Federal Home Loan Bank of Pittsburgh 10K 2022 Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2022

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

For the transition period from to

Commission File Number: 000-51395

FEDERAL HOME LOAN BANK OF PITTSBURGH

(Exact name of registrant as specified in its charter)

Federally Chartered Corporation

25-6001324

(State or other jurisdiction of
incorporation or organization)

(IRS Employer Identification No.)

601 Grant Street

Pittsburgh,

15219

(Address of principal executive offices)

(Zip Code)

(412) 288-3400

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
—	—	—


Securities registered pursuant to Section 12(g) of the Act:
Capital Stock, putable, par value $100
(Title of Class)

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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

☐

Emerging growth company

Non-accelerated filer

Smaller reporting 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

Registrant’s stock is not publicly traded and is only issued to members of the registrant. Such stock is issued and redeemed at par value, $100 per share, subject to certain regulatory and statutory limits. At June 30, 2022, the aggregate par value of the stock held by current and former members of the registrant was approximately $2,085.4 million. There were 35,244,966 shares of common stock outstanding at February 28, 2023.

FEDERAL HOME LOAN BANK OF PITTSBURGH

TABLE OF CONTENTS


PART I						1
Item 1: Business						1
Item 1A: Risk Factors						16
Item 1B: Unresolved Staff Comments						25
Item 2: Properties						25
Item 3: Legal Proceedings						25
Item 4: Mine Safety Disclosures						26
PART II						26
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities						26
Item 6: [Reserved]						26
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations						26
Risk Management						56
Item 7A: Quantitative and Qualitative Disclosures about Market Risk						85
Item 8: Financial Statements and Supplementary Data						86
Financial Statements for the Years 2022, 2021, and 2020						88
Notes to Financial Statements						95
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure						143
Item 9A: Controls and Procedures						143
Item 9B: Other Information						143
Item 9C: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections						143
PART III						143
Item 10: Directors, Executive Officers and Corporate Governance						143
Item 11: Executive Compensation						152
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters						174
Item 13: Certain Relationships and Related Transactions, and Director Independence						175
Item 14: Principal Accountant Fees and Services						178
PART IV						178
Item 15: Exhibits and Financial Statement Schedules						178
Item 16: Form 10-K Summary						180
Glossary						181
Signatures						185

PART I

Forward-Looking Information

Statements contained in this Form 10-K, including statements describing the objectives, projections, estimates, or predictions of the future of the Federal Home Loan Bank of Pittsburgh (the Bank), may be “forward-looking statements.” These statements may use forward-looking terms, such as “anticipates,” “believes,” “could,” “estimates,” “may,” “should,” “will,” or their negatives or other variations on these terms. The Bank cautions that, by their nature, forward-looking statements involve risk or uncertainty and that actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These forward-looking statements involve risks and uncertainties including, but not limited to, the following: economic and market conditions, including, but not limited to, real estate, credit and mortgage markets; volatility of market prices, rates, and indices related to financial instruments; including but not limited to, the discontinuance of the London Interbank Offered Rate (LIBOR) and the related effect on the Bank's LIBOR-based financial products, investments and contracts; the occurrence of man-made or natural disasters, endemics, global pandemics, conflicts or terrorist attacks or other geopolitical events; political, legislative, regulatory, litigation, or judicial events or actions, including those relating to environmental, social, and governance matters; risks related to mortgage-backed securities (MBS); changes in the assumptions used to estimate credit losses; changes in the Bank’s capital structure; changes in the Bank’s capital requirements; changes in expectations regarding the Bank’s payment of dividends; membership changes; changes in the demand by Bank members for Bank advances; an increase in advance prepayments; competitive forces, including the availability of other sources of funding for Bank members; changes in investor demand for consolidated obligations and/or the terms of interest rate exchange agreements and similar agreements; changes in the Federal Home Loan Bank (FHLBank) System’s debt rating or the Bank’s rating; the ability of the Bank to introduce new products and services to meet market demand and to manage successfully the risks associated with new products and services; the ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which the Bank has joint and several liability; applicable Bank policy requirements for retained earnings and the ratio of the market value of equity to par value of capital stock; the Bank’s ability to maintain adequate capital levels (including meeting applicable regulatory capital requirements); business and capital plan adjustments and amendments; technology and cyber-security risks; and timing and volume of market activity. Information on the Bank's websites referred to in this Form 10-K is not incorporated in, or a part of, this Form 10-K. Forward-looking statements in this Form 10-K should not be relied on as representing the Bank’s expectations or assumptions as of any time subsequent to the time this Form 10-K is filed with the Securities and Exchange Commission. Forward looking statements speak only as of the date made and the Bank has no obligation, and does not undertake publicly, to update or revise any forward-looking statement for any reason.

Item 1: Business

The Bank’s mission is to provide its members with readily available liquidity, including serving as a low-cost source of funds for housing and community development. The Bank strives to enhance the availability of credit for residential mortgages and targeted community development. The Bank manages its liquidity so that funds are available to meet members’ demand for advances (loans to members and eligible nonmember housing associates). By providing needed liquidity and enhancing competition in the mortgage market, the Bank’s lending programs benefit homebuyers and communities. For additional information regarding the Bank’s financial condition and financial statements, refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data in this Form 10-K. For additional information regarding the Bank’s business risks, refer to Item 1A. Risk Factors in this Form 10-K.

General

History. The Bank is one of 11 FHLBanks. The FHLBanks operate as separate entities with their own management, employees and board of directors. The 11 FHLBanks, along with the Office of Finance (OF - the FHLBanks’ fiscal agent) comprise the FHLBank System. The FHLBanks were organized under the authority of the Federal Home Loan Bank Act of 1932, as amended (the Act). The FHLBanks are commonly referred to as government-sponsored enterprises (GSEs), which generally means they are a combination of private capital and public sponsorship. The public sponsorship attributes include:

•being exempt from federal, state and local taxation, except real estate taxes;

•being exempt from registration under the Securities Act of 1933 (the 1933 Act), although the FHLBanks are required by Federal Housing Finance Agency (FHFA or Finance Agency) regulation and the Housing and Economic Recovery

Act of 2008 (the Housing Act or HERA) to register a class of their equity securities under the Securities Exchange Act of 1934 (the 1934 Act); and

•having a line of credit with the U.S. Treasury. This line represents the U.S. Treasury’s authority to purchase consolidated obligations in an amount up to $4 billion.

Cooperative. The Bank is a cooperative institution, owned by member financial institutions that are also its primary customers. Any building and loan association, savings and loan association, commercial bank, homestead association, insurance company, savings bank, credit union, community development financial institution (CDFI), or insured depository institution that maintains its principal place of business in Delaware, Pennsylvania or West Virginia and that meets varying requirements can apply for membership in the Bank. All members are required to purchase capital stock in the Bank as a condition of membership. The capital stock of the Bank can be purchased only by members.

Mission. The Bank’s primary mission is to assure the flow of credit to its members to support housing finance and community lending and to provide related services that enhance their businesses and vitalize their communities. The Bank provides credit for housing and community development through two primary programs. First, it provides members with advances secured by residential mortgages and other types of high-quality collateral. Second, the Bank purchases residential mortgage loans originated by, or through, eligible member institutions. The Bank also offers other credit and noncredit products and services to member institutions. These include letters of credit, affordable housing grants, securities safekeeping, and deposit products and services. The Bank issues debt to the public (consolidated obligation bonds and discount notes) in the capital markets through the OF and uses these funds to provide its member financial institutions with a reliable source of liquidity. The U.S. government does not guarantee the debt securities or other obligations of the Bank or the FHLBank System.

Overview. As a GSE, the Bank is able to raise funds in the capital markets at narrow spreads to the U.S. Treasury yield curve. This fundamental competitive advantage, coupled with the joint and several liability on FHLBank System debt, enables the Bank to provide attractively priced funding to members. Though chartered by Congress, the Bank is privately capitalized by its member institutions, which are voluntary participants in its cooperative structure. The characterization of the Bank as a voluntary cooperative with the status of a federal instrumentality differentiates the Bank from a traditional banking institution in three principal ways:

•Financial institutions choose membership in the Bank principally for access to liquidity, the value of the products offered, and the potential to receive dividends.

•Because the Bank’s customers and shareholders are predominantly the same institutions, normally there is a need to balance the pricing expectations of customers with the dividend expectations of shareholders. By charging wider spreads on loans to customers, the Bank could potentially generate higher earnings and dividends for shareholders. Yet these same shareholders are also customers who would generally prefer narrower loan spreads. The Bank strives to achieve a balance between the goals of providing liquidity and other services to members at advantageous prices and potentially generating an attractive dividend. The Bank typically does not strive to maximize the dividend yield on the stock, but to produce a dividend that compares favorably to short-term interest rates, thus compensating members for the cost of the capital they have invested in the Bank.

•The Bank’s GSE charter is based on a public policy purpose to assure liquidity for its members and to enhance the availability of affordable housing for lower-income households. In upholding its public policy mission, the Bank offers products that consume a portion of its earnings. The cooperative GSE character of this voluntary membership organization leads management to optimize the primary purpose of membership, access to liquidity, as well as the overall value of Bank membership.

Nonmember Borrowers. In addition to member institutions, the Bank is permitted under the Act to make advances to nonmember housing associates that are approved mortgagees under Title II of the National Housing Act. These eligible housing associates must be chartered under law, be subject to inspection and supervision by a governmental agency, and lend their own funds as their principal activity in the mortgage field. The Bank must approve each applicant. Housing associates are not subject to certain provisions of the Act that are applicable to members, such as the capital stock purchase requirements. However, they are generally subject to more restrictive lending and collateral requirements than those applicable to members. As of December 31, 2022, the Bank maintains relationships with three approved state housing finance agencies (HFAs); one in each of the states that comprise the Bank’s district. Each is currently eligible to borrow from the Bank and one of the housing associates had an advance balance of $4.8 million as of December 31, 2022.

Regulatory Oversight, Audits and Examinations

Supervision and Regulation. The Bank's business is subject to regulation and supervision. The laws and regulations to which it is subject cover key aspects of the Bank's business and directly and indirectly affect its earnings, product and service offerings, pricing, competitive position and strategic plan, relationship with members and third parties, capital structure, cash needs and uses, and information security. As discussed throughout this Form 10-K, such laws and regulations can affect key drivers of the Bank's results of operations, including, for example, the Bank's capital and liquidity, product and service offerings, risk management, and costs of compliance.

The Bank and OF are supervised and regulated by the Finance Agency, which is an independent agency in the executive branch of the United States government. The Finance Agency’s stated mission is to ensure the housing GSEs fulfill their mission by operating in a safe and sound manner to serve as a reliable source of liquidity and funding for housing finance and community investment. The Finance Agency establishes regulations, issues advisory bulletins (ABs), and otherwise supervises Bank operations primarily via periodic examinations. The Government Corporation Control Act provides that, before a government corporation issues and offers obligations to the public, the Secretary of the U.S. Treasury has the authority to prescribe the form, denomination, maturity, interest rate, and conditions of the obligations; the way and time issued; and the selling price. The U.S. Treasury receives the Finance Agency’s annual report to Congress and other reports on operations. The Bank is also subject to regulation by the Securities and Exchange Commission (SEC) as a registrant under the 1934 Act.

Examination. At a minimum, the Finance Agency conducts annual examinations of the operations of the Bank. In addition, the Comptroller General has authority under the Act to audit or examine the Finance Agency and the Bank and to decide the extent to which they fairly and effectively fulfill the purposes of the Act. Furthermore, the Government Corporation Control Act provides that the Comptroller General may review any audit of the financial statements conducted by an independent registered public accounting firm. If the Comptroller General conducts such a review, then he or she must report the results and provide his or her recommendations to Congress, the Office of Management and Budget (OMB), and the FHLBank in question. The Comptroller General may also conduct his or her own audit of the financial statements of the Bank.

Audit. The Bank has an internal audit department that reports directly to the Audit Committee of the Bank’s Board of Directors (Board). In addition, an independent Registered Public Accounting Firm (RPAF) audits the annual financial statements and internal controls over financial reporting of the Bank. The independent RPAF conducts these audits following the Standards of the Public Company Accounting Oversight Board (PCAOB) of the United States of America and Government Auditing Standards issued by the Comptroller General. The Bank, the Finance Agency, and Congress all receive the independent RPAF audit reports.

Advances

Advance Products. The Bank makes advances on the security of pledged mortgage loans and other eligible types of collateral. Advance products serve members’ short and long-term liquidity needs. Available structures support interest rate risk management and general asset/liability management with fixed and floating-rate advance options.

The following table summarizes the advance products offered by the Bank as of December 31, 2022.


Product	Description	Maturity
Rollover	Advances are overnight, and unless paid earlier, will be renewed automatically every day subject to approval by the Bank. Interest rates are set daily. Interest can be paid on a weekly or monthly basis. This product is not a committed line of credit.	Overnight
Fixed	Advances available with amortizing and non-amortizing structures. For non-amortizing advances, principal and interest are paid at maturity for advances up to and including 89 days and interest is paid quarterly on advances with terms greater than 89 days. For amortizing advances, principal and interest are paid monthly, with the outstanding balance due at maturity.	1 day to 30 years (for amortizing advances – 1 year to 30 years)
Floating	Advances that have interest rates that reset periodically to a specified interest rate index (e.g., SOFR). Principal is paid at maturity and interest is paid quarterly. Interest terms are set on the trade date of the advance.	3 months to 10 years (1)
Returnable	Fixed-rate and floating-rate advances that may be repaid without a prepayment fee on certain predetermined dates at the member’s option. Principal is paid at maturity and interest is paid either monthly or quarterly depending on the type of advance.	2 months to 30 years (for SOFR-based Returnable advances – 4 months to 10 years)

Notes:

(1) The max tenor permitted for SOFR products will change to 30 years during 2023.

Letters of Credit. Standby letters of credit are issued by the Bank for a fee on behalf of its members and housing associates to support certain obligations to third-party beneficiaries and are backed by an irrevocable, independent obligation from the Bank. These are subject to the same collateralization and borrowing limits that apply to advances. Standby letters of credit can be valuable tools to support community lending activities, including arranging financing to support bond issuances for community and economic development as well as affordable housing projects. The letters of credit offer customizable terms available to meet unique and evolving needs. If the Bank is required to make payment for a beneficiary’s draw, these amounts are withdrawn from the member/housing associates’ demand deposit account (DDA). Any remaining amounts not covered by the DDA withdrawal shall constitute an advance to the member and shall be immediately due, bearing interest at the rate in effect for overnight advances on that day.

Collateral

The Bank protects against credit risk by fully collateralizing all member and nonmember housing associate advances and other credit products. The Act requires the Bank to obtain and maintain a security interest in eligible collateral at the time it originates or renews an advance.

Collateral Security Agreements. In order to borrow from the Bank or obtain other credit products all members must sign one of two Bank security agreements: the Advances, Collateral Pledge and Security Agreement or the Advances, Specific Collateral Pledge and Security Agreement. Members wishing to pledge eNotes as collateral must also sign the Bank’s eNotes Addendum (together hereinafter referred to as Master Agreement). The Bank perfects its security interest in the Collateral under Article 9 of the Uniform Commercial Code (UCC) by filing a financing statement and, in some cases, the execution of an effective control agreement by the applicable member. The Specific Collateral Pledge and Security Agreement covers only those assets or categories of assets identified; the Bank therefore relies on a specific subset of the member’s total eligible collateral as security for the member’s obligations to the Bank. Additionally, for eNotes, the member must meet additional requirements (including registering the eNote on the MERS® eRegistry) before that collateral type is accepted. The Bank requires CDFIs, HFAs and insurance companies to sign a specific collateral pledge agreement. See the Credit and Counterparty Risk - TCE and Collateral discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K for a description of blanket and specific agreements.

Collateral Status. The Master Agreement describes various types of collateral status assigned based on the member’s business needs and on the Bank’s determination of the member’s current financial condition and credit product usage, as well as other available information.

The Bank monitors eligible loan collateral for depository members using the Qualifying Collateral Report (QCR), derived from regulatory financial reports which are submitted quarterly (or monthly) to the Bank by the member. For members that submit a QCR, lending value is determined based on a percentage of the unpaid principal balance of qualifying collateral (commonly referred to as the collateral weight). Qualifying collateral is determined by deducting ineligible loans from the gross call report amount for each asset category.

The Bank may require a member to provide a detailed listing of eligible collateral being pledged if the member is under a specific agreement, or if participating in the Bank’s market-value based pricing program, or as determined based on its credit condition. In these circumstances, the member typically retains physical possession of collateral pledged to the Bank but provides a listing of assets pledged. A member may benefit from providing a detailed loan listing as a participant in the Bank’s market-value based pricing program since it may result in a higher collateral weighting being applied to the collateral resulting in higher borrowing capacity. The Bank also benefits from members providing detailed loan listings because they provide more loan information to calculate a more precise valuation of the collateral.

In certain circumstances, the Bank requires the member to deliver physical possession, or grant control of, eligible loan collateral in an amount at least equal to its collateral maintenance level. Typically, the Bank takes physical possession/control of collateral if the financial condition of the member is deteriorating. Delivery of loan collateral also may be required if there is action taken against the member by its regulator. Loan collateral delivery is often required for members borrowing under specific pledge agreements (typically CDFIs, HFAs, and insurance companies) as a practical means for maintaining specifically listed collateral.

The Bank also requires delivery of loan collateral from de novo members at least until two consecutive quarters of profitability are achieved and for any other new member where a pre-existing blanket lien is in force with another creditor unless an effective subordination agreement is executed with such other creditor. See the Credit and Counterparty Risk - TCE and Collateral discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K for further details on collateral status and types.

Securities collateral must be delivered (i.e., held in a Bank restricted account or at an approved third-party custodian and subject to a control agreement in favor of the Bank).

In addition, members that do not submit a QCR or participate in the Bank’s market-value based pricing program are required to complete an Annual Collateral Certification Report (ACCR).

All eligible collateral securing advances is discounted to protect the Bank from loss in the event of default, including under adverse conditions. These discounts, also referred to as “haircuts”, vary by collateral type and the value of the collateral. The Bank’s collateral discounted values are presented in the table at the end of this subsection. The discounts typically include margins for estimated costs to sell or liquidate the collateral and the risk of a decline in the collateral value due to market or credit volatility. The Bank reviews the collateral weightings periodically and may adjust them, as well as the members’ reporting requirements to the Bank, for individual borrowers on a case-by-case basis.

Borrowing Capacity. The Bank determines the type and amount of collateral each member has available to pledge as security for a member’s obligations to the Bank by reviewing, on a quarterly basis, call reports the members file with their primary regulators. The resulting total value of collateral available to be pledged to the Bank after applying the appropriate collateral weights is referred to as a member’s maximum borrowing capacity (MBC). A member’s credit product usage and current financial condition dictate the types of reporting that a member must submit to the Bank. All members who are not community financial institutions (CFIs) as defined below must file a QCR or loan listing at least quarterly.

The Bank also performs periodic collateral reviews of its members to confirm the amounts and quality of the eligible collateral pledged for the members’ obligations to the Bank. For certain pledged residential and commercial mortgage loan collateral, as well as delivered and Bank-controlled securities, the Bank employs outside service providers to assist in determining market values. In addition, the Bank has developed and maintains an Internal Credit Rating (ICR) system that assigns each member a numerical credit rating on a scale of one to ten, with one being the best rating. Credit availability and term guidelines are primarily based on a member’s ICR and MBC usage. The Bank reserves the right, at its discretion, to refuse

certain collateral or to adjust collateral weightings. In addition, the Bank can require additional or substitute collateral while any obligations of a member to the Bank remain outstanding to protect the Bank’s security interest and ensure that it remains fully secured at all times.

See the Credit and Counterparty Risk - TCE and Collateral discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K for further information on collateral policies and practices and details of eligible collateral, including amounts and percentages of eligible collateral securing members’ obligations to the Bank as of December 31, 2022.

As additional security for each member’s obligations to the Bank, the Bank has a statutory lien on the member’s capital stock in the Bank. In the event of deterioration in the financial condition of a member, the Bank can take possession or control of sufficient eligible collateral to further perfect its security interest in collateral pledged to secure the member’s obligations to the Bank. A member with deteriorating creditworthiness is required to deliver collateral to the Bank or the Bank’s custodian to secure the member’s obligations with the Bank. Furthermore, the Bank requires specific approval of each of such member’s new or renewed advances.

Priority. The Act generally affords any security interest granted to the Bank by any member, or any affiliate of a member, priority over the claims and rights of any third party, including any receiver, conservator, trustee, or similar party having rights of a lien creditor. The only two exceptions are: (1) claims and rights that would be entitled to priority under otherwise applicable law and are held by actual bona fide purchasers for value; and (2) parties that are secured by actual perfected security interests ahead of the Bank’s security interest. The Bank has detailed liquidation plans in place which are intended to facilitate the prompt exercise of the Bank’s rights regarding securities, loan collateral, and other collateral upon the failure of a member. Management believes that adequate policies and procedures are in place to effectively manage the Bank’s credit risk associated with lending to members and nonmember housing associates.

Types of Collateral. Single-family, residential mortgage loans may be used to secure members’ obligations to the Bank. The Bank contracts with a leading provider of comprehensive mortgage analytical pricing to provide market valuations of some listed and delivered residential mortgage loan collateral. In determining borrowing capacity for members with non-listed and non-delivered collateral, the Bank utilizes book value as reported on each member's regulatory call report.

Loans that do not have a paper-based promissory note with a “wet ink” signature are ineligible for collateral purposes, with the exception of Bank accepted eNotes (digitally executed loan documents that are saved in the Bank’s eVault) as eligible collateral subject to the Banks’s requirements and guidelines.

The Bank may also accept other real estate related collateral as eligible collateral if it has a readily ascertainable value, the Bank is able to perfect its security interest in such collateral, and if the collateral meets policy eligibility standards. The Bank uses a leading provider of multi-family and commercial mortgage analytical pricing to provide more precise valuations of listed and delivered multi-family and commercial mortgage loan collateral.

A third category of eligible collateral is high quality investment securities as included in the table below. See the Credit and Counterparty Risk - TCE and Collateral discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K for a definition of these securities. Members have the option to deliver such high quality investment securities to the Bank to obtain or increase their MBC. These securities are valued daily upon delivery.

The Bank also accepts FHLBank cash deposits as eligible collateral. In addition, member CFIs may pledge a broader array of collateral to the Bank, including secured small business, small farm, small agri-business and community development loans. The Housing Act defines member CFIs as Federal Deposit Insurance Corporation (FDIC)-insured institutions with no more than $1.3 billion (the limit during 2022) in average assets over the past three years. This limit may be adjusted by the Finance Agency based on changes in the Consumer Price Index. The determination to accept such collateral is at the discretion of the Bank and is made on a case-by-case basis. Advances to CFIs are also collateralized by sufficient levels of non-CFI collateral. See the Credit and Counterparty Risk - TCE and Collateral discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K for the percentage of each type of collateral held by the Bank at December 31, 2022.

The Bank does not accept subprime residential mortgage loans (defined as FICO® score of 660 or below. FICO is a registered trademark of Fair Isaac Corporation) as qualifying collateral unless certain mitigating factors are met. The Bank requires members to identify the amount of subprime and nontraditional mortgage collateral in their QCRs.

Nontraditional residential mortgage loans are defined by the Bank’s Collateral Policy as mortgage loans that allow borrowers to defer payment of principal or interest. These loans exhibit characteristics that may result in increased risk relative

to traditional residential mortgage loan products. They may pose even greater risk when granted to borrowers with undocumented or undemonstrated repayment capacity as may be the case, for example, with low or no documentation loans or credit characteristics that would be characterized as subprime.

Regarding nontraditional mortgage collateral for the QCR, the Bank requires filing members to stratify their holdings of first lien residential mortgage loans into traditional, qualifying low FICO, and qualifying unknown FICO categories. Under limited circumstances, the Bank allows nontraditional residential mortgage loans that are consistent with Federal Financial Institutions Examination Council (FFIEC) guidance to be pledged as collateral and used to determine a member’s MBC.

Management believes that the Bank has limited collateral exposure to subprime and nontraditional loans due to its conservative policies pertaining to collateral and low credit risk due to the design of its mortgage loan purchase programs. See the Credit and Counterparty Risk - TCE and Collateral discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K for specific requirements regarding subprime and nontraditional loan collateral.

The various types of eligible collateral and related lending values as of December 31, 2022 are summarized below. The weightings are analyzed on at least a semi-annual basis and adjusted as necessary. At the discretion of the Bank, on a case-by-case basis, the collateral weighting on loan categories may be increased (up to a maximum of 85%) upon completion of specific market valuation of such collateral and authorization from the Bank’s Membership and Credit Committee.


Securities Collateral			Lending Values as a Percentage of Market Value
Deposits held by the Bank and pledged to, and under the sole control of, the Bank			100%
U.S. Treasury securities; U.S. Agency securities, including securities of FNMA, FHLMC, FFCB, NCUA, SBA, USDA and FDIC notes; FHLBank consolidated obligations; REFCorp Bonds (1)

less than 10 years			97%
10 years or greater			94%
MBS, including collateralized mortgage obligations (CMO) issued or guaranteed by GNMA, FHLMC, and FNMA (1)			95%
Seasoned Credit Risk Transfers, Seasoned Loan Structured Transactions, Multifamily K Certificates and Home Equity Conversion Mortgage bonds issued or guaranteed by GNMA, FHLMC or FNMA			90%
U.S. Treasury STRIPs
less than 10 years			97%
10 years or greater			90%
Non-agency residential MBS, including CMOs, representing a whole interest in such mortgages.			AAA 85%
			AA 75%
			A 70%
Commercial mortgage-backed securities (CMBS)			AAA 85%
			AA 75%
			A 70%
Securities issued by a state or local government or its agencies, or authorities or instrumentalities in the United States (municipals) with a real estate nexus.			AAA 92%
			AA 90%
			A 88%


Loan Collateral	Lending Values
	Percent of Unpaid Principal Balance		Percent of Market Value
	QCR Filer or Full Collateral Delivery ( Policy Reasons)	Full Collateral Delivery (Credit Reasons)	Market Valuation Program
Federal Housing Administration (FHA), Department of Veterans Affairs (VA) and Conventional whole, fully disbursed, first mortgage loans secured by 1-to-4 family residences (Note: Includes first lien HELOCs for listing members only)	75%	65%	85%
Nontraditional mortgage loans and loans with unknown FICO (2) scores	70%	60%	80%
Conventional and FHA whole, fully-disbursed mortgage loans secured by multifamily properties	75%	65%	85%
Farmland loans	70%	60%	n/a
Commercial real estate loans (owner & non-owner occupied)	70%	60%	80%
Low FICO score loans with mitigating factors as defined by the Bank	60%	50%	75%
Conventional, fully disbursed, second-mortgage loans secured by 1-to-4 family residences. Both term loans and HELOCs	60%	50%
CFI Collateral	60%	50%	n/a

Notes:

(1) Defined as Federal National Mortgage Association (Fannie Mae or FNMA), Federal Home Loan Mortgage Corporation (Freddie Mac or FHLMC), Federal Farm Credit Bank (FFCB), Government National Mortgage Association (Ginnie Mae or GNMA), Home Equity Line of Credit (HELOC), National Credit Union Administration (NCUA), Resolution Funding Corporation (REFCORP), Small Business Administration (SBA), and U.S. Department of Agriculture (USDA).

(2) Nontraditional mortgage loan portfolios may be required to be independently identified for collateral review and valuation for inclusion in a member’s MBC. This may include a request for loan-level listing on a periodic basis.

During 2022, the Bank implemented certain changes to its collateral policies and practices. See the Credit and Counterparty Risk - TCE and Collateral discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K for details regarding these changes.

Investments

Overview. The Bank maintains a portfolio of investments for two main purposes: liquidity and additional earnings. The Bank invests in short term instruments for operating liquidity, which may consist of interest-bearing deposits, certificates of deposit, Federal funds sold, securities purchased under agreements to resell, and U.S. Treasury obligations classified as trading or AFS. The Bank also maintains a contingency liquidity investment portfolio which may consist of certificate of deposits and unencumbered repurchase-eligible assets within its available-for-sale (AFS) and held-to-maturity (HTM) securities portfolio. These securities may also be pledged as collateral for derivative transactions.

The Bank further enhances income by acquiring securities issued by GSEs and state and local government agencies as well as Agency MBS. The Bank's private label MBS portfolio continues to run-off; no private label MBS have been purchased since 2007.

The long-term investment portfolio is intended to provide the Bank with higher returns than those available in the short-term money markets. See the Credit and Counterparty Risk – Investments discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K for discussion of the credit risk of the investment portfolio and further information on these securities’ current ratings.

Prohibitions. Under Finance Agency regulations, the Bank is prohibited from purchasing certain types of securities, including:

•instruments, such as common stock, that represent an ownership interest in an entity, other than stock in small business investment companies or certain investments targeted to low-income persons or communities;

•instruments issued by non-U.S. entities, other than those issued by United States branches and agency offices of foreign commercial banks;

•non-investment-grade debt instruments, other than certain investments targeted to low-income persons or communities and instruments that were downgraded after purchase by the Bank;

•whole mortgages or other whole loans, other than: (1) those acquired under the Bank’s mortgage purchase program; (2) certain investments targeted to low-income persons or communities; (3) certain marketable direct obligations of state, local or tribal government units or agencies that are of investment quality; (4) MBS or asset-backed securities (ABS) backed by manufactured housing loans or HELOCs; and (5) certain foreign housing loans authorized under Section 12(b) of the Act; and

•non-U.S. dollar denominated securities.

Finance Agency regulations further limit the Bank’s investment in MBS and ABS. These regulations require that the total book value of MBS owned by the Bank not exceed 300% of the Bank’s previous month-end regulatory capital on the day of purchase of additional MBS. In addition, the Bank is prohibited from purchasing:

•interest-only or principal-only strips of MBS;

•residual-interest or interest-accrual classes of collateralized mortgage obligations and real estate mortgage investment conduits; and

•fixed-rate or floating-rate MBS that on the trade date are at rates equal to their contractual cap and that have average lives that vary by more than six years under an assumed instantaneous interest rate change of 300 basis points.

The Bank is prohibited from purchasing a FHLBank System consolidated obligation as part of the consolidated obligation’s initial issuance. The Bank’s investment policy is even more restrictive, as it prohibits it from investing in FHLBank consolidated obligations for which another FHLBank is the primary obligor. The Federal Reserve Board (Federal Reserve) requires Federal Reserve Banks (FRBs) to release principal and interest payments on the FHLBank System consolidated obligations only when there are sufficient funds in the FHLBanks’ account to cover these payments. The prohibitions on purchasing FHLBank consolidated obligations noted above will be temporarily waived if the Bank is obligated to accept the direct placement of consolidated obligation discount notes to assist in the management of any daily funding shortfall of another FHLBank.

The Bank does not consolidate any off-balance sheet special-purpose entities or other conduits.

Mortgage Partnership Finance® (MPF®) Program

Under the MPF Program, the Bank purchases qualifying 5- to 30-year conventional conforming and government-insured fixed-rate mortgage loans secured by one-to-four family residential properties. The MPF Program provides participating members and eligible housing associates a secondary market alternative that allows for increased balance sheet liquidity and provides a method for removal of assets that carry interest rate and prepayment risks from their balance sheets. In addition, the MPF Program provides a greater degree of competition among mortgage purchasers and allows small and mid-sized community-based financial institutions to participate more effectively in the secondary mortgage market. The FHLBank of Chicago, in its role as MPF Provider, provides the programmatic and operational support for the MPF Program and is responsible for the development and maintenance of the origination, underwriting and servicing guides.

The Bank currently offers four products under the MPF Program to Participating Financial Institutions (PFIs): MPF Original, MPF 35, MPF Government, and MPF Xtra. The MPF Xtra product is described below. Further details regarding the credit risk structure for each of the other MPF products, as well as additional information regarding the MPF Program and the products offered by the Bank, is provided in the Financial Condition section and the Credit and Counterparty Risk - Mortgage Loans discussion in Risk Management, both in Item 7. Management’s Discussion and Analysis in this Form 10-K.

PFI. Members and eligible housing associates must specifically apply to become a PFI. The Bank reviews their eligibility including servicing qualifications and ability to supply documents, data and reports required to be delivered under the MPF Program. As of December 31, 2022, the Bank had 123 members as approved participants in the MPF Program.

Under the MPF Program, PFIs generally market, originate and service qualifying residential mortgages for sale to the Bank. Member banks have direct knowledge of their mortgage markets and have developed expertise in underwriting and servicing residential mortgage loans. By allowing PFIs to originate mortgage loans, whether through retail or wholesale operations, and to retain or sell servicing of mortgage loans, the MPF Program gives control of the mortgage process to PFIs. PFIs also may earn servicing income if they choose to retain loan servicing or receive a servicing released premium, if they chose to sell servicing rights to a third-party.

During the life of the loan, PFIs are paid a credit enhancement (CE) fee for retaining and managing a portion of the credit risk in the conventional mortgage loan portfolios sold to the Bank under the MPF Original and MPF 35 Programs. The CE structure motivates PFIs to minimize loan losses on mortgage loans sold to the Bank. The Bank is responsible for managing the interest rate risk, prepayment risk, liquidity risk and a portion of the credit risk associated with the mortgage loans.

Mortgage Loan Purchases. The Bank and the PFI enter into a Master Commitment which provides the general terms under which the PFI will deliver mortgage loans, including a maximum loan delivery amount, maximum CE amount and expiration date. Mortgage loans are purchased by the Bank directly from a PFI pursuant to a delivery commitment, a binding agreement between the PFI and the Bank.

