interest receivable of $15,186,000 and $45,637,000 as of September 30, 2020 and December 31, 2019, respectively.

Table 4.1

	09/30/2020				12/31/2019
Redemption Term	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	$	13,588,982	0.45	%	$	13,188,118	1.88	%
Due after one year through two years	1,994,896		1.23		10,448,433		1.96
Due after two years through three years	1,076,587		1.68		1,254,153		2.27
Due after three years through four years	1,256,388		1.77		1,067,662		2.42
Due after four years through five years	1,182,903		1.40		1,208,854		2.22
Thereafter	3,207,076		1.95		3,004,835		2.25
Total par value	22,306,832		0.92	%	30,172,055		1.99	%
Discounts	(9,818)				(1,807)
Hedging adjustments	319,238				71,067
TOTAL	$	22,616,252			$	30,241,315

During the three months ended June 30, 2020, FHLBank issued subsidized COVID-19 Relief Advances to help members serve their customers affected by the COVID-19 pandemic. The zero-cost advances have a term of 6 months and the low-cost advances have terms between 6 and 24 months. As of September 30, 2020, FHLBank had $517,351,000 and $501,890,000 of zero-cost and low-cost advances outstanding, respectively. Discounts were initially recorded on these advances and are accreted using the interest method over the life of the advances resulting in the recognition of periodic interest income on the advances at the effective interest rate (i.e., yield recorded equals a prevailing rate) in net interest income. As of September 30, 2020, the total unaccreted discount balance was $2,455,000.

FHLBank’s outstanding advances include advances that contain call options that may be exercised with or without prepayment fees at the borrower’s discretion on specific dates (call dates) before the stated advance maturities (callable advances). In exchange for receiving the right to call the advance on a predetermined call schedule, the borrower may pay a higher fixed rate for the advance relative to an equivalent maturity, non-callable, fixed rate advance. The borrower normally exercises its call options on these advances when interest rates decline (fixed rate advances) or spreads change (adjustable rate advances).

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Convertible advances allow FHLBank to convert an advance from one interest payment term structure to another. When issuing convertible advances, FHLBank purchases put options from a member that allow FHLBank to convert the fixed rate advance to a variable rate advance at the current market rate or another structure after an agreed-upon lockout period. A convertible advance carries a lower interest rate than a comparable-maturity fixed rate advance without the conversion feature.

Table 4.2 presents advances summarized by redemption term or next call date (for callable advances) and by redemption term or next conversion date (for convertible advances) as of September 30, 2020 and December 31, 2019 (in thousands):

Table 4.2

	Redemption Term or Next Call Date				Redemption Term or Next Conversion Date
Redemption Term	09/30/2020		12/31/2019		09/30/2020		12/31/2019
Due in one year or less	$	15,561,420	$	24,271,238	$	14,625,732	$	14,053,068
Due after one year through two years	1,383,709		1,133,077		2,263,896		10,637,833
Due after two years through three years	822,894		728,429		1,305,837		1,524,153
Due after three years through four years	795,261		764,990		1,338,888		1,215,412
Due after four years through five years	779,961		686,594		1,214,303		1,304,254
Thereafter	2,963,587		2,587,727		1,558,176		1,437,335
TOTAL PAR VALUE	$	22,306,832	$	30,172,055	$	22,306,832	$	30,172,055

Interest Rate Payment Terms: Table 4.3 details additional interest rate payment terms for advances as of September 30, 2020 and December 31, 2019 (in thousands):

Table 4.3

Redemption Term	09/30/2020		12/31/2019
Fixed rate:
Due in one year or less	$	9,999,404	$	2,691,528
Due after one year	6,671,538		5,912,124
Total fixed rate	16,670,942		8,603,652
Variable rate:
Due in one year or less	3,589,578		10,496,590
Due after one year	2,046,312		11,071,813
Total variable rate	5,635,890		21,568,403
TOTAL PAR VALUE	$	22,306,832	$	30,172,055

Credit Risk Exposure and Security Terms: FHLBank's advances are primarily made to member financial institutions, including commercial banks and insurance companies. FHLBank manages its credit exposure to advances through an integrated approach that includes establishing a credit limit for each borrower. This approach includes an ongoing review of each borrower's financial condition, in conjunction with FHLBank's collateral and lending policies to limit risk of loss, while balancing borrowers' needs for a reliable source of funding.

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In addition, FHLBank lends to eligible borrowers in accordance with federal law and FHFA regulations. Specifically, FHLBank is required to obtain sufficient collateral to fully secure credit products up to the counterparty’s total credit limit. Collateral eligible to secure new or renewed advances includes:

▪One-to-four family and multifamily mortgage loans (delinquent for no more than 90 days) and securities representing such mortgages;

▪Loans and securities issued, insured, or guaranteed by the U.S. government or any U.S. government agency (for example, MBS issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae);

▪Cash or deposits in FHLBank;

▪Certain other collateral that is real estate-related, provided that the collateral has a readily ascertainable value and that FHLBank can perfect a security interest in it; and

▪Certain qualifying securities representing undivided equity interests in eligible advance collateral.

During the second quarter of 2020, FHLBank was given the regulatory flexibility via a Supervisory Letter from the FHFA to allow members to pledge Small Business Administration (SBA) Paycheck Protection Program (PPP) loans as eligible collateral, with the following restrictions: (1) maximum aggregate lending value for PPP loans is limited to the lesser of $5 billion or 20 percent of the institution’s total lending value on all collateral pledged; and (2) the institution must maintain a CAMELS composite rating of “3” or better. CAMELS is a rating system for banks utilized by federal banking supervisors that represents an evaluation of a bank's financial condition and compliance with laws and regulatory policies. If an institution’s CAMELS composite rating downgrades to “4” or “5”, the institution must substitute all PPP loans being utilized to support outstanding credit obligations with other eligible collateral within five business days. As of September 30, 2020, the amount of PPP loans pledged to FHLBank as collateral was insignificant.

Residential mortgage loans are the principal form of collateral for advances. The estimated value of the collateral required to secure each member's credit products is calculated by applying collateral discounts, or haircuts, to the market value or unpaid principal balance of the collateral, as applicable. In addition, community financial institutions are eligible to use expanded statutory collateral provisions for small business, agriculture loans, and community development loans. FHLBank capital stock owned by each borrower is also pledged as collateral. Collateral arrangements may vary depending upon borrower credit quality, financial condition, and performance; borrowing capacity; and overall credit exposure to the borrower. FHLBank can also require additional or substitute collateral to protect its security interest. FHLBanks also have policies and procedures for validating the reasonableness of their collateral valuations. In addition, collateral verifications and on-site reviews are performed by FHLBank based on the risk profile of the borrower. FHLBank management believes that these policies effectively manage credit risk from advances.

The FHFA has provided non-objection relief via a Supervisory Letter that permits FHLBank to offer its members increased collateral flexibility through the acceptance of various types of forbearance plans and loan modification agreements of the Temporary COVID-19 Underwriting Guidelines in the first quarter of 2020. FHLBank management and the board of directors has approved as collateral forbearance plans and loan modification agreements for the following loan categories: conventional mortgages on one-to-four family residential real property, mortgages on multifamily residential real property, agricultural real estate, commercial real estate, second mortgages on residential one-to-four family property, home equity lines of credit, operating loans, and equipment loans. In addition, the temporary guidelines allow flexibility to accept loans as collateral that have modifications or forbearance plans executed via electronic signature in compliance with the Electronic Signatures in Global and National Commerce Act (i.e., E-SIGN). At the of the third quarter of 2020, the Temporary COVID-19 Underwriting Guidelines continue to be available for use by members.

FHLBank either allows a borrower to retain physical possession of the collateral assigned to it, or requires the borrower to specifically assign or place physical possession of the collateral with FHLBank or its safekeeping agent. FHLBank perfects its security interest in all pledged collateral. The Federal Home Loan Bank Act of 1932, as amended, (Bank Act) states that any security interest granted to an FHLBank by a borrower will have priority over the claims or rights of any other party, except for claims or rights of a third party that would be entitled to priority under otherwise applicable law and are held by a bona fide purchaser for value or by a secured party holding a prior perfected security interest.

Using a risk-based approach and taking into consideration each borrower's financial strength, FHLBank considers the types and level of collateral to be the primary indicator of credit quality on advances. As of September 30, 2020 and December 31, 2019, FHLBank had rights to collateral on a borrower-by-borrower basis with an estimated value greater than its outstanding advances.

FHLBank continues to evaluate and make changes to its collateral guidelines, as necessary, based on current market conditions. As of September 30, 2020 and December 31, 2019, no advances were past due, on non-accrual status, or considered impaired. In addition, there were no troubled debt restructurings related to advances during the three and nine months ended September 30, 2020 and 2019.

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Based on the collateral held as security, FHLBank's credit extension and collateral policies, and repayment history on advances, no losses are expected on advances as of September 30, 2020, and therefore no allowance for credit losses on advances was recorded. For the same reasons, FHLBank did not record any allowance for credit losses on advances as of December 31, 2019.

NOTE 5 – MORTGAGE LOANS

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

Mortgage Loans Held for Portfolio: Table 5.1 presents information as of September 30, 2020 and December 31, 2019 on mortgage loans held for portfolio (in thousands). Mortgage loans held for portfolio excludes accrued interest receivable of $48,406,000 and $52,358,000 as of September 30, 2020 and December 31, 2019, respectively.

Table 5.1

	09/30/2020		12/31/2019
Real estate:
Fixed rate, medium-term1, single-family mortgages	$	1,488,732	$	1,347,385
Fixed rate, long-term, single-family mortgages	8,474,420		9,128,268
Total unpaid principal balance	9,963,152		10,475,653
Premiums	143,477		155,793
Discounts	(2,126)		(2,503)
Deferred loan costs, net	146		184
Other deferred fees	(30)		(38)
Hedging adjustments	(3,227)		4,905
Total before Allowance for Credit Losses on Mortgage Loans	10,101,392		10,633,994
Allowance for Credit Losses on Mortgage Loans2	(7,926)		(985)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	10,093,466	$	10,633,009

1    Medium-term defined as a term of 15 years or less at origination.

2    Effective January 1, 2020, new accounting guidance was adopted relating to the measurement of credit losses on financial instruments and resulted in a cumulative effect adjustment of $6,123,000 (see Table 5.5).

Table 5.2 presents information as of September 30, 2020 and December 31, 2019 on the outstanding unpaid principal balance of mortgage loans held for portfolio (in thousands):

Table 5.2

	09/30/2020		12/31/2019
Conventional loans	$	9,405,054	$	9,849,542
Government-guaranteed or -insured loans	558,098		626,111
TOTAL UNPAID PRINCIPAL BALANCE	$	9,963,152	$	10,475,653

Credit Enhancements: FHLBank's allowance for credit losses considers the credit enhancements associated with conventional mortgage loans under the MPF Program. Credit enhancements may include primary mortgage insurance, supplemental mortgage insurance and the credit enhancement amount plus any recoverable performance-based credit enhancement fees (for certain MPF loans). Potential recoveries from credit enhancements for conventional loans are evaluated at the individual master commitment level to determine the credit enhancements available to recover losses on loans under each individual master commitment.

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Conventional MPF loans held for portfolio are required to be credit enhanced as determined through the use of a validated model so that the risk of loss is limited to the losses within FHLBank's risk tolerance. FHLBank and its PFIs share the risk of credit losses on conventional loans, by structuring potential losses into layers with respect to each master commitment. After considering the borrower’s equity and any primary mortgage insurance, credit losses on mortgage loans in a master commitment are then absorbed by FHLBank’s First Loss Account. If applicable to the MPF product, FHLBank will withhold a PFI’s scheduled performance-based credit enhancement fee in order to reimburse FHLBank for any losses allocated to the First Loss Account. If the First Loss Account is exhausted, the credit losses are then absorbed by the PFI up to an agreed upon credit enhancement amount. Thereafter, any remaining credit losses are absorbed by FHLBank.

Payment Status of Mortgage Loans: Payment status is the key credit quality indicator for conventional mortgage loans and allows FHLBank to monitor the migration of past due loans. Past due loans are those where the borrower has failed to make timely payments of principal and/or interest in accordance with the terms of the loan. Other delinquency statistics include non-accrual loans and loans in process of foreclosure.

Table 5.3 presents the payment status based on amortized cost as well as other delinquency statistics for FHLBank’s mortgage loans as of September 30, 2020 (dollar amounts in thousands):

Table 5.3

	09/30/2020
	Conventional Loans															Government Loans			Total
	Origination Year												Subtotal
	Prior to 2016		2016		2017		2018		2019		2020
Amortized Cost:1
Past due 30-59 days delinquent	$	16,140	$	2,749	$	8,132	$	7,949	$	19,111	$	3,470	$	57,551		$	11,657		$	69,208
Past due 60-89 days delinquent	9,267		1,812		2,924		3,265		9,102		1,878		28,248			5,969			34,217
Past due 90 days or more delinquent	24,992		4,012		14,965		22,618		49,602		4,488		120,677			22,928			143,605
Total past due	50,399		8,573		26,021		33,832		77,815		9,836		206,476			40,554			247,030
Total current loans	2,179,738		713,694		795,307		815,417		2,754,390		2,070,784		9,329,330			525,032			9,854,362
Total mortgage loans	$	2,230,137	$	722,267	$	821,328	$	849,249	$	2,832,205	$	2,080,620	$	9,535,806		$	565,586		$	10,101,392
Other delinquency statistics:
In process of foreclosure2													$	162,584		$	9,341		$	171,925
Serious delinquency rate3													2.1		%	4.7		%	2.3		%
Past due 90 days or more and still accruing interest													$	—		$	22,928		$	22,928
Loans on non-accrual status4													$	129,118		$	—		$	129,118

1    Excludes accrued interest receivable.

2    Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.

3    Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total amortized cost for the portfolio class.

4    Loans on non-accrual status include $1,251,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

FHLBank's servicers may grant a forbearance period to borrowers who have requested forbearance based on COVID-19-related difficulties regardless of the status of the loan at the time of the request. FHLBank continues to apply its accounting policy for past due loans and charge-offs to loans during the forbearance period whether it be formal or informal. The accrual status for a loan under forbearance will be driven by the past due status of the loan without consideration of the forbearance as the legal terms of the contractual arrangement have not been modified. As of September 30, 2020, there was $132,932,000, or 1.4 percent, of unpaid principal balances of conventional loans in a forbearance plan as a result of COVID-19, representing $5,118,000, $13,665,000, $17,744,000, and $96,405,000 with payment status of current, 30 to 59 days past due, 60 to 89 days past due, and greater than 90 days past due, respectively.

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Table 5.4 presents the payment status based on recorded investment as well as other delinquency statistics for FHLBank’s mortgage loans as of December 31, 2019 (dollar amounts in thousands):

Table 5.4

	12/31/2019
	Conventional Loans			Government Loans			Total
Recorded investment:1
Past due 30-59 days delinquent	$	59,226		$	15,515		$	74,741
Past due 60-89 days delinquent	7,561			6,128			13,689
Past due 90 days or more delinquent	11,813			8,778			20,591
Total past due	78,600			30,421			109,021
Total current loans	9,969,930			607,400			10,577,330
Total recorded investment	$	10,048,530		$	637,821		$	10,686,351
Other delinquency statistics:
In process of foreclosure2	$	3,352		$	2,730		$	6,082
Serious delinquency rate3	0.1		%	1.4		%	0.1		%
Past due 90 days or more and still accruing interest	$	—		$	8,778		$	8,778
Loans on non-accrual status4	$	14,923		$	—		$	14,923

1    Includes accrued interest receivable.

2    Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.

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

4    Loans on non-accrual status include $1,219,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

Allowance for Credit Losses:

Conventional Mortgage Loans: Conventional loans are evaluated collectively when similar risk characteristics exists. Conventional loans that do not share risk characteristics with other pools are evaluated for expected credit losses on an individual basis. FHLBank determines its allowances for credit losses on conventional loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions. FHLBank uses a model that discounts projected cash flows to estimate expected credit losses over the life of the loans. This model relies on a number of inputs, such as both current and forecasted property values and interest rates as well as historical borrower behavior experience. FHLBank also incorporates associated credit enhancements, as available, to determine its estimate of expected credit losses.

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

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FHLBank established an allowance for credit losses on its conventional mortgage loans held for portfolio. Table 5.5 presents a roll-forward of the allowance for credit losses on mortgage loans for the three and nine months ended September 30, 2020 and 2019.

Table 5.5

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Balance, beginning of the period	$	7,790	$	858	$	985	$	812
Adjustment for cumulative effect of accounting change	—		—		6,123		—
Net (charge-offs) recoveries	20		(346)		101		(416)
Provision (reversal) for credit losses	116		393		717		509
Balance, end of the period	$	7,926	$	905	$	7,926	$	905

Government-Guaranteed or -Insured Mortgage Loans: FHLBank invests in fixed-rate mortgage loans that are insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, the Rural Housing Service of the Department of Agriculture, and/or the Department of Housing and Urban Development. The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable guarantee or insurance with respect to defaulted government-guaranteed or -insured mortgage loans. Any losses on these loans that are not recovered from the issuer or the guarantor are absorbed by the servicer. Therefore, FHLBank only has credit risk for these loans if the servicer fails to pay for losses not covered by the guarantee or insurance. Based on FHLBank's assessment of its servicers and the collateral backing the loans, the risk of loss was immaterial, consequently, no allowance for credit losses for government-guaranteed or -insured mortgage loans was recorded as of September 30, 2020 or December 31, 2019. Furthermore, none of these mortgage loans has been placed on non-accrual status because of the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.

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NOTE 6 – DERIVATIVES AND HEDGING ACTIVITIES

Table 6.1 presents outstanding notional amounts and fair values of the derivatives outstanding by type of derivative and by hedge designation as of September 30, 2020 and December 31, 2019 (in thousands). Total derivative assets and liabilities include the effect of netting adjustments and cash collateral.

Table 6.1

	09/30/2020						12/31/2019
	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	15,913,289	$	20,791	$	295,563	$	16,448,512	$	23,462	$	80,398
Total derivatives designated as hedging relationships	15,913,289		20,791		295,563		16,448,512		23,462		80,398
Derivatives not designated as hedging instruments:
Interest rate swaps	2,929,164		191		75,020		3,099,622		736		26,285
Interest rate caps/floors	602,500		87		—		1,130,000		117		—
Mortgage delivery commitments	105,003		84		80		221,800		495		25
Total derivatives not designated as hedging instruments	3,636,667		362		75,100		4,451,422		1,348		26,310
TOTAL	$	19,549,956	21,153		370,663		$	20,899,934	24,810		106,708
Netting adjustments and cash collateral1			141,348		(370,490)				129,994		(106,506)
DERIVATIVE ASSETS AND LIABILITIES			$	162,501	$	173			$	154,804	$	202

1    Amounts represent the application of the netting requirements that allow FHLBank to settle positive and negative positions and cash collateral, including accrued interest, held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was $512,338,000 and $236,700,000 as of September 30, 2020 and December 31, 2019, respectively. Cash collateral received was $500,000 and $200,000 as of September 30, 2020 and December 31, 2019, respectively.

FHLBank carries derivative instruments at fair value on its Statements of Condition. Changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges are recorded in net interest income in the same line as the earnings effect of the hedged item.

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Gains (losses) on fair value hedges include unrealized changes in fair value as well as net interest settlements. For the three months ended September 30, 2020 and 2019, FHLBank recorded net gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on FHLBank’s net interest income as presented in Table 6.2 (in thousands):

Table 6.2

	Three Months Ended
	09/30/2020
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	38,848	$	9,588	$	5,674	$	67,142
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	10,848	$	9,424	$	(197)	$	(1,509)
Hedged items2	(28,115)		(40,444)		1,321		12,203
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(17,267)	$	(31,020)	$	1,124	$	10,694

	09/30/2019
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	186,431	$	47,811	$	133,680	$	185,096
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	(39,873)	$	(61,468)	$	(4)	$	3,915
Hedged items2	43,355		75,743		3		(5,061)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	3,482	$	14,275	$	(1)	$	(1,146)

1    Includes net interest settlements in interest income/expense.

2    Includes amortization/accretion on closed fair value relationships in interest income.

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For the nine months ended September 30, 2020 and 2019, FHLBank recorded net gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on FHLBank’s net interest income as presented in Table 6.3 (in thousands):

Table 6.3

	Nine Months Ended
	09/30/2020
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	230,000	$	43,753	$	120,385	$	310,628
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	(280,875)	$	(386,669)	$	18,350	$	45,856
Hedged items2	248,445		308,189		(112)		(16,663)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(32,430)	$	(78,480)	$	18,238	$	29,193

	9/30/2019
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	563,602	$	78,694	$	433,473	$	519,967
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	(144,016)	$	(205,705)	$	21	$	30,968
Hedged items2	159,254		206,340		(12)		(39,427)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	15,238	$	635	$	9	$	(8,459)

1    Includes net interest settlements in interest income/expense.

2    Includes amortization/accretion on closed fair value relationships in interest income.

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Table 6.4 presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items as of September 30, 2020 and December 31, 2019 (in thousands):

Table 6.4

09/30/2020
Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances	$	6,021,287	$	315,792	$	3,446	$	319,238
Available-for-sale securities	7,292,062		385,013		—		385,013
Consolidated obligation discount notes	(174,748)		39		—		39
Consolidated obligation bonds	(3,310,191)		(43,053)		—		(43,053)
12/31/2019
Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances	$	4,951,445	$	69,643	$	1,424	$	71,067
Available-for-sale securities	7,155,712		79,141		—		79,141
Consolidated obligation bonds	(3,270,635)		(26,389)		—		(26,389)

1    Includes only the portion of carrying value representing the hedged items in fair value hedging relationships. For available-for-sale securities, amortized cost is considered to be carrying value (i.e., the fair value adjustment recorded in accumulated OCI (AOCI) is excluded).

2    Included in amortized cost of the hedged asset/liability.

Table 6.5 provides information regarding net gains (losses) on derivatives and hedging activities recorded in non-interest income (in thousands).

Table 6.5

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps	$	15,842	$	(19,566)	$	(97,218)	$	(80,593)
Interest rate caps/floors	(17)		(494)		(30)		(874)
Net interest settlements	(14,222)		(691)		(32,338)		(1,238)
Mortgage delivery commitments	423		365		(5,995)		3,836
Consolidated obligation discount note commitments	—		—		—		(70)
NET GAINS (LOSSES) ON DERIVATIVES AND HEDGING ACTIVITIES	$	2,026	$	(20,386)	$	(135,581)	$	(78,939)

Based on credit analyses and collateral requirements, FHLBank management does not anticipate any credit losses on its derivative agreements. The maximum credit risk applicable to a single counterparty was $500,000 and $211,000 as of September 30, 2020 and December 31, 2019, respectively. The counterparty was different for each period.

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

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FHLBank utilizes two Derivative Clearing Organizations (Clearinghouse) for all cleared derivative transactions, LCH Limited and CME Clearing. At both Clearinghouses, initial margin is considered cash collateral. For cleared derivatives, the Clearinghouse determines initial margin requirements and generally, credit ratings are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including but not limited to credit rating downgrades. FHLBank was not required to post additional initial margin by its clearing agents as of September 30, 2020 and December 31, 2019.

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

NOTE 7 – DEPOSITS

FHLBank offers demand, overnight and short-term deposit programs to its members and to other qualifying non-members. Table 7.1 details the types of deposits held by FHLBank as of September 30, 2020 and December 31, 2019 (in thousands):

Table 7.1

	09/30/2020		12/31/2019
Interest-bearing:
Demand	$	294,447	$	383,197
Overnight	463,200		280,300
Total interest-bearing	757,647		663,497
Non-interest-bearing:
Other	258,669		127,143
Total non-interest-bearing	258,669		127,143
TOTAL DEPOSITS	$	1,016,316	$	790,640

NOTE 8 – CONSOLIDATED OBLIGATIONS

Consolidated Obligation Bonds: Table 8.1 presents FHLBank’s participation in consolidated obligation bonds outstanding as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

Table 8.1

	09/30/2020				12/31/2019
Year of Contractual Maturity	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	$	27,056,200	0.32	%	$	15,991,800	1.79	%
Due after one year through two years	1,482,650		1.70		6,318,350		1.90
Due after two years through three years	1,306,650		1.98		1,375,000		2.11
Due after three years through four years	822,650		1.95		1,285,900		2.39
Due after four years through five years	971,200		1.28		1,223,350		2.40
Thereafter	5,587,800		1.66		5,776,300		2.78
Total par value	37,227,150		0.70	%	31,970,700		2.05	%
Premiums	41,974				34,789
Discounts	(3,572)				(3,357)
Concession fees	(14,436)				(15,207)
Hedging adjustments	43,053				26,389
TOTAL	$	37,294,169			$	32,013,314

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FHLBank issues optional principal redemption bonds (callable bonds) that may be redeemed in whole or in part at the discretion of FHLBank on predetermined call dates in accordance with terms of bond offerings. FHLBank’s participation in consolidated obligation bonds outstanding as of September 30, 2020 and December 31, 2019 includes callable bonds totaling $6,465,000,000 and $8,891,500,000, respectively. FHLBank uses the unswapped callable bonds for financing its callable fixed rate advances (Note 4), MBS (Note 3) and mortgage loans (Note 5). Contemporaneous with a portion of its fixed rate callable bond issuances, FHLBank also enters into interest rate swap agreements (in which FHLBank generally pays a variable rate and receives a fixed rate) with call features that mirror the options in the callable bonds (a sold callable swap). The combined sold callable swap and callable debt transaction allows FHLBank to obtain attractively priced variable rate financing. Table 8.2 summarizes FHLBank’s participation in consolidated obligation bonds outstanding by year of maturity, or by the next call date for callable bonds as of September 30, 2020 and December 31, 2019 (in thousands):

Table 8.2

Year of Maturity or Next Call Date	09/30/2020		12/31/2019
Due in one year or less	$	33,521,200	$	24,583,300
Due after one year through two years	1,357,650		5,148,350
Due after two years through three years	878,150		615,000
Due after three years through four years	502,650		682,400
Due after four years through five years	414,200		356,850
Thereafter	553,300		584,800
TOTAL PAR VALUE	$	37,227,150	$	31,970,700

Table 8.3 summarizes interest rate payment terms for consolidated obligation bonds as of September 30, 2020 and December 31, 2019 (in thousands):

Table 8.3

	09/30/2020		12/31/2019
Simple variable rate	$	23,504,000	$	16,017,000
Fixed rate	13,723,150		15,573,700
Variable rate with cap	—		220,000
Step	—		110,000
Fixed to variable rate	—		50,000
TOTAL PAR VALUE	$	37,227,150	$	31,970,700

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

Table 8.4

	Book Value		Par Value		Weighted Average Interest Rate1
September 30, 2020	$	11,936,214	$	11,937,211	0.08	%
December 31, 2019	$	27,447,911	$	27,510,042	1.54	%

1    Represents yield to maturity excluding concession fees.

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NOTE 9 – ASSETS AND LIABILITIES SUBJECT TO OFFSETTING

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

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

Tables 9.1 and 9.2 present the fair value of financial assets, including the related collateral received from or pledged to clearing agents or counterparties, based on the terms of FHLBank’s master netting arrangements or similar agreements as of September 30, 2020 and December 31, 2019 (in thousands):

Table 9.1

09/30/2020
Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative assets:
Uncleared derivatives	$	19,682	$	(15,472)	$	4,210	$	(84)	$	4,126
Cleared derivatives	1,471		156,820		158,291		—		158,291
Total derivative assets	21,153		141,348		162,501		(84)		162,417
Securities purchased under agreements to resell	4,600,000		—		4,600,000		(4,600,000)		—
TOTAL	$	4,621,153	$	141,348	$	4,762,501	$	(4,600,084)	$	162,417

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Table 9.2

12/31/2019
Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative assets:
Uncleared derivatives	$	21,749	$	(14,424)	$	7,325	$	(495)	$	6,830
Cleared derivatives	3,061		144,418		147,479		—		147,479
Total derivative assets	24,810		129,994		154,804		(495)		154,309
Securities purchased under agreements to resell	4,750,000		—		4,750,000		(4,750,000)		—
TOTAL	$	4,774,810	$	129,994	$	4,904,804	$	(4,750,495)	$	154,309

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

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Tables 9.3 and 9.4 present the fair value of financial liabilities, including the related collateral received from or pledged to counterparties, based on the terms of FHLBank’s master netting arrangements or similar agreements as of September 30, 2020 and December 31, 2019 (in thousands):

Table 9.3

09/30/2020
Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative liabilities:
Uncleared derivatives	$	367,678	$	(367,505)	$	173	$	(80)	$	93
Cleared derivatives	2,985		(2,985)		—		—		—
Total derivative liabilities	370,663		(370,490)		173		(80)		93
TOTAL	$	370,663	$	(370,490)	$	173	$	(80)	$	93

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Table 9.4

12/31/2019
Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative liabilities:
Uncleared derivatives	$	105,468	$	(105,266)	$	202	$	(25)	$	177
Cleared derivatives	1,240		(1,240)		—		—		—
Total derivative liabilities	106,708		(106,506)		202		(25)		177
TOTAL	$	106,708	$	(106,506)	$	202	$	(25)	$	177

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

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NOTE 10 – CAPITAL

Capital Requirements: FHLBank is subject to three capital requirements under the provisions of the Gramm-Leach-Bliley Act (GLB Act) and the FHFA's capital structure regulation. Regulatory capital does not include AOCI but does include mandatorily redeemable capital stock.

•Risk-based capital. FHLBank must maintain at all times permanent capital in an amount at least equal to the sum of its credit risk, market risk and operations risk capital requirements. The risk-based capital requirements are all calculated in accordance with the rules and regulations of the FHFA. Only permanent capital, defined as Class B Common Stock and retained earnings, can be used by FHLBank to satisfy its risk-based capital requirement. The FHFA may require FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined, but the FHFA has not placed any such requirement on FHLBank to date.

•Total regulatory capital. The GLB Act requires FHLBank to maintain at all times at least a 4.0 percent total capital-to-asset ratio. Total regulatory capital is defined as the sum of permanent capital, Class A Common Stock, any general loss allowance, if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the FHFA as available to absorb losses.

•Leverage capital. FHLBank is required to maintain at all times a leverage capital-to-assets ratio of at least 5.0 percent, with the leverage capital ratio defined as the sum of permanent capital weighted 1.5 times and non-permanent capital (currently only Class A Common Stock) weighted 1.0 times, divided by total assets.

Table 10.1 illustrates that FHLBank was in compliance with its regulatory capital requirements as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

Table 10.1

	09/30/2020						12/31/2019
	Required			Actual			Required			Actual
Regulatory capital requirements:
Risk-based capital	$	206,942		$	2,216,737		$	486,650		$	2,319,531
Total regulatory capital-to-asset ratio	4.0		%	4.9		%	4.0		%	4.4		%
Total regulatory capital	$	2,120,455		$	2,605,221		$	2,531,066		$	2,768,680
Leverage capital ratio	5.0		%	7.0		%	5.0		%	6.2		%
Leverage capital	$	2,650,569		$	3,713,590		$	3,163,833		$	3,928,446

Mandatorily Redeemable Capital Stock: FHLBank is a cooperative whose members own most of FHLBank’s capital stock. Former members (including certain non-members that own FHLBank capital stock as a result of merger or acquisition, relocation, charter termination, or involuntary termination of an FHLBank member) own the remaining capital stock to support business transactions still carried on FHLBank's Statements of Condition. Shares cannot be purchased or sold except between FHLBank and its members at a price equal to the $100 per share par value. If a member cancels its written notice of redemption or notice of withdrawal, FHLBank will reclassify mandatorily redeemable capital stock from a liability to equity. After the reclassification, dividends on the capital stock would no longer be classified as interest expense.

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Table 10.2 presents a roll-forward of mandatorily redeemable capital stock for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Table 10.2

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Balance, beginning of period	$	2,308	$	2,750	$	2,415	$	3,597
Capital stock subject to mandatory redemption reclassified from equity during the period	620,561		159,775		1,627,899		218,411
Capital stock redemption cancellations reclassified to equity during the period	—		—		(100,647)		—
Redemption or repurchase of mandatorily redeemable capital stock during the period	(620,967)		(160,078)		(1,527,802)		(219,642)
Stock dividend classified as mandatorily redeemable capital stock during the period	12		30		49		111
Balance, end of period	$	1,914	$	2,477	$	1,914	$	2,477

Table 10.3 shows the amount of mandatorily redeemable capital stock by contractual year of redemption as of September 30, 2020 and December 31, 2019 (in thousands). The year of redemption in Table 10.3 is the end of the redemption period in accordance with FHLBank’s capital plan. FHLBank is not required to redeem or repurchase membership stock until six months (for Class A Common Stock) or five years (for Class B Common Stock) after FHLBank receives notice for withdrawal from the member. Additionally, FHLBank is not required to redeem or repurchase activity-based stock until any activity-based stock becomes excess stock as a result of an activity no longer remaining outstanding. However, FHLBank intends to repurchase the excess activity-based stock of non-members to the extent that it can do so and still meet its regulatory capital requirements.

Table 10.3

Contractual Year of Repurchase	09/30/2020		12/31/2019
Year 1	$	—	$	—
Year 2	636		1
Year 3	—		869
Year 4	—		—
Year 5	—		—
Past contractual redemption date due to remaining activity1	1,278		1,545
TOTAL	$	1,914	$	2,415

1    Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because there is activity outstanding to which the mandatorily redeemable capital stock relates.

Excess Capital Stock: Excess capital stock is defined as the amount of stock held by a member (or former member) in excess of that institution’s minimum stock purchase requirement. FHFA rules limit the ability of FHLBank to create excess member stock under certain circumstances. For example, FHLBank may not pay dividends in the form of capital stock or issue new excess stock to members if FHLBank’s excess stock exceeds one percent of its total assets or if the issuance of excess stock would cause FHLBank’s excess stock to exceed one percent of its total assets. As of September 30, 2020, FHLBank’s excess stock was less than one percent of total assets.

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

41

Partial Recovery of Prior Capital Distribution to Financing Corporation. The Competitive Equality Banking Act of 1987 was enacted in August 1987, which, among other things, provided for the recapitalization of the Federal Savings and Loan Insurance Corporation through a newly-chartered entity, the Financing Corporation. The capitalization of the Financing Corporation was provided by capital distributions from the FHLBanks to the Financing Corporation in exchange for Financing Corporation nonvoting capital stock. Capital distributions were made by the FHLBanks in 1987, 1988 and 1989 that aggregated to $680,000,000. Upon passage of Financial Institutions Reform, Recovery and Enforcement Act of 1989, the FHLBanks’ previous investment in capital stock of the Financing Corporation was determined to be non-redeemable and the FHLBanks charged-off their prior capital distributions to the Financing Corporation directly against retained earnings. Upon the dissolution of the Financing Corporation in June 2020, the Financing Corporation determined that excess funds aggregating to $200,031,000 were available for distribution to its stockholders, the FHLBanks. Specifically, FHLBank Topeka’s partial recovery of prior capital distribution was $10,543,000, which was determined based on its share of the $680,000,000 originally contributed. The FHLBanks treated the receipt of these funds as a return of the FHLBanks’ investment in Financing Corporation capital stock, and therefore as a partial recovery of the prior capital distributions made by the FHLBanks to the Financing Corporation in 1987, 1988, and 1989. These funds have been credited to unrestricted retained earnings.

NOTE 11 – ACCUMULATED OTHER COMPREHENSIVE INCOME

Table 11.1 summarizes the changes in AOCI for the three months ended September 30, 2020 and 2019 (in thousands):

Table 11.1

	Three Months Ended
	Net Unrealized Gains (Losses) on Available-for-sale Securities		Defined Benefit Pension Plan		Total AOCI
Balance at June 30, 2019	$	35,143	$	(3,230)	$	31,913
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	(17,324)				(17,324)
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan1			95		95
Net current period other comprehensive income (loss)	(17,324)		95		(17,229)
Balance at September 30, 2019	$	17,819	$	(3,135)	$	14,684
Balance at June 30, 2020	$	(31,746)	$	(1,948)	$	(33,694)
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	30,295				30,295
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan1			28		28
Net current period other comprehensive income (loss)	30,295		28		30,323
Balance at September 30, 2020	$	(1,451)	$	(1,920)	$	(3,371)

1    Recorded in “Other” non-interest expense on the Statements of Income. Amount represents a debit (increase to other expenses).

42

Table 11.2 summarizes the changes in AOCI for the nine months ended September 30, 2020 and 2019 (in thousands):

Table 11.2

	Nine Months Ended
	Net Unrealized Gains (Losses) on Available-for-sale Securities		Defined Benefit Pension Plan		Total AOCI
Balance at December 31, 2018	$	19,068	$	(3,375)	$	15,693
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	(1,249)				(1,249)
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan1			240		240
Net current period other comprehensive income (loss)	(1,249)		240		(1,009)
Balance at September 30, 2019	$	17,819	$	(3,135)	$	14,684
Balance at December 31, 2019	$	26,788	$	(2,002)	$	24,786
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	(26,716)				(26,716)
Reclassifications from other comprehensive income (loss) to net income:
Realized net (gains) losses included in net income2	(1,523)				(1,523)
Amortization of net losses - defined benefit pension plan1			82		82
Net current period other comprehensive income (loss)	(28,239)		82		(28,157)
Balance at September 30, 2020	$	(1,451)	$	(1,920)	$	(3,371)

1    Recorded in “Other” non-interest expense on the Statements of Income. Amount represents a debit (increase to other expenses).

2    Recorded in “Net gains (losses) on sale of available-for-sale securities” non-interest income on the Statements of Income. Amount represents a credit (increase to other income (loss)).

NOTE 12 – FAIR VALUES

The fair value amounts recorded on the Statements of Condition and presented in the note disclosures have been determined by FHLBank using available market and other pertinent information and reflect FHLBank’s best judgment of appropriate valuation methods. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). Although FHLBank uses its best judgment in estimating the fair value of its financial instruments, there are inherent limitations in any valuation technique. Therefore, the fair values may not be indicative of the amounts that would have been realized in market transactions as of September 30, 2020 and December 31, 2019. Additionally, these values do not represent an estimate of the overall market value of FHLBank as a going concern, which would take into account future business opportunities and the net profitability of assets and liabilities.

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

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

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

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

•Level 2 Inputs – Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets and liabilities in active markets; (2) quoted prices for similar assets and liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals and implied volatilities); and (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•Level 3 Inputs – Unobservable inputs for the asset or liability.

FHLBank reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. There were no transfers of assets or liabilities between fair value levels during the three and nine months ended September 30, 2020 and 2019.

Tables 12.1 and 12.2 present the carrying value, fair value and fair value hierarchy of financial assets and liabilities as of September 30, 2020 and December 31, 2019. FHLBank records trading securities, available-for-sale securities, derivative assets, and derivative liabilities at fair value on a recurring basis, and on occasion certain mortgage loans held for portfolio and certain other assets at fair value on a nonrecurring basis. FHLBank measures all other financial assets and liabilities at amortized cost. Further details about the financial assets and liabilities held at fair value on either a recurring or non-recurring basis are presented in Tables 12.3 and 12.4.

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The carrying value, fair value and fair value hierarchy of FHLBank’s financial assets and liabilities as of September 30, 2020 and December 31, 2019 are summarized in Tables 12.1 and 12.2 (in thousands):

Table 12.1

	09/30/2020
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Assets:
Cash and due from banks	$	22,704	$	22,704	$	22,704	$	—	$	—	$	—
Interest-bearing deposits	499,662		499,662		—		499,662		—		—
Securities purchased under agreements to resell	4,600,000		4,600,000		—		4,600,000		—		—
Federal funds sold	1,435,000		1,435,000		—		1,435,000		—		—
Trading securities	3,117,935		3,117,935		—		3,117,935		—		—
Available-for-sale securities	7,290,611		7,290,611		—		7,290,611		—		—
Held-to-maturity securities	2,973,976		2,975,782		—		2,897,278		78,504		—
Advances	22,616,252		22,733,051		—		22,733,051		—		—
Mortgage loans held for portfolio, net of allowance	10,093,466		10,351,013		—		10,348,886		2,127		—
Accrued interest receivable	108,532		108,532		—		108,532		—		—
Derivative assets	162,501		162,501		—		21,153		—		141,348
Liabilities:
Deposits	1,016,316		1,016,316		—		1,016,316		—		—
Consolidated obligation discount notes	11,936,214		11,936,578		—		11,936,578		—		—
Consolidated obligation bonds	37,294,169		37,517,293		—		37,517,293		—		—
Mandatorily redeemable capital stock	1,914		1,914		1,914		—		—		—
Accrued interest payable	54,913		54,913		—		54,913		—		—
Derivative liabilities	173		173		—		370,663		—		(370,490)
Other Asset (Liability):
Industrial revenue bonds	35,000		38,224		—		38,224		—		—
Financing obligation payable	(35,000)		(38,224)		—		(38,224)		—		—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral and related accrued interest held or placed with the same clearing agent or derivative counterparty.

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Table 12.2

	12/31/2019
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Assets:
Cash and due from banks	$	1,917,166	$	1,917,166	$	1,917,166	$	—	$	—	$	—
Interest-bearing deposits	921,453		921,453		—		921,453		—		—
Securities purchased under agreements to resell	4,750,000		4,750,000		—		4,750,000		—		—
Federal funds sold	850,000		850,000		—		850,000		—		—
Trading securities	2,812,562		2,812,562		—		2,812,562		—		—
Available-for-sale securities	7,182,500		7,182,500		—		7,182,500		—		—
Held-to-maturity securities	3,569,958		3,556,938		—		3,476,084		80,854		—
Advances	30,241,315		30,295,813		—		30,295,813		—		—
Mortgage loans held for portfolio, net of allowance	10,633,009		10,983,356		—		10,981,458		1,898		—
Accrued interest receivable	143,765		143,765		—		143,765		—		—
Derivative assets	154,804		154,804		—		24,810		—		129,994
Liabilities:
Deposits	790,640		790,640		—		790,640		—		—
Consolidated obligation discount notes	27,447,911		27,448,021		—		27,448,021		—		—
Consolidated obligation bonds	32,013,314		32,103,154		—		32,103,154		—		—
Mandatorily redeemable capital stock	2,415		2,415		2,415		—		—		—
Accrued interest payable	117,580		117,580		—		117,580		—		—
Derivative liabilities	202		202		—		106,708		—		(106,506)
Other Asset (Liability):
Industrial revenue bonds	35,000		34,850		—		34,850		—		—
Financing obligation payable	(35,000)		(34,850)		—		(34,850)		—		—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral and related accrued interest held or placed with the same clearing agent or derivative counterparty.

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Fair Value Measurements: Tables 12.3 and 12.4 present, for each hierarchy level, FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of or for the periods ended September 30, 2020 and December 31, 2019 (in thousands).

Table 12.3

	09/30/2020
	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
Certificates of deposit	$	225,053	$	—	$	225,053	$	—	$	—
U.S. Treasury obligations	1,557,412		—		1,557,412		—		—
GSE obligations	433,864		—		433,864		—		—
GSE MBS	901,606		—		901,606		—		—
Total trading securities	3,117,935		—		3,117,935		—		—
Available-for-sale securities:
U.S. Treasury obligations	4,067,370		—		4,067,370		—		—
GSE MBS	3,223,241		—		3,223,241		—		—
Total available-for-sale securities	7,290,611		—		7,290,611		—		—
Derivative assets:
Interest-rate related	162,417		—		21,069		—		141,348
Mortgage delivery commitments	84		—		84		—		—
Total derivative assets	162,501		—		21,153		—		141,348
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	10,571,047	$	—	$	10,429,699	$	—	$	141,348
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	93	$	—	$	370,583	$	—	$	(370,490)
Mortgage delivery commitments	80		—		80		—		—
Total derivative liabilities	173		—		370,663		—		(370,490)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	173	$	—	$	370,663	$	—	$	(370,490)
Nonrecurring fair value measurements - Assets2:
Impaired mortgage loans	$	2,132	$	—	$	—	$	2,132	$	—
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	2,132	$	—	$	—	$	2,132	$	—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

2    Includes assets adjusted to fair value during the nine months ended September 30, 2020 and still outstanding as of September 30, 2020.

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Table 12.4

	12/31/2019
	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
U.S. Treasury obligations	$	1,530,518	$	—	$	1,530,518	$	—	$	—
GSE obligations	416,025		—		416,025		—		—
GSE MBS	866,019		—		866,019		—		—
Total trading securities	2,812,562		—		2,812,562		—		—
Available-for-sale securities:
U.S. Treasury obligations	4,261,791		—		4,261,791		—		—
GSE MBS	2,920,709		—		2,920,709		—		—
Total available-for-sale securities	7,182,500		—		7,182,500		—		—
Derivative assets:
Interest-rate related	154,309		—		24,315		—		129,994
Mortgage delivery commitments	495		—		495		—		—
Total derivative assets	154,804		—		24,810		—		129,994
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	10,149,866	$	—	$	10,019,872	$	—	$	129,994
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	177	$	—	$	106,683	$	—	$	(106,506)
Mortgage delivery commitments	25		—		25		—		—
Total derivative liabilities	202		—		106,708		—		(106,506)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	202	$	—	$	106,708	$	—	$	(106,506)
Nonrecurring fair value measurements - Assets2:
Impaired mortgage loans	$	1,909	$	—	$	—	$	1,909	$	—
Real estate owned	144		—		—		144		—
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	2,053	$	—	$	—	$	2,053	$	—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

2    Includes assets adjusted to fair value during the year ended December 31, 2019 and still outstanding as of December 31, 2019.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

Joint and Several Liability: As provided in the Bank Act or in FHFA regulations, consolidated obligations are backed only by the financial resources of the FHLBanks. FHLBank Topeka is jointly and severally liable with the other FHLBanks for the payment of principal and interest on all of the consolidated obligations issued by the FHLBanks. The par amounts for which FHLBank Topeka is jointly and severally liable were approximately $770,698,374,000 and $966,413,924,000 as of September 30, 2020 and December 31, 2019, respectively.

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The joint and several obligations are mandated by FHFA regulations and are not the result of arms-length transactions among FHLBanks. As described above, FHLBanks have no control over the amount of the guaranty or the determination of how each FHLBank would perform under the joint and several liability. Because the FHLBanks are subject to the authority of the FHFA as it relates to decisions involving the allocation of the joint and several liability for all FHLBanks' consolidated obligations, FHLBank Topeka regularly monitors the financial condition of the other FHLBanks to determine whether it should expect a loss to arise from its joint and several obligations. If FHLBank were to determine that a loss was probable and the amount of the loss could be reasonably estimated, FHLBank would charge to income the amount of the expected loss. Based upon the creditworthiness of the other FHLBanks as of September 30, 2020, FHLBank Topeka has concluded that a loss accrual is not necessary at this time.

Off-balance Sheet Commitments: As of September 30, 2020 and December 31, 2019, off-balance sheet commitments are presented in Table 13.1 (in thousands):

Table 13.1

	09/30/2020						12/31/2019
Notional Amount	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	$	5,044,507	$	4,635	$	5,049,142	$	4,764,724	$	4,335	$	4,769,059
Advance commitments outstanding	38,420		12,090		50,510		64,282		15,693		79,975
Commitments for standby bond purchases	423,030		280,733		703,763		—		701,392		701,392
Commitments to fund or purchase mortgage loans	105,003		—		105,003		221,800		—		221,800
Commitments to issue consolidated bonds, at par	264,000		—		264,000		—		—		—
Commitments to issue consolidated discount notes, at par	—		—		—		411,161		—		411,161

Commitments to Extend Credit: FHLBank issues standby letters of credit on behalf of its members to support certain obligations of the members to third-party beneficiaries. These standby letters of credit are subject to the same collateralization and borrowing limits that are applicable to advances and are fully collateralized at the time of issuance with assets allowed by FHLBank’s Member Products Policy (MPP). Standby letters of credit may be offered to assist members in facilitating residential housing finance, community lending, and asset-liability management, and to provide liquidity. In particular, members often use standby letters of credit as collateral for deposits from federal and state government agencies. Standby letters of credit are executed for members for a fee. If FHLBank is required to make payment for a beneficiary's draw, the member either reimburses FHLBank for the amount drawn or, subject to FHLBank's discretion, the amount drawn may be converted into a collateralized advance to the member. However, standby letters of credit usually expire without being drawn upon. Outstanding standby letters of credit have original or extended expiration periods of up to 6 years. FHLBank's current outstanding standby letters of credit expire no later than 2024. Unearned fees as well as the value of the guarantees related to standby letters of credit are recorded in other liabilities and amounted to $1,623,000 and $1,470,000 as of September 30, 2020 and December 31, 2019, respectively. Advance commitments legally bind and unconditionally obligate FHLBank for additional advances up to 24 months in the future. Based upon management’s credit analysis of members and collateral requirements under the MPP, FHLBank does not expect to incur any credit losses on the outstanding letters of credit or advance commitments.

Standby Bond-Purchase Agreements: FHLBank has entered into standby bond purchase agreements with state housing authorities whereby FHLBank, for a fee, agrees to purchase and hold the authorities’ bonds until the designated marketing agent can find a suitable investor or the housing authority repurchases the bond according to a schedule established by the standby agreement. Each standby agreement dictates the specific terms that would require FHLBank to purchase the bond. The bond purchase commitments entered into by FHLBank expire no later than 2023, though some are renewable at the option of FHLBank. As of September 30, 2020 and December 31, 2019, the total commitments for bond purchases included agreements with two in-district state housing authorities. FHLBank was required to purchase $122,390,000 in bonds under these agreements during the nine months ended September 30, 2020. These bonds were classified as available-for-sale securities, and were acquired at par and sold at par within the same month. FHLBank was not required to purchase any bonds under any agreements during the nine months ended September 30, 2019.

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Commitments to Purchase Mortgage Loans: These commitments that unconditionally obligate FHLBank to purchase mortgage loans from participating FHLBank Topeka members in the MPF Program are generally for periods not to exceed 60 calendar days. Certain commitments are recorded as derivatives at their fair values on the Statements of Condition. FHLBank recorded mortgage delivery commitment net derivative asset (liability) balances of $4,000 and $470,000 as of September 30, 2020 and December 31, 2019, respectively.

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

NOTE 14 – TRANSACTIONS WITH STOCKHOLDERS

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

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

Activity with Members that Exceed a 10 Percent Ownership in FHLBank Regulatory Capital Stock: Tables 14.1 and 14.2 present information on members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands). None of the officers or directors of these members currently serve on FHLBank’s board of directors.

Table 14.1

09/30/2020
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A		Total Class B Stock Par Value		Percent of Total Class B		Total Capital Stock Par Value		Percent of Total Capital Stock
MidFirst Bank	OK	$	6,800	1.8	%	$	323,972	27.1	%	$	330,772	20.9	%
TOTAL		$	6,800	1.8	%	$	323,972	27.1	%	$	330,772	20.9	%

Table 14.2

12/31/2019
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A		Total Class B Stock Par Value		Percent of Total Class B		Total Capital Stock Par Value		Percent of Total Capital Stock
MidFirst Bank	OK	$	500	0.1	%	$	385,825	29.2	%	$	386,325	21.8	%
BOKF, N.A.	OK	184,282		41.0		202,000		15.3		386,282		21.8
TOTAL		$	184,782	41.1	%	$	587,825	44.5	%	$	772,607	43.6	%

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Advance and deposit balances with members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of September 30, 2020 and December 31, 2019 are summarized in Table 14.3 (dollar amounts in thousands). Information is only listed for the period in which the member owned more than 10 percent of outstanding FHLBank regulatory capital stock.

Table 14.3

	09/30/2020				12/31/2019				09/30/2020				12/31/2019
Member Name	Outstanding Advances		Percent of Total		Outstanding Advances		Percent of Total		Outstanding Deposits		Percent of Total		Outstanding Deposits		Percent of Total
MidFirst Bank	$	7,130,000	32.0	%	$	8,585,000	28.5	%	$	649	0.1	%	$	1,030	0.1	%
BOKF, N.A.					4,500,000		14.9						22,457		2.9
TOTAL	$	7,130,000	32.0	%	$	13,085,000	43.4	%	$	649	0.1	%	$	23,487	3.0	%

MidFirst Bank did not sell any mortgage loans into the MPF Program during the three and nine months ended September 30, 2020 and 2019. BOKF, N.A. did not sell any mortgage loans into the MPF Program during the three and nine months ended September 30, 2019.

Transactions with FHLBank Directors’ Financial Institutions: Table 14.4 presents information as of September 30, 2020 and December 31, 2019 for members that had an officer or director serving on FHLBank’s board of directors (dollar amounts in thousands). Information is only included for the period in which the officer or director served on FHLBank’s board of directors. Capital stock listed is regulatory capital stock, which includes mandatorily redeemable capital stock.

Table 14.4

	09/30/2020				12/31/2019
	Outstanding Amount		Percent of Total		Outstanding Amount		Percent of Total
Advances	$	179,043	0.8	%	$	178,945	0.6	%
Deposits	$	23,892	2.4	%	$	15,748	2.0	%
Class A Common Stock	$	5,461	1.4	%	$	6,467	1.4	%
Class B Common Stock	23,431		2.0		5,571		0.4
TOTAL CAPITAL STOCK	$	28,892	1.8	%	$	12,038	0.7	%

Table 14.5 presents mortgage loans acquired during the three and nine months ended September 30, 2020 and 2019 for members that had an officer or director serving on FHLBank’s board of directors in 2020 or 2019 (dollar amounts in thousands). Information is only included for the period in which the officer or director served on FHLBank’s board of directors.

Table 14.5

	Three Months Ended								Nine Months Ended
	09/30/2020				09/30/2019				09/30/2020				09/30/2019
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
Mortgage loans acquired	$	9,091	2.5	%	$	61,362	5.4	%	$	95,901	4.0	%	$	128,251	5.3	%

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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to assist the reader in understanding our business and assessing our operations both historically and prospectively. This discussion should be read in conjunction with our interim financial statements and related notes presented under Part I Item 1 of this quarterly report on Form 10-Q and the annual report on Form 10-K for the year ended December 31, 2019, which includes audited financial statements and related notes for the year ended December 31, 2019. Our MD&A includes the following sections:

•Executive Level Overview – a general description of our business and financial highlights;

•Financial Market Trends – a discussion of current trends in the financial markets and overall economic environment, including the related impact on our operations;

•Critical Accounting Policies and Estimates – a discussion of accounting policies that require critical estimates and assumptions;

•Results of Operations – an analysis of our operating results, including disclosures about the sustainability of our earnings;

•Financial Condition – an analysis of our financial position;

•Liquidity and Capital Resources – an analysis of our cash flows and capital position;

•Risk Management – a discussion of our risk management strategies;

•Impact of Recently Issued Accounting Standards; and

•Legislative and Regulatory Developments.

Executive Level Overview

We are a regional wholesale bank that makes advances (loans) to, purchases mortgage loans from, and provides limited other financial services primarily to our members. The FHLBanks, together with the Office of Finance, a joint office of the FHLBanks, make up the FHLBank System, which consists of 11 district FHLBanks. As independent, member-owned cooperatives, the FHLBanks seek to maintain a balance between their public purpose and their ability to provide adequate returns on the capital supplied by their members. The FHLBanks are supervised and regulated by the FHFA, an independent agency in the executive branch of the U.S. government. The FHFA’s mission is to ensure that the housing GSEs operate in a safe and sound manner so that they serve as a reliable source of liquidity and funding for housing finance and community investment.

Our primary funding source is consolidated obligations issued through the FHLBanks’ Office of Finance that facilitates the issuance and servicing of the consolidated obligations. The FHFA and the U.S. Secretary of the Treasury oversee the issuance of FHLBank debt. Consolidated obligations are debt instruments that constitute the joint and several obligations of all FHLBanks. Although consolidated obligations are not obligations of, nor guaranteed by, the U.S. government, the capital markets have traditionally viewed the FHLBanks’ consolidated obligations as “Federal agency” debt. As a result, the FHLBanks have historically had ready access to funding at relatively favorable spreads to U.S. Treasuries. Additional funds are provided by deposits (received from both member and non-member financial institutions), other borrowings, and the issuance of capital stock.

We serve eligible financial institutions in Colorado, Kansas, Nebraska, and Oklahoma (collectively, the Tenth District of the FHLBank System), who are also the member-owners of FHLBank. Initially, a member is required to purchase shares of Class A Common Stock based on the member’s total assets subject to a per member cap of $500 thousand. Each member may be required to purchase activity-based capital stock (Class B Common Stock) as it engages in certain business activities with FHLBank, including advances, standby letters of credit, and Acquired Members Assets (AMA), at levels determined by management with the board of director’s approval and within the ranges stipulated in our Capital Plan. Currently, our capital increases when members are required to purchase additional capital stock in the form of Class B Common Stock to support an increase in their advance borrowings or AMA activity. On July 23, 2020, FHLBank's board of directors changed the established AMA activity-based stock purchase requirement to three percent of the outstanding principal balance of AMA originated by or through that member and acquired by FHLBank from zero percent pursuant to its Capital Plan, effective as of August 5, 2020. The purchase requirement had been suspended for current members since July 2013. Former members previously required to purchase AMA activity-based stock are subject to the stock requirement in place at the time their membership ended as long as there are unpaid principal balances outstanding. The board of directors also changed the established a Letter of Credit activity-based stock purchase requirement pursuant to its Capital Plan, effective as of January 22, 2021 to one quarter of one percent of the principal amount of letters of credit outstanding from the previous requirement of zero percent. For additional discussion of these changes to capital requirements, see "Liquidity and Capital Resources – Capital" under this Item 2.

