Federal Home Loan Bank of Des Moines

11/08/2024 | Press release | Distributed by Public on 11/08/2024 10:31

Quarterly Report for Quarter Ending 2024 09 30 (Form 10 Q)

fhlbdm-20240930
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, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 000-51999
FEDERAL HOME LOAN BANK OF DES MOINES
(Exact name of registrant as specified in its charter)
Federally chartered corporation of the United States
42-6000149
(State or other jurisdiction of incorporation or organization) (I.R.S. employer identification number)
909 Locust Street
Des Moines, IA
(Address of principal executive offices)
50309
(Zip code)
Registrant's telephone number, including area code: (515) 412-2100
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐Yes ☒ No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Shares outstanding as of October 31, 2024
Class B Stock, par value $100 59,861,674
Table of Contents
Part I - Financial Information
Item 1.
Financial Statements (Unaudited)
3
Statements of Condition
3
Statements of Income
4
Statements of Comprehensive Income
5
Statements of Capital
6
Statements of Cash Flows
7
Condensed Notes to the Unaudited Financial Statements
9
Background Information
9
Note 1 - Basis of Presentation
9
Note 2 - Recently Adopted and Issued Accounting Guidance
10
Note 3 - Investments
10
Note 4 - Advances
15
Note 5 - Mortgage Loans Held for Portfolio
17
Note 6 - Derivatives and Hedging Activities
19
Note 7 - Consolidated Obligations
23
Note 8 - Capital
25
Note 9 - Fair Value
27
Note 10 - Commitments and Contingencies
33
Note 11 - Activities with Stockholders
34
Note 12 - Activities with Other FHLBanks
35
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
36
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
63
Item 4.
Controls and Procedures
63
Part II - Other Information
Item 1.
Legal Proceedings
63
Item 1A.
Risk Factors
63
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
63
Item 3.
Defaults Upon Senior Securities
63
Item 4.
Mine Safety Disclosures
63
Item 5.
Other Information
63
Item 6.
Exhibits
64
Glossary of Terms
65
Signatures
66
Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CONDITION
(dollars in millions, except capital stock par value)
(Unaudited)
September 30,
2024 		December 31,
2023
ASSETS
Cash and due from banks $ 36 $ 31
Interest-bearing deposits (Note 3) 3,781 3,481
Securities purchased under agreements to resell (Note 3) 8,200 11,400
Federal funds sold (Note 3) 8,120 7,120
Investment securities (Note 3)
Trading securities 4,131 3,152
Available-for-sale securities (amortized cost of $24,662 and $24,001)
24,634 23,823
Held-to-maturity securities (fair value of $788 and $850)
783 852
Total investment securities 29,548 27,827
Advances (Note 4) 98,923 122,530
Mortgage loans held for portfolio, net of allowance for credit losses of $4 and $6 (Note 5)
11,398 9,967
Accrued interest receivable 400 582
Derivative assets, net (Note 6) 1,437 1,267
Other assets, net 136 201
TOTAL ASSETS $ 161,979 $ 184,406
LIABILITIES
Deposits
Interest-bearing $ 919 $ 959
Non-interest-bearing 123 80
Total deposits 1,042 1,039
Consolidated obligations (Note 7)
Discount notes (includes $50,341 and $47,442 at fair value held under fair value option)
59,465 54,537
Bonds 91,067 116,961
Total consolidated obligations 150,532 171,498
Mandatorily redeemable capital stock (Note 8) 9 12
Accrued interest payable 775 1,023
Affordable Housing Program payable 254 198
Derivative liabilities, net (Note 6) 6 7
Other liabilities 77 798
TOTAL LIABILITIES 152,695 174,575
Commitments and contingencies (Note 10)
CAPITAL (Note 8)
Capital stock - Class B putable ($100 par value); 58,922,668 and 68,731,881 issued and outstanding shares
5,892 6,873
Retained earnings
Unrestricted 2,385 2,242
Restricted 1,037 896
Total retained earnings 3,422 3,138
Accumulated other comprehensive income (loss) (30) (180)
TOTAL CAPITAL 9,284 9,831
TOTAL LIABILITIES AND CAPITAL $ 161,979 $ 184,406
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF INCOME
(dollars in millions)
(Unaudited)
For the Three Months Ended
For the Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
INTEREST INCOME
Advances $ 1,476 $ 1,740 $ 4,708 $ 4,742
Interest-bearing deposits 69 58 209 147
Securities purchased under agreements to resell 116 132 427 394
Federal funds sold 172 200 500 596
Trading securities 30 9 73 26
Available-for-sale securities 394 308 1,144 826
Held-to-maturity securities 10 11 31 33
Mortgage loans held for portfolio 117 83 326 226
Loans to other FHLBanks - - - 1
Total interest income 2,384 2,541 7,418 6,991
INTEREST EXPENSE
Consolidated obligations - Discount notes 905 671 2,630 2,133
Consolidated obligations - Bonds 1,137 1,517 3,749 3,864
Deposits 14 13 42 34
Borrowings from other FHLBanks - - 1 -
Mandatorily redeemable capital stock 1 - 1 1
Total interest expense 2,057 2,201 6,423 6,032
NET INTEREST INCOME 327 340 995 959
Provision (reversal) for credit losses on mortgage loans - - (2) 1
NET INTEREST INCOME AFTER PROVISION (REVERSAL) FOR CREDIT LOSSES 327 340 997 958
OTHER INCOME (LOSS)
Net gains (losses) on trading securities 87 - 70 23
Net gains (losses) on financial instruments held under fair value option (110) (9) (63) (70)
Net gains (losses) on derivatives (2) 8 (58) 1
Net gains (losses) on extinguishment of debt - - - 2
Other, net 11 4 32 15
Total other income (loss) (14) 3 (19) (29)
OTHER EXPENSE
Compensation and benefits 18 18 58 56
Contractual services 7 5 20 17
Professional fees 5 4 14 11
Other operating expenses 6 6 16 17
Federal Housing Finance Agency 3 3 10 8
Office of Finance 2 2 7 6
Voluntary community and housing contributions
40 5 49 17
Other, net 5 5 17 12
Total other expense 86 48 191 144
NET INCOME BEFORE ASSESSMENTS 227 295 787 785
Affordable Housing Program assessments 23 30 79 79
NET INCOME $ 204 $ 265 $ 708 $ 706
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF COMPREHENSIVE INCOME
(dollars in millions)
(Unaudited)
For the Three Months Ended
For the Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Net income $ 204 $ 265 $ 708 $ 706
Other comprehensive income (loss)
Net unrealized gains (losses) on available-for-sale securities (49) (100) 150 (90)
Pension and postretirement benefits - 1 - 1
Total other comprehensive income (loss) (49) (99) 150 (89)
TOTAL COMPREHENSIVE INCOME (LOSS) $ 155 $ 166 $ 858 $ 617
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CAPITAL
(dollars and shares in millions)
(Unaudited)
Capital Stock Class B (putable) Retained Earnings Accumulated Other Comprehensive Income (Loss) Total
Capital
Shares Par Value Unrestricted Restricted Total
BALANCE, JUNE 30, 2023 64 $ 6,449 $ 2,063 $ 791 $ 2,854 $ (107) $ 9,196
Comprehensive income (loss) - - 212 53 265 (99) 166
Proceeds from issuance of capital stock 24 2,362 - - - - 2,362
Repurchases/redemptions of capital stock (20) (1,999) - - - - (1,999)
Net stock reclassified (to) from mandatorily redeemable capital stock
- (1) - - - - (1)
Cash dividends on capital stock - - (114) - (114) - (114)
BALANCE, SEPTEMBER 30, 2023 68 $ 6,811 $ 2,161 $ 844 $ 3,005 $ (206) $ 9,610
BALANCE, JUNE 30, 2024 62 $ 6,185 $ 2,363 $ 996 $ 3,359 $ 19 $ 9,563
Comprehensive income (loss) - - 163 41 204 (49) 155
Proceeds from issuance of capital stock 21 2,130 - - - - 2,130
Repurchases/redemptions of capital stock (24) (2,423) - - - - (2,423)
Cash dividends on capital stock - - (141) - (141) - (141)
BALANCE, SEPTEMBER 30, 2024 59 $ 5,892 $ 2,385 $ 1,037 $ 3,422 $ (30) $ 9,284
BALANCE, DECEMBER 31, 2022 63 $ 6,250 $ 1,915 $ 703 $ 2,618 $ (117) $ 8,751
Comprehensive income (loss) - - 565 141 706 (89) 617
Proceeds from issuance of capital stock 87 8,705 - - - - 8,705
Repurchases/redemptions of capital stock (82) (8,143) - - - - (8,143)
Net stock reclassified (to) from mandatorily redeemable capital stock
- (1) - - - - (1)
Cash dividends on capital stock - - (319) - (319) - (319)
BALANCE, SEPTEMBER 30, 2023 68 $ 6,811 $ 2,161 $ 844 $ 3,005 $ (206) $ 9,610
BALANCE, DECEMBER 31, 2023 69 $ 6,873 $ 2,242 $ 896 $ 3,138 $ (180) $ 9,831
Comprehensive income (loss) - - 567 141 708 150 858
Proceeds from issuance of capital stock 66 6,595 - - - - 6,595
Repurchases/redemptions of capital stock (76) (7,576) - - - - (7,576)
Cash dividends on capital stock - - (424) - (424) - (424)
BALANCE, SEPTEMBER 30, 2024 59 $ 5,892 $ 2,385 $ 1,037 $ 3,422 $ (30) $ 9,284
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CASH FLOWS
(dollars in millions)
(Unaudited)
For the Nine Months Ended
September 30,
2024 2023
OPERATING ACTIVITIES
Net income $ 708 $ 706
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Depreciation and amortization/(accretion) 383 89
Net (gains) losses on trading securities (70) (23)
Net (gains) losses on financial instruments held under fair value option 63 70
Net change in derivatives and hedging activities (979) 1,011
Net (gains) losses on extinguishment of debt - (2)
Other adjustments, net 14 2
Net change in:
Accrued interest receivable (29) (312)
Other assets (1) (6)
Accrued interest payable (248) 612
Other liabilities 26 43
Total adjustments (841) 1,484
Net cash provided by (used in) operating activities (133) 2,190
INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits (338) (2,413)
Securities purchased under agreements to resell 3,200 (3,110)
Federal funds sold (1,000) (3,265)
Loans to other FHLBanks - (300)
Trading securities
Proceeds from sales 596 248
Proceeds from maturities and paydowns 8 1,035
Purchases (1,513) (237)
Available-for-sale securities
Proceeds from maturities and paydowns 1,703 2,671
Purchases (2,475) (8,936)
Held-to-maturity securities
Proceeds from maturities and paydowns 65 82
Advances
Repaid 335,641 473,606
Originated (311,355) (485,115)
Mortgage loans held for portfolio
Principal collected 732 589
Purchased (2,168) (1,802)
Other investing activities, net (5) (10)
Net cash provided by (used in) investing activities 23,091 (26,957)
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF DES MOINES
STATEMENTS OF CASH FLOWS (continued from previous page)
(dollars in millions)
(Unaudited)
For the Nine Months Ended
September 30,
2024 2023
FINANCING ACTIVITIES
Net change in deposits 28 162
Net proceeds (payments) on derivative contracts with financing elements
1 -
Net proceeds from issuance of consolidated obligations
Discount notes 1,352,170 1,328,205
Bonds 35,456 106,001
Payments for maturing and retiring consolidated obligations
Discount notes (1,347,732) (1,333,297)
Bonds (61,468) (76,548)
Proceeds from issuance of capital stock 6,595 8,705
Payments for repurchases/redemptions of capital stock (7,576) (8,143)
Payments for repurchases/redemptions of mandatorily redeemable capital stock
(3) (4)
Cash dividends paid (424) (319)
Net cash provided by (used in) financing activities (22,953) 24,762
Net increase (decrease) in cash and due from banks 5 (5)
Cash and due from banks at beginning of the period 31 89
Cash and due from banks at end of the period $ 36 $ 84
SUPPLEMENTAL DISCLOSURES
Cash Transactions:
Interest paid $ 6,265 $ 5,467
Affordable Housing Program payments 33 35
Non-Cash Transactions:
Capitalized interest on reverse mortgage investment securities 206 149
Traded but not settled investment security purchases - 533
The accompanying notes are an integral part of these financial statements.
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FEDERAL HOME LOAN BANK OF DES MOINES
CONDENSED NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
These unaudited Notes to the Financial Statements do not include all of the disclosures required by Generally Accepted Accounting Principles for annual financial statements and should be read in conjunction with the audited financial statements for the year ended December 31, 2023, which are contained in the Bank's 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 7, 2024. Throughout this Form 10-Q, acronyms and terms used are defined in the Glossary of Terms. Unless the context otherwise requires, the term "Bank" refers to the Federal Home Loan Bank of Des Moines or its management.
Background Information
The Bank is a federally chartered corporation that is exempt from all federal, state, and local taxation (except real property taxes and certain employer taxes) and is one of 11 district FHLBanks. The FHLBanks are GSEs and were created under the authority of the FHLBank Act in order to serve the public by enhancing the availability of funds for residential mortgages and targeted community development. The Bank is regulated by the Finance Agency.
The Bank is a cooperative, meaning it is owned by its customers, whom the Bank calls members. As a condition of membership in the Bank, all members must purchase and maintain capital stock to support business activities with the Bank. In return, the Bank provides a readily available source of funding and liquidity to its member institutions and eligible housing associates in Alaska, Hawaii, Idaho, Iowa, Minnesota, Missouri, Montana, North Dakota, Oregon, South Dakota, Utah, Washington, Wyoming, and the U.S. Pacific territories of American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. Commercial banks, savings institutions, credit unions, insurance companies, and CDFIs may apply for membership. State and local housing associates that meet certain statutory criteria may also borrow from the Bank; while eligible to borrow, housing associates are not members of the Bank and, as such, are not permitted to hold capital stock. All stockholders, including current and former members, may receive dividends on their capital stock investment to the extent declared by the Bank's Board of Directors.
Note 1 - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with GAAP for interim financial information. In the opinion of management, the unaudited interim financial information is complete and reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of results for the interim periods. The preparation of financial statements in accordance with GAAP requires management to make assumptions and estimates that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year ending December 31, 2024.
Reclassifications
Certain amounts in the Bank's 2023 financial statements have been reclassified to conform to the presentation for the three and nine months ended September 30, 2024. These amounts were not deemed to be material.
SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes to the Bank's significant accounting policies during the ninemonths ended September 30, 2024. Descriptions of all significant accounting policies are included in "Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" in the 2023 Form 10-K.
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Note 2 - Recently Adopted and Issued Accounting Guidance
Segment Reporting (ASU 2023-07)
On November 27, 2023, the FASB issued guidance designed to improve segment reporting, primarily by requiring enhanced disclosures about significant segment expenses and measures provided to the Bank's chief operating decision maker to assess performance. This guidance will become effective for the Bank for the annual period ended December 31, 2024, and for the interim periods beginning on January 1, 2025. The adoption of this guidance is not expected to have any effect on the Bank's financial condition, results of operations, or cash flows; however, it will require certain enhanced disclosures.
Disclosure Improvements in Response to SEC Initiative (ASU 2023-06)
On October 9, 2023, the FASB issued guidance amending various disclosure requirements in response to the SEC's initiative to update and simplify disclosures. This guidance will become effective for the Bank on the date the SEC removes the related disclosure requirements from its existing regulations, to avoid duplication in FASB codification. The adoption of this guidance is not expected to have any effect on the Bank's financial condition, results of operations, or cash flows; however, it may impact certain disclosures.
Note 3 - Investments
The Bank makes short-term investments in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold, and makes other investments in debt securities, which are classified as either trading, AFS, or HTM.
INTEREST-BEARING DEPOSITS, SECURITIES PURCHASED UNDER AGREEMENTS TO RESELL, AND FEDERAL FUNDS SOLD
The Bank invests in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold to provide short-term liquidity. These investments are generally transacted with counterparties that have received a credit rating of triple-B or greater (investment grade) by an NRSRO. At September 30, 2024 and December 31, 2023, none of these investments were with counterparties rated below triple-B; however, as of September 30, 2024 and December 31, 2023, approximately 41 percent and 35 percent were secured securities purchased under agreements to resell with unrated counterparties. NRSRO ratings may differ from any internal ratings of the investments by the Bank.
Federal funds sold are unsecured loans that are generally transacted on an overnight term. Finance Agency regulations include a limit on the amount of unsecured credit the Bank may extend to a counterparty. At September 30, 2024 and December 31, 2023, no allowance for credit losses was recorded for interest-bearing deposits and federal funds sold, as all assets were repaid or expected to be repaid according to their contractual terms. The carrying values of interest-bearing deposits and federal funds sold exclude accrued interest receivable of $18 million and $22 million at September 30, 2024 and December 31, 2023.
Securities purchased under agreements to resell are secured, short-term, and are structured such that they are evaluated regularly to determine if the market value of the underlying securities decreased below the market value required as collateral (i.e. subject to collateral maintenance provisions). If so, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash, generally by the next business day. Based upon the collateral held as security and collateral maintenance provisions with its counterparties, the Bank determined that no allowance for credit losses was needed for its securities purchased under agreements to resell at September 30, 2024 and December 31, 2023. The carrying value of securities purchased under agreements to resell excludes accrued interest receivable of $1 million and $5 million at September 30, 2024 and December 31, 2023.
DEBT SECURITIES
The Bank invests in debt securities, which are classified as either trading, AFS, or HTM. The Bank is prohibited by Finance Agency regulations from purchasing certain higher-risk securities, such as equity securities and debt instruments that are not investment quality. A security is considered to be investment quality if it has adequate financial backing so that full and timely payment of principal and interest is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security. Exceptions are allowed for certain investments targeted at low-income persons or communities, and instruments that experience credit deterioration after their purchase by the Bank.