Mortgage Loan Participations. The Bank may sell participation interests in purchased mortgage loans to other FHLBanks, institutional third party investors approved in writing by the FHLBank of Chicago, the member that provided the CE, and other members of the FHLBank System. The Bank also may purchase mortgage loans from other FHLBanks.

Mortgage Loan Servicing. Under the MPF Program, PFIs may retain or sell servicing to third parties. The Bank does not service loans or own any servicing rights. The FHLBank of Chicago acts as the master servicer for the Bank and has contracted with Computershare Limited to fulfill the master servicing duties. The Bank pays the PFI or third-party servicer a servicing fee to perform these duties. The servicing fee is 25 basis points for conventional loans and 44 basis points for government loans.

MPF Xtra. MPF Xtra allows PFIs to sell residential, conforming, fixed-rate mortgages to FHLBank of Chicago, which concurrently sells them to Fannie Mae on a nonrecourse basis. MPF Xtra does not have the CE structure of the traditional MPF Program. Additionally, because these loans are sold from the PFI to FHLBank of Chicago to Fannie Mae, they are not reported on the Bank’s Statement of Condition. With the MPF Xtra product, there is no credit obligation assumed by the PFI or the Bank and no CE fees are paid. PFIs which have completed all required documentation and training are eligible to offer the product. As of December 31, 2022, 32 PFIs were eligible to offer the product. The Bank receives a nominal fee for facilitating these MPF Xtra transactions.

“Mortgage Partnership Finance”, “MPF”, “MPF Xtra”, and “MPF 35” are registered trademarks of the FHLBank of Chicago.

Specialized Programs

For additional information on Affordable Housing Program (AHP) and other similar programs, refer to the Community Investment Products section in Item 7. Management’s Discussion and Analysis in this Form 10-K.

Deposits

The Act allows the Bank to accept deposits from its members, any institution for which it is providing correspondent services, other FHLBanks, or other Federal instrumentalities. Deposit programs are low-cost funding resources for the Bank, which also provide members a low-risk earning asset that is used in meeting their regulatory liquidity requirements. The Bank offers several types of deposit programs to its members including demand, overnight and term deposits.

Debt Financing — Consolidated Obligations

The primary source of funds for the Bank is the issuance of debt securities, known as consolidated obligations, which are then sold by dealers to investors. These consolidated obligations are issued as both bonds and discount notes, depending on maturity. Consolidated obligations are the joint and several obligations of the 11 FHLBanks. Consolidated obligations are not obligations of the U.S. government, and the U.S. government does not guarantee them. Moody’s has rated consolidated obligations Aaa with stable outlook/P-1, and S&P has rated them AA+ with stable outlook/A-1+. The following table presents the total par value of the consolidated obligations of the Bank and the FHLBank System at December 31, 2022 and 2021.


(in millions)	December 31, 2022		December 31, 2021
Consolidated obligation bonds	$	57,515.3	$	23,135.4
Consolidated obligation discount notes	34,007.1		10,494.9
Total Bank consolidated obligations	91,522.4		33,630.3
Total FHLBank System combined consolidated obligations	$	1,181,742.5	$	652,861.7

OF. The OF has responsibility for facilitating the issuance and servicing of consolidated obligations on behalf of the FHLBanks. The OF also serves as a source of information for the Bank on capital market developments, markets the FHLBank System’s consolidations obligations on behalf of the FHLBanks, selects and evaluates underwriters, prepares combined financial reports, and manages the Banks’ relationship with the rating agencies and the U.S. Treasury with respect to the consolidated obligations.

Consolidated Obligation Bonds. On behalf of the Bank, the OF issues bonds that the Bank uses to fund advances, the MPF Program and its investment portfolio. Generally, the maturity of these bonds ranges from one year to ten years, although the maturity is not subject to any statutory or regulatory limit. Bonds can be issued and distributed through negotiated or competitively bid transactions with approved underwriters or selling group members. In some instances, the Bank swaps its term fixed-rate debt issuance to floating rates through the use of interest rate swaps. Bonds can be issued through:

•a daily auction for both bullet (non-callable and non-amortizing) and American-style (callable daily after lockout period expires) callable bonds

•a selling group, which typically has multiple lead investment banks on each issue

•a negotiated transaction with one or more dealers

The process for issuing bonds under the three methods above can vary depending on whether the bonds are non-callable or callable. For example, the Bank can request funding through the TAP auction program (quarterly debt issuances that reopen or “tap” into the same CUSIP number) for fixed-rate non-callable (bullet) bonds. This program uses specific maturities that may be reopened daily during a three-month period through competitive auctions. The goal of the TAP program is to aggregate frequent smaller issues into a larger bond issue that may have greater market liquidity.

Consolidated Obligation Discount Notes. The OF also issues discount notes to provide short-term funds for advances for seasonal and cyclical fluctuations in deposit flows, mortgage financing, short-term investments and other funding needs. Discount notes are sold at a discount and mature at par. These securities have maturities of up to 365 days. There are three methods for issuing discount notes:

•The OF auctions one-, two-, three- and six-month discount notes twice per week and any FHLBank can request an amount to be issued. The market sets the price for these securities.

•Via the OF’s window program, through which any FHLBank can offer a specified amount of discount notes at a maximum rate and a specified term up to 365 days. These securities are offered daily through a consolidated discount note selling group of broker-dealers.

•Via reverse inquiry, wherein a dealer requests a specified amount of discount notes be issued for a specific date and price. The OF presents reverse inquiries to the FHLBanks, which may or may not choose to issue those particular discount notes.

See the Liquidity and Funding Risk discussion in the Risk Management section in Item 7. Management’s Discussion and Analysis in this Form 10-K for further information regarding consolidated obligations and related liquidity risk.

Capital Resources

Capital Plan. The Bank currently has two subclasses of capital stock: B1 membership and B2 activity. The Board establishes requirements for the amount of capital stock a member must hold for each subclass based on ranges provided in the Capital Plan, as described in the tables below. The Bank’s membership stock requirement is based on the annual Membership Asset Value (MAV) as calculated by the Bank based on its members’ prior December 31 call report data. Membership assets include, but are not limited to, the following: U.S. Treasury securities; U.S. Agency securities; U.S. Agency MBS; non-Agency MBS; 1-4 family residential first mortgage loans; multi-family mortgage loans; 1-4 family residential second mortgage loans; home equity lines of credit; and commercial real estate loans. A factor is applied to each membership asset category.

Each member is required to purchase and maintain membership stock equal to the following:


	Range of membership stock requirement according to the Capital Plan
	Minimum	Maximum	Current requirement
% of membership assets	0.05%	1.0%	0.1%
Membership stock cap	$5 million	$100 million	$25 million (1)
Membership stock floor			$10 thousand

Note:

(1) This requirement was reduced to $25 million during the MAV update in April 2022.

Each member is required to purchase and maintain activity stock equal to the percentage of the book value of the following transactions as shown in the table below:


	Range of activity stock requirement according to the Capital Plan
	Minimum	Maximum	Current requirement
Outstanding advances	2.0%	6.0%	4.0%
Acquired member assets (AMA)	0.0%	6.0%	4.0%
Letters of credit	0.0%	4.0%	0.75%
Outstanding advance commitments (settling more than 30 days after trade date)	0.0%	6.0%	0.0%

Bank capital stock is not publicly traded; it may be issued, redeemed and repurchased at its stated par value of $100 per share. Under the Capital Plan, capital stock is redeemed upon five years’ notice, subject to certain conditions. In addition, the Bank has the discretion to repurchase excess stock from members. The Bank's current practice is to repurchase all excess capital stock on a weekly basis.

Dividends and Retained Earnings. As prescribed in the Capital Plan, the Bank may pay dividends on its capital stock only out of unrestricted retained earnings or current net income, subject to certain limitations and conditions. The Bank’s Board may declare and pay dividends in either cash or capital stock. The Bank’s practice has been to pay a cash dividend. The amount of dividends the Board determines to pay out is affected by, among other factors, the level of retained earnings recommended under the Bank’s retained earnings policy. In addition, as set forth in the Capital Plan, the dividends paid on subclass B2 activity stock will be equal to or higher than the dividends being paid on subclass B1 membership stock at that time. For further information on dividends, see Note 11 - Capital to the audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K.

As of December 31, 2022, the balance in retained earnings was $1,536.2 million, of which $499.0 million was deemed restricted. Refer to the Capital Resources section and the Risk Governance discussion in Risk Management, both in Item 7. Management’s Discussion and Analysis in this Form 10-K for additional discussion of the Bank’s capital-related metrics, retained earnings, dividend payments, capital levels and regulatory capital requirements.

Derivatives and Hedging Activities

The Bank may enter into interest rate swaps, swaptions, to-be-announced (TBAs), and interest rate cap and floor agreements (collectively, derivatives) to manage its exposure to changes in interest rates and prepayment risk. The Bank uses these derivatives to adjust the effective maturity, repricing frequency, or option characteristics of financial instruments to achieve its risk management objectives. The Bank may use derivative financial instruments in the following ways: (1) by designating them as a fair value hedge of an underlying financial instrument or a firm commitment; or (2) in asset/liability management (i.e., an economic hedge).

The Finance Agency regulates the Bank’s use of derivatives. The regulations prohibit the trading in or speculative use of these instruments and limit credit risk arising from these instruments. All derivatives are recorded in the Statement of Condition at fair value. See Note 7- Derivatives and Hedging Activities to the audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K for additional information.

Competition

Advances. The Bank competes with other suppliers of wholesale funding, both secured and unsecured, including the FRBs, commercial banks, investment banking divisions of commercial banks, and brokered deposits, largely on the basis of interest rates as well as types and weightings of collateral. Competition is often more significant when originating advances to larger members, which have greater access to the capital markets. Competition within the FHLBank System is very limited; however, there may be some members of the Bank that have affiliates that are members of other FHLBanks. The Bank's ability to compete successfully with other suppliers of wholesale funding for business depends primarily on pricing, dividends, capital stock requirements, credit and collateral terms, and products offered.

Purchase of Mortgage Loans. Members have several alternative outlets for their mortgage loan production including Fannie Mae, Freddie Mac, and other secondary market conduits. The MPF Program competes with these alternatives on the basis of price and product attributes. Additionally, a member may elect to hold all or a portion of its mortgage loan production in portfolio, potentially funded by an advance from the Bank.

Issuance of Consolidated Obligations. The Bank competes with the U.S. Treasury, Fannie Mae, Freddie Mac and other GSEs as well as corporate, sovereign and supranational entities for funds raised through the issuance of unsecured debt in the national and global debt markets. Increases in the supply of competing debt products may, in the absence of increases in demand, result in higher debt cost or lower amounts of debt issued at the same cost than otherwise would be the case. The Bank’s status as a GSE affords certain preferential treatment for its debt obligations under the current regulatory scheme for depository institutions operating in the U.S. as well as preferential tax treatment in a number of state and municipal jurisdictions. Any change in these regulatory conditions as they affect the holders of Bank debt obligations would likely alter the relative competitive position of such debt issuance and result in potentially higher costs to the Bank.

Major Customers

PNC Bank, N.A., TD Bank N.A., and Ally Bank had advance balances in excess of 10% of the Bank’s total advances as of December 31, 2022. See further discussion in Item 1A. Risk Factors and the Credit and Counterparty Risk - TCE and Collateral discussion in the Risk Management section in Item 7. Management’s Discussion and Analysis, both in this Form 10-K.

Human Capital Resources

The Bank’s human capital is a significant contributor to the success of the Bank’s strategic business objectives. In managing the Bank’s human capital, the Bank focuses on its workforce profile and the various programs and philosophies described below.

Workforce Profile. The Bank’s workforce is primarily comprised of corporate employees, with the Bank’s principal operations in one location. As of December 31, 2022, the Bank had 224 full-time and 2 part-time employees. As of December 31, 2022, the Bank’s workforce is approximately 39% female and 61% male; 79% non-minority and 21% racial or ethnic minority. The Bank’s workforce is leanly staffed, and includes a number of longer-tenured employees. The Bank strives to both develop talent from within the organization and supplement with external hires. As part of the Bank’s culture of continuous improvement, development of talent internally results in institutional strength and continuity and promotes loyalty and commitment in the Bank’s employee base, which furthers its success, while adding new employees contributes to new ideas, continuous improvement and the Bank’s goals of a diverse and inclusive workforce. As of December 31, 2022, the average tenure of the Bank’s employees was 9.7 years. There are no collective bargaining agreements with the Bank’s employees.

Total Rewards. The Bank seeks to attract, develop, and retain talented employees to achieve its strategic business initiatives, enhance business performance and provide members a reasonable return on their investment in the Bank. The Bank effects this objective through a combination of development programs, benefits and employee wellness programs and recognizing and rewarding performance. Specifically, the Bank’s programs include:

•Cash compensation that includes competitive salary, performance-based incentive, and other subsidies;

•Benefits – health insurance, dental and vision, life and accidental, death, & dismemberment insurance, supplemental life insurance, 401(k) retirement savings plans with employer match and profit sharing opportunities, pension benefits, accident, critical illness, and short and long term disability;

•Wellness program – employee assistance program, health coaching and interactive education sessions;

•Time away from work –including time off for vacation, illness, personal, holiday and volunteer opportunities;

•Culture – employee meetings and communications, employee resource groups and various cultural and inclusion initiatives, including an employee-run activities group;

•Work/Life integration – 100% paid salary continuation for short term disability, parental and military leave, bereavement, jury duty and court appearances, flexible scheduling and remote working options;

•Development programs and training – individual development plans, leadership assessment and development, employee engagement, educational assistance programs, internal educational and development opportunities, fee reimbursement for external educational and development programs, mentoring and coaching; and

•Management succession planning – the Bank’s board and leadership actively engage in management succession planning, with defined plans for more than 30 key roles and development plans for potential successors for those roles.

The Bank’s performance management framework includes a cascading annual goal setting process, as well as quarterly performance discussions leading to annual reviews. Overall annual ratings are calibrated, and merit and incentive payments are differentiated for the Bank’s highest performers.

The Bank is committed to the health, safety, and wellness of its employees. In response to the pandemic, the Bank implemented significant operating environment changes, safety protocols and procedures that it determined were in the best interest of the Bank’s employees and members, and which comply with government regulations. Until mid-2022, this included having nearly all of the Bank’s employees work remotely, while implementing additional safety measures for employees who elect to work on-site. The Bank shifted to a “hybrid” working environment in mid-2022, with the expectation of employees currently working at headquarters two days/weekly and senior leadership three days/weekly.

Diversity, Equity and Inclusion Program. Diversity, equity and inclusion are strategic business priorities for the Bank. The Bank’s diversity, equity and inclusion officer is a member of the senior leadership team, reports to the President and Chief Executive Officer and serves as a liaison to the Board of Directors on diversity, equity and inclusion matters. For 2023, the Board has established a Diversity, Equity and Inclusion committee of the full Board to support effective oversight. The Bank recognizes that diversity increases capacity for innovation and creativity, equity ensures equal access to opportunities and that inclusion allows the Bank to leverage the unique perspectives of all employees and strengthens the Bank’s retention efforts.

The Bank operationalizes its commitment through the development and execution of a three-year diversity, equity and inclusion strategic plan that includes quantifiable metrics to measure its success and reports regularly on its performance to

management and the Board of Directors. The Bank’s diversity, equity and inclusion strategic plan incorporates goals and action plans relating to the following four areas:

•Workforce – Finding, growing and retaining the right talent to bring a diverse mix of backgrounds, skills and perspectives to the Bank’s employee team at all levels;

•Workplace – Raising awareness and encouraging dialogue through opportunities that foster learning and connection and support a culture of inclusion and belonging;

•Marketplace – Building strong, long-term relationships with a network of suppliers, businesses and community partners that include diverse-owned entities and others who support, value and advance diversity, equity and inclusion; and

•Sustainability – Promoting organizational evolution of diversity, equity and inclusion to drive lasting change,

improved decision-making and impact through performance metrics and accountability.

The Bank offers a range of opportunities for its employees to connect, and grow personally and professionally through its diversity, equity and inclusion committee, inclusion and supplier diversity advisory councils and employee resource groups. The Bank supports four employee resource groups that are open to all and allow opportunities for broad engagement and leadership, including groups focused on women, multi-ethnic and Black employees and a group focused on raising broad awareness through reading.

As reflected above, the Bank considers learning an important component of its diversity, equity and inclusion strategy and regularly offers educational opportunities to its employees and evaluates inclusive behaviors as part of the Bank’s annual performance management and succession planning process. The Bank also incorporates diversity, equity and inclusion as a key component of its incentive plan framework to ensure organizational focus and accountability.

Taxation

The Bank is exempt from all Federal, state and local taxation with the exception of real estate property taxes and certain employer payroll taxes.

AHP

The FHLBanks must set aside for AHP annually, on a combined basis, the greater of $100 million or 10% of current year’s net income (GAAP net income before interest expense related to mandatorily redeemable capital stock and the assessment for AHP). If the Bank experienced a full year net loss, as defined in Note 10 - Affordable Housing Program (AHP) to the audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K, the Bank would have no obligation to AHP for the year except in the following circumstance: if the result of the combined 10% calculation described above is less than $100 million for all 11 FHLBanks, then the Act requires that each FHLBank contribute such prorated sums as may be required to assure that the aggregate contributions of the FHLBanks equal $100 million. The proration would be made on the basis of an FHLBank’s net income in relation to the income of all FHLBanks for the previous year. Each FHLBank’s required annual AHP contribution is limited to its annual net income. If an FHLBank finds that its required contributions are negatively impacting the financial stability of that FHLBank, it may apply to the Finance Agency for a temporary suspension of its contributions. As allowed by AHP regulations, an FHLBank can elect to allot fundings based on future periods’ required AHP contributions to be awarded during a year (referred to as Accelerated AHP). Accelerated AHP allows an FHLBank to commit and disburse AHP funds to meet the FHLBank’s mission when it would otherwise be unable to do so, based on its normal funding mechanism.

For additional details regarding the AHP assessment, please see the Earnings Performance discussion in Item 7. Management’s Discussion and Analysis and Note 10 - Affordable Housing Program (AHP) in Item 8. Financial Statements and Supplementary Data in this Form 10-K.

SEC Reports and Corporate Governance Information

The Bank is subject to the informational requirements of the 1934 Act and, in accordance with the 1934 Act, files annual, quarterly and current reports with the SEC. The Bank’s SEC File Number is 000-51395. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC, including the Bank’s filings. The Bank’s financial information is also filed in inline eXtensible Business Reporting Language (iXBRL) as required by the SEC. The SEC’s website address is www.sec.gov.

The Bank also makes the Annual Reports filed on Form 10-K, Quarterly Reports filed on Form 10-Q, certain Current Reports filed on Form 8-K, and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the 1934 Act available free of charge on or through its internet website as soon as reasonably practicable after such material is filed with or furnished to the SEC. The Bank’s internet website address is www.fhlb-pgh.com. The Bank filed the certifications of the President and Chief Executive Officer and Chief Financial Officer (principal financial officer) pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 with respect to the Bank’s 2022 Annual Report on Form 10-K as exhibits to this Report.

Information about the Bank’s Board and its committees and corporate governance, as well as the Bank’s Code of Conduct, is available in the corporate governance section of the “About Us” dropdown on the Bank’s website at www.fhlb-pgh.com. Printed copies of this information may be requested without charge by written request to the Bank’s Legal Department.

Item 1A: Risk Factors

There are many factors, including those beyond the Bank’s control, that could cause financial results to differ significantly from the Bank’s expectations. The following discussion summarizes the material factors that should be considered in evaluating the Bank’s business. This discussion is not exhaustive, and there may be other factors not described or factors, such as business, credit, market/liquidity and operational risks, which are described elsewhere in this report (see the Risk Management discussion in Item 7: Management’s Discussion and Analysis in this Form 10-K), which could cause results to differ materially from the Bank’s expectations. However, management believes that these factors represent the material risks relevant to the Bank, its business and industry. Any factor described in this report could by itself, or together with one or more other factors, adversely affect the Bank’s business operations, future results of operations, financial condition or cash flows.

BUSINESS RISK

Global or domestic financial market disruptions or geopolitical conditions could result in uncertainty and unpredictability for the Bank in managing its business.

The Bank’s business, earnings and risk profile are affected by international, domestic and district-specific business, economic and geopolitical conditions and disruptions, including for example, U.S. government shutdowns or downgrade of the U.S. government credit rating, which could be more likely to occur if successful resolution of the debt ceiling discussions does not occur by mid-2023. These conditions and resulting potential market disruptions, which may also affect counterparty and members’ business, include real estate values, residential mortgage originations, short-term and long-term interest rates, inflation and inflation expectations, recession or recessionary expectations, unemployment levels, money supply, fluctuations in both debt and equity markets, and the strength of the U.S. dollar against other currencies, which strengthened significantly against major currencies throughout 2022, and of the foreign, domestic and local economies in which the Bank operates. Geopolitical instability or conflicts, such as ongoing hostilities between Russia and Ukraine, may result in trade disruptions, sanctions or other market volatility which could adversely affect the Bank or its members.

Changes in the legislative and regulatory environment could negatively affect the Bank’s business, operations and financial condition and members’ investment in the Bank.

The FHLBanks’ business operations, funding costs, rights, obligations and the environment in which FHLBanks carry out their liquidity mission continue to be impacted by evolving regulations. In addition to several legislative efforts and policy proposals regarding reform of the other housing GSEs (Fannie Mae and Freddie Mac) and the federal government’s ongoing role in the mortgage market over the last several years, the Finance Agency in 2022 launched a comprehensive review and analysis of the FHLBanks as discussed below. Congress also may continue to consider GSE or FHLBank reform legislation, which could have a material effect on the Bank including debt issuance, financial condition and results of operations. Increased regulatory and legislative attention on the possibility of requiring the FHLBanks by statute to set aside higher percentages of their earnings for their affordable housing and community investment programs than is currently required by law could lead to

increased contributions to the Bank AHP, resulting in higher expenses for the Bank, which would result in less net income being available for other purposes. In addition, future legislative changes to the Act or the Housing and Economic Recovery Act (HERA) may affect the Bank’s business, risk profile, results of operations and financial condition. In the past, there have been legislative efforts and discussions regarding eligibility of certain entities, including non-banks, to become members of the FHLBank System. Changes to membership eligibility criteria could materially impact the Bank’s risk profile, financial condition and results of operations.

The FHLBanks are also governed by regulations as adopted by the Finance Agency pursuant to their authority under federal laws. The Finance Agency’s extensive statutory and regulatory authority over the FHLBanks includes, without limitation, the authority to liquidate, merge or consolidate FHLBanks, to redistrict or adjust equities among the FHLBanks, and to impose limits on permissible FHLBank products and activities within the terms set forth in applicable statutes establishing the scope of the Finance Agency’s authority. Additionally, the Finance Agency’s Office of Fair Lending Oversight (OFLO) has authority over the FHLBanks concerning fair, equitable and nondiscriminatory access to credit and housing and policy-related oversight. The Bank cannot predict if or how the Finance Agency, including OFLO, could exercise such authority with respect to any FHLBank or the potential impact of such action on the Bank’s business and operations or on members’ investment in the Bank.

In 2022, the Finance Agency initiated a comprehensive review of the FHLBank System. This review is expected to culminate with a written report from the Finance Agency. Such report may include recommendations for statutory revisions, proposals for new or modified regulations, regulatory guidance under existing regulations, and/or other regulatory or supervisory actions consistent with the Finance Agency’s statutory authority. For more details on this Finance Agency review, see the Legislative and Regulatory Developments section in Item 7: Management’s Discussion and Analysis in this Form 10-K.

At this time, the Bank cannot predict what actions will ultimately result from this initiative or the extent of any changes on the FHLBank System or the Bank, or the ultimate impact to the FHLBanks or the Bank in the future. Potential changes resulting from this initiative, including those relating to the FHLBanks’ fulfillment of their mission, membership requirements, and requirements relating to affordable housing contributions and support to community investment, will likely impact our business and operations, which may impact the Bank’s financial condition.

The Bank cannot predict new or changes in legislative or regulatory requirements or guidance or the effect of any new legislation or regulations on the Bank's operations. The impact of any of the above items could materially and negatively affect, and impose additional controls and restrictions on, the activities of the Bank. Regulatory requirements on the Bank’s members may affect their capacity and demand for Bank products and, as a result, impact the Bank’s operations and financial condition. Changes in Finance Agency regulations and other Finance Agency regulatory actions could result in, among other things, changes in the Bank’s capital composition, an increase in the Bank’s cost of funding, ability to accept certain types of collateral, a change in permissible business activities, a decrease in the size, scope or nature of the Bank’s lending, investment or mortgage purchase program activities, or a decrease in demand for the Bank’s products and services, which could negatively affect its financial condition and results of operations and members’ investment in the Bank.

Changes to and replacement of the LIBOR benchmark interest rate could adversely affect the Bank’s business, financial condition, and results of operations and increase operational risk.

On March 5, 2021, the U.K. Financial Conduct Authority (FCA) confirmed that the publication of key LIBOR settings will cease as of June 30, 2023. The Chicago Mercantile Exchange (CME) is planning to convert LIBOR-indexed interest rate exchange agreements prior to the June 30th cessation date. The Federal Reserve identified the Secured Overnight Financing Rate (SOFR), which the FRB of New York began publishing in 2018, as an alternative rate for possible use as a market benchmark. The Bank has assessed its exposure to LIBOR and developed a LIBOR transition plan, including addressing considerations related to the transition to an alternative rate (e.g., SOFR). Risks relating to the market demand for the Bank’s products, changes in legacy contractual terms on the Bank’s financial assets, liabilities and derivatives, and critical vendors being able to adjust systems to properly process and account for alternative rates may arise. Alternative rates and other market changes related to the replacement of LIBOR, including the introduction of financial products and changes in market practices, may lead to risk modeling and valuation challenges for the Bank. There may also be operational impacts to the Bank as its transition progresses. For further details regarding LIBOR/SOFR transition, refer to the Operational and Business Risks section in Item 7: Management’s Discussion and Analysis in this Form 10-K.

The COVID-19 pandemic created changes in the economy that impacted and may continue to impact the Bank’s business, operations, and financial results. Future developments, such as a resurgence of the pandemic, are unpredictable but may result in additional impacts to the Bank.

The COVID-19 pandemic as well as legislative, regulatory and other actions taken in response to the pandemic negatively impacted demand for the Bank’s products and services and its results of operations, although demand for advances increased sharply in 2022. It is difficult to predict future demand as financial markets continue to adjust to post-pandemic fiscal and monetary policies and changes in the macroeconomy. In addition, continued supply chain disruptions may have a contributory impact on inflation and inflation expectations, and resulting supply issues and financial stresses may affect the Bank’s business decisions or those of its members and may impact the Bank’s results of operations.

A resurgence of the pandemic at an emergency level, emergence of new variants or viruses or decline in vaccine or treatment efficacy may disrupt the Bank’s operations, should significant portions of the Bank’s workforce be unable to work effectively due to illness or other restrictions. Additionally, the Bank’s members, counterparties, vendors or other stakeholders could be negatively impacted by a resurgence in the pandemic, resulting in an impact to the Bank’s business.

The loss of significant Bank members or borrowers may have a negative impact on the Bank’s advances, letters of credit and capital stock outstanding and could result in lower demand for its products and services, lower dividends paid to members and higher borrowing costs for remaining members, all of which may affect the Bank’s results of operations and financial condition.

One or more significant Bank members could decrease their business activities with the Bank, move their business to another FHLBank district, merge into a nonmember, withdraw their membership or fail which could lead to a significant decrease in the Bank’s total assets. At December 31, 2022, the Bank’s five largest customers accounted for 79.6% of its total credit exposure (TCE) and owned 70.1% of its outstanding capital stock. Of these, three members had an outstanding advance balance in excess of 10% of the total advance portfolio. Further, one member had outstanding letters of credit in excess of 10% of total letters of credit. If any of the Bank’s five largest customers paid off their outstanding advances, reduced their letter of credit activity with the Bank or, if applicable, withdrew from membership, the Bank could experience a material adverse effect on its outstanding advance levels and TCE, which would impact the Bank’s financial condition and results of operations.

The Bank faces competition for advances, letters of credit, mortgage loan purchases and access to funding, which could negatively impact earnings.

The Bank’s primary business is making advances to its members. The Bank competes with other suppliers of wholesale funding, both secured and unsecured, including commercial banks and their investment banking divisions, the FRBs, providers of brokered deposits and, in some circumstances, other FHLBanks. Members have access to alternative funding sources which may offer more favorable terms than the Bank offers on its advances, including more flexible credit or collateral standards. In addition, many of the Bank’s competitors are not subject to the same body of regulations applicable to the Bank, which enables those competitors to offer products and terms that the Bank is not able to offer.

The Bank’s letters of credit can be used to support certain obligations of its members. Alternatively, members may choose to use certain investment securities as support for these obligations. As market interest rates for investment securities become more attractive and members increase their holdings of such securities, the Bank may experience a decline in member demand for letters of credit.

In connection with the MPF Program, the Bank is subject to competition regarding the purchase of conventional, conforming fixed-rate mortgage loans. The Bank faces competition in the areas of customer service, product features and purchase prices for MPF loans and ancillary services. The Bank’s strongest competitors are large mortgage aggregators, non-depository mortgage entities and the other housing GSEs (Fannie Mae and Freddie Mac). The Bank may also compete with other FHLBanks with which members have a relationship through affiliates. Competition among FHLBanks for MPF business may also be affected by the requirement that a member and its affiliates can sell loans into the MPF Program through only one FHLBank relationship at a time.

In addition, because the volume of conventional, conforming fixed-rate mortgages fluctuates depending on the level of interest rates, and with the steady and significant increases in interest rates in 2022, the demand for MPF Program products diminished. This increasing competition for the reduced amount of mortgage loans available for the Bank to purchase and, consequently, reduced net income from the Bank’s MPF Program. Continuing increases in interest rates in 2023 will further heighten competition for the purchase of mortgage loans, which could negatively affect the MPF Program’s financial performance and, in turn, the Bank’s financial condition and results of operations.

The FHLBanks also compete with the U.S. Treasury and GSEs as well as corporate, sovereign and supranational entities for funds raised through the issuance of unsecured debt in the national and global debt markets. Increases in the supply of competing debt products may, in the absence of increases in demand, result in higher debt costs or lower amounts of debt issued

at the same cost than otherwise would be the case. Increased competition could adversely affect the Bank’s ability to have access to funding, reduce the amount of funding available or increase the cost of funding. Any of these effects could adversely affect the Bank’s financial condition and results of operations.

Environmental, social and governance (ESG) matters, including regulatory and other stakeholder expectations, could adversely affect the reputation of the Bank.

Policy and regulatory environments relating to ESG matters, as well as market, regulator, policy-maker and other stakeholder expectations regarding FHLBank lending, the use of FHLBank funding by members and other FHLBank System activities are evolving and may result in additional responsibilities or costs for the Bank, such as additional compliance requirements or limitations, operational or technological changes and increased disclosures. Additionally, the Bank anticipates that the SEC will likely issue rules relating to ESG disclosures during 2023. Broader responses to ESG factors may create transition risks for the Bank. Policy, regulatory and market conditions may drive adaptation and mitigation actions whose costs may ultimately negatively impact the Bank’s lending business.

Natural disasters, including those resulting from climate change, could adversely affect the business, results of operations, financial condition or reputation of the Bank, its members or counterparties.

Climate change may cause or intensify natural disasters, which could disrupt the business or damage the facilities of the Bank or its members, increase lending losses at its members, damage or destroy collateral that members have pledged to secure advances or mortgages that the Bank holds for its portfolio, and which could cause the Bank to experience losses or be exposed to a greater risk that pledged collateral would be inadequate in the event of a default.

CREDIT RISK

The Bank is subject to credit risk due to default, including failure or ongoing instability of any of the Bank’s member, derivative, money market or other counterparties, which could adversely affect the Bank’s results of operations or financial condition.

The Bank faces credit risk on advances, mortgage loans, investment securities, money market investments, derivatives, certificates of deposit, and other financial instruments. Current economic conditions affecting members and their customers, such as inflation, recessionary expectations and rising interest rates, evolving and more complex member activities (e.g., cryptocurrency) and various other factors may be contributing to higher credit risk profiles that could lead to asset liability management challenges or potentially increased risk of loss at certain member institutions. A member failure without liquidation proceeds satisfying the amount of the failed institution’s obligations and the operational cost of liquidating the collateral could impact the Bank’s ability to issue debt.

The volatility of market prices and interest rates as well as the potential for fraud could affect the value of collateral held by the Bank as security for the obligations of Bank members as well as the ability of the Bank to liquidate the collateral in the event of a default by the obligor. Volatility within collateral indices may affect the method used in determining collateral weightings, which would ultimately affect the eventual collateral value.

Member institution failures may reduce the number of current and potential members in the Bank’s district. The resulting loss of business could negatively impact the Bank’s financial condition and results of operations. Additionally, if a Bank member fails and the FDIC or the member (or another applicable entity) does not either (1) promptly repay all of the failed institution’s obligations to the Bank or (2) assume the outstanding advances, the Bank may be required to liquidate the collateral pledged by the failed institution to satisfy its obligations to the Bank. If that were the case, the proceeds realized from the liquidation of pledged collateral may not be sufficient to fully satisfy the amount of the failed institution’s obligations and the operational cost of liquidating the collateral.