At our discretion, we may repurchase excess stock resulting from a decline in a member’s advances or AMA activities. We believe it is important to manage our business and the associated risks so that we strive to provide franchise value by maintaining a core mission asset focus and meeting the following objectives: (1) achieve our liquidity, housing finance and community development missions by meeting member credit needs by offering advances, supporting residential mortgage lending through the MPF Program and through other products; (2) periodically repurchase excess capital stock in order to appropriately manage the size of our balance sheet; and (3) pay acceptable dividends.

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The COVID-19 pandemic continued to impact financial markets during the third quarter of 2020, as interest rates remained at historically low levels and financial institutions continued to experience high levels of liquidity. During the third quarter of 2020, credit and market conditions continued the modest and uneven recovery that began in the second quarter of 2020, although the resurgence of the virus could weaken an already fragile recovery. We continue to conduct business without operational difficulties or disruptions despite the ongoing COVID-19 pandemic. We began to bring employees back to work in our offices in phases beginning in late summer 2020 but the majority of employees contine to work remotely at this time. We expect to continue remote operations until infection rates begin a significant downward trend.

During the second quarter of 2020, we provided $0.6 billion of zero-cost funding and $0.5 billion of low-cost funding to help members serve their customers affected by the COVID-19 pandemic. In March 2020, we also began accepting collateral modified by forbearance plans and loan modification agreements, including those with electronic signatures. We worked with the Federal Reserve to allow members to pledge their newly issued PPP loans to the Federal Reserve Bank of Kansas City. Additionally, we began accepting SBA PPP loans as collateral while limiting the reporting burden for members. For MPF customers, we waived delivery commitment extension fees through April 15, 2020 and eased certain underwriting, documentation and payment requirements for those impacted by the pandemic. For mortgage loans in the MPF Program, we are offering payment forbearance and temporary loan modification programs for borrowers impacted by the pandemic. Management continues to monitor the progress of the pandemic and is committed to assisting FHLBank members and their communities as impacts related to the pandemic continue to unfold.

Table 1 presents Selected Financial Data for the periods indicated (dollar amounts in thousands):

53

Table 1

	09/30/2020			06/30/2020			03/31/2020			12/31/2019			09/30/2019
Statement of Condition (as of period end):
Total assets	$	53,011,374		$	53,533,936		$	63,189,513		$	63,276,654		$	57,131,130
Investments1	19,917,184			20,633,427			19,597,238			20,086,473			16,248,522
Advances	22,616,252			21,528,991			31,678,083			30,241,315			30,634,583
Mortgage loans, net2	10,093,466			10,945,717			11,018,168			10,633,009			9,833,763
Total liabilities	50,411,438			51,178,998			60,475,924			60,485,603			54,472,808
Deposits	1,016,316			988,292			975,397			790,640			756,376
Consolidated obligation discount notes, net3	11,936,214			13,560,839			25,563,980			27,447,911			21,044,232
Consolidated obligation bonds, net3	37,294,169			36,445,676			33,730,055			32,013,314			32,441,885
Total consolidated obligations, net3	49,230,383			50,006,515			59,294,035			59,461,225			53,486,117
Mandatorily redeemable capital stock	1,914			2,308			2,390			2,415			2,477
Total capital	2,599,936			2,354,938			2,713,589			2,791,051			2,658,322
Capital stock	1,580,741			1,392,003			1,802,296			1,766,456			1,670,690
Total retained earnings	1,022,566			996,629			980,612			999,809			972,948
AOCI	(3,371)			(33,694)			(69,319)			24,786			14,684
Statement of Income (for the quarterly period ended):
Net interest income	64,788			56,677			55,086			69,404			74,415
Provision (reversal) for credit losses on mortgage loans	116			1,337			(736)			(122)			393
Other income (loss)	(1,634)			(10,252)			(23,229)			7,438			(1,507)
Other expenses	18,610			22,596			19,443			18,880			18,633
Income before assessments	44,428			22,492			13,150			58,084			53,882
Affordable Housing Program (AHP) assessments	4,444			2,250			1,318			5,811			5,391
Net income	39,984			20,242			11,832			52,273			48,491
Selected Financial Ratios and Other Financial Data (for the quarterly period ended):
Dividends paid in cash4	66			71			70			72			70
Dividends paid in stock4	13,981			14,697			24,836			25,340			25,749
Weighted average dividend rate5	3.69		%	3.69		%	5.94		%	6.14		%	6.61		%
Dividend payout ratio6	35.13		%	72.95		%	210.50		%	48.61		%	53.25		%
Return on average equity	6.34		%	3.20		%	1.75		%	7.82		%	7.54		%
Return on average assets	0.29		%	0.14		%	0.08		%	0.35		%	0.33		%
Average equity to average assets	4.60		%	4.37		%	4.44		%	4.52		%	4.36		%
Net interest margin7	0.47		%	0.39		%	0.36		%	0.47		%	0.51		%
Total capital ratio8	4.90		%	4.40		%	4.29		%	4.41		%	4.65		%
Regulatory capital ratio9	4.91		%	4.47		%	4.41		%	4.38		%	4.63		%

1    Includes trading securities, available-for-sale securities, held-to-maturity securities, interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold.

2    The allowance for credit losses on mortgage loans was $7,926,000, $7,790,000, $6,468,000, $985,000 and $905,000 as of September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively. Effective January 1, 2020, new accounting guidance was adopted relating to the measurement of credit losses on financial instruments and resulted in a cumulative effect adjustment of $6,123,000.

3    Consolidated obligations are bonds and discount notes that we are primarily liable to repay. See Note 13 to the financial statements for a description of the total consolidated obligations of all FHLBanks for which we are jointly and severally liable.

4    Dividends reclassified as interest expense on mandatorily redeemable capital stock and not included as dividends recorded in accordance with GAAP were $12,000, $14,000, $24,000, $26,000 and $30,000 for the quarters ended September 30, 2020, June 30, 2020, March 31, 2020, December 31, 2019 and September 30, 2019, respectively.

5    Dividends paid in cash and stock on both classes of stock as a percentage of average capital stock eligible for dividends.

6    Ratio disclosed represents dividends declared and paid during the period as a percentage of net income for the period presented, although FHFA regulation requires dividends be paid out of known income prior to declaration date.

7    Net interest income as a percentage of average earning assets.

8    GAAP capital stock, which excludes mandatorily redeemable capital stock, plus retained earnings and AOCI as a percentage of total assets.

9    Regulatory capital (i.e., Class A Common Stock, Class B Common Stock and retained earnings) as a percentage of total assets.

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Net income decreased $8.5 million, or 17.5 percent, to $40.0 million for the three months ended September 30, 2020 compared to $48.5 million for the three months ended September 30, 2019. For the nine months ended September 30, 2020, net income decreased $60.9 million, or 45.8 percent, to $72.1 million compared to $133.0 million for the nine months ended September 30, 2019. The $8.5 million decrease for the three-month period was driven by the decline in net interest income due to a significant decrease in the average balance of advances and substantially lower interest rates. The decrease for the nine-month period was largely due to net losses on derivatives and hedging activities and trading securities that occurred during the first quarter of 2020 due to the market disruption caused by the COVID-19 pandemic, although some stabilization was observed during the second and third quarters of 2020 as the financial markets began a modest and uneven recovery.

Net interest income decreased $9.6 million for the quarter, from $74.4 million for the three months ended September 30, 2019 to $64.8 million for the three months ended September 30, 2020. Net interest income decreased $10.1 million for the comparative nine-month periods, from $186.7 million for the nine months ended September 30, 2019 to $176.6 million for the nine months ended September 30, 2020. In addition to the decline in the average balance of advances, the decrease in net interest income for both the three- and nine-month periods is attributed to net interest settlement expense on fair value hedges and increased premium amortization on mortgage-related assets, but the declines were partially offset by a decrease in our cost of debt.

Total assets decreased between periods, from $63.3 billion at December 31, 2019 to $53.0 billion at September 30, 2020 driven mostly by the $7.6 billion, or 25.2 percent, decline in advances between periods as many members have experienced significant deposit inflows and excess liquidity since the second quarter of 2020 as a result of economic stimulus packages passed by Congress along with the Federal Reserve Bank’s easing of monetary policy, security purchase programs, and lending facilities. Although mortgage loans decreased by $0.5 billion during the first nine months of 2020, balances represented 19.0 percent of total assets as of September 30, 2020, compared to 16.8 percent as of December 31, 2019 due to the prominent decline in advances.

Total liabilities decreased $10.1 billion from December 31, 2019 to September 30, 2020 which corresponded with the decline in assets, and the funding mix shifted to a lower percentage of discount notes between periods, as we issued more floating rate debt indexed to the Secured Overnight Financing Rate (SOFR) to more closely reflect the repricing characteristics of our assets. The decrease in long-term market interest rates also allowed us to replace approximately $13 billion of callable debt at a lower cost through the third quarter of 2020, which has reduced funding costs for current and future periods. For additional information on market trends impacting the cost of issuing debt, including discussion of the transition from LIBOR to an alternate reference rate, see "Financial Market Trends" and "Financial Condition" under this Item 2.

Total capital decreased $191.1 million, or 6.8 percent, from December 31, 2019 to September 30, 2020 primarily due to a decrease in required capital stock related to the decline in advance utilization between periods that was subsequently repurchased, partially offset by the increase in required capital stock for AMA from the change to the AMA activity-based stock purchase requirement from zero to three percent effective August 5, 2020.

Return on average equity (ROE) was 6.34 percent and 3.71 percent for the three and nine months ended September 30, 2020, respectively, compared to 7.54 percent and 7.14 percent for the same periods in the prior year. The decline in ROE for both periods was a result of the aforementioned declines in net income caused by pandemic-related market volatility and balance sheet contraction, while average capital held relatively steady. Dividends paid to members totaled $53.7 million for the nine months ended September 30, 2020 compared to $74.0 million for the prior year. From September 30, 2019 to September 30, 2020, the dividend rate for Class A Common Stock decreased from 2.50 percent to 0.25 percent and the dividend rate for Class B Common Stock decreased from 7.50 percent to 5.25 percent. The weighted average dividend rate for the three and nine months ended September 30, 2020 was 3.69 percent and 4.48 percent, which represented a dividend payout ratio of 35.1 percent and 74.6 percent, respectively, compared to a weighted average dividend rate of 6.61 and 6.58 percent for the three and nine months ended September 30, 2019 and a payout ratio of 53.2 percent and 55.7 percent for the same periods in 2019, respectively. Our dividend rates have historically moved in tandem with short-term market rates, so the decrease reflects the decline in market interest rates resulting from Federal Open Market Committee of the Federal Reserve (FOMC) rate cuts in March 2020 to stimulate the U.S. economy.

Differences in the weighted average dividend rates between periods are due to the change in dividend rates and, to a lesser extent, the difference in the mix of outstanding Class A Common Stock and Class B Common Stock between those periods. Factors impacting the outstanding stock class mix during 2020 and, therefore, the average dividend rates, include regular exchanges of excess Class B Common Stock to Class A Common Stock and periodic repurchases of excess Class A Common Stock (see “Liquidity and Capital Resources - Capital” under this Item 2). The increase in the payout ratio for the nine months ended September 30, 2020, despite the decline in dividend rates for the same period, was a result of the decline in net income mostly in the first quarter of 2020 from the aforementioned COVID-19 related market volatility. We anticipate stock dividends on Class A Common Stock and Class B Common Stock will be lower than what was paid in 2019 for the remainder of 2020, consistent with the lower level of short‑term interest rates and our retained earnings policy.

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FHFA guidance requires that our strategic business plan describes how our business activities will achieve our mission consistent with the FHFA’s core mission achievement guidance. We intend to manage our balance sheet with an emphasis toward maintaining a primary mission asset ratio above 70 percent. Our ratio of average advances and average mortgage loans to average consolidated obligations less average U.S. Treasury securities classified as trading or available-for-sale with maturities of ten years or less utilizing par balances (primary mission asset ratio) was 74 percent for the nine months ended September 30, 2020. However, because this ratio is dependent on several variables such as member demand for our advance and mortgage loan products, it is possible that our primary mission asset ratio will decline from our current level.

Financial Market Trends

The primary external factors that affect net interest income are market interest rates and the general state of the economy.

General discussion of the level of market interest rates:

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

Table 2

	09/30/2020		09/30/2019		09/30/2020		09/30/2019		09/30/2020		12/31/2019		09/30/2019
Market Instrument	Three-month		Three-month		Nine-month		Nine-month		Ending		Ending		Ending
	Average		Average		Average		Average		Rate		Rate		Rate
Secured Overnight Financing Rate1	0.09	%	2.28	%	0.45	%	2.38	%	0.08	%	1.55	%	2.35	%
Federal funds effective rate1	0.09		2.20		0.45		2.33		0.09		1.55		1.90
Federal Reserve interest rate on excess reserves1	0.10		2.15		0.47		2.30		0.10		1.55		1.80
3-month U.S. Treasury bill1	0.11		2.02		0.44		2.26		0.10		1.55		1.84
3-month LIBOR1	0.25		2.20		0.79		2.46		0.23		1.91		2.09
2-year U.S. Treasury note1	0.14		1.68		0.47		2.10		0.13		1.57		1.62
5-year U.S. Treasury note1	0.27		1.62		0.59		2.07		0.28		1.69		1.55
10-year U.S. Treasury note1	0.65		1.79		0.90		2.26		0.69		1.92		1.68
30-year residential mortgage note rate1,2	3.13		3.99		3.42		4.31		3.05		3.95		3.99

1    Source is Bloomberg.

2    Mortgage Bankers Association weekly 30-year fixed rate mortgage contract rate.

The COVID-19 pandemic continued to impact financial markets during the third quarter of 2020, as interest rates remained at historically low levels and financial institutions continued to experience high levels of liquidity. During the third quarter of 2020, credit and market conditions continued the modest and uneven recovery that began in the second quarter of 2020, although the resurgence of the virus could weaken an already fragile recovery. Spreads to comparative U.S. Treasury instruments for FHLBank consolidated obligations widened in March of 2020, increasing the cost to issue these instruments. However, during the second and third quarters of 2020, these spreads narrowed considerably resulting in lower costs to issue consolidated obligations driven by robust market demand for the instruments and lower issuance needs by the FHLBanks due to ample liquidity available to FHLBank members. At the September meeting, the FOMC maintained the Federal funds rate at a range between 0 percent and 0.25 percent and said it would be appropriate to maintain its quantitative easing (QE), repo and overnight lending programs to keep credit available until it is confident that the economy has recovered from the downturn related to the COVID-19 pandemic and is on track to achieve its maximum employment, inflation, and price stability goals. The FOMC has also indicated they will not raise rates in anticipation of higher inflation but will wait until inflation exceeds two percent for some time. Based on FOMC projections in its Summary of Economic Projections released on September 16, 2020, this will not occur until the end of 2023. The FOMC stated its intent to continue its purchases of U.S. Treasuries and agency MBS as part of its QE. Monetary and fiscal actions in response to the economic impact of the COVID-19 pandemic and dire economic outlooks for the next several years have driven Treasury and other benchmark rates to or near historic lows. We issue debt at a spread above U.S. Treasury securities; as a result, the level of interest rates impacts the cost of issuing FHLBank consolidated obligations and the cost of advances to our members and housing associates.

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The COVID-19 pandemic has caused significant economic and financial turmoil both in the U.S. and around the world, and, despite improvement in the third quarter of 2020, there remains a risk that it could lead to a global recession. Our ability to obtain funds through the issuance of consolidated obligations depends in part on prevailing conditions in the capital markets (including investor demand), such as the effects of any reduced liquidity in financial markets. Volatility in the capital markets caused by the COVID-19 pandemic can impact demand for FHLBank debt and the cost of the debt the FHLBanks issue. The outlook for the remainder of 2020 is uncertain, and it is likely that the FOMC will keep interest rates low or use other policies if economic conditions warrant, each of which could impact the efficiency of our asset and liability management activities. For further discussion, see this Item 2 – “Financial Condition – Consolidated Obligations.”

In July 2017, the United Kingdom's Financial Conduct Authority (FCA) announced that it planned to phase out the regulatory oversight of LIBOR interest rate indices by 2021. The FCA and the submitting LIBOR banks have indicated they will support the LIBOR indices through 2021 to allow for an orderly transition to an alternative reference rate. The Alternative Reference Rates Committee (ARRC) in the United States has proposed SOFR as its recommended alternative to US Dollar (USD) LIBOR in the United States. SOFR is intended to be a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities. The Federal Reserve Bank of New York began publishing SOFR rates in April 2018. As noted throughout this quarterly report, many of our assets and liabilities, including derivative assets and derivative liabilities, are indexed to USD LIBOR. A portion of these assets and liabilities and related collateral have maturity dates that extend beyond 2021. For additional information on our LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under this Item 2.

Other factors impacting FHLBank consolidated obligations:

We believe investors continue to view FHLBank consolidated obligations as carrying a relatively strong credit profile. Historically, our strong credit profile has resulted in steady investor demand for FHLBank consolidated obligations. We believe several market events continue to have the potential to impact the demand for our consolidated obligations including the economic impact of the COVID-19 pandemic, geopolitical events and/or disruptions; potential policy or regulatory changes under the current or future administrations; recent regulatory changes in liquidity requirements; changes in interest rates and the shape of the yield curve as the FOMC contemplates changes to monetary policy; and the replacement of LIBOR with another index as previously discussed.

Critical Accounting Policies and Estimates

The preparation of our financial statements in accordance with GAAP requires management to make a number of judgments and assumptions that affect our reported results and disclosures. Several of our accounting policies are inherently subject to valuation assumptions and other subjective assessments and are more critical than others in terms of their importance to results. These assumptions and assessments include: (1) the accounting related to derivatives and hedging activities; and (2) fair value determinations.

Changes in any of the estimates and assumptions underlying critical accounting policies could have a material effect on our financial statements.

The accounting policies that management believes are the most critical to an understanding of our financial results and condition and require complex management judgment are described under Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our annual report on Form 10-K, incorporated by reference herein. There were no material changes to our critical accounting policies and estimates during the quarter ended September 30, 2020.

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Results of Operations

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

Table 3

	Increase (Decrease) in Earnings Components
	Three Months Ended				Nine Months Ended
	09/30/2020 vs. 09/30/2019				09/30/2020 vs. 09/30/2019
	Dollar Change		Percentage Change		Dollar Change		Percentage Change
Total interest income	$	(258,083)	(65.2)	%	$	(538,721)	(46.9)	%
Total interest expense	(248,456)		(77.2)		(528,612)		(54.9)
Net interest income	(9,627)		(12.9)		(10,109)		(5.4)
Provision (reversal) for credit losses on mortgage loans	(277)		(70.5)		208		40.9
Net interest income after mortgage loan loss provision	(9,350)		(12.6)		(10,317)		(5.5)
Net gains (losses) on trading securities	(23,181)		(143.2)		5,985		6.9
Net gains (losses) on derivatives and hedging activities	22,412		109.9		(56,642)		(71.8)
Other non-interest income	642		23.8		7		0.1
Total other income (loss)	(127)		(8.4)		(50,650)		(326.0)
Operating expenses	(433)		(2.9)		444		1.0
Other non-interest expenses	410		10.7		6,269		57.0
Total other expenses	(23)		(0.1)		6,713		12.4
AHP assessments	(947)		(17.6)		(6,774)		(45.8)
NET INCOME	$	(8,507)	(17.5)	%	$	(60,906)	(45.8)	%

Table 4 presents the amounts contributed by our principal sources of interest income (dollar amounts in thousands):

Table 4

	Three Months Ended								Nine Months Ended
	09/30/2020				09/30/2019				09/30/2020				09/30/2019
	Interest Income		Percent of Total		Interest Income		Percent of Total		Interest Income		Percent of Total		Interest Income		Percent of Total
Investments1	$	34,651	25.1	%	$	132,737	33.5	%	$	156,307	25.6	%	$	359,216	31.3	%
Advances	38,848		28.2		186,431		47.1		230,000		37.7		563,602		49.0
Mortgage loans held for portfolio	64,192		46.5		76,546		19.3		222,962		36.5		225,015		19.6
Other	286		0.2		346		0.1		940		0.2		1,097		0.1
TOTAL INTEREST INCOME	$	137,977	100.0	%	$	396,060	100.0	%	$	610,209	100.0	%	$	1,148,930	100.0	%

1    Includes trading securities, available-for-sale securities, held-to-maturity securities, interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold.

58

Net income decreased $8.5 million, or 17.5 percent, to $40.0 million for the three months ended September 30, 2020 compared to $48.5 million for the three months ended September 30, 2019. For the nine months ended September 30, 2020, net income decreased $60.9 million, or 45.8 percent, to $72.1 million compared to $133.0 million for the nine months ended September 30, 2019. The $8.5 million decrease for the three-month period was driven by the decline in net interest income due to a significant decrease in the average balance of advances and substantially lower interest rates. The decrease for the nine-month period was largely due to net losses on derivatives and hedging activities and trading securities that occurred during the first quarter of 2020 due to the market disruption caused by the COVID-19 pandemic, although some stabilization was observed during the second and third quarters of 2020 as the financial markets began a modest and uneven recovery. While market volatility cannot be predicted, previous net losses on derivatives and hedging activities and trading securities are expected to be reversed with market changes in the future although the timing of those reversals is uncertain. The declines in the fair values of derivatives resulted from market volatility related to the COVID-19 pandemic as spreads between investments and their associated swaps widened considerably during the first quarter of 2020, therefore impacting fair values at the end of the quarter. These spreads normalized during the second and third quarter of 2020, but the continued low interest rate environment kept the fair values of derivatives depressed and caused a decline in net interest settlements (from net interest received in 2019 to net interest paid in 2020, which decreased income) for both the three- and nine-month periods. This decline was partially offset by gains on trading securities for the current nine-month period, as the coupons on the trading securities are higher than current market rates. While we generally consider fair value fluctuations to be temporary and expect to recover these losses in future periods, the outlook for the remainder of 2020 is uncertain, so the fair values of our assets and derivatives could decline or fail to recover for a prolonged period of time. For detailed discussion relating to the fluctuations in net gains (losses) on derivatives and hedging activities and net gains (losses) on trading securities, see "Net Gains (Losses) on Derivatives and Hedging Activities" and "Net Gains (Losses) On Trading Securities" under this Item 2. Other expenses remained relatively flat between the three-month periods and increased by $6.7 million for the nine months ended September 30, 2020 compared to the prior year period, primarily due to the subsidy recorded for the below-market interest rates on COVID-19 Relief Advances. See "Financial Condition - Advances" under this Item 2 for additional information on the advances issued in response to COVID-19.

Net Interest Income: Net interest income decreased $9.6 million for the quarter, from $74.4 million for the three months ended September 30, 2019 to $64.8 million for the three months ended September 30, 2020. Net interest income decreased $10.1 million for the comparative nine-month periods, from $186.7 million for the nine months ended September 30, 2019 to $176.6 million for the nine months ended September 30, 2020. Management has actively managed FHLBank's funding composition in response to the current market conditions, which has reduced funding costs and resulted in an improvement in net interest spreads for the third quarter of 2020 compared to the first and second quarters of 2020. Despite the improvement in funding costs, net interest income and net interest margin declined due to lower average assets at lower average yields while average capital remained relatively flat compared to the same period in the prior year. In addition to the decline in the average balance of advances, the decrease in net interest income for both the three- and nine-month periods is attributable to net interest settlement expense on fair value hedges and increased premium amortization on mortgage-related assets, but the declines were partially offset by a decrease in our cost of debt. The low interest rate environment caused net interest settlements on swapped advances and available-for-sale securities to decline, from net interest received in 2019 to net interest paid in 2020, which decreased net interest margin for both the three- and nine-month periods. Our cost of debt decreased as a result of callable debt refinanced during 2020, combined with a decline in the cost of discount notes, floating rate debt, and net interest settlements on swapped discount notes and bonds as market interest rates declined, partially offset by accelerated concession amortization on the called debt. Prepayments on mortgage-related assets and the associated premium amortization remained elevated, but the increase in premium amortization was largely offset by the reduction in the cost of debt.

The Federal Reserve’s rapid reduction in the Federal funds target rate and purchase of U.S. Treasury bonds in response to the pandemic-related market volatility resulted in declines across the interest rate curve during the first quarter of 2020 that has persisted into the third quarter of 2020. During the first quarter, this volatility created margin compression on the short end of the curve, as overnight assets repriced downward faster than the liabilities funding them. Liabilities repriced lower throughout the second quarter of 2020, which resulted in an improvement in net interest spreads. The decline in long-term interest rates has caused an increase in mortgage loan prepayments, which reduces net interest income in the form of accelerated amortization of premiums on mortgage-related assets and reinvestment at lower market rates. However, the decrease in long-term market interest rates has allowed us to replace approximately $13 billion of callable debt at a lower cost. Replacing callable debt results in accelerated amortization of concessions (broker fees) in the month of the call, but the refinanced debt will continue to provide additional benefit in the form of lower rates for future periods, as the acceleration of the related concessions rolls off. Advance demand by members dropped significantly during the second and third quarters of 2020 as many members experienced significant deposit inflows and excess liquidity as a result of economic stimulus packages passed by Congress along with the Federal Reserve Bank’s easing of monetary policy, security purchase programs, and lending facilities.

59

Average Balances and Yields: The average balance of interest-earning assets decreased $4.0 billion, or 6.9 percent, and increased $1.7 billion, or 3.1 percent, for the three and nine months ended September 30, 2020, respectively, compared to the same periods in the prior year. Average advance balances decreased in both periods, which reflects the reduced demand for advances resulting from deposit inflows from stimulus payments and other Federal relief available to our members, as mentioned previously. The decrease in advances was partially offset by increases in long-term investments and mortgage loans for both the three- and nine-month periods. The moderate increase in long-term investments between periods represents an increase in high-quality liquid asset (HQLA) investments partially offset by a slight decline in MBS. Investments are used to enhance income and provide liquidity within balance sheet and portfolio parameters. The increase in the average balance of mortgage loans despite the increase in prepayments reflects the consistent growth in the mortgage loan portfolio that has occurred for the past several years. The recent decline in advances has caused us to exceed our targeted AMA risk tolerance as a percent of total assets as of September 30, 2020. The strategies we have implemented to manage growth in the mortgage loan portfolio have brought us closer to internal limits for AMA as a percent of total assets. For further discussion of investments, advances and mortgage loans, see Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition.”

Market interest rates and trends affect yields and net interest margin on earning assets, including advances, mortgage loans, and investments. The average yield on total interest-earning assets for the three months ended September 30, 2020 was 1.01 percent compared to 2.69 percent for the three months ended September 30, 2019. The average cost of interest-bearing liabilities for the three months ended September 30, 2020 was 0.57 percent, compared to 2.29 percent for the three months ended September 30, 2019, resulting in an improvement in net interest spread of 4 basis points, to 44 basis points for the current quarter compared to 40 basis points for the prior year quarter. Net interest margin decreased by 4 basis points to 47 basis points for the three months ended September 30, 2020 compared to 51 basis points for the same period in the prior year despite the increase in net interest spread due to the resulting increase in lower yielding assets as advance balances declined while average capital remained relatively flat. The cost of debt decreased as a result of called debt reissued at lower rates combined with a decline in the cost of discount notes, floating rate debt, and net interest settlements as market interest rates declined, partially offset by accelerated concession amortization on the called debt. The average balance of mortgage loans increased $1.0 billion, or 11.0 percent, for the current three-month period compared to the prior year period, although accelerated premium amortization from prepayments and mortgage loan purchases at lower interest rates has decreased the yield on the portfolio. With the decrease in advance balances, mortgage loans, which are one of our highest net spread assets, increased as a percentage of total assets during the first nine months of 2020, representing 19.0 percent of total assets as of September 30, 2020, compared to 16.8 percent as of December 31, 2019. However, the spread on mortgage loans has been compressed in recent periods as a result of accelerated premium amortization from prepayments, but this increase in premium amortization has been largely offset by the reduction in the cost of debt so this spread is expected to widen in future periods as the accelerated amortization of concessions on called debt rolls off and prepayments slow. Average advance balances declined by $7.6 billion, or 25.8 percent for the three months ended September 30, 2020 compared to the prior year period. The yield on advances also declined as adjustable rate advances and new or modified advances reflect current lower market interest rates, which contributed to lower net interest income and margin.

60

The average yield on total interest-earning assets for the nine months ended September 30, 2020 was 1.41 percent compared to 2.74 percent for the nine months ended September 30, 2019. The average cost of interest-bearing liabilities for the nine months ended September 30, 2020 was 1.06 percent, compared to 2.41 percent for the nine months ended September 30, 2019, resulting in a net interest spread of 35 basis points and 33 basis points, respectively. Liabilities continued repricing downward during the third quarter of 2020, but the spread compression that occurred in the first quarter of 2020 driven largely by the changes in short-term interest rates, specifically as it related to overnight assets funded with term debt, contributed to the four basis point decline in net interest margin, from 45 basis points for the nine months ended September 30, 2019 to 41 basis points for the nine months ended September 30, 2020. The average cost of discount notes decreased 151 basis points and the average yield on short-term investments decreased 201 basis points during the current nine-month period compared to the same period in the prior year (see Table 11). As previously discussed, the $1.9 billion, or 20.5 percent, increase in the average balance of mortgage loans contributed positively to net interest spread and net interest margin for the nine-month period, but the accelerated premium amortization and the accelerated concession amortization of called bonds has reduced the net spread. The average balance of advances declined $3.4 billion, or 11.8 percent, for the nine months ended September 30, 2020 when compared to the prior year period, but the impact to net interest margin was minimal for the nine-month period, as the majority of the decline for the nine-month period was in line of credit advances, which are typically low-spread products.

Our net interest spread is impacted by derivative and hedging activities, as the assets and liabilities hedged with derivative instruments designated under fair value hedging relationships are adjusted for changes in fair values, while other assets and liabilities are carried at historical cost. However, net interest payments or receipts on derivatives that do not qualify for hedge accounting (economic hedges) flow through net gains (losses) on derivatives and hedging activities (see Tables 13 through 16 under this Item 2) instead of net interest income, which does not reflect the full economic impact of the swaps on yields, especially for trading investments that are swapped to a variable rate. Tables 5 through 8 present the impact of derivatives and hedging activities recorded in net interest income (in thousands):

Table 5

	Three Months Ended 09/30/2020
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	$	304	$	870	$	—	$	(1,271)	$	5	$	(92)
Net amortization/accretion of hedging activities	(348)		—		(927)		—		—		(1,275)
Net interest received (paid)	(17,223)		(31,890)		—		2,395		10,689		(36,029)
TOTAL	$	(17,267)	$	(31,020)	$	(927)	$	1,124	$	10,694	$	(37,396)

Table 6

	Three Months Ended 09/30/2019
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	$	(924)	$	12,610	$	—	$	—	$	114	$	11,800
Net amortization/accretion of hedging activities	(182)		—		(658)		—		—		(840)
Net interest received (paid)	4,588		1,665		—		(1)		(1,260)		4,992
TOTAL	$	3,482	$	14,275	$	(658)	$	(1)	$	(1,146)	$	15,952

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Table 7

	Nine Months Ended 09/30/2020
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	$	(1,816)	$	(4,495)	$	—	$	(176)	$	(12)	$	(6,499)
Net amortization/accretion of hedging activities	(965)		—		(2,603)		—		—		(3,568)
Net interest received (paid)	(29,649)		(73,985)		—		18,414		29,205		(56,015)
TOTAL	$	(32,430)	$	(78,480)	$	(2,603)	$	18,238	$	29,193	$	(66,082)

Table 8

	Nine Months Ended 09/30/2019
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Unrealized gains (losses) due to fair value changes	$	(1,964)	$	(4,673)	$	—	$	—	$	(462)	$	(7,099)
Net amortization/accretion of hedging activities	(1,172)		—		(1,776)		—		—		(2,948)
Net interest received (paid)	18,374		5,308		—		9		(7,997)		15,694
TOTAL	$	15,238	$	635	$	(1,776)	$	9	$	(8,459)	$	5,647

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Table 9 presents average balances and annualized yields of major earning asset categories and the sources funding those earning assets (dollar amounts in thousands):

Table 9

	Three Months Ended
	09/30/2020						09/30/2019
	Average Balance		Interest Income/ Expense		Yield		Average Balance		Interest Income/ Expense		Yield
Interest-earning assets:
Interest-bearing deposits	$	1,325,680	$	471	0.14	%	$	920,843	$	5,300	2.28	%
Securities purchased under agreements to resell	4,421,739		1,378		0.12		4,437,123		26,768		2.39
Federal funds sold	2,551,728		575		0.09		1,456,826		8,179		2.23
Investment securities1	13,467,560		32,227		0.95		12,354,021		92,490		2.97
Advances1,2	21,975,855		38,848		0.70		29,613,293		186,431		2.50
Mortgage loans3,4	10,554,194		64,192		2.42		9,508,161		76,546		3.19
Other interest-earning assets	41,915		286		2.71		45,861		346		2.99
Total earning assets	54,338,671		137,977		1.01		58,336,128		396,060		2.69
Other non-interest-earning assets	183,114						227,491
Total assets	$	54,521,785					$	58,563,619
Interest-bearing liabilities:
Deposits	$	800,807	76		0.04		$	542,683	2,540		1.86
Consolidated obligations1:
Discount Notes	12,587,693		5,674		0.18		24,054,320		133,680		2.20
Bonds	37,779,502		67,142		0.71		30,952,832		185,096		2.37
Other borrowings	43,842		297		2.70		46,487		329		2.81
Total interest-bearing liabilities	51,211,844		73,189		0.57		55,596,322		321,645		2.29
Capital and other non-interest-bearing funds	3,309,942						2,967,297
Total funding	$	54,521,786					$	58,563,619
Net interest income and net interest spread5			$	64,788	0.44	%			$	74,415	0.40	%
Net interest margin6					0.47	%					0.51	%

1    Interest income/expense and average rates include the effect of associated derivatives that qualify for hedge accounting treatment.

2    Advance income includes prepayment fees on terminated advances.

3    Credit enhancement fee payments are netted against interest earnings on the mortgage loans. The expense related to credit enhancement fee payments to PFIs was $1.9 million and $1.7 million for the three months ended September 30, 2020 and 2019, respectively.

4    Mortgage loans average balance includes outstanding principal for non-performing conventional loans. However, these loans no longer accrue interest.

5    Net interest spread is the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

6    Net interest margin is defined as net interest income as a percentage of average interest-earning assets.

63

Changes in the volume of interest-earning assets and the level of interest rates influence changes in net interest income, net interest spread and net interest margin. Table 10 summarizes changes in interest income and interest expense (in thousands):

Table 10

	Three Months Ended
	09/30/2020 vs. 09/30/2019
	Increase (Decrease) Due to
	Volume1,2		Rate1,2		Total
Interest Income3:
Interest-bearing deposits	$	1,633	$	(6,462)	$	(4,829)
Securities purchased under agreements to resell	(92)		(25,298)		(25,390)
Federal funds sold	3,555		(11,159)		(7,604)
Investment securities	7,673		(67,936)		(60,263)
Advances	(38,954)		(108,629)		(147,583)
Mortgage loans	7,783		(20,137)		(12,354)
Other assets	(28)		(32)		(60)
Total interest-earning assets	(18,430)		(239,653)		(258,083)
Interest Expense3:
Deposits	821		(3,285)		(2,464)
Consolidated obligations:
Discount notes	(43,724)		(84,282)		(128,006)
Bonds	33,970		(151,924)		(117,954)
Other borrowings	(18)		(14)		(32)
Total interest-bearing liabilities	(8,951)		(239,505)		(248,456)
Change in net interest income	$	(9,479)	$	(148)	$	(9,627)

1    Changes in interest income and interest expense not identifiable as either volume-related or rate-related have been allocated to volume and rate based upon the proportion of the absolute value of the volume and rate changes.

2    Amounts used to calculate volume and rate changes are based on numbers in dollars. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same results.

3    Interest income/expense and average rates include the effect of associated derivatives that qualify for hedge accounting treatment.

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Table 11 presents average balances and yields of major earning asset categories and the sources funding those earning assets (dollar amounts in thousands):

Table 11

	Nine Months Ended
	09/30/2020						09/30/2019
	Average Balance		Interest Income/ Expense		Yield		Average Balance		Interest Income/ Expense		Yield
Interest-earning assets:
Interest-bearing deposits	$	1,488,936	$	5,736	0.51	%	$	856,180	$	15,518	2.42	%
Securities purchased under agreements to resell	4,086,171		16,906		0.55		4,512,240		84,266		2.50
Federal funds sold	2,435,255		4,517		0.25		1,583,982		28,058		2.37
Investment securities1	13,773,179		129,148		1.25		11,585,625		231,374		2.67
Advances1,2	25,135,610		230,000		1.22		28,486,279		563,602		2.65
Mortgage loans3,4	10,854,240		222,962		2.74		9,004,201		225,015		3.34
Other interest-earning assets	46,229		940		2.72		47,627		1,097		3.08
Total earning assets	57,819,620		610,209		1.41		56,076,134		1,148,930		2.74
Other non-interest-earning assets	274,176						271,516
Total assets	$	58,093,796					$	56,347,650
Interest-bearing liabilities:
Deposits	$	763,996	1,707		0.30		$	511,000	7,701		2.01
Consolidated obligations1:
Discount Notes	19,230,201		120,385		0.84		24,619,124		433,473		2.35
Bonds	34,743,772		310,628		1.19		28,290,980		519,967		2.46
Other borrowings	49,241		938		2.55		54,571		1,129		2.77
Total interest-bearing liabilities	54,787,210		433,658		1.06		53,475,675		962,270		2.41
Capital and other non-interest-bearing funds	3,306,586						2,871,975
Total funding	$	58,093,796					$	56,347,650
Net interest income and net interest spread5			$	176,551	0.35	%			$	186,660	0.33	%
Net interest margin6					0.41	%					0.45	%

1    Interest income/expense and average rates include the effect of associated derivatives that qualify for hedge accounting treatment.

2    Advance income includes prepayment fees on terminated advances.

3    Credit enhancement fee payments are netted against interest earnings on the mortgage loans. The expense related to credit enhancement fee payments to PFIs was $5.9 million and $5.0 million for the nine months ended September 30, 2020 and 2019, respectively.

4    Mortgage loans average balance includes outstanding principal for non-performing conventional loans. However, these loans no longer accrue interest.

5    Net interest spread is the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.

6    Net interest margin is defined as net interest income as a percentage of average interest-earning assets.

65

Changes in the volume of interest-earning assets and the level of interest rates influence changes in net interest income, net interest spread and net interest margin. Table 12 summarizes changes in interest income and interest expense (in thousands):

Table 12

	Nine Months Ended
	09/30/2020 vs. 09/30/2019
	Increase (Decrease) Due to
	Volume1,2		Rate1,2		Total
Interest Income3:
Interest-bearing deposits	$	7,096	$	(16,878)	$	(9,782)
Securities purchased under agreements to resell	(7,287)		(60,073)		(67,360)
Federal funds sold	10,015		(33,556)		(23,541)
Investment securities	37,604		(139,830)		(102,226)
Advances	(59,896)		(273,706)		(333,602)
Mortgage loans	41,823		(43,876)		(2,053)
Other assets	(32)		(125)		(157)
Total earning assets	29,323		(568,044)		(538,721)
Interest Expense3:
Deposits	2,619		(8,613)		(5,994)
Consolidated obligations:
Discount notes	(79,380)		(233,708)		(313,088)
Bonds	99,867		(309,206)		(209,339)
Other borrowings	(106)		(85)		(191)
Total interest-bearing liabilities	23,000		(551,612)		(528,612)
Change in net interest income	$	6,323	$	(16,432)	$	(10,109)

1    Changes in interest income and interest expense not identifiable as either volume-related or rate-related have been allocated to volume and rate based upon the proportion of the absolute value of the volume and rate changes.

2    Amounts used to calculate volume and rate changes are based on numbers in dollars. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same results.

3    Interest income/expense and average rates include the effect of associated derivatives that qualify for hedge accounting treatment.

Net Gains (Losses) on Derivatives and Hedging Activities: The volatility in other income (loss) is driven predominantly by net gains (losses) on derivatives that do not qualify for hedge accounting treatment under GAAP (economic derivatives), which generally include interest rate swaps, caps and floors. Net gains (losses) from derivatives and hedging activities are sensitive to several factors, including: (1) the general level of interest rates; (2) the shape of the term structure of interest rates; and (3) implied volatilities of interest rates. The fair value of options, particularly interest rate caps and floors, are also impacted by the time value decay that occurs as the options approach maturity, but this factor represents the normal amortization of the cost of these options and flows through income irrespective of any changes in the other factors impacting the fair value of the options (level of rates, shape of curve, and implied volatility).

As reflected in Tables 13 through 16, the majority of the net unrealized gains and losses on derivatives are related to changes in the fair values of economic derivatives. Net interest payments or receipts on these economic derivatives flow through net gains (losses) on derivatives and hedging activities instead of net interest income, which does not reflect the full economic impact of the swaps on yields, especially for trading investments that are swapped to variable rates. We generally record net unrealized gains on derivatives when the overall level of interest rates rises over the period and record net unrealized losses when the overall level of interest rates falls over the periods. Net unrealized gains or losses on derivatives will continue to be a function of the general level of swap rates but are also impacted by swap spreads in relationship to the relevant index rate. Tables 13 through 16 present the earnings impact of derivatives and hedging activities by financial instrument as recorded in other non-interest income (in thousands):

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Table 13

	Three Months Ended 09/30/2020
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Total
Derivatives not designated as hedging instruments:
Economic hedges – unrealized gains (losses) due to fair value changes	$	363	$	15,437	$	—	$	25	$	15,825
Mortgage delivery commitments	—		—		423		—		423
Economic hedges – net interest received (paid)	(45)		(14,061)		—		(116)		(14,222)
Net gains (losses) on derivatives and hedging activities	318		1,376		423		(91)		2,026
Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		(7,222)		—		—		(7,222)
TOTAL	$	318	$	(5,846)	$	423	$	(91)	$	(5,196)

Table 14

	Three Months Ended 09/30/2019
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Derivatives not designated as hedging instruments:
Economic hedges – unrealized gains (losses) due to fair value changes	$	(905)	$	(21,050)	$	—	$	(67)	$	1,962	$	(20,060)
Mortgage delivery commitments	—		—		365		—		—		365
Economic hedges – net interest received (paid)	(5)		(315)		—		(42)		(329)		(691)
Net gains (losses) on derivatives and hedging activities	(910)		(21,365)		365		(109)		1,633		(20,386)
Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		16,375		—		—		—		16,375
TOTAL	$	(910)	$	(4,990)	$	365	$	(109)	$	1,633	$	(4,011)

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Table 15

	Nine Months Ended 09/30/2020
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Derivatives not designated as hedging instruments:
Economic hedges – unrealized gains (losses) due to fair value changes	$	(3,809)	$	(93,790)	$	—	$	(1)	$	352	$	(97,248)
Mortgage delivery commitments	—		—		(5,995)		—		—		(5,995)
Discount note commitments	—		—		—		—		—		—
Economic hedges – net interest received (paid)	(96)		(32,227)		—		(145)		130		(32,338)
Net gains (losses) on derivatives and hedging activities	(3,905)		(126,017)		(5,995)		(146)		482		(135,581)
Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		92,220		—		—		—		92,220
TOTAL	$	(3,905)	$	(33,797)	$	(5,995)	$	(146)	$	482	$	(43,361)

Table 16

	Nine Months Ended 09/30/2019
	Advances		Investments		Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds		Total
Derivatives not designated as hedging instruments:
Economic hedges – unrealized gains (losses) due to fair value changes	$	(2,385)	$	(94,567)	$	—	$	18	$	15,467	$	(81,467)
Mortgage delivery commitments	—		—		3,836		—		—		3,836
Discount note commitments	—		—		—		(70)		—		(70)
Economic hedges – net interest received (paid)	(9)		700		—		(47)		(1,882)		(1,238)
Net gains (losses) on derivatives and hedging activities	(2,394)		(93,867)		3,836		(99)		13,585		(78,939)
Net gains (losses) on trading securities hedged on an economic basis with derivatives	—		87,361		—		—		—		87,361
TOTAL	$	(2,394)	$	(6,506)	$	3,836	$	(99)	$	13,585	$	8,422

For the three and nine months ended September 30, 2020, net gains and losses on derivatives and hedging activities resulted in an increase in net income of $2.0 million and a decrease in net income of $135.6 million, respectively, compared to decreases of $20.4 million and $78.9 million for the prior year periods primarily as a result of temporary changes in the fair values of derivatives resulting from market volatility related to the COVID-19 pandemic. Some recovery occurred in the second and third quarters of 2020, as spreads between investments and their associated swaps normalized from the widening that negatively impacted fair values during the first quarter of 2020. Further, the decrease in the level of swap index rates from September 30, 2019 to September 30, 2020 had a negative impact on the net interest settlements of interest rate swaps, which decreased net income by $14.2 million and $32.3 million for the three and nine months ended September 30, 2020, respectively, compared to a decrease in net income of $0.7 million and $1.2 million for the three and nine months ended September 30, 2019, respectively.

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The fair value changes on the economic interest rate swaps hedging the multifamily GSE MBS, U.S. Treasury obligations, and GSE debentures were partially offset by the fair value changes attributable to the swapped securities for the three and nine months ended September 30, 2020, which are recorded in net gains (losses) on trading securities. Table 18 depicts the considerable fair value impact of the aforementioned spread widening between investments and swaps that occurred in the first quarter of 2020, which is reflected in year-to-date results, while Table 17 depicts the impact of the subsequent recovery in the third quarter, as spreads held steady and rates declined. The unrealized gains on trading securities were generally driven by the decreases in interest rates between periods and are discussed in greater detail below. Tables 17 and 18 present the relationship between the trading securities and the associated interest rate swaps that do not qualify for hedge accounting treatment by investment type (in thousands):

Table 17

	Three Months Ended
	09/30/2020						09/30/2019
	Gain (Loss) on Derivatives		Gain (Loss) on Trading Securities		Net		Gain (Loss) on Derivatives		Gain (Loss) on Trading Securities		Net
U.S. Treasury obligations	$	9,068	$	(7,806)	$	1,262	$	(5,268)	$	2,565	$	(2,703)
GSE debentures	2,277		(1,144)		1,133		(3,709)		3,551		(158)
GSE MBS	4,085		1,728		5,813		(11,842)		10,259		(1,583)
TOTAL	$	15,430	$	(7,222)	$	8,208	$	(20,819)	$	16,375	$	(4,444)

Table 18

	Nine Months Ended
	09/30/2020						09/30/2019
	Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net		Gains (Losses) on Derivatives		Gains (Losses) on Trading Securities		Net
U.S. Treasury obligations	$	(27,687)	$	26,894	$	(793)	$	(25,894)	$	22,090	$	(3,804)
GSE debentures	(18,968)		17,839		(1,129)		(19,265)		18,747		(518)
GSE MBS	(47,319)		47,487		168		(48,916)		46,524		(2,392)
TOTAL	$	(93,974)	$	92,220	$	(1,754)	$	(94,075)	$	87,361	$	(6,714)

For additional detail regarding gains and losses on trading securities, see Table 19 and related discussion under this Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.”

See Tables 50 and 51 under Item 3 – “Quantitative and Qualitative Disclosures About Market Risk” for additional detail regarding notional and fair value amounts of derivative instruments.

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Net Gains (Losses) on Trading Securities: All unrealized gains and losses related to trading securities are recorded in other income (loss) as net gains (losses) on trading securities; however, only gains and losses relating to trading securities that are related to economic hedges are included in Tables 13 through 16. Unrealized gains (losses) fluctuate as the fair value of our trading portfolio fluctuates. There are a number of factors that can impact the fair value of a trading security including the movement in interest rates, changes in credit spreads, the passage of time, and changes in price volatility. Table 19 presents the major components of the net gains (losses) on trading securities (in thousands):

Table 19

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Trading securities not hedged:
GSE debentures	$	—	$	(58)	$	—	$	(495)
U.S. obligation MBS and GSE MBS	174		(8)		309		(82)
Short-term securities	53		(123)		240		—
Total trading securities not hedged	227		(189)		549		(577)
Trading securities hedged on an economic basis with derivatives:
U.S. Treasury obligations	(7,806)		2,565		26,894		22,090
GSE debentures	(1,144)		3,551		17,839		18,747
GSE MBS	1,728		10,259		47,487		46,524
Total trading securities hedged on an economic basis with derivatives	(7,222)		16,375		92,220		87,361
TOTAL	$	(6,995)	$	16,186	$	92,769	$	86,784

Our trading portfolio is comprised primarily of fixed rate U.S. Treasury obligations, GSE debentures, and multifamily GSE MBS, with a small percentage of variable rate GSE MBS. Periodically, we also invest in short-term securities classified as trading for liquidity purposes. In general, the fixed rate securities are related to economic hedges in the form of interest rate swaps that convert fixed rates to variable rates (see Tables 17 and 18 for the association between the gains (losses) on the fixed rate securities and the related economic hedges). The fair values of the fixed rate GSE debentures are affected by changes in intermediate interest rates and credit spreads, and are swapped on an economic basis to three-month LIBOR. The fair values of the fixed rate multifamily GSE MBS are affected by changes in mortgage rates and credit spreads, and these securities are swapped on an economic basis to one-month LIBOR. The fair values of the U.S. Treasury obligations are affected by changes in intermediate Treasury rates and swapped on an economic basis to the overnight index swap(OIS) rate or SOFR. Yields on U.S. Treasuries declined slightly during the third quarter of 2020 relative to the prevailing yields at the end of the second quarter, with the exception of higher yields for maturities 10 years and longer. The U.S. Treasuries and GSE debentures possess coupons that are above current market rates for similar securities and, therefore, are currently valued at premiums. As these securities approach maturity, their prices will converge to par resulting in a decrease in their current premium price (i.e., time decay). These securities are near enough to maturity that the price has begun converging to par, resulting in losses for the current quarter despite the decline in U.S. Treasury yields and intermediate interest rates. The gains for the current nine months reflect the decline in Treasury rates between September 30, 2019 and September 30, 2020. The decrease in intermediate interest rates between periods resulted in unrealized gains on the fixed rate GSE debentures for the nine months ended September 30, 2020. Unrealized gains on the fixed rate multifamily GSE MBS investments for the three and nine months ended September 30, 2020 were due to a decrease in mortgage-related interest rates between periods.

Other Expenses: Other expenses, which include compensation and benefits and other operating expenses, remained flat for the current quarter compared to the prior year quarter and increased $6.7 million for the nine months ended September 30, 2020, compared to the prior year period primarily due to the subsidy recorded for the below-market interest rates on COVID-19 Relief Advances. See "Financial Condition – Advances" under this Item 2 for additional information on the advances issued in response to COVID-19. We expect modest increases in compensation and benefits expense for the remainder of 2020 and for 2021 in anticipation of hiring for new positions. We also expect an increase in FHLBank System-related expenses in 2021. We do not expect a material increase in operating expenses related to the COVID-19 pandemic, as certain budgeted expenses were reallocated for pandemic-related operating expenses.

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Non-GAAP Measures: We fulfill our mission by: (1) providing liquidity to our members through the offering of advances to finance housing, economic development and community lending; (2) supporting residential mortgage lending through the MPF Program and purchases of MBS; and (3) providing regional affordable housing programs that create housing opportunities for very low-, low- and moderate-income families. In order to effectively accomplish our mission, we must obtain adequate funding amounts at acceptable interest rate levels. We use derivatives as tools to reduce our funding costs and manage interest rate risk and prepayment risk. We also acquire and classify certain investments as trading securities for liquidity and asset-liability management purposes. Although we strive to manage interest rate risk and prepayment risk utilizing these transactions for asset-liability tools, we do not manage the fluctuations in the fair value of our derivatives or trading securities. We are essentially a “hold-to-maturity” investor and transact derivatives only for hedging purposes, even though some derivative hedging relationships do not qualify for hedge accounting under GAAP (referred to as economic hedges) and therefore can add significant volatility to our GAAP net income.

We believe that certain non-GAAP financial measures are helpful in understanding our operating results and provide meaningful period-to-period comparison of our long-term economic value in contrast to GAAP results, which can be impacted by fair value changes driven by market volatility, gains/losses on instrument sales, or transactions that are considered unpredictable. However, we may engage in periodic instrument sales for liquidity purposes or to reduce our exposure to LIBOR-indexed instruments. We report the following non-GAAP financial measures that we believe are useful to stakeholders as key measures of our operating performance: (1) adjusted income, (2) adjusted net interest income, (3) adjusted net interest margin, and (4) adjusted ROE. Reconciliations of these non-GAAP financial measures to the most comparable GAAP measure are included below. Although we calculate our non-GAAP financial measures consistently from period to period using appropriate GAAP components, non-GAAP financial measures are not required to be uniformly applied and are not audited. Another material limitation associated with the use of non-GAAP financial measures is that they have no standardized measurement prescribed by GAAP and may not be comparable to similar non-GAAP financial measures used by other companies. While we believe the non-GAAP measures contained in this quarterly report are frequently used by our stakeholders in the evaluation of our performance, such non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of financial information prepared in accordance with GAAP.

As part of evaluating our financial performance, we adjust net income reported in accordance with GAAP for the impact of: (1) AHP assessments (equivalent to an effective minimum income tax rate of 10 percent); (2) fair value changes on derivatives and hedging activities (excludes net interest settlements); and (3) unpredictable items, such as prepayment fees, gains/losses on retirement of debt, gains/losses on mortgage loans held for sale, and gains/losses on securities. The result is referred to as “adjusted income,” which is a non-GAAP measure of income. Adjusted income is used to compute an adjusted ROE that is then compared to the average overnight Federal funds effective rate, with the difference referred to as adjusted ROE spread. Components of adjusted income and adjusted ROE spread are used: (1) to measure performance under our incentive compensation plans; (2) as a measure in determining the level of quarterly dividends; and (3) in strategic planning. While we utilize adjusted income as a key measure in determining the level of dividends, we consider GAAP net income volatility caused by gains (losses) on derivatives and hedging activities and trading securities in determining the adequacy of our retained earnings as determined under GAAP. Because the adequacy of GAAP retained earnings is considered in setting the level of our quarterly dividends, gains (losses) on derivatives and hedging activities and trading securities can come into consideration when setting the level of our quarterly dividends. Because we are primarily a “hold-to-maturity” investor and do not trade derivatives, we believe that adjusted income, adjusted ROE and adjusted ROE spread are helpful in understanding our operating results and provide a meaningful period-to-period comparison. In contrast, GAAP net income, ROE based on GAAP net income and ROE spread based on GAAP net income can vary significantly from period to period because of fair value changes on derivatives and certain other items that management excludes when evaluating operational performance. Management believes such volatility hinders a consistent measurement analysis.

Derivative and hedge accounting affects the timing of income or expense from derivatives. However, when the derivatives are held to maturity or call dates, there is no economic income or expense impact from these derivatives. For example, interest rate caps are purchased with an upfront fixed cost to provide protection against the risk of rising interest rates. Under derivative accounting guidance, these instruments are then marked to fair value each month, which can result in having to recognize significant fair value gains and losses from year to year, producing volatility in our GAAP net income. However, if held to maturity, the sum of such gains and losses over the term of a derivative will equal its original purchase price.

In addition to impacting the timing of income and expense from derivatives, derivative accounting also impacts the presentation of net interest settlements on derivatives and hedging activities. This presentation differs under GAAP for economic hedges when compared to hedges that qualify for hedge accounting. Net interest settlements on economic hedges are included with the economic derivative fair value changes and are recorded in net gains (losses) on derivatives and hedging activities while the net interest settlements on qualifying fair value hedges are included in net interest margin. Therefore, only the economic derivative fair value changes and the ineffectiveness for qualifying hedges are removed to arrive at adjusted income (i.e., net interest settlements, which represent actual cash inflows or outflows and do not create fair value volatility, are not removed).

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Adjusted income was $34.2 million for the quarter ended September 30, 2020 compared to $45.2 million for the quarter ended September 30, 2019 and $91.3 million for the nine months ended September 30, 2020 compared to $145.3 million for the nine months ended September 30, 2019. The decreases for both the current three- and nine-month periods compared to GAAP net income was a result of the decline in adjusted net interest income due to the impact of lower market interest rates on net interest settlements, which resulted in income in 2019 and expense in 2020 reported in adjusted net interest income (see Table 21). Fair value gains and losses in GAAP net interest margin are removed while interest settlements on economic derivatives are added or subtracted from GAAP net interest income so that only the derivative interest settlements are recorded in net interest margin for adjusted net interest income presentation purposes. See further details below, including a reconciliation of adjusted income and adjusted net interest income.