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Trading Securities
Trading securities by major security type were as follows (dollars in millions):
September 30,
2024 		December 31,
2023
Non-mortgage-backed securities
U.S. Treasury obligations1
$ 3,913 $ 2,925
Other U.S. obligations1
61 68
GSE and Tennessee Valley Authority obligations 49 49
Other2
108 110
Total fair value $ 4,131 $ 3,152
1 Represents investment securities backed by the full faith and credit of the U.S. Government.
2 Consists of taxable municipal bonds.
Net Gains (Losses) on Trading Securities
The following table summarizes the components of "Net gains (losses) on trading securities" as presented on the Statements of Income (dollars in millions):
For the Three Months Ended
For the Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Net unrealized gains (losses) on trading securities held at period-end $ 87 $ (1) $ 70 $ 2
Net gains (losses) on trading securities no longer held at period-end - 1 - 21
Net gains (losses) on trading securities $ 87 $ - $ 70 $ 23
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AFS Securities
AFS securities by major security type were as follows (dollars in millions):
September 30, 2024
Amortized
Cost1
Gross
Unrealized
Gains 		Gross
Unrealized
Losses
Fair
Value
Non-mortgage-backed securities
Other U.S. obligations2
$ 166 $ - $ - $ 166
GSE and Tennessee Valley Authority obligations 306 23 - 329
State or local housing agency obligations 526 3 (5) 524
Other3
46 2 - 48
Total non-mortgage-backed securities 1,044 28 (5) 1,067
Mortgage-backed securities
U.S. obligations single-family2
4,698 19 (1) 4,716
GSE single-family 206 - (2) 204
GSE multifamily 18,714 33 (100) 18,647
Total mortgage-backed securities 23,618 52 (103) 23,567
Total $ 24,662 $ 80 $ (108) $ 24,634
December 31, 2023
Amortized
Cost1
Gross
Unrealized
Gains 		Gross
Unrealized
Losses
Fair
Value
Non-mortgage-backed securities
Other U.S. obligations2
$ 331 $ - $ (3) $ 328
GSE and Tennessee Valley Authority obligations 324 20 - 344
State or local housing agency obligations 461 2 (5) 458
Other3
157 3 - 160
Total non-mortgage-backed securities 1,273 25 (8) 1,290
Mortgage-backed securities
U.S. obligations single-family2
4,421 1 (24) 4,398
GSE single-family 183 - (3) 180
GSE multifamily 18,124 15 (184) 17,955
Total mortgage-backed securities 22,728 16 (211) 22,533
Total $ 24,001 $ 41 $ (219) $ 23,823
1 Amortized cost includes adjustments made to the cost basis of an investment for accretion, amortization, and/or fair value hedge accounting adjustments, and excludes accrued interest receivable of $80 million and $82 million at September 30, 2024 and December 31, 2023.
2 Represents investment securities backed by the full faith and credit of the U.S. Government.
3 Consists primarily of taxable municipal bonds.
The Bank had no sales of AFS securities during the three and nine months ended September 30, 2024 and 2023.
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Unrealized Losses
The following tables summarize AFS securities with gross unrealized losses by major security type and length of time that individual securities have been in a continuous unrealized loss position (dollars in millions). In cases where the gross unrealized losses for an investment category are less than $1 million, the losses are not reported.
September 30, 2024
Less than 12 Months 12 Months or More Total
Fair
Value 		Gross Unrealized
Losses 		Fair
Value 		Gross Unrealized
Losses 		Fair
Value 		Gross Unrealized
Losses
Non-mortgage-backed securities
Other U.S. obligations1
$ 11 $ - $ 32 $ - $ 43 $ -
State or local housing agency obligations 36 - 369 (5) 405 (5)
Total non-mortgage-backed securities 47 - 401 (5) 448 (5)
Mortgage-backed securities
U.S. obligations single-family1
179 - 862 (1) 1,041 (1)
GSE single-family - - 104 (2) 104 (2)
GSE multifamily 3,626 (11) 7,860 (89) 11,486 (100)
Total mortgage-backed securities 3,805 (11) 8,826 (92) 12,631 (103)
Total $ 3,852 $ (11) $ 9,227 $ (97) $ 13,079 $ (108)
December 31, 2023
Less than 12 Months 12 Months or More Total
Fair
Value 		Gross Unrealized
Losses 		Fair
Value 		Gross Unrealized
Losses 		Fair
Value 		Gross Unrealized
Losses
Non-mortgage-backed securities
Other U.S. obligations1
$ 87 $ (3) $ 42 $ - $ 129 $ (3)
State or local housing agency obligations - - 380 (5) 380 (5)
Total non-mortgage-backed securities 87 (3) 422 (5) 509 (8)
Mortgage-backed securities
U.S. obligations single-family1
1,813 (8) 2,410 (16) 4,223 (24)
GSE single-family 25 - 112 (3) 137 (3)
GSE multifamily 8,768 (70) 5,722 (114) 14,490 (184)
Total mortgage-backed securities 10,606 (78) 8,244 (133) 18,850 (211)
Total $ 10,693 $ (81) $ 8,666 $ (138) $ 19,359 $ (219)
1 Represents investment securities backed by the full faith and credit of the U.S. Government.
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Contractual Maturity
The following table summarizes AFS securities by contractual maturity. Expected maturities of some securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees (dollars in millions):
September 30, 2024 December 31, 2023
Year of Contractual Maturity Amortized
Cost 		Fair
Value 		Amortized
Cost 		Fair
Value
Non-mortgage-backed securities
Due in one year or less $ 73 $ 73 $ 214 $ 212
Due after one year through five years 340 342 417 417
Due after five years through ten years 213 214 243 245
Due after ten years 418 438 399 416
Total non-mortgage-backed securities 1,044 1,067 1,273 1,290
Mortgage-backed securities 23,618 23,567 22,728 22,533
Total $ 24,662 $ 24,634 $ 24,001 $ 23,823
HTM Securities
HTM securities by major security type were as follows (dollars in millions):
September 30, 2024
Amortized
Cost1
Gross
Unrealized
Gains 		Gross
Unrealized
Losses 		Fair
Value
Non-mortgage-backed securities
GSE and Tennessee Valley Authority obligations $ 360 $ 13 $ (2) $ 371
State or local housing agency obligations 30 - - 30
Total non-mortgage-backed securities 390 13 (2) 401
Mortgage-backed securities
U.S. obligations single-family2
2 - - 2
GSE single-family 389 - (6) 383
Private-label 2 - - 2
Total mortgage-backed securities 393 - (6) 387
Total $ 783 $ 13 $ (8) $ 788
December 31, 2023
Amortized
Cost1
Gross
Unrealized
Gains 		Gross
Unrealized
Losses 		Fair
Value
Non-mortgage-backed securities
GSE and Tennessee Valley Authority obligations $ 364 $ 11 $ (3) $ 372
State or local housing agency obligations 31 - - 31
Total non-mortgage-backed securities 395 11 (3) 403
Mortgage-backed securities
U.S. obligations single-family2
1 - - 1
GSE single-family 453 - (10) 443
Private-label 3 - - 3
Total mortgage-backed securities 457 - (10) 447
Total $ 852 $ 11 $ (13) $ 850
1 Amortized cost includes adjustments made to the cost basis of an investment for accretion or amortization and excludes accrued interest receivable of $10 million and $5 million at September 30, 2024 and December 31, 2023.
2 Represents investment securities backed by the full faith and credit of the U.S. Government.
The Bank had no sales of HTM securities during the three and nine months ended September 30, 2024 and 2023.
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Contractual Maturity
The following table summarizes HTM securities by contractual maturity. Expected maturities of some securities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment fees (dollars in millions):
September 30, 2024 December 31, 2023
Year of Contractual Maturity Amortized
Cost 		Fair
Value 		Amortized
Cost 		Fair
Value
Non-mortgage-backed securities
Due after one year through five years $ 246 $ 247 $ 249 $ 249
Due after five years through ten years 73 77 73 76
Due after ten years 71 77 73 78
Total non-mortgage-backed securities 390 401 395 403
Mortgage-backed securities 393 387 457 447
Total $ 783 $ 788 $ 852 $ 850
ALLOWANCE FOR CREDIT LOSSES ON AFS AND HTM SECURITIES
The Bank evaluates AFS and HTM investment securities for credit losses on a quarterly basis. At September 30, 2024 and December 31, 2023, the Bank had no allowance for credit losses recorded on its AFS or HTM securities. For additional details on the Bank's allowance methodology, refer to "Item 8. Financial Statements and Supplementary Data - Note 4 - Investments" in the 2023 Form 10-K.
Note 4 - Advances
REDEMPTION TERM
The following table summarizes the Bank's advances outstanding by redemption term (dollars in millions):
September 30, 2024 December 31, 2023
Redemption Term
Amount1
Weighted
Average
Interest
Rate
Amount1
Weighted
Average
Interest
Rate
Overdrawn demand deposit accounts
$ 5 6.61 % $ 2 7.14 %
Due in one year or less 44,175 4.76 52,890 5.34
Due after one year through two years 14,689 4.24 14,866 4.12
Due after two years through three years 13,732 4.04 13,230 3.95
Due after three years through four years 13,314 4.37 8,689 4.35
Due after four years through five years 7,459 4.84 30,189 5.55
Thereafter 5,561 3.94 3,355 3.51
Total par value 98,935 4.49 % 123,221 4.98 %
Premiums 3 6
Discounts (16) -
Fair value hedging adjustments 1 (697)
Total $ 98,923 $ 122,530
1 Excludes accrued interest receivable of $183 million and $392 million at September 30, 2024 and December 31, 2023.
The Bank offers advances to members and eligible housing associates that may be prepaid on predetermined dates (call dates) prior to maturity without incurring prepayment fees (callable advances). Other advances may require a prepayment fee or credit that makes the Bank financially indifferent to the prepayment of the advance. At September 30, 2024 and December 31, 2023, the Bank had callable advances outstanding totaling $10.5 billion and $31.8 billion.
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The following table summarizes advances by year of redemption term or next call date for callable advances (dollars in millions):
Redemption Term
or Next Call Date
September 30, 2024 December 31, 2023
Overdrawn demand deposit accounts
$ 5 $ 2
Due in one year or less 53,482 82,983
Due after one year through two years 12,887 12,136
Due after two years through three years 11,285 10,584
Due after three years through four years 11,016 5,980
Due after four years through five years 4,741 8,228
Thereafter 5,519 3,308
Total par value $ 98,935 $ 123,221
PREPAYMENT FEES
The Bank generally charges a prepayment fee for advances that a borrower elects to terminate prior to the stated maturity or outside of a predetermined call date. The fees charged are priced to make the Bank financially indifferent to the prepayment of the advance. For certain advances with symmetrical prepayment features, the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. Prepayment fees and credits are recorded net of the hedged item fair value hedging adjustments, if applicable, in advance interest income on the Statements of Income.
ADVANCE CONCENTRATIONS
The Bank's advances are primarily concentrated in commercial banks and insurance companies. The following table summarizes advances outstanding to members exceeding 10 percent of total advances outstanding at September 30, 2024 (dollars in millions):
Amount % of Total Advances
Athene Annuity and Life Company1
$ 12,381 13 %
1 Excludes $0.6 billion of advances with Athene Annuity & Life Assurance Company, an affiliate of Athene Annuity and Life Company.
ALLOWANCE FOR CREDIT LOSSES
The Bank evaluates advances for credit losses on a quarterly basis. At September 30, 2024 and December 31, 2023, none of the Bank's advances were past due, on non-accrual status, or considered impaired. The Bank considers an advance past due if a default of contractual principal or interest exists for a period of 30 days or more. In addition, there were no modifications related to advances resulting from a borrower experiencing financial difficulties during the nine months ended September 30, 2024 and 2023.
The Bank has never experienced a credit loss on its advances. Based upon the Bank's collateral and lending policies, the collateral held as security, and the repayment history on advances, management has determined that there were no expected credit losses on its advances at September 30, 2024 and December 31, 2023. For additional information on the Bank's allowance methodology, including eligible collateral types, see "Item 8. Financial Statements and Supplementary Data - Note 5 - Advances" in the 2023 Form 10-K.
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Note 5 - Mortgage Loans Held for Portfolio
Mortgage loans held for portfolio include conventional mortgage loans and government-guaranteed or -insured mortgage loans obtained primarily through the MPF program. The Bank's mortgage loan program involves investment by the Bank in single-family mortgage loans held for portfolio that are purchased from PFIs. Mortgage loans may also be acquired through participations in pools of eligible mortgage loans purchased from other FHLBanks. The Bank's PFIs generally originate, service, and credit enhance mortgage loans that are sold to the Bank. PFIs participating in the servicing release program do not service the loans owned by the Bank. The servicing on these loans is sold concurrently by the PFI to a designated mortgage service provider.
The following table presents information on the Bank's mortgage loans held for portfolio (dollars in millions):
September 30, 2024 December 31, 2023
Fixed rate, long-term1single-family mortgage loans
$ 10,437 $ 8,939
Fixed rate, medium-term2single-family mortgage loans
876 945
Total unpaid principal balance 11,313 9,884
Premiums 126 113
Discounts (29) (11)
Basis adjustments from mortgage loan purchase commitments (8) (13)
Total mortgage loans held for portfolio3
11,402 9,973
Allowance for credit losses (4) (6)
Total mortgage loans held for portfolio, net $ 11,398 $ 9,967
1 Long-term is defined as an original term of greater than 15 years and up to 30 years.
2 Medium-term is defined as an original term of 15 years or less.
3 Excludes accrued interest receivable of $72 million and $58 million at September 30, 2024 and December 31, 2023.
The following table presents the Bank's mortgage loans held for portfolio by collateral or guarantee type (dollars in millions):
September 30, 2024 December 31, 2023
Conventional mortgage loans $ 10,942 $ 9,506
Government-insured mortgage loans 371 378
Total unpaid principal balance $ 11,313 $ 9,884
PAYMENT STATUS OF MORTGAGE LOANS
Payment status is the key credit quality indicator for conventional mortgage loans and allows the Bank to monitor borrower performance. Past due loans are those where the borrower has failed to make contractual principal and/or interest payments for a period of 30 days or more. Other delinquency statistics include non-accrual loans and loans in process of foreclosure.
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The following tables present the payment status for conventional mortgage loans (dollars in millions):
September 30, 2024
Origination Year
Prior to 2020
2020 to 2024
Total
Past due 30 - 59 days $ 26 $ 32 $ 58
Past due 60 - 89 days 7 7 14
Past due 90 - 179 days 6 5 11
Past due 180 days or more 3 4 7
Total past due mortgage loans 42 48 90
Total current mortgage loans 2,430 8,505 10,935
Total amortized cost of mortgage loans1
$ 2,472 $ 8,553 $ 11,025
December 31, 2023
Origination Year
Prior to 2019
2019 to 2023
Total
Past due 30 - 59 days $ 20 $ 30 $ 50
Past due 60 - 89 days 6 6 12
Past due 90 - 179 days 5 7 12
Past due 180 days or more 4 1 5
Total past due mortgage loans 35 44 79
Total current mortgage loans 1,752 7,758 9,510
Total amortized cost of mortgage loans1
$ 1,787 $ 7,802 $ 9,589
1 Amortized cost represents the unpaid principal balance adjusted for unamortized premiums, discounts, price adjustment fees, basis adjustments, and direct write-downs. Amortized cost excludes accrued interest receivable.
The following tables present other delinquency statistics for mortgage loans (dollars in millions):
September 30, 2024
Amortized Cost Conventional Government-Insured Total
In process of foreclosure1
$ 4 $ 1 $ 5
Serious delinquency rate2
- % 1 % - %
Past due 90 days or more and still accruing interest3
$ - $ 5 $ 5
Non-accrual mortgage loans4
$ 47 $ - $ 47
December 31, 2023
Amortized Cost Conventional Government- Insured Total
In process of foreclosure1
$ 2 $ 1 $ 3
Serious delinquency rate2
- % 1 % - %
Past due 90 days or more and still accruing interest3
$ - $ 5 $ 5
Non-accrual mortgage loans4
$ 40 $ - $ 40
1 Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported.
2 Represents mortgage loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of total mortgage loans. Serious delinquency rate on conventional loans was less than one percent at both September 30, 2024 and December 31, 2023.
3 Represents government-insured mortgage loans that are 90 days or more past due.
4 Represents conventional mortgage loans that are 90 days or more past due or for which the collection of interest or principal is doubtful. At September 30, 2024 and December 31, 2023, $26 million and $24 million of conventional mortgage loans on non-accrual status were evaluated individually and did not have a related allowance for credit losses because these loans were either previously charged off to the expected recoverable value and/or the fair value of the underlying collateral was greater than the amortized cost of the loans.
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ALLOWANCE FOR CREDIT LOSSES
The Bank evaluates mortgage loans for credit losses on a quarterly basis. At September 30, 2024 and December 31, 2023, the Bank's allowance for credit losses on conventional mortgage loans was $4 million and $6 million. The Bank recorded no credit losses on its government-insured mortgage loans at September 30, 2024 and December 31, 2023. For additional information on the Bank's allowance methodology, refer to "Item 8. Financial Statements and Supplementary Data - Note 6 - Mortgage Loans Held for Portfolio" in the 2023 Form 10-K.
Note 6 - Derivatives and Hedging Activities
NATURE OF BUSINESS ACTIVITY
The Bank enters into derivative contracts to manage the interest rate risk exposures inherent in its otherwise unhedged assets and funding positions. Finance Agency regulations and the Bank's risk management policies establish guidelines for derivatives, prohibit trading in or the speculative use of derivatives, and limit credit risk arising from derivatives.
For additional information on the Bank's derivative and hedging accounting policies, see "Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" in the 2023 Form 10-K. For additional information on the types of derivatives and hedged items utilized by the Bank, see "Item 8. Financial Statements and Supplementary Data - Note 7 - Derivatives and Hedging Activities" in the 2023 Form 10-K.
FINANCIAL STATEMENT EFFECT AND ADDITIONAL FINANCIAL INFORMATION
The notional amount of derivatives serves as a factor in determining periodic interest payments and cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor the overall exposure of the Bank to credit and market risk. The risks of derivatives can be measured meaningfully on a portfolio basis that takes into account the counterparties, the types of derivatives, the items being hedged, and any offsets between the derivatives and the items being hedged.
The following table summarizes the Bank's notional amount and fair value of derivative instruments and total derivative assets and liabilities. Total derivative assets and liabilities include the effect of netting adjustments and cash collateral. For purposes of this disclosure, the derivative values include the fair value of derivatives and the related accrued interest (dollars in millions):
September 30, 2024 December 31, 2023
Notional
Amount 		Derivative
Assets 		Derivative
Liabilities 		Notional
Amount 		Derivative
Assets 		Derivative
Liabilities
Derivatives designated as hedging instruments (fair value hedges)
Interest rate swaps $ 102,516 $ 396 $ 50 $ 112,954 $ 290 $ 98
Derivatives not designated as hedging instruments (economic hedges)
Interest rate swaps 52,934 8 7 53,050 1 2
Forward settlement agreements 216 1 - 115 - 1
Mortgage loan purchase commitments 213 - 1 112 1 -
Total derivatives not designated as hedging instruments 53,363 9 8 53,277 2 3
Total derivatives before netting and collateral adjustments $ 155,879 405 58 $ 166,231 292 101
Netting adjustments and cash collateral1
1,032 (52) 975 (94)
Total derivative assets and derivative liabilities $ 1,437 $ 6 $ 1,267 $ 7
1 Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral, including accrued interest, held or placed with the same clearing agent and/or counterparty. At both September 30, 2024 and December 31, 2023, cash collateral, including accrued interest, posted by the Bank was $1.3 billion. At September 30, 2024 and December 31, 2023, the Bank held cash collateral, including accrued interest, from clearing agents or counterparties of $221 million and $197 million.