There are several unique risks (e.g., individual state insolvency legislation terms that may govern creditors’ rights, as opposed to the federal Bankruptcy Code) that the Bank may be exposed to regarding members in the insurance industry. To the extent the Bank determines that the risk it faces regarding insurance company members in a specific state is elevated, the Bank takes additional steps to mitigate this risk, which may include limits on eligible collateral and establishing over-collateralization levels to address the risk of collateral volatility.

The Bank currently has two CDFI members, which are not generally subject to banking or insurance regulations. The Bank takes steps to mitigate this risk, which may include requiring specific over-collateralization levels or limits on eligible

collateral. For all CDFI members, the Bank requires delivery of collateral pledged to secure the Bank’s advances and other credit products provided to such members.

The insolvency of a major counterparty due to the credit quality and capital level of a counterparty or fraud resulting in the inability of a major counterparty to meet its obligations under unsecured credit transactions or other agreement, could cause the Bank to incur losses and have an adverse effect on the Bank’s financial condition and results of operations.

In addition, the Bank’s ability to engage in routine derivatives, funding and other transactions could be adversely affected by the actions, including fraud, and commercial soundness of other financial institutions. Financial institutions are interrelated as a result of trading, clearing, repos, or other relationships. As a result, defaults by, or even rumors or questions about, one or more financial services institutions, or the financial services industry generally, could lead to market-wide disruptions in which it may be difficult for the Bank to find counterparties for such transactions. For additional discussion regarding the Bank’s credit and counterparty risk, see the Credit and Counterparty Risk discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K.

The Bank invests in MBS and is subject to the risk of credit deterioration, which could adversely impact the Bank’s results of operations and could impact the Bank’s capital position.

The Bank currently invests in Agency MBS, which support the Bank’s mission. The Bank still has an investment in its legacy private label MBS portfolio; however, no such securities have been purchased since 2007, and the portfolio continues to run off. The Bank has incurred credit losses on this portfolio in previous years, and additional credit losses are unpredictable.

The MPF Program has different risks than those related to the Bank’s traditional advance business, which could adversely impact the Bank’s profitability.

The Bank participates in the MPF Program with FHLBank of Chicago as MPF provider. The Bank maintains portfolio-level limits and thresholds to monitor and control certain MPF portfolio characteristics including, but not limited to, geographic concentrations, aggregate portfolio size and pricing attributes. In addition, the Bank limits certain production levels and exposures from any single Participating Financial Institution (PFI). During 2022, 70.1% of the mortgage loans purchased by the Bank were from one PFI. This PFI also represented 39.5% of the total outstanding portfolio on December 31, 2022. If this PFI withdrew from or reduced its participation in the Bank’s MPF Program, the Bank could experience a material adverse effect on its MPF portfolio, which would impact the Bank’s financial condition and results of operations.

In contrast to the Bank’s traditional member advance business, the MPF Program is highly subject to competitive pressures, more susceptible to loan losses and also carries more interest rate risk, prepayment risk, operational complexity and potential for fraud. General changes in market conditions could have a negative effect on the mortgage loan market resulting in a negative impact on the profitability of the MPF Program. These include but are not limited to: rising interest rates or housing prices resulting in slowing mortgage loan originations; an economic downturn creating increased defaults and lowered housing prices; innovative products that do not currently meet the criteria of the MPF Program; and new government programs or mandates.

The rate and timing of unscheduled payments and collections of principal on mortgage loans are difficult to predict and can be affected by a variety of factors, including the level of prevailing interest rates, the availability of lender credit, and other economic, demographic, geographic, tax and legal factors. The Bank manages prepayment risk through a combination of consolidated obligation issuance and, to a lesser extent, derivatives. If the level of actual prepayments is higher or lower than expected, the Bank may experience a mismatch with a related consolidated obligation issuance, which could have an adverse impact on net interest income. Also, increased prepayment levels will cause premium amortization to increase, reducing net interest income, and increase the potential for debt overhang. For certain MPF Program products, increased prepayments may also reduce credit enhancements available to absorb credit losses. To the extent one or more of the geographic areas in which the Bank’s MPF loan portfolio is concentrated experiences considerable declines in the local housing market, declining economic conditions or a natural disaster, the Bank could experience an increase in the required allowance for credit losses on this portfolio.

The MPF Program is subject to risk that a borrower becomes delinquent or defaults on the Bank’s MPF loans. In addition, changes in real estate values could impact borrower repayment behavior. If delinquency and default rates on certain MPF loans increase, or there are additional declines in residential real estate values, the Bank will experience credit losses on these loans to the extent available credit enhancement provided by the related PFI, if any, has been exhausted.

If FHLBank of Chicago changes or ceases to operate the MPF Program, this could have a negative impact on the Bank’s mortgage purchase business, and, consequently, a related decrease in the Bank’s financial condition and results of operations. Additionally, if FHLBank of Chicago or any of its third-party vendors experience operational difficulties, such difficulties could have a negative impact on the Bank’s financial condition and results of operations.

For a description of the MPF Program, the obligations of the Bank with respect to loan losses and a PFI’s obligation to provide credit enhancement, see the Mortgage Partnership Finance Program discussion in Item 1. Business, and Item 7. Management’s Discussion and Analysis in this Form 10-K. See additional details regarding Supplemental Mortgage Insurance (SMI) exposure in the Credit and Counterparty Risk - Mortgage Loans, BOB Loans and Derivatives discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K.

MARKET/LIQUIDITY RISK

The Bank may be unable to optimally manage its market risk due to unexpected sizable adverse market movements that threaten the Bank’s interest rate risk/market risk profile faster than Bank strategies can offset. In addition, the Bank’s mortgage-related portfolio introduces specific interest rate and prepayment risk, which may impact the value of and income associated with those investments. Not prudently managing these risks may adversely affect the Bank’s results of operations.

The Bank is subject to various market risks, including interest rate risk and prepayment risk. The Bank realizes income primarily from the spread between interest earned on advances, MPF loans and investment securities and interest paid on debt and other liabilities. The Bank’s financial performance is affected by fiscal and monetary policies of the Federal government and its agencies, particularly the policies of the Federal Reserve. The Federal Reserve’s policies, which are difficult to predict, directly and indirectly influence the yield on the Bank's interest-earning assets and the cost of interest-bearing liabilities. The Federal Reserve significantly raised the target range for the federal funds rate during 2022, and there is uncertainty regarding continuing rate increases. The frequency and magnitude of interest rate changes affect market movements that can accentuate challenges of managing interest rate risk, as discussed below. Although the Bank uses various methods and procedures to monitor and manage exposures due to changes in interest rates, the Bank will experience instances when the timing of the re-pricing of interest-bearing liabilities does not coincide with the timing of re-pricing of interest-earning assets, or when the timing of the maturity or paydown of interest-bearing liabilities does not coincide with the timing of the maturity or paydown of the interest-earning assets. The Bank’s profitability and the market value of its equity are significantly affected by its ability to manage interest rate risk.

The Bank’s ability to anticipate changes regarding the direction and speed of interest rate movements, or to hedge the related exposures, significantly affects the success of the asset and liability management activities and the level of net interest income. The Bank uses derivative instruments to reduce interest rate risk. The Bank has strategies which reduce the amount of one-sided fair value adjustments and the resulting impact to the Bank’s income. However, market volatility affecting the valuation of instruments in hedging relationships can also cause income volatility to the degree that the change in the value of the derivative does not perfectly offset the change in the value of the hedged item. Should the use of derivatives be limited, with that activity being replaced with a higher volume of long-term debt funding, the Bank may still experience income volatility driven by the market and interest rate sensitivities.

The Bank uses a number of measures and analyses to monitor and manage interest rate risk. Given the unpredictability of the financial markets, capturing all potential outcomes in these analyses is not practical. Key assumptions include, but are not limited to, advance volumes and pricing, market conditions for the Bank’s consolidated obligations, interest rate spreads and prepayment speeds and cash flows on mortgage-related assets. Although trends in 2022 and early 2023 suggest increasing rates, these assumptions are inherently uncertain and, as a result, the measures cannot precisely predict the impact of higher or lower interest rates on net interest income or the market value of equity. Actual results will differ from simulated results due to the timing, magnitude and frequency of interest rate changes and changes in market conditions and management strategies, among other factors.

With respect to the Bank’s MBS and MPF portfolios, increases in interest rates slowed prepayments in 2022 and, as a result, extended mortgage cash flows. If the debt funding the mortgage assets matures, it could be re-issued at a higher rate and decrease the Bank’s net interest income. Decreases in interest rates may cause an increase in mortgage prepayments and may result in increased premium amortization expense and substandard performance in the Bank’s mortgage portfolio as the Bank experiences a return of principal that it must re-invest in a lower rate environment, adversely affecting net interest income over time, if associated debt remains outstanding (i.e., debt overhang). See additional discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K.

The Bank may be limited in its ability to access the capital markets, which could adversely affect the Bank’s liquidity. In addition, if the Bank’s ability to access the long-term debt markets would be limited, this may have a material adverse effect on its results of operations and financial condition, as well as its ability to fund operations, including advances.

The Bank’s ability to operate its business, meet its obligations and generate net interest income depends primarily on the ability to issue large amounts of debt frequently, with a variety of maturities and call features and at attractive rates. The Bank actively manages its liquidity position to maintain stable, reliable and cost-effective sources of funds, while considering market conditions, member credit demand for short-and long-term advances, investment opportunities and the maturity profile of the Bank’s assets and liabilities. The Bank recognizes that managing liquidity is critical to achieving its statutory mission of providing low-cost funding to its members. In managing liquidity risk, the Bank is required to maintain a level of liquidity in accordance with policies established by management and the Board and Finance Agency guidance.

The ability to obtain funds through the sale of consolidated obligations depends in part on conditions in the capital markets, particularly the short-term capital markets. Accordingly, the Bank may be unable to obtain funding on acceptable terms (interest rate risk), if at all (refunding risk). If the Bank cannot access funding when needed, its ability to support and continue its operations, including providing term funding to members, would be adversely affected, which would negatively affect its financial condition and results of operations. Geopolitical instability or conflicts, such as ongoing hostilities between Russia and Ukraine, may result in trade disruptions, sanctions, or other market volatility which could adversely affect funding costs or market access. The Bank’s exposure to interest rate risk and refunding risk may be impacted by the asset/liability maturity profile of the Bank. See the Liquidity and Funding discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K for additional information.

The U.S. Treasury has the authority to prescribe the form, denomination, maturity, interest rate and conditions of consolidated obligations issued by the FHLBanks, which could impact the Bank’s ability to issue or offer certain types of debt. In addition, the Finance Agency could require the Bank to hold additional liquidity, which could adversely impact the type, amount and profitability of various advance products.

The Bank is jointly and severally liable for the consolidated obligations of other FHLBanks. Additionally, the Bank may receive from or provide financial assistance to the other FHLBanks. Changes in the Bank’s, other FHLBanks’ or other GSEs’ credit ratings, as well as the rating of the U.S. Government, may adversely affect the Bank’s ability to issue consolidated obligations and enter derivative transactions on acceptable terms.

Each of the FHLBanks relies upon the issuance of consolidated obligations as a primary source of funds. Consolidated obligations are the joint and several obligations of all the FHLBanks, backed only by the financial resources of the FHLBanks. Accordingly, the Bank is jointly and severally liable with the other FHLBanks for all consolidated obligations issued, regardless of whether the Bank receives all or any portion of the proceeds from any particular issuance of consolidated obligations.

The Finance Agency at its discretion may also require any FHLBank to make principal or interest payments due on any consolidated obligation, whether or not the primary obligor FHLBank has defaulted on the payment of that obligation. For example, the Finance Agency could simply allocate the outstanding liability of an FHLBank among the other FHLBanks on a pro-rata or other basis. Accordingly, the Bank could incur significant liability beyond its primary obligation under consolidated obligations which could negatively affect the Bank’s financial condition and results of operations.

FHLBank System consolidated obligation bonds have been assigned Aaa/stable outlook and AA+/stable outlook ratings by Moody’s and S&P, respectively. Consolidated obligation discount notes have been assigned a P-1 and A-1+ rating by Moody’s and S&P, respectively. In addition, all FHLBanks have been assigned a long-term rating of Aaa/stable outlook and AA+/stable outlook by Moody’s and S&P, respectively. All FHLBanks have been assigned a short-term rating of P-1 and A-1+ by Moody’s and S&P, respectively. These ratings reflect an opinion that the FHLBanks have a strong capacity to meet their commitments to pay principal of and interest on consolidated obligations and that the consolidated obligations are judged to be of high quality with minimal credit risk. The ratings also reflect the FHLBanks’ status as GSEs.

It is possible that the credit rating of an FHLBank, another GSE or the U.S. government could be lowered by at least one Nationally Recognized Statistical Rating Organization (NRSRO). It is expected that a debt ceiling resolution will be necessary in mid-2023 or otherwise during 2023, depending on the U.S. Treasury’s use of extraordinary measures which it is already undertaking. Depending on the nature and outcome of that process, the credit rating of the U.S. government could be lowered as was the case in August 2011, which could adversely affect the Bank’s costs of doing business. In addition, such downgrades could negatively impact the Bank’s reputation.

Additional ratings actions or negative guidance may adversely affect the Bank’s cost of funds and ability to issue consolidated obligations and enter derivative transactions on acceptable terms, which could negatively affect financial condition and results of operations. In some states, acceptance of the Bank’s letters of credit as collateral for public funds deposits requires an AAA rating from at least one rating agency. If all NRSROs downgrade their ratings, the Bank’s letters of credit business in those states may be affected, and the amount of the Bank’s letters of credit may be reduced, both of which could negatively affect financial condition and results of operations. The Bank’s costs of doing business and ability to attract and retain members could also be adversely affected if the credit ratings assigned to the consolidated obligations were lowered from Aaa/AA+.

The Bank may fail to maintain a sufficient level of retained earnings, fail to meet its minimum regulatory capital requirements, or be otherwise designated by the Finance Agency as undercapitalized, which would impact the Bank’s ability to conduct business “as usual,” result in prohibitions on dividends, excess capital stock repurchases and capital stock redemptions and potentially impact the value of Bank membership. This designation may also negatively impact the Bank’s high credit rating provided by certain NRSROs and could hinder the achievement of the Bank’s economic/community development mission.

The Bank is required to maintain certain regulatory capital and leverage ratios. Any violation of these requirements will result in prohibitions on stock redemptions, repurchases and dividend payments. For example, the payment of dividends is subject to certain statutory and regulatory restrictions (including that the Bank complies with all minimum capital requirements and has not been designated undercapitalized by the Finance Agency). In addition, if the Bank becomes undercapitalized by failing to meet its regulatory capital requirements, by the Finance Agency exercising its discretion to categorize an FHLBank as undercapitalized or by the Bank failing to meet any additional Finance Agency-imposed minimum capital requirements, it will also be subject to asset growth limits and, if significantly undercapitalized, the Bank could be subject to additional actions. Violations of capital requirements could also result in changes in the Bank’s member lending, investment or MPF Program purchase activities and changes in permissible business activities. Declines in market conditions could also result in a violation of regulatory or statutory capital requirements and may impact the Bank’s ability to redeem capital stock at par value. Without advance demand and new borrowing activity to offset the run-off of existing borrowings, capital levels could eventually decline. An increase of the capital requirements on existing borrowings in an attempt to boost capital levels may deter new borrowings and reduce the value of membership as the return on that investment may not be as profitable to the member as other investment opportunities. The ability to conduct the Bank’s business as expected, to meet its statutory AHP or other legal obligations as well as the Bank’s ability to make contributions to other community and economic development programs is highly-dependent on the Bank’s ability to continue to generate net income and maintain adequate retained earnings and capital levels.

OPERATIONAL RISK

The Bank’s business is dependent upon its computer information systems. An inability to process or physically secure information or implement technological changes, or an interruption in the Bank’s systems, may result in lost business or increased operational risk. The Bank’s dependence on computer systems and technologies to engage in business transactions and to communicate with its stakeholders has increased the Bank’s exposure to cyber-security risks.

Cyber threats include computer viruses, malicious or destructive code, phishing attacks, brute force attacks, ransomware attacks, denial of service or information or other security breaches. They could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of the Bank, its employees, its members or other third parties, or otherwise materially disrupt the Bank’s or its members’ or other third parties’ network access, business operations or ability to provide services. The Bank, like many financial institutions and businesses, faces cyber-attack attempts routinely, for example, from phishing campaigns and denial of service attempts, and the risk of cyber-attacks may be heightened as a result of geopolitical conflicts. Although the Bank has both information and physical security measures in place and devotes significant resources to secure the Bank’s computer systems and networks, it might not be able to anticipate or implement effective preventive measures against all security breaches, particularly given that such attacks continue to evolve in scale and maliciousness. Additionally, cyber vulnerabilities and/or attacks could go undetected for a period of time. During such time, the Bank may not necessarily know the extent of the harm, and certain actions could be compounded before they are discovered and remediated, any or all of which could further increase the consequences of a cyber-attack.

As cyber threats evolve, the Bank may be required to expend significant additional resources to continue to modify or enhance its layers of defense or to investigate and remediate any information security vulnerabilities. The Bank’s technology control environment, along with security policies and standards, incident response procedures, security controls testing and dedicated information security resources, have protected the Bank against material cyber-security attacks. In addition, the Bank completes periodic independent assessments that leverage industry recognized frameworks in order to continually improve the

Bank’s control environment against cyber-security attacks. A successful penetration may result in unauthorized access to digital systems for purposes of misappropriating assets (including loss of funds) or sensitive information (including confidential information of the Bank, members, counterparties or mortgage loan borrowers) or may corrupt data or cause operational disruption. This may cause financial loss or a violation of privacy or other laws. The Bank could incur substantial costs and suffer other negative consequences, including but not limited to remediation costs, increased security costs, litigation, penalties and reputational damage. Cyber-security risk may also be elevated with employees working remotely or in a hybrid format. Additional opportunities may exist for cyber-criminals to exploit potential vulnerabilities. While there are continued attempts to penetrate the Bank’s security, such as phishing and malware attacks, the Bank has not experienced a breach of its security as a result of its remote or hybrid posture.

In addition, the Bank’s business is dependent upon its ability to effectively exchange and process information using its computer information systems. Continued regulatory focus on technology operations including cyber-security and cloud computing could influence the Bank’s operations. The Bank’s products and services require a complex and sophisticated computing environment, which includes licensed, purchased, and custom-developed software and software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS) solutions. Maintaining the effectiveness and efficiency of the Bank’s operations is dependent upon the continued timely implementation of technology solutions and systems, which may require ongoing expenditures, as well as the ability to sustain ongoing operations during technology solution implementations, upgrades and larger modernization efforts for business systems and data processing capability/facilities. If the Bank were unable to sustain its technological capabilities, it may not be able to remain competitive, and its business, financial condition and profitability may be significantly compromised. To advance its disaster recovery capabilities and continuous operations, the Bank continually reviews and improves its recovery facilities and processes through its business continuity plan, including testing the plan annually. Nonetheless, the Bank cannot guarantee the effectiveness of its business continuity plan or other related policies, procedures and systems to protect the Bank in any particular future situation.

The lack of a skilled workforce or Board of Directors may have an adverse effect on the Bank’s business and operations.

A skilled, diverse and inclusive workforce and Board of Directors are important to the continued successful operation of the Bank. The COVID-19 pandemic brought about changes to the job market which resulted in increased competition for skilled personnel, inflationary cost increases and investments in workforce health and safety. The effects of increased remote working opportunities in the market, even in a hybrid environment, have resulted in some employee turnover although the Bank’s hybrid posture is competitive. Further turnover, particularly among key employees, may increase operational risks as responsibilities are transitioned between employees and new employees are onboarded and trained.

Failure to attract or retain a skilled and diverse Board of Directors, particularly with respect to certain required expertise, may adversely affect the Bank’s governance or business operations. The loss of one or more key employees or not having a diverse and inclusive Board of Directors may also result in incremental regulatory scrutiny of the quality of the Bank’s overall corporate governance.

Failures of critical vendors and other third parties, including the Federal Reserve Banks, could disrupt the Bank’s ability to conduct business.

The Bank relies on third-party vendors and service providers for many of its core business processes and information systems needs. Any failure or interruption of these systems, or any disruption of service, including as a result of a security breach, cyber-attack, natural disaster, geopolitical instability, terrorist attack, widespread emergency or pandemic, could result in failures or interruptions in the Bank’s ability to conduct and manage its business effectively. The Bank has not experienced a material negative third-party vendor event in connection with the COVID-19 pandemic. However, a disruption, delay or failure of a critical third-party vendor’s services as a result of the pandemic could also impact the Bank’s operating results and the Bank’s ability to provide services to the membership.

The Bank maintains a crisis management plan which includes business continuity; however, there is no assurance that failures or interruptions will not occur or, if they do occur, that they will be adequately addressed by the Bank or the vendors or third parties on which the Bank relies. Any failure or interruption could significantly harm the Bank’s reputation, customer relations and business operations, which could negatively affect its financial condition, profitability and cash flows.

Additionally, any breach of sensitive Bank data stored at a third party could result in financial loss, damage to the Bank’s reputation, litigation, potential legal or regulatory actions and penalties, increased regulatory scrutiny and increased expense in terms of incident response costs and damages. While the Bank regularly assesses the adequacy of security controls for its significant third parties, there is no assurance that a breach will not occur. Additionally, the use of vendors, including increased use of cloud service providers (e.g., SaaS, IaaS) and other third parties, could expose the Bank to the risk of a financial loss,

loss of intellectual property or confidential information, fraud or other harm. Although the Bank has not experienced supply chain cyber-attacks to date, cyber vendor security monitoring controls continue to be a focus.

The Bank relies on both internally and externally developed models and end user computing tools to manage market and other risks, to make business decisions and for financial accounting and reporting purposes. The Bank’s business could be adversely affected if these models fail to produce reliable results or if the results are not used appropriately.

The Bank makes significant use of business and financial models and end user computing tools for making business decisions, managing risk and financial reporting. For example, the Bank uses models to measure and monitor exposures to market risks and credit and collateral risks. The Bank uses models for making credit decisions, determining the fair value of certain financial instruments and estimating credit losses.

Models are inherently imperfect predictors of actual results because they are based on assumptions about future performance. Estimations produced by the Bank’s models may be different from actual results, which could adversely affect the Bank’s business results. If the models or end user computing tools are not reliable or the Bank does not use them appropriately, the Bank could make poor business decisions, including risk management decisions, or other decisions, which could result in an adverse financial impact. Further, any controls, such as a model risk management function, that the Bank employs to attempt to manage the risks associated with the use of models may not be effective.

Changes in any models or in any of the inputs, assumptions, judgments or estimates used in the models may cause the results generated by the model to be materially different. Changes to the Bank’s models could occur due to changes in market participants’ practices, including the use of alternative rates.

Item 1B: Unresolved Staff Comments

None

Item 2: Properties

The Bank leases 86,616 square feet of office space at 601 Grant Street, Pittsburgh, Pennsylvania, 15219 and additional office space at the following locations: (1) 1325 G Street, Washington, D.C. 20005; (2) 1137 Branchton Road, Boyers, Pennsylvania 16020, (3) 609 Hamilton Street, Allentown, Pennsylvania 18101 and (4) 580 Vista Park Drive, Pittsburgh, Pennsylvania 15205. The Washington, D.C. office space is shared with the FHLBanks of Atlanta and Des Moines. Essentially all of the Bank’s operations are housed at the Bank’s headquarters at the Grant Street location.

The Bank’s management believes these facilities are well maintained and adequate for the Bank’s operations.

Item 3: Legal Proceedings

The Bank may be subject to various legal proceedings arising in the normal course of business. After consultation with legal counsel, management is not aware of any such proceedings that might result in the Bank’s ultimate liability in an amount that will have a material effect on the Bank’s financial condition or results of operations.

Item 4: Mine Safety Disclosures

Not applicable.

PART II

Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The capital stock of the Bank can be purchased only by members although it may be held by nonmembers due to out of district mergers. There is no established marketplace for the Bank’s stock; the Bank’s stock is not publicly traded and may be repurchased or redeemed by the Bank at par value. The Bank has two subclasses of capital stock: B1 membership and B2 activity.

The members may request that the Bank redeem all or part of the common stock they hold in the Bank five years after the Bank receives a written request by a member. This is referred to as mandatorily redeemable capital stock. The Bank reclassifies stock subject to redemption from capital stock to a liability after a member provides written notice of redemption, gives notice of intention to withdraw from membership, or attains nonmember status by merger or acquisition, charter termination or other involuntary termination from membership. In addition, the Bank, at its discretion, may repurchase shares held by members in excess of their required stock holdings upon one business day’s notice. Excess stock is Bank capital stock not required to be held by the member to meet its minimum stock purchase requirement under the Bank’s Capital Plan. The Bank's current practice is to repurchase all excess capital stock, including excess capital stock that is classified as mandatorily redeemable, on a weekly basis.

The members’ minimum stock purchase requirement is subject to change from time to time at the discretion of the Board of Directors of the Bank in accordance with the Capital Plan. Par value of each share of capital stock is $100. As of December 31, 2022, the total mandatorily redeemable capital stock reflected the balance for six institutions, three of which were merged out of district and considered to be nonmembers. One institution relocated and became a member of another FHLBank at which time the membership with the Bank terminated. Two other institutions have notified the Bank of their intention to voluntarily redeem their capital stock and withdraw from membership. These institutions will continue to be members of the Bank until the withdrawal period is completed.

In February 2023, the Bank paid quarterly dividends of 7.95% annualized on activity stock and 4.00% annualized on membership stock. The dividends were based on average capital stock held for the fourth quarter of 2022. Looking forward, market and business conditions can impact FHLBank's overall performance, as well as the levels of future dividends. FHLBank's intent is to continue to provide meaningful shareholder return. Due to market and economic uncertainty, as well as anticipation of slower advance growth, the Bank does not expect dividend levels to change at the pace of market rates.

The total number of shares of capital stock outstanding as of December 31, 2022 was 34,561,677 of which members held 34,289,659 shares and nonmembers held 272,018 shares. As of February 28, 2023, a total of 280 members and nonmembers held shares of the Bank’s stock.

See Note 11 - Capital to the audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K for further information regarding statutory and regulatory restrictions on capital stock redemption.

Item 6: [Reserved]

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

Statements contained in this Form 10-K, including statements describing the objectives, projections, estimates, or predictions of the future of the Bank, may be “forward-looking statements.” These statements may use forward-looking terms, such as “anticipates,” “believes,” “could,” “estimates,” “may,” “should,” “will,” or their negatives or other variations on these terms. The Bank cautions that, by their nature, forward-looking statements involve risk or uncertainty and that actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These forward-looking statements involve risks and uncertainties including, but not limited to, the following: economic and market conditions, including, but not limited to real estate, credit and mortgage markets; volatility of market prices, rates, and indices related to financial instruments; including but not limited to, the discontinuance of the London Interbank Offered Rate(LIBOR) and the related effect on the Bank's LIBOR-based financial products, investments and contracts; the occurrence of man-made or natural disasters, endemics, global pandemics, conflicts or terrorist attacks or other geopolitical events; political, legislative, regulatory, litigation, or judicial events or actions, including those relating to environmental, social and governance matters; risks related to MBS; changes in the assumptions used to estimate credit losses; changes in the Bank’s capital structure; changes in the Bank’s capital requirements; changes in expectations regarding the Bank’s payment of dividends; membership changes; changes in the demand by Bank members for Bank advances; an increase in advance prepayments; competitive forces, including the availability of other sources of funding for Bank members; changes in investor demand for consolidated obligations and/or the terms of interest rate exchange agreements and similar agreements; changes in the FHLBank System’s debt rating or the Bank’s rating; the ability of the Bank to introduce new products and services to meet market demand and to manage successfully the risks associated with new products and services; the ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which the Bank has joint and several liability; applicable Bank policy requirements for retained earnings and the ratio of the market value of equity to par value of capital stock; the Bank’s ability to maintain adequate capital levels (including meeting applicable regulatory capital requirements); business and capital plan adjustments and amendments; technology and cyber-security risks; and timing and volume of market activity. Forward-looking statements in this Form 10-K should not be relied on as representing the Bank’s expectations or assumptions as of any time subsequent to the time this Form 10-K is filed with the Securities and Exchange Commission. Forward looking statements speak only as of the date made and the Bank has no obligation, and does not undertake publicly, to update or revise any forward-looking statement for any reason.

This Management’s Discussion and Analysis (MD&A) should be read in conjunction with the Bank’s audited financial statements in Item 8. Financial Statements and Supplementary Data and all risks and uncertainties addressed throughout this report, as well as those discussed under Item 1A. Risk Factors included herein. Information on the Bank's websites referred to in this Form 10-K is not incorporated in, or a part of, this Form 10-K.

Executive Summary

Overview. The Bank's financial condition and results of operations are influenced by global and national economies, local economies within its three-state 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 the Bank's profitability. Net interest income is affected by several external factors, including market interest rate levels and volatility, credit spreads and the general state of the economy. To manage interest rate risk in connection with advances and debt, the Bank executes interest rate derivatives. Short-term interest rates also directly affect the Bank's earnings on invested capital. Finally, the Bank's mortgage-related assets make it sensitive to changes in mortgage rates. The Bank earns relatively narrow spreads between yields on assets (particularly advances, its largest asset) and the rates paid on corresponding liabilities.

The Bank's earnings are affected not only by rising or falling interest rates but also by the particular path and volatility of changes in market interest rates and the prevailing shape of the yield curve. The flattening of the yield curve tends to compress the Bank's net interest margin, while steepening of the curve offers better opportunities to purchase assets with wider net interest spreads. The performance of the Bank's mortgage asset portfolios is particularly affected by shifts in the 10-year maturity range of the yield curve, which is the point that heavily influences mortgage rates and potential refinancings. Yield curve shape can also influence the pace at which borrowers refinance or prepay their existing loans, as borrowers may select shorter-duration mortgage products.

Throughout 2022, rising inflation, Federal Reserve Board (Federal Reserve) actions as well as speculation about future actions, were dominant themes. During 2022, the Federal Reserve raised the Federal fund target rate from a range of 0% - 0.25% to a range of 4.25% - 4.5%. The changes were a result of improved economic indicators and rising future inflation expectations. During 2022, yields on U.S. Treasuries were higher relative to the prevailing yields in 2021. Longer term debt spreads relative to U.S. Treasuries were higher during the fourth quarter due to investors preferring shorter maturities.

Results of Operations. The Bank’s net income for 2022 totaled $227.1 million, compared to $86.0 million for 2021. The $141.1 million increase was driven primarily by higher net interest income. Higher net interest income was primarily due to the rising interest rate environment. Interest income was $1,610.0 million for 2022, compared with 414.1 millions for 2021. This increase was the result of higher average advance balances, and higher yields driven by higher short-term interest rates. Interest income also included net prepayment fees on advances of $1.9 million in 2022, compared to $16.5 million for 2021. Interest expense was $1,252.5 million for 2022 compared to $233.5 million in the same prior-year period. This increase was primarily the result of higher average consolidated obligations, as well as higher rates paid, which was driven by higher short-term interest rates. Other noninterest income was $11.3 million for 2022, compared with $12.4 million for 2021. This $1.1 million decrease reflected losses in 2022 on investments that secure certain deferred compensation arrangements, partially offset by higher letter of credit fees. The net interest margin was 56 basis points and 46 basis points for 2022 and 2021, respectively. The increase in net interest margin was primarily due to lower funding costs and higher rates.

Financial Condition. Advances. Advances totaled $68.9 billion at December 31, 2022, an increase of $54.8 billion compared to $14.1 billion at December 31, 2021. In addition, the par value of advances that had a remaining maturity of more than one year also increased to 59% at December 31, 2022 compared to 39% at December 31, 2021. Although advance levels increased driven by member demand, it is not uncommon for the Bank to experience variances in the overall advance portfolio driven primarily by changes in member needs. The increase in members' need for advances is primarily the result of market liquidity, as well as recent Federal Reserve actions to increase short-term interest rates.

The ability to grow and/or maintain the advance portfolio is affected by, among other things, the following: (1) the liquidity demands of the Bank’s borrowers; (2) the composition of the Bank's membership; (3) members’ regulatory requirements; (4) current and future credit market conditions; (5) housing market trends; (6) the shape of the yield curve and (7) advance pricing.

Liquidity Investments. The Bank maintains liquidity to meet member borrowing needs and regulatory standards. The liquidity investment portfolio is comprised of cash, interest-bearing deposits, certificates of deposits, Federal funds sold, securities purchased under agreements to resell, and U.S. Treasury obligations classified as trading or available-for-sale (AFS). At December 31, 2022, the Bank held $14.0 billion of liquid assets compared to $9.7 billion at December 31, 2021. The $4.3 billion increase in liquid assets was in response to increased advance activity.

Investments. To enhance earnings, the Bank maintains investments classified as AFS and held-to-maturity (HTM) as well as certain trading securities, excluding those investments designated as liquidity. The Bank held $8.1 billion in its investment portfolio at December 31, 2022, compared with $8.8 billion at December 31, 2021, a decrease of $0.7 billion. Paydowns

associated with the Bank's Agency MBS portfolio contributed to this decline. During the majority of 2022, the Bank’s MBS purchases were limited by narrow mortgage spreads. In late 2022, the Bank began to purchase MBS securities as the spreads on MBS widened.

Consolidated Obligations. The Bank's consolidated obligations totaled $90.2 billion at December 31, 2022, an increase of $56.6 billion from December 31, 2021. At December 31, 2022, bonds represented 37% of the Bank's consolidated obligations, compared with 69% at December 31, 2021. Discount notes represented 63% of the Bank's consolidated obligations at December 31, 2022 compared with 31% at year-end 2021. The overall increase in consolidated obligations outstanding is consistent with the increase in total asset balances.