Table 20 presents a reconciliation of GAAP net income to adjusted income (in thousands):

Table 20

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Net income, as reported under GAAP	$	39,984	$	48,491	$	72,058	$	132,964
AHP assessments	4,444		5,391		8,012		14,786
Income before AHP assessments	44,428		53,882		80,070		147,750
Derivative (gains) losses1	(16,156)		7,895		109,742		84,800
Trading (gains) losses	6,995		(16,186)		(92,769)		(86,784)
Prepayment fees on terminated advances	(1,067)		(373)		(4,252)		(517)
Net (gains) losses on sale of held-to-maturity securities	—		—		—		46
Net (gains) losses on sale of available-for-sale securities	—		—		(1,523)		—
Total excluded items	(10,228)		(8,664)		11,198		(2,455)
Adjusted income (a non-GAAP measure)	$	34,200	$	45,218	$	91,268	$	145,295

1    Consists of fair value changes on all derivatives and hedging activities excluding net interest settlements on economic hedges.

Table 21 presents a reconciliation of GAAP net interest income to adjusted net interest income (in thousands):

Table 21

	Three Months Ended						Nine Months Ended
	09/30/2020			09/30/2019			09/30/2020			09/30/2019
Net interest income, as reported under GAAP	$	64,788		$	74,415		$	176,551		$	186,660
(Gains) losses on derivatives qualifying for hedge accounting recorded in net interest income	92			(11,800)			6,499			7,099
Net interest settlements on derivatives not qualifying for hedge accounting	(14,222)			(691)			(32,338)			(1,238)
Prepayment fees on terminated advances	(1,067)			(373)			(4,252)			(517)
Adjusted net interest income (a non-GAAP measure)	$	49,591		$	61,551		$	146,460		$	192,004
Net interest margin, as calculated under GAAP	0.47		%	0.51		%	0.41		%	0.45		%
Adjusted net interest margin (a non-GAAP measure)	0.36		%	0.42		%	0.34		%	0.46		%

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Management uses adjusted income to evaluate the quality of our earnings. FHLBank management believes that the presentation of adjusted income as measured for management purposes enhances the understanding of our performance by highlighting its underlying results and profitability. Management uses adjusted net interest income to evaluate the earnings impact of economic hedges. Under GAAP, the net interest amount that converts economically swapped fixed rate investments or liabilities to a variable rate is recorded as part of net gains (losses) on derivatives and hedging activities rather than net interest income. Presenting fixed rate investments with the corresponding net interest amount in adjusted net interest income reflects the widening of the spread between the variable rate assets created by the economic hedge and the variable rate liabilities funding them as a result of the change in average LIBOR, SOFR, or OIS between periods. Fair value gains and losses on fair value hedges are required to be presented in the income statement line item related to the hedged item, which impacts net interest income. These fluctuations are excluded from the calculation of adjusted net income and adjusted net interest income.

Table 22 presents a comparison of adjusted ROE (a non-GAAP financial measure) to the average overnight Federal funds rate, which we use as a key measure of effective utilization and management of members’ capital. The decrease in adjusted ROE for the three and nine months ended September 30, 2020 compared to the prior year period reflects the decrease in adjusted net income. The decrease for the nine-month period also reflects the increase in average capital. Adjusted ROE spread is calculated as follows (dollar amounts in thousands):

Table 22

	Three Months Ended						Nine Months Ended
	09/30/2020			09/30/2019			09/30/2020			09/30/2019
Average GAAP total capital	$	2,507,909		$	2,551,704		$	2,593,471		$	2,490,516
ROE, based upon GAAP net income	6.34		%	7.54		%	3.71		%	7.14		%
Adjusted ROE, based upon adjusted income	5.43		%	7.03		%	4.70		%	7.80		%
Average overnight Federal funds effective rate	0.09		%	2.20		%	0.45		%	2.33		%
Adjusted ROE as a spread to average overnight Federal funds effective rate	5.34		%	4.83		%	4.25		%	5.47		%

Financial Condition

Overall: Total assets declined between periods, from $63.3 billion at December 31, 2019 to $53.0 billion at September 30, 2020, driven mostly by the $7.6 billion, or 25.2 percent, decline in advances between periods as many members experienced significant deposit inflows and excess liquidity as a result of economic stimulus packages passed by Congress along with the Federal Reserve Bank’s easing of monetary policy, security purchase programs, and lending facilities. Mortgage loans decreased by $0.5 billion during the first nine months of 2020, representing 19.0 percent of total assets as of September 30, 2020, compared to 16.8 percent as of December 31, 2019. Mortgage loans are one of the highest net spread assets on our balance sheet and as they increase as a percent of total assets, all things being equal, they have the potential to increase our net interest margin, although accelerated premium amortization from mortgage loan prepayments has resulted in spread compression in recent periods. Total liabilities decreased $10.1 billion from December 31, 2019 to September 30, 2020 which corresponded with the decline in assets, and the funding mix shifted to a lower percentage of discount notes between periods, as we issued more floating rate debt indexed to SOFR to better reflect the repricing characteristics of our assets. Our funding mix generally is driven by asset composition, but we may also shift our debt composition as a result of market conditions that impact the cost of consolidated obligations swapped or indexed to SOFR, Prime, Treasury bills, or OIS. For additional information on market trends impacting the cost of issuing debt, including discussion of the transition from LIBOR to an alternate reference rate, see "Financial Market Trends" and "Financial Condition" under this Item 2.

Total capital decreased $191.1 million, or 6.8 percent, from December 31, 2019 to September 30, 2020 primarily due to a decrease in required capital stock related to the decline in advance utilization between periods, resulting in excess stock that was subsequently repurchased, partially offset by the increase in required capital stock for AMA from the change to the AMA activity-based stock purchase requirement from zero to three percent effective August 5, 2020.

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Dividends paid to members totaled $53.7 million for the nine months ended September 30, 2020 compared to $74.0 million for the same period in the prior year. From September 30, 2019 to September 30, 2020, the dividend rate for Class A Common Stock decreased from 2.50 percent to 0.25 percent and the dividend rate for Class B Common Stock decreased from 7.50 percent to 5.25 percent. The weighted average dividend rate for the three months ended September 30, 2020 was 3.69 percent, which represented a dividend payout ratio of 35.1 percent, compared to a weighted average dividend rate of 6.61 percent and a payout ratio of 53.3 percent for the same period in 2019. The weighted average dividend rate for the nine months ended September 30, 2020 was 4.48 percent, which represented a dividend payout ratio of 74.6 percent, compared to a weighted average dividend rate of 6.58 percent and a payout ratio of 55.7 percent for the same period in 2019. The increase in payout ratios between the nine-month periods was a result of the decline in income as a result of the aforementioned COVID-19 market volatility that began near the end of the first quarter of 2020. The dividend payout ratio represents dividends declared and paid during a quarter as a percentage of net income for the quarter, although FHFA regulation requires dividends be paid out of known income prior to the declaration date. For example, dividends declared and paid in September 2020 were based on income during the three months ended August 2020. Our dividend rates have historically moved in tandem with short-term market rates, so the decrease reflects the decline in market interest rates resulting from FOMC rate cuts in March 2020 to stimulate the U.S. economy. (See Item 1 – “Business – Capital, Capital Rules and Dividends” of our Form 10-K for other factors that contribute to the level of dividends paid). We anticipate stock dividends on Class A Common Stock and Class B Common Stock will remain at these lower levels for the remainder of 2020, consistent with the lower level of short‑term interest rates and our retained earnings policy.

The majority of our short-term advances and overnight investments are funded with floating rate bonds to achieve certain liquidity targets, which is reflected in Table 23, as the allocation of discount notes decreased and bonds increased. Table 23 presents the percentage concentration of the major components of our Statements of Condition:

Table 23

	Component Concentration
	09/30/2020		12/31/2019
Assets:
Cash and due from banks	0.1	%	3.0	%
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	12.3		10.3
Investment securities	25.2		21.4
Advances	42.7		47.8
Mortgage loans, net	19.0		16.8
Other assets	0.7		0.7
Total assets	100.0	%	100.0	%
Liabilities:
Deposits	1.9	%	1.2	%
Consolidated obligation discount notes, net	22.5		43.4
Consolidated obligation bonds, net	70.4		50.6
Other liabilities	0.3		0.4
Total liabilities	95.1		95.6
Capital:
Capital stock outstanding	3.0		2.8
Retained earnings	1.9		1.6
Accumulated other comprehensive income (loss)	—		—
Total capital	4.9		4.4
Total liabilities and capital	100.0	%	100.0	%

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Table 24 presents changes in the major components of our Statements of Condition (dollar amounts in thousands):

Table 24

	Increase (Decrease) in Components
	09/30/2020 vs. 12/31/2019
	Dollar Change		Percent Change
Assets:
Cash and due from banks	$	(1,894,462)	(98.8)	%
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold	13,209		0.2
Investment securities	(182,498)		(1.3)
Advances	(7,625,063)		(25.2)
Mortgage loans, net	(539,543)		(5.1)
Other assets	(36,923)		(9.3)
Total assets	$	(10,265,280)	(16.2)	%
Liabilities:
Deposits	$	225,676	28.5	%
Consolidated obligation discount notes, net	(15,511,697)		(56.5)
Consolidated obligation bonds, net	5,280,855		16.5
Other liabilities	(68,999)		(29.5)
Total liabilities	(10,074,165)		(16.7)
Capital:
Capital stock outstanding	(185,715)		(10.5)
Retained earnings	22,757		2.3
Accumulated other comprehensive income (loss)	(28,157)		(113.6)
Total capital	(191,115)		(6.8)
Total liabilities and capital	$	(10,265,280)	(16.2)	%

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Advances: Our advance products are developed, as authorized in the Bank Act and regulations established by the FHFA, to meet the specific liquidity and term funding needs of our members. As a wholesale provider of funds, we compete with brokered certificates of deposit and security repurchase agreements. The Federal Reserve Bank’s PPP Liquidity Facility was a direct competitor for FHLBank advances during the second and third quarters of 2020, although any quantification of that impact on advance balances is difficult to determine. We strive to price our advances relative to our marginal cost of funds while trying to remain competitive with the wholesale funding markets. While there is typically less competition in the long-term maturities, member demand for advances in these maturities has historically been lower than the demand for advances with short- and medium-term maturities. Nonetheless, long-term advances are also priced at relatively low spreads to our cost of funds. We continuously evaluate our product offerings in an effort to anticipate and meet member demand and stay competitive, especially as funding availability changes, including the transition from LIBOR to other indices with less optionality. As such, in October of the current year, we placed a moratorium on the issuance of convertible advances and we no longer offer the Member Option Advance, which is a form of callable advance where the cost of the call option is paid upfront.

Advances decreased $7.6 billion from December 31, 2019 to September 30, 2020 as a result of a decrease in member demand for advances, as many members experienced significant deposit inflows and excess liquidity as a result of economic stimulus packages passed by Congress along with the Federal Reserve Bank’s easing of monetary policy, security purchase programs, and lending facilities. Though the majority of the decrease in advances is attributable to our largest borrowers, the decline in advance demand was widespread among FHLBank membership. Advance composition shifted from adjustable rate to fixed rate, as members called adjustable rate callable advances in favor of regular and short-term fixed rate advances as interest rates declined. Members also modified advances to lower rates and extended fixed rate advance terms as a result of the decline in interest rates. We anticipate volatility in advance balances in 2020 based on several factors related to the COVID-19 pandemic, including large members with relatively strong deposit growth and access to other funding sources, which could cause an additional decline in advance balances. We also anticipate an increase in advance modifications, which will lower the yield on the portfolio to current market rates but the advance is retained and the member pays a prepayment fee for the modification.

During the three months ended June 30, 2020, we issued subsidized COVID-19 Relief Advances to help members serve their customers affected by the COVID-19 pandemic. The zero-cost advances have a term of six months and the low-cost advances have terms between 6 and 24 months. As of September 30, 2020, $0.5 billion and $0.5 billion of zero-cost and low-cost advances were outstanding, respectively. Advances are no longer being issued under this program, but management continues to monitor the progress of the pandemic and is committed to assisting our members and their communities as impacts related to the COVID-19 pandemic continue to unfold.

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Table 25 summarizes advances outstanding by product (dollar amounts in thousands):

Table 25

	09/30/2020				12/31/2019
	Dollar		Percent		Dollar		Percent
Adjustable rate:
Standard advance products:
Line of credit	$	2,075,378	9.3	%	$	9,421,491	31.2	%
Regular adjustable rate advances	1,055,000		4.7		665,000		2.2
Adjustable rate callable advances	2,469,800		11.1		11,444,700		38.0
Standard housing and community development advances:
Adjustable rate callable advances	35,712		0.2		37,212		0.1
Total adjustable rate advances	5,635,890		25.3		21,568,403		71.5
Fixed rate:
Standard advance products:
Short-term fixed rate advances	8,186,469		36.7		1,111,007		3.7
Regular fixed rate advances	5,608,844		25.1		4,717,025		15.6
Fixed rate callable advances	20,146		0.1		17,241		0.1
Standard housing and community development advances:
Regular fixed rate advances	474,987		2.1		470,925		1.6
Fixed rate callable advances	831		—		2,831		—
Total fixed rate advances	14,291,277		64.0		6,319,029		21.0
Convertible:
Standard advance products:
Fixed rate convertible advances	1,735,900		7.8		1,607,500		5.3
Amortizing:
Standard advance products:
Fixed rate amortizing advances	331,643		1.5		331,551		1.1
Fixed rate callable amortizing advances	6,891		—		10,807		—
Standard housing and community development advances:
Fixed rate amortizing advances	296,551		1.4		324,477		1.1
Fixed rate callable amortizing advances	8,680		—		10,288		—
Total amortizing advances	643,765		2.9		677,123		2.2
TOTAL PAR VALUE	$	22,306,832	100.0	%	$	30,172,055	100.0	%

An individual advance may be reclassified to a different product type between periods due to the occurrence of a triggering event such as the passing of a call date (i.e., from fixed rate callable advance to regular fixed rate advance) or conversion of an advance (i.e., from fixed rate convertible advance to adjustable rate callable advance).

Advances are one of the primary ways we fulfill our mission of providing liquidity to our members and constituted the largest asset on our balance sheet at September 30, 2020 and December 31, 2019. Advance par value decreased by 26.1 percent from December 31, 2019 to September 30, 2020 (see Table 25) and the majority of the decrease was in line-of-credit and short-term adjustable rate advances. The composition of the advance portfolio remains concentrated in advances that either reprice or mature on a relatively short-term basis as members continue to benefit from pricing efficiency in a declining interest rate environment. Members are beginning to transition away from regular adjustable rate callable advances as pricing on other products has become more attractive and we expect this trend to continue.

77

As of September 30, 2020 and December 31, 2019, 61.9 percent and 57.6 percent, respectively, of our members carried outstanding advance balances. The overall demand for our advances is typically influenced by our members’ ability to profitably invest the funds in loans and investments as well as their need for liquidity, which is influenced by changes in loan demand and their ability to efficiently grow deposits proportionately. As previously mentioned, most members are flush with liquidity as a result of economic stimulus payments and other funding options such as the Federal Reserve Bank's PPP Liquidity Facility. The attractiveness of our advances is also influenced by the impact our dividends have on the effective cost of advances. Following the recent steep decline in rates, our short-term advances should continue to become more attractive relative to other funding options even when taking the reduction in dividend rates into consideration. We experienced advance growth from our smaller members in the short term as they took advantage of the subsidized COVID-19 Relief Advances to help serve their customers affected by the COVID-19 pandemic, but this increase did not offset decreases from larger members as previously discussed. When, and if, member advance demand changes, a few larger members could have a significant impact on the amount of total outstanding advances. If our members reduce the volume of their advances, we expect to continue our past practice of repurchasing excess capital stock.

Rather than match-funding long-term, fixed rate, large dollar advances, we elect to swap a significant portion of large dollar advances with longer maturities to short-term indices (e.g., OIS beginning in late 2018 and SOFR beginning in 2019) to synthetically create adjustable rate advances. When coupled with the volume of our short-term advances, advances that effectively re-price at least every three months represent 87.1 percent and 91.0 percent of our total advance portfolio as of September 30, 2020 and December 31, 2019, respectively. We anticipate continuing the practice of swapping large dollar advances with longer maturities to short-term indices. In the first quarter of 2019, we began swapping fixed rate non-callable advances to SOFR as part of our plan to transition away from LIBOR as a reference rate. For additional information on our LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under this Item 2.

Table 26 presents information on our five largest borrowers (dollar amounts in thousands). Based on no historical loss experience on advances since the inception of FHLBank, along with our rights to collateral with an estimated fair value in excess of the book value of these advances, we do not expect to incur any credit losses on these advances.

Table 26

	09/30/2020				12/31/2019
Borrower Name	Advance Par Value		Percent of Total Advance Par		Advance Par Value		Percent of Total Advance Par
MidFirst Bank	$	7,130,000	32.0	%	$	8,585,000	28.5	%
Capitol Federal Savings Bank	1,793,000		8.0		2,090,000		6.9
United of Omaha Life Insurance Co.	1,295,176		5.8		1,205,761		4.0
Security Life of Denver Insurance Co.	1,010,000		4.5		925,000		3.1
BOKF, N.A.	700,000		3.1		4,500,000		14.9
TOTAL	$	11,928,176	53.4	%	$	17,305,761	57.4	%

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Table 27 presents the accrued interest income associated with the five borrowers with the highest interest income for the periods presented (dollar amounts in thousands). If the borrower was not one of our top five borrowers for whom we accrued the highest amount of interest income for one of the periods presented, the applicable columns are left blank.

Table 27

	Three Months Ended
	09/30/2020				09/30/2019
Borrower Name	Advance Income		Percent of Total Advance Income1		Advance Income		Percent of Total Advance Income1
Capitol Federal Savings Bank	$	6,500	11.9	%	$	14,915	8.2	%
MidFirst Bank	5,005		9.2		39,859		21.9
American Fidelity Assurance Co.	2,864		5.2
United of Omaha Life Insurance Co.	1,776		3.3		6,053		3.3
CrossFirst Bank	1,582		2.9
BOKF, N.A.					49,347		27.0
Security Life of Denver Insurance Co.					4,262		2.3
TOTAL	$	17,727	32.5	%	$	114,436	62.7	%

1    Total advance income by borrower excludes: (1) changes in unrealized gains (losses) from qualifying fair value hedging relationships; (2) net interest settlements on derivatives hedging the advances; and (3) prepayment fees received.

Table 28 presents accrued interest income associated with the five borrowers with the highest interest income for the periods presented (dollar amounts in thousands). If the borrower was not one of our top five borrowers for whom we accrued the highest amount of interest income for one of the periods presented, the applicable columns are left blank.

Table 28

	Nine Months Ended
	09/30/2020				09/30/2019
Borrower Name	Advance Income		Percent of Total Advance Income1		Advance Income		Percent of Total Advance Income1
MidFirst Bank	$	43,643	17.0	%	$	126,013	23.1	%
BOKF, N.A.	31,235		12.1		143,014		26.2
Capitol Federal Savings Bank	25,493		9.9		40,476		7.4
American Fidelity Assurance Co.	9,169		3.6
United of Omaha Life Insurance Co.	8,774		3.4		18,285		3.3
Security Life of Denver Insurance Co.					12,046		2.2
TOTAL	$	118,314	46.0	%	$	339,834	62.2	%

1    Total advance income by borrower excludes: (1) changes in unrealized gains (losses) from qualifying fair value hedging relationships; (2) net interest settlements on derivatives hedging the advances; and (3) prepayment fees received.

See Table 4 for information on the amount of interest income on advances as a percentage of total interest income for the three and nine months ended September 30, 2020 and 2019.

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

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The principal amount of new mortgage loans acquired and held on our balance sheet from our PFIs during the nine months ended September 30, 2020 was $2.4 billion. The low interest rate environment has increased mortgage loan prepayments, which has resulted in a decrease of 5.1 percent in the outstanding net balance of our mortgage loan portfolio from December 31, 2019 to September 30, 2020. Net mortgage loans as a percentage of total assets increased, from 16.8 percent as of December 31, 2019 to 19.0 percent as of September 30, 2020. Table 4 presents the amount of interest income on mortgage loans held for portfolio as a percentage of total interest income for the three and nine months ended September 30, 2020 and 2019.

As a result of the recent decline in advances, we are monitoring our targeted AMA risk tolerance as a percent of our balance sheet and are implementing strategies to manage growth in the mortgage loan portfolio. Future growth in the MPF portfolio is a function of asset size and composition, most notably the balance of advances, and a multiple of capital, as growth in advances impacts our capital level and allows the balance of mortgage loans to increase without exceeding our targeted AMA risk tolerance. The other factors that may influence future growth in our mortgage loans held for portfolio include: (1) the number of new and delivering PFIs; (2) the mortgage loan origination volume of current PFIs; (3) refinancing activity; (4) the level of interest rates and the shape of the yield curve; (5) the relative competitiveness of MPF pricing to the prices offered by other buyers of residential mortgage loans; and (6) a PFI's level of excess risk-based capital relative to the required risk-based capital charge associated with the PFI's credit enhancement obligations on MPF mortgage loans. In an effort to manage the level of mortgage loans on our books, management has researched and continues to review options including participating loan volume (as described below) to members or other investors if needed. Although we may determine to sell whole loans from time to time, we have not identified any specific loans to be sold as of September 30, 2020. The MPF Program is evaluating additional liquidity options that may help participating FHLBanks manage the size of their mortgage loan portfolios in the future.

Historically, we have used the MPF Xtra product to effectively restrict the growth in mortgage loans held for portfolio and provide management with adequate means to control the amount of mortgage loan portfolio volume retained on our balance sheet to maintain our desired asset composition. The MPF Xtra product is a structure where our PFIs sell mortgage loans to FHLBank Chicago and simultaneously to Fannie Mae. MPF Government MBS is a similar product that allows our PFIs to sell mortgages to FHLBank Chicago that are pooled into Ginnie Mae securities. We also offer the MPF Direct product, which provides the PFI the opportunity to sell a jumbo loan under the MPF Program structure to an unaffiliated third party for securitization. These products are intended to further assist our members and their mortgage product needs while enhancing our ability to manage mortgage volumes and receive a counterparty fee from FHLBank Chicago based on mortgage volumes sold by our PFIs. We have the authority to offer participation interests in risk sharing MPF loan pools to member institutions and mortgage loan participations with another FHLBank, which may further enhance our ability to manage the size of our mortgage loan portfolio in the future. We expect our utilization of MPF Xtra to increase in the last half of 2020.

Table 29 presents the outstanding balances of mortgage loans sold to us, net of participations, from our top five PFIs and the percentage of those loans to total mortgage loans outstanding (dollar amounts in thousands). If the member was not one of our top five PFIs for one of the periods presented, the applicable columns are left blank.

Table 29

	09/30/2020				12/31/2019
	Mortgage Loan Balance		Percent of Total Mortgage Loans		Mortgage Loan Balance		Percent of Total Mortgage Loans
NBKC Bank	$	645,162	6.5	%	$	925,748	8.8	%
Fidelity Bank	377,061		3.8		393,205		3.8
FirstBank of Colorado	365,200		3.7		424,437		4.1
Tulsa Teachers Credit Union	354,541		3.5
West Gate Bank	316,978		3.2
Mutual of Omaha Bank					396,389		3.8
Sunflower Bank					383,226		3.7
TOTAL	$	2,058,942	20.7	%	$	2,523,005	24.2	%

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Two indications of credit quality are scores provided by Fair Isaac Corporation (FICO®) and loan-to-value (LTV) ratios. FICO is a widely used credit industry indicator to assess borrower credit quality with scores typically ranging from 300 to 850 with the low end of the scale indicating greater credit risk. The MPF Program requires a minimum FICO score of 620 for all conventional loans. LTV is a primary variable in credit performance. Generally speaking, a higher LTV ratio means greater risk of loss in the event of a default and also means higher loss severity. The weighted average FICO score and LTV recorded at origination for conventional mortgage loans outstanding as of September 30, 2020 was 750 and 74.1 percent, respectively. See Note 5 of the Notes to Financial Statements under Part I, Item 1 for additional information regarding credit quality indicators.

Allowance for Credit Losses on Mortgage Loans Held for Portfolio – The allowance for credit losses increased $6.9 million from December 31, 2019 to September 30, 2020 primarily as a result of the adoption of new accounting guidance pertaining to measurement of credit losses on financial instruments that resulted in an adjustment to retained earnings of 6.1 million. The small increase in the provision in the current quarter was due to an increase in serious delinquencies largely attributable to the negative impact of the COVID-19 pandemic on some borrowers. Continued strong performance among those borrowers not directly impacted by COVID-19 and a more favorable outlook on the recovery in the labor markets slightly offset the increase in forecasted losses for those borrowers experiencing COVID-19 related stress. We anticipate an increase in charge-offs for the remainder of 2020 as a result of the aforementioned increase in serious delinquencies, but we do not anticipate this increase to result in a material increase in the allowance for credit losses. As of September 30, 2020, there was $132.9 million, or 1.4 percent, of unpaid principal balances of conventional loans in a forbearance plan as a result of COVID-19, representing $5.1 million, $13.7 million, $17.7 million, and $96.4 million with payment status of current, 30 to 59 days past due, 60 to 89 days past due, and greater than 90 days past due, respectively. Delinquencies of conventional loans, including loans in a COVID-19 forbearance plan, remained at low levels relative to the portfolio, at 2.2 percent and 0.8 percent of total conventional loans at September 30, 2020 and December 31, 2019, respectively. We believe that policies and procedures are in place to effectively manage the credit risk on mortgage loans held in portfolio. See Note 5 of the Notes to Financial Statements under Part I, Item 1 for a summary of the allowance for credit losses on mortgage loans as well as payment status and other delinquency statistics for our mortgage loan portfolio.

The CARES Act allows financial institutions to provide payment forbearance to assist borrowers who have experienced a hardship resulting from COVID-19. The MPF Provider released information on COVID-19 borrower assistance plans, and the FHLBank System continues to consider additional relief in line with the CARES Act, which could impact our mortgage loan portfolio and allowance in future periods. For additional information on loans under forbearance, see Note 5 of the Notes to Financial Statements under Part I, Item 1.

Investments: Investments are used to enhance income and provide liquidity and primary and secondary market support for the U.S. housing securities market. Total investments were relatively steady from December 31, 2019 to September 30, 2020 as purchases of securities and increases in the carrying value of securities held at fair value were generally offset by maturities and sales of long-term investment securities.

Short-term Investments – Short-term investments, which are used to provide funds to meet the credit needs of our members, maintain liquidity, meet other financial obligations such as debt servicing, and enhance income, consist primarily of reverse repurchase agreements, interest-bearing deposits, overnight Federal funds sold, term Federal funds sold, and certificates of deposit. The Bank Act and FHFA regulations and guidelines set liquidity requirements for us, and our board of directors has adopted additional liquidity policies. In addition, we maintain a contingency liquidity plan in the event of financial market disruptions. See “Risk Management – Liquidity Risk Management” under this Item 2 for a discussion of our liquidity management.

Within our portfolio of short-term investments, we face credit risk from unsecured exposures. Our short-term unsecured credit investments have maturities generally ranging between overnight and three months and may include the following types:

•Interest-bearing deposits. Unsecured deposits that earn interest.

•Federal funds sold. Unsecured loans of reserve balances at the Federal Reserve Banks between financial institutions that are made on either an overnight or term basis.

•Certificates of deposit. Unsecured negotiable promissory notes issued by banks and payable to the bearer at maturity.

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Table 30 presents the carrying value of our unsecured credit exposure with private counterparties by investment type (in thousands). The unsecured investment credit exposure presented may not reflect the average or maximum exposure during the period as the balances presented reflect the balances at period end.

Table 30

	09/30/2020		12/31/2019
Interest-bearing deposits	$	488,028	$	919,693
Federal funds sold	1,435,000		850,000
Certificates of deposit	225,053		—
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	2,148,081	$	1,769,693

1    Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities and does not include related accrued interest.

We actively monitor our credit exposures and the credit quality of our counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, sovereign support and the current market perceptions of the counterparties. General macro-economic, political and market conditions may also be considered when deciding on unsecured exposure. As a result, we may further limit existing exposures.

FHFA regulations: (1) include limits on the amount of unsecured credit an individual FHLBank may extend to a counterparty or to a group of affiliated counterparties; (2) permit us to extend additional unsecured credit for overnight extensions of credit, subject to limitations; and (3) prohibit us 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. For additional information on our management of unsecured credit exposure, see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Investments” in our annual report on Form 10-K for the year ended December 31, 2019. As of September 30, 2020, we were in compliance with all FHFA regulations relating to unsecured credit exposure.

We manage our credit risk by conducting pre-purchase credit due diligence and on-going surveillance described previously and generally investing in unsecured investments of highly-rated counterparties. From time to time, we extend unsecured credit to qualified members by investing in overnight Federal funds issued by them. As of September 30, 2020, all unsecured investments were rated as investment grade based on NRSROs (see Table 34).

Table 31 presents the amount of our unsecured investment credit exposure by remaining contractual maturity and by the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks as of September 30, 2020 (in thousands). We also mitigate the credit risk on investments by generally investing in investments that have short-term maturities.

Table 31

Domicile of Counterparty	Overnight		Due 31 – 90 days		Total
Domestic	$	488,028	$	—	$	488,028
U.S. Branches and agency offices of foreign commercial banks:
Canada	500,000		—		500,000
Germany	230,000		225,053		455,053
Netherlands	455,000		—		455,000
Finland	250,000		—		250,000
Total U.S. Branches and agency offices of foreign commercial banks	1,435,000		225,053		1,660,053
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	1,923,028	$	225,053	$	2,148,081

1    Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities, and does not include related accrued interest.

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Unsecured credit exposure continues to be cautiously placed. In addition, we anticipate continued future investment in reverse repurchase agreements, which are secured investments, and limiting unsecured exposure, especially to foreign financial institutions, as long as the interest rates are comparable. To enhance our liquidity position, we classify our unsecured short-term investment securities in our trading portfolio, which allows us to sell these securities if necessary.

Long-term investments – Our long-term investment portfolio consists primarily of GSE MBS and U.S. Treasury obligations. Our Risk Management Policy (RMP) restricts the acquisition of investments to highly rated long-term securities. During the last half of 2018, we began acquiring fixed rate U.S. Treasury obligations and swapping these securities from fixed to variable rates, as either trading securities that are economically swapped or, beginning in 2019, available-for-sale securities that are swapped in qualifying fair value hedging relationships. In addition to serving as excellent collateral, U.S. Treasuries also satisfy recent changes to regulatory liquidity requirements. Currently, the vast majority of our variable rate investment securities are indexed to LIBOR. For additional information on our LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under this Item 2.

According to FHFA regulation, no additional MBS purchases can be made if the amortized cost of our mortgage securities exceeds 300 percent of our regulatory capital. Further, quarterly increases in holdings of mortgage securities are restricted to no more than 50 percent of regulatory capital. As of September 30, 2020, the amortized cost of our MBS portfolio represented 270 percent of our regulatory capital. At times we may exceed the required threshold due to decreases in regulatory capital; however, we were in compliance with the regulatory limit at the time of each purchase during the nine months ended September 30, 2020. We were below our threshold at September 30, 2020 due to limited MBS investment opportunities not indexed to LIBOR, as we are no longer purchasing investments that reference LIBOR and mature after December 31, 2021.

As of September 30, 2020, we held $2.9 billion, $2.9 billion, and $0.8 billion of par value in MBS in our held-to-maturity, available-for-sale, and trading portfolios, respectively. The majority of the MBS in the held-to-maturity portfolio are variable rate GSE securities. The majority of the MBS in the trading and available-for-sale portfolios are fixed rate GSE securities, which are swapped from fixed to variable rates.

Major Security Types – Securities for which we have the ability and intent to hold to maturity are classified as held-to-maturity securities and recorded at carrying value, which is the net total of par, premiums, and discounts. We classify certain investments as trading or available-for-sale securities and carry them at fair value, generally for liquidity purposes, to provide a fair value offset to the gains (losses) on the interest rate swaps tied to swapped securities, and for asset/liability management purposes. Liquidity or other asset/liability management strategies, such as reducing our LIBOR exposure, may require periodic sale of these securities but they are not actively traded with the intent of realizing gains; most often, they are held until maturity or call date. Securities acquired as asset/liability management tools to manage duration risk, which are likely to be sold when the duration risk is no longer present, are classified as trading or available-for-sale securities. Changes in the fair values of investments classified as trading are recorded through other income and original premiums/discounts on these investments are not amortized.

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See Note 3 of the Notes to Financial Statements under Part I, Item 1 of this quarterly report for additional information on our different investment classifications including the types of securities held under each classification. The carrying value of our investments is summarized by security type in Table 32 (in thousands).

Table 32

	09/30/2020		12/31/2019
Trading securities:
Certificates of deposit	$	225,053	$	—
U.S. Treasury obligations	1,557,412		1,530,518
GSE debentures	433,864		416,025
Mortgage-backed securities:
GSE MBS	901,606		866,019
Total trading securities	3,117,935		2,812,562
Available-for-sale securities:
U.S. Treasury obligations	4,067,370		4,261,791
GSE MBS	3,223,241		2,920,709
Total available-for-sale securities	7,290,611		7,182,500
Held-to-maturity securities:
State or local housing agency obligations	81,995		82,805
Mortgage-backed securities:
U.S. obligation MBS	76,852		93,375
GSE MBS	2,815,129		3,393,778
Total held-to-maturity securities	2,973,976		3,569,958
Total securities	13,382,522		13,565,020
Interest-bearing deposits	499,662		921,453
Federal funds sold	1,435,000		850,000
Securities purchased under agreements to resell	4,600,000		4,750,000
TOTAL INVESTMENTS	$	19,917,184	$	20,086,473

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The carrying values by contractual maturities of our investments are summarized by security type in Table 33 (dollar amounts in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 33

	09/30/2020
	Due in one year or less			Due after one year through five years			Due after five years through 10 years			Due after 10 years			Carrying Value
Trading securities:
Certificates of deposit	$	225,053		$	—		$	—		$	—		$	225,053
U.S. Treasury obligations	353,956			1,203,456			—			—			1,557,412
GSE debentures	—			433,864			—			—			433,864
Mortgage-backed securities:
GSE MBS	—			629,065			231,310			41,231			901,606
Total trading securities	579,009			2,266,385			231,310			41,231			3,117,935
Yield on trading securities	1.65		%	2.65		%	2.96		%	0.58		%
Available-for-sale securities:
U.S. Treasury obligations	2,022,929			2,044,441			—			—			4,067,370
GSE MBS	—			305,314			2,917,927			—			3,223,241
Total available-for-sale securities	2,022,929			2,349,755			2,917,927			—			7,290,611
Yield on available-for-sale securities	1.95		%	2.11		%	2.70		%	—		%
Held-to-maturity securities:
State or local housing agency obligations	—			—			—			81,995			81,995
Mortgage-backed securities:
U.S. obligation MBS	—			—			—			76,852			76,852
GSE MBS	—			838,911			291,440			1,684,778			2,815,129
Total held-to-maturity securities	—			838,911			291,440			1,843,625			2,973,976
Yield on held-to-maturity securities	—		%	1.12		%	1.18		%	1.41		%
Total securities	2,601,938			5,455,051			3,440,677			1,884,856			13,382,522
Yield on total securities	1.89		%	2.17		%	2.58		%	1.39		%
Interest-bearing deposits	499,662			—			—			—			499,662
Federal funds sold	1,435,000			—			—			—			1,435,000
Securities purchased under agreements to resell	4,600,000			—			—			—			4,600,000
TOTAL INVESTMENTS	$	9,136,600		$	5,455,051		$	3,440,677		$	1,884,856		$	19,917,184

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Securities Ratings – Tables 34 and 35 present the carrying value of our investments by rating as of September 30, 2020 and December 31, 2019 (in thousands). The ratings presented are the lowest ratings available for the security, issuer, or counterparty based on NRSROs, where available. Some counterparties for collateralized overnight borrowing are not rated by an NRSRO because they are not issuers of debt or are otherwise not required to be rated by an NRSRO. We also utilize other credit quality factors when analyzing potential investments including, but not limited to, collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, and/or the financial health of the underlying issuer.

Table 34

	09/30/2020
	Carrying Value1
	Investment Grade						Unrated		Total
	Triple-A		Double-A		Single-A
Interest-bearing deposits2	$	—	$	11,634	$	488,028	$	—	$	499,662
Federal funds sold2	—		250,000		1,185,000		—		1,435,000
Securities purchased under agreements to resell3	—		—		—		4,600,000		4,600,000
Investment securities:
Non-mortgage-backed securities:
Certificates of deposit2	—		—		225,053		—		225,053
U.S. Treasury obligations	—		5,624,782		—		—		5,624,782
GSE debentures	—		433,864		—		—		433,864
State or local housing agency obligations	51,995		30,000		—		—		81,995
Total non-mortgage-backed securities	51,995		6,088,646		225,053		—		6,365,694
Mortgage-backed securities:
U.S. obligation MBS	—		76,852		—		—		76,852
GSE MBS	—		6,939,976		—		—		6,939,976
Total mortgage-backed securities	—		7,016,828		—		—		7,016,828
TOTAL INVESTMENTS	$	51,995	$	13,367,108	$	1,898,081	$	4,600,000	$	19,917,184

1    Investment amounts represent the carrying value and do not include related accrued interest receivable of $44.3 million at September 30, 2020.

2    Amounts include unsecured credit exposure with original maturities ranging between overnight and 93 days.

3    Amounts represent collateralized overnight borrowings.

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Table 35

	12/31/2019
	Carrying Value1
	Investment Grade						Unrated		Total
	Triple-A		Double-A		Single-A
Interest-bearing deposits2	$	255	$	1,761	$	919,437	$	—	$	921,453
Federal funds sold2	—		—		850,000		—		850,000
Securities purchased under agreements to resell3	—		—		—		4,750,000		4,750,000
Investment securities:
Non-mortgage-backed securities:
U.S. Treasury obligations	—		5,792,309		—		—		5,792,309
GSE debentures	—		416,025		—		—		416,025
State or local housing agency obligations	52,805		30,000		—		—		82,805
Total non-mortgage-backed securities	52,805		6,238,334		—		—		6,291,139
Mortgage-backed securities:
U.S. obligation MBS	—		93,375		—		—		93,375
GSE MBS	—		7,180,506		—		—		7,180,506
Total mortgage-backed securities	—		7,273,881		—		—		7,273,881
TOTAL INVESTMENTS	$	53,060	$	13,513,976	$	1,769,437	$	4,750,000	$	20,086,473

1    Investment amounts represent the carrying value and do not include related accrued interest receivable of $45.7 million at December 31, 2019.

2    Amounts include unsecured credit exposure with overnight maturities.

3    Amounts represent collateralized overnight borrowings.

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Table 36 details interest rate payment terms for the carrying value of our investment securities as of September 30, 2020 and December 31, 2019 (in thousands). We manage the interest rate risk associated with our fixed rate trading and available-for-sale securities by entering into interest rate swaps that convert the investment's fixed rate to a variable rate index (see Tables 50 and 51 under Item 3 – “Quantitative and Qualitative Disclosures About Market Risk)."

Table 36

	09/30/2020		12/31/2019
Trading securities:
Non-mortgage-backed securities:
Fixed rate	$	2,216,329	$	1,946,543
Non-mortgage-backed securities	2,216,329		1,946,543
Mortgage-backed securities:
Fixed rate	859,277		817,568
Variable rate	42,329		48,451
Mortgage-backed securities	901,606		866,019
Total trading securities	3,117,935		2,812,562
Available-for-sale securities:
Non-mortgage-backed securities:
Fixed rate	4,067,370		4,261,791
Non-mortgage-backed securities	4,067,370		4,261,791
Mortgage-backed securities:
Fixed rate	3,223,241		2,920,709
Mortgage-backed securities	3,223,241		2,920,709
Total available-for-sale securities	7,290,611		7,182,500
Held-to-maturity securities:
Non-mortgage-backed securities:
Variable rate	81,995		82,805
Non-mortgage-backed securities	81,995		82,805
Mortgage-backed securities:
Fixed rate	82,072		104,359
Variable rate	2,809,909		3,382,794
Mortgage-backed securities	2,891,981		3,487,153
Total held-to-maturity securities	2,973,976		3,569,958
TOTAL	$	13,382,522	$	13,565,020

Deposits: Total deposits increased $225.7 million from December 31, 2019 to September 30, 2020 primarily as a result of an increase in overnight deposits. Deposit products offered primarily include demand and overnight deposits and short-term certificates of deposit. Demand deposit programs are offered primarily to facilitate customer transactions with us, such as cash flows associated with advances and mortgage loan transactions. Overnight deposits provide an alternative short-term investment option to members. The majority of deposits are in overnight or demand accounts that generally re-price daily based upon a market index such as overnight Federal funds. The level of deposits is driven by member demand for deposit products, which in turn is a function of the liquidity position of members. Factors that influence deposit levels include turnover in member investment and loan portfolios, changes in members’ customer deposit balances, changes in members’ demand for liquidity and our deposit pricing as compared to other short-term market rates. Declines in the level of deposits could occur if demand for loans at member institutions increases, if members choose to de-leverage their balance sheets, or if decreases in the general level of liquidity of members should occur. Fluctuations in deposits have little impact on our ability to obtain liquidity. We historically have had stable and ready access to the capital markets through consolidated obligations and can replace any reduction in deposits with similarly- or lower-priced borrowings.

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

Fixed-rate bonds are used to fund longer-term (one year or greater) fixed-rate advances, mortgage loans and investments. To the extent that the bonds are funding variable rate assets, we typically either issue bonds that have variable rates matching the variable rate asset index or utilize an interest rate swap to change the fixed-rate bonds' characteristics in order to match the assets' index. Additionally, we use variable rate, fixed rate, or complex consolidated obligation bonds that are swapped or indexed to SOFR, LIBOR, OIS or U.S. Treasury bills to fund short-term advances and money market investments and/or as a liquidity risk management tool.

In late 2018, we began swapping fixed rate bonds to OIS rates rather than swapping fixed rate callable bonds to LIBOR. We did so in part to reduce our exposure to LIBOR as the market prepares to transition away from LIBOR as a reference rate. We also began participating in SOFR-indexed debt issuances in November 2018 and swapping certain financial instruments to SOFR in the first quarter of 2019 in an effort to manage our exposure to LIBOR assets and liabilities with maturities beyond 2021. No outstanding LIBOR debt has a maturity date beyond December 31, 2021, which is when LIBOR cessation is expected to occur. For additional information on our LIBOR transition efforts and LIBOR exposure, see “Risk Management – Interest Rate Risk Management” under this Item 2.

Discount notes are primarily used to fund: (1) shorter-term advances with indices and resets based on our short-term cost of funds; and (2) investments with maturities of three months or less. However, we sometimes use discount notes to fund longer-term assets, including fixed rate assets, variable rate assets, assets swapped to synthetically create variable rate assets, and short-term anticipated cash flows generated by longer-term fixed rate assets.

Total consolidated obligations decreased $10.2 billion, or 17.2 percent, from December 31, 2019 to September 30, 2020. The distribution between consolidated obligation bonds and discount notes shifted from 53.8 percent and 46.2 percent, respectively, at December 31, 2019 to 75.8 percent and 24.2 percent at September 30, 2020, respectively. Consolidated obligation bonds increased by $5.3 billion as we issued more floating rate debt indexed to SOFR to better reflect the repricing characteristics of our assets. The $15.5 billion decrease in discount notes reflects the decline in short-term advances and the shift to term funding indexed to SOFR. We issued $12.4 billion of floating rate bonds indexed to SOFR during the first nine months of 2020 as we continue to transition away from LIBOR and increase our allocation of floating rate bonds funding short-term advances and short-term investments. Approximately $13.0 billion of bonds were called during the first nine months of 2020 and replaced at a lower cost with either callable fixed rate bonds or discount notes. While we currently have stable access to funding markets, future developments could impact the cost of replacing outstanding debt. Some of these include, but are not limited to, a large increase in call volume, significant increases in advance demand, legislative and regulatory changes, geopolitical events, proposals addressing GSEs, derivative and financial market reform, market transition from LIBOR to alternative reference rates, a decline in investor demand for consolidated obligations, further rating agency downgrades of U.S. Treasury obligations that will in turn impact the rating on FHLBank consolidated obligations, and changes in Federal Reserve policies, outlooks, and programs. Volatility in the capital markets caused by the COVID-19 pandemic could impact demand for FHLBank debt and the cost of the debt the FHLBanks issue.

Derivatives: All derivatives are marked to fair value with any associated accrued interest, and netted by clearing agent by Clearinghouse or by counterparty and offset by the fair value of any swap cash collateral received or delivered where the legal right of offset has been determined, and included on the Statements of Condition as an asset when there is a net fair value gain or as a liability when there is a net fair value loss. Fair values of our derivatives primarily fluctuate as the SOFR, OIS and LIBOR swap interest rate curves fluctuate. Other factors such as implied price/interest rate volatility, the shape of the above interest rate curves and time decay can also drive the market price for derivatives.

The notional amount of total derivatives outstanding decreased by $1.3 billion, from $20.9 billion at December 31, 2019 to $19.5 billion at September 30, 2020, primarily due to decreases in interest rate swaps hedging fixed rate consolidated obligation discount notes, which reflects the shift from discount notes to term funding indexed to SOFR. For additional information regarding the types of derivative instruments and risks hedged, see Tables 50 and 51 under Item 7A – “Quantitative and Qualitative Disclosures About Market Risk.”

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Liquidity and Capital Resources

Liquidity: We maintain high levels of liquidity to achieve our mission of serving as an economical funding source for our members and housing associates. As part of fulfilling our mission, we also maintain minimum liquidity requirements in accordance with certain FHFA regulations and guidelines and in accordance with policies established by management and the board of directors. Our business model enables us to manage the levels of our assets, liabilities, and capital in response to member credit demand, membership composition, and market conditions. As such, assets and liabilities utilized for liquidity purposes can vary significantly in the normal course of business due to the amount and timing of cash flows as a result of these factors. While we increased liquidity and coordination of debt issuance among the FHLBanks in response to market volatility created by the COVID-19 pandemic, at no time during the first nine months of 2020 did the COVID-19 pandemic affect our balance sheet liquidity or access to the debt markets in a manner that caused us to be unable to meet the liquidity needs of our business or our members.

Sources and Uses of Liquidity – A primary source of our liquidity is the issuance of consolidated obligations. The capital markets traditionally have treated FHLBank obligations as U.S. government agency debt. As a result, even though the U.S. government does not guarantee FHLBank debt, we generally have comparatively stable access to funding at relatively favorable spreads to U.S. Treasury rates. We are primarily and directly liable for our portion of consolidated obligations (i.e., those obligations issued on our behalf). In addition, we are jointly and severally liable with the other FHLBanks for the payment of principal and interest on the consolidated obligations of all FHLBanks.

During the nine months ended September 30, 2020, proceeds (net of premiums and discounts) from the issuance of bonds and discount notes were $35.0 billion and $500.3 billion, respectively, compared to $20.5 billion and $633.2 billion for the nine months ended September 30, 2019. The large difference between the proceeds from bonds and discount notes reflects the cumulative effect of using short-term discount notes to fund short-term advances and our short-term liquidity portfolio. Our other sources of liquidity include our short-term liquidity portfolio, deposit inflows, repayments of advances and mortgage loans, maturing investments, interest income, maturing Federal funds sold, and proceeds from maturing reverse repurchase agreements or the sale of unencumbered assets. We reduced our issuance of discount notes during the second and third quarters of 2020 due to the decrease in advance balances and to increase our allocation of variable rate term funding.

Our short-term liquidity portfolio consists of cash, short-term investments, and long-term investments with remaining maturities of one year or less. Short-term investments may include Federal funds sold, interest-bearing demand deposits, certificates of deposit, and reverse repurchase agreements. The short-term liquidity portfolio decreased slightly between periods, from $9.4 billion as of December 31, 2019 to $9.2 billion as of September 30, 2020, but the amounts remained slightly elevated at the end of both periods in anticipation of potential member needs at the end of 2019 and U.S. Treasuries within one year of maturity as of September 30, 2020. The maturities of our short-term investments are structured to provide periodic cash flows to support our ongoing liquidity needs. To enhance our liquidity position, short-term investment securities (i.e., marketable certificates of deposit) are also classified as trading when held so that they can be readily sold should liquidity be needed immediately.

We also maintain a portfolio of GSE debentures, U.S. Treasury obligations, and GSE MBS that can be pledged as collateral for financing in the securities repurchase agreement market and are classified as trading to enhance our liquidity position. The par value of these debentures and U.S. Treasury obligations was $1.9 billion as of both September 30, 2020 and December 31, 2019. The par value of these MBS was $0.8 billion as of both September 30, 2020 and December 31, 2019, respectively. We also hold $4.0 billion in par value of U.S. Treasury obligations classified as available-for-sale to satisfy regulatory liquidity requirements that went into effect March 31, 2019. In addition to the balance sheet sources of liquidity discussed previously, we have established lines of credit with numerous counterparties in the Federal funds market as well as with the other FHLBanks. Accordingly, we expect to maintain a sufficient level of liquidity for the foreseeable future.

We strive to manage our average capital ratio to remain above our minimum regulatory and RMP requirements in an effort to ensure that we have the ability to issue additional consolidated obligations should the need arise. Excess capital capacity ensures we are able to meet the liquidity needs of our members and/or repurchase excess stock either upon the submission of a redemption request by a member or at our discretion for balance sheet or capital management purposes.

Our uses of liquidity primarily include issuing advances, purchasing investments and mortgage loans, and repaying called and maturing consolidated obligations for which we are the primary obligor. We also use liquidity to repay member deposits, pledge collateral to derivative counterparties, redeem or repurchase capital stock, and pay dividends to members.

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During the nine months ended September 30, 2020, advance disbursements totaled $244.8 billion compared to $281.6 billion for the prior year period. During the nine months ended September 30, 2020, investment purchases (excluding overnight investments) totaled $1.3 billion compared to $7.9 billion for the same period in the prior year. The higher amount of investment purchases in the prior year was primarily U.S. Treasury obligations purchased in response to new regulatory liquidity requirements. During the nine months ended September 30, 2020, payments on consolidated obligation bonds and discount notes were $29.7 billion and $515.8 billion, respectively, compared to $12.1 billion and $632.7 billion for the prior year period.

Liquidity Requirements – We are subject to funding gap and cash balance guidelines for measuring required liquidity. Funding gaps are defined as the difference between our assets and liabilities scheduled to mature during a specific period stated as a percentage of total assets. FHFA liquidity guidelines require that we manage our funding gap to a minimum ratio for the three-month and one-year horizons calculated with data as of the calendar month-end using the average ratio for the three most recent month-ends. FHFA guidelines require us to maintain a minimum number of days of positive cash balances without access to the capital markets for the issuance of consolidated obligations.

FHFA guidelines allow HQLA to be included in liquidity metrics. The FHFA defines HQLA as uncommitted and unencumbered U.S. Treasury securities that have a remaining maturity of no greater than 10 years designated as trading or available-for-sale. We are also allowed to include some legacy GSE debentures as HQLA. We calculate our liquidity under the funding gap guidelines monthly and are required to submit applicable data in a report to the FHFA monthly. Liquidity is calculated under the cash balance guidelines daily and applicable data is generally required to be submitted to the FHFA weekly. Statutory liquidity requires us to have an amount equal to current deposits received from members invested in obligations of the United States, deposits in eligible banks or trust companies, and advances with a remaining maturity not exceeding five years. Statutory liquidity is calculated daily. See “Risk Management - Liquidity Risk Management” under this Item 2 for additional discussion on our liquidity requirements. We remained in compliance with liquidity regulatory requirements in effect during the first nine months of 2020, except for our three-month funding gap requirement during a portion of the first quarter of 2020.

Contingency plans are in place at FHLBank and the Office of Finance that prioritize the allocation of liquidity resources in the event of financial market disruptions, as well as systemic Federal Reserve wire transfer system disruptions. Further, under the Bank Act, the Secretary of Treasury has the authority, at his discretion, to purchase consolidated obligations up to an aggregate amount of $4.0 billion. No borrowings under this authority have been outstanding since 1977.

Generally, our overnight liquid assets are funded with discount notes or floating rate bonds of a longer tenor. In order to help ensure sufficient liquidity, we generally maintain a longer weighted-average maturity on our consolidated obligation discount notes and floating rate bonds than the weighted average maturity of short-term liquid investments and short-term advance balances. Over time, especially when the short end of the yield curve steepens, maintaining the differential between the weighted average original maturity of discount notes and short-term liquid investments and short-term advances will increase our cost of funds and reduce our net interest income. The increase in floating rate debt indexed to SOFR relative to our overall funding is to manage this risk, so that our funding will reprice relative to overnight rates rather than term rates.

Capital: Total capital decreased $191.1 million, or 6.8 percent, from December 31, 2019 to September 30, 2020 primarily due to a decrease in required capital stock related to the decline in advance utilization between periods, resulting in excess stock that was subsequently repurchased. This decline was partially offset by the increase in required capital stock for AMA from the change to the AMA activity-based stock purchase requirement from zero to three percent effective August 5, 2020 (see Table 37).

Each member is required to hold capital stock to become and remain a member of the FHLBank and enter into specified activities with the FHLBank including, but not limited to, access to the FHLBank’s credit products and selling AMA to the FHLBank. The amount of Class A Common Stock a member must acquire and maintain is the asset-based stock purchase requirement, which is currently equal to 0.1 percent of a member’s total assets as of December 31 of the preceding calendar year, with a minimum requirement of $1,000, and a maximum requirement of $500,000. The amount of Class B Common Stock a member must acquire and maintain is the activity-based stock purchase requirement, which is currently equal to 4.5 percent of the principal amount of advances outstanding to the member plus 3 percent of the principal amount of AMA outstanding for members required to be in compliance at September 30, 2020 less the member’s asset-based stock purchase requirement. As of September 30, 2020 there were no activity-based stock purchase requirements for letters of credit or derivatives.

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On July 23, 2020, FHLBank's board of directors changed the established AMA activity-based stock purchase requirement pursuant to its Capital Plan, effective as of August 5, 2020 to three percent from the previous requirement of zero percent, with a maximum AMA activity-based stock purchase requirement of three percent of a member’s total assets as of December 31 of the preceding year. Official notification of the new AMA stock requirements was sent on August 5, 2020. Following that notice, members had 60 days to comply with the new requirement. However, if members transacted MPF Program mortgage loan fundings or advances during that 60-day period, compliance occurred at the time of the transaction. In addition, on July 23, 2020, the board of directors established a Letter of Credit activity-based stock purchase requirement pursuant to its Capital Plan, effective as of January 22, 2021 to one quarter of one percent from the previous requirement of zero percent. The change in the activity-based stock purchase requirements will not change for former members with outstanding business transactions. As a result of these changes, we anticipate an increase in total capital over the remainder of the year.

Excess stock represents the amount of stock held by a member in excess of that institution’s minimum stock requirement. Upon reducing the activity-based stock purchase requirement, through a mandated change or through a reduction of advance balances, excess stock is created since the member is no longer required under our capital plan to hold the same amount of activity-based capital stock. If our excess stock exceeds one percent of our total assets before or after the payment of a dividend in the form of stock, we would be prohibited by FHFA regulation from paying dividends in the form of stock. To manage the amount of excess stock, we may repurchase excess Class A Common Stock over FHLBank-established limits held by any individual member. Our current practices include periodic mandatory repurchases of excess Class A Common Stock and exchanging all excess Class B Common Stock over $50 thousand per member for Class A Common Stock on a daily basis.

Under our cooperatively structured capital plan, our capital stock balances should fluctuate along with any growth (increased capital stock balances) or reduction (decreased capital stock balances) in advance balances and AMA in future periods. Any repurchase of excess capital stock is at our discretion and subject to statutory and regulatory limitations, including remaining in compliance with all of our regulatory and internal capital requirements after any such discretionary repurchase.

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

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Table 37 provides a summary of member capital requirements under our current capital plan as of September 30, 2020 and December 31, 2019 (in thousands):

Table 37

Requirement	09/30/2020		12/31/2019
Asset-based (Class A Common Stock only)	$	161,499	$	158,758
Activity-based (additional Class B Common Stock)1	1,158,545		1,264,160
Total Required Stock2	1,320,044		1,422,918
Excess Stock (Class A and B Common Stock)	262,611		345,953
Total Regulatory Capital Stock2	$	1,582,655	$	1,768,871
Activity-based Requirements:
Advances3	$	999,097	$	1,352,339
AMA assets (mortgage loans)4	265,210		621
Total Activity-based Requirement	1,264,307		1,352,960
Asset-based Requirement (Class A Common Stock) not supporting member activity1	55,737		69,958
Total Required Stock2	$	1,320,044	$	1,422,918

1    Class A Common Stock, up to a member’s asset-based stock requirement, will be used to satisfy a member’s activity-based stock requirement before any Class B Common Stock is purchased by the member.