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The following tables summarize the net gains (losses) on qualifying and discontinued fair value hedging relationships recorded in net interest income, including the net interest settlements on derivatives, as well as total income (expense) by hedged product recorded on the Statements of Income (dollars in millions):
For the Three Months Ended September 30, 2024
Interest Income (Expense)
Advances AFS Securities Consolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1
$ 1,476 $ 394 $ (1,137)
Gains (losses) on fair value hedging relationships
Interest rate contracts
Derivatives2
$ (830) $ (637) $ 172
Hedged items3
1,070 745 (225)
Net gains (losses) on fair value hedging relationships $ 240 $ 108 $ (53)
For the Three Months Ended September 30, 2023
Interest Income (Expense)
Advances AFS Securities Consolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1
$ 1,740 $ 308 $ (1,517)
Gains (losses) on fair value hedging relationships
Interest rate contracts
Derivatives2
$ 431 $ 651 $ (65)
Hedged items3
(182) (567) (12)
Net gains (losses) on fair value hedging relationships $ 249 $ 84 $ (77)
For the Nine Months Ended September 30, 2024
Interest Income (Expense)
Advances AFS Securities Consolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1
$ 4,708 $ 1,144 $ (3,749)
Gains (losses) on fair value hedging relationships
Interest rate contracts
Derivatives2
$ (11) $ 2 $ (29)
Hedged items3
697 290 (138)
Net gains (losses) on fair value hedging relationships $ 686 $ 292 $ (167)
For the Nine Months Ended September 30, 2023
Interest Income (Expense)
Advances AFS Securities Consolidated Obligation Bonds
Total interest income (expense) recorded on the Statements of Income1
$ 4,742 $ 826 $ (3,864)
Gains (losses) on fair value hedging relationships
Interest rate contracts
Derivatives2
$ 1,035 $ 873 $ (200)
Hedged items3
(448) (623) (5)
Net gains (losses) on fair value hedging relationships $ 587 $ 250 $ (205)
1 Amounts shown to give context to the disclosure and include total interest income (expense) of the products indicated, including coupon, prepayment fees, amortization, and derivative net interest settlements. Interest income (expense) amounts also include gains and losses on derivatives and hedged items in fair value hedging relationships.
2 Includes changes in fair value and net interest settlements on derivatives.
3 Includes changes in fair value and amortization/accretion of basis adjustments on closed hedge relationships.
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The following tables summarize cumulative fair value hedging adjustments and the related amortized cost of the hedged items (dollars in millions):
September 30, 2024
Advances AFS Securities Consolidated Obligation Bonds
Amortized cost of hedged asset/ liability1
$ 57,895 $ 17,294 $ 27,179
Fair value hedging adjustments
Changes in fair value for active hedging relationships included in amortized cost $ 38 $ (110) $ 114
Basis adjustments for discontinued hedging relationships included in amortized cost (37) (27) (1)
Total amount of fair value hedging adjustments $ 1 $ (137) $ 113
December 31, 2023
Advances AFS Securities Consolidated Obligation Bonds
Amortized cost of hedged asset/ liability1
$ 43,584 $ 16,749 $ 51,393
Fair value hedging adjustments
Changes in fair value for active hedging relationships included in amortized cost $ (645) $ (395) $ (17)
Basis adjustments for discontinued hedging relationships included in amortized cost (52) (32) (8)
Total amount of fair value hedging adjustments $ (697) $ (427) $ (25)
1 Represents the portion of amortized cost designated as a hedged item in an active or discontinued fair value hedging relationship. Amortized cost includes fair value hedging adjustments.
The following table summarizes the components of "Net gains (losses) on derivatives" as presented on the Statements of Income (dollars in millions):
For the Three Months Ended
For the Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Derivatives not designated as hedging instruments (economic hedges)
Interest rate swaps $ 22 $ 24 $ - $ 78
Forward settlement agreements (5) 3 (4) 5
Mortgage loan purchase commitments 5 (3) 3 (6)
Net interest settlements (25) (7) (59) (55)
Total net gains (losses) related to derivatives not designated as hedging instruments (3) 17 (60) 22
Price alignment amount1
1 (9) 2 (21)
Net gains (losses) on derivatives $ (2) $ 8 $ (58) $ 1
1 Represents the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract, The price alignment amount on variation margin for daily settled derivative contracts designated as hedging instruments are recorded in the same line item as the earnings effect of the hedged item.
MANAGING CREDIT RISK ON DERIVATIVES
The Bank is subject to credit risk due to the risk of nonperformance by counterparties to its derivative contracts. The Bank manages credit risk through credit analysis of derivative counterparties, collateral requirements, and adherence to the requirements set forth in the Bank's policies, CFTC regulations, and Finance Agency regulations.
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The Bank transacts most of its derivative transactions with large banks and major broker-dealers. Over-the-counter derivative transactions may be either executed directly with a counterparty, referred to as uncleared derivatives, or cleared through a clearing agent with a clearinghouse, referred to as cleared derivatives. Once a derivative transaction has been accepted for clearing by a clearinghouse, the derivative transaction is novated and the executing counterparty is replaced with the clearinghouse. The Bank is not a derivative dealer and does not trade derivatives for short-term profit.
For uncleared derivatives, the degree of credit risk is impacted by the extent to which master netting arrangements are included in the derivative contracts to mitigate the risk. The Bank requires collateral agreements on its uncleared derivatives.
Uncleared derivative transactions executed on or after September 1, 2022 are subject to two-way initial margin requirements as mandated by the Dodd-Frank Act, if the Bank's aggregate uncleared derivative transactions exposure to a counterparty exceeds a specified threshold. The initial margin is required to be held at a third-party custodian and does not change ownership. Rather, the party in respect of which the initial margin has been posted to the third-party custodian will have a security interest in the amount of initial margin required under the uncleared margin rules and can only take ownership upon the occurrence of certain events, including an event of default due to bankruptcy, insolvency, or similar proceeding. As of September 30, 2024, the Bank was not required to post initial margin on its uncleared derivative transactions in accordance with the noted regulations.
For uncleared transactions, the derivative agreements are generally fully collateralized with a zero unsecured threshold in accordance with variation margin requirements issued by the U.S. federal bank regulatory agencies and the CFTC.
For cleared derivatives, the clearinghouse is the Bank's counterparty. The Bank utilizes two clearinghouses, CME Clearing and LCH Ltd., for all cleared derivative transactions. CME Clearing and LCH Ltd. notify the clearing agent of the required initial margin and daily variation margin requirements, and the clearing agent in turn notifies the Bank.
Each clearinghouse determines initial margin requirements which are considered cash collateral. Generally credit ratings are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including, but not limited to, credit rating downgrades. The Bank was not required to post additional initial margin by its clearing agent, based on credit considerations, at September 30, 2024. Variation margin requirements with each clearinghouse are based on changes in the fair value of cleared derivatives and are legally characterized as daily settlement payments, rather than cash collateral.
The requirement that the Bank post initial and variation margin through the clearing agent, to the clearinghouse, exposes the Bank to institutional credit risk if the clearing agent or the clearinghouse fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral/payments for changes in the fair value of cleared derivatives is posted daily through a clearing agent.
OFFSETTING OF DERIVATIVE ASSETS AND DERIVATIVE LIABILITIES
The Bank presents derivative instruments, related cash collateral received or pledged, and associated accrued interest on a net basis by clearing agent and/or by counterparty when it has met the netting requirements. Additional information regarding these agreements is provided in "Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies" in the 2023 Form 10-K.
The Bank has analyzed the enforceability of offsetting rights incorporated in its cleared derivative transactions and has determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable law upon an event of default, including a bankruptcy, insolvency, or similar proceeding involving the clearinghouse or the clearing agent, or both. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular clearinghouse.
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The following tables present the fair value of derivative instruments meeting or not meeting the netting requirements and the related collateral received from or pledged to counterparties (dollars in millions):
September 30, 2024
Derivative Instruments Meeting Netting Requirements
Gross Amount Recognized1
Gross Amount of Netting Adjustments and Cash Collateral
Derivative Instruments Not Meeting Netting Requirements2
Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Uncleared derivatives $ 244 $ (243) $ - $ 1
Cleared derivatives 161 1,275 - 1,436
Total $ 405 $ 1,032 $ - $ 1,437
Derivative Liabilities
Uncleared derivatives $ 38 $ (33) $ 1 $ 6
Cleared derivatives 19 (19) - -
Total $ 57 $ (52) $ 1 $ 6
December 31, 2023
Derivative Instruments Meeting Netting Requirements
Gross Amount Recognized1
Gross Amount of Netting Adjustments and Cash Collateral
Derivative Instruments Not Meeting Netting Requirements2
Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Uncleared derivatives $ 248 $ (245) $ 1 $ 4
Cleared derivatives 43 1,220 - 1,263
Total $ 291 $ 975 $ 1 $ 1,267
Derivative Liabilities
Uncleared derivatives $ 95 $ (88) $ - $ 7
Cleared derivatives 6 (6) - -
Total $ 101 $ (94) $ - $ 7
1 Represents derivative assets and derivative liabilities prior to netting adjustments and cash collateral, including accrued interest.
2 Represents mortgage loan purchase commitments not subject to enforceable master netting requirements.
Note 7 - Consolidated Obligations
Consolidated obligations consist of bonds and discount notes. The FHLBanks issue consolidated obligations through the Office of Finance as their agent. Bonds are issued primarily to raise intermediate- and long-term funds for the Bank and are not subject to any statutory or regulatory limits on their maturity. Discount notes are issued primarily to raise short-term funds for the Bank and have original maturities of up to one year. Discount notes sell at or below their face amount and are redeemed at par value when they mature.
Although the Bank is primarily liable for the portion of consolidated obligations issued on its behalf, it is also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all FHLBank System consolidated obligations. The Finance Agency, at its discretion, may require any FHLBank to make principal and/or interest payments due on any consolidated obligation, whether or not the primary obligor FHLBank has defaulted on the payment of that consolidated obligation. The Finance Agency has never exercised this discretionary authority. At September 30, 2024 and December 31, 2023, the total par value of outstanding consolidated obligations of the FHLBanks was $1,172.8 billion and $1,204.3 billion.
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DISCOUNT NOTES
The following table summarizes the Bank's discount notes (dollars in millions):
September 30, 2024 December 31, 2023
Amount Weighted
Average
Interest
Rate 		Amount Weighted
Average
Interest
Rate
Par value $ 60,184 4.81 % $ 55,288 5.15 %
Discounts and concessions1
(767) (736)
Fair value option adjustments 48 (15)
Total $ 59,465 $ 54,537
1 Concessions represent fees paid to dealers in connections with the issuance of certain consolidated obligation discount notes.
BONDS
The following table summarizes the Bank's bonds outstanding by contractual maturity (dollars in millions):
September 30, 2024 December 31, 2023
Year of Contractual Maturity Amount Weighted
Average
Interest
Rate 		Amount Weighted
Average
Interest
Rate
Due in one year or less $ 47,858 4.82 % $ 63,887 5.10 %
Due after one year through two years 27,052 4.87 39,323 5.38
Due after two years through three years 2,981 3.78 4,159 4.00
Due after three years through four years 2,831 4.04 1,416 3.28
Due after four years through five years 3,147 4.25 2,507 4.19
Thereafter 7,082 3.88 5,671 3.14
Total par value 90,951 4.68 % 116,963 5.02 %
Premiums 29 52
Discounts and concessions1
(26) (29)
Fair value hedging adjustments 113 (25)
Total $ 91,067 $ 116,961
1 Concessions represent fees paid to dealers in connections with the issuance of certain consolidated obligation bonds.
The following table summarizes the Bank's bonds outstanding by call features (dollars in millions):
September 30, 2024 December 31, 2023
Non-callable or non-putable $ 63,270 $ 77,731
Callable 27,681 39,232
Total par value $ 90,951 $ 116,963
The following table summarizes the Bank's bonds outstanding by year of contractual maturity or next call date (dollars in millions):
Year of Contractual Maturity or Next Call Date September 30, 2024 December 31, 2023
Due in one year or less $ 65,991 $ 76,142
Due after one year through two years 19,053 33,413
Due after two years through three years 2,129 3,479
Due after three years through four years 1,805 880
Due after four years through five years 1,085 1,819
Thereafter 888 1,230
Total par value $ 90,951 $ 116,963
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Note 8 - Capital
CAPITAL STOCK
The Bank's capital stock has a par value of $100 per share, and all shares are issued, redeemed, and repurchased only at the stated par value. The Bank issues a single class of capital stock (Class B capital stock) and has two subclasses of Class B capital stock: membership and activity-based. Each member must purchase and hold membership capital stock in an amount equal to 0.06 percent of its total assets as of the preceding December 31st, subject to a cap of $10 million and a floor of $10,000. Each member is also required to purchase activity-based capital stock equal to 4.50 percent of its outstanding advances, 4.00 percent of its outstanding mortgage loans, and 0.10 percent of its standby letters of credit. All capital stock issued is subject to a notice of redemption period of five years.
The capital stock requirements established in the Bank's Capital Plan are designed so that the Bank can remain adequately capitalized as member activity changes. The Bank's Board of Directors may make adjustments to the capital stock requirements within ranges established in the Capital Plan.
EXCESS STOCK
Capital stock owned by members in excess of their investment requirement is deemed excess capital stock. Under its Capital Plan, the Bank, at its discretion and upon 15 days written notice, may repurchase excess membership capital stock. The Bank, at its discretion, may also repurchase excess activity-based capital stock to the extent that (i) the excess capital stock balance exceeds an operational threshold set forth in the Capital Plan, which is currently set at zero, or (ii) a member submits a notice to redeem all or a portion of the excess activity-based capital stock. At September 30, 2024 and December 31, 2023, the Bank had no excess capital stock outstanding.
MANDATORILY REDEEMABLE CAPITAL STOCK
The Bank reclassifies capital stock subject to redemption from equity to a liability, which represents MRCS, at the time shares meet the definition of a mandatorily redeemable financial instrument. This occurs after a member provides written notice of intention to withdraw from membership, becomes ineligible for continuing membership, or attains non-member status by merger or consolidation, charter termination, or other involuntary termination from membership. Dividends on MRCS are classified as interest expense on the Statements of Income.
The following table summarizes changes in MRCS (dollars in millions):
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2024 2023 2024 2023
Balance, beginning of period $ 10 $ 13 $ 12 $ 15
Capital stock reclassified to (from) MRCS, net - 1 - 1
Net payments for repurchases/redemptions of MRCS (1) (2) (3) (4)
Balance, end of period $ 9 $ 12 $ 9 $ 12
The following table summarizes the Bank's MRCS by year of contractual redemption (dollars in millions):
Year of Contractual Redemption1
September 30, 2024 December 31, 2023
Due after one year through two years $ 5 $ -
Due after two years through three years - 6
Past contractual redemption date due to outstanding activity with the Bank 4 6
Total $ 9 $ 12
1 At the Bank's election, MRCS may be redeemed prior to the expiration of the five year redemption period that commences on the date of the notice of redemption.
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RESTRICTED RETAINED EARNINGS
The Bank entered into a JCE Agreement with all of the other FHLBanks in 2011. The JCE Agreement, as amended, is intended to enhance the capital position of the Bank over time. Under the JCE Agreement, each FHLBank is required to allocate 20 percent of its quarterly net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least one percent of its average balance of outstanding consolidated obligations for the calendar quarter. The restricted retained earnings are not available to pay dividends. At September 30, 2024 and December 31, 2023, the Bank's restricted retained earnings account totaled $1.0 billion and $0.9 billion.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table summarizes changes in AOCI (dollars in millions):
Net unrealized gains (losses) on AFS securities (Note 3) Pension and postretirement benefits Total AOCI
Balance, June 30, 2023 $ (104) $ (3) $ (107)
Other comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securities (100) - (100)
Net actuarial gains (losses) - 1 1
Net current period other comprehensive income (loss) (100) 1 (99)
Balance, September 30, 2023 $ (204) $ (2) $ (206)
Balance, June 30, 2024 $ 21 $ (2) $ 19
Other comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securities (49) - (49)
Net current period other comprehensive income (loss) (49) - (49)
Balance, September 30, 2024 $ (28) $ (2) $ (30)
Balance, December 31, 2022 $ (114) $ (3) $ (117)
Other comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securities (90) - (90)
Net actuarial gains (losses) - 1 1
Net current period other comprehensive income (loss) (90) 1 (89)
Balance, September 30, 2023 $ (204) $ (2) $ (206)
Balance, December 31, 2023 $ (178) $ (2) $ (180)
Other comprehensive income (loss) before reclassifications
Net unrealized gains (losses) on AFS securities 150 - 150
Net current period other comprehensive income (loss) 150 - 150
Balance, September 30, 2024 $ (28) $ (2) $ (30)
REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to three regulatory capital requirements:
•Risk-based capital. The Bank must maintain at all times permanent capital greater than or equal to the sum of its credit, market, and operational risk capital requirements, all calculated in accordance with Finance Agency regulations. Only permanent capital, defined as the amounts paid-in for Class B capital stock (including MRCS), and retained earnings can satisfy this risk-based capital requirement.
•Regulatory capital. The Bank is required to maintain a minimum four percent capital-to-asset ratio, which is defined as total regulatory capital divided by total assets. Total regulatory capital includes Class B stock (including MRCS) and retained earnings.
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•Leverage capital. The Bank is required to maintain a minimum five percent leverage ratio, which is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times, divided by total assets. The Bank did not hold any nonpermanent capital at September 30, 2024 and December 31, 2023.
In addition to the requirements previously discussed, the Capital Stock AB requires each FHLBank to maintain at all times a ratio of at least two percent of capital stock to total assets. For purposes of the Capital Stock AB, capital stock includes MRCS. The capital stock to total assets ratio is measured on a daily average basis at month end.
If the Bank's capital falls below the required levels, the Finance Agency has authority to take actions necessary to return it to levels that it deems to be consistent with safe and sound business operations.
The following table shows the Bank's compliance with the Finance Agency's regulatory capital requirements (dollars in millions):
September 30, 2024 December 31, 2023
Required Actual Required Actual
Regulatory capital requirements
Risk-based capital $ 1,533 $ 9,323 $ 1,641 $ 10,023
Regulatory capital $ 6,479 $ 9,323 $ 7,376 $ 10,023
Leverage capital $ 8,099 $ 13,986 $ 9,220 $ 15,034
Capital-to-assets ratio 4.00 % 5.76 % 4.00 % 5.44 %
Capital stock-to-assets ratio 2.00 % 3.44 % 2.00 % 3.59 %
Leverage ratio 5.00 % 8.63 % 5.00 % 8.15 %
Note 9 - Fair Value
Fair value amounts are determined by the Bank using available market information and reflect the Bank's best judgment of appropriate valuation methods. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., exit price). The fair value hierarchy requires an entity to maximize the use of significant observable inputs and minimize the use of significant unobservable inputs when measuring fair value. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of market observability of the fair value measurement for the asset or liability.
The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels:
•Level 1 Inputs. Quoted prices (unadjusted) for identical assets or liabilities in an active market that the Bank can access on the measurement date. An active market for an asset or liability is a market in which the transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
•Level 2 Inputs. Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals and implied volatilities), and (iv) market-corroborated inputs.
•Level 3 Inputs.Unobservable inputs for the asset or liability. Valuations are derived from techniques that use significant assumptions not observable in the market, which may include pricing models, discounted cash flow models, or similar techniques.
The Bank reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. The Bank had no transfers of assets or liabilities into or out of Level 3 of the fair value hierarchy during the nine months ended September 30, 2024 and 2023.