Capital Position and Regulatory Requirements. Total capital at December 31, 2022 was $5.0 billion, compared to $2.7 billion at December 31, 2021. The increase was primarily due to increased capital stock as a result of higher advances. Total retained earnings at December 31, 2022 were $1.5 billion, compared with $1.4 billion at December 31, 2021. Accumulated other comprehensive income (AOCI) was $(66.5) million at December 31, 2022, a decrease of $176.7 million from December 31, 2021. The decrease was primarily due to declines in the fair values of securities within the AFS portfolio as a result of rising interest rates.

In October 2022, the Bank paid quarterly dividends of 7.25% annualized on activity stock and 3.25% annualized on membership stock. In July 2022, the Bank paid quarterly dividends of 6.25% annualized on activity stock and 2.25% annualized on membership stock. In both February and April 2022, the Bank paid quarterly dividends of 5.25% annualized on activity stock and 1.25% annualized on membership stock. The dividends paid were based on stockholders' average balances for the third quarter of 2022 (October dividend), the second quarter of 2022 (July dividend), the first quarter of 2022 (April dividend), and the fourth quarter of 2021 (February dividend).

In February 2023, the Bank paid quarterly dividends of 7.95% annualized on activity stock and 4.0% annualized on membership stock. The dividends were based on average member capital stock held for the fourth quarter of 2022. However, the amount of any future dividends will depend on economic and market conditions and the Bank’s financial condition and operating results.

The dividend rates demonstrate that the Bank continues to return value to its member shareholders. Looking forward, market and business conditions can impact FHLBank's overall performance, as well as the levels of future dividends. FHLBank's intent is to continue to provide meaningful shareholder return; future dividend rates may not correspond directly with the pace of interest rate changes.

The Bank met all of its capital requirements as of December 31, 2022, and in the Federal Housing Finance Agency’s (Finance Agency) most recent determination, as of September 30, 2022, the Bank was deemed "adequately capitalized."

2023 Outlook

The Bank is a cooperative designed to meet the liquidity and other needs of its members, whether those needs increase or decrease. The Bank expects that members will continue to use advances to meet liquidity needs during 2023, but with slower growth. Member demand will continue to be impacted by market liquidity and Federal Reserve actions to adjust short-term interest rates, and the borrowing activities of larger members will continue to be the predominant driver of change in the Bank’s advance balances. In addition, the Bank expects members usage of letters of credit to remain stable.

The Bank expects the mortgage loans held for portfolio purchased through the MPF Program to remain relatively stable during 2023. The Bank expects a stable balance due to lower purchases and paydowns of MPF loans as a result of the increased interest rate environment.

The Bank expects to increase its MBS investment portfolio due to spread widening in the market as a result of the Federal Reserve unwinding its balance sheet and uncertain investor demand. The Bank is able to increase its investment portfolio as a result of increased capacity under its regulatory purchasing authority as a result of the additional capital associated with advance balance increases.

Access to debt markets has been reliable, and the Bank expects this access to remain reliable as the Bank and the financial markets continue to prepare for the cessation of LIBOR and transition to an alternative rate.

The Bank expects interest rates to remain higher during 2023, as the Federal Reserve is expected to continue to increase the target range for the federal funds rate as it continues to take steps to control inflation. The combination of higher average advance balances and higher interest rates will result in improved financial performance during 2023. In addition, the Bank expects an increase to operating expenses primarily due to increased number of employees and inflationary pressures. The Bank also will continue its discretionary community investment programs during 2023, including a voluntary housing grant initiative to enhance its regulatory required AHP assessments. The Bank’s intent is to continue to provide meaningful shareholder return; future dividend rates may not correspond directly with the pace of interest rate changes.

Future opportunities and challenges may arise with potential changes in the Bank's operating landscape including various legislative actions and changes in the Bank’s regulatory compliance requirements. However, the Bank has been, and will continue to be, mission driven. Advances are central to the Bank’s mission and, along with other key activities, are crucial to the Bank continuing to meet the needs of its membership and communities.

Earnings Performance

The following is Management Discussion and Analysis of the Bank’s earnings performance for the years ended December 31, 2022 and 2021, which should be read in conjunction with the Bank's audited financial statements included in Item 8. Financial Statements and Supplementary Data in this Form 10-K.

Summary of Financial Results

Net Income and Return on Average Equity. The Bank’s net income for 2022 totaled $227.1million, compared to $86.0 million for 2021. The $141.1 million increase in net income was driven primarily by the following:

•Net interest income was $357.5 million for 2022, an increase of $176.9 million from $180.6 million in 2021.

◦Interest income was $1,610.0 million for 2022, compared with $414.1 million for 2021. This increase was the result of higher average advance balances and higher yields, driven by higher short-term interest rates.

◦Interest income also included net prepayment fees on advances of $1.9 million for 2022, compared with $16.5 million for 2021.

◦Interest expense was $1,252.5 million for 2022, compared with $233.5 million in the same prior-year period. This increase was the result of higher average consolidated obligations and higher short-term interest rates.

•Noninterest income was $11.3 million for 2022, compared to $12.4 million for 2021. This $1.1 million decrease reflected losses in 2022 on investments that secure certain deferred compensation arrangements, partially offset by higher letters of credit fees.

•Other expense was $110.5 million for 2022 compared to $99.2 million for 2021, an increase of $11.3 million. The increase in operating expense was primarily driven by the voluntary housing grants in 2022. The Bank awarded $10.1 million in voluntary housing grants to support affordable housing projects in Delaware, Pennsylvania and West Virginia. Other factors were higher compensation, benefit expenses and technology-related costs, which were partially offset by a decrease in Home4Good contributions and market value changes of deferred compensation agreements and smaller discretionary pension contributions.

The Bank’s return on average equity for 2022 was 6.33% compared to 3.10% for 2021.

2021 vs 2020. For discussion of this year-to-year comparison, refer to the Summary of Financial Results disclosure included in Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Bank’s 2021 Form 10-K.

Net Interest Income

Average Balances and Interest Yields/Rates Paid. The following table summarizes the average balances, yields or rates paid, and net interest margin on interest-earning assets and interest-bearing liabilities for 2022 , 2021, and 2020.


	2022					2021					2020
(dollars in millions)	Average Balance		Interest Income/ Expense		Avg. Yield/ Rate (%)	Average Balance		Interest Income/ Expense		Avg. Yield/ Rate (%)	Average Balance		Interest Income/ Expense		Avg. Yield/ Rate (%)
Assets:
Securities purchased under agreements to resell (1)	$	2,301.4	$	53.3	2.32	$	755.1	$	0.6	0.08	$	1,442.7	$	8.2	0.57
Federal funds sold (1)	4,514.5		81.9		1.82	3,470.8		2.7		0.08	6,441.9		28.3		0.44
Interest-bearing deposits(2)	2,002.9		47.2		2.35	774.6		1.0		0.13	1,507.0		6.5		0.43
Investment securities(3)	13,342.2		300.2		2.25	13,427.8		143.5		1.07	15,275.9		270.0		1.77
Advances(4)	36,592.8		992.3		2.71	16,178.4		139.9		0.86	47,874.2		625.5		1.31
Mortgage loans held for portfolio(5)	4,657.2		135.1		2.90	4,798.1		126.4		2.63	5,151.5		155.2		3.01
Total interest-earning assets	63,411.0		1,610.0		2.54	39,404.8		414.1		1.05	77,693.2		1,093.7		1.41
Other assets(6)	826.2					1,016.3					1,093.1
Total assets	$	64,237.2				$	40,421.1				$	78,786.3
Liabilities and capital:
Deposits (2)	$	798.5	$	11.0	1.38	$	983.4	$	0.3	0.03	$	838.9	$	1.8	0.22
Consolidated obligation discount notes(7)	23,491.4		464.4		1.98	11,803.6		6.7		0.06	24,575.2		179.6		0.73
Consolidated obligation bonds(8)	35,009.7		775.1		2.21	24,118.3		222.8		0.92	48,614.6		531.0		1.09
Other borrowings	42.7		2.0		4.81	67.0		3.7		5.57	264.1		16.6		6.29
Total interest-bearing liabilities	59,342.3		1,252.5		2.11	36,972.3		233.5		0.63	74,292.8		729.0		0.98
Other liabilities	1,308.5					669.5					690.5
Total capital	3,586.4					2,779.3					3,803.0
Total liabilities and capital	$	64,237.2				$	40,421.1				$	78,786.3
Net interest spread					0.43					0.42					0.43
Impact of noninterest-bearing funds					0.13					0.04					0.04
Net interest income/net interest margin(9)			$	357.5	0.56			$	180.6	0.46			$	364.7	0.47

Notes:

(1) The average balance of Federal funds sold and securities purchased under agreements to resell may include loans to other FHLBanks.

(2) Average balances of deposits (assets and liabilities) include cash collateral received from/paid to counterparties which is reflected in the Statements of Condition as derivative assets/liabilities.

(3) Investment securities include trading, AFS and HTM securities. The average balances of AFS and HTM are reflected at amortized cost.

(4) Average balances reflect noninterest-earning hedge accounting adjustments of ($193.0)million, $146.2 million and $387.4 million in 2022, 2021 and 2020, respectively.

(5) Nonaccrual mortgage loans are included in average balances in determining the average rate.

(6) Other assets include allowance for credit losses on investment securities and MPF.

(7) Average balances reflect noninterest-bearing hedge accounting adjustments of ($1.2) million in 2022 and $0 for 2021 and 2020.

(8) Average balances reflect noninterest-bearing hedge accounting adjustments of ($640.0) million, ($0.5) million and $50.4 million in 2022, 2021 and 2020, respectively.

(9) Net interest margin is net interest income before provision (reversal) for credit losses as a percentage of average interest-earning assets.

The Bank’s business model is designed to protect the net interest spread earned by the Bank and withstand fluctuations in both the level of interest rates and volume of business. As a result, although interest income and interest expense increased due to rises in short term interest rates, net interest spread has remained stable increasing by 1 basis point to 43 basis points in 2022, primarily due to improved funding levels and partially offset by the impact of higher advance prepayment fees in 2021 compared with 2022. Interest income included net prepayment fees on advances of $1.9 million for 2022, compared with $16.5 million for 2021. Net interest margin has increased 10 basis points from 2021 due to the impact that the increase in short term interest rates had on non-interest bearing funds.

For discussion related to 2021 compared to 2020, refer to the Net Interest Income disclosure included in Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Bank’s 2021 Form 10-K.

Rate/Volume Analysis. Changes in both volume and interest rates influence changes in net interest income and net interest margin. The following table summarizes changes in interest income and interest expense between 2022, 2021, and 2020.


	Increase (Decrease) in Interest Income/Expense Due to Changes in Rate/Volume						Increase (Decrease) in Interest Income/Expense Due to Changes in Rate/Volume
	2022 Compared to 2021						2021 Compared to 2020
(in millions)	Volume		Rate		Total		Volume		Rate		Total
Securities purchased under agreements to resell	$	3.5	$	49.2	$	52.7	$	(2.7)	$	(4.9)	$	(7.6)
Federal funds sold	1.1		78.1		79.2		(9.2)		(16.4)		(25.6)
Interest-bearing deposits	4.0		42.2		46.2		(2.3)		(3.2)		$	(5.5)
Investment securities	(0.8)		157.5		156.7		(29.7)		(96.8)		$	(126.5)
Advances	316.6		535.8		852.4		(321.4)		(164.2)		$	(485.6)
Mortgage loans held for portfolio	(3.8)		12.5		8.7		(10.1)		(18.7)		(28.8)
Total interest-earning assets	$	320.6	$	875.3	$	1,195.9	$	(375.4)	$	(304.2)	$	(679.6)

Deposits	$	(0.1)	$	10.8	$	10.7	$	0.3	$	(1.8)	$	(1.5)
Consolidated obligation discount notes	13.0		444.7		457.7		(62.3)		(110.6)		(172.9)
Consolidated obligation bonds	134.9		417.4		552.3		(236.0)		(72.2)		(308.2)
Other borrowings	(1.2)		(0.5)		(1.7)		(11.2)		(1.7)		(12.9)
Total interest-bearing liabilities	$	146.6	$	872.4	$	1,019.0	$	(309.2)	$	(186.3)	$	(495.5)
Total increase (decrease) in net interest income	$	174.0	$	2.9	$	176.9	$	(66.2)	$	(117.9)	$	(184.1)

Interest income increased in 2022 compared to 2021. A higher interest rate environment, coupled with increased volume in advances drove interest income higher as compared to 2021. However, interest income on the mortgage loans held for portfolio was not impacted as much by the rise in interest rates because it is a fixed rate portfolio. MPF experienced a reduction in originations due to the higher interest rate environment. The Bank experienced higher volume in its advance portfolio. It is not uncommon for the Bank to experience variances in the overall advance portfolio driven primarily by changes in member needs. Market liquidity, as well as recent Federal Reserve actions responding to inflation, continued to impact members’ need for advances. Member deposit balances, while still elevated, have declined in recent quarters. In contrast, member loan balances have continued to increase modestly.

Interest expense increased in 2022 compared to 2021 driven by higher rates paid on consolidated obligations brought on by increases in short-term interest rates. Average balances of consolidated obligations increased significantly in 2022 with the increase in average assets.

Net interest spread increased in 2022 compared to 2021 driven primarily by attractive funding levels achieved on new advances. Net interest margin increased more dramatically due to the impact of non-interest bearing funds from a rise in short term interest rates.

Derivative Effects on Net Interest Income. The following tables quantify the effects of the Bank’s derivative activities on net interest income for 2022, 2021 and 2020.


	2022
(in millions)	Advances		Investments		Mortgage Loans		Bonds		Discount Notes		Total
Amortization/accretion of hedging activities in net interest income	$	0.1	$	(0.1)	$	(1.4)	$	0.1	$	—	$	(1.3)
Gains (losses) on designated fair value hedges	0.1		3.5		—		(0.4)		0.4		3.6
Net interest settlements included in net interest income	(7.7)		30.4		—		(69.2)		5.7		(40.8)
Total effect on net interest income	$	(7.5)	$	33.8	$	(1.4)	$	(69.5)	$	6.1	$	(38.5)


	2021
(in millions)	Advances		Investments		Mortgage Loans		Bonds		Discount Notes		Total
Amortization/accretion of hedging activities in net interest income	$	—	$	(0.1)	$	(3.5)	$	0.1	$	—	$	(3.5)
Gains (losses) on designated fair value hedges	(0.1)		1.7		—		(0.1)		—		1.5
Net interest settlements included in net interest income	(141.0)		(46.7)		—		51.8		—		(135.9)
Total effect on net interest income	$	(141.1)	$	(45.1)	$	(3.5)	$	51.8	$	—	$	(137.9)


	2020
(in millions)	Advances		Investments		Mortgage Loans		Bonds		Discount Notes		Total
Amortization/accretion of hedging activities in net interest income	$	—	$	(0.1)	$	(3.2)	$	0.1	$	—	$	(3.2)
Gains (losses) on designated fair value hedges	(0.1)		(2.0)		—		0.6		—		(1.5)
Net interest settlements included in net interest income	(185.9)		(21.1)		—		66.8		—		(140.2)
Total effect on net interest income	$	(186.0)	$	(23.2)	$	(3.2)	$	67.5	$	—	$	(144.9)

The Bank generally uses interest rate swaps to hedge a portion of fixed rate assets and fixed rate bonds which convert the interest rates on those instruments from a fixed rate to a variable rate. The purpose of this strategy is to protect the net interest spread against adverse interest rate changes. Using derivatives to convert interest rates from fixed to variable can increase or decrease net interest income. The variances in the derivative impacts from period to period are driven by the change in the average variable rate, the timing of interest rate resets and the average hedged portfolio balances outstanding during any given period. The Bank uses derivatives to hedge the fair market value changes attributable to the change in the benchmark interest rates.

In addition, the Bank uses many different funding and hedging strategies. These strategies involve closely match-funding bullet advances with bullet debt. This is designed in part to avoid the use of derivatives where prudent and reduce the Bank's reliance on short-term funding.

Provision (reversal) for Credit Losses. The provision for credit losses was $5.8 million for 2022 compared to a reversal of $(2.1) million for 2021. The provision reflected in 2022 was driven primarily by private label MBS classified as AFS due to a decline in market values. The reversal reflected in 2021 was primarily driven by the MPF portfolio due to improvements in the Bank's assumptions used to estimate expected credit losses, including forecasted housing prices, and a decline in delinquent loan balances.

Noninterest Income


(in millions)	2022		2021		2020
Net gains (losses) on investment securities	$	(29.0)	$	(21.4)	$	47.3
Net gains (losses) on derivatives	14.2		5.9		(90.9)
Standby letters of credit fees	24.7		23.6		22.1
Other, net	1.4		4.3		2.3
Total noninterest income (loss)	$	11.3	$	12.4	$	(19.2)

The Bank's change in total noninterest income for 2022 compared to 2021 was due primarily due to losses in 2022 on investments that secure certain deferred compensation arrangements, partially offset by higher letter of credit fees.

2021 vs 2020. For discussion of this year-to-year comparison, refer to the Other Noninterest Income disclosure included in Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Bank’s 2021 Form 10-K.

Derivatives and Hedging Activities. The Bank enters into interest rate swaps, TBAs, interest rate caps and floors and swaption agreements, referred to as derivatives transactions. The Bank enters into derivatives transactions to offset all or portions of the financial risk exposures inherent in its member lending, investment and funding activities. Derivatives are recorded on the balance sheet at fair value. Changes in derivatives’ fair values are recorded in the Statements of Income.

Economic hedges address specific risks inherent in the Bank's balance sheet, but either they do not qualify for hedge accounting or the Bank does not elect to apply hedge accounting. As a result, income recognition on the derivatives in economic hedges may vary considerably compared to the timing of income recognition on the underlying asset or liability. The Bank does not enter into derivatives for speculative purposes nor does it have any cash flow hedges.

Regardless of the hedge strategy employed, the Bank's predominant hedging instrument is an interest rate swap. At the time of inception, the fair market value of an interest rate swap generally equals or is close to zero. Notwithstanding the exchange of interest payments made during the life of the swap, which are recorded as either interest income/expense or as a gain (loss) on derivatives, depending upon the accounting classification of the hedging instrument, the fair value of an interest rate swap returns to zero at the end of its contractual term. Therefore, although the fair value of an interest rate swap is likely to change over the course of its full term, upon maturity any unrealized gains and losses generally net to zero.

The following tables detail the net effect of derivatives on noninterest income during 2022, 2021 and 2020.


	2022
(in millions)	Advances		Investments		Mortgage Loans		Bonds		Discount Notes		Other		Total
Net gains (losses) on derivatives:
Gains (losses) on derivatives not receiving hedge accounting, including net interest settlements	$	9.0	$	39.5	$	1.6	$	(27.6)	$	(7.6)	$	—	$	14.9
Other (1)	—		—		—		—		—		(0.7)		(0.7)
Total net gains (losses) on derivatives	$	9.0	$	39.5	$	1.6	$	(27.6)	$	(7.6)	$	(0.7)	$	14.2


	2021
(in millions)	Advances		Investments		Mortgage Loans		Bonds		Discount Notes		Other		Total
Net gains (losses) on derivatives:
Gains (losses) on derivatives not receiving hedge accounting, including net interest settlements	$	0.1	$	11.6	$	(3.8)	$	(2.0)	$	—	$	—	$	5.9

Total net gains (losses) on derivatives	$	0.1	$	11.6	$	(3.8)	$	(2.0)	$	—	$	—	$	5.9


	2020
(in millions)	Advances		Investments		Mortgage Loans		Bonds		Discount Notes		Other		Total
Net gains (losses) on derivatives:
Gains (losses) on derivatives not receiving hedge accounting, including net interest settlements	$	(17.4)	$	(90.8)	$	(7.1)	$	16.5	$	7.7	$	—	$	(91.1)
Other (1)	—		—		—		—		—		0.2		0.2
Total net gains (losses) on derivatives	$	(17.4)	$	(90.8)	$	(7.1)	$	16.5	$	7.7	$	0.2	$	(90.9)

Notes:

(1) Represents the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract.

Derivatives not receiving hedge accounting. For derivatives not receiving hedge accounting (i.e., economic hedges and mortgage delivery commitments), the Bank includes the net interest settlements and the fair value changes in the “Net gains (losses) on derivatives” financial statement line item. For economic hedges, the Bank recorded net income of $14.9 million in 2022 compared to net income of $5.9 million in 2021. The net gains observed during 2022 were primarily due to an increase in market value on the Bank’s asset swaps, partially offset by losses on the Bank’s liability swaps, resulting from rising interest rates throughout 2022. In contrast, overall rate increases were lower in 2021, resulting in a smaller net gain. In addition, the total notional amount of economic hedges, which includes mortgage delivery commitments, increased to $3.2 billion at December 31, 2022 from $2.1 billion at December 31, 2021.

2021 vs 2020. For discussion of this year-to-year comparison, refer to the Derivatives and Hedging Activities disclosure included in Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Bank’s 2021 Form 10-K.

Other Expense


(in millions)	2022		2021		2020
Compensation and benefits	$	51.6	$	48.8	$	52.2
Other	47.9		39.6		40.8
Finance Agency	5.2		6.1		7.3
Office of Finance	5.8		4.7		5.2
Total other expense	$	110.5	$	99.2	$	105.5

The Bank's total other expense increased by $11.3 million to $110.5 million for 2022, compared to 2021. The increase in operating expense was primarily driven by the voluntary housing grants in 2022. Other factors were higher compensation, benefit expenses and technology-related costs, which were partially offset by a decrease in Home4Good contributions and market value changes of deferred compensation agreements and smaller discretionary pension contributions.

2021 vs 2020. For discussion of this year-to-year comparison, refer to the Other Expense disclosure included in Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Bank’s 2021 Form 10-K.

Community Investment Products

The Bank’s mission includes the important public policy goal of making funds available for housing and economic development in the communities served by the Bank’s member financial institutions. In support of this goal, the Bank administers a number of products, some mandated and some voluntary.

AHP. AHP, mandated by the Act, is the largest and primary public policy product of the Bank. AHP helps applicable members meet their Community Reinvestment Act (CRA) responsibilities. Through AHP, members have access to grants to create affordable rental and homeownership opportunities that benefit low- and moderate-income neighborhoods. Award recipients are required to have a Bank member sponsor their application.

The AHP funds, which are offered on a competitive basis, provide grants for both rental and owner-occupied housing for households at 80% or less of the area median income. The Bank is required to contribute 10% of its income (GAAP net income before interest expense related to mandatorily redeemable capital stock and the assessment for AHP) to AHP and makes these funds available to be granted to projects in the subsequent year.

The Bank's AHP Assessment for 2022, 2021 and 2020, which is available to be awarded the following year, was as follows:


(in millions)	2022	2021	2020
AHP Assessment	$25.4	$10.0	$25.2

Each year, the Bank’s Board adopts an AHP Implementation Plan that defines the structure of AHP pursuant to the AHP regulations. The following table details the funding round attributes and the distribution of AHP funds during 2022 and 2021.


	2022	2021
Funding Rounds	1	1
Eligible Applications	124	124
Grants	$8.9 million	$22.8 million
Projects	20	35
Project Development Costs	$52.5 million	$147.3 million
Units of Affordable Housing	188	629

In addition, the Board has approved a homeownership set-aside program in its AHP Implementation Plan, the First Front Door program (FFD).

FFD offers grants to first time homebuyers up to $5,000 to assist with the purchase of a home. FFD grants are available to households earning 80% or less of the area median income. Members apply for FFD on behalf of their borrowers.


	2022	2021
Homebuyers Funded	783	1,684
Amounts Funded	$3.8 million	$8.2 million

Loan Programs. Pursuant to the requirements of the Community Investment Cash Advance (CICA) Regulation, the Bank offers a mandatory loan product, the Community Lending Program (CLP). The Bank also offers a voluntary loan product, Banking On Business (BOB). The following table presents the loans funded to members during 2022 and 2021 and the outstanding loan balances as of December 31, 2022 and 2021.


	2022		2021
(in millions)	Loans Funded	Total Balances Outstanding	Loans Funded	Total Balances Outstanding
BOB	$5.8	$26.3	$5.8	$25.7
CLP	284.9	583.5	83.1	625.0
Total	$290.7	$609.8	$88.9	$650.7

CLP offers advances to members at the Bank’s cost of funds providing the full advantage of a low-cost funding source. CLP also helps Bank members meet their CRA responsibilities. CLP advances help member institutions finance housing construction and rehabilitation, infrastructure improvement, and economic and community development projects that benefit targeted neighborhoods and households.

The Bank’s BOB loan product is targeted to assist in the growth and development of small business, including both start-up and expansion. The Bank makes funds available to members to extend credit to approved small business borrowers, enabling small businesses to qualify for credit that would otherwise not be available. BOB Loans are unsecured secondary loans that the Bank’s member applies for on the borrower’s behalf (the small business). In 2022, the Bank established a BOB special purpose credit program, the Banking On Business Inclusion and Equity fund (BOBIE). BOBIE is a set aside of BOB funds for minority- and women- owned small businesses. After the Bank approves the BOB loan, the Bank has committed itself to fund the loan at a future date. In 2022, the Bank approved 59 small business loans through BOB which are expected to create or retain 497 jobs. Of the 59 businesses approved by BOB, 29, or 49%, were approved through BOBIE. Of the 29 BOBIE businesses, six were minority-owned, 20 were women-owned, and three were minority- and women-owned.


	2022	2021
(in millions)	Funds Committed		Funds Committed
BOB	$4.1		$6.5
BOBIE	2.4		NA
Total	$6.5		$6.5

Discretionary Grants and Contributions. The Bank also provides grants and contributions through other initiatives and programs. During 2022, 2021, and 2020, the Bank expensed the following:


(in millions)	2022	2021	2020
Voluntary Housing Grants	$10.1	$—	$—
Home4Good	1.5	3.9	4.8
Blueprint Communities®	0.1	0.2	0.4

Total	$11.7	$4.1	$5.2

Notes:

® Blueprint Communities” is a registered service mark of the Federal Home Loan Bank of Pittsburgh

During 2022, the Bank awarded $10.1 million in voluntary housing grant funding to support affordable housing projects in Delaware, Pennsylvania and West Virginia exclusively. Of this amount, at least $2.5 million in each state in the district was

made available to support eligible projects. All in-district projects applying for statutory AHP funding were automatically considered for the voluntary housing grant funding if the submitted project did not rank high enough to receive statutory AHP funding. The voluntary housing grant initiative is a separate and distinct offering and not part of the statutory AHP. Voluntary housing grant funds will also be offered in 2023. The following table details voluntary housing grant round attributes for 2022.


			2022
Funding Rounds			1
Eligible Applications			91
Grants			$10.1 million
Projects			23
Project Development Costs			$126.2 million
Units of Affordable Housing			721

Home4Good helps those who are experiencing or at risk of experiencing homelessness in collaboration with three state housing finance agencies (HFA), the Delaware State Housing Authority, the Pennsylvania Housing Finance Agency and the West Virginia Housing Development Fund. All grant awards are made to Continuums of Care who work with service organizations serving those experiencing homelessness.


	2022			2021			2020
(in millions)	Bank Contribution	HFA Contribution	Projects Approved	Bank Contribution	HFA Contribution	Projects Approved	Bank Contribution	HFA Contribution	Projects Approved
Delaware	$0.3	$0.8	12	$0.6	$0.5	13	$0.7	$0.5	1
Pennsylvania	$0.9	$1.0	30	$2.5	$1.5	73	$3.0	$1.5	16
West Virginia	$0.3	$0.3	14	$0.9	$0.3	19	$1.1	$—	4
Total	$1.5	$2.1	56	$4.0	$2.3	105	$4.8	$2.0	21

The Bank’s Blueprint Communities® initiative was created to help revitalize communities. Since its 2005 inception, 64 communities have participated in the initiative. Instead of a one-time project or grant, the program gives local leaders the tools to customize a long-term revitalization strategy. Intermittent application periods are conducted on a state-by-state basis within the Bank’s district. When a new application period begins, application information is shared with the Bank’s member financial institutions and other stakeholders via the Bank’s website and several other channels. Community applicants, typically groups led by dedicated individuals or organizations, generally have populations of 30,000 or less.

Once established, the community leadership teams attend training, funded by the Bank, where they are taught how to develop a strategic plan of revitalization. They also are taught strategies to help attract the public and private funding necessary to implement their plan. Once teams graduate from training, their communities receive up to a 10-year designation as a Blueprint Community.

Although not a community investment product, the Bank sponsors a charitable contribution program allowing employees and Board members to request that the Bank contribute up to $5,000 for an organization in which they are directly involved. Charitable contributions were $0.2 million, $0.3 million, and $0.3 million in 2022, 2021 and 2020, respectively.

Financial Condition

The following should be read in conjunction with the Bank’s audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K.

Assets

Total assets were $96.1 billion at December 31, 2022, compared with $37.7 billion at December 31, 2021. The increase of $58.4 billion was primarily due to an increase in advances. Advances totaled $68.9 billion at December 31, 2022, an increase of $54.8 billion, compared to $14.1 billion at December 31, 2021. The Bank’s return on average assets was 0.35% for 2022 and 0.21% for 2021.

The Bank's core mission activities include the issuance of advances and acquiring member assets through the MPF® program. The core mission asset ratio, defined as the ratio of par amount of advances and MPF loans relative to consolidated obligations adjusted for certain U.S. Treasury securities using full year average balances, was 77.5% as of December 31, 2022 and 64.1% as of December 31, 2021. The increase in this ratio is primarily due to higher average advance balances.

Advances. Advances (par) totaled $69.2 billion at December 31, 2022 compared to $14.1 billion at December 31, 2021. At December 31, 2022, the Bank had advances to 168 borrowing members, compared to 122 borrowing members at December 31, 2021. Advances outstanding to the Bank’s five largest borrowers increased to 78.5% of total advances as of December 31, 2022, compared to 64.0% at December 31, 2021. Fixed rate advances with a balance of $30.8 billion comprised 44% of the total par value of advances outstanding at December 31, 2022.

The following table provides information on advances at par by redemption terms at December 31, 2022 and December 31, 2021.


	December 31,
(in millions)	2022		2021
Fixed-rate
Due in 1 year or less (1)	$	23,242.9	$	8,299.5
Due after 1 year through 3 years	5,116.8		3,928.8
Due after 3 years through 5 years	1,780.2		1,209.3
Due after 5 years through 15 years	54.7		78.8
Thereafter	74.8		74.7
Total par value	$	30,269.4	$	13,591.1

Fixed-rate, callable or prepayable (1)

Due after 1 year through 3 years	$	250.0	$	—



Total par value	$	250.0	$	—

Variable-rate
Due in 1 year or less (1)	$	5,247.6	$	140.1
Due after 1 year through 3 years	29,076.5		53.1
Due after 3 years through 5 years	4,010.0		—


Total par value	$	38,334.1	$	193.2

Variable-rate, callable or prepayable (2)
Due in 1 year or less	$	85.0	$	10.0
Due after 1 year through 3 years	40.0		40.0



Total par value	$	125.0	$	50.0

Other (3)
Due in 1 year or less	$	96.9	$	89.7
Due after 1 year through 3 years	74.3		86.3
Due after 3 years through 5 years	42.1		44.0
Due after 5 years through 15 years	36.4		22.1
Thereafter	0.7		2.8
Total par value	$	250.4	$	244.9



Total par balance	$	69,228.9	$	14,079.2

Notes:

(1) Includes overnight advances.

(2) Prepayable advances are those advances that may be contractually prepaid by the borrower on specified dates without incurring prepayment or termination fees.

(3) Includes fixed-rate amortizing/mortgage matched, convertible, and other advances.

The Bank had no putable advances at December 31, 2022 or December 31, 2021.

The following table provides a distribution of the number of members, categorized by individual member asset size (as reported quarterly) that had an outstanding advance balance during 2022 and 2021. Commercial Bank and Savings Institution members are classified by asset size as follows: Super-Regional (over $150 billion), Regional ($25 billion to $150 billion), Mid-size ($1.2 billion to $25 billion) and Community Financial Institutions (CFIs) (under $1.2 billion). Credit Union and Insurance members are classified separately.


	December 31,
Member Classification	2022		2021
Super-Regional	3		3
Regional	4		4
Mid-size	39		41
CFI	122		116
Credit Union	44		36
Insurance	25		24
Total borrowing members during the period	237		224
Total membership	282		281
Percentage of members borrowing during the period	84.0	%	79.7	%

The following table provides information at par on advances by member classification at December 31, 2022 and December 31, 2021.


(in millions)	December 31, 2022		December 31, 2021
Member Classification
Super-Regional	$	48,750.0	$	6,275.0
Regional	6,495.0		1,280.0
Mid-size	7,410.0		2,397.2
CFI	2,904.2		1,888.6
Credit Union	2,121.8		875.4
Insurance	1,001.7		853.4
Non-member	546.2		509.6
Total	$	69,228.9	$	14,079.2

As of December 31, 2022, advances increased 392% compared with balances at December 31, 2021. It is not uncommon for the Bank to experience variances in the overall advance portfolio driven primarily by changes in member needs. The increase in members’ need for advances is primarily the result of market liquidity, as well as recent Federal Reserve actions to curtail inflation. Member deposit balances, while still elevated, have declined in recent quarters. In addition, member loan balances have continued to increase modestly.