2    Includes mandatorily redeemable capital stock.

3    Advances to housing associates have no activity-based requirements because housing associates cannot own FHLBank stock.

4    Non-members previously required to purchase AMA activity-based stock are subject to the stock requirement in place at the time their membership ended as long as there are unpaid principal balances outstanding. The requirement was three percent for members required to be in compliance at September 30, 2020.

We are subject to three capital requirements under provisions of the GLB Act, the FHFA’s capital structure regulation and our current capital plan, which includes risk-based capital requirement, total capital requirement and leverage capital requirement. We have been in compliance with each of the aforementioned capital rules and requirements at all times since the implementation of our capital plan. See Note 10 of the Notes to Financial Statements under Part I, Item 1 for additional information and compliance as of September 30, 2020 and December 31, 2019.

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

Within our capital plan, we have the ability to pay different dividend rates to the holders of Class A Common Stock and Class B Common Stock. This differential is implemented through a methodology referred to as the dividend parity threshold. Holders of Class A Common Stock and Class B Common Stock share in dividends equally up to the dividend parity threshold for a dividend period, then the dividend rate for holders of Class B Common Stock can exceed the rate for holders of Class A Common Stock, but the dividend rate on Class A Common Stock can never exceed the dividend rate on Class B Common Stock. In essence, the dividend parity threshold: (1) serves as a soft floor to holders of Class A Common Stock since we must pay holders of Class A Common Stock the dividend parity threshold rate before paying a higher rate to holders of Class B Common Stock; (2) indicates a potential dividend rate to holders of Class A Common Stock so that they can make decisions as to whether or not to hold excess Class A Common Stock; and (3) provides us with a tool to manage the amount of excess stock through higher or lower dividend rates by varying the desirability of holding excess shares of Class A Common Stock (i.e., the lower the dividend rate on Class A Common Stock, the less desirable it is to hold excess Class A Common Stock).

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The current dividend parity threshold is equal to the average effective overnight Federal funds rate for a dividend period minus 100 basis points and was effective for all dividends paid in 2019 and 2020. The dividend parity threshold is floored at zero percent when the current overnight Federal funds target rate is less than one percent. Under the capital plan, all dividends paid in the form of capital stock must be paid in the form of Class B Common Stock. Table 38 presents the dividend rates per annum paid on capital stock under our capital plan for the quarterly periods of 2020:

Table 38

Applicable Rate per Annum	09/30/2020		06/30/2020		03/31/2020		12/31/2019		09/30/2019
Class A Common Stock	0.25	%	0.50	%	2.25	%	2.50	%	2.50	%
Class B Common Stock	5.25		5.50		7.25		7.50		7.50
Weighted Average1	3.69		3.69		5.94		6.14		6.61
Dividend Parity Threshold:
Average effective overnight Federal funds rate	0.09	%	0.06	%	1.23	%	1.65	%	2.20	%
Spread to index	(1.00)		(1.00)		(1.00)		(1.00)		(1.00)
TOTAL (floored at zero percent)	0.00	%	0.00	%	0.23	%	0.65	%	1.20	%

1    Weighted average dividend rates are dividends paid in cash and stock on both classes of stock divided by the average of capital stock eligible for dividends.

We paid dividend rates of 0.25 percent on Class A Common Stock and 5.25 percent on Class B Common Stock for the third quarter of 2020. We anticipate stock dividends on Class A Common Stock and Class B Common Stock to be lower than what was paid in 2019 for the remainder of 2020, consistent with the lower level of short‑term interest rates and our retained earnings policy. Continued adverse market conditions may result in lower dividend rates in future quarters. While there is no assurance that our board of directors will not change the dividend parity threshold in the future, the capital plan requires that we provide members with 90 days' notice prior to the end of a dividend period in which a different dividend parity threshold is utilized in the payment of a dividend.

We expect to continue paying dividends primarily in the form of capital stock, but future dividends may be paid in cash. The payment of cash dividends instead of stock dividends should not have a significant impact from a liquidity perspective, as the subsequent redemption of excess stock created by stock dividends would utilize liquidity resources in the same manner as a cash dividend.

Risk Management

Active risk management continues to be an essential part of our operations and a key determinant of our ability to maintain earnings to return an acceptable dividend to our members and meet retained earnings thresholds. We maintain an enterprise risk management (ERM) program in an effort to enable the identification of all significant risks to the organization and institute the prompt and effective management of any major risk exposures. Our ERM program is a structured and disciplined approach that aligns strategy, processes, people, technology and knowledge with the purpose of identifying, evaluating and managing the uncertainties we face as we create value. It is a continuous process of identifying, prioritizing, assessing and managing inherent enterprise risks (i.e., business, compliance, credit, liquidity, market and operations) before they become realized risk events. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management” in our Form 10-K for more information on our ERM program. A separate discussion of market risk is included under Item 3 – “Quantitative and Qualitative Disclosures About Market Risk” of this Form 10-Q.

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

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Transition from LIBOR to an Alternative Reference Rate – Many of our assets and liabilities are indexed to LIBOR, so we continue to evaluate the potential impact of the replacement of the LIBOR benchmark interest rate, including the likelihood of SOFR prevailing as the most widely adopted replacement reference rate. We have assessed our current LIBOR exposure, which included evaluating the fallback language of derivative and investment contracts indexed to LIBOR, and have developed a transition plan that includes strategies to manage and reduce exposure in addition to operational readiness. Our swap agreements are governed by the International Swap Dealers Association (ISDA). On October 9, 2020, ISDA announced the launch of the ISDA 2020 Interbank Offered Rate (IBOR) Fallbacks Protocol (Protocol). The Protocol has an effective date of January 25, 2021 and modifies legacy and new trades to include robust fallback language for adherents. We adhered to the Protocol on October 22, 2020. For additional information on the Protocol, see "Legislative and Regulatory Developments" under this Item 2. The market transition away from LIBOR is expected to be gradual and complex, including the development of term and credit adjustments to accommodate differences between LIBOR, an unsecured rate, and SOFR, a secured rate. SOFR is based on a broad segment of the overnight U.S. Treasuries repurchase market and is intended to be a measure of the average cost of borrowing cash overnight collateralized by U.S. Treasury securities. We started participating in SOFR-indexed debt issuances in November 2018 and swapping certain financial instruments to SOFR in January 2019 in an effort to manage our exposure to LIBOR assets and liabilities with maturities beyond 2021. We sold $162.9 million of available-for-sale securities indexed to LIBOR during the first quarter of 2020. We continue to consider the sale of securities as part of our strategy to reduce LIBOR exposure, but market pricing and reinvestment opportunities are limiting factors.

During the fourth quarter of 2020, the derivative clearinghouses, CME Clearing and LCH Limited, began using SOFR to calculate price alignment interest and discount future cash flows for cleared interest rate derivatives in an effort to promote liquidity in SOFR and support the swap market's transition from LIBOR to SOFR. The impact of the transition on FHLBank was immaterial.

In September 2019, the FHFA issued a supervisory letter to the FHLBanks providing LIBOR transition guidance. The supervisory letter states that by March 31, 2020, the FHLBanks should no longer enter into new financial assets, liabilities, and derivatives that reference LIBOR and mature after December 31, 2021, for all product types except investments. On March 16, 2020, in light of market volatility, the FHFA extended from March 31, 2020 to June 30, 2020 the FHLBanks’ ability to enter into instruments referencing LIBOR that mature after December 31, 2021, except for investments and option embedded products. With respect to investments, the FHLBanks were required, by December 31, 2019, to stop purchasing investments that reference LIBOR and mature after December 31, 2021.

The principal balance of variable rate advances indexed to LIBOR as of September 30, 2020 was $920 million, which represents 16.3 percent of total variable rate advances. The contractual maturities of these LIBOR-indexed advances are all due by the end of 2021; thus, we have no LIBOR exposure after 2021. We have no advances indexed to SOFR as of September 30, 2020. However, we began to offer these advances during the second quarter of 2020.

Table 39 presents the par value of variable rate investment securities by the related interest rate index as of September 30, 2020 (dollar amounts in thousands):

Table 39

09/30/2020
Index	Amount		Percent
Non-mortgage-backed securities:
LIBOR	$	81,995	2.8	%
Non-mortgage-backed securities	81,995		2.8
Mortgage-backed securities:
LIBOR	2,852,101		97.2
Other	22		—
Mortgage-backed securities	2,852,123		97.2
TOTAL	$	2,934,118	100.0	%

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Table 40 presents the par value of investment securities indexed to LIBOR outstanding by year of contractual maturity as of September 30, 2020 (in thousands):

Table 40

09/30/2020
Year of Contractual Maturity	Amount
Non-mortgage-backed securities:
2020	$	—
2021	—
Thereafter	81,995
Non-mortgage-backed securities	81,995
Mortgage-backed securities:
2020	—
2021	—
Thereafter	2,852,101
Mortgage-backed securities	2,852,101
TOTAL	$	2,934,096

Table 41 presents the notional amount of interest rate swaps (excludes interest rate caps and mortgage delivery commitments) by related interest rate index as of September 30, 2020 (amounts in thousands):

Table 41

09/30/2020
Index	Pay Side		Receive Side
Fixed rate	$	15,205,482	$	3,636,971
LIBOR	580,000		5,972,501
SOFR	974,471		6,607,020
OIS	2,082,500		2,625,961
TOTAL	$	18,842,453	$	18,842,453

Table 42 presents the notional amount of interest rate swaps (excludes interest rate caps and mortgage delivery commitments) indexed to LIBOR outstanding by termination date as of September 30, 2020 (in thousands). Actual terminations of certain derivatives will differ from contractual termination dates because derivative counterparties may have call options within the derivative contracts. Likewise, if the financial instrument being hedged by the derivative (either as a qualifying fair value hedge or as an economic hedge) is called or paid off prior to contractual maturity, we could potentially call or terminate the corresponding derivative prior to the termination date.

Table 42

09/30/2020
Year	Pay Side				Receive Side
	Cleared		Bilateral		Cleared		Bilateral
2020	$	—	$	15,000	$	75,400	$	5,000
2021	500,000		40,000		362,695		15,000
Thereafter	—		25,000		1,612,440		3,901,966
TOTAL	$	500,000	$	80,000	$	2,050,535	$	3,921,966

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Table 43 presents the par value of variable rate consolidated obligation bonds by the related interest rate index as of September 30, 2020 (dollar amounts in thousands):

Table 43

09/30/2020
Index	Amount		Percent
SOFR	$	16,154,000	68.7	%
LIBOR	7,300,000		31.1
U.S. Treasury	50,000		0.2
TOTAL	$	23,504,000	100.0	%

Table 44 presents the par value of consolidated obligation bonds indexed to LIBOR outstanding by year of maturity as of September 30, 2020 (in thousands):

Table 44

09/30/2020
Year	Maturity Date
2020	$	2,750,000
2021	4,550,000
Thereafter	—
TOTAL	$	7,300,000

Credit Risk Management: Credit risk is defined as the potential that a borrower or counterparty will fail to meet its financial obligations in accordance with agreed terms. We manage credit risk by following established policies, evaluating the creditworthiness of our counterparties, and utilizing collateral agreements and settlement netting for derivative transactions where enforceability of the legal right of offset has been determined. The most important step in the management of credit risk is the initial decision to extend credit. Continuous monitoring of counterparties is completed for all areas where we are exposed to credit risk, whether that is through lending, investing or derivative activities.

Lending and AMA Activities – Credit risk with members arises largely as a result of our lending and AMA activities (members’ credit enhancement obligations on conventional mortgage loans that we acquire through the MPF Program). We manage our exposure to credit risk on advances, letters of credit, and members’ credit enhancement obligations on conventional mortgage loans through a combined approach that provides ongoing review of the financial condition of our members coupled with prudent collateralization.

As provided in the Bank Act, a member’s investment in our capital stock is held as additional collateral for the member’s advances and other credit obligations (letters of credit, credit enhancement obligations, etc.). In addition, we can call for additional collateral or substitute collateral during the life of an advance or other credit obligation to protect our security interest.

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Credit risk arising from AMA activities under our MPF Program falls into three categories: (1) the risk of credit losses on the mortgage loans represented in our First Loss Account and last loss positions; (2) the risk that a PFI will not perform as promised with respect to its loss position provided through its credit enhancement obligations on conventional mortgage loan pools, which are covered by the same collateral arrangements as those described for advances; and (3) the risk that a third-party insurer (obligated under primary mortgage insurance or supplemental mortgage insurance arrangements) will fail to perform as expected. Should a PMI third-party insurer fail to perform, it would increase our credit risk exposure because our First Loss Account is the next layer to absorb credit losses on conventional mortgage loan pools. Likewise, if a supplemental mortgage insurance third-party insurer fails to perform, it would increase our credit risk exposure because it would reduce the participating member’s credit enhancement obligation loss layer since supplemental mortgage insurance is purchased by PFIs to cover all or a portion of their credit enhancement obligation exposure for mortgage pools under certain MPF Program products. Credit risk exposure to third-party insurers to which we have primary mortgage insurance and/or supplemental mortgage insurance exposure is monitored on an ongoing basis and regularly reported to the board of directors. In addition, we perform a credit analysis of third-party primary mortgage insurance and supplemental mortgage insurance insurers. On an ongoing basis, we review trends that could identify changing risks within our mortgage loan portfolio, including adverse changes in credit characteristics (low FICO scores, high debt-to-income ratios, high LTV ratios, etc.) and/or various types of concentrations. Based on the credit underwriting standards under the MPF Program and this ongoing review, we have concluded that the mortgage loans we hold would not be considered subprime.

Investments – Our RMP restricts the acquisition of investments to high-quality, short-term money market instruments and highly rated long-term securities. The short-term investment portfolio represents unsecured credit and reverse repurchase agreements. Counterparty ratings are monitored daily while performance and capital adequacy are monitored on a monthly basis in an effort to mitigate unsecured credit risk on our short-term investments. Collateral eligibility and transaction margin requirements on our reverse repurchase agreements are monitored daily. U.S. Treasury obligations and MBS securitized by Fannie Mae or Freddie Mac represent the majority of our long-term investments. Other long-term investments include MBS issued by Ginnie Mae, unsecured GSE debentures and collateralized state and local housing finance agency securities.

Derivatives – We transact most of our derivatives with large banks and major broker-dealers. Over-the-counter derivative transactions may be either executed with a counterparty (uncleared derivatives) or with an executing broker and cleared through a Futures Commission Merchant (i.e., clearing agent) that acts on our behalf to clear and settle derivative transactions through a Clearinghouse (cleared derivatives).

We are subject to credit risk due to the risk of nonperformance by counterparties to our derivative transactions. The amount of credit risk on derivatives depends on the extent to which netting procedures and collateral requirements are used and are effective in mitigating the risk. We manage this risk through credit analysis and collateral management. We are also required to follow the requirements set forth by applicable regulation.

Uncleared Derivatives. We are subject to non-performance by the counterparties to our uncleared derivative transactions. All bilateral security agreements with our non-member counterparties include bilateral-collateral-exchange provisions that require all credit exposures be collateralized, subject to a minimum transfer amount. As a result of these risk mitigation practices, we do not anticipate any credit losses on our uncleared derivative transactions as of September 30, 2020.

Cleared Derivatives. We are subject to nonperformance by the Clearinghouse(s) and clearing agent(s). The requirement that we post initial and variation margin, through the clearing agent, to the Clearinghouse, exposes us to institutional credit risk if the clearing agent or the Clearinghouse fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral and/or payments are posted daily for changes in the value of cleared derivatives through a clearing agent. We do not anticipate any credit losses on our cleared derivatives as of September 30, 2020.

We regularly monitor the exposures on our derivative transactions by determining the market value of positions using internal pricing models. The market values generated by the pricing model used to value derivatives are compared to dealer model results on a monthly basis to ensure that our derivative pricing model is reasonably calibrated to actual market pricing methodologies utilized by the dealers. In addition, we have our internal pricing model validated regularly by an independent consultant. As a result of these risk mitigation initiatives, management does not anticipate any credit losses on our derivative transactions. See Note 6 of the Notes to Financial Statements under Part I, Item 1 for additional information on managing credit risk on derivatives.

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The contractual or notional amount of derivative transactions reflects our involvement in the various classes of financial instruments. The maximum credit risk with respect to derivative transactions is the estimated cost of replacing the derivative transactions if there are defaults, minus the value of any related collateral posted to satisfy the initial margin (if required). Our derivative transactions are subject to variation margin which is derived from the change in market value of the transaction and must be posted by the net debtor on demand. Cleared transactions are subject to initial margin as well as variation margin. The initial margin is intended to protect the Clearinghouse against default of a customer. Initial margin is calculated to cover the potential price volatility of the derivative transaction between the time of the default and the assignment of the transaction to another clearing agent or termination of the transaction. Although the initial margin requirement should decrease over time as the duration and market volatility decrease, it remains outstanding for the life of the transaction; thus, it is possible that we could either have: (1) net credit exposure with a Clearinghouse even if our net creditor position has been fully satisfied by the receipt of variation margin; or (2) net credit exposure with a Clearinghouse despite being the net debtor (i.e., being in a liability position). In determining maximum credit risk, we consider accrued interest receivables and payables as well as the netting requirements to net assets and liabilities.

Tables 45 and 46 present derivative notional amounts and counterparty credit exposure by whole-letter rating (in the event of a split rating, we use the lowest rating published by Moody's Investor Service (Moody's) or Standard & Poor's (S&P)) for derivative positions with counterparties to which we had credit exposure (in thousands):

Table 45

09/30/2020
Credit Rating	Notional Amount		Net Derivatives Fair Value Before Collateral		Cash Collateral Pledged From (To) Counterparty		Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Cleared derivatives1	$	5,273,333	$	1,126	$	(62,226)	$	63,352
Liability positions with credit exposure:
Uncleared derivatives2:
Single-A	4,352,442		(325,448)		(329,380)		3,932
Triple-B	243,938		(20,308)		(20,502)		194
Cleared derivatives1	9,329,241		(2,640)		(97,579)		94,939
TOTAL DERIVATIVE POSITIONS WITH CREDIT EXPOSURE	$	19,198,954	$	(347,270)	$	(509,687)	$	162,417

1    Represents derivative transactions cleared with LCH Limited and CME Clearing. LCH Limited was rated AA- by S&P; LCH Limited's parent company, LCH Group Holdings Limited, was not rated; and London Stock Exchange Group, LCH Group Holdings Limited's ultimate parent, was rated A3 by Moody's and A by S&P as of September 30, 2020. CME Clearing is not rated; however, CME Clearing's parent company, CME Group, Inc., was rated Aa3 by Moody's and AA- by S&P as of September 30, 2020.

2    Exposure can change on a daily basis; thus, there is often a short lag time between the date the exposure is identified, collateral is requested and collateral is returned.

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Table 46

12/31/2019
Credit Rating	Notional Amount		Net Derivatives Fair Value Before Collateral		Cash Collateral Pledged From (To) Counterparty		Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives:
Single-A	$	63,500	$	257	$	—	$	257
Cleared derivatives1	14,150,148		1,821		(145,658)		147,479
Liability positions with credit exposure:
Uncleared derivatives2:
Single-A	6,123,478		(78,575)		(84,633)		6,058
Triple-B	286,008		(5,894)		(6,409)		515
TOTAL DERIVATIVE POSITIONS WITH CREDIT EXPOSURE	$	20,623,134	$	(82,391)	$	(236,700)	$	154,309

1    Represents derivative transactions cleared with LCH Limited and CME Clearing. LCH Limited was rated AA- by S&P; LCH Limited's parent company, LCH Group Holdings Limited, was not rated; and London Stock Exchange Group, LCH Group Holdings Limited's ultimate parent, was rated A3 by Moody's and A by S&P as of December 31, 2019. CME Clearing is not rated; however, CME Clearing's parent company, CME Group, Inc., was rated Aa3 by Moody's and AA- by S&P as of December 31, 2019.

2    Exposure can change on a daily basis; thus, there is often a short lag time between the date the exposure is identified, collateral is requested and collateral is returned.

Foreign Counterparty Risk – Loans, acceptances, interest-bearing deposits with other banks, other interest-bearing investments and any other monetary assets payable to us by entities of foreign countries, regardless of the currency in which the claim is denominated are referred to as "cross-border outstandings." Our cross-border outstandings consist primarily of short-term trading securities and Federal funds sold issued by banks and other financial institutions, which are non-sovereign entities, and derivative asset exposure with counterparties that are also non-sovereign entities. Secured reverse repurchase agreements outstanding are excluded from cross-border outstandings because they are fully collateralized.

In addition to credit risk, cross-border outstandings have the risk that, as a result of political or economic conditions in a country, borrowers may be unable to meet their contractual repayment obligations of principal and/or interest when due because of the unavailability of, or restrictions on, foreign exchange needed by borrowers to repay their obligations. We continue to cautiously place unsecured cross-border outstandings.

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Table 47 presents the fair value of cross-border outstandings as of September 30, 2020 (dollar amounts in thousands):

Table 47

	Total1
	Amount		Percent of Total Assets
Federal funds sold2	$	1,435,000	2.7	%
Trading securities3	225,053		0.4
Derivative assets:
Net exposure at fair value	(61,520)
Cash collateral held	62,865
Net exposure after cash collateral	1,345		—
TOTAL	$	1,661,398	3.1	%

1    Represents foreign countries where individual exposure is less than one percent of total assets. Total cross-border outstandings to countries that individually represented between 0.75 and 1.0 percent of our total assets as of September 30, 2020 were $1.4 billion (Canada, Germany, Netherlands).

2    Consists solely of overnight Federal funds sold.

3 Consists of certificates of deposit with remaining maturities of less than three months.

Liquidity Risk Management: Maintaining the ability to meet our obligations as they come due and to meet the credit needs of our members and housing associates in a timely and cost-efficient manner is the primary objective of managing liquidity risk. We seek to be in a position to meet the credit needs of our members, as well as our debt service and liquidity needs, without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs.

We manage liquidity, first and foremost, to meet the needs of members, while adhering to regulatory and statutory liquidity requirements. We maintain daily liquidity levels above certain thresholds and consider hypothetical adverse scenarios. These thresholds are outlined in our internal policies and comply with federal statutes, FHFA regulations and other FHFA guidance not issued in the form of regulations. We remained in compliance with liquidity regulatory requirements throughout the third quarter of 2020.

We are focused on maintaining a cost-effective liquidity and funding balance between our financial assets and financial liabilities. The FHLBanks work collectively to manage the system-wide liquidity and funding management and jointly monitor the combined refinancing risk. In managing and monitoring the amounts of assets that require refunding, we may consider contractual maturities of the financial assets, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments and scheduled amortizations). See the Notes to the Financial Statements under Item 1 for more detailed information regarding contractual maturities of certain of our financial assets and liabilities.

We generally maintained stable access to the capital markets for the quarter ended September 30, 2020. For additional discussion of the market for our consolidated obligations and the overall market affecting liquidity, see “Financial Market Trends” under this Item 2.

Our derivative instruments contain provisions that require all credit exposures be collateralized. See Note 6 of the Notes to Financial Statements under Part I, Item 1 for additional information on collateral posting requirements.

Recently Issued Accounting Standards

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

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Legislative and Regulatory Developments

LIBOR Transition – ISDA 2020 IBOR Fallbacks Protocol and Supplement to the 2006 ISDA Definitions. On October 23, 2020, ISDA launched the Supplement to the 2006 ISDA Definitions (Supplement) and the Protocol. Both the Supplement and the Protocol will take effect on January 25, 2021. On that date, all legacy bilateral derivative transactions subject to Protocol-covered agreements (including ISDA agreements) that incorporate certain covered ISDA definitional booklets and reference a covered IBORs, including USD LIBOR, will be amended to apply the new ISDA-recommended IBOR fallbacks in the event of the relevant IBOR’s cessation. Both FHLBank and its relevant counterparty must have adhered to the Protocol in order to effectively amend legacy derivative contracts, otherwise the parties must bilaterally agree to include amended legacy contracts to address LIBOR fallbacks. The Protocol will remain open for adherence after this effective date. As of January 25, 2021, new and future derivative contracts will be subject to the relevant IBOR fallbacks set forth in the Supplement.

On October 21, 2020, the FHFA issued a Supervisory Letter to the FHLBanks that requires each FHLBank to adhere to the Protocol no later than December 31, 2020, and to the extent necessary, to amend any bilateral agreements regarding the adoption of the Protocol by December 15, 2020.

We have adhered to the Protocol and will work with counterparties, as necessary, to address our over-the-counter derivative agreements referencing USD LIBOR as a part of our LIBOR transition efforts.

Margin and Capital Requirements for Covered Swap Entities. On July 1, 2020, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), the Farm Credit Administration, and the FHFA (collectively, Prudential Banking Regulators) jointly published a final rule, effective August 31, 2020, amending regulations that established minimum margin and capital requirements for uncleared swaps for covered swap entities under the jurisdiction of the Prudential Banking Regulators (Prudential Margin Rules). In addition to other changes, the final rule: (1) allows swaps entered into by a covered swap entity prior to an applicable compliance date to retain their legacy status and not become subject to the Prudential Margin Rules in the event that the legacy swaps are amended to replace an interbank offered rate (such as LIBOR) or other discontinued rate, or due to other technical amendments such as notional reductions or portfolio compression exercises; (2) introduces a new Phase 6 compliance date for initial margin requirements for covered swap entities and their counterparties with an average daily aggregate notional amount (AANA) of uncleared swaps from $8 billion to $50 billion, and limits Phase 5 to counterparties with an AANA of uncleared swaps from $50 billion to $750 billion; and (3) clarifies that initial margin trading documentation does not need to be executed prior to a counterparty reaching the initial margin threshold.

On the same date, the Prudential Banking Regulators issued an interim final rule, effective September 1, 2020, extending the initial margin compliance date for Phase 5 counterparties to September 1, 2021 and extending the initial margin compliance date for Phase 6 counterparties to September 1, 2022. On July 10, 2020, the Commodity Futures Trading Commission (CFTC) issued a final rule and a proposed rule to amend the minimum margin and capital requirements for uncleared swaps under the jurisdiction of the CFTC (CFTC Margin Rules) which collectively, among other things, extend the initial margin compliance date for Phase 5 counterparties to September 1, 2021 and extend the initial margin compliance date for Phase 6 counterparties to September 1, 2022, thereby aligning with the Prudential Banking Regulators.

On September 22, 2020, the CFTC issued a proposed rule to amend the CFTC Margin Rules which would permit, among other changes, covered swap entities to maintain separate minimum transfer amounts (MTA) for initial and variation margin for each swap counterparty, provided the combined MTA does not exceed $500,000. Separately, on September 23, 2020, the CFTC issued a proposed rule to address concerns by covered entities related to determining initial margin compliance across different regulators and jurisdictions. The CFTC’s proposed rule would, among other things, require entities subject to the CFTC’s jurisdiction to calculate the AANA for uncleared swaps during March, April and May of the current year, based on an average of month-end dates, as opposed to the existing requirement which requires the calculation of AANA during June, July and August of the prior year, based on daily calculations. Parties would continue to be expected to exchange initial margin based on the AANA totals as of September 1 of the current year. The proposed change aligns with the recommendation of the Basel Committee on Banking Supervision and Board of the International Organization of Securities Commission.

We do not expect these final or proposed rules, if adopted as proposed, to have a material effect on our financial condition or results of operations.

Legislative and Regulatory Developments Related to COVID-19 Pandemic.

FHFA Supervisory Letter - PPP Loans as Collateral for FHLBank Advances. On July 1, 2020, Congress approved an extension of the PPP until August 8, 2020. The April 23, 2020 Supervisory Letter from the FHFA allowing FHLBanks to accept PPP loans as collateral remains in effect.

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Federal Reserve Lending Facilities. The Federal Reserve announced on July 28, 2020 that its lending facilities scheduled to expire on or around September 30, 2020 would be extended through December 31, 2020.

Coronavirus Aid, Relief, and Economic Security Act. The CARES Act provisions began to expire in July 2020, but some have been extended by regulatory action:

▪Additional federal unemployment funds expired July 31, 2020;

▪Statutory eviction freeze for federally-backed properties expired July 25, 2020; and

▪Foreclosure moratorium on federally-backed properties was extended by the FHFA on August 27, 2020 to last until “at least” December 31, 2020.

Additional phases of the CARES Act or other COVID-19 pandemic relief legislation may be enacted by Congress. We continue to evaluate the potential impact of the CARES Act on our business, including its continued impact to the U.S. economy; impacts to mortgages held or serviced by our members and that we accept as collateral; and the impacts on our MPF Program.

Additional COVID-19 Presidential, Legislative and Regulatory Developments. In light of the COVID-19 pandemic, the President, through executive orders, governmental agencies, including the SEC, the Office of the Comptroller of the Currency, Federal Reserve, FDIC, National Credit Union Administration, CFTC and the FHFA, as well as state governments and agencies, have taken, and may continue to take, actions to provide various forms of relief from, and guidance regarding, the financial, operational, credit, market, and other effects of the pandemic, some of which may have a direct or indirect impact on us or our members. Many of these actions are temporary in nature. We continue to monitor these actions and guidance as they evolve and to evaluate their potential impact on us.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

We measure interest rate risk exposure by various methods, including the calculation of duration of equity (DOE) and market value of equity (MVE) in different interest rate scenarios.

Duration of Equity

DOE aggregates the estimated sensitivity of market value for each of our financial assets and liabilities to changes in interest rates. In essence, DOE indicates the sensitivity of MVE to changes in interest rates. However, MVE should not be considered indicative of our market value as a going concern or our value in a liquidation scenario. A positive DOE results when the duration of assets and designated derivatives is greater than the duration of liabilities and designated derivatives. A positive DOE generally indicates a degree of interest rate risk exposure in a rising interest rate environment. A negative DOE indicates a degree of interest rate risk exposure in a declining interest rate environment. Higher DOE numbers, whether positive or negative, indicate greater volatility of MVE in response to changing interest rates.

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We manage DOE within ranges approved by our board of directors as described under Item 7A - "Quantitative and Qualitative Disclosures About Market Risk" in the annual report on Form 10-K, incorporated by reference herein. All our DOE measurements were in compliance with board of director established policy limits and operating ranges as of September 30, 2020. On an ongoing basis, we actively monitor portfolio relationships and overall DOE dynamics as a part of our evaluation processes for determining acceptable future asset/liability management actions. Table 48 presents the DOE in the base case and the up and down 200 basis point interest rate shock scenarios as of the periods noted:

Table 48

Duration of Equity
Date	Up 200 Basis Points	Base	Down 200 Basis Points
09/30/2020	-0.9	1.1	0.4
06/30/2020	-1.5	-3.9	0.4
03/31/2020	-0.5	-2.3	0.7
12/31/2019	0.8	-0.9	2.4
09/30/2019	1.0	-0.7	2.0

The absolute value of the DOE of the portfolio as of September 30, 2020 decreased in the base and up 200 basis point shock scenarios and remained approximately unchanged in the down 200 basis point shock scenario from June 30, 2020. The primary factors contributing to these changes in duration during the period were: (1) the general increase in longer-term interest rates and the relative level of mortgage prices and rates during the period; (2) a decrease in the weighting of the mortgage loan portfolio as a percent of total assets during the period; and (3) asset/liability actions taken by management throughout the period, including the continued issuance of long-term, unswapped callable consolidated obligation bonds with relatively short lock-out periods, and the continued issuance of discount notes and short-term variable rate consolidated obligations to fund changes in advance balances.

The general increase in longer-term interest rates during the third quarter of 2020 generally indicates a lengthening duration profile for both the fixed rate mortgage loan portfolio and the associated unswapped callable consolidated obligation bonds funding these assets. The increase in advance balances and the decline of our mortgage loan portfolio during the period, as discussed in Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – MPF Program,” caused the mortgage loan portfolio to decrease as an overall percentage of assets, decreasing from 20.4 percent of total assets as of June 30, 2020 to 19.0 percent as of September 30, 2020. Since the mortgage loan portfolio continues to comprise a considerable percentage of overall assets and has such a sizable duration relative to our other assets, especially with the increase in the advance portfolio during the period, its behavior is quite visible in the duration risk profile and changes in this portfolio are typically magnified as the composition of assets changes. This magnification occurs when a portfolio market value weighting as a percent of the overall net market value of the balance sheet changes, causing the remaining portfolios to be a smaller or larger component of the total balance sheet composition. For example, if advance balances decrease during a given period, this decrease will cause the mortgage loan portfolio weighting to increase as a total proportion of total assets. Further, if interest rates decrease, the market value gains in the mortgage loan portfolio will cause the mortgage loan portfolio to further increase its sizable percentage of overall market value of assets. This increase in market value of assets will cause the duration for this portfolio to have a greater impact on DOE. In other words, this relationship causes the duration of the mortgage loan portfolio to have a larger contribution impact to the overall DOE since DOE is a market value weighted measurement. With these balance sheet dynamics, we continue to actively manage and monitor the contributing factors of our risk profile, including DOE. As the relationship of the fixed rate mortgage loan assets and the associated callable liabilities vary based on market conditions, we evaluate and manage these market driven sensitivities as both portfolios change in balance level and overall proportion.

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Under the RMP approved by our board of directors, our DOE is generally limited to a range of ±5.0 in the base case, while we typically manage our DOE in the base scenario to remain in the range of ±2.5 as set forth in our Risk Appetite Metrics approved by the board of directors. This lower operating range for DOE is considered prudent and reasonable by management and the board of directors and can change depending upon market conditions and other factors. However, when DOE exceeds either the limits established by the RMP or the more narrowly-defined ranges to which we manage DOE, corrective actions taken may include: (1) the purchase of interest rate caps, interest rate floors, swaptions or other derivatives; (2) the sale of assets; and/or (3) the addition to the balance sheet of assets or liabilities having characteristics that are such that they counterbalance the excessive duration observed. Provided the current unprecedented, historically low and volatile interest rate environment, we regularly evaluate balance sheet composition along with strategic alternatives to mitigate potential excessive duration positions that may include: (1) take asset/liability actions to bring the DOE back within the ranges established in our RMP; or (2) review and discuss potential asset/liability management actions with the board of directors at the next regularly scheduled meeting that could bring the DOE back within the ranges established in the RMP and ascertain a course of action, which can include a determination that no asset/liability management actions are necessary. A determination that no asset/liability management actions are necessary can be made only if the board of directors agrees with management’s recommendations. We continue to actively monitor portfolio relationships and overall DOE dynamics as a part of our evaluation processes for determining acceptable future asset/liability management actions.

With respect to the mortgage loan portfolio, new loans were added to replace loans that were prepaid during the period as we continue to actively manage this portfolio to position the balance sheet sensitivity to perform within our expected risk tolerances. To effectively manage these changes in the mortgage loan portfolio (including new production loans) and related sensitivity to changes in market conditions, we continued to issue unswapped callable consolidated obligation bonds with relatively long maturities and short lock-out periods (generally three months to one year). The issuance of callable bonds and reissuance of new callable bonds to replace called bonds at lower interest rates as rates continued to remain historically low during the period, generally extends the duration profile of this portfolio. This liability extension corresponds with the expected longer duration profile of the new fixed rate mortgage loans, all else being equal, and positions the balance sheet for future changes in rates, including rate increases where the mortgage loan portfolio will likely lengthen in duration as expected prepayments slow. This liability lengthening demonstrates the specific duration sensitivity to changes in interest rates at certain shock scenarios where the unswapped callable bonds are more or less sensitive to certain levels of increasing interest rates, causing the overall DOE to increase or decrease, similar to the factors causing the changes in DOE for all interest rate shock scenarios. This sensitivity, or convexity, is further described under Item 7A – "Quantitative and Qualitative Disclosures About Market Risk" in the annual report on Form 10-K for the year ended December 31, 2019.

In addition, the relative level of mortgage rates and prices generally contributes significantly to the sensitivity of the fixed rate mortgage loan portfolio causing the duration profile to lengthen or shorten based on the relationship between interest rates, mortgage rates, mortgage prices and associated mortgage spreads. For instance, the increase in longer-term interest rates during the period caused the mortgage loan portfolio duration to lengthen more than the associated liabilities, contributing to the asset sensitive DOE profile in the base and a less liability sensitive DOE in the up 200 basis point shock interest rate scenario and an approximately unchanged DOE profile in the down 200 basis point shock interest rate scenario. While mortgage rates and spreads contributed to the changes in DOE sensitivity during the period, associated mortgage prices were a more significant contributing factor. As expected, all model-related assumptions are regularly evaluated with reasonable enhancements applied periodically. The associated mortgage pricing mechanism includes an extended market-based approach and contributed to the changes during the period. Further, issuance of discount notes continued, as well as increased issuance of variable rate consolidated obligations, in order to provide adequate liquidity sources to appropriately address changes in customer short-term advance balances and associated capital stock activity during the period. The combination of all these factors contributed to the net DOE changes in all interest rate shock scenarios, where the DOE decreased in the base and up 200 basis point shock scenarios and remained approximately unchanged in the down 200 basis point shock scenario. The down shock scenario continues to provide limited information since interest rates remain at historically low levels. This low interest rate environment essentially generates at or near zero interest rates for the majority of interest rates along the down 200 shocked term structure of interest rates, causing valuation changes to be limited, generating DOE results with marginal information.

In calculating DOE, we also calculate our duration gap, which is the difference between the duration of our assets and the duration of our liabilities. Our base duration gap was 0.7 months for September 30, 2020 and -2.5 months for June 30, 2020. As discussed previously, the performance was primarily the result of the changes in the fixed rate mortgage loan portfolio and the associated funding decisions made by management in response to changes in the interest rate environment, mortgage rates and prices, as well as balance sheet changes during the third quarter of 2020. All FHLBanks are required to submit this base duration gap number to the Office of Finance as part of the quarterly reporting process created by the FHFA.

105

Market Value of Equity

MVE is the net value of our assets and liabilities. Estimating sensitivity of MVE to changes in interest rates is another measure of interest rate risk. We generally maintain an MVE within limits specified by the board of directors in the RMP. The RMP measures our market value risk in terms of the MVE in relation to total regulatory capital stock outstanding (TRCS). TRCS includes all capital stock outstanding, including stock subject to mandatory redemption. As a cooperative, we believe using the TRCS results is an appropriate measure because it reflects our market value relative to the book value of our capital stock. Our RMP stipulates MVE shall not be less than: (1) 100 percent of TRCS under the base case scenario; or (2) 90 percent of TRCS under a ±200 basis point instantaneous parallel shock in interest rates. Table 49 presents MVE as a percent of TRCS. As of September 30, 2020, all scenarios are well above the specified limits and much of the relative level in the ratios during the periods covered by the table can be attributed to the relative level of the fixed rate mortgage loan market values as rates have continued to remain historically low along with the relative level of outstanding capital.

The MVE to TRCS ratios can be greatly impacted by the level of capital outstanding based on our capital management approach. Typically, as advances increase and the associated capital level increases, the ratio will generally decline since the new advances are primarily short-term with market values at or near par. Conversely, as advance balances decrease and the capital level decreases as capital stock is repurchased, the ratio will generally increase. However, if excess capital stock is not repurchased, the capital level remains higher thereby causing a decrease in the ratio. The relative level of advance balances, required stock (including the new capital stock requirement for mortgage loan balances) and excess stock as of September 30, 2020 (see Table 37 under Item 2 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources - Capital”) as well as the extended market-based mortgage loan portfolio derived market values contributed to the MVE levels as of September 30, 2020. These relationships primarily generate the changes in the MVE/TRCS levels and produce the changes in the ratios in all interest rate scenarios in the table below.

Table 49

Market Value of Equity as a Percent of Total Regulatory Capital Stock
Date	Up 200 Basis Points	Base	Down 200 Basis Points
09/30/2020	186	177	182
06/30/2020	231	210	209
03/31/2020	184	173	177
12/31/2019	175	174	176
09/30/2019	174	174	179

Detail of Derivative Instruments by Type of Instrument by Type of Risk

Various types of derivative instruments are utilized to mitigate the interest rate risks described in the preceding sections as well as to better match the terms of assets and liabilities. Generally, we designate derivative instruments as either: (1) a fair value hedge of an underlying financial instrument; or (2) an economic hedge used in asset/liability management. An economic hedge is defined as a derivative hedging specific or non-specific underlying assets, liabilities or firm commitments that either does not qualify for hedge accounting, or for which we have not elected hedge accounting, but is an acceptable hedging strategy under our RMP. For hedging relationships that are not designated for shortcut hedge accounting, we formally assess (both at the hedge’s inception and monthly on an ongoing basis) whether the derivatives used have been highly effective in offsetting changes in the fair values of hedged items and whether those derivatives may be expected to remain highly effective in future periods. We typically use regression analyses or similar statistical analyses to assess the quantitative effectiveness of our long haul hedges. We determine the hedge accounting to be applied when the hedge is entered into by completing detailed documentation, which includes a checklist setting forth criteria that must be met to qualify for hedge accounting.

106

Tables 50 and 51 present the notional amount and fair value amount (fair value includes net accrued interest receivable or payable on the derivative) for derivative instruments by hedged item, hedging instrument, hedging objective and accounting designation (in thousands):

Table 50

09/30/2020
Hedged Item	Hedging Instrument	Hedging Objective	Accounting Designation	Notional Amount		Fair Value Amount
Advances
Fixed rate non-callable advances	Pay fixed, receive variable interest rate swap	Convert the advance’s fixed rate to a variable rate index	Fair Value Hedge	$	3,866,857	$	(5,722)
Fixed rate convertible advances	Pay fixed, receive variable interest rate swap	Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance	Fair Value Hedge	1,735,900		(130,111)
Firm commitment to issue a fixed rate advance	Forward settling interest rate swap	Protect against fair value risk	Economic Hedge	25,012		(1,271)
Fixed rate non-callable advances	Pay fixed, receive variable interest rate swap	Convert the advance’s fixed rate to a variable rate index	Economic Hedge	21,527		(1,322)
Firm commitment to issue a fixed rate advance	Forward settling interest rate swap	Protect against fair value risk	Fair Value Hedge	11,004		5
Investments
Fixed rate non-MBS available-for-sale investments	Pay fixed, receive variable interest rate swap	Convert the investment’s fixed rate to a variable rate index	Fair Value Hedge	3,950,000		(123)
Fixed rate MBS available-for-sale investments	Pay fixed, receive variable interest rate swap	Convert the investment’s fixed rate to a variable rate index	Fair Value Hedge	2,912,415		(158,391)
Fixed rate non-MBS trading investments	Pay fixed, receive variable interest rate swap	Convert the investment’s fixed rate to a variable rate index	Economic Hedge	1,898,500		97
Fixed rate MBS trading investments	Pay fixed, receive variable interest rate swap	Convert the investment’s fixed rate to a variable rate index	Economic Hedge	784,267		(72,334)
Adjustable rate MBS with embedded caps	Interest rate cap	Offset the interest rate cap embedded in a variable rate investment	Economic Hedge	602,500		87
Mortgage Loans Held for Portfolio
Fixed rate mortgage purchase commitments	Mortgage purchase commitment	Protect against fair value risk	Economic Hedge	105,003		4
Consolidated Obligation Discount Notes
Fixed rate non-callable consolidated obligation discount notes with tenors less than 6 months	Receive fixed, pay variable interest rate swap	Convert the discount note's fixed rate to a variable rate	Economic Hedge	199,858		1
Fixed rate non-callable consolidated obligation discount notes with tenors of 6 to 12 months	Receive fixed, pay variable interest rate swap	Convert the discount note's fixed rate to a variable rate	Fair Value Hedge	174,613		(1)
Consolidated Obligation Bonds
Fixed rate non-callable consolidated obligation bonds	Receive fixed, pay variable interest rate swap	Convert the bond’s fixed rate to a variable rate index	Fair Value Hedge	3,262,500		19,571
TOTAL				$	19,549,956	$	(349,510)

107

Table 51

12/31/2019
Hedged Item	Hedging Instrument	Hedging Objective	Accounting Designation	Notional Amount		Fair Value Amount
Advances
Fixed rate non-callable advances	Pay fixed, receive variable interest rate swap	Convert the advance’s fixed rate to a variable rate index	Fair Value Hedge	$	3,160,580	$	953
Fixed rate convertible advances	Pay fixed, receive variable interest rate swap	Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance	Fair Value Hedge	1,607,500		(24,784)
Firm commitment to issue a fixed rate advance	Forward settling interest rate swap	Protect against fair value risk	Fair Value Hedge	35,504		28
Fixed rate non-callable advances	Pay fixed, receive variable interest rate swap	Convert the advance’s fixed rate to a variable rate index	Economic Hedge	6,000		(62)
Firm commitment to issue a fixed rate advance	Forward settling interest rate swap	Protect against fair value risk	Economic Hedge	35,077		(532)
Investments
Fixed rate non-MBS available-for-sale investments	Pay fixed, receive variable interest rate swap	Convert the investment’s fixed rate to a variable rate index	Fair Value Hedge	4,200,000		(352)
Fixed rate MBS available-for-sale investments	Pay fixed, receive variable interest rate swap	Convert the investment’s fixed rate to a variable rate index	Fair Value Hedge	2,822,646		(49,571)
Fixed rate non-MBS trading investments	Pay fixed, receive variable interest rate swap	Convert the investment’s fixed rate to a variable rate index	Economic Hedge	1,898,500		248
Adjustable rate MBS with embedded caps	Interest rate cap	Offset the interest rate cap embedded in a variable rate investment	Economic Hedge	1,130,000		117
Fixed rate MBS trading investments	Pay fixed, receive variable interest rate swap	Convert the investment’s fixed rate to a variable rate index	Economic Hedge	790,045		(24,861)
Mortgage Loans Held for Portfolio
Fixed rate mortgage purchase commitments	Mortgage purchase commitment	Protect against fair value risk	Economic Hedge	221,800		470
Consolidated Obligation Discount Notes
Fixed rate non-callable consolidated obligation discount notes with tenors of 6 to 12 months	Receive fixed, pay variable interest rate swap	Convert the discount note's fixed rate to a variable rate	Fair Value Hedge	1,383,782		47
Consolidated Obligation Bonds
Fixed rate non-callable consolidated obligation bonds	Receive fixed, pay variable interest rate swap	Convert the bond’s fixed rate to a variable rate index	Fair Value Hedge	2,628,500		14,013
Fixed rate callable consolidated obligation bonds	Receive fixed, pay variable interest rate swap	Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond	Fair Value Hedge	500,000		2,635
Variable rate consolidated obligation bonds	Receive variable interest rate, pay variable interest rate swap	Reduce basis risk by converting an undesirable variable rate index in the bond to a more desirable variable rate index	Economic Hedge	370,000		(342)
Callable step-up/step-down consolidated obligation bonds	Receive variable interest rate with embedded features, pay variable interest rate swap	Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond	Fair Value Hedge	110,000		95
TOTAL				$	20,899,934	$	(81,898)

108

Item 4: Controls and Procedures

Disclosure Controls and Procedures

Senior management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide a reasonable level of assurance in achieving their desired objectives; however, in designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Management, with the participation of the President and Chief Executive Officer (CEO), our principal executive officer/principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of September 30, 2020. Based upon that evaluation, the CEO has concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2020.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. OTHER INFORMATION

Item 1: Legal Proceedings

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

Item 1A: Risk Factors

An economic downturn or natural disaster in the FHLBank’s region, or a pandemic, could adversely affect our profitability and financial condition. Economic recession over a prolonged period or other unfavorable economic conditions in our region (including on a state or local level) could have an adverse effect on our business, including the demand for our products and services, and the value of the collateral securing advances, investments, and mortgage loans held in portfolio. Portions of our region also are subject to risks from tornadoes, floods, or other natural disasters. These natural disasters, including those resulting from significant climate changes, could damage or dislocate the facilities of our members, may damage or destroy collateral that members have pledged to secure advances or mortgages, or the livelihood of borrowers of members, or otherwise could cause significant economic dislocation in the affected areas of our region. Additionally, the impact of widespread health emergencies may adversely impact our financial condition and results of operations.

The impact of the COVID-19 pandemic on our members and our business could adversely affect our profitability and financial condition. As of the date of the filing of this report, the full effects of the COVID-19 pandemic are evolving and not fully known. The COVID-19 pandemic has to date caused significant economic and financial turmoil both in the U.S. and around the world, and has fueled concerns that it will lead to a global recession. These conditions are expected to continue in the near term. Many businesses in our district and across the U.S. have been forced to suspend operations for an indefinite period of time in an attempt to slow the spread of the virus, and unemployment claims have increased dramatically as more employers lay off or furlough workers. Ultimately, the significant slowdown in economic activity caused by the COVID-19 pandemic could reduce demand at our member institutions, which could impact members’ demand for our products and services. It could also lead to a devaluation of our assets and/or the collateral pledged by our members to secure advances and other extensions of credit, all of which have had and could continue to have an adverse impact on our financial condition and results of operations, including as a result of reduced business volumes, reduced income or increased credit losses.

109

Our ability to obtain funds through the issuance of consolidated obligations depends in part on prevailing conditions in the capital markets (including investor demand), such as the effects of any reduced liquidity in financial markets, which are beyond our control. Volatility in the capital markets caused by the COVID-19 pandemic can impact demand for FHLBank debt and the cost of the debt the FHLBanks issue, which could impact our liquidity and profitability. Our business and results of operations are affected by the fiscal and monetary policies of the U.S. government, foreign governments and their agencies. The Federal Reserve Board’s policies directly and indirectly influence the yield on our interest-earning assets and the cost of our interest-bearing liabilities. In response to COVID-19, the FOMC lowered the target range for Federal funds to a target range of zero to 0.25 percent. The outlook for the remainder of 2020 is uncertain, and there is a possibility that the FOMC may keep interest rates low or use other policies if economic conditions warrant, each of which could further impact the efficiency of our asset and liability management activities and continue to negatively affect our financial condition and results of operations.

Most of our employees have been working remotely since mid-March. Management began bringing employees back to work in our offices in early August and plans to continue this process in phases but is prepared to continue remote operations if local infection trends continue to rise. With most of our employees working remotely, we could face operational difficulties or disruptions that could impair our ability to conduct and manage our business effectively. In addition, some of our employees, executive management team, or board of directors could become infected with the COVID-19 virus which, depending upon the number and the severity of their cases, could similarly affect our ability to conduct and manage our business effectively. Counterparties, vendors and other third parties upon which we rely to conduct our business could be adversely impacted by the COVID-19 pandemic which could, in turn, lead to operational challenges for us. These potential difficulties, disruptions and challenges could increase the likelihood that our financial condition and results of operations could be impacted.

Significant borrower defaults on loans made by our members could occur as a result of reduced economic activity and these defaults could cause members to fail. We could be adversely impacted by the reduction in business volume that would arise from the failure of one or more of our members. Further, counterparty default, whether as a result of the operational or financial impacts of the COVID-19 pandemic, could adversely impact our financial condition and results of operations.

There have been no other material changes to the risk factors previously disclosed in our annual report on Form 10-K filed on March 20, 2020, and such risk factors are incorporated by reference herein.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3: Defaults Upon Senior Securities

Not applicable.

Item 4: Mine Safety Disclosures

Not applicable.

Item 5: Other Information

None.

110

Item 6: Exhibits

Exhibit No.	Description
3.1	Exhibit 3.1 to the FHLBank’s registration statement on Form 10, filed May 15, 2006, and made effective on July 14, 2006 (File No. 000-52004), Federal Home Loan Bank of Topeka Articles and Organization Certificate, is incorporated herein by reference as Exhibit 3.1.
3.2	Exhibit 3.1 to the Current Report on Form 8-K, filed November 5, 2020, Federal Home Loan Bank of Topeka Amended and Restated Bylaws, is incorporated herein by reference as Exhibit 3.2.
4.1	Exhibit 4.1 to the Annual Report on Form 10-K, filed March 20, 2020, Federal Home Loan Bank of Topeka Capital Plan.
31.1	Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Interim Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of President and Chief Executive Officer (Principal Executive Officer) and Interim Chief Financial Officer (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

*     Represents a management contract or a compensatory plan or arrangement.

111

SIGNATURES

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

	Federal Home Loan Bank of Topeka
November 10, 2020	By: /s/ Mark E. Yardley
Date	Mark E. Yardley
	President and Chief Executive Officer

112

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

     I, Mark E. Yardley, President and Chief Executive Officer of Federal Home Loan Bank of Topeka (the “registrant”), certify that:

1.I have reviewed this quarterly report on Form 10-Q of the registrant;

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.I am 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 my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me 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 my 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 my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.I have disclosed, based on my 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.

Dated: November 10, 2020

By: /s/ Mark E. Yardley

Mark E. Yardley

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF INTERIM PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

     I, Mark E. Yardley, Interim Principal Financial Officer of Federal Home Loan Bank of Topeka (the “registrant”), certify that:

1.I have reviewed this quarterly report on Form 10-Q of the registrant;

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.I am 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; and

5.I have disclosed, based on my 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.

Dated: November 10, 2020

By: /s/ Mark E. Yardley

Mark E. Yardley

Interim Principal Financial Officer

EX-32

Exhibit 32

CERTIFICATION FURNISHED PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of the Federal Home Loan Bank of Topeka (the “Bank”) for the period ended September 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Mark E. Yardley, as Chief Executive Officer and Interim Principal Financial Officer of the Bank, hereby certifies, pursuant to 18 U.S.C. Section 1350, that, to the best of his/her knowledge:

(1)  The 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 Bank.

November 10, 2020	By: /s/ Mark E. Yardley
Date	Mark E. Yardley
	President and Chief Executive Officer (Principal Executive Officer) and Interim Principal Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Bank and will be retained by the Bank and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Nov. 03, 2020
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2020
Document Transition Report	false
Entity File Number	000-52004
Entity Registrant Name	FEDERAL HOME LOAN BANK OF TOPEKA
Entity Tax Identification Number	48-0561319
Entity Address, Address Line One	500 SW Wanamaker Road
Entity Address, City or Town	Topeka
Entity Address, State or Province	KS
Entity Address, Postal Zip Code	66606
City Area Code	785
Local Phone Number	233.0507
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Amendment Flag	false
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001325878
Current Fiscal Year End Date	--12-31
Entity Incorporation, State or Country Code	X1
Class A [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		3,454,177
Class B [Member]
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		11,978,572

XML

Statements Of Condition - USD ($) $ in Thousands		Sep. 30, 2020	Dec. 31, 2019
ASSETS
Cash and due from banks		$ 22,704	$ 1,917,166
Interest-bearing deposits		499,662	921,453
Securities purchased under agreements to resell (Note 9)		4,600,000	4,750,000
Federal funds sold		1,435,000	850,000
Investment securities:
Trading securities (Note 3)		3,117,935	2,812,562
Available-for-sale securities (Note 3)		7,290,611	7,182,500
Held-to-maturity securities, fair value of $2,975,782 and $3,556,938 (Note 3)		2,973,976	3,569,958
Total investment securities		13,382,522	13,565,020
Advances (Note 4)		22,616,252	30,241,315
Mortgage loans held for portfolio, net of allowance for credit losses of $7,926 and $985 (Note 5)		10,093,466	10,633,009
Accrued interest receivable		108,532	143,765
Derivative assets, net (Notes 6, 9)		162,501	154,804
Other assets		90,735	100,122
TOTAL ASSETS		53,011,374	63,276,654
LIABILITIES
Deposits (Note 7)		1,016,316	790,640
Consolidated obligations, net:
Discount notes (Note 8)		11,936,214	27,447,911
Bonds (Note 8)		37,294,169	32,013,314
Total consolidated obligations, net		49,230,383	59,461,225
Mandatorily redeemable capital stock (Note 10)		1,914	2,415
Accrued interest payable		54,913	117,580
Affordable Housing Program payable		39,350	43,027
Derivative liabilities, net (Notes 6, 9)		173	202
Other liabilities		68,389	70,514
TOTAL LIABILITIES		50,411,438	60,485,603
Commitments and contingencies (Note 13)
Capital stock outstanding - putable:
Total capital stock (Note 10)	[1]	1,580,741	1,766,456
Retained earnings:
Unrestricted		773,640	765,295
Restricted		248,926	234,514
Total retained earnings		1,022,566	999,809
Accumulated other comprehensive income (loss) (Note 11)		(3,371)	24,786
TOTAL CAPITAL		2,599,936	2,791,051
TOTAL LIABILITIES AND CAPITAL		53,011,374	63,276,654
Class A [Member]
Capital stock outstanding - putable:
Total capital stock (Note 10)	[1]	387,207	447,610
Class B [Member]
Capital stock outstanding - putable:
Total capital stock (Note 10)	[1]	$ 1,193,534	$ 1,318,846

[1] Putable

XML

Statements Of Condition (Parenthetical) - USD ($) shares in Thousands, $ in Thousands		Sep. 30, 2020	Dec. 31, 2019
ASSETS
Allowance for Credit Losses on Mortgage Loans	[1]	$ 7,926	$ 985
Investment securities:
Held-to-maturity, Fair Value		$ 2,975,782	$ 3,556,938
Capital stock outstanding - putable:
Common Stock, par value per share		$ 100
Class A [Member]
Capital stock outstanding - putable:
Common Stock, par value per share	[2]	$ 100	$ 100
Common Stock, Shares, Issued	[2]	3,872	4,476
Common Stock, Shares Outstanding	[2]	3,872	4,476
Class B [Member]
Capital stock outstanding - putable:
Common Stock, par value per share	[2]	$ 100	$ 100
Common Stock, Shares, Issued	[2]	11,935	13,188
Common Stock, Shares Outstanding	[2]	11,935	13,188

[1] Effective January 1, 2020, new accounting guidance was adopted relating to the measurement of credit losses on financial instruments and resulted in a cumulative effect adjustment of $6,123,000 (see Table 5.5).