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The following table summarizes the carrying value, fair value, and fair value hierarchy of the Bank's financial instruments (dollars in millions). The Bank records trading securities, AFS securities, derivative assets, derivative liabilities, financial instruments held under the fair value option, and certain other assets at fair value on a recurring basis, and on occasion certain impaired mortgage loans held for portfolio on a non-recurring basis. The Bank records all other financial assets and liabilities at amortized cost. The fair values do not represent an estimate of the overall market value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of assets and liabilities.
September 30, 2024
Fair Value
Financial Instruments Carrying Value Level 1 Level 2 Level 3
Netting Adjustments and Cash Collateral1
Total
Assets
Cash and due from banks $ 36 $ 36 $ - $ - $ - $ 36
Interest-bearing deposits 3,781 - 3,781 - - 3,781
Securities purchased under agreements to resell 8,200 - 8,200 - - 8,200
Federal funds sold 8,120 - 8,120 - - 8,120
Trading securities 4,131 - 4,131 - - 4,131
Available-for-sale securities 24,634 - 24,634 - - 24,634
Held-to-maturity securities 783 - 786 2 - 788
Advances 98,923 - 98,993 - - 98,993
Mortgage loans held for portfolio, net 11,398 - 10,604 33 - 10,637
Accrued interest receivable 400 - 400 - - 400
Derivative assets, net 1,437 - 405 - 1,032 1,437
Other assets 44 44 - - - 44
Liabilities
Deposits (1,042) - (1,042) - - (1,042)
Consolidated obligations
Discount notes (59,465) - (59,470) - - (59,470)
Bonds (91,067) - (90,526) - - (90,526)
Total consolidated obligations (150,532) - (149,996) - - (149,996)
MRCS (9) (9) - - - (9)
Accrued interest payable (775) - (775) - - (775)
Derivative liabilities, net (6) - (58) - 52 (6)
1 Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.
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The following table summarizes the carrying value, fair value, and fair value hierarchy of the Bank's financial instruments (dollars in millions):
December 31, 2023
Fair Value
Financial Instruments Carrying Value Level 1 Level 2 Level 3
Netting Adjustments and Cash Collateral1
Total
Assets
Cash and due from banks $ 31 $ 31 $ - $ - $ - $ 31
Interest-bearing deposits 3,481 - 3,481 - - 3,481
Securities purchased under agreements to resell 11,400 - 11,400 - - 11,400
Federal funds sold 7,120 - 7,120 - - 7,120
Trading securities 3,152 - 3,152 - - 3,152
Available-for-sale securities 23,823 - 23,823 - - 23,823
Held-to-maturity securities 852 - 847 3 - 850
Advances 122,530 - 122,512 - - 122,512
Mortgage loans held for portfolio, net 9,967 - 9,051 30 - 9,081
Accrued interest receivable 582 - 582 - - 582
Derivative assets, net 1,267 - 292 - 975 1,267
Other assets 39 39 - - - 39
Liabilities
Deposits (1,039) - (1,039) - - (1,039)
Consolidated obligations
Discount notes (54,537) - (54,534) - - (54,534)
Bonds (116,961) - (116,121) - - (116,121)
Total consolidated obligations (171,498) - (170,655) - - (170,655)
MRCS (12) (12) - - - (12)
Accrued interest payable (1,023) - (1,023) - - (1,023)
Derivative liabilities, net (7) - (101) - 94 (7)
1 Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.
SUMMARY OF VALUATION TECHNIQUES AND PRIMARY INPUTS
The valuation methodologies and primary inputs used to develop the measurement of fair value for assets and liabilities that are measured at fair value on a recurring or non-recurring basis on the Statements of Condition are disclosed in "Item 8. Financial Statements and Supplementary Data - Note 13 - Fair Value" in the 2023 Form 10-K. There have been no significant changes in the valuation methodologies during the nine months ended September 30, 2024.
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FAIR VALUE ON A RECURRING AND NON-RECURRING BASIS
The following table summarizes, for each hierarchy level, the Bank's assets and liabilities that are measured at fair value on the Statements of Condition (dollars in millions):
September 30, 2024
Level 1 Level 2 Level 3
Netting Adjustments and Cash Collateral1
Total
Recurring fair value measurements
Assets
Trading securities
U.S. Treasury obligations $ - $ 3,913 $ - $ - $ 3,913
Other U.S. obligations - 61 - - 61
GSE and TVA obligations - 49 - - 49
Other non-MBS
- 108 - - 108
Total trading securities - 4,131 - - 4,131
Available-for-sale securities
Other U.S. obligations - 166 - - 166
GSE and TVA obligations - 329 - - 329
State or local housing agency obligations - 524 - - 524
Other non-MBS - 48 - - 48
U.S. obligations single-family MBS - 4,716 - - 4,716
GSE single-family MBS - 204 - - 204
GSE multifamily MBS - 18,647 - - 18,647
Total available-for-sale securities - 24,634 - - 24,634
Derivative assets, net
Interest-rate related - 404 - 1,032 1,436
Forward settlement agreements - 1 - - 1
Total derivative assets, net - 405 - 1,032 1,437
Other assets 44 - - - 44
Total recurring assets at fair value $ 44 $ 29,170 $ - $ 1,032 $ 30,246
Liabilities
Discount notes2
$ - $ (50,341) $ - $ - $ (50,341)
Derivative liabilities, net
Interest-rate related - (57) - 52 (5)
Mortgage loan purchase commitments - (1) - - (1)
Total derivative liabilities, net - (58) - 52 (6)
Total recurring liabilities at fair value $ - $ (50,399) $ - $ 52 $ (50,347)
Non-recurring fair value measurements
Assets
Impaired mortgage loans held for portfolio3
$ - $ - $ 4 $ - $ 4
Total non-recurring assets at fair value
$ - $ - $ 4 $ - $ 4
1 Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.
2 Represents financial instruments recorded under the fair value option.
3 These assets are subject to fair value adjustments in certain circumstances. The fair value information presented is as of the date the fair value adjustment was recorded during the nine months ended September 30, 2024.
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The following table summarizes, for each hierarchy level, the Bank's assets and liabilities that are measured at fair value on the Statements of Condition (dollars in millions):
December 31, 2023
Level 1 Level 2 Level 3
Netting Adjustments and Cash Collateral1
Total
Recurring fair value measurements
Assets
Trading securities
U.S. Treasury obligations $ - $ 2,925 $ - $ - $ 2,925
Other U.S. obligations - 68 - - 68
GSE and TVA obligations - 49 - - 49
Other non-MBS
- 110 - - 110
Total trading securities - 3,152 - - 3,152
Available-for-sale securities
Other U.S. obligations - 328 - - 328
GSE and TVA obligations - 344 - - 344
State or local housing agency obligations - 458 - - 458
Other non-MBS - 160 - - 160
U.S. obligations single-family MBS - 4,398 - - 4,398
GSE single-family MBS - 180 - - 180
GSE multifamily MBS - 17,955 - - 17,955
Total available-for-sale securities - 23,823 - - 23,823
Derivative assets, net
Interest-rate related - 291 - 975 1,266
Mortgage loan purchase commitments - 1 - - 1
Total derivative assets, net - 292 - 975 1,267
Other assets 39 - - - 39
Total recurring assets at fair value $ 39 $ 27,267 $ - $ 975 $ 28,281
Liabilities
Discount notes2
$ - $ (47,442) $ - $ - $ (47,442)
Derivative liabilities, net
Interest-rate related - (100) - 94 (6)
Forward settlement agreements (TBAs) - (1) - - (1)
Total derivative liabilities, net - (101) - 94 (7)
Total recurring liabilities at fair value $ - $ (47,543) $ - $ 94 $ (47,449)
Non-recurring fair value measurements
Assets
Impaired mortgage loans held for portfolio3
$ - $ - $ 1 $ - $ 1
Total non-recurring assets at fair value
$ - $ - $ 1 $ - $ 1
1 Amounts represent the application of the netting requirements that allow the Bank to net settle positive and negative positions and also cash collateral and the related accrued interest held or placed with the same clearing agent and/or counterparty.
2 Represents financial instruments recorded under the fair value option.
3 These assets are subject to fair value adjustments in certain circumstances. The fair value information presented is as of the date the fair value adjustment was recorded during the year ended December 31, 2023.
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FAIR VALUE OPTION
The fair value option provides an irrevocable option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments not previously carried at fair value. It requires entities to display the fair value of those assets and liabilities for which it has chosen to use fair value on the face of the Statements of Condition. Fair value is used for both the initial and subsequent measurement of the designated assets, liabilities, and commitments, with the changes in fair value recognized in net income.
The Bank elects the fair value option for certain financial instruments when a hedge relationship does not qualify for hedge accounting. These fair value elections are made primarily in an effort to mitigate the potential income statement volatility that can arise when an economic derivative is adjusted for changes in fair value but the related hedged item is not.
For financial instruments recorded under the fair value option, the related contractual interest income, interest expense, and the discount amortization on fair value option discount notes are recorded as part of net interest income on the Statements of Income. The remaining changes are recorded as "Net gains (losses) on financial instruments held under fair value option" on the Statements of Income.
For the three and nine months ended September 30, 2024, net losses on financial instruments held under fair value option (i.e., discount notes) were $110 million and $63 million compared to net losses of $9 million and $70 million for the same periods in 2023, and the Bank determined no credit risk adjustments for nonperformance were necessary. In determining that no credit risk adjustments were necessary, the Bank considered the following factors:
•The Bank is a federally chartered GSE, and as a result of this status, the Bank's consolidated obligations have historically received the same credit rating as the government bond credit rating of the United States, even though they are not obligations of the United States and are not guaranteed by the United States.
•The Bank is jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations of the FHLBanks.
The following tables summarize the difference between the unpaid principal balance and fair value of outstanding instruments for which the fair value option has been elected (dollars in millions):
September 30, 2024
Unpaid Principal Balance Fair Value Fair Value Over (Under) Unpaid Principal
Discount Notes $ 50,969 $ 50,341 $ (628)
December 31, 2023
Unpaid Principal Balance Fair Value Fair Value Over (Under) Unpaid Principal
Discount Notes $ 48,164 $ 47,442 $ (722)
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Note 10 - Commitments and Contingencies
The following table summarizes additional off-balance sheet commitments for the Bank (dollars in millions):
September 30, 2024 December 31, 2023
Expire
within one year 		Expire
after one year 		Total Total
Standby letters of credit1,2
$ 18,097 $ 105 $ 18,202 $ 9,396
Standby bond purchase agreements2
75 922 997 852
Commitments to purchase mortgage loans 213 - 213 112
Commitment to issue bonds3
2,335 - 2,335 47
Commitments to issue discount notes3
379 - 379 551
Commitments to fund advances2,4
425 - 425 2,163
1 Excludes commitments to issue standby letters of credit, when applicable. At both September 30, 2024 and December 31, 2023, the Bank had no commitments to issue standby letters of credit.
2 The Bank has deemed it unnecessary to record any liability for credit losses on these agreements at September 30, 2024 and December 31, 2023, based on its credit extension and collateral policies.
3 The Bank enters into commitments to issue consolidated obligations in the normal course of its business, that generally settle within 30 calendar days.
4 The Bank enters into commitments to fund additional advances up to 24 months in the future.
Standby Letters of Credit. The Bank issues standby letters of credit on behalf of its members to support certain obligations of the members to third-party beneficiaries. Standby letters of credit may be offered to assist members and non-member housing associates in facilitating residential housing finance, community lending, and asset-liability management, and to provide liquidity. In particular, members often use standby letters of credit as collateral for deposits from federal and state government agencies. Standby letters of credit are executed with members for a fee. If the Bank is required to make payment for a beneficiary's draw, the member either reimburses the Bank for the amount drawn or, subject to the Bank's discretion, the amount drawn may be converted into a collateralized advance to the member. The maturities of standby letters of credit outstanding at September 30, 2024 are currently no later than 2038. The carrying value of guarantees related to standby letters of credit are recorded in "Other liabilities" on the Statements of Condition and amounted to $8 million and $4 million at September 30, 2024 and December 31, 2023.
The Bank monitors the creditworthiness of its members and non-member housing associates that have standby letters of credit. The Bank has established parameters for the measurement, review, classification, and monitoring of credit risk related to these standby letters of credit. All standby letters of credit, similar to advances, are fully collateralized at the time of issuance and subject to member borrowing limits as established by the Bank.
Standby Bond Purchase Agreements. The Bank has entered into standby bond purchase agreements with state housing finance agencies within its district pursuant to which, for a fee, it agrees to serve as a standby liquidity provider if required, to purchase and hold the bonds until the designated marketing agent can find a suitable investor or the state housing finance agency repurchases the bonds according to a schedule established by the agreement. Each standby bond purchase agreement includes the provisions under which the Bank would be required to purchase the bonds and typically allows the Bank to terminate the agreement upon the occurrence of a default event of the issuer. At September 30, 2024, the Bank had standby bond purchase agreements with seven state housing finance agencies. The maturities of standby bond purchase agreements outstanding at September 30, 2024 are currently no later than 2029. During the nine months ended September 30, 2024 and 2023, the Bank was not required to purchase any bonds under these agreements.
Commitments to Purchase Mortgage Loans. The Bank enters into commitments that unconditionally obligate it to purchase mortgage loans from its members. These commitments are considered derivatives and their estimated fair value at September 30, 2024 and December 31, 2023 is reported in "Note 6 - Derivatives and Hedging Activities" as mortgage loan purchase commitments.
Joint and Several Liability. The FHLBanks have joint and several liability for all consolidated obligations issued. Accordingly, if an FHLBank were unable to repay any consolidated obligation for which it is the primary obligor, each of the other FHLBanks could be called upon by the Finance Agency to repay all or part of such obligations. No FHLBank has ever been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank. At September 30, 2024 and December 31, 2023, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which the Bank is jointly and severally liable was $1,021.7 billion and $1,032.1 billion.
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Other Commitments. For each MPF master commitment, the Bank's potential loss exposure prior to the PFI's credit enhancement obligation is estimated and tracked in a FLA. For absorbing certain losses in excess of the FLA, PFIs are paid a credit enhancement fee, a portion of which may be performance-based. To the extent the Bank experiences losses under the FLA, it may be able to recapture performance-based credit enhancement fees paid to the PFI to offset these losses. The FLA balance for all MPF master commitments with a PFI credit enhancement obligation was $190 million and $178 million at September 30, 2024 and December 31, 2023.
Legal Proceedings. The Bank is subject to various pending legal proceedings arising in the normal course of business. The Bank is not currently aware of any pending or threatened legal proceedings to which it is a party that it believes could have a material impact on its financial condition, results of operations, or cash flows.
Note 11 - Activities with Stockholders
The Bank is a cooperative. This means the Bank is owned by its customers, whom the Bank calls members. As a condition of membership in the Bank, all members must purchase and maintain membership capital stock based on a percentage of their total assets, subject to a minimum and maximum amount, as of the preceding December 31st. Each member is also required to purchase and maintain activity-based capital stock to support certain business activities with the Bank. All transactions with stockholders are entered into in the ordinary course of business. Refer to "Note 8 - Capital" for more information on our capital stock requirements.
TRANSACTIONS WITH DIRECTORS' FINANCIAL INSTITUTIONS
In the normal course of business, the Bank extends credit to its members whose directors and officers serve as Bank directors (Directors' Financial Institutions). Finance Agency regulations require that transactions with Directors' Financial Institutions be made on the same terms and conditions as those with any other member.
The following table summarizes the Bank's outstanding transactions with Directors' Financial Institutions (dollars in millions):
September 30, 2024 December 31, 2023
Amount % of Total Amount % of Total
Advances $ 627 1 $ 739 1
Mortgage loans 169 2 124 1
Deposits 7 1 8 1
Capital stock 48 1 50 1
BUSINESS CONCENTRATIONS
The Bank considers itself to have business concentrations with stockholders owning 10 percent or more of total capital stock outstanding (including MRCS). At September 30, 2024, there were no stockholders owning 10 percent or more of total capital stock outstanding. At December 31, 2023, the Bank had the following business concentrations with stockholders (dollars in millions):
December 31, 2023
Capital Stock Mortgage Interest
Stockholder Amount
% of Total1
Advances Loans
Income2
Wells Fargo Bank, N.A.3
$ 1,676 24 $ 37,000 $ 7 $ 1,687
Superior Guaranty Insurance Company4
6 - - 137 -
Total $ 1,682 24 $ 37,000 $ 144 $ 1,687
1 Pursuant to applicable Finance Agency regulations, the Bank's voting structure limits the voting rights of these stockholders and other members holding a significant amount of the Bank's capital stock.
2 Represents interest income earned on advances during the year ended December 31, 2023. Interest income on mortgage loans is excluded from this table as this interest relates to the borrower, not to the stockholder.
3 Wells Fargo Bank, N.A. had standby letters of credit outstanding totaling $0.9 billion as of December 31, 2023.
4 Superior Guaranty Insurance Company is an affiliate of Wells Fargo Bank, N.A. and had no standby letters of credit outstanding as of December 31, 2023.