See the Credit and Counterparty Risk -TCE and Collateral discussion in the Risk Management section of this Item 7. Management’s Discussion and Analysis in this Form 10-K for further information on collateral policies and practices and details regarding eligible collateral, including amounts and percentages of eligible collateral securing member advances as of December 31, 2022.

Allowance for Credit Losses (ACL) - Advances. The Bank evaluates its advances for an allowance for credit losses on a collective, or pooled basis unless an individual assessment is deemed necessary because the instruments do not possess similar risk characteristics. The Bank pools advances by member type. Based on the collateral held as security, the Bank's credit extension and collateral policies and repayment history on advances, including that the Bank has not incurred any credit losses since inception, the Bank has not recorded an ACL at December 31, 2022 or December 31, 2021. For additional information on the allowance methodology, see Note 5 - Advances in this Form 10-K.

Mortgage Loans Held for Portfolio, Net. Mortgage loans held for portfolio, net of ACL, was $4.6 billion and $4.7 billion at December 31, 2022 and December 31, 2021, respectively.

The following table provides mortgage loans held for portfolio by redemption term at December 31, 2022 and 2021.


(in millions)	December 31, 2022		December 31, 2021
Redemption Term
Due in 1 year or less	$	145.4	$	146.8
Due after 1 year through 5 years	618.9		625.0
Due after 5 years through 15 years	1,663.4		1,679.9
Thereafter	2,101.0		2,139.0
Total unpaid principal balance (1)	$	4,528.7	$	4,590.7
Other adjustments, net (2)	65.4		88.9
Total mortgage loans held for portfolio	$	4,594.1	$	4,679.6
Allowance for credit losses on mortgage loans	(3.2)		(3.4)
Mortgage loans held for portfolio, net	$	4,590.9	$	4,676.2

Notes:

(1) Consists of fixed-rate mortgages.

(2) Consists of premiums, discounts, and other adjustments.

The Bank places conventional mortgage loans that are 90 days or more delinquent on nonaccrual status. In addition, the Bank records cash payments received as a reduction of principal until the remaining principal amount due is expected to be collected and then as a recovery of any charge-off, if applicable, followed by the recording of interest income. However, government mortgage loans that are 90 days or more delinquent remain in accrual status due to government guarantees or insurance. The Bank has a loan modification program for participating financial institutions (PFIs) under the MPF Program. The Bank considers loan modifications or Chapter 7 bankruptcies where the obligation is discharged under the MPF Program to be troubled debt restructurings (TDRs), since some form of concession has been made by the Bank.

Foregone interest represents income the Bank would have recorded if the loan was paying according to its contractual terms. Foregone interest was immaterial for the Bank’s mortgage loans for both 2022 and 2021.

The Bank continues to accrue interest on its government-insured or -guaranteed mortgage loans after becoming 90 days or more delinquent. The amount of mortgage loans 90 days or more delinquent and still accruing interest was $3.1 million at both December 31, 2022 and December 31, 2021.

The performance of the mortgage loans in the Bank’s MPF Program improved compared to December 31, 2021, and the MPF Original portfolio continues to outperform the market based on national delinquency statistics. As of December 31, 2022, the Bank’s seriously delinquent mortgage loans (90 days or more delinquent or in the process of foreclosure) represented 0.3% of the MPF Original portfolio, 1.2% of the MPF Plus portfolio and 0.5% of the MPF 35 portfolio, compared with 0.3%, 1.7%, and 0.7%, respectively, at December 31, 2021. The amount of seriously delinquent loans decreased compared to December 31, 2021, as loans continued to exit forbearance and the related repayment programs provided as a result of COVID-19.

ACL - Conventional MPF. The Bank’s conventional mortgage loan portfolio is comprised of large groups of smaller-balance homogeneous loans made to borrowers of PFIs that are secured by residential real estate. Expected credit losses are evaluated based on either an individual or collective assessment of the loans, depending on whether the loans share similar risk characteristics. The Bank purchases government-guaranteed and/or insured and conventional fixed-rate residential mortgage loans. Because the credit risk on the government-guaranteed/insured loans is predominantly assumed by other entities, only conventional mortgage loans are evaluated for an ACL.

The Bank determines its ACL through consideration of various loan portfolio and collateral-related characteristics, including past performance, current conditions, and reasonable and supportable forecasts of economic conditions. To estimate credit losses, the Bank uses a third-party model which incorporates certain assumptions, including forecasted housing prices and interest rates, as well as historical borrower behavior experience. The estimate of the expected credit losses includes coverage of certain losses by primary mortgage insurance (PMI), if applicable. The Bank may incorporate a qualitative adjustment to the model results, if deemed appropriate, based on current market conditions or results. For loans determined to

be collateral dependent, the Bank charges-off the estimated credit loss against the reserve. However, if the estimated loss can be recovered through credit enhancement (CE), a receivable is established, resulting in a net charge-off. The expected credit loss of a collateral dependent mortgage loan to determine the charge-off is equal to the difference between the amortized cost basis of the loan and the estimated fair value of the underlying collateral, less selling costs.

The Bank recognizes a recovery when expected credit losses, including credit losses charged-off for collateral dependent loans, are less than the amounts previously charged-off. Expected recoveries of prior charge-offs, if any, are included as a reduction to the ACL through the Bank's provision for credit losses. The reduction to the ACL is partially offset by a reversal of expected CE, resulting in a net impact to the Bank's provision for credit losses.

The Bank's conventional MPF loans held for portfolio are required to be credit enhanced as determined through the use of a validated model so the risk of loss is limited to the losses within the Bank's risk tolerance. Credit losses on a mortgage loan may only be absorbed by the CE amount in the master commitment related to the loan. In addition, the CE structure of the MPF Program is designed such that initial losses on mortgage loans are incurred by the Bank up to an agreed upon amount, referred to as the First Loss Account (FLA). Additional eligible credit losses are covered by CE provided by PFIs (available CE) until exhausted. Certain losses incurred by the Bank on MPF 35 and MPF Plus can be recaptured by withholding fees paid to the PFI for its retention of credit risk. All additional losses are incurred by the Bank.

The following table presents the balance of the MPF CE structure as of December 31, 2022 and 2021.


	December 31, 2022				December 31, 2021
(in millions)	FLA		Available CE (1)		FLA		Available CE
MPF Original	$	8.1	$	72.2	$	7.3	$	105.8
MPF 35	17.7		122.8		16.1		148.2
MPF Plus	14.9		1.6		15.0		2.9
Total	$	40.7	$	196.6	$	38.4	$	256.9

Note:

(1) The decline in Available CE was primarily driven by a one-time recalculation of required CE for eligible MPF Original and MPF 35 Master Commitments during December 2022.

The following table presents certain metrics and ratios related to the Bank’s mortgage loans held for portfolio. The ratios in the table below are reported after the application of CE.


(dollars in millions)	December 31, 2022			December 31, 2021
Average mortgage loans outstanding during the period (UPB)	$	4,580.8		$	4,703.4
Mortgage loans held for portfolio (UPB)	$	4,528.7		$	4,590.7
Nonaccrual loans (UPB) (1)	$	21.3		$	30.4
ACL on mortgage loans held for portfolio	$	3.2		$	3.4
(Charge-offs) Recoveries, net (2)	$	0.3		$	1.0

Ratio of net charge-offs (recoveries) to average loans outstanding during the period	(0.01)		%	(0.02)		%
Ratio of ACL to mortgage loans held for portfolio	0.07		%	0.07		%
Ratio of nonaccrual loans to mortgage loans held for portfolio	0.47		%	0.66		%
Ratio of ACL to nonaccrual loans	15.24		%	11.24		%

Notes:

(1) Does not include performing TDRs.

(2) Net charge-offs that the Bank does not expect to recover through CE receivable.

The ACL on mortgage loans decreased $0.2 million during 2022 as the Bank recorded a reversal for credit losses which was partially offset by recoveries.

Real Estate Owned (REO). When a PFI or servicer forecloses on a delinquent mortgage loan, the Bank reclassifies the carrying value of the loan to other assets as REO at fair value less estimated selling expenses. If the fair value of the REO property is lower than the carrying value of the loan, then the difference to the extent such amount is not expected to be

recovered through recapture of performance-based CE fees is recorded as a charge-off to the ACL. The fair value less estimated costs to sell the property becomes the new cost basis for subsequent accounting. If the fair value of the REO property is higher than the carrying value of the loan, then the REO property is recorded at fair value less estimated selling costs. This is rare as the Bank believes this situation would require additional validation of the fair value. The servicer is charged with the responsibility for disposing of real estate on defaulted mortgage loans on behalf of the Bank. Once a property has been sold, the servicer presents a summary of the gain or loss for the individual mortgage loan to the master servicer for reimbursement of any loss. Gains on the sale of REO property are held and offset by future losses in the pool of loans, ahead of any remaining balances in the FLA. Losses are deducted from the FLA, if it has not been fully used. The Bank held $0.3 million and $0.4 million of REO at December 31, 2022 and December 31, 2021, respectively.

During the third quarter of 2022, a significant hurricane (Ian) impacted the southeastern coasts of the United States. The Bank has analyzed the potential impact that the damage related to this hurricane might have on the Bank’s mortgage loans held for portfolio. Based on the information currently available, the Bank does not anticipate any related losses to be material. The Bank continues to evaluate the impact of the hurricane and if additional information becomes available indicating that any of the Bank's mortgage loans have been impaired and the amount of the loss can be reasonably estimated, the Bank will record appropriate reserves at that time.

Cash and Investments. The Bank’s strategy is to maintain its short-term liquidity position in part to be able to meet members’ advance demand and Bank regulatory liquidity requirements. Excess cash is typically invested in overnight investments. The Bank also maintains an investment portfolio to enhance earnings. These investments may be classified as trading, AFS or HTM.

The Bank maintains a liquidity portfolio comprised of cash, interest-bearing deposits, Federal funds sold, securities purchased under agreements to resell, certificates of deposits and U.S. Treasury obligations classified as trading or AFS. The liquidity portfolio totaled $14.0 billion at December 31, 2022 increased by approximately $4.3 billion compared to December 31, 2021. The increase in liquid assets was in response to increased advance activity.

The Bank's investment portfolio, excluding those investments included in the liquidity portfolio, is comprised of trading, AFS and HTM investments. The investments must meet the Bank's risk guidelines and certain other requirements, such as yield. The Bank's investment portfolio totaled $8.1 billion at December 31, 2022 and $8.8 billion at December 31, 2021. Paydowns associated with the Bank's Agency MBS portfolio contributed to this decline. During the majority of 2022, the Bank’s MBS purchases were limited by narrow mortgage spreads. In late 2022, the Bank began to purchase MBS securities as the spreads on MBS widened.

Investment securities, defined as all trading, AFS, and HTM securities, totaled $13.4 billion at December 31, 2022, compared to $13.9 billion at December 31, 2021. Details of the investment securities portfolio follow.


	Carrying Value
	December 31,
(in millions)	2022		2021
Trading securities:
Non-MBS:


Government-sponsored enterprises (GSE)	214.0		243.2
Total trading securities	$	214.0	$	243.2

AFS securities:

Non-MBS:
U.S. Treasury obligations	$	5,232.5	$	5,075.2
GSE and Tennessee Valley Authority (TVA) obligations	1,125.7		1,493.7
State or local agency obligations	170.3		207.2
MBS:
U.S. obligations single-family	483.0		398.8
GSE single-family	1,881.0		2,093.1
GSE multifamily	3,155.8		3,004.9
Private label	142.3		194.4
Total AFS securities	$	12,190.6	$	12,467.3

HTM securities:



MBS:
U.S. obligations single-family	162.4		83.2
GSE single-family	435.1		566.0
GSE multifamily	305.3		494.5
Private label	53.7		70.2
Total HTM securities	$	956.5	$	1,213.9

Total investment securities	$	13,361.1	$	13,924.4

The following table presents the composition of investment securities and investments, assuming no principal prepayments, as of December 31, 2022 and December 31, 2021. Contractual maturity of MBS is not a reliable indicator of their expected life because borrowers generally have the right to prepay their obligation at any time.


	December 31, 2022
(dollars in millions)	Due in 1 year or less			Due after 1 year through 5 years			Due after 5 years through 10 years			Due after 10 years			Net Carrying Value
AFS securities:
Non-MBS:
U.S. Treasury obligations	$	1,398.1		$	2,148.9		$	1,685.5		$	—		$	5,232.5
GSE and TVA obligations	162.0			483.5			462.0			18.2			1,125.7
State or local agency obligations	0.2			—			58.8			111.3			170.3
MBS:
U.S. obligations single-family	—			��			—			483.0			483.0
GSE single-family	0.2			20.6			67.4			1,792.8			1,881.0
GSE multifamily	13.0			375.6			2,758.2			9.0			3,155.8
Private label	—			—			—			142.3			142.3
Total AFS securities	$	1,573.5		$	3,028.6		$	5,031.9		$	2,556.6		$	12,190.6
Yield on AFS Securities(1)	0.72		%	1.59		%	3.15		%	4.98		%	2.83		%
HTM securities:


MBS:
U.S. obligations single-family	$	—		$	—		$	—		$	162.4		$	162.4
GSE single-family	—			5.9			3.7			425.5			435.1
GSE multifamily	58.6			246.7			—			—			305.3
Private label	0.1			—			5.0			48.6			53.7
Total HTM securities	$	58.7		$	252.6		$	8.7		$	636.5		$	956.5
Yield on HTM securities(1)	2.69		%	3.93		%	3.87		%	3.15		%	3.32		%

Note:

(1) Yield excludes the impact of derivatives in a hedging relationship.


	December 31, 2021
(dollars in millions)	Due in 1 year or less			Due after 1 year through 5 years			Due after 5 years through 10 years			Due after 10 years			Net Carrying Value
AFS securities:
Non-MBS:
U.S. Treasury obligations	$	351.2		$	2,833.0		$	1,891.0		$	—		$	5,075.2
GSE and TVA obligations	203.8			456.5			776.0			57.4			1,493.7
State or local agency obligations	0.5			0.2			56.9			149.6			207.2
MBS:
U.S. obligations single-family	—			—			—			398.8			398.8
GSE single-family	—			25.5			80.9			1,986.7			2,093.1
GSE multifamily	165.1			266.9			2,572.9			—			3,004.9
Private label	—			—			—			194.4			194.4
Total AFS securities	$	720.6		$	3,582.1		$	5,377.7		$	2,786.9		$	12,467.3
Yield on AFS Securities (1)	1.73		%	0.91		%	1.14		%	1.57		%	1.20		%
HTM securities:


MBS:
U.S. obligations single-family	—			—			—			83.2			83.2
GSE single-family	—			10.1			2.5			553.4			566.0
GSE multifamily	137.0			105.9			251.6			—			494.5
Private label	0.3			—			5.3			64.6			70.2
Total HTM securities	$	137.3		$	116.0		$	259.4		$	701.2		$	1,213.9
Yield on HTM securities(1)	3.00		%	2.55		%	3.82		%	2.32		%	2.74		%

Note:

(1) Yield excludes the impact of derivatives in a hedging relationship.

For additional information on the credit risk of the investment portfolio, see the Credit and Counterparty Risk - Investments discussion in the Risk Management section of this Item 7. Management’s Discussion and Analysis in this Form 10-K.

ACL - Investments. The Bank invests in interest-bearing deposits and Federal funds sold which are unsecured investments. The Bank also invests in securities purchased under agreements to resell which are secured investments. At December 31, 2022 and December 31, 2021, these investments were repaid according to the contractual terms. No ACL was recorded for these assets at December 31, 2022.

AFS securities are evaluated quarterly for expected credit losses on an individual security basis. In assessing whether a credit loss exists, the Bank considers whether there would be a shortfall in receiving all cash flows contractually due. The allowance is limited to the amount of the AFS security’s unrealized loss, if any. If the AFS security is in an unrealized gain, the ACL is zero. The ACL on AFS private label MBS was $8.5 million, at December 31, 2022 and $2.4 million at December 31, 2021. The increase in the ACL reflected a higher provision for credit losses, which was driven by a decline in market values, that reflected higher interest rates during 2022.

HTM securities are evaluated quarterly for expected credit losses on a pool basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. An ACL is recorded with a corresponding adjustment to the provision for credit losses. There was no ACL at December 31, 2022 and December 31, 2021.

For additional information on the allowance methodology, see Note 4 - Investments in this Form 10-K.

Liabilities and Capital

Deposits. The Bank offers demand, overnight and term deposits for members and qualifying nonmembers. Total deposits at December 31, 2022 decreased to $553.3 million from $1,087.5 million at December 31, 2021. Interest-bearing deposits classified as demand and overnight pay interest based on a daily interest rate. The average balances of deposits were $877.2 million, $1,184.6 million, and $974.1 million and the weighted-average interest rates paid were 1.38% , 0.03% and 0.22% during 2022, 2021 and 2020, respectively. Term deposits pay interest based on a fixed rate determined at the issuance of the deposit. The Bank had no term deposits during 2022, 2021 and 2020.

Factors that generally influence deposit levels include turnover in members’ investment securities portfolios, changes in member demand for liquidity driven by member institution deposit growth, the slope of the yield curve and the Bank’s deposit pricing compared to other short-term money market rates. Fluctuations in this source of the Bank’s funding are typically offset by changes in the issuance of consolidated obligation discount notes. The Act requires the Bank to have assets, referred to as deposit reserves, invested in obligations of the United States, deposits in eligible banks or trust companies or loans with a maturity not exceeding five years, totaling at least equal to the current deposit balance. As of December 31, 2022 and 2021, excess deposit reserves were $75.1 billion and $20.1 billion, respectively.

Consolidated Obligations. Consolidated obligations consist of bonds and discount notes. The Bank's consolidated obligations totaled $90.2 billion at December 31, 2022, an increase of $56.6 billion from December 31, 2021. The overall increase in consolidated obligations outstanding is consistent with the increased advances and total asset balances. At December 31, 2022, the Bank’s bonds outstanding increased to $56.5 billion compared to $23.1 billion at December 31, 2021.

Discount notes outstanding at December 31, 2022 increased to $33.7 billion from $10.5 billion at December 31, 2021.

Consolidated obligations bonds often have investor-determined features. The decision to issue a bond using a particular structure is based upon the desired amount of funding, and the ability of the Bank to hedge the risks. The issuance of a bond with a simultaneously-transacted interest-rate exchange agreement usually results in a funding vehicle with a lower cost than the Bank could otherwise achieve. The continued attractiveness of such debt/swap transactions depends on price relationships in both the consolidated bond and interest-rate exchange markets. If conditions in these markets change, the Bank may alter the types or terms of the bonds issued. The increase in funding alternatives available to the Bank through negotiated debt/swap transactions is beneficial to the Bank because it may reduce funding costs and provide additional asset/liability management tools. The types of consolidated obligations bonds issued can fluctuate based on comparative changes in their cost levels, supply and demand conditions, advance demand, and the Bank’s balance sheet management strategy.

The Bank primarily uses noncallable bonds as a source of funding but also utilizes structured notes such as callable bonds. Unswapped callable bonds primarily fund the Bank’s mortgage portfolio while swapped callable bonds fund other floating rate assets.

The following table provides information on consolidated obligations by product type and contractual maturity at December 31, 2022 and December 31, 2021.


(in millions)	December 31, 2022		December 31, 2021
Discount Notes
Overnight	$	880.0	$	413.3
Due after 1 day through 30 days	6,497.8		4,197.6
Due after 30 days through 90 days	21,764.8		3,647.3
Due after 90 days though 1 Year	4,864.5		2,236.7
Total par value	$	34,007.1	$	10,494.9

Fixed-rate, non-callable
Due in 1 year or less	$	11,341.5	$	4,898.6
Due after 1 year through 3 years	7,130.1		2,878.3
Due after 3 years through 5 years	999.1		1,303.5
Thereafter	1,412.1		1,446.0
Total par value	$	20,882.8	$	10,526.4

Fixed-rate, callable
Due in 1 year or less	$	4,137.5	$	—
Due after 1 year through 3 years	6,552.0		2,506.0
Due after 3 years through 5 years	6,419.0		5,635.0
Thereafter	1,992.0		1,983.0
Total par value	$	19,100.5	$	10,124.0

Variable- rate, non-callable
Due in 1 year or less	$	14,148.0	$	825.0
Due after 1 year through 3 years	260.0		100.0


Total par value	$	14,408.0	$	925.0








Step-up, non-callable
Due in 1 year or less	$	90.0	$	25.0
Due after 1 year through 3 years	101.0		—
Due after 3 years through 5 years	320.0		—
Thereafter	15.0		—


Total par value	$	526.0	$	25.0

Step-up, callable
Due in 1 year or less	$	1,031.0	$	—
Due after 1 year through 3 years	712.0		279.0
Due after 3 years through 5 years	670.0		1,046.0
Thereafter	185.0		210.0
Total par value	$	2,598.0	$	1,535.0
Total par balance	$	91,522.4	$	33,630.3
Other Adjustments (1)	$	(1,305.5)	$	(31.0)
Total consolidated obligations	$	90,216.9	$	33,599.3

Notes:

(1)Consists of premiums, discounts, and other adjustments.

For additional information on the Bank’s consolidated obligations, refer to Note 9 to the audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K.

Commitments and Off-Balance Sheet Items. As of December 31, 2022, the Bank was obligated to fund approximately $0.4 million in additional advances and Banking on Business (BOB) loans, $10.3 million of mortgage loans and to issue $1,095.4 million in consolidated obligations. In addition, the Bank had $22.1 billion in outstanding standby letters of credit as of December 31, 2022. The Bank does not consolidate any off-balance sheet special purpose entities or other off-balance sheet conduits.

In accordance with regulations governing the operations of the FHLBanks, each FHLBank, including the Bank, is jointly and severally liable for the FHLBank System’s consolidated obligations. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. Refer to the Liquidity and Funding Risk section in Item 7. Management’s Discussion and Analysis for FHLBank System consolidated obligations. For additional information on the Bank’s commitments and contingencies, refer to Note 15 in this Form 10-K.

Capital and Retained Earnings. The Bank’s return on average equity was 6.33% at December 31, 2022 and 3.10% at December 31, 2021. Capital adequacy, including the level of retained earnings, is monitored through the evaluation of market value of equity to par value of capital stock (MV/CS) as well as other risk metrics. Details regarding these metrics are discussed in the Risk Management portion in Item 7. Management’s Discussion and Analysis in this Form 10-K.

The Bank’s capital stock is owned by its members and former members. The concentration of the Bank’s capital stock by institution type is presented below.


(dollars in millions)	December 31, 2022			December 31, 2021
Commercial banks	130	$	3,045.3	131	$	966.5
Savings institutions	49	172.9		51	107.6
Insurance companies	38	91.8		35	88.7
Credit unions	63	118.0		62	63.8
Community Development Financial Institutions	2	0.4		2	0.5
Total member institutions / total GAAP capital stock	282	$	3,428.4	281	$	1,227.1
Mandatorily redeemable capital stock		27.8			22.5
Total capital stock		$	3,456.2		$	1,249.6

The total number of members as of December 31, 2022 increased by one compared to December 31, 2021. The Bank added six new members and lost five members. Three members merged with other institutions within the Bank's district and two members merged their charters with an entity outside the Bank’s district.

The following tables present member holdings of 10% or more of the Bank’s total capital stock including mandatorily redeemable capital stock outstanding as of December 31, 2022 and December 31, 2021.


(dollars in millions)	December 31, 2022
Member	Capital Stock		% of Total
PNC Bank, N.A., Wilmington, DE(1)	$	1,308.0	38.2	%
TD Bank, N.A.,Wilmington, DE	$	533.1	15.6	%


(dollars in millions)	December 31, 2021
Member	Capital Stock		% of Total
Ally Bank, Midvale, UT(2)	$	288.8	23.1	%
TD Bank, N.A., Wilmington, DE	$	159.8	12.8

Note:

(1) For Bank membership purposes, the principal place of business is Pittsburgh, PA.

(2) For Bank Membership purposes, the principal place of business for Ally Bank is Horsham,PA.

The Finance Agency has issued regulatory guidance to the FHLBanks relating to capital management and retained earnings. The guidance directs each FHLBank to assess, at least annually, the adequacy of its retained earnings with consideration given to future possible financial and economic scenarios. The guidance also outlines the considerations that each FHLBank should undertake in assessing the adequacy of its retained earnings.

The Bank developed a framework for evaluating retained earnings adequacy, consistent with regulatory guidance and requirements. Retained earnings are intended to cover unexpected losses and protect members’ par value of capital stock. The framework also assists management in its overall analysis of the level of future dividends. The framework includes four risk elements that comprise the Bank’s total retained earnings target: (1) market risk; (2) credit risk; (3) operational risk; and (4) accounting risk. The retained earnings target generated from this framework is sensitive to changes in the Bank’s risk profile, whether favorable or unfavorable. The framework generated a retained earnings target of $444 million as of December 31, 2022.

In addition to the retained earnings target, the Bank considers the amount of retained earnings needed for compliance with the regulatory minimum capital-to-asset ratio of 4% to determine an overall retained earnings need. The Bank’s overall retained earnings need is $833 million as of December 31, 2022.

The following table presents retained earnings information for the current and prior year.


	December 31, 2022		December 31, 2021
Unrestricted Retained Earnings	$	1,037.2	$	941.0
Restricted Retained Earnings (RRE)	499.0		457.4
Total Retained Earnings	$	1,536.2	$	1,398.4

Retained earnings increased $137.8 million compared to December 31, 2021. The increase reflected net income that was partially offset by dividends paid. In accordance with the Joint Capital Enhancement Agreement (JCEA), entered into by the Bank and as result of increased consolidated obligations, an allocation of net income was made to RRE during the second, third, and fourth quarters of 2022. For additional information, see Note 11 - Capital in this Form 10-K.

Dividends. The Bank declares dividends based on an annualized yield and differentiates between membership and activity capital stock. The dividend received by the member is calculated based on the average capital stock owned by the member for the previous quarter. Historically, the Bank has paid cash dividends although dividends may be paid in capital stock. The following table presents dividend information for the current and prior years.


	Year ended December 31,
	2022			2021			2020
Dividends (in millions)	$	(89.2)		$	(64.4)		$	(168.4)
Dividends per share	$	4.18		$	5.12		$	7.14
Dividend payout ratio (1)	39.30		%	74.83		%	80.00		%
Weighted average dividend rate	5.45		%	4.70		%	6.35 %
Average Fed Funds rate	1.68		%	0.08		%	0.36		%
Dividend spread to Fed Funds	3.77		%	4.62		%	5.99		%

Notes:

(1) Represents dividends paid as a percentage of net income for the respective periods presented.

The increase in the weighted average dividend rate is in line with the Bank’s performance and reflective of the higher interest rate environment. Details regarding the Bank’s payment of dividends, including annual yields, for current and prior years are provided in Note 11 - Capital in this Form 10-K.

Capital Resources

The following should be read in conjunction with Note 11 - Capital to the audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K.

Liquidity and Funding. Refer to the Liquidity and Funding Risk section of Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K for details.

Capital Plan and Dividends. Refer to the Capital Resources section of Item 1. Business in this Form 10-K for details.

Risk-Based Capital (RBC)

The Finance Agency’s RBC regulatory framework requires the Bank to maintain sufficient permanent capital, defined as retained earnings plus capital stock, to meet its combined credit risk, market risk and operations risk. Each of these components is computed as specified in regulations and directives issued by the Finance Agency.


	December 31,
(in millions)	2022		2021
Permanent capital:
Capital stock (1)	$	3,456.2	$	1,249.6
Retained earnings	1,536.2		1,398.4
Total permanent capital	$	4,992.4	$	2,648.0

RBC requirement:
Credit risk capital	$	211.8	$	160.4
Market risk capital	127.5		152.5
Operations risk capital	101.8		93.8
Total RBC requirement	$	441.1	$	406.7
Excess permanent capital over RBC requirement	$	4,551.3	$	2,241.3

Note:

(1) Capital stock includes mandatorily redeemable capital stock.

The increase in the total RBC requirement as of December 31, 2022 is mainly related to the increase in advances and associated increase in credit risk capital requirement. Despite the increased requirement, the Bank continues to maintain significant excess permanent capital over the RBC requirement.

On December 15, 2022, the Bank received final notification from the Finance Agency that it was considered “adequately capitalized” for the quarter ended September 30, 2022. As of the date of this filing, the Bank has not received final notice from the Finance Agency regarding its capital classification for the quarter ended December 31, 2022.

Credit Risk Capital. The Bank’s credit risk capital requirement is the sum of credit risk capital charges computed for assets, off-balance sheet items, and derivative contracts based on the credit risk percentages assigned to each item as determined by the Finance Agency. Credit risk amounts for private-label MBS and MPF assets are based upon projected losses from the simulation of stressed house price levels provided by the FHFA.

Market Risk Capital. The Bank’s market risk capital requirement is the market value of the Bank’s portfolio at risk of loss due to adverse movements in interest rates as of the measurement calculation date. The Bank calculates the market value of its portfolio at risk using a market risk model that is subject to annual independent validation.

The market risk component of the overall RBC framework is designed around a “stress test” approach. Simulations of hundreds of historical market interest rate scenarios provided by the FHFA are generated and, under each scenario, the hypothetical beneficial/adverse effects on the Bank’s current market value of equity are determined. The hypothetical beneficial/adverse effect associated with each historical scenario is calculated by simulating the effect of each set of market conditions upon the Bank’s current risk position, which reflects current assets, liabilities, derivatives and off-balance sheet

commitment positions as of the measurement date. From the resulting simulated scenarios, the average of the five largest deteriorations in market value of capital represents the market value risk component of the Bank’s regulatory RBC requirement.

Operations Risk Capital. The Bank’s operations risk capital requirement as prescribed by Finance Agency regulation is equal to 30% of the sum of its credit risk capital requirement and its market risk capital requirement.

Critical Accounting Estimates

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, income and expense. To understand the Bank's financial position and results of operations, it is important to understand the Bank's most significant accounting policies and the extent to which management uses judgment, estimates and assumptions in applying those policies. The Bank's critical accounting estimates related to the Bank’s:

•fair value estimates based on pricing models that use discounted cash flows; and

•accounting for derivatives.

Fair Value Estimates Based on Pricing Models that use Discounted Cash Flows. Pricing models that use discounted cash flows incorporate assumptions that may have a significant effect on the reported fair values of assets and liabilities and the income and expense related thereto. These assumptions are highly subjective and are based on the best estimates of management regarding the amount and timing of future cash flows, volatility of interest rates and the selection of discount rates that appropriately reflect market and credit risks. The use of different assumptions, as well as changes in market conditions, could result in materially different net income and retained earnings. Pricing models are based on the best estimates of management with respect to:

•interest rate projections;

•discount rates;

•prepayments;

•market volatility; and

•other factors.

The Bank categorizes financial instruments carried at fair value into a three-level hierarchy. The valuation hierarchy is based upon the observability of inputs to the valuation of an asset or liability as of the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Bank’s own assumptions that it believes market participants would use. With respect to fair values of certain assets and liabilities estimated using a pricing model, the inputs used to determine fair value are either observable (e.g., interest rates and yield curves that are observable at commonly quoted intervals, and implied volatilities) or are derived principally from or corroborated by observable market data by correlation or other means.

The Bank regularly validates its pricing models that use discounted cash flows. Such model validations are performed by the Bank’s model risk management department, which is separate from the model owner. In addition, the Bank benchmarks model-derived fair values to those provided by third-parties or alternative internal valuation models. The benchmarking analysis is performed by a group that is separate from the model owner. Results of the model validations and benchmarking analyses, as well as changes to the valuation methodologies and inputs, are reported to the Bank’s Asset and Liability Committee (ALCO) (or subcommittee of), which is responsible for overseeing market risk.

Investment Securities. The Bank uses pricing models that use discounted cash flows to estimate the fair value of its GSE obligations. These investments are classified as AFS or trading and recognized on the Statement of Condition at fair value. The Bank incorporates significant inputs, which include a market-observable interest rate curve and a discount spread, if applicable. The Bank uses the CO curve as the market-observable interest rate curve for its GSE obligations and may also incorporate additional inputs that calibrate the model for market volatility.

Derivatives and Hedged Items. The Bank uses pricing models that use discounted cash flows to estimate the fair value of its derivatives and the benchmark fair value of the related hedged items. Derivatives are recognized on the Statement of Condition at fair value and the hedged items are recognized on the Statement of Condition at benchmark fair value.

To estimate the fair value of the derivative, the pricing model utilizes market-observable inputs (inputs that are actively quoted and can be validated to external sources). Inputs are as follows:

•Discount rate assumption. SOFR curve for cleared derivatives and SOFR uncleared derivatives, Overnight Index Swap (OIS) curve for all other uncleared derivatives;

•Forward interest rate assumption (rates projected in order to calculate cash flows through the designated term of the hedge relationship). LIBOR Swap curve, OIS curve, or SOFR curve;

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

The Bank designates eligible advances, investment securities or consolidated obligations as hedged items in fair value hedge relationships. For long-haul hedge relationships, the Bank calculates a gain or loss on the hedged item attributable to changes in the benchmark interest rate being hedged. The change in value associated with the hedged item is calculated each period by projecting future hedged item cash flows based on the fixed interest rate assigned to the hedged item. For floating rate option embedded hedged items, the model projects cash flows utilizing the assigned forward interest rate curve and appropriate option pricing model. The projected future cash flows are then discounted using the rate curves corresponding to the designated benchmark rate plus a discount spread. The discount spread is calculated and set at hedge inception and is the amount added to the discount rate resulting in a fair value of zero at the inception of the hedging relationship. For additional information regarding the Bank’s fair value estimates, refer to Note 14 - Estimated Fair Values.