[2] Putable

XML

Statements Of Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
INTEREST INCOME:
Interest-bearing deposits	$ 471	$ 5,300	$ 5,736	$ 15,518
Securities purchased under agreements to resell	1,378	26,768	16,906	84,266
Federal funds sold	575	8,179	4,517	28,058
Trading securities	18,099	20,342	56,371	68,211
Available-for-sale securities	9,588	47,811	43,753	78,694
Held-to-maturity securities	4,540	24,337	29,024	84,469
Advances	38,848	186,431	230,000	563,602
Mortgage loans held for portfolio	64,192	76,546	222,962	225,015
Other	286	346	940	1,097
Total interest income	137,977	396,060	610,209	1,148,930
INTEREST EXPENSE:
Deposits	76	2,540	1,707	7,701
Consolidated obligations:
Discount notes	5,674	133,680	120,385	433,473
Bonds	67,142	185,096	310,628	519,967
Mandatorily redeemable capital stock (Note 10)	12	30	50	113
Other	285	299	888	1,016
Total interest expense	73,189	321,645	433,658	962,270
NET INTEREST INCOME	64,788	74,415	176,551	186,660
Provision (reversal) for credit losses on mortgage loans (Note 5)	116	393	717	509
NET INTEREST INCOME AFTER LOAN LOSS PROVISION (REVERSAL)	64,672	74,022	175,834	186,151
OTHER INCOME (LOSS):
Net gains (losses) on trading securities (Note 3)	(6,995)	16,186	92,769	86,784
Net gains (losses) on sale of available-for-sale securities (Note 3)	0	0	1,523	0
Net gains (losses) on sale of held-to-maturity securities (Note 3)	0	0	0	(46)
Net gains (losses) on derivatives and hedging activities (Note 6)	2,026	(20,386)	(135,581)	(78,939)
Standby bond purchase agreement commitment fees	560	566	1,660	1,685
Letters of credit fees	1,663	1,190	4,705	3,581
Other	1,112	937	(191)	2,470
Total other income (loss)	(1,634)	(1,507)	(35,115)	15,535
OTHER EXPENSES:
Compensation and benefits	10,014	9,781	29,533	28,598
Other operating	4,365	5,031	13,840	14,331
Federal Housing Finance Agency	1,023	812	3,068	2,437
Office of Finance	1,036	972	2,889	2,717
Mortgage loans transaction service fees	1,946	1,775	6,029	5,010
Other	226	262	5,290	843
Total other expenses	18,610	18,633	60,649	53,936
INCOME BEFORE ASSESSMENTS	44,428	53,882	80,070	147,750
Affordable Housing Program	4,444	5,391	8,012	14,786
NET INCOME	$ 39,984	$ 48,491	$ 72,058	$ 132,964

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Statements Of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Net income	$ 39,984	$ 48,491	$ 72,058	$ 132,964
Other comprehensive income (loss):
Net unrealized gains (losses) on available-for-sale securities	30,295	(17,324)	(28,239)	(1,249)
Defined benefit pension plan	28	95	82	240
Total other comprehensive income (loss)	30,323	(17,229)	(28,157)	(1,009)
TOTAL COMPREHENSIVE INCOME	$ 70,307	$ 31,262	$ 43,901	$ 131,955

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Statements Of Capital - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at the beginning of the period		$ 2,354,938	$ 2,580,693	$ 2,791,051	$ 2,454,252
Comprehensive income		70,307	31,262	43,901	131,955
Proceeds from issuance of capital stock		821,042	397,429	1,372,381	1,161,329
Repurchase/redemption of capital stock		(25,724)	(191,217)	(84,358)	(870,594)
Net reclassification of shares to mandatorily redeemable capital stock		(620,561)	(159,775)	(1,527,252)	(218,411)
Net transfer of shares between Class A and Class B		0	0	0	0
Partial recovery of prior capital distribution to Financing Corporation				10,543	0
Dividends on capital stock
Cash payment		(66)	(70)	(207)	(209)
Stock issued		0	0	0	0
Balance at the end of the period		$ 2,599,936	$ 2,658,322	$ 2,599,936	$ 2,658,322
Capital Stock [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares, beginning balance	[1]	13,920	15,985	17,664	15,245
Balance at the beginning of the period	[1]	$ 1,392,003	$ 1,598,504	$ 1,766,456	$ 1,524,537
Proceeds from issuance of capital stock, shares	[1]	8,210	3,974	13,723	11,613
Proceeds from issuance of capital stock	[1]	$ 821,042	$ 397,429	$ 1,372,381	$ 1,161,329
Repurchase/redemption of capital stock, shares	[1]	(257)	(1,912)	(843)	(8,706)
Repurchase/redemption of capital stock	[1]	$ (25,724)	$ (191,217)	$ (84,358)	$ (870,594)
Net reclassification of shares to mandatorily redeemable capital stock, shares	[1]	(6,206)	(1,598)	(15,272)	(2,184)
Net reclassification of shares to mandatorily redeemable capital stock	[1]	$ (620,561)	$ (159,775)	$ (1,527,252)	$ (218,411)
Net transfer of shares between Class A and Class B, shares	[1]	0	0	0	0
Net transfer of shares between Class A and Class B	[1]	$ 0	$ 0	$ 0	$ 0
Dividends on capital stock
Stock issued, shares	[1]	140	257	535	738
Stock issued	[1]	$ 13,981	$ 25,749	$ 53,514	$ 73,829
Shares, ending balance	[1]	15,807	16,706	15,807	16,706
Balance at the end of the period	[1]	$ 1,580,741	$ 1,670,690	$ 1,580,741	$ 1,670,690
Total Retained Earnings [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at the beginning of the period		996,629	950,276	999,809	914,022
Comprehensive income		39,984	48,491	72,058	132,964
Partial recovery of prior capital distribution to Financing Corporation				10,543
Dividends on capital stock
Cash payment		(66)	(70)	(207)	(209)
Stock issued		(13,981)	(25,749)	(53,514)	(73,829)
Balance at the end of the period		1,022,566	972,948	1,022,566	972,948
Unrestricted Retained Earnings [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at the beginning of the period		755,700	735,915	765,295	716,555
Comprehensive income		31,987	38,792	57,646	106,371
Partial recovery of prior capital distribution to Financing Corporation				10,543
Dividends on capital stock
Cash payment		(66)	(70)	(207)	(209)
Stock issued		(13,981)	(25,749)	(53,514)	(73,829)
Balance at the end of the period		773,640	748,888	773,640	748,888
Restricted Retained Earnings [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at the beginning of the period		240,929	214,361	234,514	197,467
Comprehensive income		7,997	9,699	14,412	26,593
Partial recovery of prior capital distribution to Financing Corporation				0
Dividends on capital stock
Balance at the end of the period		248,926	224,060	248,926	224,060
Accumulated Other Comprehensive Income (Loss) [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at the beginning of the period		(33,694)	31,913	24,786	15,693
Comprehensive income		30,323	(17,229)	(28,157)	(1,009)
Dividends on capital stock
Balance at the end of the period		$ (3,371)	$ 14,684	(3,371)	$ 14,684
Adjustment for cumulative effect of accounting change , Period of Adoption [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at the beginning of the period				(6,123)
Adjustment for cumulative effect of accounting change , Period of Adoption [Member] | Total Retained Earnings [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at the beginning of the period				(6,123)
Adjustment for cumulative effect of accounting change , Period of Adoption [Member] | Unrestricted Retained Earnings [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at the beginning of the period				(6,123)
Adjustment for cumulative effect of accounting change , Period of Adoption [Member] | Restricted Retained Earnings [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Balance at the beginning of the period				$ 0
Class A [Member] | Capital Stock [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares, beginning balance	[1]	5,007	2,155	4,476	2,473
Balance at the beginning of the period	[1]	$ 500,679	$ 215,536	$ 447,610	$ 247,361
Proceeds from issuance of capital stock, shares	[1]	2	0	10	12
Proceeds from issuance of capital stock	[1]	$ 222	$ 0	$ 1,035	$ 1,171
Repurchase/redemption of capital stock, shares	[1]	0	(721)	0	(6,450)
Repurchase/redemption of capital stock	[1]	$ 0	$ (72,148)	$ 0	$ (645,039)
Net reclassification of shares to mandatorily redeemable capital stock, shares	[1]	(1,987)	(253)	(8,608)	(778)
Net reclassification of shares to mandatorily redeemable capital stock	[1]	$ (198,626)	$ (25,225)	$ (860,766)	$ (77,763)
Net transfer of shares between Class A and Class B, shares	[1]	850	2,263	7,994	8,187
Net transfer of shares between Class A and Class B	[1]	$ 84,932	$ 226,290	$ 799,328	$ 818,723
Dividends on capital stock
Shares, ending balance	[1]	3,872	3,444	3,872	3,444
Balance at the end of the period	[1]	$ 387,207	$ 344,453	$ 387,207	$ 344,453
Class B [Member] | Capital Stock [Member]
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares, beginning balance	[1]	8,913	13,830	13,188	12,772
Balance at the beginning of the period	[1]	$ 891,324	$ 1,382,968	$ 1,318,846	$ 1,277,176
Proceeds from issuance of capital stock, shares	[1]	8,208	3,974	13,713	11,601
Proceeds from issuance of capital stock	[1]	$ 820,820	$ 397,429	$ 1,371,346	$ 1,160,158
Repurchase/redemption of capital stock, shares	[1]	(257)	(1,191)	(843)	(2,256)
Repurchase/redemption of capital stock	[1]	$ (25,724)	$ (119,069)	$ (84,358)	$ (225,555)
Net reclassification of shares to mandatorily redeemable capital stock, shares	[1]	(4,219)	(1,345)	(6,664)	(1,406)
Net reclassification of shares to mandatorily redeemable capital stock	[1]	$ (421,935)	$ (134,550)	$ (666,486)	$ (140,648)
Net transfer of shares between Class A and Class B, shares	[1]	(850)	(2,263)	(7,994)	(8,187)
Net transfer of shares between Class A and Class B	[1]	$ (84,932)	$ (226,290)	$ (799,328)	$ (818,723)
Dividends on capital stock
Stock issued, shares	[1]	140	257	535	738
Stock issued	[1]	$ 13,981	$ 25,749	$ 53,514	$ 73,829
Shares, ending balance	[1]	11,935	13,262	11,935	13,262
Balance at the end of the period	[1]	$ 1,193,534	$ 1,326,237	$ 1,193,534	$ 1,326,237

[1] Putable

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Statements Of Capital (Parenthetical) - Capital Stock [Member]	3 Months Ended		9 Months Ended
	Sep. 30, 2020 Rate	Sep. 30, 2019 Rate	Sep. 30, 2020 Rate	Sep. 30, 2019 Rate
Class A [Member]
Stock dividend rate percentage	0.30%	2.50%	0.90%	2.40%
Class B [Member]
Stock dividend rate percentage	5.20%	7.50%	6.10%	7.50%

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Statements Of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 72,058	$ 132,964
Adjustments to reconcile income (loss) to net cash provided by (used in) operating activities:
Premiums and discounts on consolidated obligations, net	(50,162)	738
Concessions on consolidated obligations	24,029	10,128
Premiums and discounts on investments, net	14,556	6,246
Premiums, discounts and commitment fees on advances, net	(3,385)	(1,379)
Premiums, discounts and deferred loan costs on mortgage loans, net	47,349	18,542
Fair value adjustments on hedged assets or liabilities	3,568	2,948
Premises, software and equipment	2,498	2,331
Other	82	240
Provision (reversal) for credit losses on mortgage loans	717	509
Non-cash interest on mandatorily redeemable capital stock	49	111
Net realized (gains) losses on sale of available-for-sale securities	(1,523)	0
Net realized (gains) losses on sale of held-to-maturity securities	0	46
Net realized (gains) losses on disposal of premises, software and equipment	3,471	(3)
Other adjustments	4,366	(272)
Net (gains) losses on trading securities	(92,769)	(86,784)
Net change in derivatives and hedging activities	(288,215)	(144,589)
(Increase) decrease in accrued interest receivable	36,037	(41,801)
Change in net accrued interest included in derivative assets	30,973	(1,254)
(Increase) decrease in other assets	1,407	3,056
Increase (decrease) in accrued interest payable	(63,193)	28,372
Change in net accrued interest included in derivative liabilities	(117)	4,332
Increase (decrease) in Affordable Housing Program liability	(3,677)	(1,777)
Increase (decrease) in other liabilities	(1,849)	(1,682)
Total adjustments	(335,788)	(201,942)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	(263,730)	(68,978)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits	145,874	(32,829)
Net (increase) decrease in securities purchased under resale agreements	150,000	(886,278)
Net (increase) decrease in Federal funds sold	(585,000)	(850,000)
Proceeds from sale of trading securities	275,186	429
Proceeds from maturities of and principal repayments on trading securities	337,209	3,015,268
Purchases of trading securities	(825,000)	(3,679,375)
Proceeds from sale of available-for-sale securities	289,045	0
Proceeds from maturities of and principal repayments on available-for-sale securities	300,801	8,732
Purchases of available-for-sale securities	(430,610)	(4,180,862)
Proceeds from sale of held-to-maturity securities	0	9,442
Proceeds from maturities of and principal repayments on held-to-maturity securities	594,829	716,417
Advances repaid	252,632,071	279,880,008
Advances originated	(244,759,865)	(281,623,825)
Principal collected on mortgage loans	2,878,144	1,011,265
Purchases of mortgage loans	(2,401,848)	(2,451,132)
Proceeds from sale of foreclosed assets	793	1,965
Other investing activities	2,481	2,320
Purchases of premises, software and equipment	(568)	(1,037)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	8,603,542	(9,059,492)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	225,977	205,498
Net proceeds from issuance of consolidated obligations:
Discount notes	500,327,628	633,162,917
Bonds	34,971,746	20,517,358
Payments for maturing and retired consolidated obligations:
Discount notes	(515,803,859)	(632,736,460)
Bonds	(29,717,000)	(12,082,800)
Proceeds from financing derivatives	3,470	0
Net interest payments received (paid) for financing derivatives	(12,793)	652
Proceeds from issuance of capital stock	1,372,381	1,161,329
Payments for repurchase/redemption of capital stock	(84,358)	(870,594)
Payments for repurchase of mandatorily redeemable capital stock	(1,527,802)	(219,642)
Cash dividends paid	(207)	(209)
Partial Recovery Of Prior Capital Distribution To Financing Corporation	10,543	0
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(10,234,274)	9,138,049
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(1,894,462)	9,579
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	1,917,166	15,060
CASH AND CASH EQUIVALENTS AT END OF PERIOD	22,704	24,639
Supplemental disclosures:
Interest paid	523,348	919,428
Affordable Housing Program payments	11,783	16,859
Net transfers of mortgage loans to other assets	$ 670	$ 627

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BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

BASIS OF PRESENTATION

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

FHLBank’s significant accounting policies and certain other disclosures are set forth in the notes to the audited financial statements for the year ended December 31, 2019. The interim financial statements presented herein should be read in conjunction with FHLBank’s audited financial statements and notes thereto, which are included in FHLBank’s annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 20, 2020 (annual report on Form 10-K). The notes to the interim financial statements highlight significant changes to the notes included in the annual report on Form 10-K.

Out-of-Period Adjustment: Included in net income for the three months ended September 30, 2019 was an out-of-period adjustment of $14,336,000, of which $2,545,000 and $11,791,000 related to income that should have been recorded during the three months ended March 31, 2019 and June 30, 2019, respectively. The out-of-period adjustment related to hedged item valuations for certain available-for-sale securities in fair value hedging relationships and resulted in an increase in available-for-sale interest income and a reduction in other comprehensive income. Consequently, available-for-sale interest income was understated by $11,791,000 and $14,336,000 for the three and six months ended June 30, 2019. FHLBank has assessed the impact of this error and concluded that the amounts were not material, either individually or in the aggregate, to any prior period financial statements.

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

Allowance for Credit Losses: Beginning January 1, 2020, FHLBank adopted new accounting guidance pertaining to the measurement of credit losses on financial instruments that requires a financial asset or group of financial assets measured at amortized cost to be presented at the net amount expected to be collected. The new guidance also requires credit losses relating to these financial instruments as well as available-for-sale securities to be recorded through an allowance for credit losses. Key changes as compared to prior accounting guidance are detailed below. Consistent with the modified retrospective method of adoption, the prior period has not been revised to conform to the new basis of accounting. See Note 1 of the Notes to the Financial Statements included in the annual report on Form 10-K for information on the prior accounting treatment.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold: FHLBank invests in interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold. These investments provide short-term liquidity and are carried at amortized cost. Accrued interest receivable is recorded separately on the Statements of Condition.

These investments are evaluated quarterly for expected credit losses. If applicable, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. FHLBank uses the collateral maintenance provision practical expedient for securities purchased under agreements to resell. Consequently, a credit loss would be recognized if there is a collateral shortfall which FHLBank does not believe the counterparty will replenish in accordance with its contractual terms. The credit loss would be limited to the difference between the fair value of the collateral and the investment’s amortized cost. See Note 3 for details on the allowance methodologies relating to these investments.

Investment Securities:

Available-for-Sale: For securities classified as available-for-sale, FHLBank evaluates an individual security for impairment on a quarterly basis by comparing the security’s fair value to its amortized cost. Accrued interest receivable is recorded separately on the Statements of Condition. Impairment exists when the fair value of the investment is less than its amortized cost (i.e., in an unrealized loss position). In assessing whether a credit loss exists on an impaired security, FHLBank considers whether there would be a shortfall in receiving all cash flows contractually due. When a shortfall is considered possible, FHLBank compares the present value of cash flows to be collected from the security with the amortized cost basis of the security. If the present value of cash flows is less than amortized cost, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance is limited by the amount of the unrealized loss. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately.

If management intends to sell an impaired security classified as available-for-sale, or more likely than not will be required to sell the security before expected recovery of its amortized cost basis, any allowance for credit losses is written off and the amortized cost basis is written down to the security’s fair value at the reporting date with any incremental impairment reported in earnings as net gains (losses) on available-for-sale securities. If management does not intend to sell an impaired security classified as available-for-sale and it is not more likely than not that management will be required to sell the debt security, then the credit portion of the difference is recognized as an allowance for credit losses and any remaining difference between the security’s fair value and amortized cost is recorded to net unrealized gains (losses) on available-for-sale securities within other comprehensive income (loss) (OCI).

Held-to-Maturity: Securities that FHLBank has both the ability and intent to hold to maturity are classified as held-to-maturity and are carried at amortized cost, adjusted for periodic principal repayments, amortization of premiums, and accretion of discounts. Accrued interest receivable is recorded separately on the Statements of Condition.

Held-to-maturity securities are evaluated quarterly for expected credit losses on a pool basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. An allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately.

See Note 3 for details on the allowance methodologies relating to available-for-sale and held-to-maturity securities.

Advances: Advances are carried at amortized cost, which is original cost adjusted for periodic principal repayments, amortization of premiums, accretion of discounts, and fair value hedge adjustments. Accrued interest receivable is recorded separately on the Statements of Condition. Advances are evaluated quarterly for expected credit losses. If deemed necessary, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. See Note 4 for details on the allowance methodology relating to advances.

Mortgage Loans Held for Portfolio: Mortgage loans held for portfolio are recorded at amortized cost, which is original cost adjusted for periodic principal repayments, amortization of premiums, accretion of discounts, hedging adjustments, other fees, and direct write-downs. Accrued interest receivable is recorded separately on the Statements of Condition. FHLBank performs a quarterly assessment of its mortgage loans held for portfolio to estimate expected credit losses. An allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses.

FHLBank measures expected credit losses on mortgage loans on a collective basis, pooling loans with similar risk characteristics. If a mortgage loan no longer shares risk characteristics with other loans, it is removed from the pool and evaluated for expected credit losses on an individual basis.

When developing the allowance for credit losses, FHLBank measures the estimated loss over the remaining life of a mortgage loan, which also considers how credit enhancements mitigate credit losses. If a loan is purchased at a discount, the discount does not offset the allowance for credit losses. The allowance excludes uncollectible accrued interest receivable, as FHLBank writes off accrued interest receivable by reversing interest income if a mortgage loan is placed on nonaccrual status.

FHLBank does not purchase mortgage loans with credit deterioration present at the time of purchase. FHLBank includes estimates of expected recoveries within the allowance for credit losses. See Note 5 for details on the allowance methodologies relating to mortgage loans.

Off-Balance Sheet Credit Exposures: FHLBank evaluates off-balance sheet credit exposures on a quarterly basis for expected credit losses. If deemed necessary, an allowance for expected credit losses on these off-balance sheet exposures is recorded in other liabilities with a corresponding adjustment to the provision (reversal) for credit losses. See Note 13 for details on the allowance methodologies relating to off-balance sheet credit exposures.

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Recently Issued Accounting Standards And Interpretations And Changes In And Adoptions Of Accounting Principles

9 Months Ended

Sep. 30, 2020

Accounting Standards Update and Change in Accounting Principle [Abstract]

Recently Issued Accounting Standards And Interpretations And Changes In And Adoptions Of Accounting Principles

RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS AND CHANGES IN AND ADOPTIONS OF ACCOUNTING PRINCIPLES

Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In March 2020, the CARES Act was signed into law to provide relief from the economic impact of the COVID-19 pandemic to a variety of sectors of the U.S. economy, including businesses, individuals, health care, education, and state and local governments. The CARES Act also includes provisions that provide optional relief from certain accounting and reporting requirements related to troubled debt restructurings (TDRs). TDR relief applies to COVID-19-related modifications made from March 1, 2020 until the earlier of December 31, 2020 or 60 days following the termination of the national emergency declared by the President of the United States for borrowers that were current as of December 31, 2019. FHLBank has elected the optional relief but does not expect it to have a material effect on FHLBank's financial condition, results of operations, cash flows, or disclosures.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Accounting Standard Update (ASU) 2020-04). In March 2020, the Financial Accounting Standards Board (FASB) issued temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The transactions primarily include: (1) contract modifications; (2) hedging relationships; and (3) sale or transfer of debt securities classified as held-to-maturity. This guidance was effective immediately for FHLBank, and the amendments may be applied prospectively through December 31, 2022. FHLBank is in the process of evaluating the guidance, and its effect on FHLBank's financial condition, results of operations and cash flows has not yet been determined.

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU 2018-15). In August 2018, the FASB issued an amendment to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the amendments in this ASU require an entity in a hosting arrangement that is a service contract to follow existing guidance relating to internal-use software to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Costs to develop or obtain internal-use software that cannot be capitalized also cannot be capitalized for a hosting arrangement that is a service contract. Therefore, an entity in a hosting arrangement that is a service contract determines to which project stage (that is, preliminary project stage, application development stage, or post-implementation stage) an implementation activity relates. Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed. The amendments in this ASU also require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments in this ASU were effective January 1, 2020 for FHLBank. The adoption of this guidance did not materially impact FHLBank's financial condition, results of operations or cash flows.

Changes to the Disclosure Requirements for Defined Benefit Plans (ASU 2018-14). In August 2018, the FASB issued an amendment modifying the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans to improve disclosure effectiveness. The amendments in the ASU remove disclosures that are no longer considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this ASU are effective for annual periods ending after December 15, 2020, which is the year ending December 31, 2020 for FHLBank, and will be applied retrospectively for all comparative periods presented. The adoption of this guidance will not have a material impact on the disclosures related to defined benefit plans and will not impact FHLBank’s financial condition, results of operations or cash flows.

Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). In August 2018, the FASB issued an amendment that modifies the disclosure requirements for fair value measurements. This ASU removes the requirement to disclose: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; and (3) the valuation processes for Level 3 fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in OCI for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this ASU were effective January 1, 2020 for FHLBank. The adoption of this guidance did not have an impact on the disclosures related to fair value measurements and did not impact FHLBank’s financial condition, results of operations or cash flows.

Measurement of Credit Losses on Financial Instruments, as amended (ASU 2016-13). In June 2016, the FASB issued amended guidance for the accounting of 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 in its circumstances. Additionally, under the new guidance, a financial asset, or a group of financial assets, measured at amortized cost basis is required to be presented at the net amount expected to be collected.

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; and

▪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 became effective for FHLBank on January 1, 2020 and was applied using a modified-retrospective approach, through a cumulative-effect adjustment to retained earnings. Adoption of this guidance did not materially impact FHLBank’s financial condition, results of operations, or cash flows.

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Investment Securities

9 Months Ended

Sep. 30, 2020

Investments, Debt and Equity Securities [Abstract]

Investment Securities

INVESTMENTS

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

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold: FHLBank invests in interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received a credit rating of triple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO). These may differ from internal ratings of the investments, if applicable. As of September 30, 2020, approximately 70 percent of these overnight investments were with counterparties not rated by an NRSRO. All transactions with unrated counterparties are secured transactions.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. Federal Housing Finance Agency (FHFA) regulations include a limit on the amount of unsecured credit FHLBank may extend to a counterparty. As of September 30, 2020 and December 31, 2019, all investments in interest-bearing deposits and Federal funds sold were repaid or expected to be repaid according to the contractual terms. No allowance for credit losses was recorded for these assets as of September 30, 2020 and December 31, 2019. Carrying values of interest-bearing deposits and Federal funds sold exclude accrued interest receivable of $83,000 and $3,000, respectively, as of September 30, 2020, and $589,000 and $30,000, respectively, as of December 31, 2019.

Securities purchased under agreements to resell are short-term and are structured such that they are evaluated regularly to determine if the market value of the underlying securities decreases below the market value required as collateral (i.e., subject to collateral maintenance provisions). If so, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash, generally by the next business day. Based upon the collateral held as security and collateral maintenance provisions with its counterparties, FHLBank determined that no allowance for credit losses was needed for its securities purchased under agreements to resell as of September 30, 2020 and December 31, 2019. The carrying value of securities purchased under agreements excludes accrued interest receivable of $15,000 and $424,000 as of September 30, 2020 and December 31, 2019, respectively.

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

FHLBank's debt securities include the following major security types, which are based on the issuer and the risk characteristics of the security:

▪Certificates of deposit - unsecured negotiable promissory notes issued by banks;

▪U.S. Treasury obligations - sovereign debt of the United States;

▪GSE obligations - debentures issued by other FHLBanks, Federal National Mortgage Association (Fannie Mae), Federal Farm Credit Bank and Federal Agricultural Mortgage Corporation. GSE securities are not guaranteed by the U.S. government;

▪State or local housing agency obligations - municipal bonds issued by housing finance agencies;

▪U.S. obligation MBS - single-family MBS issued by Government National Mortgage Association (Ginnie Mae), which are guaranteed by the U.S. government; and

▪GSE MBS - single-family and multifamily MBS issued by Fannie Mae and Federal Home Loan Mortgage Corporation (Freddie Mac).

Trading Securities: Trading securities by major security type as of September 30, 2020 and December 31, 2019 are summarized in Table 3.1 (in thousands):

Table 3.1

	Fair Value
	09/30/2020		12/31/2019
Non-mortgage-backed securities:
Certificates of deposit	$	225,053	$	—
U.S. Treasury obligations	1,557,412		1,530,518
GSE obligations	433,864		416,025
Non-mortgage-backed securities	2,216,329		1,946,543
Mortgage-backed securities:
GSE MBS	901,606		866,019
Mortgage-backed securities	901,606		866,019
TOTAL	$	3,117,935	$	2,812,562

Net gains (losses) on trading securities during the three and nine months ended September 30, 2020 and 2019 are shown in Table 3.2 (in thousands):

Table 3.2

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Net gains (losses) on trading securities held as of September 30, 2020	$	(6,995)	$	16,237	$	92,583	$	86,429
Net gains (losses) on trading securities sold or matured prior to September 30, 2020	—		(51)		186		355
NET GAINS (LOSSES) ON TRADING SECURITIES	$	(6,995)	$	16,186	$	92,769	$	86,784

Available-for-sale Securities: Available-for-sale securities by major security type as of September 30, 2020 are summarized in Table 3.3 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of $27,450,000 as of September 30, 2020.

Table 3.3

	09/30/2020
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
U.S. Treasury obligations	$	4,062,655	$	4,715	$	—	$	4,067,370
Non-mortgage-backed securities	4,062,655		4,715		—		4,067,370
Mortgage-backed securities:
GSE MBS	3,229,407		28,211		(34,377)		3,223,241
Mortgage-backed securities	3,229,407		28,211		(34,377)		3,223,241
TOTAL	$	7,292,062	$	32,926	$	(34,377)	$	7,290,611

Available-for-sale securities by major security type as of December 31, 2019 are summarized in Table 3.4 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of $30,321,000 as of December 31, 2019.

Table 3.4

	12/31/2019
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
U.S. Treasury obligations	$	4,258,608	$	3,580	$	(397)	$	4,261,791
Non-mortgage-backed securities	4,258,608		3,580		(397)		4,261,791
Mortgage-backed securities:
GSE MBS	2,897,104		28,353		(4,748)		2,920,709
Mortgage-backed securities	2,897,104		28,353		(4,748)		2,920,709
TOTAL	$	7,155,712	$	31,933	$	(5,145)	$	7,182,500

Table 3.5 summarizes the available-for-sale securities with unrealized losses as of September 30, 2020 (in thousands). The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table 3.5

	09/30/2020
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities:
GSE MBS	$	1,579,922	$	(30,449)	$	325,075	$	(3,928)	$	1,904,997	$	(34,377)
Mortgage-backed securities	1,579,922		(30,449)		325,075		(3,928)		1,904,997		(34,377)
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	1,579,922	$	(30,449)	$	325,075	$	(3,928)	$	1,904,997	$	(34,377)

Table 3.6 summarizes the available-for-sale securities with unrealized losses as of December 31, 2019 (in thousands). The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table 3.6

	12/31/2019
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Non-mortgage-backed securities:
U.S. Treasury obligations	$	1,579,004	$	(397)	$	—	$	—	$	1,579,004	$	(397)
Non-mortgage-backed securities	1,579,004		(397)		—		—		1,579,004		(397)
Mortgage-backed securities:
GSE MBS	787,809		(932)		301,161		(3,816)		1,088,970		(4,748)
Mortgage-backed securities	787,809		(932)		301,161		(3,816)		1,088,970		(4,748)
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	2,366,813	$	(1,329)	$	301,161	$	(3,816)	$	2,667,974	$	(5,145)

The amortized cost and fair values of available-for-sale securities by contractual maturity as of September 30, 2020 and December 31, 2019 are shown in Table 3.7 (in thousands). Expected maturities of MBS will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 3.7

	09/30/2020				12/31/2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	2,021,424	$	2,022,929	$	754,003	$	753,891
Due after one year through five years	2,041,231		2,044,441		3,504,605		3,507,900
Due after five years through ten years	—		—		—		—
Due after ten years	—		—		—		—
Non-mortgage-backed securities	4,062,655		4,067,370		4,258,608		4,261,791
Mortgage-backed securities	3,229,407		3,223,241		2,897,104		2,920,709
TOTAL	$	7,292,062	$	7,290,611	$	7,155,712	$	7,182,500

Net gains (losses) realized on the sale of available-for-sale securities are recorded in other income (loss) on the Statements of Income. Table 3.8 presents details of the sales for the three and nine months ended September 30, 2020 (in thousands). There were no sales of available-for-sale securities during the three and nine months ended September 30, 2019.

Table 3.8

	Three Months Ended		Nine Months Ended
	09/30/2020		09/30/2020
Proceeds from sale of available-for-sale securities	$	—	$	289,045
Gross gains on sale of available-for-sale securities	$	—	$	1,526
Gross losses on sale of available-for-sale securities	—		(3)
NET GAINS (LOSSES) ON SALE OF AVAILABLE-FOR-SALE SECURITIES	$	—	$	1,523

Held-to-maturity Securities: Held-to-maturity securities by major security type as of September 30, 2020 are summarized in Table 3.9 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of $1,147,000 as of September 30, 2020.

Table 3.9

	09/30/2020
	Amortized Cost		Net Carrying Value		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
State or local housing agency obligations	$	81,995	$	81,995	$	—	$	(3,491)	$	78,504
Non-mortgage-backed securities	81,995		81,995		—		(3,491)		78,504
Mortgage-backed securities:
U.S. obligation MBS	76,852		76,852		151		(60)		76,943
GSE MBS	2,815,129		2,815,129		10,503		(5,297)		2,820,335
Mortgage-backed securities	2,891,981		2,891,981		10,654		(5,357)		2,897,278
TOTAL	$	2,973,976	$	2,973,976	$	10,654	$	(8,848)	$	2,975,782

Held-to-maturity securities by major security type as of December 31, 2019 are summarized in Table 3.10 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of $4,324,000 as of December 31, 2019.

Table 3.10

	12/31/2019
	Amortized Cost		Carrying Value		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
State or local housing agency obligations	$	82,805	$	82,805	$	5	$	(1,956)	$	80,854
Non-mortgage-backed securities	82,805		82,805		5		(1,956)		80,854
Mortgage-backed securities:
U.S. obligation MBS	93,375		93,375		—		(496)		92,879
GSE MBS	3,393,778		3,393,778		6,558		(17,131)		3,383,205
Mortgage-backed securities	3,487,153		3,487,153		6,558		(17,627)		3,476,084
TOTAL	$	3,569,958	$	3,569,958	$	6,563	$	(19,583)	$	3,556,938

The amortized cost, carrying value and fair values of held-to-maturity securities by contractual maturity as of September 30, 2020 and December 31, 2019 are shown in Table 3.11 (in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 3.11

	09/30/2020						12/31/2019
	Amortized Cost		Net Carrying Value		Fair Value		Amortized Cost		Carrying Value		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	—	$	—	$	—	$	—	$	—	$	—
Due after one year through five years	—		—		—		—		—		—
Due after five years through ten years	—		—		—		—		—		—
Due after ten years	81,995		81,995		78,504		82,805		82,805		80,854
Non-mortgage-backed securities	81,995		81,995		78,504		82,805		82,805		80,854
Mortgage-backed securities	2,891,981		2,891,981		2,897,278		3,487,153		3,487,153		3,476,084
TOTAL	$	2,973,976	$	2,973,976	$	2,975,782	$	3,569,958	$	3,569,958	$	3,556,938

Net gains (losses) were realized on the sale of held-to-maturity securities as presented below and are recorded as net gains (losses) on sale of held-to-maturity securities in other income (loss) on the Statements of Income. All securities sold had paid down below 15 percent of the principal outstanding at acquisition and were therefore considered maturities under GAAP. Table 3.12 presents details of the sales (in thousands). There were no sales of held-to-maturity securities during the three and nine months ended September 30, 2020.

Table 3.12

	Three Months Ended		Nine Months Ended
	09/30/2019		09/30/2019
Proceeds from sale of held-to-maturity securities	$	—	$	9,442
Carrying value of held-to-maturity securities sold	—		(9,488)
NET REALIZED GAINS (LOSSES)	$	—	$	(46)

Allowance for Credit Losses on Available-for-Sale and Held-to-Maturity Securities: FHLBank evaluates available-for-sale and held-to-maturity investment securities for credit losses on a quarterly basis. FHLBank adopted new accounting guidance for the measurement of credit losses on financial instruments on January 1, 2020. See Note 2 for additional information.

During the three and nine months ended September 30, 2020, FHLBank did not recognize a provision for credit losses associated with available-for-sale investments or held-to-maturity investments. To evaluate investment securities for credit loss as of September 30, 2020, FHLBank employed the following methodologies, based on the type of security.

FHLBank's available-for-sale and held-to-maturity securities are principally certificates of deposit, U.S. obligations, GSE obligations, state or local housing agency obligations, and MBS issued by Ginnie Mae, Freddie Mac, and Fannie Mae that are backed by single-family or multifamily mortgage loans. FHLBank only purchases securities considered investment quality. As of September 30, 2020, all of FHLBank's available-for-sale securities and held-to-maturity securities were rated single-A or above by an NRSRO, based on the lowest long-term credit rating for each security. These may differ from any internal ratings of the securities, if applicable.

FHLBank evaluates available-for-sale securities for impairment by comparing the security’s fair value to its amortized cost. Impairment may exist when the fair value of the investment is less than its amortized cost (i.e., in an unrealized loss position). As of September 30, 2020, certain available-for-sale securities were in an unrealized loss position. These losses are considered temporary as FHLBank expects to recover the entire amortized cost basis on these available-for-sale investment securities. FHLBank neither intends to sell these securities nor considers it more likely than not that it will be required to sell these securities before its anticipated recovery of each security's remaining amortized cost basis. Further, FHLBank has not experienced any payment defaults on the instruments. In addition, all of these securities carry an implicit or explicit government guarantee. As a result, no allowance for credit losses was recorded on these available-for-sale securities as of September 30, 2020. FHLBank evaluates its held-to-maturity securities for impairment on a collective or pooled basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. As of September 30, 2020, FHLBank had not established an allowance for credit loss on any held-to-maturity securities because the securities: (1) were all highly-rated and/or had short remaining terms to maturity; (2) had not experienced, nor did FHLBank expect, any payment default on the instruments; and (3) in the case of U.S. or GSE obligations, carry an implicit or explicit government guarantee such that FHLBank considers the risk of nonpayment to be zero.

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Advances

9 Months Ended

Sep. 30, 2020

Advances [Abstract]

Advances

ADVANCES

General Terms: FHLBank offers a wide range of fixed and variable rate advance products with different maturities, interest rates, payment characteristics and optionality. As of September 30, 2020 and December 31, 2019, FHLBank had advances outstanding at interest rates ranging from 0.14 percent to 7.20 percent and 0.96 percent to 7.41 percent, respectively, for traditional advances (excludes COVID-19 Relief Advances described below). Table 4.1 presents advances summarized by redemption term as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands). Carrying amounts exclude accrued interest receivable of $15,186,000 and $45,637,000 as of September 30, 2020 and December 31, 2019, respectively.

Table 4.1

	09/30/2020				12/31/2019
Redemption Term	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	$	13,588,982	0.45	%	$	13,188,118	1.88	%
Due after one year through two years	1,994,896		1.23		10,448,433		1.96
Due after two years through three years	1,076,587		1.68		1,254,153		2.27
Due after three years through four years	1,256,388		1.77		1,067,662		2.42
Due after four years through five years	1,182,903		1.40		1,208,854		2.22
Thereafter	3,207,076		1.95		3,004,835		2.25
Total par value	22,306,832		0.92	%	30,172,055		1.99	%
Discounts	(9,818)				(1,807)
Hedging adjustments	319,238				71,067
TOTAL	$	22,616,252			$	30,241,315

During the three months ended June 30, 2020, FHLBank issued subsidized COVID-19 Relief Advances to help members serve their customers affected by the COVID-19 pandemic. The zero-cost advances have a term of 6 months and the low-cost advances have terms between 6 and 24 months. As of September 30, 2020, FHLBank had $517,351,000 and $501,890,000 of zero-cost and low-cost advances outstanding, respectively. Discounts were initially recorded on these advances and are accreted using the interest method over the life of the advances resulting in the recognition of periodic interest income on the advances at the effective interest rate (i.e., yield recorded equals a prevailing rate) in net interest income. As of September 30, 2020, the total unaccreted discount balance was $2,455,000.

FHLBank’s outstanding advances include advances that contain call options that may be exercised with or without prepayment fees at the borrower’s discretion on specific dates (call dates) before the stated advance maturities (callable advances). In exchange for receiving the right to call the advance on a predetermined call schedule, the borrower may pay a higher fixed rate for the advance relative to an equivalent maturity, non-callable, fixed rate advance. The borrower normally exercises its call options on these advances when interest rates decline (fixed rate advances) or spreads change (adjustable rate advances).

Convertible advances allow FHLBank to convert an advance from one interest payment term structure to another. When issuing convertible advances, FHLBank purchases put options from a member that allow FHLBank to convert the fixed rate advance to a variable rate advance at the current market rate or another structure after an agreed-upon lockout period. A convertible advance carries a lower interest rate than a comparable-maturity fixed rate advance without the conversion feature.

Table 4.2 presents advances summarized by redemption term or next call date (for callable advances) and by redemption term or next conversion date (for convertible advances) as of September 30, 2020 and December 31, 2019 (in thousands):

Table 4.2

	Redemption Term or Next Call Date				Redemption Term or Next Conversion Date
Redemption Term	09/30/2020		12/31/2019		09/30/2020		12/31/2019
Due in one year or less	$	15,561,420	$	24,271,238	$	14,625,732	$	14,053,068
Due after one year through two years	1,383,709		1,133,077		2,263,896		10,637,833
Due after two years through three years	822,894		728,429		1,305,837		1,524,153
Due after three years through four years	795,261		764,990		1,338,888		1,215,412
Due after four years through five years	779,961		686,594		1,214,303		1,304,254
Thereafter	2,963,587		2,587,727		1,558,176		1,437,335
TOTAL PAR VALUE	$	22,306,832	$	30,172,055	$	22,306,832	$	30,172,055

Interest Rate Payment Terms: Table 4.3 details additional interest rate payment terms for advances as of September 30, 2020 and December 31, 2019 (in thousands):

Table 4.3

Redemption Term	09/30/2020		12/31/2019
Fixed rate:
Due in one year or less	$	9,999,404	$	2,691,528
Due after one year	6,671,538		5,912,124
Total fixed rate	16,670,942		8,603,652
Variable rate:
Due in one year or less	3,589,578		10,496,590
Due after one year	2,046,312		11,071,813
Total variable rate	5,635,890		21,568,403
TOTAL PAR VALUE	$	22,306,832	$	30,172,055

Credit Risk Exposure and Security Terms: FHLBank's advances are primarily made to member financial institutions, including commercial banks and insurance companies. FHLBank manages its credit exposure to advances through an integrated approach that includes establishing a credit limit for each borrower. This approach includes an ongoing review of each borrower's financial condition, in conjunction with FHLBank's collateral and lending policies to limit risk of loss, while balancing borrowers' needs for a reliable source of funding.

In addition, FHLBank lends to eligible borrowers in accordance with federal law and FHFA regulations. Specifically, FHLBank is required to obtain sufficient collateral to fully secure credit products up to the counterparty’s total credit limit. Collateral eligible to secure new or renewed advances includes:

▪One-to-four family and multifamily mortgage loans (delinquent for no more than 90 days) and securities representing such mortgages;

▪Loans and securities issued, insured, or guaranteed by the U.S. government or any U.S. government agency (for example, MBS issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae);

▪Cash or deposits in FHLBank;

▪Certain other collateral that is real estate-related, provided that the collateral has a readily ascertainable value and that FHLBank can perfect a security interest in it; and

▪Certain qualifying securities representing undivided equity interests in eligible advance collateral.

During the second quarter of 2020, FHLBank was given the regulatory flexibility via a Supervisory Letter from the FHFA to allow members to pledge Small Business Administration (SBA) Paycheck Protection Program (PPP) loans as eligible collateral, with the following restrictions: (1) maximum aggregate lending value for PPP loans is limited to the lesser of $5 billion or 20 percent of the institution’s total lending value on all collateral pledged; and (2) the institution must maintain a CAMELS composite rating of “3” or better. CAMELS is a rating system for banks utilized by federal banking supervisors that represents an evaluation of a bank's financial condition and compliance with laws and regulatory policies. If an institution’s CAMELS composite rating downgrades to “4” or “5”, the institution must substitute all PPP loans being utilized to support outstanding credit obligations with other eligible collateral within five business days. As of September 30, 2020, the amount of PPP loans pledged to FHLBank as collateral was insignificant.

Residential mortgage loans are the principal form of collateral for advances. The estimated value of the collateral required to secure each member's credit products is calculated by applying collateral discounts, or haircuts, to the market value or unpaid principal balance of the collateral, as applicable. In addition, community financial institutions are eligible to use expanded statutory collateral provisions for small business, agriculture loans, and community development loans. FHLBank capital stock owned by each borrower is also pledged as collateral. Collateral arrangements may vary depending upon borrower credit quality, financial condition, and performance; borrowing capacity; and overall credit exposure to the borrower. FHLBank can also require additional or substitute collateral to protect its security interest. FHLBanks also have policies and procedures for validating the reasonableness of their collateral valuations. In addition, collateral verifications and on-site reviews are performed by FHLBank based on the risk profile of the borrower. FHLBank management believes that these policies effectively manage credit risk from advances.

The FHFA has provided non-objection relief via a Supervisory Letter that permits FHLBank to offer its members increased collateral flexibility through the acceptance of various types of forbearance plans and loan modification agreements of the Temporary COVID-19 Underwriting Guidelines in the first quarter of 2020. FHLBank management and the board of directors has approved as collateral forbearance plans and loan modification agreements for the following loan categories: conventional mortgages on one-to-four family residential real property, mortgages on multifamily residential real property, agricultural real estate, commercial real estate, second mortgages on residential one-to-four family property, home equity lines of credit, operating loans, and equipment loans. In addition, the temporary guidelines allow flexibility to accept loans as collateral that have modifications or forbearance plans executed via electronic signature in compliance with the Electronic Signatures in Global and National Commerce Act (i.e., E-SIGN). At the of the third quarter of 2020, the Temporary COVID-19 Underwriting Guidelines continue to be available for use by members.

FHLBank either allows a borrower to retain physical possession of the collateral assigned to it, or requires the borrower to specifically assign or place physical possession of the collateral with FHLBank or its safekeeping agent. FHLBank perfects its security interest in all pledged collateral. The Federal Home Loan Bank Act of 1932, as amended, (Bank Act) states that any security interest granted to an FHLBank by a borrower will have priority over the claims or rights of any other party, except for claims or rights of a third party that would be entitled to priority under otherwise applicable law and are held by a bona fide purchaser for value or by a secured party holding a prior perfected security interest.

Using a risk-based approach and taking into consideration each borrower's financial strength, FHLBank considers the types and level of collateral to be the primary indicator of credit quality on advances. As of September 30, 2020 and December 31, 2019, FHLBank had rights to collateral on a borrower-by-borrower basis with an estimated value greater than its outstanding advances.

FHLBank continues to evaluate and make changes to its collateral guidelines, as necessary, based on current market conditions. As of September 30, 2020 and December 31, 2019, no advances were past due, on non-accrual status, or considered impaired. In addition, there were no troubled debt restructurings related to advances during the three and nine months ended September 30, 2020 and 2019.

Based on the collateral held as security, FHLBank's credit extension and collateral policies, and repayment history on advances, no losses are expected on advances as of September 30, 2020, and therefore no allowance for credit losses on advances was recorded. For the same reasons, FHLBank did not record any allowance for credit losses on advances as of December 31, 2019.

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Mortgage Loans

9 Months Ended

Sep. 30, 2020

Receivables [Abstract]

Mortgage Loans

MORTGAGE LOANS

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

Mortgage Loans Held for Portfolio: Table 5.1 presents information as of September 30, 2020 and December 31, 2019 on mortgage loans held for portfolio (in thousands). Mortgage loans held for portfolio excludes accrued interest receivable of $48,406,000 and $52,358,000 as of September 30, 2020 and December 31, 2019, respectively.

Table 5.1

	09/30/2020		12/31/2019
Real estate:
Fixed rate, medium-term1, single-family mortgages	$	1,488,732	$	1,347,385
Fixed rate, long-term, single-family mortgages	8,474,420		9,128,268
Total unpaid principal balance	9,963,152		10,475,653
Premiums	143,477		155,793
Discounts	(2,126)		(2,503)
Deferred loan costs, net	146		184
Other deferred fees	(30)		(38)
Hedging adjustments	(3,227)		4,905
Total before Allowance for Credit Losses on Mortgage Loans	10,101,392		10,633,994
Allowance for Credit Losses on Mortgage Loans2	(7,926)		(985)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	10,093,466	$	10,633,009

1    Medium-term defined as a term of 15 years or less at origination.

2    Effective January 1, 2020, new accounting guidance was adopted relating to the measurement of credit losses on financial instruments and resulted in a cumulative effect adjustment of $6,123,000 (see Table 5.5).

Table 5.2 presents information as of September 30, 2020 and December 31, 2019 on the outstanding unpaid principal balance of mortgage loans held for portfolio (in thousands):

Table 5.2

	09/30/2020		12/31/2019
Conventional loans	$	9,405,054	$	9,849,542
Government-guaranteed or -insured loans	558,098		626,111
TOTAL UNPAID PRINCIPAL BALANCE	$	9,963,152	$	10,475,653

Credit Enhancements: FHLBank's allowance for credit losses considers the credit enhancements associated with conventional mortgage loans under the MPF Program. Credit enhancements may include primary mortgage insurance, supplemental mortgage insurance and the credit enhancement amount plus any recoverable performance-based credit enhancement fees (for certain MPF loans). Potential recoveries from credit enhancements for conventional loans are evaluated at the individual master commitment level to determine the credit enhancements available to recover losses on loans under each individual master commitment. Conventional MPF loans held for portfolio are required to be credit enhanced as determined through the use of a validated model so that the risk of loss is limited to the losses within FHLBank's risk tolerance. FHLBank and its PFIs share the risk of credit losses on conventional loans, by structuring potential losses into layers with respect to each master commitment. After considering the borrower’s equity and any primary mortgage insurance, credit losses on mortgage loans in a master commitment are then absorbed by FHLBank’s First Loss Account. If applicable to the MPF product, FHLBank will withhold a PFI’s scheduled performance-based credit enhancement fee in order to reimburse FHLBank for any losses allocated to the First Loss Account. If the First Loss Account is exhausted, the credit losses are then absorbed by the PFI up to an agreed upon credit enhancement amount. Thereafter, any remaining credit losses are absorbed by FHLBank.

Payment Status of Mortgage Loans: Payment status is the key credit quality indicator for conventional mortgage loans and allows FHLBank to monitor the migration of past due loans. Past due loans are those where the borrower has failed to make timely payments of principal and/or interest in accordance with the terms of the loan. Other delinquency statistics include non-accrual loans and loans in process of foreclosure.

Table 5.3 presents the payment status based on amortized cost as well as other delinquency statistics for FHLBank’s mortgage loans as of September 30, 2020 (dollar amounts in thousands):

Table 5.3

	09/30/2020
	Conventional Loans															Government Loans			Total
	Origination Year												Subtotal
	Prior to 2016		2016		2017		2018		2019		2020
Amortized Cost:1
Past due 30-59 days delinquent	$	16,140	$	2,749	$	8,132	$	7,949	$	19,111	$	3,470	$	57,551		$	11,657		$	69,208
Past due 60-89 days delinquent	9,267		1,812		2,924		3,265		9,102		1,878		28,248			5,969			34,217
Past due 90 days or more delinquent	24,992		4,012		14,965		22,618		49,602		4,488		120,677			22,928			143,605
Total past due	50,399		8,573		26,021		33,832		77,815		9,836		206,476			40,554			247,030
Total current loans	2,179,738		713,694		795,307		815,417		2,754,390		2,070,784		9,329,330			525,032			9,854,362
Total mortgage loans	$	2,230,137	$	722,267	$	821,328	$	849,249	$	2,832,205	$	2,080,620	$	9,535,806		$	565,586		$	10,101,392
Other delinquency statistics:
In process of foreclosure2													$	162,584		$	9,341		$	171,925
Serious delinquency rate3													2.1		%	4.7		%	2.3		%
Past due 90 days or more and still accruing interest													$	—		$	22,928		$	22,928
Loans on non-accrual status4													$	129,118		$	—		$	129,118

1    Excludes accrued interest receivable.

2    Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.

3    Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total amortized cost for the portfolio class.

4    Loans on non-accrual status include $1,251,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

FHLBank's servicers may grant a forbearance period to borrowers who have requested forbearance based on COVID-19-related difficulties regardless of the status of the loan at the time of the request. FHLBank continues to apply its accounting policy for past due loans and charge-offs to loans during the forbearance period whether it be formal or informal. The accrual status for a loan under forbearance will be driven by the past due status of the loan without consideration of the forbearance as the legal terms of the contractual arrangement have not been modified. As of September 30, 2020, there was $132,932,000, or 1.4 percent, of unpaid principal balances of conventional loans in a forbearance plan as a result of COVID-19, representing $5,118,000, $13,665,000, $17,744,000, and $96,405,000 with payment status of current, 30 to 59 days past due, 60 to 89 days past due, and greater than 90 days past due, respectively.

Table 5.4 presents the payment status based on recorded investment as well as other delinquency statistics for FHLBank’s mortgage loans as of December 31, 2019 (dollar amounts in thousands):

Table 5.4

	12/31/2019
	Conventional Loans			Government Loans			Total
Recorded investment:1
Past due 30-59 days delinquent	$	59,226		$	15,515		$	74,741
Past due 60-89 days delinquent	7,561			6,128			13,689
Past due 90 days or more delinquent	11,813			8,778			20,591
Total past due	78,600			30,421			109,021
Total current loans	9,969,930			607,400			10,577,330
Total recorded investment	$	10,048,530		$	637,821		$	10,686,351
Other delinquency statistics:
In process of foreclosure2	$	3,352		$	2,730		$	6,082
Serious delinquency rate3	0.1		%	1.4		%	0.1		%
Past due 90 days or more and still accruing interest	$	—		$	8,778		$	8,778
Loans on non-accrual status4	$	14,923		$	—		$	14,923

1    Includes accrued interest receivable.

2    Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.

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

4    Loans on non-accrual status include $1,219,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

Allowance for Credit Losses:

Conventional Mortgage Loans: Conventional loans are evaluated collectively when similar risk characteristics exists. Conventional loans that do not share risk characteristics with other pools are evaluated for expected credit losses on an individual basis. FHLBank determines its allowances for credit losses on conventional loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions. FHLBank uses a model that discounts projected cash flows to estimate expected credit losses over the life of the loans. This model relies on a number of inputs, such as both current and forecasted property values and interest rates as well as historical borrower behavior experience. FHLBank also incorporates associated credit enhancements, as available, to determine its estimate of expected credit losses.

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

FHLBank established an allowance for credit losses on its conventional mortgage loans held for portfolio. Table 5.5 presents a roll-forward of the allowance for credit losses on mortgage loans for the three and nine months ended September 30, 2020 and 2019.

Table 5.5

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Balance, beginning of the period	$	7,790	$	858	$	985	$	812
Adjustment for cumulative effect of accounting change	—		—		6,123		—
Net (charge-offs) recoveries	20		(346)		101		(416)
Provision (reversal) for credit losses	116		393		717		509
Balance, end of the period	$	7,926	$	905	$	7,926	$	905

Government-Guaranteed or -Insured Mortgage Loans: FHLBank invests in fixed-rate mortgage loans that are insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, the Rural Housing Service of the Department of Agriculture, and/or the Department of Housing and Urban Development. The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable guarantee or insurance with respect to defaulted government-guaranteed or -insured mortgage loans. Any losses on these loans that are not recovered from the issuer or the guarantor are absorbed by the servicer. Therefore, FHLBank only has credit risk for these loans if the servicer fails to pay for losses not covered by the guarantee or insurance. Based on FHLBank's assessment of its servicers and the collateral backing the loans, the risk of loss was immaterial, consequently, no allowance for credit losses for government-guaranteed or -insured mortgage loans was recorded as of September 30, 2020 or December 31, 2019. Furthermore, none of these mortgage loans has been placed on non-accrual status because of the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.

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Derivatives And Hedging Activities

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives And Hedging Activities

DERIVATIVES AND HEDGING ACTIVITIES

Table 6.1 presents outstanding notional amounts and fair values of the derivatives outstanding by type of derivative and by hedge designation as of September 30, 2020 and December 31, 2019 (in thousands). Total derivative assets and liabilities include the effect of netting adjustments and cash collateral.

Table 6.1

	09/30/2020						12/31/2019
	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	15,913,289	$	20,791	$	295,563	$	16,448,512	$	23,462	$	80,398
Total derivatives designated as hedging relationships	15,913,289		20,791		295,563		16,448,512		23,462		80,398
Derivatives not designated as hedging instruments:
Interest rate swaps	2,929,164		191		75,020		3,099,622		736		26,285
Interest rate caps/floors	602,500		87		—		1,130,000		117		—
Mortgage delivery commitments	105,003		84		80		221,800		495		25
Total derivatives not designated as hedging instruments	3,636,667		362		75,100		4,451,422		1,348		26,310
TOTAL	$	19,549,956	21,153		370,663		$	20,899,934	24,810		106,708
Netting adjustments and cash collateral1			141,348		(370,490)				129,994		(106,506)
DERIVATIVE ASSETS AND LIABILITIES			$	162,501	$	173			$	154,804	$	202

1    Amounts represent the application of the netting requirements that allow FHLBank to settle positive and negative positions and cash collateral, including accrued interest, held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was $512,338,000 and $236,700,000 as of September 30, 2020 and December 31, 2019, respectively. Cash collateral received was $500,000 and $200,000 as of September 30, 2020 and December 31, 2019, respectively.