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Note 12 - Activities with Other FHLBanks
Overnight Funds. The Bank may lend or borrow unsecured overnight funds to or from other FHLBanks. All such transactions are at current market rates. The following table summarizes loan activity to other FHLBanks during the nine months ended September 30, 2024 and 2023 (dollars in millions):
Other FHLBank Beginning
Balance 		Loans Principal
Repayment 		Ending
Balance
2024
Boston
$ - $ 200 $ (200) $ -
Chicago - 5 (5) -
$ - $ 205 $ (205) $ -
2023
Chicago $ - $ 2,005 $ (2,005) $ -
New York
- 500 (500) -
San Francisco
- 2,655 (2,355) 300
$ - $ 5,160 $ (4,860) $ 300
The following table summarizes borrowing activity from other FHLBanks during the nine months ended September 30, 2024 and 2023 (dollars in millions):
Other FHLBank Beginning Balance Borrowing Principal Payment Ending Balance
2024
Chicago $ - $ 2,000 $ (2,000) $ -
Cincinnati - 500 (500) -
$ - $ 2,500 $ (2,500) $ -
2023
Boston
$ - $ 200 $ (200) $ -
Cincinnati
- 750 (750) -
San Francisco
- 500 (500) -
Topeka
- 565 (565) -
$ - $ 2,015 $ (2,015) $ -
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Management's Discussion and Analysis (MD&A) of Financial Condition and Results of Operations should be read in conjunction with our financial statements and condensed notes at the beginning of this Form 10-Q and in conjunction with our MD&A and Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (SEC) on March 7, 2024. Our MD&A is designed to provide information that will help the reader develop a better understanding of our financial statements, key financial statement changes from quarter to quarter, and the primary factors driving those changes. Throughout this Form 10-Q, acronyms and terms used are defined in the Glossary of Terms. Unless the context otherwise requires, the terms "we," "us," and "our" refer to the Federal Home Loan Bank of Des Moines or its management. Our MD&A is organized as follows:
CONTENTS
Forward-Looking Information
37
Executive Overview
38
Conditions in the Financial Markets
39
Selected Financial Data
40
Results of Operations
41
Net Interest Income
41
Other Income (Loss)
44
Hedging Activities
44
Other Expense
47
Statements of Condition
48
Financial Highlights
48
Advances
48
Mortgage Loans
49
Investments
50
Consolidated Obligations
51
Capital
52
Derivatives
52
Liquidity and Capital Resources
53
Critical Accounting Estimates
56
Legislative and Regulatory Developments
56
Risk Management
57
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FORWARD-LOOKING INFORMATION
Statements contained in this report, including statements describing the objectives, projections, estimates, or future predictions in our operations, may be forward-looking statements. These statements may be identified by the use of forward-looking terminology, such as believes, projects, expects, anticipates, estimates, intends, strategy, plan, could, should, may, and will or their negatives or other variations on these terms. By their nature, forward-looking statements involve risk or uncertainty, and actual results could differ materially from those expressed or implied or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, you are cautioned not to place undue reliance on such statements. These risks and uncertainties include, but are not limited to, the following:
•political or economic events, including legislative, regulatory, monetary, judicial, or other developments that affect us, our members, our counterparties, and/or our investors in the consolidated obligations of the 11 FHLBanks, including the Finance Agency's comprehensive review of the FHLBank System;
•the ability to meet capital and other regulatory requirements;
•competitive forces, including without limitation, other sources of funding available to our borrowers that could impact the demand for our advances, other entities purchasing mortgage loans in the secondary mortgage market, and other entities borrowing funds in the capital markets;
•reliance on a relatively small number of member institutions for a large portion of our advance business;
•member consolidations and failures;
•disruptions in the credit and debt markets and the effect on future funding costs, sources, and availability;
•general economic and market conditions that could impact the business we do with our members, including, but not limited to, the timing and volatility of market activity, inflation/deflation, employment rates, geopolitical instability or conflicts, housing market activity and housing prices, the level of mortgage prepayments, the valuation of pledged collateral, and the condition of the capital markets and the impact it has on our consolidated obligations;
•ineffective use of hedging strategies or the availability of derivative instruments in the types and quantities needed for risk management purposes from acceptable counterparties;
•the volatility of reported results due to changes in the fair value of certain assets, liabilities, and derivative instruments;
•risks related to the other FHLBanks that could trigger our joint and several liability for debt issued by the other FHLBanks;
•changes in the relative attractiveness of consolidated obligations due to actual or perceived changes in the FHLBanks' credit ratings or ratings outlook as well as the U.S. Government's long-term credit rating or rating outlook;
•increases in delinquency or loss estimates on mortgage loans;
•the ability to develop and support internal controls, business processes, information systems, and other operating technologies that effectively manage the risks we face, including but not limited to, cyber-attacks, widespread health emergencies, and other business interruptions;
•significant business interruptions resulting from third-party failures;
•the volatility of credit quality, market prices, interest rates, and other factors that could affect the value of collateral held by us as security for borrower and counterparty obligations;
•the ability to attract and retain key personnel; and
•natural disasters, including those from significant climate change.
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For additional information regarding these and other risks and uncertainties that could cause our actual results to differ materially from the expectations reflected in our forward-looking statements, see "Item 1A. Risk Factors" in this quarterly report and in our 2023 Form 10-K. Forward-looking statements apply only as of the date they are made, and we undertake no obligation to update or revise any forward-looking statement.
EXECUTIVE OVERVIEW
Our Bank is a member-owned cooperative serving shareholder members in our district. Our mission is to be a reliable provider of funding, liquidity, and services for our members so that they can meet the housing, business, and economic development needs of the communities they serve. In addition, we help to meet the economic and housing needs of our communities through our affordable housing and community investment initiatives. Our operating model balances the trade-off between attractively priced products, reasonable returns on capital stock, maintaining an adequate level of capital to meet regulatory capital requirements, and maintaining adequate retained earnings to preserve the par value of member-owned capital stock. Our members include commercial banks, savings institutions, credit unions, insurance companies, and CDFIs.
Affordable Housing and Community Impact
Our housing and community development programs are central to our mission by providing reliable liquidity and funding to help our members build strong communities and support their affordable housing needs. We contribute 10 percent of our net income each year to our AHP, an annual grant program that supports the creation, preservation, or purchase of affordable housing. This program includes a competitive AHP and two down payment products called Home$tart and the Native American Homeownership Initiative. During the third quarter of 2024, we accrued AHP assessments of $23 million and disbursed $13 million of AHP funds through this program. We recorded an additional $4 million voluntary AHP contribution during the third quarter of 2024.
In addition to our AHP, we offer our members other voluntary programs to further our housing mission and provide more support for affordable housing initiatives. During the third quarter of 2024, we authorized $4 million through Mortgage Rate Relief, in addition to the $25 million previously announced, to provide a total of approximately $29 million in subsidy to those seeking affordable homeownership. Mortgage Rate Relief is designed to make homeownership attainable for borrowers at or below 80 percent of the area median income, by providing them an interest rate that is approximately two percentage points lower than the current market rate. During the third quarter of 2024, we funded $210 million of loans under this program and recorded $20 million in subsidy expense. During the third quarter of 2024, we launched a new program, the Habitat for Humanity®Advance Rate Discount. This program provides up to $100 million in zero percent advances to members that originate or purchase mortgage loans from a Habitat for Humanity®affiliate. During the third quarter of 2024, we originated $70 million of zero percent advances and recorded $16 million in subsidy expense.
Financial Results
Our financial condition and results of operations are influenced by global and national economies, local economies within our district, and the conditions in the financial, housing, and credit markets, all of which impact the interest rate environment. The interest rate environment significantly impacts our profitability. In response to higher inflation, the FOMC raised the target range for the federal funds rate throughout 2023, which led to higher interest rates on average during 2024 when compared to the same period last year that affected our net interest income. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Conditions in the Financial Markets" for additional discussion on economic conditions, including interest rates, impacting our financial results.
For the three and nine months ended September 30, 2024, we recorded net income of $204 million and $708 million compared to $265 million and $706 million for the same periods in 2023.
Net interest income decreased $13 million during the three months ended September 30, 2024 when compared to the same period last year. The decline during the three months ended September 30, 2024 was primarily due to lower average advance balances, which also reduced earnings on invested capital. The decline was offset in part by improved asset-liability spreads on our investments, driven by higher-yielding MBS purchases.
Net interest income during the nine months ended September 30, 2024 increased $36 million when compared to the same period last year primarily due to higher asset-liability spread resulting largely from higher-yielding MBS purchases and increased longer-term advances, as well as higher short-term interest rates, which improved earnings on invested capital. The increase was partially offset by lower average advance balances.
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Other income (loss) declined $17 million and improved by $10 million during the three and nine months ended September 30, 2024 when compared to the same periods last year. The decline in other income (loss) during the three months ended September 30, 2024 was primarily due to the net changes in fair value on our trading securities, fair value option instruments, and economic derivatives. During the nine months ended September 30, 2024, the improvement in other (income) loss was driven by net gains recorded on litigation settlements and increased fees on standby letters of credit. The increase was offset in part by the net changes in fair value on our trading securities, fair value option instruments, and economic derivatives.
Other expense increased $38 million and $47 million during the three and nine months ended September 30, 2024 when compared to the same periods last year. The increase during the three and nine months ended September 30, 2024 was primarily driven by an increase in voluntary community and housing contributions of $35 million and $32 million when compared to the same periods in 2023. Additionally, the increase during the nine months ended September 30, 2024 was driven by higher contract labor and consultant costs.
Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations" for additional discussion on our results of operations.
Our total assets decreased to $162.0 billion at September 30, 2024, from $184.4 billion at December 31, 2023, driven primarily by a decline in advances. Advances decreased $23.6 billion mainly due to a decline in borrowings by large depository institution members, offset in part by an increase in borrowings by insurance companies.
Total capital decreased to $9.3 billion at September 30, 2024 from $9.8 billion at December 31, 2023. Our regulatory capital ratio increased to 5.76 percent at September 30, 2024, from 5.44 percent at December 31, 2023, and remained above the required regulatory limit at each period end. Regulatory capital includes capital stock, MRCS, and retained earnings.
Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Statements of Condition" for additional discussion on our financial condition.
CONDITIONS IN THE FINANCIAL MARKETS
Economy and Financial Markets
Throughout 2023, the FOMC raised the target range for the federal funds rate. Recent indicators suggest that economic activity has continued to expand. Job gains have slowed, and the unemployment rate has remained low. Inflation remains somewhat elevated. At its September 2024 meeting, in light of the progress on inflation and the balance of risks, the FOMC decided to lower the target range for the federal funds rate by 0.50 percent to 4.75 to 5.00 percent. Further, in its November 2024 meeting, the FOMC reduced the target range for the federal funds rate by an additional 0.25 percent to 4.50 to 4.75 percent, stating that it will carefully assess incoming data, the evolving outlook, and the balance of risks. In addition, the FOMC stated that it will continue reducing its holdings of Treasury securities, agency debt, and agency MBS.
The following table shows information on key market interest rates1:
3-Month Average
9-Month Average
Period End
September 30,
2024 		September 30,
2023 		September 30,
2024 		September 30,
2023 		September 30,
2024 		December 31,
2023
Federal funds 5.27 % 5.26 % 5.31 % 4.93 % 4.83 % 5.33 %
SOFR 5.28 5.24 5.30 4.90 4.96 5.38
2-year U.S. Treasury 4.05 4.92 4.45 4.51 3.66 4.23
10-year U.S. Treasury 3.96 4.15 4.19 3.80 3.81 3.88
30-year residential mortgage note 6.54 7.05 6.76 6.64 6.08 6.42
1 Source: Bloomberg.
Mortgage Markets
During 2024, mortgage rates were higher, on average, when compared to the same period last year; however, they began to decline in the third quarter of 2024 and decreased from the prior year-end. The primary driver of activity within the mortgage markets was home purchases during 2024 as mortgage rates remained elevated. New home sales increased; however, existing home sales declined relative to the prior year. Home prices have increased in 2024 and prepayment activity increased relative to the same period last year.
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SELECTED FINANCIAL DATA
The following tables present selected financial data for the periods indicated (dollars in millions):
Statements of Condition September 30,
2024 		June 30,
2024 		March 31,
2024 		December 31,
2023 		September 30,
2023
Cash and due from banks $ 36 $ 35 $ 32 $ 31 $ 84
Investments1
49,649 47,415 53,018 49,828 56,667
Advances 98,923 104,784 110,976 122,530 122,258
Mortgage loans held for portfolio, net2
11,398 10,810 10,351 9,967 9,546
Total assets 161,979 164,821 176,269 184,406 190,668
Consolidated obligations
Discount notes 59,465 63,786 63,358 54,537 64,315
Bonds 91,067 89,045 100,687 116,961 113,766
Total consolidated obligations3
150,532 152,831 164,045 171,498 178,081
Mandatorily redeemable capital stock 9 10 10 12 12
Total liabilities 152,695 155,258 166,560 174,575 181,058
Capital stock - Class B putable 5,892 6,185 6,442 6,873 6,811
Retained earnings 3,422 3,359 3,276 3,138 3,005
Accumulated other comprehensive income (loss) (30) 19 (9) (180) (206)
Total capital 9,284 9,563 9,709 9,831 9,610
Regulatory capital ratio4
5.76 5.80 5.52 5.44 5.15
For the Three Months Ended
Statements of Income September 30,
2024 		June 30,
2024 		March 31,
2024 		December 31,
2023 		September 30,
2023
Net interest income $ 327 $ 319 $ 349 $ 347 $ 340
Provision (reversal) for credit losses on mortgage loans - (1) (1) - -
Other income (loss)5
(14) (9) 4 14 3
Voluntary community and housing contributions 40 9 - 30 5
All other expense6
46 46 50 47 43
AHP assessments 23 26 30 28 30
Net income 204 230 274 256 265
Selected Financial Ratios7
Net interest spread8
0.48 % 0.45 % 0.43 % 0.45 % 0.42 %
Net interest margin9
0.77 0.75 0.74 0.74 0.74
Return on average equity (annualized) 8.40 9.57 11.36 10.36 11.31
Return on average capital stock (annualized) 13.31 14.68 16.42 14.81 15.65
Return on average assets (annualized) 0.47 0.53 0.57 0.53 0.56
Average equity to average assets 5.58 5.49 5.03 5.12 4.99
1 Investments include interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, trading securities, AFS securities, and HTM securities.
2 Includes an allowance for credit losses of $4 million, $4 million, $5 million, $6 million, and $6 million at September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023, and September 30, 2023.
3 The total par value of outstanding consolidated obligations of the 11 FHLBanks was $1,172.8 billion, $1,192.0 billion, $1,172.4 billion, $1,204.3 billion, and $1,229.9 billion at September 30, 2024, June 30, 2024, March 31, 2024, December 31, 2023, and September 30, 2023.
4 Represents period-end regulatory capital expressed as a percentage of period-end total assets. Regulatory capital includes Class B capital stock (including MRCS) and retained earnings.
5 Other income (loss) includes, among other things, net gains (losses) on investment securities, net gains (losses) on derivatives, net gains (losses) on financial instruments held under fair value option, and standby letter of credit fees.
6 All other expense includes, among other things, compensation and benefits, professional fees, and contractual services.
7 Amounts used to calculate selected financial ratios are based on numbers in actuals. Accordingly, recalculations using numbers in millions may not produce the same results.
8 Represents annualized yield on total interest-earning assets minus annualized cost of total interest-bearing liabilities.
9 Represents net interest income expressed as a percentage of average interest-earning assets.
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RESULTS OF OPERATIONS
Net Interest Income
Our net interest income is impacted by changes in average interest-earning asset and interest-bearing liability balances, and the related yields and costs. The following table presents average balances and annualized yields/costs of major asset and liability categories (dollars in millions):
For the Three Months Ended September 30,
2024 2023
Average
Balance1
Yield/Cost2
Interest
Income/
Expense3
Average
Balance1
Yield/Cost
Interest
Income/
Expense3
Interest-earning assets
Interest-bearing deposits $ 5,222 5.25 % $ 69 $ 4,382 5.26 % $ 58
Securities purchased under agreements to resell 8,544 5.41 116 9,816 5.33 132
Federal funds sold 12,708 5.35 172 14,860 5.34 200
MBS4,5,6
23,524 6.49 384 19,940 5.74 289
Other investments4,5,6,7
5,338 3.73 50 3,623 4.27 39
Advances5,8
102,813 5.71 1,476 120,336 5.74 1,740
Mortgage loans9
11,133 4.20 117 9,241 3.57 83
Loans to other FHLBanks 7 5.43 - 39 5.33 -
Total interest-earning assets 169,289 5.60 2,384 182,237 5.53 2,541
Non-interest-earning assets 3,781 - - 3,848 - -
Total assets $ 173,070 5.48 % $ 2,384 $ 186,085 5.42 % $ 2,541
Interest-bearing liabilities
Deposits $ 1,219 4.47 % $ 14 $ 1,150 4.50 % $ 13
Consolidated obligations
Discount notes5
70,697 5.10 905 51,954 5.12 671
Bonds5
87,910 5.14 1,137 117,889 5.11 1,517
Other interest-bearing liabilities10
21 7.51 1 34 6.29 -
Total interest-bearing liabilities 159,847 5.12 2,057 171,027 5.11 2,201
Non-interest-bearing liabilities 3,572 - - 5,764 - -
Total liabilities 163,419 5.01 2,057 176,791 4.94 2,201
Capital 9,651 - - 9,294 - -
Total liabilities and capital $ 173,070 4.73 % $ 2,057 $ 186,085 4.69 % $ 2,201
Net interest income and spread11
0.48 % $ 327 0.42 % $ 340
Net interest margin12
0.77 % 0.74 %
Average interest-earning assets to interest-bearing liabilities 105.91 % 106.55 %
1 Average balances are calculated on a daily weighted average basis and do not reflect the effect of derivative master netting arrangements with counterparties and/or clearing agents.
2 In instances where the average balance and/or related income/expense is less than $1 million, the yield/cost will continue to be presented, based on numbers in actuals.
3 Interest income and expense amounts reported for advances, MBS, other investments, and consolidated obligation bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.
4 The average balance of AFS and HTM securities is reflected at amortized cost.
5 Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.
6 Interest income on investment securities includes prepayment fees, net of related amortization, of $6 million and less than $1 million for the three months ended September 30, 2024 and 2023.
7 Other investments primarily include U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, and taxable municipal bonds.
8 Interest income on advances includes prepayment fees, net of related amortization, of less than $1 million and $25 million for the three months ended September 30, 2024 and 2023.
9 Non-accrual loans are included in the average balance used to determine the average yield.
10 Other interest-bearing liabilities consist primarily of MRCS and/or borrowings from other FHLBanks.
11 Represents annualized yield on total interest-earning assets minus annualized yield on total interest-bearing liabilities.
12 Represents net interest income expressed as a percentage of average interest-earning assets.
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For the Nine Months Ended September 30,
2024 2023
Average
Balance1
Yield/Cost2
Interest
Income/
Expense3
Average
Balance1
Yield/Cost
Interest
Income/
Expense3
Interest-earning assets
Interest-bearing deposits $ 5,230 5.34 % $ 209 $ 4,038 4.87 % $ 147
Securities purchased under agreements to resell 10,512 5.43 427 10,501 5.01 394
Federal funds sold 12,373 5.39 500 15,967 4.99 596
Mortgage-backed securities,4,5,6
23,543 6.29 1,108 18,036 5.69 767
Other investments4,5,6,7
4,845 3.85 140 4,315 3.65 118
Advances5,8
109,670 5.73 4,708 119,137 5.32 4,742
Mortgage loans9
10,629 4.10 326 8,764 3.45 226
Loans to other FHLBanks 2 5.44 - 29 5.07 1
Total interest-earning assets 176,804 5.60 7,418 180,787 5.17 6,991
Non-interest-earning assets 3,907 - - 3,351 - -
Total assets $ 180,711 5.48 % $ 7,418 $ 184,138 5.08 % $ 6,991
Interest-bearing liabilities
Deposits $ 1,250 4.52 % $ 42 $ 1,104 4.11 % $ 34
Consolidated obligations
Discount notes5
68,189 5.15 2,630 61,522 4.64 2,133
Bonds5
97,138 5.15 3,749 107,243 4.82 3,864
Other interest-bearing liabilities10
34 6.70 2 24 6.81 1
Total interest-bearing liabilities 166,611 5.15 6,423 169,893 4.75 6,032
Non-interest-bearing liabilities 4,421 - - 5,064 - -
Total liabilities 171,032 5.02 6,423 174,957 4.61 6,032
Capital 9,679 - - 9,181 - -
Total liabilities and capital $ 180,711 4.75 % $ 6,423 $ 184,138 4.38 % $ 6,032
Net interest income and spread11
0.45 % $ 995 0.42 % $ 959
Net interest margin12
0.75 % 0.71 %
Average interest-earning assets to interest-bearing liabilities 106.12 % 106.41 %
1 Average balances are calculated on a daily weighted average basis and do not reflect the effect of derivative master netting arrangements with counterparties and/or clearing agents.
2 In instances where the average balance and/or related income/expense is less than $1 million, the yield/cost will continue to be presented, based on numbers in actuals.