Accounting for Derivatives. The Bank uses derivative instruments as part of its risk management activities to protect the value of certain assets, liabilities and future cash flows against adverse interest rate movements. The Bank is prohibited by Finance Agency regulation from entering into hedging relationships for speculative purposes.

The accounting for derivatives is subject to complex accounting rules and strict documentation requirements. Proper application of these rules and requirements permits the Bank to utilize the favorable accounting treatment provided by hedge accounting. Not receiving hedge accounting could have a material impact on the Bank’s financial results, including increased earnings volatility.

Derivatives are recognized on the Statement of Condition at fair value, with changes recognized in earnings. The change in fair value of the derivative and benchmark fair value of the hedged item should effectively offset for an effective hedging relationship, which reduces earnings volatility. To qualify for hedge accounting, the hedging relationship must meet certain criteria, which must be documented at inception, and it must be expected to be highly effective. To assess effectiveness, the Bank uses either the short-cut or long-haul method.

Hedging relationships that meet certain criteria qualify for the short-cut method of hedge accounting. In these instances, the Bank may assume that the change in fair value of a hedged item, due to changes in the hedged risk, exactly offsets the change in fair value of the related derivative. As the hedging relationship is assumed to be perfectly effective, the Bank does not record any hedge ineffectiveness in earnings. The Bank documents at hedge inception its long-haul fallback methodology, including the quantitative method to be used to assess hedge effectiveness if the short-cut method were to no longer be appropriate during the hedging relationship. If the short-cut method is misapplied, the Bank must assess effectiveness using the documented long-haul method and recognize the difference between the fair value of the derivative and benchmark fair value of the hedged item in earnings.

The application of the long-haul method requires an assessment (at least quarterly) of hedge effectiveness. The Bank performs regression analyses to evaluate effectiveness. For hedge relationships that meet certain requirements, subsequent hedge effectiveness assessments may be completed qualitatively. The difference in the change in fair value of the derivative and the change in the benchmark fair value of the hedged item (i.e., hedge ineffectiveness), is recognized in earnings. If the hedging relationship fails effectiveness testing, the derivative loses hedge accounting and is accounted for as an economic derivative.

During 2023, as a result of the cessation of LIBOR, the Bank’s LIBOR-indexed derivatives will fallback to an alternative rate, which is expected to be SOFR. The Bank expects to continue to apply hedge accounting to those derivatives that are impacted by reference rate reform by adopting optional expedients and exceptions temporarily allowed by GAAP for these circumstances. The Bank will disclose the optional expedients and exceptions when they are applied.

Derivatives that do not qualify for hedge accounting are referred to as economic derivatives. Economic derivatives require the Bank to recognize the changes in the fair value in earnings without the offset of the benchmark fair value of the hedged items and result in increased earnings volatility.

Certain of the Bank’s economic derivatives are used to hedge instruments that are recorded at fair value. These transactions are not required to comply with the complex hedge accounting rules.

For additional information regarding the Bank’s accounting for derivatives, refer to Note 7 - Derivatives and Hedging Activities.

Recent Accounting Developments. See Note 2 - Changes in Accounting Principle and Recently Issued Accounting Standards and Interpretations to the audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K. Note 2 contains information on new accounting pronouncements impacting the 2022 financial statements or that will become effective for the Bank in future periods.

Legislative and Regulatory Developments

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

Proposed SEC Rule on Climate-related Disclosures.

On March 21, 2022, the SEC proposed a new rule that would require the Bank to make specific climate-related disclosures in its periodic reports. The proposed rule would require the Bank to account for and disclose certain direct, indirect and third-party greenhouse gas emissions, provide additional disclosures of material impact of climate-change risks on its strategy, business model and outlook, disclose climate-event impacts, discuss board and management governance and oversight of climate-related risks, climate-change risk management framework considering both physical and transitional risks, and plans to reduce such risks, and provide and discuss climate-related financial impact metrics and expenditure metrics. The Bank is unable to predict when a rule will be finalized and the extent to which a final rule will apply or deviate from the proposal. Should the rule become final in its current form, the Bank anticipates a significant increase in its compliance costs given the complexity of these prospective obligations.

Finance Agency’s Review and Analysis of the Federal Home Loan Bank System (FHLBank System).

On July 20, 2022, Finance Agency Director Sandra L. Thompson provided testimony to the U.S. House Committee on Financial Services, indicating that the Finance Agency would conduct a review and analysis of the FHLBank System. As part of its review and analysis, the Finance Agency has held a series of public listening sessions and regional roundtable discussions, and has requested written comments from stakeholders. The review has been examining matters covering such areas as the FHLBanks’ adequate fulfillment of their mission and purpose in a changing marketplace; their organization, operational efficiency and effectiveness; their role in promoting affordable, sustainable, equitable, and resilient housing and community investment; their role in addressing the unique needs of rural and financially vulnerable communities; member products, services, collateral requirements; and membership eligibility and requirements. The Bank anticipates that the Finance Agency’s review and analysis will culminate in a written report. The report may involve recommendations for changes related to a number of areas such as the FHLBanks’ fulfillment of their mission, membership requirements, contributions to affordable housing and support to community investment and may lead to recommendations for statutory revisions, proposals for new or modified regulations, regulatory guidance under existing regulations, and/or other regulatory or supervisory actions consistent with the Finance Agency’s statutory authority.

Amendment to FINRA Rule 4210: Margining of Covered Agency Transactions.

On February 24, 2023, the Financial Industry Regulatory Authority filed a proposed rule change with the SEC, with immediate effect, further extending the implementation date from April 24, 2023 to October 25, 2023 of the margining requirements set by FINRA Rule 4210 dated July 29, 2022, for covered agency transactions. When the margining requirements are effective, the Bank may be required to collateralize transactions that are covered agency transactions, which include to be announced transactions (TBAs). These collateralization requirements could have the effect of reducing the overall profitability of engaging in covered agency transactions, including TBAs. Further, the collateralization requirements could expose the Bank to credit risk from its counterparties for such transactions. The Bank does not expect this rule to have a material effect on its financial condition or results of operations.

Final Rule Implementing the Adjustable Interest Rate (LIBOR) Act.

On December 16, 2022, the Federal Reserve Board of Governors adopted a final rule that implements the Adjustable Interest Rate (LIBOR) Act, enacted in March 2022. The rule, which went into effect on February 27, 2023, establishes benchmark replacement rates based on SOFR (Secured Overnight Financing Rate) for certain contracts, to apply following the first London banking day after June 30, 2023 (the “LIBOR replacement date”). Generally, the rule provides that Federal Reserve-selected benchmark replacements will apply by operation of law to contracts governed by U.S. law which have the following characteristics: (a) contain no fallback provisions; (b) contain fallback provisions but fail to specify either the fallback rate or the party that can determine the fallback rate; or (c) contain a fallback provision that identifies the party that can determine the fallback rate, but the determining party has failed to do so before (i) the LIBOR replacement date or (ii) the latest date to select a benchmark replacement according to the contract terms. For FHLBank advances that have any of the above characteristics, the final rule sets the replacement benchmark rate as the Fallback Rate (SOFR) in the ISDA 2020 IBOR Fallbacks Protocol. For any other FHLBank contract with the above characteristics, references to overnight LIBOR would be replaced with SOFR and one-, three-, six, or 12-month LIBOR will be replaced with 30-day Average SOFR, in each case plus the applicable tenor spread adjustment specified in the Adjustable Interest Rate (LIBOR) Act. The Bank does not expect this rule to have a material effect on its financial condition or results of operations.

The Bank continues to monitor these actions and guidance as they evolve and to evaluate their potential impact on the Bank.

Risk Management

The Bank employs a corporate governance and internal control framework designed to support the effective management of the Bank’s business activities and the related inherent risks. As part of this framework, the Board has approved a Risk Governance Policy and a Member Products Policy, both of which are reviewed regularly and re-approved at least annually. The Risk Governance Policy establishes risk guidelines, limits (if applicable), and standards for credit risk, market risk, liquidity risk, business risk and various forms of operational and technology risk, in accordance with Finance Agency regulations and consistent with the Bank’s risk appetite. The Member Products Policy establishes the eligibility and authorization requirements, policy limits and restrictions, and the terms applicable to each type of Bank product or service, as well as collateral requirements. The risk appetite is established by the Board, as are other applicable guidelines in connection with the Bank’s Capital Plan and overall risk management.

Risk Governance

The Bank’s lending, investment and funding and hedging activities expose the Bank to a number of risks that include market and interest rate risk, credit and counterparty risk, liquidity and funding risk, and operational and business risks. These include risks such as use and reliance on models and end-user computing tools, technology and information security risk, among others. In addition, the Bank’s risks are affected by current and projected financial and residential mortgage market trends including those described in Item 1A. Risk Factors in this Form 10-K.

The Bank believes that a strong and dynamic risk management process serves as a base for building member value in the cooperative. The Bank has a risk management infrastructure that addresses risk governance, appetite, measurement and assessment, and reporting, along with top and emerging risks, as follows:

•the Bank’s policies and committees provide effective governance over the risk management process;

•the Bank’s risk appetite is integrated with the strategic plan and reinforced through management initiatives;

•all material risk exposures have been reviewed to establish a robust set of key indicators, many with associated limits and guidelines;

•the Bank has a risk reporting system that provides for management and Board oversight of risk and a clear understanding of risks that the Bank faces; and

•management and the Board are actively engaged in surveying and assessing top and emerging risks.

Top risks are existing, material risks the Bank faces; these are regularly reviewed and actively managed. Emerging risks are those risks that are new or evolving forms of existing risks; once identified, potential action plans are considered based on probability and severity.

The Board and its committees have adopted a comprehensive risk governance framework to oversee the risk management process and manage the Bank’s risk exposures which is shown in the chart below. All Board members are provided training dealing with the specific risk issues relevant to the Bank. The following table describes the Committees of the Board of Directors and their focus in relation to risk governance:


Committee Title			Major Responsibilities
Audit			•Legal and regulatory compliance •Integrity of internal and external financial reporting •Oversight of the internal and external audit functions
Affordable Housing, Products & Services			•Member credit risk and collateral management •Mortgage Credit (MPF) •AHP
Enterprise Risk Management*			•Focus on the Bank’s comprehensive risk appetite and position •Risk issues that are significant for several committees •Updates on regulatory issues
Finance			•Balance Sheet Management •Oversight of market events and risk activities over interest rate, pricing, liquidity, funding and hedging and counterparty risk
Governance & Public Policy			•Develop and maintain best practices in governing the Bank •Keep abreast of public policy issues impacting Bank’s mission and purpose
Human Resources			•Oversight on strategies and policies around total rewards and culture •Diversity, equity and inclusion strategic actions and related regulatory compliance matters
Diversity, Equity & Inclusion*			•Oversight of diversity, equity and inclusion strategy and performance
Operational Risk			•Oversight of operating risks including compliance, fraud and Bank-wide risk assessment •Oversight of risks related to information technology, continuity, model and cyber risk

* Comprised of the entire Board of Directors

As previously mentioned, key components of this risk governance framework are the Board-level Member Products Policy and Risk Governance Policy. The Member Products Policy, which applies to products offered to members and housing associates, addresses the credit risk of secured credit by establishing appropriate collateralization levels and collateral valuation methodologies. The Risk Governance Policy establishes risk limits for the Bank in accordance with the risk profile established by the Board, Finance Agency regulations, credit underwriting criteria, and other applicable guidelines. The magnitude of the risk limits reflects the Bank’s risk appetite given the market environment, the business strategy and the financial resources available to absorb potential losses. The limits are reviewed and continually re-evaluated with adjustments requiring Board

approval and processes are included in the Risk Governance Policy. All breaches of risk limits are reported in a timely manner to the appropriate Board and senior management and the affected business unit must take appropriate action, as applicable, to rationalize and/or reduce affected positions. The risk governance framework also includes supplemental risk management policies and procedures that are reviewed on a regular basis to ensure that they provide effective governance of the Bank’s risk-taking activities.

As noted above, the Board and its Operational Risk Committee have oversight of the Bank’s cyber-security program. On an ongoing basis, the Board receives updates on the program’s maturity, independent third-party assessments periodically performed, emerging threats and notable cyber events. Additionally, the Bank performs an advanced penetration test that is composed of blended attacks against the Bank, emulating an advanced, real-world adversary, targeting the organization in a persistent manner. The results of these attacks along with management’s response are shared with the Board.

The following table describes the Management Committees which provide oversight and operational support in managing risks.


Committee Title			Major Responsibilities
Asset/Liability			•Reviews and approves financial management strategies and decisions •Oversight of market events and risk activities over interest rate, pricing, liquidity, funding and hedging risks
Market Risk			•Sub-Committee of Asset/Liability Committee •Oversees and analyzes trends in market risk positions and fair market value pricing
Risk Management			•Bank-wide oversight of the Bank’s primary risks •Approves key overarching risk policies and Bank objectives to manage risk
Operational Risk Management			•Sub-Committee of Risk Management Committee •Oversight of specific technology and operational risks
Executive			•Manages Strategic and reputation risk •Oversight of project, succession and diversity compliance risks
Membership and Credit			•Oversees member credit and collateral risk •Mortgage credit (MPF)

Further, Internal Audit provides an assessment of the internal control systems. Internal Audit activities are designed to provide reasonable assurance for the Board that: (1) risks are appropriately identified and managed; (2) significant financial, managerial and operating information is materially accurate, reliable and timely; and (3) employees’ actions are in compliance with Bank policies, standards, procedures and applicable laws and regulations. Additionally, as a GSE, the Bank is subject to a comprehensive examination by the Finance Agency which executes its responsibilities via annual examinations, periodic evaluations, and monitoring of the various compliance and activity reports provided by the Bank.

Capital Adequacy Measures. MV/CS provides a current assessment of the liquidation value of the balance sheet and measures the Bank’s current ability to honor the par put redemption feature of its capital stock. This is one of the risk metrics used to evaluate the adequacy of retained earnings which is used to develop dividend payment recommendations and support the repurchase of excess capital stock.

The current Board-approved floor for MV/CS is 90.0%. MV/CS is measured against the floor monthly. When MV/CS is below the established floor, excess capital stock repurchases and dividend payouts are restricted. The MV/CS ratio was 137.1% at December 31, 2022 and 221.8% at December 31, 2021. The decrease was primarily due to the increase in capital stock as a result of higher advances.

Subprime and Nontraditional Loan Exposure. The Bank policy definitions of subprime and nontraditional residential mortgage loans and securities are consistent with FFIEC and Finance Agency guidance. According to policy, the Bank does not accept subprime residential mortgage loans (defined as FICO score of 660 or below) as qualifying collateral unless certain mitigating factors are met. The Bank requires members to identify the amount of subprime and nontraditional mortgage collateral in their QCR each quarter and provide periodic certification that they comply with the FFIEC guidance. See the Credit and Counterparty Risk - TCE and Collateral discussion in Risk Management in Item 7. Management’s Discussion and Analysis in this Form 10-K for specific requirements regarding subprime and nontraditional loan collateral.

Qualitative and Quantitative Disclosures Regarding Market Risk

Managing Market Risk. The Bank’s market risk management objective is to protect member/shareholder and bondholder value consistent with the Bank’s housing mission and safe and sound operations across a wide range of interest rate environments. Management believes that a disciplined approach to market risk management is essential to maintaining a strong capital base and uninterrupted access to the capital markets.

Market risk is defined as the risk to earnings or capital arising from adverse changes in market rates, prices and other relevant market factors. Interest rate risk, which represents the primary market risk exposure to the Bank, is the risk that relative and absolute changes in prevailing interest rates may adversely affect an institution’s financial performance or condition. Interest rate risk arises from a variety of sources, including repricing risk, yield curve risk, basis risk and options risk. The Bank invests in mortgage assets, such as mortgage loans and MBS, which together represent the primary source of options risk. Management regularly reviews the estimated market risk of the entire portfolio of assets and related funding and hedges to assess the need for re-balancing strategies. These re-balancing strategies may include entering into new funding and hedging transactions, terminating existing funding and hedging transactions, or forgoing or modifying certain funding or hedging transactions normally executed with asset acquisition or debt issuance.

The Bank’s Market Risk Model. Significant resources are devoted to ensuring that the level of market risk in the balance sheet is accurately measured, thus allowing management to monitor the risk against policy and regulatory limits. The Bank uses externally developed models to evaluate its financial position and market risk. One of the most critical market-based models relates to the prepayment of principal on mortgage-related instruments. Management regularly reviews the major assumptions and methodologies used in its models, as well as the performance of the models relative to empirical results, so that appropriate changes to the models can be made. Economic conditions, such as inflationary pressures and rising interest rates, may impact the performance of the Bank’s models used to measure market risk. Management will consider the impact of current economic conditions on key market risk measures and may make changes as deemed appropriate in future periods.

The Bank regularly validates the models used to measure market risk. Such model validations are performed by the Bank’s model risk management department, which is separate from the model owner. These model validations may include third-party specialists when appropriate. The model validations are supplemented by performance monitoring by the model owner which is reported to the Bank’s model risk management department. In addition, the Bank benchmarks model-derived fair values to those provided by third-party services or alternative internal valuation models. The benchmarking analysis is performed by a group that is separate from the model owner. Results of the model validations and benchmarking analysis, as well as any changes to the valuation methodologies and inputs, are reported to the Bank’s Asset and Liability Committee (ALCO) (or subcommittee of), which is responsible for overseeing market risk.

Duration of Equity. One key risk metric used by the Bank is duration. Duration is a measure of the sensitivity of a financial instrument’s value, or the value of a portfolio of instruments, to a 100 basis point parallel shift in interest rates. Duration (typically expressed in years) is commonly used by investors throughout the fixed income securities market as a measure of financial instrument price sensitivity.

The Bank’s asset/liability management policy approved by the Board calls for actual duration of equity to be maintained within a + 4.5 year range in the base case. In addition, the duration of equity exposure limit in an instantaneous parallel interest rate shock of + 200 basis points is + 7 years. Management analyzes the duration of equity exposure against this policy limit on a daily basis and regularly evaluates its market risk management strategies.

The following table presents the Bank's duration of equity exposure at December 31, 2022 and December 31, 2021. Given the increase in interest rates throughout 2022, additional down rate shock scenarios were re-introduced for in the third quarter.


(in years)	Down 200 basis points	Down 100 basis points	Base Case	Up 100 basis points	Up 200 basis points
Actual Duration of Equity:
December 31, 2022	0.7	0.9	1.0	1.1	1.3
December 31, 2021	N/A	N/A	(0.4)	0.5	1.3

Duration of equity changes in 2022 were mainly the result of interest rate increases and the offsetting impact of funding mix changes and higher equity due to capital stock increases. The Bank continues to monitor the mortgage and related fixed-income markets, including the impact that changes in the market or anticipated modeling changes may have on duration of

equity and other market risk measures and may take actions to reduce market risk exposures as needed. Management believes that the Bank's current market risk profile is reasonable given the current market conditions.

Return on Equity (ROE) Spread Volatility. Interest rate risk is also measured based on the volatility in the Bank’s projected return on capital in excess of the return of an established benchmark market index. ROE spread is defined as the Bank's return on average equity, including capital stock and retained earnings, in excess of the average of the projected Federal funds rate.

ROE spread volatility is a measure of the variability of the Bank’s projected ROE spread in response to shifts in interest rates and represents the change in ROE spread compared to an ROE spread that is generated by the Bank in its base forecasting scenario. ROE spread volatility is measured over a rolling forward 12 month period for selected interest rate scenarios and excludes the income sensitivity resulting from mark-to-market changes, which are separately described below.

The ROE spread volatility presented in the table below reflects spreads relative to the projected Federal funds rate. Management uses both parallel and non-parallel rate scenarios to assess interest rate risk. The steeper and flatter yield curve shift scenarios are represented by appropriate increases and decreases in short-term and long-term interest rates using the three-year point on the yield curve as the pivot point. Given the increase in interest rates throughout 2022, additional down rate shock scenarios were re-introduced in the third quarter.



ROE Spread Volatility Increase/(Decline)
(in basis points)	Down 100 bps Longer Term Rate Shock	Down 100 bps Parallel Shock	100 bps Steeper	100 bps Flatter	Up 200 bps Parallel Shock
December 31, 2022	(1)	1	2	(7)	(24)
December 31, 2021	(49)	N/A	N/A	23	56

Changes in ROE spread volatility in 2022, primarily reflect the impact of funding mix changes and interest rate increases. For each scenario, the Board's limit on the decline in ROE spread is set at no greater than 100 basis points. The Bank was in compliance with the ROE spread volatility limit across all selected interest rate shock scenarios at December 31, 2022 and December 31, 2021.

Mark-to-Market Risk. The Bank measures earnings risk associated with certain mark-to-market positions, including economic hedges. This framework measures forward-looking, scenario-based exposure based on interest rate and volatility shocks that are applied to any existing transaction that is marked to market through the income statement without an offsetting mark arising from a qualifying hedge relationship. In addition, the Bank’s Capital Markets and Corporate Risk Management departments monitor the actual profit/loss change on a daily, monthly cumulative, and quarterly cumulative basis. The Bank's ALCO monitors mark-to-market risk through a daily exposure guideline and quarterly profit/loss reporting trigger.

Derivatives and Hedging Activities. Members may obtain loans through a variety of product types that include features such as variable- and fixed-rate coupons, overnight to 30-year maturities, and bullet or amortizing redemption schedules. The Bank funds loans primarily through the issuance of consolidated obligation bonds and discount notes. The terms and amounts of these consolidated obligations and the timing of their issuance is determined by the Bank and is subject to investor demand as well as FHLBank System debt issuance policies. The intermediation of the timing, structure, and amount of Bank members’ credit needs with the investment requirements of the Bank’s creditors is made possible by the extensive use of interest rate derivatives. The Bank’s general practice is to simultaneously execute interest rate swaps or other derivative transactions when extending term and option-embedded advances and/or issuing liabilities to convert the instruments’ cash flows to a floating-rate that is indexed to OIS or SOFR (LIBOR-indexed derivatives will fallback to an alternative rate, which is expected to be SOFR as a result of the cessation of LIBOR in 2023). By doing so, the Bank strives to reduce its interest rate risk exposure and preserve the value of, and attempts to earn more stable returns on, its members’ capital investment.

The Bank may also acquire assets with structural characteristics that reduce the Bank’s ability to enter into interest rate exchange agreements having mirror image terms. These assets can include small fixed-rate, fixed-term loans and small fixed schedule amortizing loans. These assets may require the Bank to employ risk management strategies in which the Bank hedges the aggregated risks. The Bank may use fixed-rate, callable or non-callable debt or interest rate swaps to manage these aggregated risks.

The use of derivatives is integral to the Bank’s financial management strategy, and their impact on the Bank’s financial statements is significant. Management has a risk management framework that outlines the permitted uses of derivatives that adjusts the effective maturity, repricing frequency or option characteristics of various financial instruments to achieve the Bank’s risk and earnings objectives. The Bank utilizes derivatives to hedge identifiable risks; none are used for speculative purposes.

The Bank uses derivatives as follows: (1) by designating them as either a fair value hedge of an underlying financial instrument or a firm commitment; or (2) in asset/liability management (i.e., an economic hedge). For example, the Bank uses derivatives in its overall interest rate risk management to adjust the interest rate sensitivity of consolidated obligations to approximate more closely the interest rate sensitivity of assets (advances, investment securities, and mortgage loans), and/or to adjust the interest rate sensitivity of advances, investment securities, or mortgage loans to approximate more closely the interest rate sensitivity of liabilities. In addition to using derivatives to hedge mismatches of interest rates between assets and liabilities, the Bank also uses derivatives to hedge: (1) embedded options in assets and liabilities; (2) the market value of existing assets and liabilities and anticipated transactions; or (3) the duration risk of prepayable instruments. See Note 7 - Derivatives and Hedging Activities of the audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K for additional information regarding the Bank’s derivative and hedging activities.

The following tables summarize the derivative instruments, along with the specific hedge transaction utilized to manage various interest rate and other risks as noted below.


Hedged Item/Hedging Instrument	Hedging Objective	Hedge Accounting Designation (1)	Notional Amount at December 31, 2022 (in billions)		Notional Amount at December 31, 2021 (in billions)
Advances
Pay-fixed, receive floating interest rate swap (without options)	Converts the advance’s fixed rate to a variable rate index.	Fair Value	$	9.6	$	8.9
		Economic	0.2		0.1
Pay-fixed, receive float interest rate swap (with options)	Converts the advance’s fixed rate to a variable rate index and offsets option risk in the advance.	Fair Value	0.3		—






Subtotal-advances			$	10.1	$	9.0

Investments
Pay-fixed, receive floating interest-rate swap	Converts the investment’s fixed rate to a variable-rate index.	Fair Value	$	6.8	$	6.0
		Economic	0.4		0.5
Interest-rate cap or floor	Offsets the interest-rate cap or floor embedded in a variable rate investment.	Economic	1.0		1.0

Subtotal - investments			$	8.2	$	7.5

Mortgage Loans
Pay-fixed, receive floating interest rate swap	Converts the mortgage loan’s fixed rate to a variable rate index.	Economic	$	0.1	$	—

Consolidated Obligation Bonds
Receive-fixed, pay floating interest rate swap (without options)	Converts the bond’s fixed rate to a variable rate index.	Fair Value	$	12.2	$	0.8
		Economic	0.1		0.3
Receive-fixed, pay floating interest rate swap (with options)	Converts the bond’s fixed rate to a variable rate index and offsets option risk in the bond.	Fair Value	22.4		9.9
		Economic	0.3		0.2





Subtotal - consolidated obligation bonds			$	35.0	$	11.2

Consolidated Obligation Discount Notes
Receive-fixed, pay floating interest rate swap	Converts the discount note’s fixed rate to a variable-rate index.	Fair Value	$	17.7	$	—
		Economic	1.1		$	—
Subtotal - consolidated obligation discount notes			$	18.8	$	—






Total notional amount			$	72.2	$	27.7

Note

(1) The Fair Value designation represents hedging strategies for which qualifying hedge accounting is achieved. The Economic designation represents hedging strategies for which qualifying hedge accounting is not achieved.

Credit and Counterparty Risk - Total Credit Exposure (TCE) and Collateral

TCE. The Bank manages the credit risk of each member on the basis of the member’s total credit exposure (TCE) to the Bank, which includes advances and related accrued interest, fees, basis adjustments and estimated prepayment fees; letters of credit; forward-dated advance commitments; and MPF credit enhancement and related obligations. This credit risk is managed by monitoring the financial condition of borrowers and by requiring all borrowers (and, where applicable in connection with member affiliate pledge arrangements approved by the Bank, their affiliates) to pledge sufficient eligible collateral for all borrower obligations to the Bank as the Bank seeks to cover all potential forms of credit-related exposure with sufficient eligible collateral. At December 31, 2022, aggregate TCE was $95.0 billion, comprised of approximately $69.2 billion in advance principal outstanding, $25.3 billion in letters of credit (including forward commitments), $12.0 million in advance commitments and $364.2 million in accrued interest, prepayment fees, MPF credit enhancement obligations and other fees.

The Bank establishes a maximum borrowing capacity (MBC) for each member based on collateral weightings applied to eligible collateral as described in the Bank’s Member Products Policy. Details regarding this policy are available in the Advance Products discussion in Item 1. Business in this Form 10-K. According to the policy, eligible collateral is weighted so that the collateral value is likely to exceed the amount that may be owed to the Bank in the event of a default. The Bank also has the ability to call for additional or substitute collateral while any indebtedness is outstanding to protect the Bank’s secured position. At December 31, 2022 and December 31, 2021, on a borrower-by-borrower basis, the Bank had a perfected security interest in eligible collateral with an estimated collateral value (after collateral weightings) in excess of the book value of all members’ and nonmember housing associates’ obligations to the Bank.

The financial condition of all members and eligible non-member housing associates is closely monitored for compliance with financial criteria as set forth in the Bank’s credit policies. The Bank has developed an internal credit rating (ICR) system that calculates financial scores and rates member institutions on a quarterly basis using a numerical rating scale from one to ten, with one being the best rating. Generally, scores are objectively calculated based on financial ratios computed from publicly available data. The scoring system gives the highest weighting to the member’s asset quality and capitalization. Other key factors include earnings and balance sheet composition. Operating results which include net income, capital levels, reserve coverage and other factors for the previous four quarters are used. The most recent quarter’s results are given a higher weighting. Additionally, a member’s credit score can be adjusted for various qualitative factors, such as the financial condition of the member’s holding company. A higher number (i.e., worse) rating indicates that a member exhibits well defined financial weaknesses. Members in these categories are reviewed for potential change to their collateral delivery status. Other uses of the ICR include the scheduling of on-site collateral reviews. Insurance company members are rated on the same numerical rating scale as depository institutions, but the analysis includes both quantitative and qualitative factors. While depository institution member analysis is based on standardized regulatory call report data and risk modeling, insurance company credit risk analysis is based on various forms of financial data, including, but not limited to, statutory reporting filed by insurance companies with state insurance regulators, which requires specialized methodologies and dedicated underwriting resources.

As noted above, the Bank monitors member credit quality on a regular basis. Management believes that it has adequate policies and procedures in place to effectively manage credit risk exposure related to member TCE. These credit and collateral policies are intended to balance the Bank’s dual goals of meeting members’ needs as a reliable source of liquidity and limiting credit loss by adjusting the credit and collateral terms in response to deterioration in creditworthiness. The Bank has never experienced a loss on its advance exposure.

The following table presents the Bank’s top five financial entities with respect to their TCE at December 31, 2022.


	December 31, 2022
(dollars in millions)	TCE		% of Total
PNC Bank, National Association, DE(1)	$	32,234.0	33.9	%
TD Bank, National Association, DE	29,063.5		30.6
Ally Bank, UT (2)	7,187.5		7.6
Santander Bank, National Association, DE(3)	4,027.4		4.2
Fulton Bank, National Association, PA	3,133.9		3.3


	$	75,646.3	79.6	%
Other financial institutions	19,379.7		20.4
Total TCE outstanding	$	95,026.0	100.0	%

Notes:

(1) For Bank membership purposes, principal place of business is Pittsburgh, PA.

(2) For Bank membership purposes, principal place of business is Horsham, PA.

(3) For Bank membership purposes, principal place of business is Wilmington, DE, and is a subsidiary of Banco Santander, which is located in Spain.

Advance Concentration Risk. The following table lists the Bank’s top five borrowers based on advance balances at par as of December 31, 2022.


	December 31, 2022
(dollars in millions)	Advance Balance		% of Total
PNC Bank, National Association, DE(1)	$	32,075.0	46.3	%
TD Bank, National Association, DE	9,500.0		13.7
Ally Bank(2)	7,175.0		10.4
Santander Bank, National Association, DE(3)	4,000.0		5.8

Fulton Bank, National Association, PA	1,565.0		2.3

	$	54,315.0	78.5	%
Other borrowers	14,913.9		21.5
Total advances	$	69,228.9	100.0	%

Notes:

(1)For Bank membership purposes, principal place of business is Pittsburgh, PA.

(2) For Bank membership purposes, principal place of business is Horsham, PA.

(3) For Bank membership purposes, principal place of business is Wilmington, DE, and is a subsidiary of Banco Santander, which is located in Spain.

The average balances for the five largest borrowers during 2022 totaled $27.8 billion, or 75.5% of total average advances. The advances made by the Bank to each of these borrowers are secured by collateral with an estimated value, after collateral weightings, in excess of the book value of the advances. The Bank has implemented specific credit and collateral review monitoring for these members.

Letters of Credit. The letter of credit product is collateralized under the same policies, procedures and guidelines that apply to advances. Outstanding letters of credit totaled $22.1 billion at December 31, 2022 and $19.4 billion at December 31, 2021, primarily related to public unit deposits. Not included in these totals are additional authorized but unused standby letters of credit of $3.2 billion at December 31, 2022 and $2.3 billion at December 31, 2021. The Bank had a concentration of letters of credit with one member (TD Bank) of $16.8 billion or 76% of the total at December 31, 2022 and $14.7 billion or 76% of the total at December 31, 2021.

Collateral Policies and Practices. All members are required to maintain eligible collateral to secure their TCE in accordance with the Member Products Policy. The Bank periodically reviews the collateral pledged by members or affiliates, where applicable. Additionally, the Bank conducts periodic collateral verification reviews to ensure the eligibility, adequacy and sufficiency of the collateral pledged. The Bank may, in its discretion, require the delivery of loan collateral at any time.

The Bank reviews and assigns borrowing capacities based on this collateral, taking into account the known credit attributes in assigning the appropriate secondary market discounts to determine that a member’s TCE is fully collateralized. Other factors that the Bank may consider in calculating a member’s MBC include the collateral status for loans, frequency of loan data reporting, collateral field review results, the member’s financial strength and condition, and the concentration of collateral type by member.

The Bank uses a QCR that is designed to provide timely, detailed collateral information. Depending on a member’s credit product usage and financial condition, a member may be required to file the QCR on a quarterly or monthly basis. The QCR is designed to strengthen the Bank’s collateral analytical review procedures. The output of the QCR is a member’s loan-based MBC. For the small number of members who opt out of QCR filing, MBC is calculated by the Bank, based on the member’s regulatory filing data. For such members, final MBC is established at 20% of the aggregate weighted collateral value. Such members are required to file an Annual Collateral Certification Report.