FHLBank carries derivative instruments at fair value on its Statements of Condition. Changes in fair value of the derivative hedging instrument and the hedged item attributable to the hedged risk for designated fair value hedges are recorded in net interest income in the same line as the earnings effect of the hedged item.

Gains (losses) on fair value hedges include unrealized changes in fair value as well as net interest settlements. For the three months ended September 30, 2020 and 2019, FHLBank recorded net gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on FHLBank’s net interest income as presented in Table 6.2 (in thousands):

Table 6.2

	Three Months Ended
	09/30/2020
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	38,848	$	9,588	$	5,674	$	67,142
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	10,848	$	9,424	$	(197)	$	(1,509)
Hedged items2	(28,115)		(40,444)		1,321		12,203
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(17,267)	$	(31,020)	$	1,124	$	10,694

	09/30/2019
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	186,431	$	47,811	$	133,680	$	185,096
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	(39,873)	$	(61,468)	$	(4)	$	3,915
Hedged items2	43,355		75,743		3		(5,061)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	3,482	$	14,275	$	(1)	$	(1,146)

1    Includes net interest settlements in interest income/expense.

2    Includes amortization/accretion on closed fair value relationships in interest income.

For the nine months ended September 30, 2020 and 2019, FHLBank recorded net gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on FHLBank’s net interest income as presented in Table 6.3 (in thousands):

Table 6.3

	Nine Months Ended
	09/30/2020
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	230,000	$	43,753	$	120,385	$	310,628
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	(280,875)	$	(386,669)	$	18,350	$	45,856
Hedged items2	248,445		308,189		(112)		(16,663)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(32,430)	$	(78,480)	$	18,238	$	29,193

	9/30/2019
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	563,602	$	78,694	$	433,473	$	519,967
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	(144,016)	$	(205,705)	$	21	$	30,968
Hedged items2	159,254		206,340		(12)		(39,427)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	15,238	$	635	$	9	$	(8,459)

1    Includes net interest settlements in interest income/expense.

2    Includes amortization/accretion on closed fair value relationships in interest income.

Table 6.4 presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items as of September 30, 2020 and December 31, 2019 (in thousands):

Table 6.4

09/30/2020
Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances	$	6,021,287	$	315,792	$	3,446	$	319,238
Available-for-sale securities	7,292,062		385,013		—		385,013
Consolidated obligation discount notes	(174,748)		39		—		39
Consolidated obligation bonds	(3,310,191)		(43,053)		—		(43,053)
12/31/2019
Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances	$	4,951,445	$	69,643	$	1,424	$	71,067
Available-for-sale securities	7,155,712		79,141		—		79,141
Consolidated obligation bonds	(3,270,635)		(26,389)		—		(26,389)

1    Includes only the portion of carrying value representing the hedged items in fair value hedging relationships. For available-for-sale securities, amortized cost is considered to be carrying value (i.e., the fair value adjustment recorded in accumulated OCI (AOCI) is excluded).

2    Included in amortized cost of the hedged asset/liability.

Table 6.5 provides information regarding net gains (losses) on derivatives and hedging activities recorded in non-interest income (in thousands).

Table 6.5

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps	$	15,842	$	(19,566)	$	(97,218)	$	(80,593)
Interest rate caps/floors	(17)		(494)		(30)		(874)
Net interest settlements	(14,222)		(691)		(32,338)		(1,238)
Mortgage delivery commitments	423		365		(5,995)		3,836
Consolidated obligation discount note commitments	—		—		—		(70)
NET GAINS (LOSSES) ON DERIVATIVES AND HEDGING ACTIVITIES	$	2,026	$	(20,386)	$	(135,581)	$	(78,939)

Based on credit analyses and collateral requirements, FHLBank management does not anticipate any credit losses on its derivative agreements. The maximum credit risk applicable to a single counterparty was $500,000 and $211,000 as of September 30, 2020 and December 31, 2019, respectively. The counterparty was different for each period.

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

FHLBank utilizes two Derivative Clearing Organizations (Clearinghouse) for all cleared derivative transactions, LCH Limited and CME Clearing. At both Clearinghouses, initial margin is considered cash collateral. For cleared derivatives, the Clearinghouse determines initial margin requirements and generally, credit ratings are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including but not limited to credit rating downgrades. FHLBank was not required to post additional initial margin by its clearing agents as of September 30, 2020 and December 31, 2019.

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

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Deposits

9 Months Ended

Sep. 30, 2020

Deposits [Abstract]

Deposits

DEPOSITS

FHLBank offers demand, overnight and short-term deposit programs to its members and to other qualifying non-members. Table 7.1 details the types of deposits held by FHLBank as of September 30, 2020 and December 31, 2019 (in thousands):

Table 7.1

	09/30/2020		12/31/2019
Interest-bearing:
Demand	$	294,447	$	383,197
Overnight	463,200		280,300
Total interest-bearing	757,647		663,497
Non-interest-bearing:
Other	258,669		127,143
Total non-interest-bearing	258,669		127,143
TOTAL DEPOSITS	$	1,016,316	$	790,640

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Consolidated Obligations

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Consolidated Obligations

CONSOLIDATED OBLIGATIONS

Consolidated Obligation Bonds: Table 8.1 presents FHLBank’s participation in consolidated obligation bonds outstanding as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

Table 8.1

	09/30/2020				12/31/2019
Year of Contractual Maturity	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	$	27,056,200	0.32	%	$	15,991,800	1.79	%
Due after one year through two years	1,482,650		1.70		6,318,350		1.90
Due after two years through three years	1,306,650		1.98		1,375,000		2.11
Due after three years through four years	822,650		1.95		1,285,900		2.39
Due after four years through five years	971,200		1.28		1,223,350		2.40
Thereafter	5,587,800		1.66		5,776,300		2.78
Total par value	37,227,150		0.70	%	31,970,700		2.05	%
Premiums	41,974				34,789
Discounts	(3,572)				(3,357)
Concession fees	(14,436)				(15,207)
Hedging adjustments	43,053				26,389
TOTAL	$	37,294,169			$	32,013,314

FHLBank issues optional principal redemption bonds (callable bonds) that may be redeemed in whole or in part at the discretion of FHLBank on predetermined call dates in accordance with terms of bond offerings. FHLBank’s participation in consolidated obligation bonds outstanding as of September 30, 2020 and December 31, 2019 includes callable bonds totaling $6,465,000,000 and $8,891,500,000, respectively. FHLBank uses the unswapped callable bonds for financing its callable fixed rate advances (Note 4), MBS (Note 3) and mortgage loans (Note 5). Contemporaneous with a portion of its fixed rate callable bond issuances, FHLBank also enters into interest rate swap agreements (in which FHLBank generally pays a variable rate and receives a fixed rate) with call features that mirror the options in the callable bonds (a sold callable swap). The combined sold callable swap and callable debt transaction allows FHLBank to obtain attractively priced variable rate financing. Table 8.2 summarizes FHLBank’s participation in consolidated obligation bonds outstanding by year of maturity, or by the next call date for callable bonds as of September 30, 2020 and December 31, 2019 (in thousands):

Table 8.2

Year of Maturity or Next Call Date	09/30/2020		12/31/2019
Due in one year or less	$	33,521,200	$	24,583,300
Due after one year through two years	1,357,650		5,148,350
Due after two years through three years	878,150		615,000
Due after three years through four years	502,650		682,400
Due after four years through five years	414,200		356,850
Thereafter	553,300		584,800
TOTAL PAR VALUE	$	37,227,150	$	31,970,700

Table 8.3 summarizes interest rate payment terms for consolidated obligation bonds as of September 30, 2020 and December 31, 2019 (in thousands):

Table 8.3

	09/30/2020		12/31/2019
Simple variable rate	$	23,504,000	$	16,017,000
Fixed rate	13,723,150		15,573,700
Variable rate with cap	—		220,000
Step	—		110,000
Fixed to variable rate	—		50,000
TOTAL PAR VALUE	$	37,227,150	$	31,970,700

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

Table 8.4

	Book Value		Par Value		Weighted Average Interest Rate1
September 30, 2020	$	11,936,214	$	11,937,211	0.08	%
December 31, 2019	$	27,447,911	$	27,510,042	1.54	%

1    Represents yield to maturity excluding concession fees.

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Assets and Liabilities Subject to Offsetting

9 Months Ended

Sep. 30, 2020

Offsetting [Abstract]

Assets and Liabilities Subject to Offsetting

ASSETS AND LIABILITIES SUBJECT TO OFFSETTING

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

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

Tables 9.1 and 9.2 present the fair value of financial assets, including the related collateral received from or pledged to clearing agents or counterparties, based on the terms of FHLBank’s master netting arrangements or similar agreements as of September 30, 2020 and December 31, 2019 (in thousands):

Table 9.1

09/30/2020
Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative assets:
Uncleared derivatives	$	19,682	$	(15,472)	$	4,210	$	(84)	$	4,126
Cleared derivatives	1,471		156,820		158,291		—		158,291
Total derivative assets	21,153		141,348		162,501		(84)		162,417
Securities purchased under agreements to resell	4,600,000		—		4,600,000		(4,600,000)		—
TOTAL	$	4,621,153	$	141,348	$	4,762,501	$	(4,600,084)	$	162,417

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Table 9.2

12/31/2019
Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative assets:
Uncleared derivatives	$	21,749	$	(14,424)	$	7,325	$	(495)	$	6,830
Cleared derivatives	3,061		144,418		147,479		—		147,479
Total derivative assets	24,810		129,994		154,804		(495)		154,309
Securities purchased under agreements to resell	4,750,000		—		4,750,000		(4,750,000)		—
TOTAL	$	4,774,810	$	129,994	$	4,904,804	$	(4,750,495)	$	154,309

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Tables 9.3 and 9.4 present the fair value of financial liabilities, including the related collateral received from or pledged to counterparties, based on the terms of FHLBank’s master netting arrangements or similar agreements as of September 30, 2020 and December 31, 2019 (in thousands):

Table 9.3

09/30/2020
Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative liabilities:
Uncleared derivatives	$	367,678	$	(367,505)	$	173	$	(80)	$	93
Cleared derivatives	2,985		(2,985)		—		—		—
Total derivative liabilities	370,663		(370,490)		173		(80)		93
TOTAL	$	370,663	$	(370,490)	$	173	$	(80)	$	93

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Table 9.4

12/31/2019
Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative liabilities:
Uncleared derivatives	$	105,468	$	(105,266)	$	202	$	(25)	$	177
Cleared derivatives	1,240		(1,240)		—		—		—
Total derivative liabilities	106,708		(106,506)		202		(25)		177
TOTAL	$	106,708	$	(106,506)	$	202	$	(25)	$	177

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

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Capital

9 Months Ended

Sep. 30, 2020

Stockholders' Equity Note [Abstract]

Capital

CAPITAL

Capital Requirements: FHLBank is subject to three capital requirements under the provisions of the Gramm-Leach-Bliley Act (GLB Act) and the FHFA's capital structure regulation. Regulatory capital does not include AOCI but does include mandatorily redeemable capital stock.

•Risk-based capital. FHLBank must maintain at all times permanent capital in an amount at least equal to the sum of its credit risk, market risk and operations risk capital requirements. The risk-based capital requirements are all calculated in accordance with the rules and regulations of the FHFA. Only permanent capital, defined as Class B Common Stock and retained earnings, can be used by FHLBank to satisfy its risk-based capital requirement. The FHFA may require FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined, but the FHFA has not placed any such requirement on FHLBank to date.

•Total regulatory capital. The GLB Act requires FHLBank to maintain at all times at least a 4.0 percent total capital-to-asset ratio. Total regulatory capital is defined as the sum of permanent capital, Class A Common Stock, any general loss allowance, if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the FHFA as available to absorb losses.

•Leverage capital. FHLBank is required to maintain at all times a leverage capital-to-assets ratio of at least 5.0 percent, with the leverage capital ratio defined as the sum of permanent capital weighted 1.5 times and non-permanent capital (currently only Class A Common Stock) weighted 1.0 times, divided by total assets.

Table 10.1 illustrates that FHLBank was in compliance with its regulatory capital requirements as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

Table 10.1

	09/30/2020						12/31/2019
	Required			Actual			Required			Actual
Regulatory capital requirements:
Risk-based capital	$	206,942		$	2,216,737		$	486,650		$	2,319,531
Total regulatory capital-to-asset ratio	4.0		%	4.9		%	4.0		%	4.4		%
Total regulatory capital	$	2,120,455		$	2,605,221		$	2,531,066		$	2,768,680
Leverage capital ratio	5.0		%	7.0		%	5.0		%	6.2		%
Leverage capital	$	2,650,569		$	3,713,590		$	3,163,833		$	3,928,446

Mandatorily Redeemable Capital Stock: FHLBank is a cooperative whose members own most of FHLBank’s capital stock. Former members (including certain non-members that own FHLBank capital stock as a result of merger or acquisition, relocation, charter termination, or involuntary termination of an FHLBank member) own the remaining capital stock to support business transactions still carried on FHLBank's Statements of Condition. Shares cannot be purchased or sold except between FHLBank and its members at a price equal to the $100 per share par value. If a member cancels its written notice of redemption or notice of withdrawal, FHLBank will reclassify mandatorily redeemable capital stock from a liability to equity. After the reclassification, dividends on the capital stock would no longer be classified as interest expense.

Table 10.2 presents a roll-forward of mandatorily redeemable capital stock for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Table 10.2

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Balance, beginning of period	$	2,308	$	2,750	$	2,415	$	3,597
Capital stock subject to mandatory redemption reclassified from equity during the period	620,561		159,775		1,627,899		218,411
Capital stock redemption cancellations reclassified to equity during the period	—		—		(100,647)		—
Redemption or repurchase of mandatorily redeemable capital stock during the period	(620,967)		(160,078)		(1,527,802)		(219,642)
Stock dividend classified as mandatorily redeemable capital stock during the period	12		30		49		111
Balance, end of period	$	1,914	$	2,477	$	1,914	$	2,477

Table 10.3 shows the amount of mandatorily redeemable capital stock by contractual year of redemption as of September 30, 2020 and December 31, 2019 (in thousands). The year of redemption in Table 10.3 is the end of the redemption period in accordance with FHLBank’s capital plan. FHLBank is not required to redeem or repurchase membership stock until six months (for Class A Common Stock) or five years (for Class B Common Stock) after FHLBank receives notice for withdrawal from the member. Additionally, FHLBank is not required to redeem or repurchase activity-based stock until any activity-based stock becomes excess stock as a result of an activity no longer remaining outstanding. However, FHLBank intends to repurchase the excess activity-based stock of non-members to the extent that it can do so and still meet its regulatory capital requirements.

Table 10.3

Contractual Year of Repurchase	09/30/2020		12/31/2019
Year 1	$	—	$	—
Year 2	636		1
Year 3	—		869
Year 4	—		—
Year 5	—		—
Past contractual redemption date due to remaining activity1	1,278		1,545
TOTAL	$	1,914	$	2,415

1    Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because there is activity outstanding to which the mandatorily redeemable capital stock relates.

Excess Capital Stock: Excess capital stock is defined as the amount of stock held by a member (or former member) in excess of that institution’s minimum stock purchase requirement. FHFA rules limit the ability of FHLBank to create excess member stock under certain circumstances. For example, FHLBank may not pay dividends in the form of capital stock or issue new excess stock to members if FHLBank’s excess stock exceeds one percent of its total assets or if the issuance of excess stock would cause FHLBank’s excess stock to exceed one percent of its total assets. As of September 30, 2020, FHLBank’s excess stock was less than one percent of total assets.

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

Partial Recovery of Prior Capital Distribution to Financing Corporation. The Competitive Equality Banking Act of 1987 was enacted in August 1987, which, among other things, provided for the recapitalization of the Federal Savings and Loan Insurance Corporation through a newly-chartered entity, the Financing Corporation. The capitalization of the Financing Corporation was provided by capital distributions from the FHLBanks to the Financing Corporation in exchange for Financing Corporation nonvoting capital stock. Capital distributions were made by the FHLBanks in 1987, 1988 and 1989 that aggregated to $680,000,000. Upon passage of Financial Institutions Reform, Recovery and Enforcement Act of 1989, the FHLBanks’ previous investment in capital stock of the Financing Corporation was determined to be non-redeemable and the FHLBanks charged-off their prior capital distributions to the Financing Corporation directly against retained earnings. Upon the dissolution of the Financing Corporation in June 2020, the Financing Corporation determined that excess funds aggregating to $200,031,000 were available for distribution to its stockholders, the FHLBanks. Specifically, FHLBank Topeka’s partial recovery of prior capital distribution was $10,543,000, which was determined based on its share of the $680,000,000 originally contributed. The FHLBanks treated the receipt of these funds as a return of the FHLBanks’ investment in Financing Corporation capital stock, and therefore as a partial recovery of the prior capital distributions made by the FHLBanks to the Financing Corporation in 1987, 1988, and 1989. These funds have been credited to unrestricted retained earnings.

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Accumulated Other Comprehensive Income

9 Months Ended

Sep. 30, 2020

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Income

ACCUMULATED OTHER COMPREHENSIVE INCOME

Table 11.1 summarizes the changes in AOCI for the three months ended September 30, 2020 and 2019 (in thousands):

Table 11.1

	Three Months Ended
	Net Unrealized Gains (Losses) on Available-for-sale Securities		Defined Benefit Pension Plan		Total AOCI
Balance at June 30, 2019	$	35,143	$	(3,230)	$	31,913
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	(17,324)				(17,324)
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan1			95		95
Net current period other comprehensive income (loss)	(17,324)		95		(17,229)
Balance at September 30, 2019	$	17,819	$	(3,135)	$	14,684
Balance at June 30, 2020	$	(31,746)	$	(1,948)	$	(33,694)
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	30,295				30,295
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan1			28		28
Net current period other comprehensive income (loss)	30,295		28		30,323
Balance at September 30, 2020	$	(1,451)	$	(1,920)	$	(3,371)

1    Recorded in “Other” non-interest expense on the Statements of Income. Amount represents a debit (increase to other expenses).

Table 11.2 summarizes the changes in AOCI for the nine months ended September 30, 2020 and 2019 (in thousands):

Table 11.2

	Nine Months Ended
	Net Unrealized Gains (Losses) on Available-for-sale Securities		Defined Benefit Pension Plan		Total AOCI
Balance at December 31, 2018	$	19,068	$	(3,375)	$	15,693
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	(1,249)				(1,249)
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan1			240		240
Net current period other comprehensive income (loss)	(1,249)		240		(1,009)
Balance at September 30, 2019	$	17,819	$	(3,135)	$	14,684
Balance at December 31, 2019	$	26,788	$	(2,002)	$	24,786
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	(26,716)				(26,716)
Reclassifications from other comprehensive income (loss) to net income:
Realized net (gains) losses included in net income2	(1,523)				(1,523)
Amortization of net losses - defined benefit pension plan1			82		82
Net current period other comprehensive income (loss)	(28,239)		82		(28,157)
Balance at September 30, 2020	$	(1,451)	$	(1,920)	$	(3,371)

1    Recorded in “Other” non-interest expense on the Statements of Income. Amount represents a debit (increase to other expenses).

2    Recorded in “Net gains (losses) on sale of available-for-sale securities” non-interest income on the Statements of Income. Amount represents a credit (increase to other income (loss)).

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Fair Values

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Values

FAIR VALUES

The fair value amounts recorded on the Statements of Condition and presented in the note disclosures have been determined by FHLBank using available market and other pertinent information and reflect FHLBank’s best judgment of appropriate valuation methods. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). Although FHLBank uses its best judgment in estimating the fair value of its financial instruments, there are inherent limitations in any valuation technique. Therefore, the fair values may not be indicative of the amounts that would have been realized in market transactions as of September 30, 2020 and December 31, 2019. Additionally, these values do not represent an estimate of the overall market value of FHLBank as a going concern, which would take into account future business opportunities and the net profitability of assets and liabilities.

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

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

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

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

•Level 2 Inputs – Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets and liabilities in active markets; (2) quoted prices for similar assets and liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals and implied volatilities); and (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

•Level 3 Inputs – Unobservable inputs for the asset or liability.

FHLBank reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. There were no transfers of assets or liabilities between fair value levels during the three and nine months ended September 30, 2020 and 2019.

Tables 12.1 and 12.2 present the carrying value, fair value and fair value hierarchy of financial assets and liabilities as of September 30, 2020 and December 31, 2019. FHLBank records trading securities, available-for-sale securities, derivative assets, and derivative liabilities at fair value on a recurring basis, and on occasion certain mortgage loans held for portfolio and certain other assets at fair value on a nonrecurring basis. FHLBank measures all other financial assets and liabilities at amortized cost. Further details about the financial assets and liabilities held at fair value on either a recurring or non-recurring basis are presented in Tables 12.3 and 12.4.

The carrying value, fair value and fair value hierarchy of FHLBank’s financial assets and liabilities as of September 30, 2020 and December 31, 2019 are summarized in Tables 12.1 and 12.2 (in thousands):

Table 12.1

	09/30/2020
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Assets:
Cash and due from banks	$	22,704	$	22,704	$	22,704	$	—	$	—	$	—
Interest-bearing deposits	499,662		499,662		—		499,662		—		—
Securities purchased under agreements to resell	4,600,000		4,600,000		—		4,600,000		—		—
Federal funds sold	1,435,000		1,435,000		—		1,435,000		—		—
Trading securities	3,117,935		3,117,935		—		3,117,935		—		—
Available-for-sale securities	7,290,611		7,290,611		—		7,290,611		—		—
Held-to-maturity securities	2,973,976		2,975,782		—		2,897,278		78,504		—
Advances	22,616,252		22,733,051		—		22,733,051		—		—
Mortgage loans held for portfolio, net of allowance	10,093,466		10,351,013		—		10,348,886		2,127		—
Accrued interest receivable	108,532		108,532		—		108,532		—		—
Derivative assets	162,501		162,501		—		21,153		—		141,348
Liabilities:
Deposits	1,016,316		1,016,316		—		1,016,316		—		—
Consolidated obligation discount notes	11,936,214		11,936,578		—		11,936,578		—		—
Consolidated obligation bonds	37,294,169		37,517,293		—		37,517,293		—		—
Mandatorily redeemable capital stock	1,914		1,914		1,914		—		—		—
Accrued interest payable	54,913		54,913		—		54,913		—		—
Derivative liabilities	173		173		—		370,663		—		(370,490)
Other Asset (Liability):
Industrial revenue bonds	35,000		38,224		—		38,224		—		—
Financing obligation payable	(35,000)		(38,224)		—		(38,224)		—		—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral and related accrued interest held or placed with the same clearing agent or derivative counterparty.

Table 12.2

	12/31/2019
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Assets:
Cash and due from banks	$	1,917,166	$	1,917,166	$	1,917,166	$	—	$	—	$	—
Interest-bearing deposits	921,453		921,453		—		921,453		—		—
Securities purchased under agreements to resell	4,750,000		4,750,000		—		4,750,000		—		—
Federal funds sold	850,000		850,000		—		850,000		—		—
Trading securities	2,812,562		2,812,562		—		2,812,562		—		—
Available-for-sale securities	7,182,500		7,182,500		—		7,182,500		—		—
Held-to-maturity securities	3,569,958		3,556,938		—		3,476,084		80,854		—
Advances	30,241,315		30,295,813		—		30,295,813		—		—
Mortgage loans held for portfolio, net of allowance	10,633,009		10,983,356		—		10,981,458		1,898		—
Accrued interest receivable	143,765		143,765		—		143,765		—		—
Derivative assets	154,804		154,804		—		24,810		—		129,994
Liabilities:
Deposits	790,640		790,640		—		790,640		—		—
Consolidated obligation discount notes	27,447,911		27,448,021		—		27,448,021		—		—
Consolidated obligation bonds	32,013,314		32,103,154		—		32,103,154		—		—
Mandatorily redeemable capital stock	2,415		2,415		2,415		—		—		—
Accrued interest payable	117,580		117,580		—		117,580		—		—
Derivative liabilities	202		202		—		106,708		—		(106,506)
Other Asset (Liability):
Industrial revenue bonds	35,000		34,850		—		34,850		—		—
Financing obligation payable	(35,000)		(34,850)		—		(34,850)		—		—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral and related accrued interest held or placed with the same clearing agent or derivative counterparty.

Fair Value Measurements: Tables 12.3 and 12.4 present, for each hierarchy level, FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of or for the periods ended September 30, 2020 and December 31, 2019 (in thousands).

Table 12.3

	09/30/2020
	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
Certificates of deposit	$	225,053	$	—	$	225,053	$	—	$	—
U.S. Treasury obligations	1,557,412		—		1,557,412		—		—
GSE obligations	433,864		—		433,864		—		—
GSE MBS	901,606		—		901,606		—		—
Total trading securities	3,117,935		—		3,117,935		—		—
Available-for-sale securities:
U.S. Treasury obligations	4,067,370		—		4,067,370		—		—
GSE MBS	3,223,241		—		3,223,241		—		—
Total available-for-sale securities	7,290,611		—		7,290,611		—		—
Derivative assets:
Interest-rate related	162,417		—		21,069		—		141,348
Mortgage delivery commitments	84		—		84		—		—
Total derivative assets	162,501		—		21,153		—		141,348
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	10,571,047	$	—	$	10,429,699	$	—	$	141,348
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	93	$	—	$	370,583	$	—	$	(370,490)
Mortgage delivery commitments	80		—		80		—		—
Total derivative liabilities	173		—		370,663		—		(370,490)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	173	$	—	$	370,663	$	—	$	(370,490)
Nonrecurring fair value measurements - Assets2:
Impaired mortgage loans	$	2,132	$	—	$	—	$	2,132	$	—
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	2,132	$	—	$	—	$	2,132	$	—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

2    Includes assets adjusted to fair value during the nine months ended September 30, 2020 and still outstanding as of September 30, 2020.

Table 12.4

	12/31/2019
	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
U.S. Treasury obligations	$	1,530,518	$	—	$	1,530,518	$	—	$	—
GSE obligations	416,025		—		416,025		—		—
GSE MBS	866,019		—		866,019		—		—
Total trading securities	2,812,562		—		2,812,562		—		—
Available-for-sale securities:
U.S. Treasury obligations	4,261,791		—		4,261,791		—		—
GSE MBS	2,920,709		—		2,920,709		—		—
Total available-for-sale securities	7,182,500		—		7,182,500		—		—
Derivative assets:
Interest-rate related	154,309		—		24,315		—		129,994
Mortgage delivery commitments	495		—		495		—		—
Total derivative assets	154,804		—		24,810		—		129,994
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	10,149,866	$	—	$	10,019,872	$	—	$	129,994
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	177	$	—	$	106,683	$	—	$	(106,506)
Mortgage delivery commitments	25		—		25		—		—
Total derivative liabilities	202		—		106,708		—		(106,506)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	202	$	—	$	106,708	$	—	$	(106,506)
Nonrecurring fair value measurements - Assets2:
Impaired mortgage loans	$	1,909	$	—	$	—	$	1,909	$	—
Real estate owned	144		—		—		144		—
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	2,053	$	—	$	—	$	2,053	$	—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

2    Includes assets adjusted to fair value during the year ended December 31, 2019 and still outstanding as of December 31, 2019.

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Commitments And Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments And Contingencies

COMMITMENTS AND CONTINGENCIES Joint and Several Liability: As provided in the Bank Act or in FHFA regulations, consolidated obligations are backed only by the financial resources of the FHLBanks. FHLBank Topeka is jointly and severally liable with the other FHLBanks for the payment of principal and interest on all of the consolidated obligations issued by the FHLBanks. The par amounts for which FHLBank Topeka is jointly and severally liable were approximately $770,698,374,000 and $966,413,924,000 as of September 30, 2020 and December 31, 2019, respectively. The joint and several obligations are mandated by FHFA regulations and are not the result of arms-length transactions among FHLBanks. As described above, FHLBanks have no control over the amount of the guaranty or the determination of how each FHLBank would perform under the joint and several liability. Because the FHLBanks are subject to the authority of the FHFA as it relates to decisions involving the allocation of the joint and several liability for all FHLBanks' consolidated obligations, FHLBank Topeka regularly monitors the financial condition of the other FHLBanks to determine whether it should expect a loss to arise from its joint and several obligations. If FHLBank were to determine that a loss was probable and the amount of the loss could be reasonably estimated, FHLBank would charge to income the amount of the expected loss. Based upon the creditworthiness of the other FHLBanks as of September 30, 2020, FHLBank Topeka has concluded that a loss accrual is not necessary at this time.

Off-balance Sheet Commitments: As of September 30, 2020 and December 31, 2019, off-balance sheet commitments are presented in Table 13.1 (in thousands):

Table 13.1

	09/30/2020						12/31/2019
Notional Amount	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	$	5,044,507	$	4,635	$	5,049,142	$	4,764,724	$	4,335	$	4,769,059
Advance commitments outstanding	38,420		12,090		50,510		64,282		15,693		79,975
Commitments for standby bond purchases	423,030		280,733		703,763		—		701,392		701,392
Commitments to fund or purchase mortgage loans	105,003		—		105,003		221,800		—		221,800
Commitments to issue consolidated bonds, at par	264,000		—		264,000		—		—		—
Commitments to issue consolidated discount notes, at par	—		—		—		411,161		—		411,161

Commitments to Extend Credit: FHLBank issues standby letters of credit on behalf of its members to support certain obligations of the members to third-party beneficiaries. These standby letters of credit are subject to the same collateralization and borrowing limits that are applicable to advances and are fully collateralized at the time of issuance with assets allowed by FHLBank’s Member Products Policy (MPP). Standby letters of credit may be offered to assist members in facilitating residential housing finance, community lending, and asset-liability management, and to provide liquidity. In particular, members often use standby letters of credit as collateral for deposits from federal and state government agencies. Standby letters of credit are executed for members for a fee. If FHLBank is required to make payment for a beneficiary's draw, the member either reimburses FHLBank for the amount drawn or, subject to FHLBank's discretion, the amount drawn may be converted into a collateralized advance to the member. However, standby letters of credit usually expire without being drawn upon. Outstanding standby letters of credit have original or extended expiration periods of up to 6 years. FHLBank's current outstanding standby letters of credit expire no later than 2024. Unearned fees as well as the value of the guarantees related to standby letters of credit are recorded in other liabilities and amounted to $1,623,000 and $1,470,000 as of September 30, 2020 and December 31, 2019, respectively. Advance commitments legally bind and unconditionally obligate FHLBank for additional advances up to 24 months in the future. Based upon management’s credit analysis of members and collateral requirements under the MPP, FHLBank does not expect to incur any credit losses on the outstanding letters of credit or advance commitments.

Standby Bond-Purchase Agreements: FHLBank has entered into standby bond purchase agreements with state housing authorities whereby FHLBank, for a fee, agrees to purchase and hold the authorities’ bonds until the designated marketing agent can find a suitable investor or the housing authority repurchases the bond according to a schedule established by the standby agreement. Each standby agreement dictates the specific terms that would require FHLBank to purchase the bond. The bond purchase commitments entered into by FHLBank expire no later than 2023, though some are renewable at the option of FHLBank. As of September 30, 2020 and December 31, 2019, the total commitments for bond purchases included agreements with two in-district state housing authorities. FHLBank was required to purchase $122,390,000 in bonds under these agreements during the nine months ended September 30, 2020. These bonds were classified as available-for-sale securities, and were acquired at par and sold at par within the same month. FHLBank was not required to purchase any bonds under any agreements during the nine months ended September 30, 2019.

Commitments to Purchase Mortgage Loans: These commitments that unconditionally obligate FHLBank to purchase mortgage loans from participating FHLBank Topeka members in the MPF Program are generally for periods not to exceed 60 calendar days. Certain commitments are recorded as derivatives at their fair values on the Statements of Condition. FHLBank recorded mortgage delivery commitment net derivative asset (liability) balances of $4,000 and $470,000 as of September 30, 2020 and December 31, 2019, respectively.

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

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Transactions With Stockholders

9 Months Ended

Sep. 30, 2020

Federal Home Loan Banks [Abstract]

Transactions With Stockholders

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

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

Activity with Members that Exceed a 10 Percent Ownership in FHLBank Regulatory Capital Stock: Tables 14.1 and 14.2 present information on members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands). None of the officers or directors of these members currently serve on FHLBank’s board of directors.

Table 14.1

09/30/2020
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A		Total Class B Stock Par Value		Percent of Total Class B		Total Capital Stock Par Value		Percent of Total Capital Stock
MidFirst Bank	OK	$	6,800	1.8	%	$	323,972	27.1	%	$	330,772	20.9	%
TOTAL		$	6,800	1.8	%	$	323,972	27.1	%	$	330,772	20.9	%

Table 14.2

12/31/2019
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A		Total Class B Stock Par Value		Percent of Total Class B		Total Capital Stock Par Value		Percent of Total Capital Stock
MidFirst Bank	OK	$	500	0.1	%	$	385,825	29.2	%	$	386,325	21.8	%
BOKF, N.A.	OK	184,282		41.0		202,000		15.3		386,282		21.8
TOTAL		$	184,782	41.1	%	$	587,825	44.5	%	$	772,607	43.6	%

Advance and deposit balances with members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of September 30, 2020 and December 31, 2019 are summarized in Table 14.3 (dollar amounts in thousands). Information is only listed for the period in which the member owned more than 10 percent of outstanding FHLBank regulatory capital stock.

Table 14.3

	09/30/2020				12/31/2019				09/30/2020				12/31/2019
Member Name	Outstanding Advances		Percent of Total		Outstanding Advances		Percent of Total		Outstanding Deposits		Percent of Total		Outstanding Deposits		Percent of Total
MidFirst Bank	$	7,130,000	32.0	%	$	8,585,000	28.5	%	$	649	0.1	%	$	1,030	0.1	%
BOKF, N.A.					4,500,000		14.9						22,457		2.9
TOTAL	$	7,130,000	32.0	%	$	13,085,000	43.4	%	$	649	0.1	%	$	23,487	3.0	%

MidFirst Bank did not sell any mortgage loans into the MPF Program during the three and nine months ended September 30, 2020 and 2019. BOKF, N.A. did not sell any mortgage loans into the MPF Program during the three and nine months ended September 30, 2019.

Transactions with FHLBank Directors’ Financial Institutions: Table 14.4 presents information as of September 30, 2020 and December 31, 2019 for members that had an officer or director serving on FHLBank’s board of directors (dollar amounts in thousands). Information is only included for the period in which the officer or director served on FHLBank’s board of directors. Capital stock listed is regulatory capital stock, which includes mandatorily redeemable capital stock.

Table 14.4

	09/30/2020				12/31/2019
	Outstanding Amount		Percent of Total		Outstanding Amount		Percent of Total
Advances	$	179,043	0.8	%	$	178,945	0.6	%
Deposits	$	23,892	2.4	%	$	15,748	2.0	%
Class A Common Stock	$	5,461	1.4	%	$	6,467	1.4	%
Class B Common Stock	23,431		2.0		5,571		0.4
TOTAL CAPITAL STOCK	$	28,892	1.8	%	$	12,038	0.7	%

Table 14.5 presents mortgage loans acquired during the three and nine months ended September 30, 2020 and 2019 for members that had an officer or director serving on FHLBank’s board of directors in 2020 or 2019 (dollar amounts in thousands). Information is only included for the period in which the officer or director served on FHLBank’s board of directors.

Table 14.5

	Three Months Ended								Nine Months Ended
	09/30/2020				09/30/2019				09/30/2020				09/30/2019
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
Mortgage loans acquired	$	9,091	2.5	%	$	61,362	5.4	%	$	95,901	4.0	%	$	128,251	5.3	%

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BASIS OF PRESENTATION (Policies)

9 Months Ended

Sep. 30, 2020

Accounting Policies [Abstract]

Basis of Presentation, Policy

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

FHLBank’s significant accounting policies and certain other disclosures are set forth in the notes to the audited financial statements for the year ended December 31, 2019. The interim financial statements presented herein should be read in conjunction with FHLBank’s audited financial statements and notes thereto, which are included in FHLBank’s annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 20, 2020 (annual report on Form 10-K). The notes to the interim financial statements highlight significant changes to the notes included in the annual report on Form 10-K.

Use Of Estimates, Policy

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

Credit Loss, Financial Instrument [Policy Text Block]

Beginning January 1, 2020, FHLBank adopted new accounting guidance pertaining to the measurement of credit losses on financial instruments that requires a financial asset or group of financial assets measured at amortized cost to be presented at the net amount expected to be collected. The new guidance also requires credit losses relating to these financial instruments as well as available-for-sale securities to be recorded through an allowance for credit losses. Key changes as compared to prior accounting guidance are detailed below. Consistent with the modified retrospective method of adoption, the prior period has not been revised to conform to the new basis of accounting. See Note 1 of the Notes to the Financial Statements included in the annual report on Form 10-K for information on the prior accounting treatment.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold: FHLBank invests in interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold. These investments provide short-term liquidity and are carried at amortized cost. Accrued interest receivable is recorded separately on the Statements of Condition.

These investments are evaluated quarterly for expected credit losses. If applicable, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. FHLBank uses the collateral maintenance provision practical expedient for securities purchased under agreements to resell. Consequently, a credit loss would be recognized if there is a collateral shortfall which FHLBank does not believe the counterparty will replenish in accordance with its contractual terms. The credit loss would be limited to the difference between the fair value of the collateral and the investment’s amortized cost. See Note 3 for details on the allowance methodologies relating to these investments.

Investment Securities:

Available-for-Sale: For securities classified as available-for-sale, FHLBank evaluates an individual security for impairment on a quarterly basis by comparing the security’s fair value to its amortized cost. Accrued interest receivable is recorded separately on the Statements of Condition. Impairment exists when the fair value of the investment is less than its amortized cost (i.e., in an unrealized loss position). In assessing whether a credit loss exists on an impaired security, FHLBank considers whether there would be a shortfall in receiving all cash flows contractually due. When a shortfall is considered possible, FHLBank compares the present value of cash flows to be collected from the security with the amortized cost basis of the security. If the present value of cash flows is less than amortized cost, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance is limited by the amount of the unrealized loss. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately.

If management intends to sell an impaired security classified as available-for-sale, or more likely than not will be required to sell the security before expected recovery of its amortized cost basis, any allowance for credit losses is written off and the amortized cost basis is written down to the security’s fair value at the reporting date with any incremental impairment reported in earnings as net gains (losses) on available-for-sale securities. If management does not intend to sell an impaired security classified as available-for-sale and it is not more likely than not that management will be required to sell the debt security, then the credit portion of the difference is recognized as an allowance for credit losses and any remaining difference between the security’s fair value and amortized cost is recorded to net unrealized gains (losses) on available-for-sale securities within other comprehensive income (loss) (OCI).

Held-to-Maturity: Securities that FHLBank has both the ability and intent to hold to maturity are classified as held-to-maturity and are carried at amortized cost, adjusted for periodic principal repayments, amortization of premiums, and accretion of discounts. Accrued interest receivable is recorded separately on the Statements of Condition.

Held-to-maturity securities are evaluated quarterly for expected credit losses on a pool basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. An allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately.

See Note 3 for details on the allowance methodologies relating to available-for-sale and held-to-maturity securities.

Advances: Advances are carried at amortized cost, which is original cost adjusted for periodic principal repayments, amortization of premiums, accretion of discounts, and fair value hedge adjustments. Accrued interest receivable is recorded separately on the Statements of Condition. Advances are evaluated quarterly for expected credit losses. If deemed necessary, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. See Note 4 for details on the allowance methodology relating to advances.

Mortgage Loans Held for Portfolio: Mortgage loans held for portfolio are recorded at amortized cost, which is original cost adjusted for periodic principal repayments, amortization of premiums, accretion of discounts, hedging adjustments, other fees, and direct write-downs. Accrued interest receivable is recorded separately on the Statements of Condition. FHLBank performs a quarterly assessment of its mortgage loans held for portfolio to estimate expected credit losses. An allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses.

FHLBank measures expected credit losses on mortgage loans on a collective basis, pooling loans with similar risk characteristics. If a mortgage loan no longer shares risk characteristics with other loans, it is removed from the pool and evaluated for expected credit losses on an individual basis.

When developing the allowance for credit losses, FHLBank measures the estimated loss over the remaining life of a mortgage loan, which also considers how credit enhancements mitigate credit losses. If a loan is purchased at a discount, the discount does not offset the allowance for credit losses. The allowance excludes uncollectible accrued interest receivable, as FHLBank writes off accrued interest receivable by reversing interest income if a mortgage loan is placed on nonaccrual status.

FHLBank does not purchase mortgage loans with credit deterioration present at the time of purchase. FHLBank includes estimates of expected recoveries within the allowance for credit losses. See Note 5 for details on the allowance methodologies relating to mortgage loans.

Off-Balance Sheet Credit Exposures: FHLBank evaluates off-balance sheet credit exposures on a quarterly basis for expected credit losses. If deemed necessary, an allowance for expected credit losses on these off-balance sheet exposures is recorded in other liabilities with a corresponding adjustment to the provision (reversal) for credit losses. See Note 13 for details on the allowance methodologies relating to off-balance sheet credit exposures.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold: FHLBank invests in interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received a credit rating of triple-B or greater (investment grade) by a nationally recognized statistical rating organization (NRSRO). These may differ from internal ratings of the investments, if applicable. As of September 30, 2020, approximately 70 percent of these overnight investments were with counterparties not rated by an NRSRO. All transactions with unrated counterparties are secured transactions.

Federal funds sold are unsecured loans that are generally transacted on an overnight term. Federal Housing Finance Agency (FHFA) regulations include a limit on the amount of unsecured credit FHLBank may extend to a counterparty. As of September 30, 2020 and December 31, 2019, all investments in interest-bearing deposits and Federal funds sold were repaid or expected to be repaid according to the contractual terms. No allowance for credit losses was recorded for these assets as of September 30, 2020 and December 31, 2019. Carrying values of interest-bearing deposits and Federal funds sold exclude accrued interest receivable of $83,000 and $3,000, respectively, as of September 30, 2020, and $589,000 and $30,000, respectively, as of December 31, 2019.

Securities purchased under agreements to resell are short-term and are structured such that they are evaluated regularly to determine if the market value of the underlying securities decreases below the market value required as collateral (i.e., subject to collateral maintenance provisions). If so, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash, generally by the next business day. Based upon the collateral held as security and collateral maintenance provisions with its counterparties, FHLBank determined that no allowance for credit losses was needed for its securities purchased under agreements to resell as of September 30, 2020 and December 31, 2019. The carrying value of securities purchased under agreements excludes accrued interest receivable of $15,000 and $424,000 as of September 30, 2020 and December 31, 2019, respectively.

Allowance for Credit Losses on Available-for-Sale and Held-to-Maturity Securities: FHLBank evaluates available-for-sale and held-to-maturity investment securities for credit losses on a quarterly basis. FHLBank adopted new accounting guidance for the measurement of credit losses on financial instruments on January 1, 2020. See Note 2 for additional information.

During the three and nine months ended September 30, 2020, FHLBank did not recognize a provision for credit losses associated with available-for-sale investments or held-to-maturity investments. To evaluate investment securities for credit loss as of September 30, 2020, FHLBank employed the following methodologies, based on the type of security.

FHLBank's available-for-sale and held-to-maturity securities are principally certificates of deposit, U.S. obligations, GSE obligations, state or local housing agency obligations, and MBS issued by Ginnie Mae, Freddie Mac, and Fannie Mae that are backed by single-family or multifamily mortgage loans. FHLBank only purchases securities considered investment quality. As of September 30, 2020, all of FHLBank's available-for-sale securities and held-to-maturity securities were rated single-A or above by an NRSRO, based on the lowest long-term credit rating for each security. These may differ from any internal ratings of the securities, if applicable.

FHLBank evaluates available-for-sale securities for impairment by comparing the security’s fair value to its amortized cost. Impairment may exist when the fair value of the investment is less than its amortized cost (i.e., in an unrealized loss position). As of September 30, 2020, certain available-for-sale securities were in an unrealized loss position. These losses are considered temporary as FHLBank expects to recover the entire amortized cost basis on these available-for-sale investment securities. FHLBank neither intends to sell these securities nor considers it more likely than not that it will be required to sell these securities before its anticipated recovery of each security's remaining amortized cost basis. Further, FHLBank has not experienced any payment defaults on the instruments. In addition, all of these securities carry an implicit or explicit government guarantee. As a result, no allowance for credit losses was recorded on these available-for-sale securities as of September 30, 2020.

FHLBank evaluates its held-to-maturity securities for impairment on a collective or pooled basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. As of September 30, 2020, FHLBank had not established an allowance for credit loss on any held-to-maturity securities because the securities: (1) were all highly-rated and/or had short remaining terms to maturity; (2) had not experienced, nor did FHLBank expect, any payment default on the instruments; and (3) in the case of U.S. or GSE obligations, carry an implicit or explicit government guarantee such that FHLBank considers the risk of nonpayment to be zero.

Credit Risk Exposure and Security Terms: FHLBank's advances are primarily made to member financial institutions, including commercial banks and insurance companies. FHLBank manages its credit exposure to advances through an integrated approach that includes establishing a credit limit for each borrower. This approach includes an ongoing review of each borrower's financial condition, in conjunction with FHLBank's collateral and lending policies to limit risk of loss, while balancing borrowers' needs for a reliable source of funding.

In addition, FHLBank lends to eligible borrowers in accordance with federal law and FHFA regulations. Specifically, FHLBank is required to obtain sufficient collateral to fully secure credit products up to the counterparty’s total credit limit. Collateral eligible to secure new or renewed advances includes:

▪One-to-four family and multifamily mortgage loans (delinquent for no more than 90 days) and securities representing such mortgages;

▪Loans and securities issued, insured, or guaranteed by the U.S. government or any U.S. government agency (for example, MBS issued or guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae);

▪Cash or deposits in FHLBank;

▪Certain other collateral that is real estate-related, provided that the collateral has a readily ascertainable value and that FHLBank can perfect a security interest in it; and

▪Certain qualifying securities representing undivided equity interests in eligible advance collateral.

During the second quarter of 2020, FHLBank was given the regulatory flexibility via a Supervisory Letter from the FHFA to allow members to pledge Small Business Administration (SBA) Paycheck Protection Program (PPP) loans as eligible collateral, with the following restrictions: (1) maximum aggregate lending value for PPP loans is limited to the lesser of $5 billion or 20 percent of the institution’s total lending value on all collateral pledged; and (2) the institution must maintain a CAMELS composite rating of “3” or better. CAMELS is a rating system for banks utilized by federal banking supervisors that represents an evaluation of a bank's financial condition and compliance with laws and regulatory policies. If an institution’s CAMELS composite rating downgrades to “4” or “5”, the institution must substitute all PPP loans being utilized to support outstanding credit obligations with other eligible collateral within five business days. As of September 30, 2020, the amount of PPP loans pledged to FHLBank as collateral was insignificant.

Residential mortgage loans are the principal form of collateral for advances. The estimated value of the collateral required to secure each member's credit products is calculated by applying collateral discounts, or haircuts, to the market value or unpaid principal balance of the collateral, as applicable. In addition, community financial institutions are eligible to use expanded statutory collateral provisions for small business, agriculture loans, and community development loans. FHLBank capital stock owned by each borrower is also pledged as collateral. Collateral arrangements may vary depending upon borrower credit quality, financial condition, and performance; borrowing capacity; and overall credit exposure to the borrower. FHLBank can also require additional or substitute collateral to protect its security interest. FHLBanks also have policies and procedures for validating the reasonableness of their collateral valuations. In addition, collateral verifications and on-site reviews are performed by FHLBank based on the risk profile of the borrower. FHLBank management believes that these policies effectively manage credit risk from advances.

The FHFA has provided non-objection relief via a Supervisory Letter that permits FHLBank to offer its members increased collateral flexibility through the acceptance of various types of forbearance plans and loan modification agreements of the Temporary COVID-19 Underwriting Guidelines in the first quarter of 2020. FHLBank management and the board of directors has approved as collateral forbearance plans and loan modification agreements for the following loan categories: conventional mortgages on one-to-four family residential real property, mortgages on multifamily residential real property, agricultural real estate, commercial real estate, second mortgages on residential one-to-four family property, home equity lines of credit, operating loans, and equipment loans. In addition, the temporary guidelines allow flexibility to accept loans as collateral that have modifications or forbearance plans executed via electronic signature in compliance with the Electronic Signatures in Global and National Commerce Act (i.e., E-SIGN). At the of the third quarter of 2020, the Temporary COVID-19 Underwriting Guidelines continue to be available for use by members.

FHLBank either allows a borrower to retain physical possession of the collateral assigned to it, or requires the borrower to specifically assign or place physical possession of the collateral with FHLBank or its safekeeping agent. FHLBank perfects its security interest in all pledged collateral. The Federal Home Loan Bank Act of 1932, as amended, (Bank Act) states that any security interest granted to an FHLBank by a borrower will have priority over the claims or rights of any other party, except for claims or rights of a third party that would be entitled to priority under otherwise applicable law and are held by a bona fide purchaser for value or by a secured party holding a prior perfected security interest.

Using a risk-based approach and taking into consideration each borrower's financial strength, FHLBank considers the types and level of collateral to be the primary indicator of credit quality on advances. As of September 30, 2020 and December 31, 2019, FHLBank had rights to collateral on a borrower-by-borrower basis with an estimated value greater than its outstanding advances.

FHLBank continues to evaluate and make changes to its collateral guidelines, as necessary, based on current market conditions. As of September 30, 2020 and December 31, 2019, no advances were past due, on non-accrual status, or considered impaired. In addition, there were no troubled debt restructurings related to advances during the three and nine months ended September 30, 2020 and 2019.

Based on the collateral held as security, FHLBank's credit extension and collateral policies, and repayment history on advances, no losses are expected on advances as of September 30, 2020, and therefore no allowance for credit losses on advances was recorded. For the same reasons, FHLBank did not record any allowance for credit losses on advances as of December 31, 2019.

Allowance for Credit Losses:

Conventional Mortgage Loans: Conventional loans are evaluated collectively when similar risk characteristics exists. Conventional loans that do not share risk characteristics with other pools are evaluated for expected credit losses on an individual basis. FHLBank determines its allowances for credit losses on conventional loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions. FHLBank uses a model that discounts projected cash flows to estimate expected credit losses over the life of the loans. This model relies on a number of inputs, such as both current and forecasted property values and interest rates as well as historical borrower behavior experience. FHLBank also incorporates associated credit enhancements, as available, to determine its estimate of expected credit losses.

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

Government-Guaranteed or -Insured Mortgage Loans: FHLBank invests in fixed-rate mortgage loans that are insured or guaranteed by the Federal Housing Administration, the Department of Veterans Affairs, the Rural Housing Service of the Department of Agriculture, and/or the Department of Housing and Urban Development. The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable guarantee or insurance with respect to defaulted government-guaranteed or -insured mortgage loans. Any losses on these loans that are not recovered from the issuer or the guarantor are absorbed by the servicer. Therefore, FHLBank only has credit risk for these loans if the servicer fails to pay for losses not covered by the guarantee or insurance. Based on FHLBank's assessment of its servicers and the collateral backing the loans, the risk of loss was immaterial, consequently, no allowance for credit losses for government-guaranteed or -insured mortgage loans was recorded as of September 30, 2020 or December 31, 2019. Furthermore, none of these mortgage loans has been placed on non-accrual status because of the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.

New Accounting Pronouncements, Policy

Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In March 2020, the CARES Act was signed into law to provide relief from the economic impact of the COVID-19 pandemic to a variety of sectors of the U.S. economy, including businesses, individuals, health care, education, and state and local governments. The CARES Act also includes provisions that provide optional relief from certain accounting and reporting requirements related to troubled debt restructurings (TDRs). TDR relief applies to COVID-19-related modifications made from March 1, 2020 until the earlier of December 31, 2020 or 60 days following the termination of the national emergency declared by the President of the United States for borrowers that were current as of December 31, 2019. FHLBank has elected the optional relief but does not expect it to have a material effect on FHLBank's financial condition, results of operations, cash flows, or disclosures.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Accounting Standard Update (ASU) 2020-04). In March 2020, the Financial Accounting Standards Board (FASB) issued temporary optional guidance to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The transactions primarily include: (1) contract modifications; (2) hedging relationships; and (3) sale or transfer of debt securities classified as held-to-maturity. This guidance was effective immediately for FHLBank, and the amendments may be applied prospectively through December 31, 2022. FHLBank is in the process of evaluating the guidance, and its effect on FHLBank's financial condition, results of operations and cash flows has not yet been determined.

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract (ASU 2018-15). In August 2018, the FASB issued an amendment to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). Accordingly, the amendments in this ASU require an entity in a hosting arrangement that is a service contract to follow existing guidance relating to internal-use software to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. Costs to develop or obtain internal-use software that cannot be capitalized also cannot be capitalized for a hosting arrangement that is a service contract. Therefore, an entity in a hosting arrangement that is a service contract determines to which project stage (that is, preliminary project stage, application development stage, or post-implementation stage) an implementation activity relates. Costs for implementation activities in the application development stage are capitalized depending on the nature of the costs, while costs incurred during the preliminary project and post-implementation stages are expensed as the activities are performed. The amendments in this ASU also require the entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The amendments in this ASU were effective January 1, 2020 for FHLBank. The adoption of this guidance did not materially impact FHLBank's financial condition, results of operations or cash flows.

Changes to the Disclosure Requirements for Defined Benefit Plans (ASU 2018-14). In August 2018, the FASB issued an amendment modifying the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans to improve disclosure effectiveness. The amendments in the ASU remove disclosures that are no longer considered cost beneficial, clarify the specific requirements of disclosures, and add disclosure requirements identified as relevant. The amendments in this ASU are effective for annual periods ending after December 15, 2020, which is the year ending December 31, 2020 for FHLBank, and will be applied retrospectively for all comparative periods presented. The adoption of this guidance will not have a material impact on the disclosures related to defined benefit plans and will not impact FHLBank’s financial condition, results of operations or cash flows.

Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13). In August 2018, the FASB issued an amendment that modifies the disclosure requirements for fair value measurements. This ASU removes the requirement to disclose: (1) the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; and (3) the valuation processes for Level 3 fair value measurements. The ASU requires disclosure of changes in unrealized gains and losses for the period included in OCI for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this ASU were effective January 1, 2020 for FHLBank. The adoption of this guidance did not have an impact on the disclosures related to fair value measurements and did not impact FHLBank’s financial condition, results of operations or cash flows.

Measurement of Credit Losses on Financial Instruments, as amended (ASU 2016-13). In June 2016, the FASB issued amended guidance for the accounting of 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 in its circumstances. Additionally, under the new guidance, a financial asset, or a group of financial assets, measured at amortized cost basis is required to be presented at the net amount expected to be collected.

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; and

▪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 became effective for FHLBank on January 1, 2020 and was applied using a modified-retrospective approach, through a cumulative-effect adjustment to retained earnings. Adoption of this guidance did not materially impact FHLBank’s financial condition, results of operations, or cash flows.

Derivatives, Offsetting Fair Value Amounts, Policy [Policy Text Block]

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

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

Fair Value Transfer, Policy

FHLBank reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities.

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Investment Securities (Tables)

9 Months Ended

Sep. 30, 2020

Investment Holdings [Line Items]

Trading Securities by Major Security Type

Trading securities by major security type as of September 30, 2020 and December 31, 2019 are summarized in Table 3.1 (in thousands):

Table 3.1

	Fair Value
	09/30/2020		12/31/2019
Non-mortgage-backed securities:
Certificates of deposit	$	225,053	$	—
U.S. Treasury obligations	1,557,412		1,530,518
GSE obligations	433,864		416,025
Non-mortgage-backed securities	2,216,329		1,946,543
Mortgage-backed securities:
GSE MBS	901,606		866,019
Mortgage-backed securities	901,606		866,019
TOTAL	$	3,117,935	$	2,812,562

Net Gains (Losses) on Trading Securities

Net gains (losses) on trading securities during the three and nine months ended September 30, 2020 and 2019 are shown in Table 3.2 (in thousands):

Table 3.2

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Net gains (losses) on trading securities held as of September 30, 2020	$	(6,995)	$	16,237	$	92,583	$	86,429
Net gains (losses) on trading securities sold or matured prior to September 30, 2020	—		(51)		186		355
NET GAINS (LOSSES) ON TRADING SECURITIES	$	(6,995)	$	16,186	$	92,769	$	86,784

Available-for-sale Securities by Major Security Type

Available-for-sale securities by major security type as of September 30, 2020 are summarized in Table 3.3 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of $27,450,000 as of September 30, 2020.

Table 3.3

	09/30/2020
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
U.S. Treasury obligations	$	4,062,655	$	4,715	$	—	$	4,067,370
Non-mortgage-backed securities	4,062,655		4,715		—		4,067,370
Mortgage-backed securities:
GSE MBS	3,229,407		28,211		(34,377)		3,223,241
Mortgage-backed securities	3,229,407		28,211		(34,377)		3,223,241
TOTAL	$	7,292,062	$	32,926	$	(34,377)	$	7,290,611

Available-for-sale securities by major security type as of December 31, 2019 are summarized in Table 3.4 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and fair value hedge accounting adjustments, and excludes accrued interest receivable of $30,321,000 as of December 31, 2019.