3 Interest income and expense amounts reported for advances, MBS, other investments, and consolidated obligation bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.
4 The average balance of AFS and HTM securities is reflected at amortized cost.
5 Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.
6 Interest income on investment securities includes prepayment fees, net of related amortization, of $6 million and $10 million for the nine months ended September 30, 2024 and 2023.
7 Other investments primarily include U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, and taxable municipal bonds.
8 Interest income on advances includes prepayment fees, net of related amortization, of ($1) million and $24 million for the nine months ended September 30, 2024 and 2023.
9 Non-accrual loans are included in the average balance used to determine the average yield.
10 Other interest-bearing liabilities consist primarily of MRCS and/or borrowings from other FHLBanks.
11 Represents annualized yield on total interest-earning assets minus annualized yield on total interest-bearing liabilities.
12 Represents net interest income expressed as a percentage of average interest-earning assets.
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The following table presents changes in interest income and interest expense. Changes in interest income and interest expense that are not identifiable as either volume-related or rate-related, but rather attributable to both volume and rate changes, are allocated to the volume and rate categories based on the proportion of the absolute value of the volume and rate changes (dollars in millions).
Three Months Ended Nine Months Ended
September 30, 2024 vs. September 30, 2023
September 30, 2024 vs. September 30, 2023
Total Increase
(Decrease) Due to 		Total Increase
(Decrease) 		Total Increase
(Decrease) Due to 		Total Increase
(Decrease)
Volume Rate Volume Rate
Interest income
Interest-bearing deposits $ 11 $ - $ 11 $ 47 $ 15 $ 62
Securities purchased under agreements to resell (18) 2 (16) - 33 33
Federal funds sold (28) - (28) (141) 45 (96)
MBS 55 40 95 253 88 341
Other investments 16 (5) 11 15 7 22
Advances (255) (9) (264) (389) 355 (34)
Mortgage loans 18 16 34 53 47 100
Loans to other FHLBanks - - - (1) - (1)
Total interest income (201) 44 (157) (163) 590 427
Interest expense
Deposits 1 - 1 5 3 8
Consolidated obligations
Discount notes 237 (3) 234 247 250 497
Bonds (389) 9 (380) (373) 258 (115)
Other interest-bearing liabilities 1 - 1 1 - 1
Total interest expense (150) 6 (144) (120) 511 391
Net interest income $ (51) $ 38 $ (13) $ (43) $ 79 $ 36
Net interest spread represents the annualized yield on total interest-earning assets minus the annualized cost of total interest-bearing liabilities. Our net interest spread increased during the three and nine months ended September 30, 2024 when compared to the same periods in 2023 driven primarily by higher-yielding MBS purchases and improvements in market value adjustments on fair value hedge relationships, offset in part by lower net advance prepayment fees. Net interest margin equals net interest income expressed as a percentage of average interest-earning assets. Our net interest margin increased during the three and nine months ended September 30, 2024 when compared to the same periods in 2023 due primarily to higher net interest spread. Our net interest margin during the nine months ended September 30, 2024 was also impacted by increased earnings on invested capital driven by higher short-term interest rates. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview - Financial Results" for additional discussion on our net interest income.
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Other Income (Loss)
The following table summarizes the components of other income (loss) (dollars in millions):
For the Three Months Ended
For the Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Net gains (losses) on trading securities $ 87 $ - $ 70 $ 23
Net gains (losses) on financial instruments held under fair value option (110) (9) (63) (70)
Net gains (losses) on derivatives (2) 8 (58) 1
Net gains (losses) on extinguishment of debt - - - 2
Other, net 11 4 32 15
Total other income (loss) $ (14) $ 3 $ (19) $ (29)
Other income (loss) declined $17 million and improved by $10 million during the three and nine months ended September 30, 2024 when compared to the same periods in 2023. We utilize economic derivatives to hedge certain instruments held at fair value that do not qualify for fair value hedge accounting in an effort to manage potential income statement volatility. As a result, we review the related gains (losses) on these items on a net basis. During the three months ended September 30, 2024, we recorded net combined losses of $25 million on our trading securities, fair value option instruments, and the related economic derivatives, including the related interest settlements, compared to net combined losses of $1 million for the same period in 2023. The net decrease was primarily driven by changes in interest rates and volumes of fair value option discount notes. The improvement in other income (loss) during the nine months ended September 30, 2024 was driven by net gains recorded on litigation settlements and increased fees on standby letters of credit. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Hedging Activities" for additional discussion on our economic derivatives.
Hedging Activities
We use derivatives to manage interest rate risk. Accounting rules affect the timing and recognition of income and expense on derivatives and therefore we may be subject to income statement volatility. If a hedging activity qualifies for hedge accounting treatment (fair value hedge), the net interest settlements of interest receivables or payables related to the derivative are recognized as interest income or expense in the relevant income statement line item consistent with the hedged asset or liability. The net fair value gains and losses of derivatives and hedged items designated in fair value hedge relationships are also recognized as interest income or expense. Amortization of basis adjustments from terminated hedges is also recorded in interest income or expense.
If a hedging activity does not qualify for hedge accounting treatment (economic hedge), the net interest settlements of interest receivables or payables related to the derivative as well as the fair value gains and losses on the derivative are recorded as a component of other income (loss) in "Net gains (losses) on derivatives;" however, there is no fair value adjustment for the corresponding asset or liability being hedged unless changes in the fair value of the asset or liability are normally marked to fair value through earnings (i.e., trading securities and fair value option instruments).
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The following tables categorize the net effect of hedging activities on net income by product (dollars in millions):
For the Three Months Ended September 30, 2024
Net Effect of Hedging Activities Advances Investments Mortgage
Loans 		Discount Notes Bonds Other Total
Net interest income:
Net amortization/accretion1
$ 9 $ 7 $ 2 $ - $ (1) $ - $ 17
Net gains (losses) on derivatives and hedged items (1) 5 - - 5 - 9
Price alignment amount on derivatives2
(6) (4) - - (2) - (12)
Net interest settlements on derivatives3
238 100 - - (55) - 283
Total impact to net interest income 240 108 2 - (53) - 297
Other income (loss):
Net gains (losses) on derivatives4
- (66) - 62 - - (4)
Net gains (losses) on trading securities5
- 87 - - - - 87
Net gains (losses) on financial instruments held under fair value option5
- - - (110) - - (110)
Price alignment amount on derivatives2
- - - - - 1 1
Total impact to other income (loss) - 21 - (48) - 1 (26)
Total net effect of hedging activities6
$ 240 $ 129 $ 2 $ (48) $ (53) $ 1 $ 271
For the Three Months Ended September 30, 2023
Net Effect of Hedging Activities Advances Investments Mortgage
Loans 		Discount Notes Bonds Other Total
Net interest income:
Net amortization/accretion1
$ 35 $ 6 $ 1 $ - $ (5) $ - $ 37
Net gains (losses) on derivatives and hedged items - (6) - - (1) - (7)
Price alignment amount on derivatives2
(11) (3) - - (5) - (19)
Net interest settlements on derivatives3
225 87 - - (66) - 246
Total impact to net interest income 249 84 1 - (77) - 257
Other income (loss):
Net gains (losses) on derivatives4
- 19 - (2) - - 17
Net gains (losses) on trading securities5
- - - - - - -
Net gains (losses) on financial instruments held under fair value option5
- - - (9) - - (9)
Price alignment amount on derivatives2
- - - - - (9) (9)
Total impact to other income (loss) - 19 - (11) - (9) (1)
Total net effect of hedging activities6
$ 249 $ 103 $ 1 $ (11) $ (77) $ (9) $ 256
1 Represents the amortization/accretion of basis adjustments on closed hedge relationships.
2 Represents the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract, which fluctuates with changes in the interest rate environment.
3 Represents the interest component on derivatives that qualify for fair value hedge accounting.
4 Represents net gains (losses) on economic derivatives and the related interest settlements.
5 Represents the net gains (losses) on those trading securities and fair value option instruments for which we are utilizing economic derivatives to hedge the risk of changes in fair value.
6 The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
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For the Nine Months Ended September 30, 2024
Net Effect of Hedging Activities Advances Investments Mortgage
Loans 		Discount Notes Bonds Other Total
Net interest income:
Net amortization/accretion1
$ 28 $ 11 $ 1 $ - $ (7) $ - $ 33
Net gains (losses) on derivatives and hedged items (1) 2 - - 20 - 21
Price alignment amount on derivatives2
(36) (25) - - (1) - (62)
Net interest settlements on derivatives3
695 304 - - (179) - 820
Total impact to net interest income 686 292 1 - (167) - 812
Other income (loss):
Net gains (losses) on derivatives3
- (8) (1) (51) - - (60)
Net gains (losses) on trading securities4
- 70 - - - - 70
Net gains (losses) on financial
instruments held under fair value option5
- - - (63) - - (63)
Price alignment amount on derivatives2
- - - - - 2 2
Total impact to other income (loss) - 62 (1) (114) - 2 (51)
Total net effect of hedging activities6
$ 686 $ 354 $ - $ (114) $ (167) $ 2 $ 761
For the Nine Months Ended September 30, 2023
Net Effect of Hedging Activities Advances Investments Mortgage
Loans 		Discount Notes Bonds Other Total
Net interest income:
Net amortization/accretion1
$ 56 $ 21 $ 1 $ - $ (11) $ - $ 67
Net gains (losses) on derivatives and hedged items (1) 36 - - (20) - 15
Price alignment amount on derivatives2
(21) (7) - - (11) - (39)
Net interest settlements on derivatives3
553 200 - - (163) - 590
Total impact to net interest income 587 250 1 - (205) - 633
Other income (loss):
Net gains (losses) on derivatives3
- 48 (1) (25) - - 22
Net gains (losses) on trading securities4
- 23 - - - - 23
Net gains (losses) on financial
instruments held under fair value option5
- - - (70) - - (70)
Price alignment amount on derivatives2
- - - - - (21) (21)
Total impact to other income (loss) - 71 (1) (95) - (21) (46)
Total net effect of hedging activities6
$ 587 $ 321 $ - $ (95) $ (205) $ (21) $ 587
1 Represents the amortization/accretion of basis adjustments on closed hedge relationships.
2 Represents the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract, which fluctuates with changes in the interest rate environment.
3 Represents the interest component on derivatives that qualify for fair value hedge accounting.
4 Represents net gains (losses) on economic derivatives and the related interest settlements.
5 Represents the net gains (losses) on those trading securities and fair value option instruments for which we are utilizing economic derivatives to hedge the risk of changes in fair value.
6 The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
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NET AMORTIZATION/ACCRETION
Net amortization/accretion varies from period to period depending on our hedge relationship termination activities and the maturity, call, or prepayment of assets or liabilities previously in hedge relationships.
NET GAINS (LOSSES) ON DERIVATIVES AND HEDGED ITEMS
Net gains and losses on derivatives and hedged items designated in fair value hedge relationships are recorded in net interest income. Gains (losses) on derivatives and hedged items fluctuate with changes in market conditions and are based on a range of factors, including current and projected levels of interest rates and volatility.
NET INTEREST SETTLEMENTS ON DERIVATIVES
Net interest settlements represent the interest component on derivatives that qualify for fair value hedge accounting. These amounts vary from period to period depending on our hedging activities and interest rates and are partially offset by the interest component on the related hedged item within net interest income. The hedging activity tables do not include the impact of the interest component on the related hedged item.
NET GAINS (LOSSES) ON DERIVATIVES
We utilize economic derivatives to manage certain risks on our Statements of Condition. Gains and losses on economic derivatives include interest settlements. Interest settlements represent the interest component on economic derivatives. These amounts vary from period to period depending on our hedging activities and interest rates. During the three and nine months ended September 30, 2024, we recorded net losses of $4 million and $60 million on our economic derivatives, compared to net gains of $17 million and $22 million during the same periods last year. These changes were primarily driven by changes in the interest rate environment.
Other Expense
The following table shows the components of other expense (dollars in millions):
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2024 2023 2024 2023
Compensation and benefits $ 18 $ 18 $ 58 $ 56
Contractual services 7 5 20 17
Professional fees 5 4 14 11
Other operating expenses 6 6 16 17
Total operating expenses 36 33 108 101
Federal Housing Finance Agency 3 3 10 8
Office of Finance 2 2 7 6
Voluntary community and housing contributions 40 5 49 17
Other, net 5 5 17 12
Total other expense $ 86 $ 48 $ 191 $ 144
Other expense increased $38 million and $47 million during the three and nine months ended September 30, 2024 when compared to the same periods last year. The increase during the three and nine months ended September 30, 2024 was primarily due to an increase in voluntary community and housing contributions of $35 million and $32 million when compared to the same periods in 2023. Additionally, the increase during the nine months ended September 30, 2024 was driven by higher contract labor and consultant costs.
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STATEMENTS OF CONDITION
Financial Highlights
Our total assets decreased to $162.0 billion at September 30, 2024 from $184.4 billion at December 31, 2023. Our total liabilities decreased to $152.7 billion at September 30, 2024 from $174.6 billion at December 31, 2023. Total capital decreased to $9.3 billion at September 30, 2024 from $9.8 billion at December 31, 2023. See further discussion of changes in our financial condition in the appropriate sections that follow.
Advances
The following table summarizes our advances by type of institution (dollars in millions):
September 30,
2024 		December 31,
2023
Commercial banks $ 43,918 $ 75,997
Savings institutions 1,863 1,359
Credit unions 13,715 13,458
Insurance companies 39,241 31,992
CDFIs 10 8
Total member advances 98,747 122,814
Housing associates 172 354
Non-member borrowers 16 53
Total par value $ 98,935 $ 123,221
Our total advance par value decreased $24.3 billion or 20 percent at September 30, 2024 when compared to December 31, 2023, primarily due to a decline in borrowings by large depository institution members, offset in part by an increase in borrowings by insurance companies.
The following table summarizes our advances by interest rate payment terms (dollars in millions):
September 30, 2024 December 31, 2023
Amount % of Total Amount % of Total
Fixed rate $ 74,175 75 $ 71,502 58
Variable rate 13,294 14 18,795 15
Variable rate, callable1
10,293 10 31,655 26
Other2
1,168 1 1,267 1
Overdrawn demand deposit accounts 5 - 2 -
Total advance par value 98,935 100 123,221 100
Premiums 3 6
Discounts (16) -
Fair value hedging adjustments
1 (697)
Total $ 98,923 $ 122,530
1 Callable advances are those advances that may be contractually prepaid by the borrower on predetermined dates without incurring prepayment or termination fees. Interest rates on our variable rate callable advances reset at each call date to be consistent with either the underlying index or our current offering rate in line with our underlying cost of funds.
2 Includes fixed rate amortizing and fixed rate callable advances.
During the nine months ended September 30, 2024, the composition of our advance portfolio shifted to a higher concentration of fixed rate advances, primarily due to called longer-term variable rate advances. Fair value hedging adjustments changed $698 million at September 30, 2024 when compared to December 31, 2023, due primarily to the impact of interest rates on our cumulative fair value adjustments on advances in active hedge relationships.
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At September 30, 2024 and December 31, 2023, advances outstanding to our top five borrowers totaled $30.9 billion and $55.0 billion, which represented 31 percent and 45 percent of our total advances outstanding. The following table summarizes our top five borrowers based on advances outstanding at September 30, 2024 (dollars in millions):
Amount % of Total Advances
Athene Annuity and Life Company1
$ 12,381 13
Wells Fargo Bank, N.A. 7,000 7
UBS Bank USA 4,101 4
Principal Life Insurance Company 3,950 4
Symetra Life Insurance Company 3,486 3
Total par value $ 30,918 31
1 Excludes $0.6 billion of advances with Athene Annuity & Life Assurance Company, an affiliate of Athene Annuity and Life Company.
We evaluate advances for credit losses on a quarterly basis and have never experienced a credit loss on our advances. For additional discussion on our advance credit risk, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Advances."
Mortgage Loans
The following table summarizes information on our mortgage loans held for portfolio (dollars in millions):
September 30, 2024 December 31, 2023
Fixed rate conventional loans $ 10,942 $ 9,506
Fixed rate government-insured loans 371 378
Total unpaid principal balance 11,313 9,884
Premiums 126 113
Discounts (29) (11)
Basis adjustments from mortgage loan purchase commitments (8) (13)
Total mortgage loans held for portfolio 11,402 9,973
Allowance for credit losses (4) (6)
Total mortgage loans held for portfolio, net $ 11,398 $ 9,967
Our total mortgage loans increased $1.4 billion or 14 percent at September 30, 2024 when compared to December 31, 2023. The increase was primarily due to new loan purchases exceeding principal paydowns, driven in part by low prepayment activity as mortgage rates remain elevated.
We evaluate mortgage loans for credit losses on a quarterly basis. For additional discussion on our mortgage loan credit risk, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Mortgage Loans."
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Investments
The following table summarizes the carrying value of our investments (dollars in millions):
September 30, 2024 December 31, 2023
Amount % of Total Amount % of Total
Short-term investments1
Interest-bearing deposits $ 3,781 8 $ 3,481 7
Securities purchased under agreements to resell 8,200 17 11,400 23
Federal funds sold 8,120 16 7,120 14
Total short-term investments 20,101 41 22,001 44
Long-term investments2
MBS
GSE single-family 593 1 633 1
GSE multifamily 18,647 38 17,955 36
U.S. obligations single-family3
4,718 10 4,399 9
Private-label residential 2 - 3 -
Total MBS 23,960 49 22,990 46
Non-MBS
U.S. Treasury obligations3
3,913 8 2,925 6
Other U.S. obligations3
227 - 396 1
GSE and TVA obligations 738 1 757 1
State or local housing agency obligations 554 1 489 1
Other4
156 - 270 1
Total non-MBS 5,588 10 4,837 10
Total long-term investments 29,548 59 27,827 56
Total investments $ 49,649 100 $ 49,828 100
1 Short-term investments have original maturities equal to or less than one year.
2 Long-term investments have original maturities of greater than one year.
3 Represents investment securities backed by the full faith and credit of the U.S. Government.
4 Consists primarily of taxable municipal bonds.
Our investments decreased $0.2 billion at September 30, 2024 when compared to December 31, 2023 due primarily to a decline in securities purchased under agreements to resell, partially offset by an increase in federal funds sold and the purchase of U.S. Treasury obligations and agency MBS. At September 30, 2024, we had no investments that were traded but not yet settled. At December 31, 2023, we had agency MBS with a total par value of $692 million that were traded but not yet settled. These investments were recorded as "available-for-sale" on our Statements of Condition with a corresponding payable recorded in "other liabilities."
The Finance Agency limits our investments in MBS by requiring that the balance of our MBS not exceed three times regulatory capital at the time of purchase. Our ratio of MBS to regulatory capital was 2.58 and 2.35 at September 30, 2024 and December 31, 2023.
We evaluate investments for credit losses on a quarterly basis. For additional discussion on our investment credit risk, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Investments."
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Consolidated Obligations
Consolidated obligations, which include bonds and discount notes, are the primary source of funds to support our advances, mortgage loans, and investments. At September 30, 2024 and December 31, 2023, the carrying value of consolidated obligations for which we are primarily liable totaled $150.5 billion and $171.5 billion.