The Bank does not accept subprime residential mortgage loans (defined as FICO score of 660 or below) as qualifying collateral unless there are other mitigating factors, including a LTV ratio of 65% or less (100% if loan level data is provided by the member for valuation and FICO score is at least 600), and one of the following: (1) a debt-to-income ratio of 35% (50% if loan level data is provided and FICO score is at least 600) or less; or (2) a satisfactory payment history over the past 12 months (i.e., no 30-day delinquencies). Loans which do not have the mitigating factors described above are not included in a member’s MBC. For loans identified as low FICO with mitigating factors and those for which no FICO score is available, a reduced collateral weighting ranging from 50-75%, depending on pledging and delivery status, will apply. The Bank allows nontraditional residential mortgage loans to be included in collateral and used to determine a member’s MBC.

A limit of 25% has been established for the percentage of member collateral that is categorized as low FICO (with acceptable mitigating factors), missing (unknown) FICO score loans and nontraditional loans and securities. A limit of 25% has also been established for total Bank-wide exposure related to nontraditional, subprime and low FICO whole mortgage loans acquired through the Bank’s MPF program, and the Bank’s MBS investment portfolio.

The Bank may require specific loan level characteristic reporting on nontraditional residential mortgage loans and will generally assign a reduced collateral weighting ranging from 60-80% depending on pledging and delivery status. At December 31, 2022, less than 12% of the Bank’s total pledged collateral was considered to be nontraditional.

The Bank is allowed by regulation to expand eligible collateral for many of its members. Members that qualify as CFIs can pledge expanded collateral which includes small-business, small-farm, small-agribusiness and community development loans as collateral for credit products from the Bank. At December 31, 2022, loans to CFIs secured with both eligible standard and expanded collateral represented approximately $4.2 billion, or 6.1% of total par value of loans outstanding. Eligible expanded collateral represented 6.5% of total eligible collateral for these loans. However, these loans were collateralized by sufficient levels of standard collateral.

During 2022, the Bank communicated several key Collateral Policy clarifications and changes: 1) clarification that U.S. Treasury or agency securities valued below 85 are eligible collateral at the discretion of Credit Risk Management and 2) reductions to collateral weights for 1-4 family first lien residential mortgages, in such QCR filers and members in Full Collateral Delivery (Policy Reasons) will be lowered from 80% to 75% and members in Full Collateral Delivery (Credit Reasons) will be lowered from 70% to 65%.

Collateral Agreements and Valuation. The Bank provides members with two types of collateral agreements: a blanket lien collateral pledge agreement and a specific collateral pledge agreement. Under a blanket lien agreement, the Bank obtains a lien against all of the member’s unencumbered eligible collateral assets and most ineligible assets to secure the member’s obligations with the Bank. Under a specific collateral pledge agreement, the Bank obtains a lien against specific eligible collateral assets of the member or its affiliate (if applicable) to secure the member’s obligations with the Bank. The member provides a detailed listing, as an addendum to the specific collateral agreement, identifying those assets pledged as collateral or delivered to the Bank or its third-party custodian.

Consistent with previous policy stipulations, high quality investment securities are defined as U.S. Treasury and U.S. Agency securities, REFCORP bonds, GSE MBS, commercial and residential private label MBS with a minimum credit rating of single A-minus, which the Bank considers as part of its evaluation of the collateral. In addition, municipal securities (or portions thereof) with a real estate nexus (e.g. proceeds primarily used for real estate development) with a minimum credit rating of single A-minus are included. Members have the option to deliver such high-quality investment securities to the Bank to increase their maximum borrowing capacity. Upon delivery, these securities are valued daily and all non-government or

agency securities are subject to weekly ratings reviews. Reported amount also includes pledged FHLBank cash deposits with the Bank.

The following table summarizes average lending values assigned to various types of collateral which are part of the Bank’s Member Products Policy. The reported range of effective lending values applied to collateral may be impacted by collateral adjustments applied to individual members. At the discretion of the Bank, on a case-by-case basis, the collateral weighting on loan categories may be increased (up to a maximum of 85%) upon completion of specific market valuation of such collateral and authorization from the Bank’s Membership and Credit Committee.


	Blanket Lien(1)(2)			Listing				Delivery(2)
Collateral Type	Range	Average		Range		Average		Range		Average
Single-Family mortgage loans (including FHA/VA loans)(3)	60%-75%	74	%	85	%	84	%	n/a		n/a
Multifamily mortgage Loans	60%-75%	75	%	85	%	85	%	n/a		n/a

Community financial institution (CFI) collateral (e.g., small business, small-farm, small-agribusiness loans)	45%-70%	65	%	60	%	60	%	n/a		n/a
Other real estate related collateral - commercial	55%-70%	70	%	80	%	77	%	60	%	60	%
Other real estate related collateral - H/E loans and lines of credit	55%-60%	60	%	75%-85%		80	%	n/a		n/a

U.S. agency MBS/CMOs	n/a	n/a		n/a		n/a		90%-95%		94	%
U.S. agency securities (excluding MBS, student loans)	n/a	n/a		n/a		n/a		n/a		n/a
Private-label MBS/CMOs	n/a	n/a		n/a		n/a		70%-85%		81	%
State and local government securities	n/a	n/a		n/a		n/a		88%-92%		84	%

Cash/U.S. government/US Treasury securities	n/a	n/a		n/a		n/a		90%-100%		99	%
Other Real estate related securities collateral -CMBS	n/a	n/a		n/a		n/a		70%-85%		81	%

Notes:

(1) Includes QCR filer, full collateral delivery policy reasons and market valuation.

(2) Includes specific pledge loans and specific delivered securities.

(3) Includes nontraditional loans, loans with unknown FICO scores, and low FICO loans with mitigating factors, which all receive a lower collateral weighing.

For member borrowers, the following tables present information on a combined basis regarding the type of collateral securing their outstanding credit exposure and the collateral status as of December 31, 2022 and December 31, 2021.


	December 31, 2022
(dollars in millions)	Blanket Lien				Listing				Delivery				Total
	Amount		%		Amount		%		Amount		%		Amount		%
One-to-four single-family residential mortgage loans	$	109,992.7	46.5	%	$	111.9	5.0	%	$	1.2	0.1	%	$	110,105.8	45.9	%
High quality investment securities	6,935.0		2.9		1,651.8		73.3		1,031.2		96.8		9,618.0		4.0
ORERC/ CFI eligible collateral	96,224.4		40.7		407.8		18.1		32.9		3.1		96,665.1		40.3
Multi-family residential mortgage loans	23,189.4		9.9		81.9		3.6		—		—		23,271.3		9.8
Total eligible collateral value	$	236,341.5	100.0	%	$	2,253.4	100.0	%	$	1,065.3	100.0	%	$	239,660.2	100.0	%
Total TCE	$	93,225.6	98.1	%	$	1,108.8	1.2	%	$	691.7	0.7	%	$	95,026.1	100.0	%
Number of members	168		85.3	%	16		8.1	%	13		6.6	%	197		100.0	%


	December 31, 2021
(dollars in millions)	Blanket Lien				Listing				Delivery				Total
	Amount		%		Amount		%		Amount		%		Amount		%
One-to-four single-family residential mortgage loans	$	95,780.3	48.3	%	$	126.7	8.4	%	$	8.2	0.7	%	$	95,915.2	47.8	%
High quality investment securities	1,155.1		0.6		1,177.9		78.6		1,056.2		95.9		3,389.2		1.7
ORERC/ CFI eligible collateral	83,792.5		42.3		170.3		11.4		37.4		3.4		84,000.2		41.8
Multi-family residential mortgage loans	17,489.1		8.8		24.0		1.6		—		—		17,513.1		8.7
Total eligible collateral value	$	198,217.0	100.0	%	$	1,498.9	100.0	%	$	1,101.8	100.0	%	$	200,817.7	100.0	%
Total TCE	$	35,003.0	95.7	%	$	894.0	2.4	%	$	684.5	1.9	%	$	36,581.5	100.0	%
Number of members	156		85.2	%	13		7.1	%	14		7.7	%	183		100.0	%

Credit and Counterparty Risk - Investments

The Bank is also subject to credit risk on investments consisting of money market investments and investment securities. The Bank considers 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.

Investment Quality and External Credit Ratings. The following tables present the Bank’s investment carrying values as of December 31, 2022 and December 31, 2021 based on the lowest credit rating from the NRSROs (Moody’s, S&P and Fitch).


	December 31, 2022(1)
	Long-Term Rating
(in millions)	AAA		AA		A		BBB		Below Investment Grade		Unrated		Total
Money market investments:
Interest-bearing deposits	$	—	$	—	$	2,129.8	$	336.2	$	—	$	—	2,466.0
Securities purchased under agreements to resell	3,200.0		—		—		—		—		—		3,200.0
Federal funds sold	—		1,475.0		1,575.0		—		—		—		3,050.0
Total money market investments	3,200.0		1,475.0		3,704.8		336.2		—		—		8,716.0
Investment securities:
U.S. Treasury obligations	—		5,232.5		—		—		—		—		5,232.5

GSE and TVA obligations	—		1,339.8		—		—		—		—		1,339.8
State or local agency obligations	15.6		154.7		—		—		—		—		170.3
Total non-MBS	15.6		6,727.0		—		—		—		—		6,742.6
U.S. obligations single-family MBS	—		645.3		—		—		—		—		645.3
GSE single-family MBS	—		2,316.2		—		—		—		—		2,316.2
GSE multifamily MBS	—		3,461.1		—		—		—		—		3,461.1
Private label MBS	5.8		4.5		12.2		13.4		43.6		116.4		195.9
Total MBS	5.8		6,427.1		12.2		13.4		43.6		116.4		6,618.5
Total investments	$	3,221.4	$	14,629.1	$	3,717.0	$	349.6	$	43.6	$	116.4	$	22,077.1


	December 31, 2021 (1)
	Long-Term Rating
(in millions)	AAA		AA		A		BBB		Below Investment Grade		Unrated		Total
Money market investments:
Interest-bearing deposits	$	—	$	—	$	333.0	$	190.0	$	—	$	—	$	523.0
Securities purchased under agreements to resell	920.0		—		750.0		—		—		—		1,670.0
Federal funds sold	—		250.0		1,725.0		—		—		—		1,975.0
Total money market investments	920.0		250.0		2,808.0		190.0		—		—		4,168.0
Investment securities:
U.S. Treasury obligations	—		5,075.2		—		—		—		—		5,075.2

GSE and TVA obligations	—		1,736.9		—		—		—		—		1,736.9
State or local agency obligations	20.5		186.7		—		—		—		—		207.2
Total non-MBS	20.5		6,998.8		—		—		—		—		7,019.3
U.S. obligations single-family MBS	—		482.0		—		—		—		—		482.0
GSE single-family MBS	—		2,659.1		—		—		—		—		2,659.1
GSE multifamily MBS	—		3,499.4		—		—		—		—		3,499.4
Private label MBS	—		6.9		24.5		18.1		83.6		131.5		264.6
Total MBS	—		6,647.4		24.5		18.1		83.6		131.5		6,905.1
Total investments	$	940.5	$	13,896.2	$	2,832.5	$	208.1	$	83.6	$	131.5	$	18,092.4

Notes:

(1) Balances exclude $5.1 million of interest-bearing deposits with FHLB of Chicago for December 31, 2022 and $5.4 million for December 31, 2021, and total accrued interest of $45.6 million and $27.6 million at December 31, 2022 and December 31, 2021, respectively.

The Bank also manages its investments’ credit risks based on an internal credit rating system. For purposes of determining the internal credit rating, the Bank measures credit exposure through a process which includes internal credit review and various external factors, including NRSRO analysis. The Bank does not rely solely on any NRSRO rating in deriving its final internal credit rating.

Short-term Investments. Within the portfolio of short-term investments, the Bank faces credit risk from unsecured exposures. The Bank's unsecured investments have maturities generally ranging between overnight and six months and may include the following 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 that are made on an overnight and term basis; and

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

Under the Bank’s Risk Governance Policy, the Bank can place money market investments, which include those investment types listed above, on an unsecured basis with large financial institutions with long-term credit ratings no lower than BBB. Management actively monitors the credit quality of these counterparties. The Bank also invests in securities purchased under agreements to resell which are secured investments.

As of December 31, 2022, the Bank had unsecured exposure to eleven counterparties totaling $5.5 billion with five counterparties each exceeding 10% of the total exposure. The following table presents the Banks' unsecured credit exposure with non-governmental counterparties by investment type at December 31, 2022 and December 31, 2021. The unsecured investment credit exposure presented may not reflect the average or maximum exposure during the period.


(in millions)
Carrying Value (1) (2)	December 31, 2022		December 31, 2021
Interest-bearing deposits	$	2,466.0	$	523.0

Federal funds sold	3,050.0		$	1,975.0
Total	$	5,516.0	$	2,498.0

Note:

(1) Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies and instrumentalities, GSEs, and supranational entities.

(2) Excludes $5.1 million of Interest-bearing deposits with FHLB of Chicago for December 31, 2022 and $5.4 million for December 31, 2021. There were no compensating account balances with a counterparty which are non-interest bearing at December 31, 2022 and 333.6 million at December 31, 2021.

As of December 31, 2022, 51% of the Bank’s unsecured investment credit exposures were to U.S. branches and agency offices of foreign commercial banks. The Bank actively monitors its credit exposures and the credit quality of its counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, sovereign support, and the current market perceptions of the counterparties. General macro-economic, political and market conditions may also be considered when deciding on unsecured exposure. As a result, the Bank may limit or suspend existing counterparties.

Finance Agency regulations include limits on the amount of unsecured credit the Bank may extend to a counterparty or to a group of affiliated counterparties. This limit is based on a percentage of eligible regulatory capital and the counterparty's overall internal credit rating. Under these regulations, the level of eligible regulatory capital is determined as the lesser of the Bank's total regulatory capital or the eligible amount of regulatory capital of the counterparty. The eligible amount of regulatory capital is then multiplied by a stated percentage. This percentage is 1% to 15% and is based on the counterparty's internal credit rating. The calculation of term extensions of unsecured credit includes on-balance sheet transactions, off-balance sheet commitments, and derivative transactions.

Finance Agency regulation also permits the Bank to extend additional unsecured credit for overnight transactions and for sales of Federal funds subject to continuing contracts that renew automatically. For overnight exposures only, the Bank's total unsecured exposure to a counterparty may not exceed twice the applicable regulatory limit, or a total of 2% to 30% of the eligible amount of regulatory capital, based on the counterparty's internal credit rating. As of December 31, 2022, the Bank was in compliance with the regulatory limits established for unsecured credit.

The Bank's unsecured credit exposures to U.S. branches and agency offices of foreign commercial banks include the risk that, as a result of political or economic conditions in a country, the counterparty may be unable to meet their contractual repayment obligations. The Bank's unsecured credit exposures to domestic counterparties and U.S. subsidiaries of foreign commercial banks include the risk that these counterparties have extended credit to foreign counterparties.

The following table presents the long-term credit ratings of the unsecured investment credit exposures by the domicile of the counterparty or the domicile of the counterparty's immediate parent for U.S. subsidiaries or branches and agency offices of foreign commercial banks based on the NRSROs used. This table does not reflect the foreign sovereign government's credit rating.


(in millions)
December 31, 2022 (1) (2)
	Carrying Value
Domicile of Counterparty	Investment Grade (3) (4)
	AA		A		BBB		Total
Domestic	$	250.0	$	2,131.0	$	335.0	$	2,716.0


U.S. branches and agency offices of foreign commercial banks:
Australia	—		675.0		—		675.0

Canada	850.0		—		—		850.0
Finland	375.0		—		—		375.0
France	—		—		—		—
Germany	—		150.0		—		150.0
Netherlands	—		750.0		—		750.0


Total U.S. branches and agency offices of foreign commercial banks	1,225.0		1,575.0		—		2,800.0
Total unsecured investment credit exposure	$	1,475.0	$	3,706.0	$	335.0	$	5,516.0


(in millions)
December 31, 2021 (1) (2)
	Carrying Value
Domicile of Counterparty	Investment Grade (3) (4)
	AA		A		BBB		Total
Domestic	$	—	$	333.0	$	190.0	$	523.0


U.S. branches and agency offices of foreign commercial banks:
Australia	—		675.0		—		675.0

Canada	—		425.0		—		425.0
Finland	250.0		—		—		250.0

Germany	—		200.0		—		200.0
Netherlands	—		425.0		—		425.0


Total U.S. branches and agency offices of foreign commercial banks	250.0		1,725.0		—		1,975.0
Total unsecured investment credit exposure	$	250.0	$	2,058.0	$	190.0	$	2,498.0

Notes:

(1) Ratings are as of the respective dates.

(2) These ratings represent the lowest rating available for each security owned by the Bank based on the NRSROs used by the Bank. The Bank’s internal ratings may differ from those obtained from the NRSROs.

(3) Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies and instrumentalities, GSEs, and supranational entities.

(4) Represents the NRSRO rating of the counterparty not the country. There were no AAA rated investments at December 31, 2022 or December 31, 2021.

The following table presents the remaining contractual maturity of the Bank's unsecured investment credit exposure by the domicile of the counterparty or the domicile of the counterparty's parent for U.S. subsidiaries or branches and agency offices of foreign commercial banks. The Bank also mitigates the credit risk on investments by generally investing in investments that have short-term maturities.


(in millions)
December 31, 2022
Carrying Value
Domicile of Counterparty	Overnight		Due 2 days through 30 days		Due 31 days through 90 days		Total
Domestic	$	—	$	—	$	—	$	—


U.S. branches and agency offices of foreign commercial banks:
Australia	675.0		—		—		675.0

Canada	850.0		—		—		850.0
Finland	375.0		—		—		375.0

Germany	150.0		—		—		150.0
Netherlands	750.0		—		—		750.0


Total U.S. branches and agency offices of foreign commercial banks	2,800.0		—		—		2,800.0
Total unsecured investment credit exposure	$	2,800.0	$	—	$	—	$	2,800.0


(in millions)
December 31, 2021
Carrying Value
Domicile of Counterparty	Overnight		Due 2 days through 30 days		Due 31 days through 90 days		Total
Domestic	$	523.0	$	—	$	—	$	523.0


U.S. branches and agency offices of foreign commercial banks:
Australia	675.0		—		—		675.0

Canada	425.0		—		—		425.0
Finland	250.0		—		—		250.0

Germany	200.0		—		—		200.0
Netherlands	425.0		—		—		425.0


Total U.S. branches and agency offices of foreign commercial banks	1,975.0		—		—		1,975.0
Total unsecured investment credit exposure	$	2,498.0	$	—	$	—	$	2,498.0

At December 31, 2022 and December 31, 2021, all of the unsecured investments held by the Bank had overnight maturities.

U.S. Treasury Obligations. The Bank invests in U.S. Treasury obligations that are explicitly fully guaranteed by the U.S. government. This portfolio totaled $5.2 billion at December 31, 2022 and $5.1 billion at December 31, 2021.

Agency/GSE Securities and Agency/GSE MBS. The Bank invests in and is subject to credit risk related to securities issued by Federal Agencies or U.S. government corporations. In addition, the Bank invests in MBS issued by these same entities that are directly supported by underlying mortgage loans. Both the securities and MBS are either explicitly or implicitly guaranteed by the U.S. government. These portfolios totaled $7.8 billion at December 31, 2022 and $8.4 billion at December 31, 2021.

State and Local Agency Obligations. The Bank invests in and is subject to credit risk related to a portfolio of state and local agency obligations (i.e., Housing Finance Agency bonds) that are directly or indirectly supported by underlying mortgage loans. These portfolios totaled $170.3 million at December 31, 2022 and $207.2 million at December 31, 2021.

Private Label MBS. The Bank also holds investments in private label MBS, which are supported by underlying mortgage loans. The Bank made investments in private label MBS that were rated AAA at the time of purchase with the exception of one, which was rated AA. However, since the time of purchase, there have been significant ratings downgrades. In 2007, the Bank

discontinued the purchase of private label MBS. The carrying value of the Bank’s private label MBS portfolio was $195.9 million at December 31, 2022 and $264.6 million at December 31, 2021.

Credit Losses. The Bank evaluates its private label MBS for expected credit losses quarterly, based on whether there is an expectation of a shortfall in receiving all cash flows contractually due. The Bank expects to receive all cash flows contractually due with respect to its HTM private label MBS and therefore has no ACL related to this portfolio. With respect to its AFS private label MBS, the Bank had an ACL of $8.5 million at December 31, 2022 and $2.4 million at December 31, 2021. For its AFS private label MBS for which the Bank expects a shortfall, an ACL is recorded, limited to the amount of a security's unrealized loss. If the security is in an unrealized gain position, the ACL is zero.

The Bank recorded a provision for credit losses of $6.2 million on its private label MBS in 2022 and an insignificant reversal for credit losses in 2021. Because the Bank does not intend to sell and will not be required to sell its AFS private label MBS with recorded credit losses before anticipated recovery of their amortized cost basis, the Bank did not write down any of its AFS private label MBS securities amortized cost basis for the difference between amortized cost and fair value.

For those AFS private label MBS with a credit loss previously recorded, when the Bank projects an increase in cash flows during its quarterly assessment of expected credit losses, the Bank will first reverse the ACL by recognizing a reversal for credit losses up to the amount of the ACL, if any. If the Bank projects a significant increase in cash flows, the Bank adjusts the accretable yield prospectively. Credit losses recovered through interest income on these securities were $12.1 million, $13.1 million and $15.8 million for 2022, 2021 and 2020, respectively.

Management will continue to evaluate its private label MBS. Material credit losses have occurred on AFS private label MBS and may occur in the future. The specific amount of credit losses will depend on the actual performance of the underlying loan collateral, payments received on the securities themselves, as well as the Bank’s future modeling assumptions. Declines in the fair values of AFS private label MBS with expected credit losses may result in the Bank recording an ACL. Those AFS private label MBS for which the Bank is recognizing recovery of credit losses through interest income may be more likely to incur additional credit losses due to the nature of the historic OTTI accounting model.

Credit and Counterparty Risk - Mortgage Loans, BOB Loans and Derivatives

Mortgage Loans. The Finance Agency has authorized the Bank to hold mortgage loans under the MPF Program whereby the Bank acquires mortgage loans from participating members in a shared credit risk structure. Conventional mortgage loans carry CE such that the Bank has a high degree of confidence that it will be paid principal and interest in all material respects, even under reasonably likely adverse changes to expected economic conditions. Loans are assessed by a third-party credit model at acquisition, and a CE is calculated based on loan attributes and the Bank’s risk tolerance with respect to its MPF portfolio.

The Bank had net mortgage loans held for portfolio of $4.6 billion and $4.7 billion at December 31, 2022 and December 31, 2021, respectively, after an allowance for credit losses of $3.2 million and $3.4 million, respectively. The tables and graphs below present additional mortgage loan portfolio statistics including portfolio balances categorized by product. The data in the FICO and LTV ratio range graphs is based on original FICO scores and LTV ratios and unpaid principal balance for the loans remaining in the portfolio at December 31, 2022 and December 31, 2021. The geographic breakdown graphs are also based on the unpaid principal balance at December 31, 2022 and December 31, 2021.


(dollars in millions)	December 31, 2022				December 31, 2021
	Balance		% of Total		Balance		% of Total
Conventional loans:
MPF 35	$	2,384.2	52.6	%	$	2,216.6	48.3	%
MPF Original	1,893.2		41.8		2,071.0		45.1
MPF Plus	138.5		3.1		173.1		3.8
Total conventional loans	$	4,415.9	97.5	%	$	4,460.7	97.2	%
Government-insured loans:
MPF Government	112.8		2.5		130.0		2.8
Total par value	$	4,528.7	100.0	%	$	4,590.7	100.0	%


(dollars in millions)	2022			2021
Mortgage loans interest income	$	135.1		$	126.4
Average mortgage loans portfolio balance	$	4,657.2		$	4,798.1
Average yield	2.90		%	2.63		%
Weighted average coupon (WAC)	3.65		%	3.78		%
Weighted average estimated life (WAL)	7.9 years			6.1 years

Underwriting Standards. Purchased mortgage loans must meet certain underwriting standards established in the MPF Program guidelines. Key standards and/or eligibility guidelines include the following loan criteria:

a.Conforming loan size, established annually; may not exceed the loan limits set by the Finance Agency;

b.Fixed-rate, fully-amortizing loans with terms from 5 to 30 years;

c.Secured by first lien mortgages on owner-occupied residential properties and second homes;

d.Generally, 95% maximum LTV; all LTV ratio criteria generally are based on the loan purpose, occupancy and borrower citizenship status; all loans with LTV ratios above 80% require PMI coverage; and

e.Unseasoned or current production with up to 24 payments made by the borrowers.

The following types of mortgage loans are not eligible for delivery under the MPF Program: (1) mortgage loans that are not ratable by S&P; (2) mortgage loans not meeting the MPF Program eligibility requirements as set forth in the MPF Guides and agreements; and (3) mortgage loans that are classified as high cost, high rate, Home Ownership and Equity Protection Act (HOEPA) loans, or loans in similar categories defined under predatory lending or abusive lending laws.

Under the MPF Program, the FHLBank of Chicago (in its role as MPF Provider) and the PFI both conduct quality assurance reviews on a sample of the conventional mortgage loans to ensure compliance with MPF Program requirements. The PFI may be required to repurchase at book value the individual loans which fail these reviews. Subsequent to this quality assurance review, any loans which are discovered to breach representations and warranties may be required to be repurchased by the PFI. Additionally, MPF Government residential mortgage loans which are 90 days or more past due are contractually permitted to be repurchased by the PFI. For 2022 and 2021, the Bank repurchased conventional and government mortgage loans of $19.5 million or 3.5% and $11.4 million or 0.9%, respectively, of total funded loans.

Layers of Loss Protection. The Bank is required to put a CE structure in place at purchase that assures that, on any mortgage loans acquired, the Bank has a high degree of confidence that it will be paid the principal and interest in all material respects, even under reasonably likely adverse changes to expected economic conditions. The PFI must bear a specified portion of the direct economic consequences of actual loan losses on the individual mortgage loans or pool of loans, which may be provided by a CE obligation or SMI. Each MPF product structure has various layers of loss protection as presented below.


Layer	MPF 35	MPF Original	MPF Plus
First	Borrower’s equity in the property	Borrower’s equity in the property	Borrower’s equity in the property
Second (required for mortgage loans with LTV greater than 80%)	PMI issued by qualified mortgage insurance companies (if applicable)	PMI issued by qualified mortgage insurance companies (if applicable)	PMI issued by qualified mortgage insurance companies (if applicable)
Third	Bank FLA (1) (upfront amount)	Bank FLA (1) (allocated amount)	Bank FLA (1) (upfront amount)
Fourth	PFI CE amount (2)	PFI CE amount (2)	SMI and/or PFI CE amount, if applicable (2)
Final	Bank loss	Bank loss	Bank loss

Notes:

(1) The FLA either builds over time (allocated amount) or is an amount equal to an agreed-upon percentage of the aggregate balance of the mortgage loans purchased (upfront amount). The Bank does not receive fees in connection with the FLA.

(2) The PFI’s CE amount for each pool of loans, together with any PMI or SMI, is sized at the time of loan purchase to equal the amount of losses in excess of the FLA to the equivalent of AMA Investment Grade.

By credit enhancing each master commitment, the PFI maintains an interest in the performance of the mortgage loans it sells to the Bank and may service for the Bank. For managing this risk, the PFI is paid a monthly CE fee by the Bank. CE fees are recorded as an offset to mortgage loan net interest income in the Statement of Income. For 2022 and 2021, CE fees were $5.4 million and $5.5 million, respectively. Performance-based CE fees paid are reduced by losses absorbed through the FLA, where applicable.

MPF 35. Under MPF 35, the FLA is equal to a specified percentage of the amount of loans funded in the Master Commitment. Loan losses not covered by PMI, but not to exceed the FLA, are recorded as losses by the Bank. Losses in excess of FLA are allocated to the PFI under its CE obligation. The PFI is paid a fixed CE fee and a performance-based fee for providing the CE obligation. Losses incurred by the Bank up to its exposure under the FLA may be recaptured through recovery of future performance-based CE fees earned by the PFI. Any loan losses in excess of both the FLA and the CE amounts are recorded as losses by the Bank.

MPF Original. Under MPF Original, the FLA is zero on the day the first loan is purchased and increases steadily over the life of the Master Commitment based on the month-end outstanding aggregate principal balance. Loan losses not covered by PMI, but not to exceed the FLA, are recorded as losses by the Bank. Losses in excess of FLA are allocated to the PFI under its CE obligation for each pool of loans. The PFI is paid a fixed CE fee for providing this CE obligation. Loan losses in excess of both the FLA and the CE amount are recorded as losses by the Bank.

MPF Plus. MPF Plus has the same structure as MPF 35, with the exception of the PFI’s CE obligation. Under MPF Plus, the PFI may obtain an SMI policy to cover its CE obligation to the Bank. If applicable, the SMI policy has a deductible that approximates the FLA. Since 2016, the Bank has not offered the MPF Plus product.

The following table presents the outstanding balances in the FLAs for the MPF Original, MPF Plus, and MPF 35 products.


(in millions)	MPF 35		MPF Original		MPF Plus		Total
December 31, 2022	$	17.7	$	8.1	$	14.9	$	40.7
December 31, 2021	16.1		7.3		15.0		38.4

Mortgage Insurers. The Bank’s MPF Program currently has credit exposure to nine mortgage insurance companies which provide PMI and/or Supplemental Mortgage Insurance (SMI) for the Bank’s various products. To be active, the mortgage insurance company must be approved as a qualified insurer in accordance with the AMA regulation. At least every two years, the Bank reviews the qualified insurers to determine if they continue to meet the financial and operational standards set by the Bank.

When a conventional mortgage loan requires PMI, the MPF Program modeling applied to the Bank’s acquisitions requires additional CE from the PFI to compensate for the mortgage insurer rating when it is below BBB+. The unpaid principal balance and maximum coverage outstanding for seriously delinquent loans with PMI as of December 31, 2022 was $8.4 million and $2.5 million, respectively. The corresponding amounts at December 31, 2021 were $10.3 million and $3.2 million.

The MPF Plus product required SMI under the MPF Program when each pool was established. At December 31, 2022, five of the 14 MPF Plus pools still have SMI policies in place. The Bank does not currently offer the MPF Plus product and has not purchased loans under MPF Plus Commitments since July 2006. Per MPF Program guidelines, the existing MPF Plus product exposure is required to be secured by the PFI once the SMI company is rated below AA-. As of December 31, 2022, all of the SMI exposure is fully collateralized.

BOB Loans. See Note 1 - Summary of Significant Accounting Policies in Item 8. in this Form 10-K for a description of the BOB program. The allowance for credit losses on BOB loans was $3.3 million at December 31, 2022 and $3.2 million at December 31, 2021.

Derivative Counterparties. To manage interest rate risk, the Bank enters into derivative contracts. Derivative transactions may be either executed with a counterparty (referred to as uncleared derivatives) or cleared through a Futures Commission Merchant (i.e., clearing agent) or a Swap Execution Facility with a Derivatives Clearing Organization (referred to as cleared derivatives). For uncleared derivatives, the Bank transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. The Bank is not a derivatives dealer and does not trade derivatives for short-term profit.

The Bank uses either CME Clearing or LCH Ltd as the Clearing House for all its cleared derivative transactions. Variation margin payments are characterized as daily settlement payments, rather than collateral. Initial margin is considered cash collateral. The Bank is subject to credit risk due to the risk of non-performance by counterparties to its derivative transactions. The amount of credit risk on derivatives depends on the extent to which netting procedures, collateral requirements, daily settlement and other credit enhancements are used and are effective in mitigating the risk. The Bank manages credit risk through credit analysis, collateral management, and other credit enhancements.

Uncleared Derivatives. The Bank is subject to non-performance by counterparties to its uncleared derivative transactions. The Bank requires collateral on uncleared derivative transactions. Generally, the Bank's ISDA agreements for uncleared derivatives have collateral delivery thresholds set to zero (subject to minimum transfer amounts). The Bank has a small number of legacy trades that require collateral amounts from its counterparties based on credit rating. As a result of these risk mitigation initiatives, the Bank does not anticipate any credit losses on its uncleared derivative transactions with counterparties as of December 31, 2022. The Bank’s total net credit exposure to uncleared derivative counterparties is immaterial.

Cleared Derivatives. The Bank is subject to credit risk exposure to the Clearing Houses and clearing agent. The requirement that the Bank post initial margin and exchange variation margin settlement payments, through the clearing agent, to the Clearing Houses, exposes the Bank to institutional credit risk in the event that the clearing agent or the Clearing Houses fail to meet their obligations. Initial margin is the amount calculated based on anticipated exposure to future changes in the value of a swap and protects the Clearing Houses from market risk in the event of default by one of its clearing agents. Variation margin is the amount accumulated through daily settlement of the current exposure arising from changes in the market value of the position since the trade was executed. The Bank's use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral postings and variation margin settlement payments are made daily for changes in the value of cleared derivatives through a clearing agent. The Bank does not anticipate any credit losses on its cleared derivatives as of December 31, 2022.

The contractual or notional amount of derivative transactions reflects the involvement of the Bank in the various classes of financial instruments. The maximum credit risk of the Bank with respect to derivative transactions is the estimated cost of replacing the derivative transactions if there is a default, minus the value of any related collateral, including initial margin and variation margin settlements on cleared derivatives. In determining maximum credit risk, the Bank considers accrued interest receivables and payables as well as the netting requirements to net assets and liabilities. The following table presents the derivative positions with non-member counterparties and member institutions to which the Bank has credit exposure at December 31, 2022 and December 31, 2021.