Table 3.4

	12/31/2019
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
U.S. Treasury obligations	$	4,258,608	$	3,580	$	(397)	$	4,261,791
Non-mortgage-backed securities	4,258,608		3,580		(397)		4,261,791
Mortgage-backed securities:
GSE MBS	2,897,104		28,353		(4,748)		2,920,709
Mortgage-backed securities	2,897,104		28,353		(4,748)		2,920,709
TOTAL	$	7,155,712	$	31,933	$	(5,145)	$	7,182,500

Available-for-sale securities with unrealized losses, fair value

Table 3.5 summarizes the available-for-sale securities with unrealized losses as of September 30, 2020 (in thousands). The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table 3.5

	09/30/2020
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Mortgage-backed securities:
GSE MBS	$	1,579,922	$	(30,449)	$	325,075	$	(3,928)	$	1,904,997	$	(34,377)
Mortgage-backed securities	1,579,922		(30,449)		325,075		(3,928)		1,904,997		(34,377)
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	1,579,922	$	(30,449)	$	325,075	$	(3,928)	$	1,904,997	$	(34,377)

Table 3.6 summarizes the available-for-sale securities with unrealized losses as of December 31, 2019 (in thousands). The unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.

Table 3.6

	12/31/2019
	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Non-mortgage-backed securities:
U.S. Treasury obligations	$	1,579,004	$	(397)	$	—	$	—	$	1,579,004	$	(397)
Non-mortgage-backed securities	1,579,004		(397)		—		—		1,579,004		(397)
Mortgage-backed securities:
GSE MBS	787,809		(932)		301,161		(3,816)		1,088,970		(4,748)
Mortgage-backed securities	787,809		(932)		301,161		(3,816)		1,088,970		(4,748)
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	2,366,813	$	(1,329)	$	301,161	$	(3,816)	$	2,667,974	$	(5,145)

Net Gains (Losses) Realized on Sale of Available-For-Sale Securities

Table 3.8 presents details of the sales for the three and nine months ended September 30, 2020 (in thousands). There were no sales of available-for-sale securities during the three and nine months ended September 30, 2019.

Table 3.8

	Three Months Ended		Nine Months Ended
	09/30/2020		09/30/2020
Proceeds from sale of available-for-sale securities	$	—	$	289,045
Gross gains on sale of available-for-sale securities	$	—	$	1,526
Gross losses on sale of available-for-sale securities	—		(3)
NET GAINS (LOSSES) ON SALE OF AVAILABLE-FOR-SALE SECURITIES	$	—	$	1,523

Held-To-Maturity Securities by Major Security Type

Held-to-maturity securities by major security type as of September 30, 2020 are summarized in Table 3.9 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of $1,147,000 as of September 30, 2020.

Table 3.9

	09/30/2020
	Amortized Cost		Net Carrying Value		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
State or local housing agency obligations	$	81,995	$	81,995	$	—	$	(3,491)	$	78,504
Non-mortgage-backed securities	81,995		81,995		—		(3,491)		78,504
Mortgage-backed securities:
U.S. obligation MBS	76,852		76,852		151		(60)		76,943
GSE MBS	2,815,129		2,815,129		10,503		(5,297)		2,820,335
Mortgage-backed securities	2,891,981		2,891,981		10,654		(5,357)		2,897,278
TOTAL	$	2,973,976	$	2,973,976	$	10,654	$	(8,848)	$	2,975,782

Held-to-maturity securities by major security type as of December 31, 2019 are summarized in Table 3.10 (in thousands). Amortized cost includes adjustments made to the cost basis of an investment for accretion and amortization, and excludes accrued interest receivable of $4,324,000 as of December 31, 2019.

Table 3.10

	12/31/2019
	Amortized Cost		Carrying Value		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
State or local housing agency obligations	$	82,805	$	82,805	$	5	$	(1,956)	$	80,854
Non-mortgage-backed securities	82,805		82,805		5		(1,956)		80,854
Mortgage-backed securities:
U.S. obligation MBS	93,375		93,375		—		(496)		92,879
GSE MBS	3,393,778		3,393,778		6,558		(17,131)		3,383,205
Mortgage-backed securities	3,487,153		3,487,153		6,558		(17,627)		3,476,084
TOTAL	$	3,569,958	$	3,569,958	$	6,563	$	(19,583)	$	3,556,938

Proceeds from sale and Gains and Losses on Securities

Table 3.12 presents details of the sales (in thousands). There were no sales of held-to-maturity securities during the three and nine months ended September 30, 2020.

Table 3.12

	Three Months Ended		Nine Months Ended
	09/30/2019		09/30/2019
Proceeds from sale of held-to-maturity securities	$	—	$	9,442
Carrying value of held-to-maturity securities sold	—		(9,488)
NET REALIZED GAINS (LOSSES)	$	—	$	(46)

Available-for-sale Securities [Member]

Investment Holdings [Line Items]

Securities Classified By Contractual Maturity

The amortized cost and fair values of available-for-sale securities by contractual maturity as of September 30, 2020 and December 31, 2019 are shown in Table 3.7 (in thousands). Expected maturities of MBS will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 3.7

	09/30/2020				12/31/2019
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	2,021,424	$	2,022,929	$	754,003	$	753,891
Due after one year through five years	2,041,231		2,044,441		3,504,605		3,507,900
Due after five years through ten years	—		—		—		—
Due after ten years	—		—		—		—
Non-mortgage-backed securities	4,062,655		4,067,370		4,258,608		4,261,791
Mortgage-backed securities	3,229,407		3,223,241		2,897,104		2,920,709
TOTAL	$	7,292,062	$	7,290,611	$	7,155,712	$	7,182,500

Held-to-maturity Securities [Member]

Investment Holdings [Line Items]

Securities Classified By Contractual Maturity

The amortized cost, carrying value and fair values of held-to-maturity securities by contractual maturity as of September 30, 2020 and December 31, 2019 are shown in Table 3.11 (in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 3.11

	09/30/2020						12/31/2019
	Amortized Cost		Net Carrying Value		Fair Value		Amortized Cost		Carrying Value		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	—	$	—	$	—	$	—	$	—	$	—
Due after one year through five years	—		—		—		—		—		—
Due after five years through ten years	—		—		—		—		—		—
Due after ten years	81,995		81,995		78,504		82,805		82,805		80,854
Non-mortgage-backed securities	81,995		81,995		78,504		82,805		82,805		80,854
Mortgage-backed securities	2,891,981		2,891,981		2,897,278		3,487,153		3,487,153		3,476,084
TOTAL	$	2,973,976	$	2,973,976	$	2,975,782	$	3,569,958	$	3,569,958	$	3,556,938

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Advances (Tables)

9 Months Ended

Sep. 30, 2020

Advances [Abstract]

Advances Table

Table 4.1 presents advances summarized by redemption term as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands). Carrying amounts exclude accrued interest receivable of $15,186,000 and $45,637,000 as of September 30, 2020 and December 31, 2019, respectively.

Table 4.1

	09/30/2020				12/31/2019
Redemption Term	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	$	13,588,982	0.45	%	$	13,188,118	1.88	%
Due after one year through two years	1,994,896		1.23		10,448,433		1.96
Due after two years through three years	1,076,587		1.68		1,254,153		2.27
Due after three years through four years	1,256,388		1.77		1,067,662		2.42
Due after four years through five years	1,182,903		1.40		1,208,854		2.22
Thereafter	3,207,076		1.95		3,004,835		2.25
Total par value	22,306,832		0.92	%	30,172,055		1.99	%
Discounts	(9,818)				(1,807)
Hedging adjustments	319,238				71,067
TOTAL	$	22,616,252			$	30,241,315

Table 4.2 presents advances summarized by redemption term or next call date (for callable advances) and by redemption term or next conversion date (for convertible advances) as of September 30, 2020 and December 31, 2019 (in thousands):

Table 4.2

	Redemption Term or Next Call Date				Redemption Term or Next Conversion Date
Redemption Term	09/30/2020		12/31/2019		09/30/2020		12/31/2019
Due in one year or less	$	15,561,420	$	24,271,238	$	14,625,732	$	14,053,068
Due after one year through two years	1,383,709		1,133,077		2,263,896		10,637,833
Due after two years through three years	822,894		728,429		1,305,837		1,524,153
Due after three years through four years	795,261		764,990		1,338,888		1,215,412
Due after four years through five years	779,961		686,594		1,214,303		1,304,254
Thereafter	2,963,587		2,587,727		1,558,176		1,437,335
TOTAL PAR VALUE	$	22,306,832	$	30,172,055	$	22,306,832	$	30,172,055

Interest Rate Payment Terms: Table 4.3 details additional interest rate payment terms for advances as of September 30, 2020 and December 31, 2019 (in thousands):

Table 4.3

Redemption Term	09/30/2020		12/31/2019
Fixed rate:
Due in one year or less	$	9,999,404	$	2,691,528
Due after one year	6,671,538		5,912,124
Total fixed rate	16,670,942		8,603,652
Variable rate:
Due in one year or less	3,589,578		10,496,590
Due after one year	2,046,312		11,071,813
Total variable rate	5,635,890		21,568,403
TOTAL PAR VALUE	$	22,306,832	$	30,172,055

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Mortgage Loans (Tables)

9 Months Ended

Sep. 30, 2020

Receivables [Abstract]

Mortgage Loans Held For Portfolio

Table 5.1 presents information as of September 30, 2020 and December 31, 2019 on mortgage loans held for portfolio (in thousands). Mortgage loans held for portfolio excludes accrued interest receivable of $48,406,000 and $52,358,000 as of September 30, 2020 and December 31, 2019, respectively.

Table 5.1

	09/30/2020		12/31/2019
Real estate:
Fixed rate, medium-term1, single-family mortgages	$	1,488,732	$	1,347,385
Fixed rate, long-term, single-family mortgages	8,474,420		9,128,268
Total unpaid principal balance	9,963,152		10,475,653
Premiums	143,477		155,793
Discounts	(2,126)		(2,503)
Deferred loan costs, net	146		184
Other deferred fees	(30)		(38)
Hedging adjustments	(3,227)		4,905
Total before Allowance for Credit Losses on Mortgage Loans	10,101,392		10,633,994
Allowance for Credit Losses on Mortgage Loans2	(7,926)		(985)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	10,093,466	$	10,633,009

1    Medium-term defined as a term of 15 years or less at origination.

2    Effective January 1, 2020, new accounting guidance was adopted relating to the measurement of credit losses on financial instruments and resulted in a cumulative effect adjustment of $6,123,000 (see Table 5.5).

Table 5.2 presents information as of September 30, 2020 and December 31, 2019 on the outstanding unpaid principal balance of mortgage loans held for portfolio (in thousands):

Table 5.2

	09/30/2020		12/31/2019
Conventional loans	$	9,405,054	$	9,849,542
Government-guaranteed or -insured loans	558,098		626,111
TOTAL UNPAID PRINCIPAL BALANCE	$	9,963,152	$	10,475,653

Financing Receivable Credit Quality Indicators

Table 5.3 presents the payment status based on amortized cost as well as other delinquency statistics for FHLBank’s mortgage loans as of September 30, 2020 (dollar amounts in thousands):

Table 5.3

	09/30/2020
	Conventional Loans															Government Loans			Total
	Origination Year												Subtotal
	Prior to 2016		2016		2017		2018		2019		2020
Amortized Cost:1
Past due 30-59 days delinquent	$	16,140	$	2,749	$	8,132	$	7,949	$	19,111	$	3,470	$	57,551		$	11,657		$	69,208
Past due 60-89 days delinquent	9,267		1,812		2,924		3,265		9,102		1,878		28,248			5,969			34,217
Past due 90 days or more delinquent	24,992		4,012		14,965		22,618		49,602		4,488		120,677			22,928			143,605
Total past due	50,399		8,573		26,021		33,832		77,815		9,836		206,476			40,554			247,030
Total current loans	2,179,738		713,694		795,307		815,417		2,754,390		2,070,784		9,329,330			525,032			9,854,362
Total mortgage loans	$	2,230,137	$	722,267	$	821,328	$	849,249	$	2,832,205	$	2,080,620	$	9,535,806		$	565,586		$	10,101,392
Other delinquency statistics:
In process of foreclosure2													$	162,584		$	9,341		$	171,925
Serious delinquency rate3													2.1		%	4.7		%	2.3		%
Past due 90 days or more and still accruing interest													$	—		$	22,928		$	22,928
Loans on non-accrual status4													$	129,118		$	—		$	129,118

1    Excludes accrued interest receivable.

2    Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.

3    Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total amortized cost for the portfolio class.

4    Loans on non-accrual status include $1,251,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

Table 5.4 presents the payment status based on recorded investment as well as other delinquency statistics for FHLBank’s mortgage loans as of December 31, 2019 (dollar amounts in thousands):

Table 5.4

	12/31/2019
	Conventional Loans			Government Loans			Total
Recorded investment:1
Past due 30-59 days delinquent	$	59,226		$	15,515		$	74,741
Past due 60-89 days delinquent	7,561			6,128			13,689
Past due 90 days or more delinquent	11,813			8,778			20,591
Total past due	78,600			30,421			109,021
Total current loans	9,969,930			607,400			10,577,330
Total recorded investment	$	10,048,530		$	637,821		$	10,686,351
Other delinquency statistics:
In process of foreclosure2	$	3,352		$	2,730		$	6,082
Serious delinquency rate3	0.1		%	1.4		%	0.1		%
Past due 90 days or more and still accruing interest	$	—		$	8,778		$	8,778
Loans on non-accrual status4	$	14,923		$	—		$	14,923

1    Includes accrued interest receivable.

2    Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.

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

4    Loans on non-accrual status include $1,219,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

Financing Receivable, Past Due

Table 5.3 presents the payment status based on amortized cost as well as other delinquency statistics for FHLBank’s mortgage loans as of September 30, 2020 (dollar amounts in thousands):

Table 5.3

	09/30/2020
	Conventional Loans															Government Loans			Total
	Origination Year												Subtotal
	Prior to 2016		2016		2017		2018		2019		2020
Amortized Cost:1
Past due 30-59 days delinquent	$	16,140	$	2,749	$	8,132	$	7,949	$	19,111	$	3,470	$	57,551		$	11,657		$	69,208
Past due 60-89 days delinquent	9,267		1,812		2,924		3,265		9,102		1,878		28,248			5,969			34,217
Past due 90 days or more delinquent	24,992		4,012		14,965		22,618		49,602		4,488		120,677			22,928			143,605
Total past due	50,399		8,573		26,021		33,832		77,815		9,836		206,476			40,554			247,030
Total current loans	2,179,738		713,694		795,307		815,417		2,754,390		2,070,784		9,329,330			525,032			9,854,362
Total mortgage loans	$	2,230,137	$	722,267	$	821,328	$	849,249	$	2,832,205	$	2,080,620	$	9,535,806		$	565,586		$	10,101,392
Other delinquency statistics:
In process of foreclosure2													$	162,584		$	9,341		$	171,925
Serious delinquency rate3													2.1		%	4.7		%	2.3		%
Past due 90 days or more and still accruing interest													$	—		$	22,928		$	22,928
Loans on non-accrual status4													$	129,118		$	—		$	129,118

1    Excludes accrued interest receivable.

2    Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.

3    Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total amortized cost for the portfolio class.

4    Loans on non-accrual status include $1,251,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

Table 5.4 presents the payment status based on recorded investment as well as other delinquency statistics for FHLBank’s mortgage loans as of December 31, 2019 (dollar amounts in thousands):

Table 5.4

	12/31/2019
	Conventional Loans			Government Loans			Total
Recorded investment:1
Past due 30-59 days delinquent	$	59,226		$	15,515		$	74,741
Past due 60-89 days delinquent	7,561			6,128			13,689
Past due 90 days or more delinquent	11,813			8,778			20,591
Total past due	78,600			30,421			109,021
Total current loans	9,969,930			607,400			10,577,330
Total recorded investment	$	10,048,530		$	637,821		$	10,686,351
Other delinquency statistics:
In process of foreclosure2	$	3,352		$	2,730		$	6,082
Serious delinquency rate3	0.1		%	1.4		%	0.1		%
Past due 90 days or more and still accruing interest	$	—		$	8,778		$	8,778
Loans on non-accrual status4	$	14,923		$	—		$	14,923

1    Includes accrued interest receivable.

2    Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.

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

4    Loans on non-accrual status include $1,219,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

Financing Receivable, Allowance for Credit Loss

Table 5.5 presents a roll-forward of the allowance for credit losses on mortgage loans for the three and nine months ended September 30, 2020 and 2019.

Table 5.5

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Balance, beginning of the period	$	7,790	$	858	$	985	$	812
Adjustment for cumulative effect of accounting change	—		—		6,123		—
Net (charge-offs) recoveries	20		(346)		101		(416)
Provision (reversal) for credit losses	116		393		717		509
Balance, end of the period	$	7,926	$	905	$	7,926	$	905

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Derivatives And Hedging Activities (Tables)

9 Months Ended

Sep. 30, 2020

Derivative Instruments, Gain (Loss) [Line Items]

Fair Value of Derivative Instruments

Table 6.1 presents outstanding notional amounts and fair values of the derivatives outstanding by type of derivative and by hedge designation as of September 30, 2020 and December 31, 2019 (in thousands). Total derivative assets and liabilities include the effect of netting adjustments and cash collateral.

Table 6.1

	09/30/2020						12/31/2019
	Notional Amount		Derivative Assets		Derivative Liabilities		Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	15,913,289	$	20,791	$	295,563	$	16,448,512	$	23,462	$	80,398
Total derivatives designated as hedging relationships	15,913,289		20,791		295,563		16,448,512		23,462		80,398
Derivatives not designated as hedging instruments:
Interest rate swaps	2,929,164		191		75,020		3,099,622		736		26,285
Interest rate caps/floors	602,500		87		—		1,130,000		117		—
Mortgage delivery commitments	105,003		84		80		221,800		495		25
Total derivatives not designated as hedging instruments	3,636,667		362		75,100		4,451,422		1,348		26,310
TOTAL	$	19,549,956	21,153		370,663		$	20,899,934	24,810		106,708
Netting adjustments and cash collateral1			141,348		(370,490)				129,994		(106,506)
DERIVATIVE ASSETS AND LIABILITIES			$	162,501	$	173			$	154,804	$	202

1    Amounts represent the application of the netting requirements that allow FHLBank to settle positive and negative positions and cash collateral, including accrued interest, held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was $512,338,000 and $236,700,000 as of September 30, 2020 and December 31, 2019, respectively. Cash collateral received was $500,000 and $200,000 as of September 30, 2020 and December 31, 2019, respectively.

Net Gains or Losses on Derivatives and Hedging Activities

For the three months ended September 30, 2020 and 2019, FHLBank recorded net gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on FHLBank’s net interest income as presented in Table 6.2 (in thousands):

Table 6.2

	Three Months Ended
	09/30/2020
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	38,848	$	9,588	$	5,674	$	67,142
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	10,848	$	9,424	$	(197)	$	(1,509)
Hedged items2	(28,115)		(40,444)		1,321		12,203
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(17,267)	$	(31,020)	$	1,124	$	10,694

	09/30/2019
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	186,431	$	47,811	$	133,680	$	185,096
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	(39,873)	$	(61,468)	$	(4)	$	3,915
Hedged items2	43,355		75,743		3		(5,061)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	3,482	$	14,275	$	(1)	$	(1,146)

1    Includes net interest settlements in interest income/expense.

2    Includes amortization/accretion on closed fair value relationships in interest income.

For the nine months ended September 30, 2020 and 2019, FHLBank recorded net gains (losses) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on FHLBank’s net interest income as presented in Table 6.3 (in thousands):

Table 6.3

	Nine Months Ended
	09/30/2020
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	230,000	$	43,753	$	120,385	$	310,628
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	(280,875)	$	(386,669)	$	18,350	$	45,856
Hedged items2	248,445		308,189		(112)		(16,663)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	(32,430)	$	(78,480)	$	18,238	$	29,193

	9/30/2019
	Interest Income/Expense
	Advances		Available-for-sale Securities		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds
Total amounts presented in the Statements of Income	$	563,602	$	78,694	$	433,473	$	519,967
Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Derivatives1	$	(144,016)	$	(205,705)	$	21	$	30,968
Hedged items2	159,254		206,340		(12)		(39,427)
NET GAINS (LOSSES) ON FAIR VALUE HEDGING RELATIONSHIPS	$	15,238	$	635	$	9	$	(8,459)

1    Includes net interest settlements in interest income/expense.

2    Includes amortization/accretion on closed fair value relationships in interest income.

Cumulative Basis Adjustments for Fair Value Hedges

Table 6.4 presents the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items as of September 30, 2020 and December 31, 2019 (in thousands):

Table 6.4

09/30/2020
Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances	$	6,021,287	$	315,792	$	3,446	$	319,238
Available-for-sale securities	7,292,062		385,013		—		385,013
Consolidated obligation discount notes	(174,748)		39		—		39
Consolidated obligation bonds	(3,310,191)		(43,053)		—		(43,053)
12/31/2019
Line Item in Statements of Condition of Hedged Item	Carrying Value of Hedged Asset/(Liability)1		Basis Adjustments for Active Hedging Relationships2		Basis Adjustments for Discontinued Hedging Relationships2		Cumulative Amount of Fair Value Hedging Basis Adjustments2
Advances	$	4,951,445	$	69,643	$	1,424	$	71,067
Available-for-sale securities	7,155,712		79,141		—		79,141
Consolidated obligation bonds	(3,270,635)		(26,389)		—		(26,389)

1    Includes only the portion of carrying value representing the hedged items in fair value hedging relationships. For available-for-sale securities, amortized cost is considered to be carrying value (i.e., the fair value adjustment recorded in accumulated OCI (AOCI) is excluded).

2    Included in amortized cost of the hedged asset/liability.

Net Gains or Losses on Derivatives Not Designated as Hedging Instruments

Table 6.5 provides information regarding net gains (losses) on derivatives and hedging activities recorded in non-interest income (in thousands).

Table 6.5

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps	$	15,842	$	(19,566)	$	(97,218)	$	(80,593)
Interest rate caps/floors	(17)		(494)		(30)		(874)
Net interest settlements	(14,222)		(691)		(32,338)		(1,238)
Mortgage delivery commitments	423		365		(5,995)		3,836
Consolidated obligation discount note commitments	—		—		—		(70)
NET GAINS (LOSSES) ON DERIVATIVES AND HEDGING ACTIVITIES	$	2,026	$	(20,386)	$	(135,581)	$	(78,939)

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Deposits (Tables)

9 Months Ended

Sep. 30, 2020

Deposits [Abstract]

Deposits

Table 7.1 details the types of deposits held by FHLBank as of September 30, 2020 and December 31, 2019 (in thousands):

Table 7.1

	09/30/2020		12/31/2019
Interest-bearing:
Demand	$	294,447	$	383,197
Overnight	463,200		280,300
Total interest-bearing	757,647		663,497
Non-interest-bearing:
Other	258,669		127,143
Total non-interest-bearing	258,669		127,143
TOTAL DEPOSITS	$	1,016,316	$	790,640

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Consolidated Obligations (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Consolidated Bonds Obligations Outstanding By Maturity

Table 8.1 presents FHLBank’s participation in consolidated obligation bonds outstanding as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

Table 8.1

	09/30/2020				12/31/2019
Year of Contractual Maturity	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in one year or less	$	27,056,200	0.32	%	$	15,991,800	1.79	%
Due after one year through two years	1,482,650		1.70		6,318,350		1.90
Due after two years through three years	1,306,650		1.98		1,375,000		2.11
Due after three years through four years	822,650		1.95		1,285,900		2.39
Due after four years through five years	971,200		1.28		1,223,350		2.40
Thereafter	5,587,800		1.66		5,776,300		2.78
Total par value	37,227,150		0.70	%	31,970,700		2.05	%
Premiums	41,974				34,789
Discounts	(3,572)				(3,357)
Concession fees	(14,436)				(15,207)
Hedging adjustments	43,053				26,389
TOTAL	$	37,294,169			$	32,013,314

Table 8.2 summarizes FHLBank’s participation in consolidated obligation bonds outstanding by year of maturity, or by the next call date for callable bonds as of September 30, 2020 and December 31, 2019 (in thousands):

Table 8.2

Year of Maturity or Next Call Date	09/30/2020		12/31/2019
Due in one year or less	$	33,521,200	$	24,583,300
Due after one year through two years	1,357,650		5,148,350
Due after two years through three years	878,150		615,000
Due after three years through four years	502,650		682,400
Due after four years through five years	414,200		356,850
Thereafter	553,300		584,800
TOTAL PAR VALUE	$	37,227,150	$	31,970,700

Consolidated Bonds by Interest-Rate Payment Type

Table 8.3 summarizes interest rate payment terms for consolidated obligation bonds as of September 30, 2020 and December 31, 2019 (in thousands):

Table 8.3

	09/30/2020		12/31/2019
Simple variable rate	$	23,504,000	$	16,017,000
Fixed rate	13,723,150		15,573,700
Variable rate with cap	—		220,000
Step	—		110,000
Fixed to variable rate	—		50,000
TOTAL PAR VALUE	$	37,227,150	$	31,970,700

Consolidated Discount Notes Outstanding

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

Table 8.4

	Book Value		Par Value		Weighted Average Interest Rate1
September 30, 2020	$	11,936,214	$	11,937,211	0.08	%
December 31, 2019	$	27,447,911	$	27,510,042	1.54	%

1    Represents yield to maturity excluding concession fees.

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Assets and Liabilities Subject to Offsetting (Tables)

9 Months Ended

Sep. 30, 2020

Offsetting [Abstract]

Schedule of Offsetting Assets

Tables 9.1 and 9.2 present the fair value of financial assets, including the related collateral received from or pledged to clearing agents or counterparties, based on the terms of FHLBank’s master netting arrangements or similar agreements as of September 30, 2020 and December 31, 2019 (in thousands):

Table 9.1

09/30/2020
Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative assets:
Uncleared derivatives	$	19,682	$	(15,472)	$	4,210	$	(84)	$	4,126
Cleared derivatives	1,471		156,820		158,291		—		158,291
Total derivative assets	21,153		141,348		162,501		(84)		162,417
Securities purchased under agreements to resell	4,600,000		—		4,600,000		(4,600,000)		—
TOTAL	$	4,621,153	$	141,348	$	4,762,501	$	(4,600,084)	$	162,417

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Table 9.2

12/31/2019
Description	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statements of Condition		Net Amounts of Assets Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative assets:
Uncleared derivatives	$	21,749	$	(14,424)	$	7,325	$	(495)	$	6,830
Cleared derivatives	3,061		144,418		147,479		—		147,479
Total derivative assets	24,810		129,994		154,804		(495)		154,309
Securities purchased under agreements to resell	4,750,000		—		4,750,000		(4,750,000)		—
TOTAL	$	4,774,810	$	129,994	$	4,904,804	$	(4,750,495)	$	154,309

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Schedule of Offsetting Liabilities

Tables 9.3 and 9.4 present the fair value of financial liabilities, including the related collateral received from or pledged to counterparties, based on the terms of FHLBank’s master netting arrangements or similar agreements as of September 30, 2020 and December 31, 2019 (in thousands):

Table 9.3

09/30/2020
Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative liabilities:
Uncleared derivatives	$	367,678	$	(367,505)	$	173	$	(80)	$	93
Cleared derivatives	2,985		(2,985)		—		—		—
Total derivative liabilities	370,663		(370,490)		173		(80)		93
TOTAL	$	370,663	$	(370,490)	$	173	$	(80)	$	93

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

Table 9.4

12/31/2019
Description	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statements of Condition		Net Amounts of Liabilities Presented in the Statements of Condition		Gross Amounts Not Offset in the Statement of Condition1		Net Amount
Derivative liabilities:
Uncleared derivatives	$	105,468	$	(105,266)	$	202	$	(25)	$	177
Cleared derivatives	1,240		(1,240)		—		—		—
Total derivative liabilities	106,708		(106,506)		202		(25)		177
TOTAL	$	106,708	$	(106,506)	$	202	$	(25)	$	177

1    Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

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Capital (Tables)

9 Months Ended

Sep. 30, 2020

Stockholders' Equity Note [Abstract]

Regulatory Capital Requirements

Table 10.1 illustrates that FHLBank was in compliance with its regulatory capital requirements as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands):

Table 10.1

	09/30/2020						12/31/2019
	Required			Actual			Required			Actual
Regulatory capital requirements:
Risk-based capital	$	206,942		$	2,216,737		$	486,650		$	2,319,531
Total regulatory capital-to-asset ratio	4.0		%	4.9		%	4.0		%	4.4		%
Total regulatory capital	$	2,120,455		$	2,605,221		$	2,531,066		$	2,768,680
Leverage capital ratio	5.0		%	7.0		%	5.0		%	6.2		%
Leverage capital	$	2,650,569		$	3,713,590		$	3,163,833		$	3,928,446

Mandatorily Redeemable Capital Stock By Contractual Year Of Repurchase

Table 10.2 presents a roll-forward of mandatorily redeemable capital stock for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Table 10.2

	Three Months Ended				Nine Months Ended
	09/30/2020		09/30/2019		09/30/2020		09/30/2019
Balance, beginning of period	$	2,308	$	2,750	$	2,415	$	3,597
Capital stock subject to mandatory redemption reclassified from equity during the period	620,561		159,775		1,627,899		218,411
Capital stock redemption cancellations reclassified to equity during the period	—		—		(100,647)		—
Redemption or repurchase of mandatorily redeemable capital stock during the period	(620,967)		(160,078)		(1,527,802)		(219,642)
Stock dividend classified as mandatorily redeemable capital stock during the period	12		30		49		111
Balance, end of period	$	1,914	$	2,477	$	1,914	$	2,477

Table 10.3 shows the amount of mandatorily redeemable capital stock by contractual year of redemption as of September 30, 2020 and December 31, 2019 (in thousands). The year of redemption in Table 10.3 is the end of the redemption period in accordance with FHLBank’s capital plan. FHLBank is not required to redeem or repurchase membership stock until six months (for Class A Common Stock) or five years (for Class B Common Stock) after FHLBank receives notice for withdrawal from the member. Additionally, FHLBank is not required to redeem or repurchase activity-based stock until any activity-based stock becomes excess stock as a result of an activity no longer remaining outstanding. However, FHLBank intends to repurchase the excess activity-based stock of non-members to the extent that it can do so and still meet its regulatory capital requirements.

Table 10.3

Contractual Year of Repurchase	09/30/2020		12/31/2019
Year 1	$	—	$	—
Year 2	636		1
Year 3	—		869
Year 4	—		—
Year 5	—		—
Past contractual redemption date due to remaining activity1	1,278		1,545
TOTAL	$	1,914	$	2,415

1    Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because there is activity outstanding to which the mandatorily redeemable capital stock relates.

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Accumulated Other Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2020

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Income Or Loss

Table 11.1 summarizes the changes in AOCI for the three months ended September 30, 2020 and 2019 (in thousands):

Table 11.1

	Three Months Ended
	Net Unrealized Gains (Losses) on Available-for-sale Securities		Defined Benefit Pension Plan		Total AOCI
Balance at June 30, 2019	$	35,143	$	(3,230)	$	31,913
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	(17,324)				(17,324)
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan1			95		95
Net current period other comprehensive income (loss)	(17,324)		95		(17,229)
Balance at September 30, 2019	$	17,819	$	(3,135)	$	14,684
Balance at June 30, 2020	$	(31,746)	$	(1,948)	$	(33,694)
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	30,295				30,295
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan1			28		28
Net current period other comprehensive income (loss)	30,295		28		30,323
Balance at September 30, 2020	$	(1,451)	$	(1,920)	$	(3,371)

1    Recorded in “Other” non-interest expense on the Statements of Income. Amount represents a debit (increase to other expenses).

Table 11.2 summarizes the changes in AOCI for the nine months ended September 30, 2020 and 2019 (in thousands):

Table 11.2

	Nine Months Ended
	Net Unrealized Gains (Losses) on Available-for-sale Securities		Defined Benefit Pension Plan		Total AOCI
Balance at December 31, 2018	$	19,068	$	(3,375)	$	15,693
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	(1,249)				(1,249)
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan1			240		240
Net current period other comprehensive income (loss)	(1,249)		240		(1,009)
Balance at September 30, 2019	$	17,819	$	(3,135)	$	14,684
Balance at December 31, 2019	$	26,788	$	(2,002)	$	24,786
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)	(26,716)				(26,716)
Reclassifications from other comprehensive income (loss) to net income:
Realized net (gains) losses included in net income2	(1,523)				(1,523)
Amortization of net losses - defined benefit pension plan1			82		82
Net current period other comprehensive income (loss)	(28,239)		82		(28,157)
Balance at September 30, 2020	$	(1,451)	$	(1,920)	$	(3,371)

1    Recorded in “Other” non-interest expense on the Statements of Income. Amount represents a debit (increase to other expenses).

2    Recorded in “Net gains (losses) on sale of available-for-sale securities” non-interest income on the Statements of Income. Amount represents a credit (increase to other income (loss)).

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Fair Values (Tables)

9 Months Ended

Sep. 30, 2020

Fair Value Disclosures [Abstract]

Fair Value Summary

The carrying value, fair value and fair value hierarchy of FHLBank’s financial assets and liabilities as of September 30, 2020 and December 31, 2019 are summarized in Tables 12.1 and 12.2 (in thousands):

Table 12.1

	09/30/2020
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Assets:
Cash and due from banks	$	22,704	$	22,704	$	22,704	$	—	$	—	$	—
Interest-bearing deposits	499,662		499,662		—		499,662		—		—
Securities purchased under agreements to resell	4,600,000		4,600,000		—		4,600,000		—		—
Federal funds sold	1,435,000		1,435,000		—		1,435,000		—		—
Trading securities	3,117,935		3,117,935		—		3,117,935		—		—
Available-for-sale securities	7,290,611		7,290,611		—		7,290,611		—		—
Held-to-maturity securities	2,973,976		2,975,782		—		2,897,278		78,504		—
Advances	22,616,252		22,733,051		—		22,733,051		—		—
Mortgage loans held for portfolio, net of allowance	10,093,466		10,351,013		—		10,348,886		2,127		—
Accrued interest receivable	108,532		108,532		—		108,532		—		—
Derivative assets	162,501		162,501		—		21,153		—		141,348
Liabilities:
Deposits	1,016,316		1,016,316		—		1,016,316		—		—
Consolidated obligation discount notes	11,936,214		11,936,578		—		11,936,578		—		—
Consolidated obligation bonds	37,294,169		37,517,293		—		37,517,293		—		—
Mandatorily redeemable capital stock	1,914		1,914		1,914		—		—		—
Accrued interest payable	54,913		54,913		—		54,913		—		—
Derivative liabilities	173		173		—		370,663		—		(370,490)
Other Asset (Liability):
Industrial revenue bonds	35,000		38,224		—		38,224		—		—
Financing obligation payable	(35,000)		(38,224)		—		(38,224)		—		—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral and related accrued interest held or placed with the same clearing agent or derivative counterparty.

Table 12.2

	12/31/2019
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Assets:
Cash and due from banks	$	1,917,166	$	1,917,166	$	1,917,166	$	—	$	—	$	—
Interest-bearing deposits	921,453		921,453		—		921,453		—		—
Securities purchased under agreements to resell	4,750,000		4,750,000		—		4,750,000		—		—
Federal funds sold	850,000		850,000		—		850,000		—		—
Trading securities	2,812,562		2,812,562		—		2,812,562		—		—
Available-for-sale securities	7,182,500		7,182,500		—		7,182,500		—		—
Held-to-maturity securities	3,569,958		3,556,938		—		3,476,084		80,854		—
Advances	30,241,315		30,295,813		—		30,295,813		—		—
Mortgage loans held for portfolio, net of allowance	10,633,009		10,983,356		—		10,981,458		1,898		—
Accrued interest receivable	143,765		143,765		—		143,765		—		—
Derivative assets	154,804		154,804		—		24,810		—		129,994
Liabilities:
Deposits	790,640		790,640		—		790,640		—		—
Consolidated obligation discount notes	27,447,911		27,448,021		—		27,448,021		—		—
Consolidated obligation bonds	32,013,314		32,103,154		—		32,103,154		—		—
Mandatorily redeemable capital stock	2,415		2,415		2,415		—		—		—
Accrued interest payable	117,580		117,580		—		117,580		—		—
Derivative liabilities	202		202		—		106,708		—		(106,506)
Other Asset (Liability):
Industrial revenue bonds	35,000		34,850		—		34,850		—		—
Financing obligation payable	(35,000)		(34,850)		—		(34,850)		—		—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral and related accrued interest held or placed with the same clearing agent or derivative counterparty.

Hierarchy Level for Financial Assets and Liabilities - Recurring and Nonrecurring

Tables 12.3 and 12.4 present, for each hierarchy level, FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of or for the periods ended September 30, 2020 and December 31, 2019 (in thousands).

Table 12.3

	09/30/2020
	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
Certificates of deposit	$	225,053	$	—	$	225,053	$	—	$	—
U.S. Treasury obligations	1,557,412		—		1,557,412		—		—
GSE obligations	433,864		—		433,864		—		—
GSE MBS	901,606		—		901,606		—		—
Total trading securities	3,117,935		—		3,117,935		—		—
Available-for-sale securities:
U.S. Treasury obligations	4,067,370		—		4,067,370		—		—
GSE MBS	3,223,241		—		3,223,241		—		—
Total available-for-sale securities	7,290,611		—		7,290,611		—		—
Derivative assets:
Interest-rate related	162,417		—		21,069		—		141,348
Mortgage delivery commitments	84		—		84		—		—
Total derivative assets	162,501		—		21,153		—		141,348
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	10,571,047	$	—	$	10,429,699	$	—	$	141,348
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	93	$	—	$	370,583	$	—	$	(370,490)
Mortgage delivery commitments	80		—		80		—		—
Total derivative liabilities	173		—		370,663		—		(370,490)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	173	$	—	$	370,663	$	—	$	(370,490)
Nonrecurring fair value measurements - Assets2:
Impaired mortgage loans	$	2,132	$	—	$	—	$	2,132	$	—
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	2,132	$	—	$	—	$	2,132	$	—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

2    Includes assets adjusted to fair value during the nine months ended September 30, 2020 and still outstanding as of September 30, 2020.

Table 12.4

	12/31/2019
	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
U.S. Treasury obligations	$	1,530,518	$	—	$	1,530,518	$	—	$	—
GSE obligations	416,025		—		416,025		—		—
GSE MBS	866,019		—		866,019		—		—
Total trading securities	2,812,562		—		2,812,562		—		—
Available-for-sale securities:
U.S. Treasury obligations	4,261,791		—		4,261,791		—		—
GSE MBS	2,920,709		—		2,920,709		—		—
Total available-for-sale securities	7,182,500		—		7,182,500		—		—
Derivative assets:
Interest-rate related	154,309		—		24,315		—		129,994
Mortgage delivery commitments	495		—		495		—		—
Total derivative assets	154,804		—		24,810		—		129,994
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	10,149,866	$	—	$	10,019,872	$	—	$	129,994
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	177	$	—	$	106,683	$	—	$	(106,506)
Mortgage delivery commitments	25		—		25		—		—
Total derivative liabilities	202		—		106,708		—		(106,506)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	202	$	—	$	106,708	$	—	$	(106,506)
Nonrecurring fair value measurements - Assets2:
Impaired mortgage loans	$	1,909	$	—	$	—	$	1,909	$	—
Real estate owned	144		—		—		144		—
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	2,053	$	—	$	—	$	2,053	$	—

1    Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

2    Includes assets adjusted to fair value during the year ended December 31, 2019 and still outstanding as of December 31, 2019.

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Commitments And Contingencies (Tables)

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Off Balance Sheet Commitments

As of September 30, 2020 and December 31, 2019, off-balance sheet commitments are presented in Table 13.1 (in thousands):

Table 13.1

	09/30/2020						12/31/2019
Notional Amount	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	$	5,044,507	$	4,635	$	5,049,142	$	4,764,724	$	4,335	$	4,769,059
Advance commitments outstanding	38,420		12,090		50,510		64,282		15,693		79,975
Commitments for standby bond purchases	423,030		280,733		703,763		—		701,392		701,392
Commitments to fund or purchase mortgage loans	105,003		—		105,003		221,800		—		221,800
Commitments to issue consolidated bonds, at par	264,000		—		264,000		—		—		—
Commitments to issue consolidated discount notes, at par	—		—		—		411,161		—		411,161

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Transactions With Stockholders (Tables)

9 Months Ended

Sep. 30, 2020

Related Party Transactions, by Balance Sheet Grouping

Tables 14.1 and 14.2 present information on members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of September 30, 2020 and December 31, 2019 (dollar amounts in thousands). None of the officers or directors of these members currently serve on FHLBank’s board of directors.

Table 14.1

09/30/2020
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A		Total Class B Stock Par Value		Percent of Total Class B		Total Capital Stock Par Value		Percent of Total Capital Stock
MidFirst Bank	OK	$	6,800	1.8	%	$	323,972	27.1	%	$	330,772	20.9	%
TOTAL		$	6,800	1.8	%	$	323,972	27.1	%	$	330,772	20.9	%

Table 14.2

12/31/2019
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A		Total Class B Stock Par Value		Percent of Total Class B		Total Capital Stock Par Value		Percent of Total Capital Stock
MidFirst Bank	OK	$	500	0.1	%	$	385,825	29.2	%	$	386,325	21.8	%
BOKF, N.A.	OK	184,282		41.0		202,000		15.3		386,282		21.8
TOTAL		$	184,782	41.1	%	$	587,825	44.5	%	$	772,607	43.6	%

Advance and deposit balances with members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of September 30, 2020 and December 31, 2019 are summarized in Table 14.3 (dollar amounts in thousands). Information is only listed for the period in which the member owned more than 10 percent of outstanding FHLBank regulatory capital stock.

Table 14.3

	09/30/2020				12/31/2019				09/30/2020				12/31/2019
Member Name	Outstanding Advances		Percent of Total		Outstanding Advances		Percent of Total		Outstanding Deposits		Percent of Total		Outstanding Deposits		Percent of Total
MidFirst Bank	$	7,130,000	32.0	%	$	8,585,000	28.5	%	$	649	0.1	%	$	1,030	0.1	%
BOKF, N.A.					4,500,000		14.9						22,457		2.9
TOTAL	$	7,130,000	32.0	%	$	13,085,000	43.4	%	$	649	0.1	%	$	23,487	3.0	%

Related Party Transactions, by Balance Sheet Grouping - Directors'

Table 14.4 presents information as of September 30, 2020 and December 31, 2019 for members that had an officer or director serving on FHLBank’s board of directors (dollar amounts in thousands). Information is only included for the period in which the officer or director served on FHLBank’s board of directors. Capital stock listed is regulatory capital stock, which includes mandatorily redeemable capital stock.

Table 14.4

	09/30/2020				12/31/2019
	Outstanding Amount		Percent of Total		Outstanding Amount		Percent of Total
Advances	$	179,043	0.8	%	$	178,945	0.6	%
Deposits	$	23,892	2.4	%	$	15,748	2.0	%
Class A Common Stock	$	5,461	1.4	%	$	6,467	1.4	%
Class B Common Stock	23,431		2.0		5,571		0.4
TOTAL CAPITAL STOCK	$	28,892	1.8	%	$	12,038	0.7	%

Schedule Of Related Party Transactions, Mortgage Loans Disclosure

Table 14.5 presents mortgage loans acquired during the three and nine months ended September 30, 2020 and 2019 for members that had an officer or director serving on FHLBank’s board of directors in 2020 or 2019 (dollar amounts in thousands). Information is only included for the period in which the officer or director served on FHLBank’s board of directors.

Table 14.5

	Three Months Ended								Nine Months Ended
	09/30/2020				09/30/2019				09/30/2020				09/30/2019
	Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total		Amount		Percent of Total
Mortgage loans acquired	$	9,091	2.5	%	$	61,362	5.4	%	$	95,901	4.0	%	$	128,251	5.3	%

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BASIS OF PRESENTATION BASIS OF PRESENTATION (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Available-for-sale securities	$ 9,588	$ 47,811	$ 43,753	$ 78,694
Other Comprehensive Income (Loss), before Tax, Portion Attributable to Parent	$ (30,323)	$ 17,229	28,157	$ 1,009
Out-of-period Adjustment [Member] | QTD March 31, 2019 [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Available-for-sale securities			2,545
Other Comprehensive Income (Loss), before Tax, Portion Attributable to Parent			2,545
Out-of-period Adjustment [Member] | QTD June 30, 2019 [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Available-for-sale securities			11,791
Other Comprehensive Income (Loss), before Tax, Portion Attributable to Parent			11,791
Out-of-period Adjustment [Member] | YTD September 30, 2019 [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Available-for-sale securities			14,336
Other Comprehensive Income (Loss), before Tax, Portion Attributable to Parent			$ 14,336

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Investment Securities (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Dec. 31, 2019
Marketable Securities [Line Items]
Interest-Bearing Deposits, Securities Purchased Under Agreements to Resell, and Federal Funds Sold, Percentage Unrated	70.00%	70.00%
Securities Purchased under Agreements to Resell, Allowance for Credit Loss	$ 0	$ 0	$ 0
Debt Securities, Held-to-maturity, Credit Loss Expense (Reversal)	0	0
Debt Securities, Available-for-sale, Allowance for Credit Loss	0	0
Debt Securities, Held-to-maturity, Allowance for Credit Loss	0	0
Available-for-sale Securities [Member]
Marketable Securities [Line Items]
Provision for Other Credit Losses	0	0
Interest-bearing Deposits and Federal Funds Sold [Member]
Marketable Securities [Line Items]
Financing Receivable, Allowance for Credit Loss	0	0	0
Interest-bearing Deposits [Member]
Marketable Securities [Line Items]
Financial Asset, Amortized Cost, Accrued Interest, after Allowance for Credit Loss	83	83	589
Federal Funds Sold [Member]
Marketable Securities [Line Items]
Financial Asset, Amortized Cost, Accrued Interest, after Allowance for Credit Loss	3	3	30
Securities Borrowed or Purchased under Agreements to Resell [Member]
Marketable Securities [Line Items]
Financial Asset, Amortized Cost, Accrued Interest, after Allowance for Credit Loss	$ 15	$ 15	$ 424

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Investment Securities Investment Securities (Trading Securities by Major Security Type) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	$ 3,117,935	$ 2,812,562
Certificates of Deposit [Member]
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	225,053	0
U.S. Treasury obligations [Member]
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	1,557,412	1,530,518
GSE obligations [Member]
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	433,864	416,025
Non-mortgage-backed securities [Member]
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	2,216,329	1,946,543
GSE MBS [Member]
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	901,606	866,019
Mortgage-backed securities [Member]
Debt and Equity Securities, FV-NI [Line Items]
Trading securities	$ 901,606	$ 866,019

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Investment Securities (Net Gains (Losses) on Trading Securities) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Investments, Debt and Equity Securities [Abstract]
Net gains (losses) on trading securities held as of current period end	$ (6,995)	$ 16,237	$ 92,583	$ 86,429
Net gains (losses) on trading securities sold or matured prior to current period end	0	(51)	186	355
NET GAINS (LOSSES) ON TRADING SECURITIES	$ (6,995)	$ 16,186	$ 92,769	$ 86,784

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Investment Securities (Available-For-Sale Securities by Major Security Type) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Debt Securities, Available-for-Sale, Accrued Interest, after Allowance for Credit Loss	$ 27,450	$ 30,321
Debt Securities, Available-for-Sale, Excluded Accrued Interest from Amortized Cost [true false]	true
Amortized Cost	$ 7,292,062	7,155,712
Gross Unrecognized Gains	32,926	31,933
Gross Unrecognized Losses	(34,377)	(5,145)
Fair Value	7,290,611	7,182,500
U.S. Treasury obligations [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	4,062,655	4,258,608
Gross Unrecognized Gains	4,715	3,580
Gross Unrecognized Losses	0	(397)
Fair Value	4,067,370	4,261,791
Non-mortgage-backed securities [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	4,062,655	4,258,608
Gross Unrecognized Gains	4,715	3,580
Gross Unrecognized Losses	0	(397)
Fair Value	4,067,370	4,261,791
GSE MBS [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	3,229,407	2,897,104
Gross Unrecognized Gains	28,211	28,353
Gross Unrecognized Losses	(34,377)	(4,748)
Fair Value	3,223,241	2,920,709
Mortgage-backed securities [Member]
Debt Securities, Available-for-sale [Line Items]
Amortized Cost	3,229,407	2,897,104
Gross Unrecognized Gains	28,211	28,353
Gross Unrecognized Losses	(34,377)	(4,748)
Fair Value	$ 3,223,241	$ 2,920,709

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Investment Securities (Available-for-sale securities with unrealized losses, fair value) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale, Unrealized Loss Position [Line Items]
Less than 12 Months, Fair Value	$ 1,579,922	$ 2,366,813
Less than 12 Months, Unrealized Losses	(30,449)	(1,329)
12 Months or More, Fair Value	325,075	301,161
12 Months or More, Unrealized Losses	(3,928)	(3,816)
TOTAL TEMPORARILY IMPAIRED SECURITIES, Fair Value	1,904,997	2,667,974
TOTAL TEMPORARILY IMPAIRED SECURITIES, Unrealized Losses	(34,377)	(5,145)
U.S. Treasury obligations [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position [Line Items]
Less than 12 Months, Fair Value		1,579,004
Less than 12 Months, Unrealized Losses		(397)
12 Months or More, Fair Value		0
12 Months or More, Unrealized Losses		0
TOTAL TEMPORARILY IMPAIRED SECURITIES, Fair Value		1,579,004
TOTAL TEMPORARILY IMPAIRED SECURITIES, Unrealized Losses		(397)
Non-mortgage-backed securities [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position [Line Items]
Less than 12 Months, Fair Value		1,579,004
Less than 12 Months, Unrealized Losses		(397)
12 Months or More, Fair Value		0
12 Months or More, Unrealized Losses		0
TOTAL TEMPORARILY IMPAIRED SECURITIES, Fair Value		1,579,004
TOTAL TEMPORARILY IMPAIRED SECURITIES, Unrealized Losses		(397)
GSE MBS [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position [Line Items]
Less than 12 Months, Fair Value	1,579,922	787,809
Less than 12 Months, Unrealized Losses	(30,449)	(932)
12 Months or More, Fair Value	325,075	301,161
12 Months or More, Unrealized Losses	(3,928)	(3,816)
TOTAL TEMPORARILY IMPAIRED SECURITIES, Fair Value	1,904,997	1,088,970
TOTAL TEMPORARILY IMPAIRED SECURITIES, Unrealized Losses	(34,377)	(4,748)
Mortgage-backed securities [Member]
Debt Securities, Available-for-sale, Unrealized Loss Position [Line Items]
Less than 12 Months, Fair Value	1,579,922	787,809
Less than 12 Months, Unrealized Losses	(30,449)	(932)
12 Months or More, Fair Value	325,075	301,161
12 Months or More, Unrealized Losses	(3,928)	(3,816)
TOTAL TEMPORARILY IMPAIRED SECURITIES, Fair Value	1,904,997	1,088,970
TOTAL TEMPORARILY IMPAIRED SECURITIES, Unrealized Losses	$ (34,377)	$ (4,748)

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Investment Securities (Available-For-Sale Securities Classified By Contractual Maturities) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized Cost	$ 7,292,062	$ 7,155,712
Fair Value	7,290,611	7,182,500
Non-mortgage-backed securities [Member]
Available-for-sale Securities, Debt Maturities [Abstract]
Due in one year or less, Amortized Cost	2,021,424	754,003
Due after one year through five years, Amortized Cost	2,041,231	3,504,605
Due after five years through ten years, Amortized Cost	0	0
Due after ten years, Amortized Cost	0	0
Amortized Cost	4,062,655	4,258,608
Due in one year or less, Fair Value	2,022,929	753,891
Due after one year through five years, Fair Value	2,044,441	3,507,900
Due after five years though ten years, Fair Value	0	0
Due after ten years, Fair Value	0	0
Fair Value	4,067,370	4,261,791
Mortgage-backed securities [Member]
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized Cost	3,229,407	2,897,104
Mortgage-backed securities, Amortized Cost	3,229,407	2,897,104
Mortgage-backed securities, Fair Value	3,223,241	2,920,709
Fair Value	$ 3,223,241	$ 2,920,709

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Investment Securities Investment Securities (Net Gains (Losses) Realized AFS Securities) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Debt Securities, Available-for-sale, Sale [Abstract]
Proceeds from sale of available-for-sale securities	$ 0	$ 0	$ 289,045	$ 0
Gross gains on sale of available-for-sale securities	0		1,526
Gross losses on sale of available-for-sale securities	0		(3)
NET GAINS (LOSSES) ON SALE OF AVAILABLE-FOR-SALE SECURITIES	$ 0	$ 0	$ 1,523	$ 0

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Investment Securities (Held-To-Maturity Securities by Major Security Type) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Schedule of Held-to-maturity Securities [Line Items]
Debt Securities, Held-to-Maturity, Accrued Interest, after Allowance for Credit Loss	$ 1,147	$ 4,324
Debt Securities, Held-to-Maturity, Excluded Accrued Interest [true false]	true
Amortized Cost	$ 2,973,976	3,569,958
Carrying Value	2,973,976	3,569,958
Gross Unrecognized Gains	10,654	6,563
Gross Unrecognized Losses	(8,848)	(19,583)
Held-to-maturity, Fair Value	2,975,782	3,556,938
State or local housing agency obligations [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	81,995	82,805
Carrying Value	81,995	82,805
Gross Unrecognized Gains	0	5
Gross Unrecognized Losses	(3,491)	(1,956)
Held-to-maturity, Fair Value	78,504	80,854
Non-mortgage-backed securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	81,995	82,805
Carrying Value	81,995	82,805
Gross Unrecognized Gains	0	5
Gross Unrecognized Losses	(3,491)	(1,956)
Held-to-maturity, Fair Value	78,504	80,854
U.S. obligation MBS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	76,852	93,375
Carrying Value	76,852	93,375
Gross Unrecognized Gains	151	0
Gross Unrecognized Losses	(60)	(496)
Held-to-maturity, Fair Value	76,943	92,879
GSE MBS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	2,815,129	3,393,778
Carrying Value	2,815,129	3,393,778
Gross Unrecognized Gains	10,503	6,558
Gross Unrecognized Losses	(5,297)	(17,131)
Held-to-maturity, Fair Value	2,820,335	3,383,205
Mortgage-backed securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	2,891,981	3,487,153
Carrying Value	2,891,981	3,487,153
Gross Unrecognized Gains	10,654	6,558
Gross Unrecognized Losses	(5,357)	(17,627)
Held-to-maturity, Fair Value	$ 2,897,278	$ 3,476,084

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Investment Securities (Held-To-Maturity Securities Classified By Contractual Maturity) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Securities, Held-to-maturity, Maturity, Amortized Cost, Rolling Maturity [Abstract]
Amortized Cost	$ 2,973,976	$ 3,569,958
Carrying Value	2,973,976	3,569,958
Debt Securities, Held-to-maturity, Maturity, Fair Value, Rolling Maturity [Abstract]
Fair Value	2,975,782	3,556,938
Non-mortgage-backed securities [Member]
Debt Securities, Held-to-maturity, Maturity, Amortized Cost, Rolling Maturity [Abstract]
Due in one year or less, Carrying Value	0	0
Due after one year through five years, Carrying Value	0	0
Due after five years through ten years, Carrying Value	0	0
Due after ten years, Carrying Value	81,995	82,805
Amortized Cost	81,995	82,805
Carrying Value	81,995	82,805
Debt Securities, Held-to-maturity, Maturity, Fair Value, Rolling Maturity [Abstract]
Due in one year or less, Fair Value	0	0
Due after one year through five years, Fair Value	0	0
Due after five years through ten years, Fair Value	0	0
Due after ten years, Fair Value	78,504	80,854
Fair Value	78,504	80,854
Non-mortgage-backed securities [Member] | Amortized Cost Before Allowance For Credit Losses And Non-Credit Other-Than-Temporary Impairment [Member]
Debt Securities, Held-to-maturity, Maturity, Amortized Cost, Rolling Maturity [Abstract]
Due in one year or less, Carrying Value	0	0
Due after one year through five years, Carrying Value	0	0
Due after five years through ten years, Carrying Value	0	0
Due after ten years, Carrying Value	81,995	82,805
Mortgage-backed securities [Member]
Debt Securities, Held-to-maturity, Maturity, Amortized Cost, Rolling Maturity [Abstract]
Amortized Cost	2,891,981	3,487,153
Carrying Value	2,891,981	3,487,153
Debt Securities, Held-to-maturity, Maturity, Fair Value, Rolling Maturity [Abstract]
Fair Value	$ 2,897,278	$ 3,476,084

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Investment Securities Investment Securities (Proceeds from Sale and Gains and Losses on HTM Securities) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Investments, Debt and Equity Securities [Abstract]
Proceeds from sale of held-to-maturity securities	$ 0	$ 0	$ 0	$ 9,442
Carrying value of held-to-maturity securities sold		0		(9,488)
Net gains (losses) on sale of held-to-maturity securities (Note 3)	$ 0	$ 0	$ 0	$ (46)

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Advances (Narrative) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019
Federal Home Loan Bank, Advances [Line Items]
Federal Home Loan Bank, Advances, Par Value	$ 22,306,832	$ 30,172,055
Federal Home Loan Bank Advances Receivable [Member]
Federal Home Loan Bank, Advances [Line Items]
Advances, past due	0	0
Advances, Nonaccrual	0	0
Advances Impaired, Unpaid Principal Balance	0	0
Advances, Troubled Debt Restructuring	0		$ 0
Advances, Allowance for Credit Loss	$ 0	$ 0
Minimum [Member]
Federal Home Loan Bank, Advances [Line Items]
FHLB advances, outstanding interest rate	0.14%	0.96%
Maximum [Member]
Federal Home Loan Bank, Advances [Line Items]
FHLB advances, outstanding interest rate	7.20%	7.41%

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Advances Advances Narrative 2 (Details) $ in Thousands	Sep. 30, 2020 USD ($)
Receivables with Imputed Interest [Line Items]
COVID-19 Relief Advance, Discount	$ 2,455
COVID-19 Relief Advances Zero Cost 6 Month Term [Member]
Receivables with Imputed Interest [Line Items]
COVID-19 Relief Advance, Face Amount	517,351
COVID-19 Relief Advances Low Cost 6-24 Month Term [Member]
Receivables with Imputed Interest [Line Items]
COVID-19 Relief Advance, Face Amount	$ 501,890

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Advances (Advances Redemption Terms) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Amount
Due in one year or less	$ 13,588,982	$ 13,188,118
Due after one year through two years	1,994,896	10,448,433
Due after two years through three years	1,076,587	1,254,153
Due after three years through four years	1,256,388	1,067,662
Due after four years through five years	1,182,903	1,208,854
Thereafter	3,207,076	3,004,835
TOTAL PAR VALUE	22,306,832	30,172,055
Discounts	(9,818)	(1,807)
Hedging adjustments	319,238	71,067
TOTAL	$ 22,616,252	$ 30,241,315
Weighted Average Interest Rate
Due in one year or less	0.45%	1.88%
Due after one year through two years	1.23%	1.96%
Due after two years through three years	1.68%	2.27%
Due after three years through four years	1.77%	2.42%
Due after four years through five years	1.40%	2.22%
Thereafter	1.95%	2.25%
Total par value	0.92%	1.99%
Federal Home Loan Bank Advances Receivable [Member]
Federal Home Loan Bank, Advances [Line Items]
Advances, Accrued Interest, after Allowance for Credit Loss	$ 15,186	$ 45,637

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Advances (Advances by Year of Redemption Term, Next Call Date, or Next Convert Date) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Redemption Term, Year of Redemption Term or Next Call Date
Due in one year or less	$ 15,561,420	$ 24,271,238
Due after one year through two years	1,383,709	1,133,077
Due after two years through three years	822,894	728,429
Due after three years through four years	795,261	764,990
Due after four years through five years	779,961	686,594
Thereafter	2,963,587	2,587,727
TOTAL PAR VALUE	22,306,832	30,172,055
Redemption Term, Year of Redemption Term or Next Conversion Date
Due in one year or less	14,625,732	14,053,068
Due after one year through two years	2,263,896	10,637,833
Due after two years through three years	1,305,837	1,524,153
Due after three years through four years	1,338,888	1,215,412
Due after four years through five years	1,214,303	1,304,254
Thereafter	1,558,176	1,437,335
TOTAL PAR VALUE	$ 22,306,832	$ 30,172,055

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Advances (Advances by Interest Rate Payment Terms) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Fixed rate:
Due in one year or less	$ 9,999,404	$ 2,691,528
Due after one year	6,671,538	5,912,124
Total fixed rate	16,670,942	8,603,652
Variable rate:
Due in one year or less	3,589,578	10,496,590
Due after one year	2,046,312	11,071,813
Total variable rate	5,635,890	21,568,403
TOTAL PAR VALUE	$ 22,306,832	$ 30,172,055

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Mortgage Loans Mortgage Loans (Narrative) (Details) - USD ($)		Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance		$ 9,963,152,000		$ 10,475,653,000
Mortgage Loans [Member]
Loans and Leases Receivable Disclosure [Line Items]
Loans on non-accrual status	[1]	129,118,000
Conventional Mortgage Loan [Member]
Loans and Leases Receivable Disclosure [Line Items]
Loans on non-accrual status	[1]	129,118,000
Total unpaid principal balance		$ 9,405,054,000		9,849,542,000
Total unpaid principal balance, percent in a CARES Act forbearance plan		1.40%
Financing Receivable, Allowance for Credit Loss		$ 7,926,000	$ 7,790,000	985,000	$ 905,000	$ 858,000	$ 812,000
Conventional Mortgage Loan [Member] | Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Forbearance Plan [Member]
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance		132,932,000
US Government Agency Insured Loans [Member]
Loans and Leases Receivable Disclosure [Line Items]
Loans on non-accrual status		0
Financing Receivable, Allowance for Credit Loss		0		$ 0
Payments statuses of current [Member] | Conventional Mortgage Loan [Member] | Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Forbearance Plan [Member]
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance		5,118,000
30 to 59 Days Past Due [Member] | Conventional Mortgage Loan [Member] | Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Forbearance Plan [Member]
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance		13,665,000
60 to 89 Days Past Due [Member] | Conventional Mortgage Loan [Member] | Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Forbearance Plan [Member]
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance		17,744,000
Equal to or Greater than 90 Days Past Due [Member] | Conventional Mortgage Loan [Member] | Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Forbearance Plan [Member]
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance		$ 96,405,000

[1] Loans on non-accrual status include $1,251,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

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Mortgage Loans (Mortgage Loans Held For Portfolio) (Details) - USD ($) $ in Thousands		9 Months Ended
		Sep. 30, 2020		Dec. 31, 2019
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance		$ 9,963,152		$ 10,475,653
Premiums		143,477		155,793
Discounts		(2,126)		(2,503)
Deferred loan costs, net		146		184
Other deferred fees		(30)		(38)
Hedging adjustments		(3,227)		4,905
Total before Allowance for Credit Losses on Mortgage Loans		10,101,392	[1]	10,633,994
Allowance for Credit Losses on Mortgage Loans	[2]	(7,926)		(985)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET		10,093,466		10,633,009
Mortgage Loans [Member]
Loans and Leases Receivable Disclosure [Line Items]
Financing Receivable, Accrued Interest, after Allowance for Credit Loss		48,406		52,358
Adjustment for cumulative effect of accounting change		6,123
Fixed rates, medium-term [Member] | Single-family mortgage [Member]
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance	[3]	1,488,732		1,347,385
Fixed rates, long-term [Member] | Single-family mortgage [Member]
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance		$ 8,474,420		$ 9,128,268

[1] Excludes accrued interest receivable.