DISCOUNT NOTES
The following table summarizes our discount notes, all of which are due within one year (dollars in millions):
September 30, 2024 December 31, 2023
Par value $ 60,184 $ 55,288
Discounts and concession fees1
(767) (736)
Fair value option valuation adjustments 48 (15)
Total $ 59,465 $ 54,537
1 Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation discount notes.
Our discount notes increased $4.9 billion or nine percent at September 30, 2024 when compared to December 31, 2023. During the nine months ended September 30, 2024, we continued to utilize discount notes primarily to fund our short-term assets and/or meet our liquidity requirements. Fair value option adjustments changed $63 million at September 30, 2024 when compared to December 31, 2023, driven primarily by the interest rate environment.
BONDS
The following table summarizes information on our bonds (dollars in millions):
September 30, 2024 December 31, 2023
Par value $ 90,951 $ 116,963
Premiums 29 52
Discounts and concession fees1
(26) (29)
Fair value hedging adjustments
113 (25)
Total $ 91,067 $ 116,961
1 Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation bonds.
Our bonds decreased $25.9 billion or 22 percent at September 30, 2024 when compared to December 31, 2023, driven by a reduction in total assets. Although the balance declined from the prior year-end, during the nine months ended September 30, 2024, we continued to utilize bonds in an effort to capture attractive funding and/or meet our liquidity requirements. Fair value hedging adjustments changed $138 million at September 30, 2024 when compared to December 31, 2023, driven primarily by volume and the interest rate environment.
For additional information on our consolidated obligations, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Liquidity - Sources of Liquidity."
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Capital
The following table summarizes information on our capital (dollars in millions):
September 30, 2024 December 31, 2023
Capital stock $ 5,892 $ 6,873
Retained earnings 3,422 3,138
Accumulated other comprehensive income (loss) (30) (180)
Total capital $ 9,284 $ 9,831
Our capital decreased at September 30, 2024 when compared to December 31, 2023 due primarily to a decrease in activity-based capital stock resulting from a decrease in advance balances, offset in part by an increase in retained earnings. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital" for additional information on our capital.
Derivatives
We use derivatives to manage interest rate risk. The notional amount of derivatives serves as a factor in determining periodic interest payments and cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor our overall exposure to credit and market risk.
The following table categorizes the notional amount of our derivatives by type (dollars in millions):
September 30, 2024 December 31, 2023
Interest rate swaps
Non-callable $ 144,456 $ 133,720
Callable by counterparty 10,994 32,284
Total interest rate swaps 155,450 166,004
Forward settlement agreements 216 115
Mortgage loan purchase commitments 213 112
Total notional amount $ 155,879 $ 166,231
The notional amount of our derivative contracts decreased $10.4 billion or six percent at September 30, 2024 when compared to December 31, 2023. This was primarily due to a decrease in callable swaps on consolidated obligation bonds, offset in part by increased utilization of non-callable swaps to hedge our advances in an effort to manage our interest rate risk. For additional discussion regarding our use of derivatives, see "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Derivatives."
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LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital positions are actively managed in an effort to preserve stable, reliable, and cost-effective sources of funds to meet current and projected operating financial commitments, as well as regulatory, liquidity, and capital requirements.
Liquidity
SOURCES OF LIQUIDITY
We utilize several sources of liquidity to carry out our business activities. These include, but are not limited to, proceeds from the issuance of consolidated obligations, payments collected on advances and mortgage loans, proceeds from investment securities, member deposits, proceeds from the issuance of capital stock, and current period earnings.
Our primary source of liquidity is proceeds from the issuance of consolidated obligations (bonds and discount notes) in the capital markets. During the nine months ended September 30, 2024, proceeds from the issuance of bonds and discount notes were $35.5 billion and $1,352.2 billion compared to $106.0 billion and $1,328.2 billion for the same periods in 2023. During the nine months ended September 30, 2024, we increased our utilization of consolidated obligation discount notes relative to bonds in an effort to capture attractive funding and/or meet our liquidity requirements.
Access to debt markets has been reliable because investors, driven by increased liquidity preference and our GSE status, have sought the FHLBanks' debt as an asset of choice. However, due to the short-term maturity of the debt, we may be exposed to additional risks associated with refinancing and our ability to access the capital markets.
We are focused on maintaining an adequate liquidity balance and a funding balance between our financial assets and financial liabilities and work collectively with the other FHLBanks to manage the system-wide liquidity and funding needs. We monitor our debt refinancing risk and liquidity position primarily by tracking the maturities of financial assets and financial liabilities. In managing and monitoring the amounts of assets that require refunding, we consider contractual maturities of our financial assets and liabilities, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments). External factors, including member borrowing needs, supply and demand in the debt markets, and other factors may affect liquidity balances and the funding balances between financial assets and financial liabilities. Refer to "Item 1. Financial Statements" for additional information regarding the contractual maturities of certain of our financial assets and liabilities.
Our ability to raise funds in the capital markets as well as our cost of borrowing may be affected by our credit ratings. As of October 31, 2024, our consolidated obligations were rated AA+/A-1+ with a stable outlook by S&P and Aaa/P-1 with a negative outlook by Moody's. For further discussion of how credit rating changes and our ability to access the capital markets may impact us in the future, refer to "Item 1A. Risk Factors" in our 2023 Form 10-K.
Although we are primarily liable for the portion of consolidated obligations that are issued on our behalf, we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations issued by the FHLBank System. At September 30, 2024 and December 31, 2023, the total par value of outstanding consolidated obligations for which we are primarily liable was $151.1 billion and $172.2 billion. At September 30, 2024 and December 31, 2023, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which we are jointly and severally liable was $1,021.7 billion and $1,032.1 billion.
The Office of Finance and FHLBanks have contingency plans in place that prioritize the allocation of proceeds from the issuance of consolidated obligations during periods of financial distress if consolidated obligations cannot be issued in sufficient amounts to satisfy all FHLBank demand. In the event of significant market disruptions or local disasters, our President and CEO or designee is authorized to establish interim borrowing relationships with other FHLBanks. To provide further access to funding, the FHLBank Act also authorizes the U.S. Treasury to directly purchase new issue consolidated obligations of the GSEs, including FHLBanks, up to an aggregate principal amount of $4.0 billion. As of October 31, 2024, no purchases had been made by the U.S. Treasury under this authorization.
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USES OF LIQUIDITY
We use our available liquidity, including proceeds from the issuance of consolidated obligations, primarily to repay consolidated obligations, fund advances, and purchase investments. During the nine months ended September 30, 2024, repayments of consolidated obligations totaled $1,409.2 billion compared to $1,409.8 billion for the same period in 2023.
During the nine months ended September 30, 2024, advance disbursements (excluding daily renewals) totaled $311.4 billion compared to $485.1 billion for the same period in 2023. Advance disbursements vary from period to period depending on member needs and decreased during the nine months ended September 30, 2024 due primarily to decreased member utilization of short-term advances. During the nine months ended September 30, 2024, investment purchases (excluding overnight investments) totaled $5.5 billion compared to $9.3 billion for the same period in 2023, a decrease due primarily to fewer purchases of agency MBS in 2024.
We also use liquidity to purchase mortgage loans, redeem member deposits, pledge collateral to derivative counterparties, redeem or repurchase capital stock, pay expenses, and pay dividends.
LIQUIDITY REQUIREMENTS
We are subject to certain liquidity requirements set forth by the Finance Agency and maintain a liquidity contingency funding plan designed to enable us to meet our obligations and the liquidity needs of our members in the event of short-term capital market disruptions, or operational disruptions at our Bank and/or the Office of Finance. For additional details on these liquidity requirements, refer to our 2023 Form 10-K. Our primary liquidity requirement is discussed further below.
Liquidity Guidance AB- This guidance requires us to maintain sufficient liquidity for a period of 10 to 30 calendar days. The base case scenario requires 20 days of positive daily cash balances and assumes that we cannot access the capital markets to issue debt, and during that time we will automatically renew maturing and called advances for all members, including large, highly-rated members, and we hold additional liquid assets equal to one percent of our letters of credit balances. At September 30, 2024 and December 31, 2023, we were in compliance with this base case liquidity guidance.
The Liquidity Guidance AB also specifies appropriate funding gap limits to address the risks associated with an FHLBank having too large a mismatch between the contractual maturities of its assets and liabilities. A funding gap measures the difference between assets and liabilities that are scheduled to mature during a specified period and is expressed as a percentage of total assets. The guidance provides recommended funding gap maximums of negative 15 percent at the three-month horizon and negative 30 percent at the one-year horizon. At September 30, 2024 and December 31, 2023, we adhered to these funding gap requirements.
Capital
CAPITAL REQUIREMENTS
We are subject to certain regulatory capital requirements. First, the FHLBank Act requires that we maintain at all times permanent capital greater than or equal to the sum of our credit, market, and operational risk capital requirements, all calculated in accordance with Finance Agency regulations. Only permanent capital, defined as the amounts paid-in for Class B capital stock (including MRCS), and retained earnings, can satisfy this risk-based capital requirement. Second, the FHLBank Act requires a minimum four percent capital-to-asset ratio, which is defined as total regulatory capital divided by total assets. Total regulatory capital includes Class B capital stock (including MRCS) and retained earnings. Third, the FHLBank Act imposes a five percent minimum leverage ratio, which is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times, divided by total assets. At September 30, 2024 and December 31, 2023, we did not hold any nonpermanent capital. At September 30, 2024 and December 31, 2023, we were in compliance with all three of the Finance Agency's regulatory capital requirements.
In addition to the requirements previously discussed, the Capital Stock AB requires each FHLBank to maintain at all times a ratio of at least two percent of capital stock to total assets. For purposes of the Capital Stock AB, capital stock includes MRCS. The capital stock to total assets ratio is measured on a daily average basis at month end. At September 30, 2024 and December 31, 2023, we were in compliance with the Capital Stock AB.
Refer to "Item 1. Financial Statements - Note 8 - Capital" for additional information on our regulatory capital requirements.
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CAPITAL STOCK
Our capital stock has a par value of $100 per share, and all shares are issued, redeemed, and repurchased only at the stated par value. We issue a single class of capital stock (Class B capital stock) and have two subclasses of Class B capital stock: membership and activity-based. Each member must purchase and hold membership capital stock in an amount equal to 0.06 percent of its total assets as of the preceding December 31st, subject to a cap of $10.0 million and a floor of $10,000. Each member is also required to purchase activity-based capital stock equal to 4.50 percent of its advances, 4.00 percent of mortgage loans outstanding, and 0.10 percent of its standby letters of credit. All Class B capital stock issued is subject to a notice of redemption period of five years.
The capital stock requirements established in our Capital Plan are designed so that we can remain adequately capitalized as member activity changes. Our Board of Directors may make adjustments to the capital stock requirements within ranges established in our Capital Plan.
The following table summarizes our regulatory capital stock by type of member (dollars in millions):
September 30, 2024 December 31, 2023
Commercial banks $ 2,798 $ 4,172
Savings institutions 126 102
Credit unions 958 919
Insurance companies 2,009 1,679
CDFIs 1 1
Total GAAP capital stock 5,892 6,873
MRCS 9 12
Total regulatory capital stock $ 5,901 $ 6,885
The decrease in regulatory capital stock held at September 30, 2024 when compared to December 31, 2023 was due primarily to a decrease in activity-based capital stock resulting from a decline in advance balances. For additional information on our capital stock, refer to "Item 1. Financial Statements - Note 8 - Capital."
Retained Earnings
Our risk management policies outline a targeted level of retained earnings based on the amount we believe necessary to help protect the redemption value of capital stock, facilitate safe and sound operations, maintain regulatory capital ratios, and support our ability to pay a relatively stable dividend. We monitor our achievement of this targeted level and may utilize tools such as restructuring our balance sheet, generating additional income, reducing our risk exposures, increasing capital stock requirements, or reducing our dividends to achieve this level of retained earnings. At September 30, 2024 and December 31, 2023, our actual retained earnings exceeded our targeted level of retained earnings.
We entered into a JCE Agreement with all of the other Federal Home Loan Banks in 2011. Under the JCE Agreement, we are required to allocate 20 percent of our quarterly net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least one percent of our average balance of outstanding consolidated obligations for the calendar quarter. The restricted retained earnings are not available to pay dividends and are presented separately on our Statements of Condition. At September 30, 2024 and December 31, 2023, our restricted retained earnings balance totaled $1.0 billion and $0.9 billion. One percent of our average balance of outstanding consolidated obligations for the three months ended September 30, 2024 was $1.6 billion.
Dividends
Our dividend philosophy is to pay a consistent dividend equal to or greater than the current market rate for a highly-rated investment (i.e. SOFR), and at a rate that the Board of Directors believes is sustainable under current and projected earnings to maintain an appropriate level of capital and retained earnings. Our dividend is determined quarterly by our Board of Directors, based on policies, regulatory requirements, actual performance, and other considerations that the Board of Directors determines to be appropriate.
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The following table summarizes dividend-related information (dollars in millions):
For the Three Months Ended
For the Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Aggregate cash dividends paid1
$ 141 $ 114 $ 424 $ 319
Effective combined annualized dividend rate paid on capital stock2
8.96 % 6.86 % 8.55 % 6.77 %
Annualized dividend rate paid on membership capital stock 6.00 % 3.00 % 5.19 % 3.00 %
Annualized dividend rate paid on activity-based capital stock 9.50 % 7.95 % 9.25 % 7.88 %
Average SOFR 5.28 % 5.24 % 5.30 % 4.90 %
1 Includes aggregate cash dividends paid during the period. Amount excludes cash dividends paid on MRCS. For financial reporting purposes, these dividends were recorded as interest expense on our Statements of Income.
2 Effective combined annualized dividend rate is paid on total capital stock, including MRCS.
CRITICAL ACCOUNTING ESTIMATES
For a discussion of our critical accounting estimates, refer to our 2023 Form 10-K. There have been no material changes to our critical accounting estimates during the nine months ended September 30, 2024.
For a discussion of recently adopted or issued accounting standards, refer to "Item 1. Financial Statements - Note 2 - Recently Adopted and Issued Accounting Guidance."
LEGISLATIVE AND REGULATORY DEVELOPMENTS
Certain legislative and regulatory actions and developments are summarized in this section. See Management's Discussion and Analysis of Financial Condition and Results of Operations -Legislative and Regulatory Developments in our 2023 Form 10-K and in our quarterly reports on Form 10-Q for the periods ended March 31, 2024 and June 30, 2024, for a description of certain legislative and regulatory developments that occurred prior to the publication of those reports.
Advisory Bulletin on FHLBank Member Credit Risk Management
On September 27, 2024, the Finance Agency issued an advisory bulletin setting forth the Finance Agency's expectations that an FHLBank's underwriting and credit decisions should reflect a member's financial condition and not rely solely on the collateral securing the member's credit obligations. The advisory bulletin provides guidance for the FHLBanks to implement policies for credit risk governance, member credit assessment and monitoring of credit conditions, among other considerations. It also provides guidance on the oversight of members in financial distress by recommending implementation of escalation policies, processes for coordination with members' prudential regulators, and management policies addressing default, failure, and insolvency situations. While we are still evaluating this advisory bulletin against our current member credit risk management policies and procedures to assess its potential impact on us and our operations, we do not expect that this guidance will impact our role as a reliable source of liquidity for our members.
Advisory Bulletin on Federal Home Loan Bank System Climate-Related Risk Management
On September 30, 2024, the Finance Agency issued an advisory bulletin setting forth the Finance Agency's expectation that each FHLBank should integrate climate-related risk management into its existing enterprise risk management framework over time. The advisory bulletin provides that an effective framework should address climate-related risk governance, such as selection of the related risk appetite and setting strategy and objectives, establishing and implementing plans to mitigate, monitor, and report material exposures to such risks, and establishing roles and responsibilities for the board of directors and management. The advisory bulletin requires the FHLBanks to establish metrics that track exposure to climate-related risks and collect related data to quantify risk exposures, conduct climate-related scenario analyses, implement processes to report and communicate climate-related risks to internal stakeholders, and have a plan to respond to natural disasters and support climate resiliency. We are evaluating the potential impact of the advisory bulletin on us and our operations.
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Proposed Rule on Unsecured Credit Limits for Federal Home Loan Banks
On October 3, 2024, the Finance Agency published a proposed rule with a comment deadline of December 2, 2024, to amend the Finance Agency's regulation on capital requirements (Capital Regulation) to modify unsecured credit limits for FHLBanks. The proposed rule would include interest bearing deposit accounts (IBDAs) in a category of authorized overnight investments that would be excluded from the general limit (more restrictive) on unsecured credit to a single counterparty. IBDAs are non-maturity deposits in approved counterparties which may be used to manage liquidity. The proposed rule would, among other things, increase the frequency of the required performance of certain capital calculations and clarify that certain non-interest-bearing deposit accounts (such as settlement, payment or other transactional accounts) are to be considered unsecured extensions of credit subject to the Capital Regulation's unsecured general or overall (less restrictive) limit. Although excluding IBDAs from the general unsecured credit limit could provide greater flexibility for an FHLBank's liquidity management, several of the other proposed changes, if adopted, could result in significant changes to our current business processes. We are evaluating the potential impact of the proposed rule on us and our operations.
Proposed Rule on Federal Home Loan Bank System Boards of Directors and Executive Management
On October 21, 2024, the Finance Agency proposed revisions to its regulations addressing boards of directors and overall corporate governance of the FHLBanks and the Office of Finance. The comment deadline will be 90 days after the proposed rule is published in the Federal Register. If adopted as presented, the proposed rule would, among other things: (1) impact director compensation by allowing the Director of the Finance Agency to establish an annual amount of director compensation that the Director determines is reasonable; (2) require us to complete and submit background checks to the Finance Agency on every nominee for a directorship; (3) impact public interest independent director qualifications, in part by requiring a person to have advocated for, or otherwise acted primarily on behalf of or for the direct benefit of, consumers or the community to meet the representation requirement; (4) expand the list of qualifying experiences for all regular independent directors to include artificial intelligence, information technology and security, climate-related risk, Community Development Financial Institutions, business models, and modeling; and (5) establish a review process for director performance and participation, together with a process for removing directors for cause. Other proposed revisions address, among other things, Bank conflicts of interest policies, covering all Bank employees, including specific limitations on executive officers and senior management, and record retention.
While some proposed revisions would codify existing guidance and practice, several of the proposed revisions could result in significant changes to the nomination, election, and retention of our board of directors. Additional director eligibility requirements and limitations on and potential reductions or limitations to director compensation resulting from the proposed rule could hinder our ability to recruit and retain the talent and expertise that are critical to our ability to satisfy our mission, particularly given the growing complexities of the finance industry. We continue to analyze the impact that the proposed rule could have on us.