[2] Effective January 1, 2020, new accounting guidance was adopted relating to the measurement of credit losses on financial instruments and resulted in a cumulative effect adjustment of $6,123,000 (see Table 5.5).

[3] Medium-term defined as a term of 15 years or less at origination.

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Mortgage Loans (Mortgage Loans Held For Portfolio by Collateral or Guarantee Type) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance	$ 9,963,152	$ 10,475,653
Government Loans [Member]
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance	558,098	626,111
Conventional Loans [Member]
Loans and Leases Receivable Disclosure [Line Items]
Total unpaid principal balance	$ 9,405,054	$ 9,849,542

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Mortgage Loans Mortgage Loans (Credit Quality Indicator for Conventional Mortgage Loans) (Details) - USD ($) $ in Thousands		Sep. 30, 2020		Dec. 31, 2019
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans		$ 10,101,392	[1]	$ 10,633,994
Nonperforming Financial Instruments [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans	[1]	247,030
Performing Financial Instruments [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans	[1]	9,854,362
Mortgage Loans [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
In process of foreclosure, included above	[2]	171,925
Past due 90 days or more and still accruing interest		22,928
Loans on non-accrual status	[3]	129,118
Mortgage Loans, Troubled Debt Restructuring		1,251		1,219
Mortgage Loans [Member] | Recorded Investment [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
In process of foreclosure, included above	[2]			6,082
Past due 90 days or more and still accruing interest				8,778
Loans on non-accrual status	[4]			14,923
Recorded investment:
Total recorded investment	[5]			10,686,351
Mortgage Loans [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			109,021
Mortgage Loans [Member] | Performing Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total current loans	[5]			10,577,330
Conventional Mortgage Loan [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Prior to 2016	[1]	2,230,137
2016	[1]	722,267
2017	[1]	821,328
2018	[1]	849,249
2019	[1]	2,832,205
2020	[1]	2,080,620
Total before Allowance for Credit Losses on Mortgage Loans	[1]	9,535,806
In process of foreclosure, included above	[2]	162,584
Past due 90 days or more and still accruing interest		0
Loans on non-accrual status	[3]	129,118
Conventional Mortgage Loan [Member] | Recorded Investment [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
In process of foreclosure, included above	[2]			3,352
Past due 90 days or more and still accruing interest				0
Loans on non-accrual status	[4]			14,923
Recorded investment:
Total recorded investment	[5]			10,048,530
Conventional Mortgage Loan [Member] | Nonperforming Financial Instruments [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Prior to 2016	[1]	50,399
2016	[1]	8,573
2017	[1]	26,021
2018	[1]	33,832
2019	[1]	77,815
2020	[1]	9,836
Total before Allowance for Credit Losses on Mortgage Loans	[1]	206,476
Conventional Mortgage Loan [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			78,600
Conventional Mortgage Loan [Member] | Performing Financial Instruments [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Prior to 2016	[1]	2,179,738
2016	[1]	713,694
2017	[1]	795,307
2018	[1]	815,417
2019	[1]	2,754,390
2020	[1]	2,070,784
Total before Allowance for Credit Losses on Mortgage Loans	[1]	9,329,330
Conventional Mortgage Loan [Member] | Performing Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total current loans	[5]			9,969,930
Government Loans [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans	[1]	565,586
In process of foreclosure, included above	[2]	9,341
Past due 90 days or more and still accruing interest		22,928
Loans on non-accrual status	[3]	0
Government Loans [Member] | Recorded Investment [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
In process of foreclosure, included above	[2]			2,730
Past due 90 days or more and still accruing interest				8,778
Loans on non-accrual status	[4]			0
Recorded investment:
Total recorded investment	[5]			637,821
Government Loans [Member] | Nonperforming Financial Instruments [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans	[1]	40,554
Government Loans [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			30,421
Government Loans [Member] | Performing Financial Instruments [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans	[1]	525,032
Government Loans [Member] | Performing Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total current loans	[5]			607,400
Financial Asset, 30 to 59 Days Past Due [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans	[1]	69,208
Financial Asset, 30 to 59 Days Past Due [Member] | Mortgage Loans [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			74,741
Financial Asset, 30 to 59 Days Past Due [Member] | Conventional Mortgage Loan [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Prior to 2016	[1]	16,140
2016	[1]	2,749
2017	[1]	8,132
2018	[1]	7,949
2019	[1]	19,111
2020	[1]	3,470
Total before Allowance for Credit Losses on Mortgage Loans	[1]	57,551
Financial Asset, 30 to 59 Days Past Due [Member] | Conventional Mortgage Loan [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			59,226
Financial Asset, 30 to 59 Days Past Due [Member] | Government Loans [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans	[1]	11,657
Financial Asset, 30 to 59 Days Past Due [Member] | Government Loans [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			15,515
Financial Asset, 60 to 89 Days Past Due [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans	[1]	34,217
Financial Asset, 60 to 89 Days Past Due [Member] | Mortgage Loans [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			13,689
Financial Asset, 60 to 89 Days Past Due [Member] | Conventional Mortgage Loan [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Prior to 2016	[1]	9,267
2016	[1]	1,812
2017	[1]	2,924
2018	[1]	3,265
2019	[1]	9,102
2020	[1]	1,878
Total before Allowance for Credit Losses on Mortgage Loans	[1]	28,248
Financial Asset, 60 to 89 Days Past Due [Member] | Conventional Mortgage Loan [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			7,561
Financial Asset, 60 to 89 Days Past Due [Member] | Government Loans [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans	[1]	5,969
Financial Asset, 60 to 89 Days Past Due [Member] | Government Loans [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			$ 6,128
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans	[1]	$ 143,605
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Mortgage Loans [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Serious delinquency rate	[6]	2.30%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Mortgage Loans [Member] | Recorded Investment [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Serious delinquency rate	[7]			0.10%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Mortgage Loans [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			$ 20,591
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Conventional Mortgage Loan [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Prior to 2016	[1]	$ 24,992
2016	[1]	4,012
2017	[1]	14,965
2018	[1]	22,618
2019	[1]	49,602
2020	[1]	4,488
Total before Allowance for Credit Losses on Mortgage Loans	[1]	$ 120,677
Serious delinquency rate	[6]	2.10%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Conventional Mortgage Loan [Member] | Recorded Investment [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Serious delinquency rate	[7]			0.10%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Conventional Mortgage Loan [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			$ 11,813
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Government Loans [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Total before Allowance for Credit Losses on Mortgage Loans	[1]	$ 22,928
Serious delinquency rate	[6]	4.70%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Government Loans [Member] | Recorded Investment [Member]
Financing Receivable, Credit Quality Indicator [Line Items]
Serious delinquency rate	[7]			1.40%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Government Loans [Member] | Nonperforming Financial Instruments [Member] | Recorded Investment [Member]
Recorded investment:
Total past due	[5]			$ 8,778

[1] Excludes accrued interest receivable.

[2] Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.

[3] Loans on non-accrual status include $1,251,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

[4] Loans on non-accrual status include $1,219,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

[5] Includes accrued interest receivable.

[6] Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total amortized cost for the portfolio class.

[7] Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment for the portfolio class.

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Mortgage Loans (Rollforward of Allowance for Credit Losses on Conventional Mortgage Loans) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Allowance for credit losses:
Provision (reversal) for credit losses	$ 116	$ 393	$ 717	$ 509
Conventional Loans [Member]
Allowance for credit losses:
Balance, beginning of the period	7,790	858	985	812
Adjustment for cumulative effect of accounting change	0	0	6,123	0
Net (charge-offs) recoveries	20	(346)	101	(416)
Provision (reversal) for credit losses	116	393	717	509
Balance, end of the period	$ 7,926	$ 905	$ 7,926	$ 905

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Derivatives And Hedging Activities (Narrative) (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Uncleared derivatives [Member] | Counterparty One [Member]
Derivative [Line Items]
Maximum credit risk applicable to a single counterparty (at period end)	$ 500	$ 211

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Derivatives And Hedging Activities (Fair Values of Derivatives Instruments) (Details) - USD ($) $ in Thousands		Sep. 30, 2020	Dec. 31, 2019
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		$ 19,549,956	$ 20,899,934
TOTAL, Derivative Assets		21,153	24,810
TOTAL, Derivative Liabilities		370,663	106,708
Netting adjustments and cash collateral, Derivative Assets	[1],[2]	141,348	129,994
Netting adjustments and cash collateral, Derivative Liabilities	[1],[2]	(370,490)	(106,506)
DERIVATIVE ASSETS		162,501	154,804
DERIVATIVE LIABILITIES		173	202
Cash collateral posted		512,338	236,700
Cash collateral received		500	200
Derivatives designated as hedging instruments: [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		15,913,289	16,448,512
TOTAL, Derivative Assets		20,791	23,462
TOTAL, Derivative Liabilities		295,563	80,398
Not Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		3,636,667	4,451,422
TOTAL, Derivative Assets		362	1,348
TOTAL, Derivative Liabilities		75,100	26,310
Interest rate swaps [Member] | Derivatives designated as hedging instruments: [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		15,913,289	16,448,512
TOTAL, Derivative Assets		20,791	23,462
TOTAL, Derivative Liabilities		295,563	80,398
Interest rate swaps [Member] | Not Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		2,929,164	3,099,622
TOTAL, Derivative Assets		191	736
TOTAL, Derivative Liabilities		75,020	26,285
Interest rate caps/floors [Member] | Not Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		602,500	1,130,000
TOTAL, Derivative Assets		87	117
TOTAL, Derivative Liabilities		0	0
Mortgage delivery commitments [Member] | Not Designated as Hedging Instrument [Member] | Mortgage Receivable [Member]
Derivatives, Fair Value [Line Items]
Derivative, Notional Amount		105,003	221,800
TOTAL, Derivative Assets		84	495
TOTAL, Derivative Liabilities		$ 80	$ 25

[1] Amounts represent the application of the netting requirements that allow FHLBank to settle positive and negative positions and cash collateral, including accrued interest, held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was $512,338,000 and $236,700,000 as of September 30, 2020 and December 31, 2019, respectively. Cash collateral received was $500,000 and $200,000 as of September 30, 2020 and December 31, 2019, respectively.

[2] Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

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Derivatives And Hedging Activities (Net Gains or Losses on Derivatives and Hedging Activities) (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Derivative Instruments, Gain (Loss) [Line Items]
Total amounts presented in the Statements of Income, Advances		$ 38,848	$ 186,431	$ 230,000	$ 563,602
Total amounts presented in the Statements of Income, Available-for-sale Securities		9,588	47,811	43,753	78,694
Total amounts presented in the Statements of Income, Consolidated Obligations Discount Notes		5,674	133,680	120,385	433,473
Total amounts presented in the Statements of Income, Consolidated Obligations Bonds		67,142	185,096	310,628	519,967
Interest Rate Contract [Member] | Advances [Member] | Interest Income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivatives1	[1]	10,848	(39,873)	(280,875)	(144,016)
Hedged items2	[2]	(28,115)	43,355	248,445	159,254
NET GAINS (LOSSES) OF FAIR VALUE HEDGING RELATIONSHIPS (INTEREST INCOME/EXPENSE)		(17,267)	3,482	(32,430)	15,238
Interest Rate Contract [Member] | Available-for-sale Securities [Member] | Interest Income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivatives1	[1]	9,424	(61,468)	(386,669)	(205,705)
Hedged items2	[2]	(40,444)	75,743	308,189	206,340
NET GAINS (LOSSES) OF FAIR VALUE HEDGING RELATIONSHIPS (INTEREST INCOME/EXPENSE)		(31,020)	14,275	(78,480)	635
Interest Rate Contract [Member] | Consolidated Obligations Discount Notes [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivatives1	[1]	(197)	(4)	18,350	21
Hedged items2	[2]	1,321	3	(112)	(12)
NET GAINS (LOSSES) OF FAIR VALUE HEDGING RELATIONSHIPS (INTEREST INCOME/EXPENSE)		1,124	(1)	18,238	9
Interest Rate Contract [Member] | Consolidated Obligations Bonds [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivatives1	[1]	(1,509)	3,915	45,856	30,968
Hedged items2	[2]	12,203	(5,061)	(16,663)	(39,427)
NET GAINS (LOSSES) OF FAIR VALUE HEDGING RELATIONSHIPS (INTEREST INCOME/EXPENSE)		$ 10,694	$ (1,146)	$ 29,193	$ (8,459)

[1] Includes net interest settlements in interest income/expense.

[2] Includes amortization/accretion on closed fair value relationships in interest income.

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Derivatives And Hedging Activities Derivatives And Hedging Activities (Cumulative Basis Adjustments for Fair Value Hedges) (Details) - USD ($) $ in Thousands		Sep. 30, 2020	Dec. 31, 2019
Advances [Member]
Derivatives, Fair Value [Line Items]
Carrying Value of Hedged Asset, Fair Value Hedge1	[1]	$ 6,021,287	$ 4,951,445
Asset, Basis Adjustments for Active Hedging Relationships2	[2]	315,792	69,643
Hedged Asset, Basis Adjustments for Discontinued Hedging Relationships2	[2]	3,446	1,424
Hedged Asset, Cumulative Amount of Fair Value Hedging Basis Adjustments2	[2]	319,238	71,067
Available-for-sale Securities [Member]
Derivatives, Fair Value [Line Items]
Carrying Value of Hedged Asset, Fair Value Hedge1	[1]	7,292,062	7,155,712
Asset, Basis Adjustments for Active Hedging Relationships2	[2]	385,013	79,141
Hedged Asset, Basis Adjustments for Discontinued Hedging Relationships2	[2]	0	0
Hedged Asset, Cumulative Amount of Fair Value Hedging Basis Adjustments2	[2]	385,013	79,141
Consolidated Obligation Discount Notes [Member]
Derivatives, Fair Value [Line Items]
Carrying Value of Hedged Liability, Fair Value Hedge1	[1]	(174,748)
Liability, Basis Adjustments for Active Hedging Relationships2	[2]	39
Hedged Liability, Basis Adjustments for Discontinued Hedging Relationships2	[2]	0
Hedged Liability, Cumulative Amount of Fair Value Hedging Basis Adjustments2	[2]	39
Consolidated Obligation Bonds [Member]
Derivatives, Fair Value [Line Items]
Carrying Value of Hedged Liability, Fair Value Hedge1	[1]	(3,310,191)	(3,270,635)
Liability, Basis Adjustments for Active Hedging Relationships2	[2]	(43,053)	(26,389)
Hedged Liability, Basis Adjustments for Discontinued Hedging Relationships2	[2]	0	0
Hedged Liability, Cumulative Amount of Fair Value Hedging Basis Adjustments2	[2]	$ (43,053)	$ (26,389)

[1] Includes only the portion of carrying value representing the hedged items in fair value hedging relationships. For available-for-sale securities, amortized cost is considered to be carrying value (i.e., the fair value adjustment recorded in accumulated OCI (AOCI) is excluded).

[2] Included in amortized cost of the hedged asset/liability.

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Derivatives And Hedging Activities (Net Gains Or Losses On Derivatives And Hedging Activities in Non-Interest Income) (Details) - Gain (Loss) on Derivative Instruments [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses) related to derivatives not designated as hedging instruments	$ 2,026	$ (20,386)	$ (135,581)	$ (78,939)
Interest rate swaps [Member] | Not Designated as Hedging Instrument, Economic Hedge [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses) related to derivatives not designated as hedging instruments	15,842	(19,566)	(97,218)	(80,593)
Interest rate caps/floors [Member] | Not Designated as Hedging Instrument, Economic Hedge [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses) related to derivatives not designated as hedging instruments	(17)	(494)	(30)	(874)
Net Interest Settlements [Member] | Not Designated as Hedging Instrument, Economic Hedge [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses) related to derivatives not designated as hedging instruments	(14,222)	(691)	(32,338)	(1,238)
Mortgage delivery commitments [Member] | Mortgage Receivable [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses) related to derivatives not designated as hedging instruments	423	365	(5,995)	3,836
Consolidated obligation discount note commitments [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total net gains (losses) related to derivatives not designated as hedging instruments	$ 0	$ 0	$ 0	$ (70)

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Deposits (Types Of Deposits) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Interest-bearing:
Demand	$ 294,447	$ 383,197
Overnight	463,200	280,300
Total interest-bearing	757,647	663,497
Non-interest-bearing:
Other	258,669	127,143
Total non-interest-bearing	258,669	127,143
TOTAL DEPOSITS	$ 1,016,316	$ 790,640

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Consolidated Obligations (Narrative) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Par value	$ 37,227,150	$ 31,970,700
Federal Home Loan Bank, Consolidated Obligations, Callable Option [Member]
Debt Instrument [Line Items]
Par value	$ 6,465,000	$ 8,891,500

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Consolidated Obligations (Consolidated Bond Obligations Outstanding By Contractual Maturity) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Due in one year or less	$ 27,056,200	$ 15,991,800
Due in one year or less, Weighted Average Interest Rate	0.32%	1.79%
Due after one year through two years	$ 1,482,650	$ 6,318,350
Due after one year through two years, Weighted Average Interest Rate	1.70%	1.90%
Due after two years through three years	$ 1,306,650	$ 1,375,000
Due after two years through three years, Weighted Average Interest Rate	1.98%	2.11%
Due after three years through four years	$ 822,650	$ 1,285,900
Due after three years through four years, Weighted Average Interest Rate	1.95%	2.39%
Due after four years through five years	$ 971,200	$ 1,223,350
Due after four years through five years, Weighted Average Interest Rate	1.28%	2.40%
Thereafter	$ 5,587,800	$ 5,776,300
Thereafter, Weighted Average Interest Rate	1.66%	2.78%
Total par value	$ 37,227,150	$ 31,970,700
Total par value, Weighted Average Interest Rate	0.70%	2.05%
Premium	$ 41,974	$ 34,789
Discounts	(3,572)	(3,357)
Concession fees	(14,436)	(15,207)
Hedging adjustments	43,053	26,389
TOTAL	$ 37,294,169	$ 32,013,314

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Consolidated Obligations (Consolidated Bond Obligations By Contractual Maturity Or Next Call Date) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Due in one year or less	$ 27,056,200	$ 15,991,800
Due after one year through two years	1,482,650	6,318,350
Due after two years through three years	1,306,650	1,375,000
Due after three years through four years	822,650	1,285,900
Due after four years through five years	971,200	1,223,350
Thereafter	5,587,800	5,776,300
Total par value	37,227,150	31,970,700
Earlier of Contractual Maturity or Next Call Date [Member]
Debt Instrument [Line Items]
Due in one year or less	33,521,200	24,583,300
Due after one year through two years	1,357,650	5,148,350
Due after two years through three years	878,150	615,000
Due after three years through four years	502,650	682,400
Due after four years through five years	414,200	356,850
Thereafter	$ 553,300	$ 584,800

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Consolidated Obligations (Consolidated Bonds By Interest-Rate Payment Type) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
Total par value	$ 37,227,150	$ 31,970,700
Simple variable rate [Member]
Debt Instrument [Line Items]
Total par value	23,504,000	16,017,000
Fixed rate [Member]
Debt Instrument [Line Items]
Total par value	13,723,150	15,573,700
Variable rate with cap [Member]
Debt Instrument [Line Items]
Total par value	0	220,000
Step [Member]
Debt Instrument [Line Items]
Total par value	0	110,000
Fixed to variable rate [Member]
Debt Instrument [Line Items]
Total par value	$ 0	$ 50,000

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Consolidated Obligations (Consolidated Discount Notes Outstanding) (Details) - USD ($) $ in Thousands		Sep. 30, 2020	Dec. 31, 2019
Short-term Debt [Line Items]
Book Value		$ 11,936,214	$ 27,447,911
Consolidated Obligation Discount Notes [Member]
Short-term Debt [Line Items]
Par Value		$ 11,937,211	$ 27,510,042
Weighted Average Interest Rate	[1]	0.08%	1.54%

[1] Represents yield to maturity excluding concession fees.

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Assets and Liabilities Subject to Offsetting Assets Subject to Offsetting (Schedule of Offsetting Assets) (Details) - USD ($) $ in Thousands		Sep. 30, 2020	Dec. 31, 2019
Offsetting Assets [Line Items]
Derivative assets, Gross Amounts of Recognized Assets		$ 21,153	$ 24,810
Derivative assets, Gross Amounts Offset in the Statement of Condition	[1],[2]	141,348	129,994
Total derivative assets		162,501	154,804
Derivative assets, Gross Amounts Not Offset in the Statement of Condition	[3]	(84)	(495)
Derivative assets, Net Amount		162,417	154,309
Securities purchased under agreements to resell, Gross Amounts of Recognized Assets		4,600,000	4,750,000
Securities purchased under agreements to resell, Gross Amounts Offset in the Statement of Condition		0	0
Securities purchased under agreements to resell, Net Amounts of Assets Presented in the Statement of Condition		4,600,000	4,750,000
Securities purchased under agreements to resell, Gross Amounts Not Offset in the Statement of Condition	[3]	(4,600,000)	(4,750,000)
Securities purchased under agreements to resell, Net Amount		0	0
TOTAL, Gross Amounts of Recognized Assets		4,621,153	4,774,810
TOTAL, Gross Amounts Offset in the Statement of Condition		141,348	129,994
TOTAL, Net Amounts of Assets Presented in the Statement of Condition		4,762,501	4,904,804
TOTAL, Gross Amounts Not Offset in the Statement of Condition	[3]	(4,600,084)	(4,750,495)
TOTAL, Net Amount		162,417	154,309
Uncleared derivatives [Member]
Offsetting Assets [Line Items]
Derivative assets, Gross Amounts of Recognized Assets		19,682	21,749
Derivative assets, Gross Amounts Offset in the Statement of Condition		(15,472)	(14,424)
Total derivative assets		4,210	7,325
Derivative assets, Gross Amounts Not Offset in the Statement of Condition	[3]	(84)	(495)
Derivative assets, Net Amount		4,126	6,830
Cleared derivatives [Member]
Offsetting Assets [Line Items]
Derivative assets, Gross Amounts of Recognized Assets		1,471	3,061
Derivative assets, Gross Amounts Offset in the Statement of Condition		156,820	144,418
Total derivative assets		158,291	147,479
Derivative assets, Gross Amounts Not Offset in the Statement of Condition	[3]	0	0
Derivative assets, Net Amount		$ 158,291	$ 147,479

[1] Amounts represent the application of the netting requirements that allow FHLBank to settle positive and negative positions and cash collateral, including accrued interest, held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was $512,338,000 and $236,700,000 as of September 30, 2020 and December 31, 2019, respectively. Cash collateral received was $500,000 and $200,000 as of September 30, 2020 and December 31, 2019, respectively.

[2] Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

[3] Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

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Assets and Liabilities Subject to Offsetting Liabilities Subject to Offsetting (Schedule of Offsetting Liabilities) (Details) - USD ($) $ in Thousands		Sep. 30, 2020	Dec. 31, 2019
Offsetting Liabilities [Line Items]
Derivative liabilities, Gross Amounts of Recognized Liabilities		$ 370,663	$ 106,708
Derivative liabilities, Gross Amounts Offset in the Statement of Condition	[1],[2]	(370,490)	(106,506)
Total derivative liabilities		173	202
Derivative liabilities, Gross Amounts Not Offset in the Statement of Condition	[3]	(80)	(25)
Derivative liabilities, Net Amount		93	177
TOTAL, Gross Amounts of Recognized Liabilities		370,663	106,708
TOTAL, Gross Amounts Offset in the Statement of Condition		(370,490)	(106,506)
TOTAL, Net Amounts of Liabilities Presented in the Statement of Condition		173	202
TOTAL, Gross Amounts Not Offset in the Statement of Condition	[3]	(80)	(25)
TOTAL, Net Amount		93	177
Uncleared derivatives [Member]
Offsetting Liabilities [Line Items]
Derivative liabilities, Gross Amounts of Recognized Liabilities		367,678	105,468
Derivative liabilities, Gross Amounts Offset in the Statement of Condition		(367,505)	(105,266)
Total derivative liabilities		173	202
Derivative liabilities, Gross Amounts Not Offset in the Statement of Condition	[3]	(80)	(25)
Derivative liabilities, Net Amount		93	177
Cleared derivatives [Member]
Offsetting Liabilities [Line Items]
Derivative liabilities, Gross Amounts of Recognized Liabilities		2,985	1,240
Derivative liabilities, Gross Amounts Offset in the Statement of Condition		(2,985)	(1,240)
Total derivative liabilities		0	0
Derivative liabilities, Gross Amounts Not Offset in the Statement of Condition	[3]	0	0
Derivative liabilities, Net Amount		$ 0	$ 0

[1] Amounts represent the application of the netting requirements that allow FHLBank to settle positive and negative positions and cash collateral, including accrued interest, held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was $512,338,000 and $236,700,000 as of September 30, 2020 and December 31, 2019, respectively. Cash collateral received was $500,000 and $200,000 as of September 30, 2020 and December 31, 2019, respectively.

[2] Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

[3] Represents noncash collateral received on financial instruments that: (1) do not qualify for netting on the Statements of Condition; or (2) are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

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Capital (Narrative) (Details) $ / shares in Units, $ in Thousands		9 Months Ended
		Sep. 30, 2020 USD ($) $ / shares Rate	Sep. 30, 2019 USD ($)	Dec. 31, 2019 $ / shares Rate
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Number of Finance Agency Regulatory Capital Requirements		3
Total regulatory capital-to-asset ratio, required | Rate		4.00%		4.00%
Leverage capital ratio, required | Rate		5.00%		5.00%
Leverage capital, permanent capital weight		1.5
Common Stock, par value per share | $ / shares		$ 100
Excess Stock (less than) | Rate		1.00%
Capital Distributions From FHLBanks to FICO		$ 680,000
Excess FICO Funds Available for Distribution to FHLBanks		200,031
Partial recovery of prior capital distribution to Financing Corporation		10,543	$ 0
Unrestricted Retained Earnings [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Partial recovery of prior capital distribution to Financing Corporation		$ 10,543
Class A [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Leverage capital, non-permanent capital weight		1.0
Minimum period after which redemption is required		6 months
Common Stock, par value per share | $ / shares	[1]	$ 100		$ 100
Class B [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Minimum period after which redemption is required		5 years
Common Stock, par value per share | $ / shares	[1]	$ 100		$ 100

[1] Putable

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Capital (Regulatory Capital Requirements) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Regulatory capital requirements:
Risk-based capital, Required	$ 206,942	$ 486,650
Risk-based capital, Actual	$ 2,216,737	$ 2,319,531
Total regulatory capital-to-asset ratio, Required	4.00%	4.00%
Total regulatory capital-to-asset ratio, Actual	4.90%	4.40%
Total regulatory capital, Required	$ 2,120,455	$ 2,531,066
Total regulatory capital, Actual	$ 2,605,221	$ 2,768,680
Leverage capital ratio, Required	5.00%	5.00%
Leverage capital ratio, Actual	7.00%	6.20%
Leverage capital, Required	$ 2,650,569	$ 3,163,833
Leverage capital, Actual	$ 3,713,590	$ 3,928,446

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Capital (Mandatorily Redeemable Capital Stock Rollforward) (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Mandatorily Redeemable Capital Stock [Roll Forward]
Balance, beginning of period	$ 2,308	$ 2,750	$ 2,415	$ 3,597
Capital stock subject to mandatory redemption reclassified from equity during the period	620,561	159,775	1,627,899	218,411
Capital stock redemption cancellations reclassified to equity during the period	0	0	(100,647)	0
Redemption or repurchase of mandatorily redeemable capital stock during the period	(620,967)	(160,078)	(1,527,802)	(219,642)
Stock dividend classified as mandatorily redeemable capital stock during the period	12	30	49	111
Balance, end of period	$ 1,914	$ 2,477	$ 1,914	$ 2,477

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Capital (Mandatorily Redeemable Capital Stock By Contractual Year Of Redemption) (Details) - USD ($) $ in Thousands		Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018
Contractual Year of Repurchase
Year 1		$ 0		$ 0
Year 2		636		1
Year 3		0		869
Year 4		0		0
Year 5		0		0
Past contractual redemption date due to remaining activity	[1]	1,278		1,545
TOTAL		$ 1,914	$ 2,308	$ 2,415	$ 2,477	$ 2,750	$ 3,597

[1] Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because there is activity outstanding to which the mandatorily redeemable capital stock relates.

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Accumulated Other Comprehensive Income (Accumulated Other Comprehensive Income Or Loss) (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Accumulated Other Comprehensive Income [Roll Forward]
Balance at the beginning of the period		$ 2,354,938	$ 2,580,693	$ 2,791,051	$ 2,454,252
Reclassifications from other comprehensive income (loss) to net income:
Total other comprehensive income (loss)		30,323	(17,229)	(28,157)	(1,009)
Balance at the end of the period		2,599,936	2,658,322	2,599,936	2,658,322
Net Unrealized Gain (Loss) on Available-for-Sale Securities [Member]
Accumulated Other Comprehensive Income [Roll Forward]
Balance at the beginning of the period		(31,746)	35,143	26,788	19,068
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)		30,295	(17,324)	(26,716)	(1,249)
Reclassifications from other comprehensive income (loss) to net income:
Realized net (gains) losses included in net income2	[1]			(1,523)
Total other comprehensive income (loss)		30,295	(17,324)	(28,239)	(1,249)
Balance at the end of the period		(1,451)	17,819	(1,451)	17,819
Defined Benefit Pension Plan [Member]
Accumulated Other Comprehensive Income [Roll Forward]
Balance at the beginning of the period		(1,948)	(3,230)	(2,002)	(3,375)
Reclassifications from other comprehensive income (loss) to net income:
Amortization of net losses - defined benefit pension plan1	[2]	28	95	82	240
Total other comprehensive income (loss)		28	95	82	240
Balance at the end of the period		(1,920)	(3,135)	(1,920)	(3,135)
Total AOCI [Member]
Accumulated Other Comprehensive Income [Roll Forward]
Balance at the beginning of the period		(33,694)	31,913	24,786	15,693
Other comprehensive income (loss) before reclassification:
Unrealized gains (losses)		30,295	(17,324)	(26,716)	(1,249)
Reclassifications from other comprehensive income (loss) to net income:
Realized net (gains) losses included in net income2	[1]			(1,523)
Amortization of net losses - defined benefit pension plan1	[2]	28	95	82	240
Total other comprehensive income (loss)		30,323	(17,229)	(28,157)	(1,009)
Balance at the end of the period		$ (3,371)	$ 14,684	$ (3,371)	$ 14,684

[1] Recorded in “Net gains (losses) on sale of available-for-sale securities” non-interest income on the Statements of Income. Amount represents a credit (increase to other income (loss)).

[2] Recorded in “Other” non-interest expense on the Statements of Income. Amount represents a debit (increase to other expenses).

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Fair Values (Fair Value Summary) (Details) - USD ($) $ in Thousands		Sep. 30, 2020	Dec. 31, 2019
Assets:
Cash and due from banks		$ 22,704	$ 1,917,166
Trading securities		3,117,935	2,812,562
Available-for-sale securities		7,290,611	7,182,500
Held-to-maturity securities, Carrying Value		2,973,976	3,569,958
Held-to-maturity securities		2,975,782	3,556,938
Accrued interest receivable		108,532	143,765
Derivative assets		162,501	154,804
Netting adjustments and cash collateral, Derivative Assets	[1],[2]	141,348	129,994
Liabilities:
Accrued interest payable		54,913	117,580
Derivative liabilities		173	202
Netting adjustments and cash collateral, Derivative Liabilities	[1],[2]	(370,490)	(106,506)
Carrying Value [Member]
Assets:
Cash and due from banks		22,704	1,917,166
Interest-bearing deposits		499,662	921,453
Securities purchased under agreements to resell		4,600,000	4,750,000
Federal funds sold		1,435,000	850,000
Trading securities		3,117,935	2,812,562
Available-for-sale securities		7,290,611	7,182,500
Held-to-maturity securities, Carrying Value		2,973,976	3,569,958
Advances		22,616,252	30,241,315
Mortgage loans held for portfolio, net of allowance		10,093,466	10,633,009
Accrued interest receivable		108,532	143,765
Derivative assets		162,501	154,804
Liabilities:
Deposits		1,016,316	790,640
Mandatorily redeemable capital stock		1,914	2,415
Accrued interest payable		54,913	117,580
Derivative liabilities		173	202
Carrying Value [Member] | Industrial revenue bond [Member]
Other Asset (Liability):
Other asset (liability), asset		35,000	35,000
Carrying Value [Member] | Financing lease payable [Member]
Other Asset (Liability):
Other asset (liability), liability		(35,000)	(35,000)
Carrying Value [Member] | Consolidated Obligation Discount Notes [Member]
Liabilities:
Consolidated obligation discount notes		11,936,214	27,447,911
Carrying Value [Member] | Consolidated Obligation Bonds [Member]
Liabilities:
Consolidated obligation bonds		37,294,169	32,013,314
Fair Value [Member]
Assets:
Cash and due from banks		22,704	1,917,166
Interest-bearing deposits		499,662	921,453
Securities purchased under agreements to resell		4,600,000	4,750,000
Federal funds sold		1,435,000	850,000
Trading securities		3,117,935	2,812,562
Available-for-sale securities		7,290,611	7,182,500
Held-to-maturity securities		2,975,782	3,556,938
Advances		22,733,051	30,295,813
Mortgage loans held for portfolio, net of allowance		10,351,013	10,983,356
Accrued interest receivable		108,532	143,765
Derivative assets		162,501	154,804
Liabilities:
Deposits		1,016,316	790,640
Mandatorily redeemable capital stock		1,914	2,415
Accrued interest payable		54,913	117,580
Derivative liabilities		173	202
Fair Value [Member] | Industrial revenue bond [Member]
Other Asset (Liability):
Other asset (liability), asset		38,224	34,850
Fair Value [Member] | Financing lease payable [Member]
Other Asset (Liability):
Other asset (liability), liability		(38,224)	(34,850)
Fair Value [Member] | Consolidated Obligation Discount Notes [Member]
Liabilities:
Consolidated obligation discount notes		11,936,578	27,448,021
Fair Value [Member] | Consolidated Obligation Bonds [Member]
Liabilities:
Consolidated obligation bonds		37,517,293	32,103,154
Level 1 [Member]
Assets:
Cash and due from banks		22,704	1,917,166
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 securities		0	0
Held-to-maturity securities		0	0
Advances		0	0
Mortgage loans held for portfolio, net of allowance		0	0
Accrued interest receivable		0	0
Derivative assets		0	0
Liabilities:
Deposits		0	0
Mandatorily redeemable capital stock		1,914	2,415
Accrued interest payable		0	0
Derivative liabilities		0	0
Level 1 [Member] | Industrial revenue bond [Member]
Other Asset (Liability):
Other asset (liability), asset		0	0
Level 1 [Member] | Financing lease payable [Member]
Other Asset (Liability):
Other asset (liability), liability		0	0
Level 1 [Member] | Consolidated Obligation Discount Notes [Member]
Liabilities:
Consolidated obligation discount notes		0	0
Level 1 [Member] | Consolidated Obligation Bonds [Member]
Liabilities:
Consolidated obligation bonds		0	0
Level 2 [Member]
Assets:
Cash and due from banks		0	0
Interest-bearing deposits		499,662	921,453
Securities purchased under agreements to resell		4,600,000	4,750,000
Federal funds sold		1,435,000	850,000
Trading securities		3,117,935	2,812,562
Available-for-sale securities		7,290,611	7,182,500
Held-to-maturity securities		2,897,278	3,476,084
Advances		22,733,051	30,295,813
Mortgage loans held for portfolio, net of allowance		10,348,886	10,981,458
Accrued interest receivable		108,532	143,765
Derivative assets		21,153	24,810
Liabilities:
Deposits		1,016,316	790,640
Mandatorily redeemable capital stock		0	0
Accrued interest payable		54,913	117,580
Derivative liabilities		370,663	106,708
Level 2 [Member] | Industrial revenue bond [Member]
Other Asset (Liability):
Other asset (liability), asset		38,224	34,850
Level 2 [Member] | Financing lease payable [Member]
Other Asset (Liability):
Other asset (liability), liability		(38,224)	(34,850)
Level 2 [Member] | Consolidated Obligation Discount Notes [Member]
Liabilities:
Consolidated obligation discount notes		11,936,578	27,448,021
Level 2 [Member] | Consolidated Obligation Bonds [Member]
Liabilities:
Consolidated obligation bonds		37,517,293	32,103,154
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 securities		0	0
Held-to-maturity securities		78,504	80,854
Advances		0	0
Mortgage loans held for portfolio, net of allowance		2,127	1,898
Accrued interest receivable		0	0
Derivative assets		0	0
Liabilities:
Deposits		0	0
Mandatorily redeemable capital stock		0	0
Accrued interest payable		0	0
Derivative liabilities		0	0
Level 3 [Member] | Industrial revenue bond [Member]
Other Asset (Liability):
Other asset (liability), asset		0	0
Level 3 [Member] | Financing lease payable [Member]
Other Asset (Liability):
Other asset (liability), liability		0	0
Level 3 [Member] | Consolidated Obligation Discount Notes [Member]
Liabilities:
Consolidated obligation discount notes		0	0
Level 3 [Member] | Consolidated Obligation Bonds [Member]
Liabilities:
Consolidated obligation bonds		$ 0	$ 0

[1] Amounts represent the application of the netting requirements that allow FHLBank to settle positive and negative positions and cash collateral, including accrued interest, held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was $512,338,000 and $236,700,000 as of September 30, 2020 and December 31, 2019, respectively. Cash collateral received was $500,000 and $200,000 as of September 30, 2020 and December 31, 2019, respectively.

[2] Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

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Fair Values (Hierarchy Level for Financial Assets And Liabilities - Recurring And Nonrecurring) (Details) - USD ($) $ in Thousands		Sep. 30, 2020		Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		$ 3,117,935		$ 2,812,562
Available-for-sale securities		7,290,611		7,182,500
Total derivative assets		162,501		154,804
Netting adjustments and cash collateral, Derivative Assets	[1],[2]	141,348		129,994
Total derivative liabilities		173		202
Netting adjustments and cash collateral, Derivative Liabilities	[1],[2]	(370,490)		(106,506)
Held-to-maturity securities		2,975,782		3,556,938
Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		225,053		0
U.S. Treasury obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		1,557,412		1,530,518
Available-for-sale securities		4,067,370		4,261,791
US Government-sponsored Enterprises Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		433,864		416,025
U.S. obligation MBS [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Held-to-maturity securities		76,943		92,879
GSE MBS [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		901,606		866,019
Available-for-sale securities		3,223,241		2,920,709
Held-to-maturity securities		2,820,335		3,383,205
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		3,117,935		2,812,562
Available-for-sale securities		7,290,611		7,182,500
Total derivative assets		21,153		24,810
Total derivative liabilities		370,663		106,708
Held-to-maturity securities		2,897,278		3,476,084
Mortgage loans held for portfolio		10,348,886		10,981,458
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		0		0
Available-for-sale securities		0		0
Total derivative assets		0		0
Total derivative liabilities		0		0
Held-to-maturity securities		78,504		80,854
Mortgage loans held for portfolio		2,127		1,898
Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		3,117,935		2,812,562
Available-for-sale securities		7,290,611		7,182,500
Total derivative assets		162,501		154,804
Total derivative liabilities		173		202
Held-to-maturity securities		2,975,782		3,556,938
Mortgage loans held for portfolio		10,351,013		10,983,356
Recurring fair value measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Netting adjustments and cash collateral, Derivative Assets	[2]	141,348		129,994
Netting adjustments and cash collateral, Derivative Liabilities	[2]	(370,490)		(106,506)
Recurring fair value measurements [Member] | Interest-rate related [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Netting adjustments and cash collateral, Derivative Assets	[2]	141,348		129,994
Netting adjustments and cash collateral, Derivative Liabilities	[2]	(370,490)		(106,506)
Recurring fair value measurements [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		3,117,935		2,812,562
Available-for-sale securities		7,290,611		7,182,500
Total derivative assets		21,153		24,810
TOTAL FAIR VALUE MEASUREMENTS - ASSETS		10,429,699		10,019,872
Total derivative liabilities		370,663		106,708
TOTAL FAIR VALUE MEASUREMENTS - LIABILITIES		370,663		106,708
Recurring fair value measurements [Member] | Level 2 [Member] | Interest-rate related [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative assets		21,069		24,315
Total derivative liabilities		370,583		106,683
Recurring fair value measurements [Member] | Level 2 [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		225,053
Recurring fair value measurements [Member] | Level 2 [Member] | U.S. Treasury obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		1,557,412		1,530,518
Available-for-sale securities		4,067,370		4,261,791
Recurring fair value measurements [Member] | Level 2 [Member] | US Government-sponsored Enterprises Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		433,864		416,025
Recurring fair value measurements [Member] | Level 2 [Member] | GSE MBS [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		901,606		866,019
Available-for-sale securities		3,223,241		2,920,709
Recurring fair value measurements [Member] | Level 2 [Member] | Mortgage Receivable [Member] | Mortgage delivery commitments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative assets		84		495
Total derivative liabilities		80		25
Recurring fair value measurements [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		3,117,935		2,812,562
Available-for-sale securities		7,290,611		7,182,500
Total derivative assets		162,501		154,804
TOTAL FAIR VALUE MEASUREMENTS - ASSETS		10,571,047		10,149,866
Total derivative liabilities		173		202
TOTAL FAIR VALUE MEASUREMENTS - LIABILITIES		173		202
Recurring fair value measurements [Member] | Fair Value [Member] | Interest-rate related [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative assets		162,417		154,309
Total derivative liabilities		93		177
Recurring fair value measurements [Member] | Fair Value [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		225,053
Recurring fair value measurements [Member] | Fair Value [Member] | U.S. Treasury obligations [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		1,557,412		1,530,518
Available-for-sale securities		4,067,370		4,261,791
Recurring fair value measurements [Member] | Fair Value [Member] | US Government-sponsored Enterprises Debt Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		433,864		416,025
Recurring fair value measurements [Member] | Fair Value [Member] | GSE MBS [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities		901,606		866,019
Available-for-sale securities		3,223,241		2,920,709
Recurring fair value measurements [Member] | Fair Value [Member] | Mortgage Receivable [Member] | Mortgage delivery commitments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total derivative assets		84		495
Total derivative liabilities		80		25
Nonrecurring fair value measurements - Assets: [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
TOTAL FAIR VALUE MEASUREMENTS - ASSETS		2,132	[3]	2,053	[4]
Mortgage loans held for portfolio		2,132	[3]	1,909	[4]
Real estate owned	[4]			144
Nonrecurring fair value measurements - Assets: [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
TOTAL FAIR VALUE MEASUREMENTS - ASSETS		2,132	[3]	2,053	[4]
Mortgage loans held for portfolio		$ 2,132	[3]	1,909	[4]
Real estate owned	[4]			$ 144

[1] Amounts represent the application of the netting requirements that allow FHLBank to settle positive and negative positions and cash collateral, including accrued interest, held or placed with the same clearing agent and/or derivative counterparty. Cash collateral posted was $512,338,000 and $236,700,000 as of September 30, 2020 and December 31, 2019, respectively. Cash collateral received was $500,000 and $200,000 as of September 30, 2020 and December 31, 2019, respectively.

[2] Represents the effect of legally enforceable master netting agreements that allow FHLBank to net settle positive and negative positions and also derivative cash collateral, including related accrued interest, held or placed with the same clearing agent or derivative counterparty.

[3] Includes assets adjusted to fair value during the nine months ended September 30, 2020 and still outstanding as of September 30, 2020.

[4] Includes assets adjusted to fair value during the year ended December 31, 2019 and still outstanding as of December 31, 2019.

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Commitments And Contingencies (Narrative) (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2020 USD ($)	Dec. 31, 2019 USD ($)
Off-balance Sheet Commitments:
Obligation with Joint and Several Liability Arrangement, Description	As provided in the Bank Act or in FHFA regulations, consolidated obligations are backed only by the financial resources of the FHLBanks. FHLBank Topeka is jointly and severally liable with the other FHLBanks for the payment of principal and interest on all of the consolidated obligations issued by the FHLBanks.
Obligation with joint and several liability arrangement, off balance sheet amount	$ 770,698,374	$ 966,413,924
Carrying value included in other liabilities	$ 68,389	$ 70,514
Number of in-district state housing authorities with standby bond purchase agreements	2	2
Stand by Bond Purchase Agreements, Aquired And Sold At Par, During the Period	$ 122,390
Mortgage Delivery Commitments Derivative Asset (Liability)	4	$ 470
Standby Letters of Credit Outstanding [Member]
Off-balance Sheet Commitments:
Carrying value included in other liabilities	$ 1,623	$ 1,470
Commitment Expiration Year (no later than)	2024
Term (up to)	6
Forward Settling Advance Commitments [Member]
Off-balance Sheet Commitments:
Term (up to)	24
Commitments for standby bond purchases [Member]
Off-balance Sheet Commitments:
Commitment Expiration Year (no later than)	2023
Mortgage Receivable [Member] | Commitments to fund or purchase mortgage loans [Member]
Off-balance Sheet Commitments:
Term (up to)	60

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Commitments And Contingencies (Off-Balance Sheet Commitments) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Standby letters of credit outstanding [Member]
Loss Contingencies [Line Items]
Expire Within One Year	$ 5,044,507	$ 4,764,724
Expire After One Year	4,635	4,335
Total	5,049,142	4,769,059
Advance commitments outstanding [Member]
Loss Contingencies [Line Items]
Expire Within One Year	38,420	64,282
Expire After One Year	12,090	15,693
Total	50,510	79,975
Commitments for standby bond purchases [Member]
Loss Contingencies [Line Items]
Expire Within One Year	423,030	0
Expire After One Year	280,733	701,392
Total	703,763	701,392
Commitments to issue consolidated bonds, at par [Member]
Loss Contingencies [Line Items]
Expire Within One Year	264,000	0
Expire After One Year	0	0
Total	264,000	0
Commitments to issue consolidated obligations discount notes, at par [Member]
Loss Contingencies [Line Items]
Expire Within One Year	0	411,161
Expire After One Year	0	0
Total	0	411,161
Mortgage Receivable [Member] | Commitments to fund or purchase mortgage loans [Member]
Loss Contingencies [Line Items]
Expire Within One Year	105,003	221,800
Expire After One Year	0	0
Total	$ 105,003	$ 221,800

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Transactions With Stockholders (Related Party Transactions, by Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Related Party Transaction [Line Items]
Outstanding Advances	$ 22,616,252	$ 30,241,315
Outstanding Deposits	1,016,316	790,640
Ten Percent Owner [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Total Par Value	$ 330,772	$ 772,607
Regulatory Capital Stock, Percent Of Total	20.90%	43.60%
Outstanding Advances	$ 7,130,000	$ 13,085,000
Outstanding Advances, Percent of Total	32.00%	43.40%
Outstanding Deposits	$ 649	$ 23,487
Outstanding Deposits, Percent of Total	0.10%	3.00%
Ten Percent Owner [Member] | Total Class A Stock [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Total Par Value	$ 6,800	$ 184,782
Regulatory Capital Stock, Percent Of Total	1.80%	41.10%
Ten Percent Owner [Member] | Total Class B Stock [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Total Par Value	$ 323,972	$ 587,825
Regulatory Capital Stock, Percent Of Total	27.10%	44.50%
MidFirst Bank [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Total Par Value	$ 330,772	$ 386,325
Regulatory Capital Stock, Percent Of Total	20.90%	21.80%
Outstanding Advances	$ 7,130,000	$ 8,585,000
Outstanding Advances, Percent of Total	32.00%	28.50%
Outstanding Deposits	$ 649	$ 1,030
Outstanding Deposits, Percent of Total	0.10%	0.10%
MidFirst Bank [Member] | Total Class A Stock [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Total Par Value	$ 6,800	$ 500
Regulatory Capital Stock, Percent Of Total	1.80%	0.10%
MidFirst Bank [Member] | Total Class B Stock [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Total Par Value	$ 323,972	$ 385,825
Regulatory Capital Stock, Percent Of Total	27.10%	29.20%
BOKF, N.A. [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Total Par Value		$ 386,282
Regulatory Capital Stock, Percent Of Total		21.80%
Outstanding Advances		$ 4,500,000
Outstanding Advances, Percent of Total		14.90%
Outstanding Deposits		$ 22,457
Outstanding Deposits, Percent of Total		2.90%
BOKF, N.A. [Member] | Total Class A Stock [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Total Par Value		$ 184,282
Regulatory Capital Stock, Percent Of Total		41.00%
BOKF, N.A. [Member] | Total Class B Stock [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Total Par Value		$ 202,000
Regulatory Capital Stock, Percent Of Total		15.30%

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Transactions With Stockholders (Related Party Transactions, by Balance Sheet Grouping-Directors) (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Related Party Transaction [Line Items]
Advances, Outstanding Amount	$ 22,616,252	$ 30,241,315
Deposits, Outstanding Amount	1,016,316	790,640
Director [Member]
Related Party Transaction [Line Items]
TOTAL CAPITAL STOCK, Outstanding Amount	$ 28,892	$ 12,038
TOTAL CAPITAL STOCK, Percent Of Total	1.80%	0.70%
Advances, Outstanding Amount	$ 179,043	$ 178,945
Advances, Percent of Total	0.80%	0.60%
Deposits, Outstanding Amount	$ 23,892	$ 15,748
Deposits, Percent of Total	2.40%	2.00%
Director [Member] | Class A [Member]
Related Party Transaction [Line Items]
TOTAL CAPITAL STOCK, Outstanding Amount	$ 5,461	$ 6,467
TOTAL CAPITAL STOCK, Percent Of Total	1.40%	1.40%
Director [Member] | Class B [Member]
Related Party Transaction [Line Items]
TOTAL CAPITAL STOCK, Outstanding Amount	$ 23,431	$ 5,571
TOTAL CAPITAL STOCK, Percent Of Total	2.00%	0.40%

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Transactions With Stockholders (Schedule Of Related Party Transactions, Mortgage Loans Disclosure) (Details) - Director [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Related Party Transaction [Line Items]
Mortgage loans acquired	$ 9,091	$ 61,362	$ 95,901	$ 128,251
Mortgage loans acquired, Percent of Total	2.50%	5.40%	4.00%	5.30%