RISK MANAGEMENT
We have risk management policies, established by our Board of Directors, that allow us to monitor and control our exposure to various risks, including interest rate, liquidity, credit, operational, model, information security, legal, regulatory and compliance, DEI, strategic, and reputational, as well as capital adequacy. Our primary risk management objective is to manage our assets and liabilities in ways that ensure liquidity is available to our members and protect the par redemption value of our capital stock. We periodically evaluate our risk management policies in order to respond to changes in our financial position and general market conditions. The following sections outline our interest rate and credit risks. For additional details on all other risks noted above, please refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management" in our 2023 Form 10-K.
Interest Rate Risk
We define interest rate risk as the risk that changes in interest rates or spreads will adversely affect our financial condition (market value) or performance (income). Interest rate risk is the principal type of risk to which we are exposed, as our cash flows, and therefore earnings and equity value, can change significantly as interest rates change. Our general approach toward managing interest rate risk is to acquire and maintain a portfolio of assets, liabilities, and derivatives which, taken together, limit our expected exposure to interest rate risk. Our key interest rate risk measures are MVE and Projected 24-Month Income. Management regularly monitors these key measures, as discussed further in the sections below.
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MARKET VALUE OF EQUITY
MVE measures the net present value of the Bank by either marking positions to market or discounting all future cash flows using market discount rates. MVE is measured as the market value of our assets minus the market value of our liabilities (excluding MRCS). MVE is an estimate of the Bank's value and takes into account short-term market price fluctuations.
We monitor and manage to MVE policy limits in an effort to ensure the stability of the Bank's value. Our policy limits are based on declines from the base case in parallel and non-parallel interest rate change scenarios. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner. At September 30, 2024 and December 31, 2023, our base case MVE was $9.1 billion and $9.7 billion, and the decline between periods was primarily due to a decrease in activity-based stock resulting from a decline in advance balances. At September 30, 2024 and December 31, 2023, we were in compliance with all MVE policy limits.
MVCS represents our MVE divided by the total outstanding shares of our capital stock (including MRCS). To ensure we remain adequately capitalized, we must ensure our MVCS remains at or above our $100 par value. Our base case MVCS was $154.3 at September 30, 2024 compared to $141.6 at December 31, 2023. The increase in our base case MVCS was primarily attributable to the redemption of activity-based capital stock at par value, which is below our current MVCS value.
For more information on this risk measure, including policy limits, refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate Risk - Market Value of Equity" in our 2023 Form 10-K.
PROJECTED 24-MONTH INCOME
The projected 24-month income simulation measures our short-term earnings forecast over a two-year horizon based on forward interest rates and business assumptions. Our primary measure of profitability is the spread between projected AROCS and average SOFR. In this measure, AROCS adjusts GAAP net income for certain non-routine or unpredictable items, including, but not limited to, market adjustments relating to derivative and hedging activities and instruments held at fair value, net asset prepayment fee income, MRCS interest expense, debt extinguishment gains (losses), and (ii) other non-routine items, if applicable.
We monitor and manage to policy limits, which are based on the spread between our projected AROCS and average SOFR in parallel and non-parallel interest rate change scenarios. Additionally, there is a limit on the decline in projected AROCS from base case AROCS for certain basis shock scenarios to limit basis risk exposure. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner. We were in compliance with all projected 24-month income policy limits at September 30, 2024 and December 31, 2023.
For more information on this risk measure, including policy limits, refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate Risk - Projected 24-Month Income" in our 2023 Form 10-K.
CAPITAL ADEQUACY
An adequate capital position is necessary for facilitating safe and sound business operations, protecting the redemption value of our capital stock, maintaining regulatory capital ratios, and supporting our ability to pay dividends and redeem excess capital stock. To ensure capital adequacy, we maintain a targeted level of retained earnings to achieve business imperatives and cover unexpected losses. Our key capital adequacy measures are regulatory capital and targeted retained earnings in order to maintain capital levels in accordance with Finance Agency regulations. In addition, our risk management policies require that we maintain MVCS at or above our $100 par value.
For additional information on our compliance with regulatory capital requirements as well as our targeted retained earnings, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital."
For additional information on MVCS, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate Risk - Market Value of Equity."
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Credit Risk
We define credit risk as the risk that a member or counterparty will fail to meet its financial obligations. Our primary credit risks arise from our ongoing lending, investing, and hedging activities. Our overall objective in managing credit risk is to operate a sound credit granting process and to maintain appropriate credit administration, measurement, and monitoring practices.
ADVANCES
We manage our credit exposure to advances through a lending policy that provides for an established credit limit for each borrower, ongoing reviews of each borrower's financial condition and ability to repay, and detailed collateral and lending policies to limit risk of loss while balancing borrowers' needs for a reliable source of funding. In addition, we lend to our borrowers in accordance with the FHLBank Act, Finance Agency regulations, and other applicable laws.
We are required by regulation to evaluate our members' creditworthiness and ability to repay, and to obtain sufficient collateral to fully secure our advances, standby letters of credit, and other extensions of credit to borrowers (collectively, credit products). The estimated value of the collateral required to secure each borrower's credit products is calculated by applying collateral discounts, or haircuts, to the unpaid principal or market value, as applicable, of the collateral. We also have policies and procedures for validating the reasonableness of our collateral valuations. In addition, we perform collateral verifications and on-site reviews based on the risk profile of the borrower. Management believes that these policies effectively manage our credit risk from advances.
At September 30, 2024 and December 31, 2023, borrowers pledged $399.1 billion and $380.7 billion of collateral (net of applicable discounts) to support activity with us, including advances. At September 30, 2024 and December 31, 2023, all of our advances met the requirement to be collateralized at a minimum of 100 percent, net of applicable discounts. Borrowers pledge collateral in excess of their collateral requirement mainly to demonstrate available liquidity and to borrow additional amounts in the future.
We evaluate advances for credit losses on a quarterly basis. We have never experienced a credit loss on our advances. Based upon our collateral and lending policies, the collateral held as security, and the repayment history on advances, management has determined that there were no expected credit losses on our advances as of September 30, 2024 and December 31, 2023. Refer to "Item 1. Financial Statements - Note 4 - Advances" for additional information on our allowance for credit losses.
MORTGAGE LOANS
Mortgage loan credit risk is the risk that we will not receive timely payments of principal and interest due from mortgage borrowers because of borrower defaults. Credit risk on mortgage loans is affected by a number of factors, including loan type, borrower's credit history, and other factors such as home price fluctuations, unemployment levels, and other economic factors in the local market or nationwide.
The following table presents the unpaid principal balance of our mortgage loans by product type (dollars in millions):
Product Type September 30, 2024 December 31, 2023
Conventional $ 10,942 $ 9,506
Government 371 378
Total unpaid principal balance $ 11,313 $ 9,884
We manage the credit risk on mortgage loans by (i) adhering to our underwriting standards, (ii) using agreements to establish credit risk sharing responsibilities with our PFIs, and (iii) monitoring the performance of the mortgage loan portfolio and creditworthiness of PFIs.
We evaluate mortgage loans for credit losses on a quarterly basis and establish an allowance for credit losses to reflect management's estimate of expected credit losses inherent in the portfolio. At September 30, 2024 and December 31, 2023, we had an allowance for credit losses of $4 million and $6 million on our conventional mortgage loans. At September 30, 2024, over 99 percent of our conventional loan portfolio was performing (i.e. current payment status) and charge-offs recorded during the nine months ended September 30, 2024 were less than one percent of the total conventional portfolio.
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We have never experienced a credit loss on our government-insured mortgage loans. At September 30, 2024 and December 31, 2023, we determined no allowance for credit losses was necessary on our government-insured mortgage loans. Refer to "Item 1. Financial Statements - Note 5 - Mortgage Loans Held for Portfolio" for additional information on our allowance for credit losses and the payment status of our conventional mortgage loans.
INVESTMENTS
We maintain an investment portfolio primarily to provide liquidity as well as investment income. Our primary credit risk on investments is the counterparties' ability to meet repayment terms. We mitigate this credit risk by purchasing investment quality securities. We define investment quality as a security with adequate financial backing so that full and timely payment of principal and interest on such security is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security. We consider a variety of credit quality factors when analyzing potential investments, including collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, NRSRO credit ratings, and/or the financial health of the underlying issuer. We limit our purchases of MBS to those guaranteed by the U.S. Government or issued by a GSE. We perform ongoing analysis on these investments to determine potential credit issues.
Finance Agency regulations also limit the type of investments we may purchase. We are prohibited from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks, unless otherwise approved by the Finance Agency. At September 30, 2024, we were in compliance with the regulation and did not own any financial instruments issued by non-U.S. entities, other than those issued by U.S. branches and agency offices of foreign commercial banks, and those approved by the Finance Agency.
In addition, Finance Agency regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties. These limits are based on a percentage of regulatory capital and the counterparty's overall credit rating. At September 30, 2024, we were in compliance with the regulatory limits established for unsecured credit.
Refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk" in our 2023 Form 10-K for additional information on these regulatory limits.
Our short-term portfolio may include, but is not limited to, interest-bearing deposits, federal funds sold, securities purchased under agreements to resell, certificates of deposit, commercial paper, and U.S. Treasury obligations. Our long-term portfolio may include, but is not limited to, U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, taxable municipal bonds, and agency MBS. We consider our long-term investments issued or guaranteed by the U.S. Government, an agency or instrumentality of the U.S. Government, or the Federal Deposit Insurance Corporation to be of the highest credit quality and therefore those exposures are not monitored with other unsecured investments. Given the credit quality of our unsecured long-term investments, our unsecured credit risk is primarily in the short-term portfolio.
We limit short-term unsecured credit exposure primarily to the following overnight investment types:
•Interest-bearing deposits.Primarily consists of unsecured deposits that earn interest.
•Federal funds sold. Unsecured loans of reserve balances at the Federal Reserve Banks between financial institutions.
•Commercial paper. Unsecured debt issued by corporations, typically for the financing of accounts receivable, inventories, and meeting short-term liabilities.
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At September 30, 2024, our unsecured short-term investment exposure consisted of overnight interest-bearing deposits and federal funds sold. The following table presents our unsecured short-term investment exposure by counterparty credit rating and domicile (dollars in millions):
September 30, 2024
Credit Rating1,2
Domicile of Counterparty AA A Total
Domestic $ - $ 3,820 $ 3,820
U.S subsidiaries of foreign commercial banks - 300 300
Total domestic and U.S. subsidiaries of foreign commercial banks - 4,120 4,120
U.S. branches and agency offices of foreign commercial banks
Australia 1,250 - 1,250
Canada - 1,725 1,725
Finland 525 - 525
France - 300 300
Germany 1,390 - 1,390
Netherlands - 700 700
Norway 1,390 - 1,390
Sweden - 400 400
United Kingdom - 100 100
Total U.S. branches and agency offices of foreign commercial banks 4,555 3,225 7,780
Total unsecured short-term investment exposure $ 4,555 $ 7,345 $ 11,900
1 Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.
2 Table excludes investments issued or guaranteed by the U.S. Government, U.S. government agencies, government instrumentalities, GSEs, and supranational entities, and does not include related accrued interest.
Investment Ratings
The following table summarizes the carrying value of our investments by credit rating (dollars in millions):
September 30, 2024
Credit Rating1
AAA AA A BBB Unrated Total
Interest-bearing deposits $ - $ 1 $ 3,780 $ - $ - $ 3,781
Securities purchased under agreements to resell - - - - 8,200 8,200
Federal funds sold - 4,555 3,565 - - 8,120
Investment securities:
MBS
GSE single-family - 593 - - - 593
GSE multifamily - 18,647 - - - 18,647
U.S. obligations single-family2
- 4,718 - - - 4,718
Private-label residential - - 1 1 - 2
Total MBS - 23,958 1 1 - 23,960
Non-MBS
U.S. Treasury obligations2
- 3,913 - - - 3,913
Other U.S. obligations2
- 227 - - - 227
GSE and TVA obligations - 738 - - - 738
State or local housing agency obligations 416 138 - - - 554
Other3
136 20 - - - 156
Total non-MBS 552 5,036 - - - 5,588
Total investments $ 552 $ 33,550 $ 7,346 $ 1 $ 8,200 $ 49,649
1 Represents either the lowest credit rating available for each investment based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.
2 Represents investment securities backed by the full faith and credit of the U.S. Government.
3 Consists primarily of taxable municipal bonds.
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We evaluate investments for credit losses on a quarterly basis. At September 30, 2024 and December 31, 2023, we determined no allowance for credit losses was necessary on our investments. Refer to "Item 1. Financial Statements - Note 3 - Investments" for additional information on our allowance for credit losses.
DERIVATIVES
We execute most of our derivative transactions with large banks and major broker-dealers. Over-the-counter derivative transactions may be either executed directly with a counterparty, referred to as uncleared derivatives, or cleared through a clearing agent with a clearinghouse, referred to as cleared derivatives.
We are subject to credit risk due to the risk of nonperformance by counterparties to our derivative agreements. The amount of credit risk on derivatives depends on the extent to which netting procedures and collateral requirements are used and are effective in mitigating the risk. We manage credit risk through credit analysis of derivative counterparties, collateral requirements, and adherence to the requirements set forth in our policies, CFTC regulations, and Finance Agency regulations.
Uncleared derivative transactions executed on or after September 1, 2022 are subject to two-way initial margin requirements as mandated by the Dodd-Frank Act, if our aggregate uncleared derivative transactions exposure to a counterparty exceeds a specified threshold. The initial margin is required to be held at a third-party custodian and does not change ownership. Rather, the party in respect of which the initial margin has been posted to the third-party custodian will have a security interest in the amount of initial margin required under the uncleared margin rules and can only take ownership upon the occurrence of certain events, including an event of default due to bankruptcy, insolvency, or similar proceeding. As of October 31, 2024, we were not required to post initial margin on our uncleared derivative transactions in accordance with the noted regulations.
For uncleared transactions, the derivative agreements are generally fully collateralized with a zero unsecured threshold in accordance with variation margin requirements issued by the U.S. federal bank regulatory agencies and the CFTC.
The contractual or notional amount of derivatives reflects our involvement in the various classes of financial instruments. Our maximum credit risk is the estimated cost of replacing derivatives if there is a default, minus the value of any related collateral. In determining maximum credit risk, we consider accrued interest receivables and payables as well as our ability to net settle positive and negative positions with the same counterparty and/or clearing agent when netting requirements are met.
The following table shows our derivative counterparty credit exposure (dollars in millions):
September 30, 2024
Credit Rating1
Notional Amount Net Derivatives
Fair Value Before Collateral 		Cash Collateral Pledged
To (From) Counterparty 		Net Credit Exposure
to Counterparties
Non-member counterparties:
Asset positions with credit exposure
Uncleared derivatives
A
$ 1,292 $ 43 $ (42) $ 1
Cleared derivatives2
111,877 144 1,261 1,405
Liability positions with credit exposure
Cleared derivatives2
31,039 (2) 33 31
Total derivative positions with credit exposure to non-member counterparties 144,208 185 1,252 1,437
Member institutions3,4
53 - - -
Total 144,261 $ 185 $ 1,252 $ 1,437
Derivative positions without credit exposure 11,618
Total notional $ 155,879
1 Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable.
2 Represents derivative transactions cleared with CME Clearing and LCH Ltd., our clearinghouses. CME Clearing is not rated, but its parent, CME Group Inc. was rated Aa3 by Moody's and AA- by S&P at September 30, 2024. LCH Ltd. was rated AA- by S&P at September 30, 2024.
3 Net credit exposure is less than $1 million.
4 Represents mortgage loan purchase commitments with our member institutions.
Refer to "Item 1. Financial Statements - Note 6 - Derivatives and Hedging Activities" for additional information on our derivatives and hedging activities.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate Risk" and the sections referenced therein for quantitative and qualitative disclosures about market risk.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management is responsible for establishing and maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms; and (ii) accumulated and communicated to our management, including our President and CEO, and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management, with the participation of our President and CEO, and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the quarterly period covered by this report. Based on that evaluation, our President and CEO, and CFO have concluded that our disclosure controls and procedures were effective as of September 30, 2024.
Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2024, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Refer to "Item 1. Financial Statements - Note 10 - Commitments and Contingencies" for information regarding legal proceedings.
ITEM 1A. RISK FACTORS
For a discussion of our risk factors, refer to our 2023 Form 10-K. There have been no material changes to our risk factors during the nine months ended September 30, 2024.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
3.1
3.2
4.1
31.1
Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of the President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2
Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
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101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
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1 Incorporated by reference from our Form 8-K filed with the SEC on June 1, 2015 (Commission File No. 000-51999).
2 Incorporated by reference from our Form 8-K filed with the SEC on December 14, 2021 (Commission File No. 000-51999).
3 Incorporated by reference from our Form 10-K filed with the SEC on March 7, 2024 (Commission File No. 000-51999).
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Glossary of Terms
2023 Form 10-K: The Bank's 2023 Annual Report on Form 10-K filed with the SEC on March 7, 2024
AFS: Available-for-Sale
AHP: Affordable Housing Program
AOCI: Accumulated Other Comprehensive Income (Loss)
AROCS: Adjusted Return on Capital Stock
ASU: Accounting Standards Update
Capital Stock AB: Finance Agency Advisory Bulletin on Capital Stock 2019-03
CDFI: Community Development Financial Institution
CEO: Chief Executive Officer
CFO: Chief Financial Officer
CFTC: U.S. Commodity Futures Trading Commission
DEI: Diversity, Equity and Inclusion
Dodd-Frank Act:Dodd-Frank Wall Street Reform and Consumer Protection Act
Exchange Act: Securities Exchange Act of 1934, as amended
FASB: Financial Accounting Standards Board
FHLBank Act: Federal Home Loan Bank Act of 1932
FHLBanks: The 11 Federal Home Loan Banks or a subset thereof
Finance Agency: Federal Housing Finance Agency
FLA: First Loss Account
FOMC: Federal Open Markets Committee
GAAP: Generally Accepted Accounting Principles
Ginnie Mae:Government National Mortgage Association
GSE: Government-Sponsored Enterprise
HTM: Held-to-Maturity
JCE Agreement: Joint Capital Enhancement Agreement entered into by the FHLBanks in 2011, as amended
LCH: London Clearing House
Liquidity Guidance AB: Finance Agency Advisory Bulletin on FHLBank Liquidity 2018-07
MBS: Mortgage-Backed Securities
MD&A: Management's Discussion and Analysis
Moody's: Moody's Investors Service, Inc.
MPF: Mortgage Partnership Finance (a federally registered trademark of the Federal Home Loan Bank of Chicago)
MRCS: Mandatorily Redeemable Capital Stock
MVCS: Market Value of Capital Stock
MVE: Market Value of Equity
NRSRO: Nationally Recognized Statistical Rating Organization
PFI:Participating Financial Institution
S&P: S&P Global Ratings
SEC: Securities and Exchange Commission
SOFR: Secured Overnight Financing Rate
TBA: To-Be-Announced
TVA: Tennessee Valley Authority
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
FEDERAL HOME LOAN BANK OF DES MOINES
(Registrant)
Date: November 8, 2024
By:
/s/ Kristina K. Williams
Kristina K. Williams
President and Chief Executive Officer
By:
/s/ James G. Livingston
James G. Livingston
Chief Financial Officer
(Principal Financial and Accounting Officer)
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