(in millions)	December 31, 2022
Credit Rating (1)	Notional Amount		Fair Value Before Collateral		Cash Collateral Pledged To (From) Counterparties		Net Credit Exposure to Counterparties
Non-member counterparties
Asset positions with credit exposure:
Uncleared derivatives

A	$	250.0	$	0.9	$	(0.6)	$	0.3

Cleared derivatives	$	12,157.3	$	12.7	$	170.4	$	183.1
Liability positions with credit exposure:
Uncleared derivatives
AA	$	50.0	$	(0.4)	$	0.6	$	0.2
A	3,409.3		(129.5)		131.3		1.8

Cleared derivatives (2)	$	35,358.3	$	—	$	43.7	$	43.7
Total derivative positions with credit exposure to non-member counterparties	$	51,224.9	$	(116.3)	$	345.4	$	229.1
Member institutions (2)	10.3		—		—		—
Total	$	51,235.2	$	(116.3)	$	345.4	$	229.1
Derivative positions without credit exposure	20,966.6
Total notional	$	72,201.8


(in millions)	December 31, 2021
Credit Rating (1)	Notional Amount		Fair Value Before Collateral		Cash Collateral Pledged To (From) Counterparties		Net Credit Exposure to Counterparties
Non-member counterparties
Asset positions with credit exposure:




Cleared derivatives	$	16,504.7	$	—	$	182.5	$	182.5
Liability positions with credit exposure:
Uncleared derivatives
A	$	1,435.0	$	(6.7)	$	6.9	$	0.2
BBB	1,241.9		(5.8)		5.9		0.1

Total derivative positions with credit exposure to non-member counterparties	$	19,181.6	$	(12.5)	$	195.3	$	182.8
Member institutions (2)	24.8		—		—		—
Total	$	19,206.4	$	(12.5)	$	195.3	$	182.8
Derivative positions without credit exposure	8,505.6
Total notional	$	27,712.0

Notes:

(1) This table does not reflect any changes in rating, outlook or watch status occurring after December 31, 2022. The ratings presented in this table represent the lowest long-term counterparty credit rating available for each counterparty based on the NRSROs used by the Bank.

(2) Member institutions include mortgage delivery commitments.

The Bank annually underwrites each counterparty and country and regularly monitors NRSRO rating actions and other publications to assess credit risk and determine if there have been any changes to credit quality. This includes actively monitoring counterparties with an elevated risk profile and assessing approximate indirect exposure to foreign sovereign debt.

Liquidity and Funding Risk

As a wholesale bank, the Bank employs financial strategies which enable it to expand and contract its assets, liabilities and capital in response to changes in member credit demand, membership composition and other market factors. In addition, the Bank is required to maintain a level of liquidity in accordance with the FHLBank Act, Finance Agency regulations and policies established by its management and board of directors. The Bank’s liquidity resources are designed to support these strategies and requirements through a focus on maintaining a liquidity and funding balance between its financial assets and financial liabilities.

Asset/Liability Maturity Profile. The Bank is focused on maintaining adequate liquidity and funding balances with its financial assets and financial liabilities, and the FHLBanks work collectively to manage system-wide liquidity and funding needs. The Bank monitors the funding balance between financial assets and financial liabilities and is committed to prudent risk management practices and complies with FHFA requirements regarding this funding balance. 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.

Sources of Liquidity. The Bank’s primary sources of liquidity are proceeds from the issuance of consolidated obligations and a liquidity investment portfolio, as well as proceeds from the issuance of capital stock.

Consolidated Obligations. The Bank’s ability to operate its business, meet its obligations and generate net interest income depends primarily on the ability to issue large amounts of various debt structures at attractive rates. Consolidated obligation bonds and discount notes, along with member deposits and capital, represent the primary funding sources used by the Bank to support its asset base. Consolidated obligations benefit from the Bank’s GSE status; however, they are not obligations of the U.S., and the U.S. government does not guarantee them. Consolidated obligation bonds and discount notes are rated Aaa with stable outlook/P-1 by Moody’s and AA+ with stable outlook/A-1+ by S&P as of December 31, 2022. These ratings measure the likelihood of timely payment of principal and interest. See Note 9 - Consolidated Obligations of the audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K for additional information regarding the Bank’s consolidated obligations.

Liquidity Investment Portfolio. The Bank’s liquidity for regulatory purposes is comprised of cash, interest-bearing deposits, certificates of deposit, Federal funds sold, securities purchased under agreements to resell, and U.S. Treasury obligations classified as trading or AFS.

Contingency Liquidity. If a market or operational disruption occurred that prevented the issuance of new consolidated obligations or discount notes, the Bank could meet its obligations by: (1) allowing short-term liquid investments to mature; (2) purchasing Federal funds; (3) using eligible securities as collateral for repurchase agreement borrowings; and (4) if necessary, allowing advances to mature without renewal. The Bank’s GSE status and the FHLBank System consolidated obligation credit rating, which reflects the fact that all 11 FHLBanks share a joint and several liability on the consolidated obligations, have historically provided excellent capital market access.

The Bank’s liquidity measures are estimates which are dependent upon certain assumptions which may or may not prove valid in the event of an actual complete capital market disruption. Management believes that under normal operating conditions, routine member borrowing needs and consolidated obligation maturities could be met under these requirements; however, under extremely adverse market conditions, the Bank’s ability to meet a significant increase in member loan demand could be impaired without immediate access to the consolidated obligation debt markets.

The Bank’s access to the capital markets has never been interrupted to the extent the Bank’s ability to meet its membership needs and obligations was compromised, and the Bank currently has no reason to believe that its ability to issue consolidated obligations will be impeded to that extent. Specifically, the Bank’s sources of contingency liquidity include maturing overnight and short-term investments, maturing advances, unencumbered repurchase-eligible assets, trading securities, AFS securities, certificates of deposits and MBS repayments. Uses of contingency liquidity include net settlements of consolidated obligations, member loan commitments, mortgage loan purchase commitments, deposit outflows and maturing other borrowed funds. Excess contingency liquidity is calculated as the difference between sources and uses of contingency liquidity. Excess contingency liquidity as of December 31, 2022 and December 31, 2021 was approximately $29.3 billion and $15.7 billion, respectively.

The OF has developed a standard methodology for the allocation of the proceeds from the issuance of consolidated obligations when consolidated obligations cannot be issued in sufficient amounts to satisfy all FHLBank demand for funding during periods of financial distress and when its existing allocation processes are deemed insufficient. In general, this methodology provides that the proceeds in such circumstances will be allocated among the FHLBanks based on relative FHLBank total regulatory capital unless the OF determines that there is an overwhelming reason to adopt a different allocation method. As is the case during any instance of a disruption in the Bank's ability to access the capital markets, market conditions or this allocation could adversely impact the Bank's ability to finance operations, which could thereby adversely impact its financial condition and results of operations.

In addition, by law, the Secretary of the Treasury may acquire up to $4 billion of consolidated obligations of the FHLBanks. This authority may be exercised only if alternative means cannot be effectively employed to permit the FHLBanks to continue to supply reasonable amounts of funds to the mortgage market, and the ability to supply such funds is substantially impaired because of monetary stringency and a high level of interest rates. Any funds borrowed shall be repaid by the FHLBanks at the earliest practicable date.

Funding and Debt Issuance. Changes or disruptions in the capital markets could limit the Bank’s ability to issue consolidated obligations, which could impact the Bank's liquidity and cost of funds. During 2022, the Bank maintained continual access to funding. Access to short-term debt markets has been reliable because investors, driven by increased liquidity preferences and risk aversion have sought the FHLBank’s short-term debt as an asset of choice, including funding indexed to Secured Overnight Financing Rate (SOFR). This has led to advantageous funding opportunities and increased utilization of debt maturing in one year or less. The FHLBanks have maintained comparatively stable access to funding through a diverse investor base at relatively favorable spreads to U.S. Treasury rates.

Refinancing Risk. There are inherent risks in utilizing short-term funding to support longer-dated assets and the Bank may be exposed to refinancing and investor concentration risks (collectively, refinancing risk). Refinancing risk includes the risk the Bank could have difficulty in rolling over short-term obligations when market conditions change. In managing and monitoring the amounts of financial assets that require refinancing, the Bank considers their contractual maturities, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments, embedded call optionality, and scheduled amortizations). The Bank and the Office of Finance (OF) jointly monitor the combined refinancing risk of the FHLBank System. In managing and monitoring the amounts of assets that require refunding, the Bank may consider contractual maturities of the financial assets, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments and scheduled amortizations).

Interest Rate Risk. The Bank may use a portion of the short-term consolidated obligations issued to fund both short- and long-term variable rate-indexed assets. However, funding longer-term variable rate-indexed assets with shorter-term liabilities generally does not expose the Bank to interest rate risk because the rates on the variable rate-indexed assets reset similar to the liabilities. The Bank measures and monitors interest rate-risk with commonly used methods and metrics, which include the calculations of market value of equity, duration of equity, and duration gap.

Regulatory Liquidity Requirements. The Bank is required to maintain a level of liquidity in accordance with certain Finance Agency guidance. Under these policies and guidelines, the Bank is required to maintain contingency liquidity to meet liquidity needs in an amount at least equal to its anticipated net cash outflows under certain scenarios. One scenario assumes that the Bank cannot access the capital markets for a period of 20 days and during that time members would renew any maturing, prepaid or called advances. In addition, the Bank is required to perform and report to the Finance Agency the results of an annual liquidity stress test. During 2022, the Bank was in compliance with the liquidity requirements except for one day, which non-compliance was a result of significant advance demand.

Negative Pledge Requirement. Finance Agency regulations require the Bank to maintain qualifying assets free from any lien or pledge in an amount at least equal to its portion of the total consolidated obligations outstanding issued on its behalf. Qualifying assets meeting the negative pledge requirement are defined as: (1) cash; (2) obligations of, or fully guaranteed by, the United States; (3) secured advances; (4) mortgages which have any guaranty, insurance or commitment from the United States or a Federal agency; and (5) investments described in Section 16(a) of the Act, which includes securities that a fiduciary or trust fund may purchase under the laws of any of the three states in which the Bank operates. The Bank held total negative pledge qualifying assets in excess of total consolidated obligations of $5.6 billion at December 31, 2022 and $3.8 billion at December 31, 2021. The FHLBanks will continue to be required to operate individually and collectively to ensure that consolidated obligations maintain a high level of acceptance and are perceived by investors as presenting a low level of credit risk.

Joint and Several Liability. Although the Bank is primarily liable for its portion of consolidated obligations, (i.e., those issued on its behalf), the Bank is also jointly and severally liable with the other 10 FHLBanks for the payment of principal and interest on consolidated obligations of all the FHLBanks. The Finance Agency, in its discretion and notwithstanding any other provisions, may at any time order any FHLBank to make principal or interest payments due on any consolidated obligation, even in the absence of default by the primary obligor. To the extent that an FHLBank makes any payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank shall be entitled to reimbursement from the non-paying FHLBank, which has a corresponding obligation to reimburse the FHLBank to the extent of such assistance and other associated costs. However, if the Finance Agency determines that the non-paying FHLBank is unable to satisfy its obligations, then the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis the Finance Agency may determine. Finance Agency regulations govern the issuance of debt on behalf of the FHLBanks and authorize the FHLBanks to issue consolidated obligations, through the OF as its agent. The Bank is not permitted to issue individual debt without Finance Agency approval. See Note 9 - Consolidated Obligations of the audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K for additional information.

Consolidated obligation bonds and discount notes outstanding for each of the FHLBanks acting as primary obligor are presented in the following table, exclusive of combining adjustments. The Bank’s total consolidated obligation bonds and discount notes represented 7.8% at December 31, 2022 and 5.2% at December 31, 2021 of the total FHLBank System consolidated obligations.


	December 31, 2022						December 31, 2021
			Discount						Discount
(in millions - par value)	Bonds		Notes		Total		Bonds		Notes		Total
Atlanta	$	104,200.6	$	40,005.3	$	144,205.9	$	46,445.6	$	25,507.0	$	71,952.6
Boston	32,898.9		27,109.2		60,008.1		26,725.2		2,275.5		29,000.7
Chicago	61,273.8		59,814.2		121,088.0		63,602.8		24,564.6		88,167.4
Cincinnati	59,743.2		41,007.5		100,750.7		24,589.4		29,844.0		54,433.4
Dallas	62,442.0		46,634.9		109,076.9		44,773.4		11,004.4		55,777.8
Des Moines	84,572.4		70,002.2		154,574.6		55,078.5		22,355.0		77,433.5
Indianapolis	42,002.1		27,533.7		69,535.8		42,550.3		12,117.8		54,668.1
New York	87,515.4		62,295.7		149,811.1		54,514.7		42,204.4		96,719.1
Pittsburgh	57,515.3		34,007.1		91,522.4		23,135.4		10,494.9		33,630.3
San Francisco	76,907.0		36,158.5		113,065.5		22,862.2		23,988.7		46,850.9
Topeka	43,106.5		24,997.0		68,103.5		37,658.3		6,569.6		44,227.9
Total FHLBank System	$	712,177.2	$	469,565.3	$	1,181,742.5	$	441,935.8	$	210,925.9	$	652,861.7

Operational and Business Risks

Operational Risk. Operational Risk is defined as the potential for loss resulting from inadequate or failed internal processes, people, and systems, or from external events and encompasses risks related to housing mission-related activities, including the Bank’s member products and services activities and those associated with affordable housing programs or goals and other Bank business activities. The Bank considers various sources of risk of unexpected loss, including human error, fraud, unenforceability of legal contracts, deficiencies in internal controls and/or information systems, and the impact of cyber-security attacks, vendor breakdown, or damage from fire, theft, natural disaster or acts of terrorism. Generally, the category of operational risk includes loss exposures of a physical or procedural nature. Specifically, operational risk includes compliance, fraud, information/transaction, legal, cyber, vendor, people, succession and model risk. The Bank has established policies and procedures to manage each of the specific operational risks.

Business areas retain primary responsibility for identifying, assessing and reporting their operational risks. To assist them in discharging this responsibility and to ensure that operational risk is managed consistently throughout the organization, the Bank has an effective operational risk management framework, which includes quantitative and qualitative key risk indicators, as well as a Bank-wide compliance program designed to promote awareness of compliance requirements and monitor compliance activities. Some operational risk may also result from external factors, such as the failure of other parties with which the Bank conducts business to adequately address their own operational risks (see additional discussion below). In addition, the Bank’s Internal Audit department reports directly to the Audit Committee of the Board and regularly monitors compliance with established policies and procedures.

The Bank also experiences ongoing operational risks that are similar to those of other large financial institutions. The Bank relies on third-party vendors and other service providers for ongoing support of business activities. Disruption or failure of service or breach of security at one of these vendors or other service providers could impact the Bank’s ability to conduct business or expose the Bank to fraud, financial loss loss of intellectual property or confidential information. The Bank has processes in place to manage vendor and third-party risks. The Bank is also exposed to the risk that a catastrophic event could result in significant business disruption and an inability to process transactions through normal business processes. To mitigate this risk, the Bank maintains and tests business continuity plans and has established backup facilities for critical business processes and systems away from its headquarters. The Bank also has a reciprocal backup agreement in place with another FHLBank to provide its members short-term loans and debt servicing in the event that Pittsburgh facilities are inoperable. The results of the Bank’s periodic business continuity tests are presented annually to the Board. Management can make no assurances that these measures will be sufficient to respond to the full range of catastrophic events that might occur.

The Bank's business is dependent upon its ability to effectively exchange and process information using its computer information systems. The Bank's products and services require a complex and sophisticated computing environment, which includes licensed or purchased, custom-developed software, IaaS and SaaS. The effectiveness and efficiency of the Bank's operations is dependent upon the continued functionality of technology solutions and systems, which may require ongoing expenditures, as well as the ability to sustain ongoing operations during technology implementations, upgrades or patches. If the Bank were unable to sustain its technological capabilities, it may not be able to remain competitive, and its business, financial condition and profitability may be significantly compromised. To advance its disaster recovery and continuous operations, the Bank continues to take steps to review and improve its recovery facilities and processes through its business continuity plan. Nonetheless, the Bank cannot guarantee the effectiveness of its business continuity plan or other related policies, procedures and systems to protect the Bank in any particular future situation.

The Bank maintains insurance, including director and officer liability protection and coverage for cyber-related incidents, as well as other insurance protection, as deemed appropriate. The Bank regularly reviews its insurance coverage for adequacy as well as the financial claims-paying ability of its insurance carriers.

While the Bank’s business operations have not been significantly disrupted to date, they may be disrupted if significant portions of the Bank’s workforce are unable to work effectively due to illness, or other restrictions in connection with the COVID-19 or other pandemic. The Bank is reliant on third-party vendors who may also be impacted by a pandemic, including by stress on supply chains. Vendor personnel may be working remotely and/or the vendors could have a shortage of personnel. The Bank has not experienced material vendor issues related to the pandemic and continues to monitor vendors for factors such as disruption or delays which could impact the Bank’s operating results or the Bank’s ability to provide services to members.

Business Risk. Business risk is the possibility of an adverse impact on the Bank’s profitability or financial or business strategies resulting from external factors that may occur in the short-term and/or long-term. This risk includes the potential for strategic business constraints to be imposed through regulatory, legislative or political changes. Examples of external factors may include, but are not limited to: financial services industry consolidation, a declining membership base, concentration of borrowing among members, the introduction of new competing products and services, increased non-Bank competition, quantitative easing, weakening of the FHLBank System’s GSE status, changes in the deposit and mortgage markets for the Bank’s members, changes that could occur as a result of new legislation, geopolitical instability, climate change and other factors that may have a significant direct or indirect impact on the ability of the Bank to achieve its mission and strategic objectives. The Bank’s various Risk Management Committees monitor economic indicators and the external environment in which the Bank operates for alignment with the Bank's risk appetite. A discussion of various Bank risks is also included in Item 1A. Risk Factors in this Form 10-K.

The Bank continues to evaluate its risks and monitor the changes in the market as it relates to the cessation of LIBOR and the transition to an alternative rate (e.g., SOFR). Key LIBOR settings will cease as of June 30, 2023. The Bank has a LIBOR transition plan which addresses considerations such as: exposure, fallback language, systems preparation, and balance sheet management.

The Bank has assessed its exposure to LIBOR by developing an inventory of impacted financial instruments. The Bank manages interest rate risk between its assets and liabilities by entering into derivatives to preserve the value of and earn stable returns on its assets. These instruments may have different fallback features when LIBOR ceases. The following table presents the Bank’s LIBOR-indexed financial instruments, excluding interest rate caps, by contractual maturity as of December 31, 2022.


(in millions)	Prior to June 30, 2023		Thereafter		Total
Assets Indexed to LIBOR
Principal Amount:
Advances	$	—	$	93.1	$	93.1
Investments:

MBS	2.0		3,814.0		3,816.0
Derivatives Hedging Assets (Receive Leg LIBOR)
Notional Amount:
Cleared	313.6		1,972.0		2,285.6
Uncleared	5.8		11.5		17.3
Total Principal/Notional Amounts	$	321.4	$	5,890.6	$	6,212.0

Liabilities Indexed to LIBOR


Derivatives Hedging Liabilities (Pay Leg LIBOR)
Notional Amount:
Cleared	$	85.0	$	60.0	$	145.0

Total Principal/Notional Amounts	$	85.0	$	60.0	$	145.0

To assess trigger events requiring potential fallback language, the Bank has evaluated its contracts. The Bank has also added or adjusted fallback language in advance contracts with its members. Similarly, fallback language has been added to consolidated obligation agreements. With respect to investments, the Bank believes that the LIBOR Act, which was signed into law in March 2022, will facilitate the transition of its LIBOR-based investments that lack adequate language/provisions to address LIBOR’s permanent cessation. With respect to derivatives, the Bank’s transition to an alternative rate will be facilitated by the ISDA fallback protocols, which includes CME’s conversion plan based on those protocols. The operational impact of adjusting terms and conditions to reflect the fallback language may be impacted by the number of financial instruments and counterparties.

The Bank continues to enhance its operational and modeling capabilities for alternative reference rates such SOFR by testing and installing vendor releases. From a balance sheet management perspective, the Bank has issued SOFR-indexed debt and SOFR-indexed advance products. Additionally, the Bank has been executing Overnight Index Swap (OIS) and SOFR indexed derivatives as alternative interest rate hedging strategies. The Bank is no longer issuing new financial instruments indexed to LIBOR. The following table presents the Bank’s variable rate financial instruments, excluding interest rate caps, by index as of December 31, 2022.


(in millions)	LIBOR		SOFR		OIS		Other		Total
Assets Indexed to a Variable Rate
Principal Amount:
Advances	$	93.1	$	34,535.8	$	—	$	3,830.2	$	38,459.1
Investments:

MBS	3,816.0		936.8		62.5		—		4,815.3
Derivatives Hedging Assets (Receive Leg Variable Rate)
Notional Amount	2,302.9		14,950.4		108.9		—		17,362.2
Total Principal/Notional Amounts	$	6,212.0	$	50,423.0	$	171.4	$	3,830.2	$	60,636.6

Liabilities Indexed to a Variable Rate
Principal Amount:
Consolidated Obligations	$	—	$	15,238.0	$	—	$	—	$	15,238.0
Derivatives Hedging Liabilities (Pay Leg Variable Rate)
Notional Amount	145.0		52,661.3		1,048.0		—		53,854.3
Total Principal/Notional Amounts	$	145.0	$	67,899.3	$	1,048.0	$	—	$	69,092.3

In 2021, the Finance Agency issued a Supervisory Letter to the FHLBanks regarding its expectations regarding an FHLBank’s use of alternative rates other than SOFR or other rates currently used by the Bank. The Supervisory Letter provides guidance on considerations, such as volume of underlying transactions, credit sensitivity, modeling risk and others, that an FHLBank should take into account prior to employing an alternative reference rate. In addition, if the Bank intends to use an alternative rate not already used, it needs to provide notice to the Finance Agency.

Item 7A: Quantitative and Qualitative Disclosures about Market Risk

See the Risk Management section of Item 7. Management’s Discussion and Analysis in this Form 10-K.

Item 8: Financial Statements and Supplementary Data

Management’s Report on Internal Control over Financial Reporting

The management of the Bank is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Bank’s internal control over financial reporting is designed by and under the supervision of the Bank’s management, including the Chief Executive Officer, Chief Operating Officer, and the Chief Financial Officer. The Bank’s internal controls over financial reporting are to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with GAAP in the United States of America.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Bank’s management assessed the effectiveness of the Bank’s internal control over financial reporting as of December 31, 2022. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the Internal Control-Integrated Framework (2013). Based on its assessment, management of the Bank determined that as of December 31, 2022, the Bank’s internal control over financial reporting was effective based on those criteria.

The effectiveness of the Bank’s internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, the Bank’s independent registered public accounting firm, as stated in their report that follows.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of the Federal Home Loan Bank of Pittsburgh

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying statements of condition of the Federal Home Loan Bank of Pittsburgh (the “FHLBank”) as of December 31, 2022 and 2021 and the related statements of income, comprehensive income, changes in capital and cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “financial statements”). We also have audited the FHLBank's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the FHLBank as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the FHLBank maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

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

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

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

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Interest-Rate Related Derivatives and Hedged Items

As described in Notes 7 and 14 to the financial statements, the FHLBank uses derivatives to manage its exposure to interest-rate risks and reduce funding costs, among other objectives. The total notional amount of derivatives as of December 31, 2022 was $72.2 billion, of which 96% were designated as hedging instruments, and the fair value of derivative assets and liabilities as of December 31, 2022 was $229.0 million and $13.4 million, respectively. The fair values of interest-rate related derivatives and hedged items are estimated using standard valuation techniques such as discounted cash flow analysis and comparisons to similar instruments. The discounted cash flow analysis uses market-observable inputs, such as discount rate, forward interest rate, and volatility assumptions.

The principal considerations for our determination that performing procedures relating to the valuation of interest-rate related derivatives and hedged items is a critical audit matter are the significant audit effort in evaluating the discount rate, forward interest rate, and volatility assumptions used to fair value these derivatives and hedged items, and the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included testing the effectiveness of controls relating to the valuation of interest-rate related derivatives and hedged items, including controls over the method, data and assumptions. These procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist in developing an independent range of fair values for a sample of interest-rate derivatives and hedged items and comparison of management’s estimate to the independently developed ranges. Developing the independent range of fair values involved testing the completeness and accuracy of data provided by management and independently developing the discount rate, forward interest rate, and volatility assumptions.

/s/ PricewaterhouseCoopers LLP

Pittsburgh, Pennsylvania

March 8, 2023

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

Federal Home Loan Bank of Pittsburgh

Statements of Income


	Year Ended December 31,
(in thousands)	2022		2021		2020
Interest income:
Advances	$	992,336	$	139,905	$	625,473
Interest-bearing deposits	47,166		1,038		6,474
Securities purchased under agreements to resell	53,294		587		8,220
Federal funds sold	81,947		2,706		28,331
Trading securities	7,426		14,182		48,208
Available-for-sale (AFS) securities	264,785		96,438		166,842
Held-to-maturity (HTM) securities	27,965		32,967		54,976
Mortgage loans held for portfolio	135,086		126,360		155,271
Total interest income	1,610,005		414,183		1,093,795
Interest expense:
Consolidated obligations - discount notes	464,352		6,701		179,597
Consolidated obligations - bonds	775,104		222,781		530,962
Deposits	11,000		311		1,851
Mandatorily redeemable capital stock and other borrowings	2,056		3,732		16,602
Total interest expense	1,252,512		233,525		729,012
Net interest income	357,493		180,658		364,783
Provision (reversal) for credit losses	5,796		(2,146)		4,383
Net interest income after provision (reversal) for credit losses	351,697		182,804		360,400
Noninterest income (loss):

Net gains (losses) on investment securities (Note 4)	(28,993)		(21,440)		47,327
Net gains (losses) on derivatives (Note 7)	14,244		5,893		(90,910)

Standby letters of credit fees	24,722		23,632		22,077
Other, net	1,322		4,280		2,300
Total noninterest income (loss)	11,295		12,365		(19,206)
Other expense:
Compensation and benefits	51,569		48,787		52,252
Other operating	47,947		39,528		40,814
Finance Agency	5,218		6,124		7,304
Office of Finance	5,780		4,715		5,149
Total other expense	110,514		99,154		105,519
Income before assessments	252,478		96,015		235,675
Affordable Housing Program (AHP) assessment (Note 10)	25,410		9,974		25,227
Net income	$	227,068	$	86,041	$	210,448

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

Federal Home Loan Bank of Pittsburgh

Statements of Comprehensive Income


	Year ended December 31,
(in thousands)	2022		2021		2020
Net income	$	227,068	$	86,041	$	210,448
Other comprehensive income (loss):
Net unrealized gains (losses) on AFS securities	(180,423)		(28,577)		46,733

Reclassification of net (gains) included in net income relating to hedging activities	—		—		(149)
Realized (gains) losses on AFS securities included in net income	(509)		—		—
Pension and post-retirement benefits	4,214		1,442		(1,084)
Total other comprehensive income (loss)	(176,718)		(27,135)		45,500
Comprehensive income	$	50,350	$	58,906	$	255,948

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

Federal Home Loan Bank of Pittsburgh

Statements of Condition


	December 31,
(in thousands)	2022		2021
ASSETS
Cash and due from banks (Note 3)	$	13,242	$	428,190
Interest-bearing deposits (Note 4)	2,471,135		528,476
Securities purchased under agreements to resell (Note 4)	3,200,000		1,670,000
Federal funds sold (Note 4)	3,050,000		1,975,000
Investment securities: (Note 4)
Trading securities	214,008		243,262
AFS securities, net; amortized cost of $12,265,009 and $12,354,656	12,190,560		12,467,293
HTM securities; fair value of $874,282 and $1,248,363	956,471		1,213,872
Total investment securities	13,361,039		13,924,427
Advances (Note 5)	68,856,236		14,124,375
Mortgage loans held for portfolio, net (Note 6)	4,590,888		4,676,183
Banking on Business (BOB) loans, net	22,998		22,501
Accrued interest receivable	310,081		74,660
Derivative assets (Note 7)	228,996		182,853
Other assets	36,552		44,609
Total assets	$	96,141,167	$	37,651,274


LIABILITIES AND CAPITAL
Liabilities
Deposits (Note 8)	$	553,279	$	1,087,507
Consolidated obligations (Note 9)
Discount notes	33,745,478		10,493,617
Bonds	56,471,455		23,105,738
Total consolidated obligations	90,216,933		33,599,355
Mandatorily redeemable capital stock (Note 11)	27,763		22,457
Accrued interest payable	287,539		59,123
AHP payable (Note 10)	75,828		81,152
Derivative liabilities (Note 7)	13,438		5,845
Other liabilities	68,272		60,183
Total liabilities	91,243,052		34,915,622
Commitments and contingencies (Note 15)
Capital (Note 11)
Capital stock - putable ($100 par value) issued and outstanding shares 34,284 and 12,270	3,428,405		1,227,050
Retained earnings:
Unrestricted	1,037,182		941,033
Restricted	499,055		457,378
Total retained earnings	1,536,237		1,398,411
Accumulated Other Comprehensive Income (Loss) (AOCI)	(66,527)		110,191
Total capital	4,898,115		2,735,652
Total liabilities and capital	$	96,141,167	$	37,651,274

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

Federal Home Loan Bank of Pittsburgh

Statements of Cash Flows


	Year Ended December 31,
(in thousands)	2022		2021		2020
OPERATING ACTIVITIES
Net income	$	227,068	$	86,041	$	210,448
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization (accretion)	152,040		10,329		(35,881)
Net change in derivative and hedging activities	825,987		288,817		(159,506)
Net realized (gains) from sales of AFS securities	(509)		—		—

Net change in fair value adjustments on trading securities	29,502		21,440		—
Other adjustments, net	7,548		(237)		6,399
Net change in:
Trading securities	—		—		2,475,647
Accrued interest receivable	(239,133)		16,033		102,814
Other assets	1,855		(677)		(2,178)
Accrued interest payable	228,423		(5,827)		(140,178)
Other liabilities	3,309		(29,237)		(9,035)
Net cash provided by (used in) operating activities	$	1,236,090	$	386,682	$	2,448,530
INVESTING ACTIVITIES
Net change in:
Interest-bearing deposits (including $290, $447 and $(683) (to)/from other FHLBanks)	$	(2,856,713)	$	317,376	$	520,307
Securities purchased under agreements to resell	(1,530,000)		(1,070,000)		1,600,000
Federal funds sold	(1,075,000)		(125,000)		1,920,000
Trading securities:
Proceeds	15,000		1,285,605		—
Purchases	(14,944)		(399,875)		—
AFS securities:
Proceeds (includes $577,197 from sales of AFS securities in 2022)	2,205,312		2,297,968		2,413,475
Purchases	(2,622,328)		(5,434,624)		(659,400)
HTM securities:
Proceeds	355,881		1,763,964		1,637,219
Purchases	(101,553)		(500,000)		(1,728,986)
Advances:
Repaid	308,278,196		29,551,622		335,084,344
Originated	(363,428,429)		(18,907,336)		(294,368,775)
Mortgage loans held for portfolio:
Principal collected	614,770		1,503,302		1,568,005
Purchases	(546,455)		(1,325,564)		(1,366,335)
Other investing activities, net	822		(1,751)		(220)
Net cash provided by (used in) investing activities	$	(60,705,441)	$	8,955,687	$	46,619,634






Federal Home Loan Bank of Pittsburgh Statements of Cash Flows (continued)

	Year Ended December 31,
(in thousands)	2022		2021		2020
FINANCING ACTIVITIES
Net change in deposits	$	(532,652)	$	163,300	$	342,926
Net proceeds from issuance of consolidated obligations:
Discount notes	353,808,520		172,798,211		259,821,983
Bonds	47,131,803		23,090,138		42,113,093
Payments for maturing and retiring consolidated obligations:
Discount notes	(330,717,062)		(171,813,150)		(273,411,300)
Bonds	(12,753,625)		(33,703,615)		(75,032,150)
Proceeds from issuance of capital stock	5,326,056		846,208		2,902,031
Payments for repurchase/redemption of capital stock	(3,118,892)		(1,145,930)		(4,389,729)
Payments for repurchase/redemption of mandatorily redeemable capital stock	(503)		(121,419)		(240,225)
Cash dividends paid	(89,242)		(64,381)		(168,365)
Partial recovery of prior capital distribution to Financing Corporation	—		—		8,541
Net cash provided by (used in) financing activities	$	59,054,403	$	(9,950,638)	$	(48,053,195)
Net increase (decrease) in cash and due from banks	$	(414,948)	$	(608,269)	$	1,014,969
Cash and due from banks at beginning of the period	428,190		1,036,459		21,490
Cash and due from banks at end of the period	$	13,242	$	428,190	$	1,036,459
Supplemental disclosures:
Cash activities:
Interest paid	$	874,226	$	280,039	$	897,787
AHP payments, net	30,734		31,008		35,330
Non-cash activities:
Capital stock reclassified to mandatorily redeemable capital stock	5,809		1,069		39,457

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

Federal Home Loan Bank of Pittsburgh

Statements of Changes in Capital

Years Ended December 31, 2022, 2021, and 2020


	Capital Stock - Putable			Retained Earnings
(in thousands)	Shares	Par Value		Unrestricted		Restricted		Total		AOCI		Total Capital
December 31, 2019	30,550	$	3,054,996	$	910,726	$	415,288	$	1,326,014	$	91,826	$	4,472,836
Adjustment for cumulative effect of accounting change - adoption of ASU 2016-13				113				$	113			113
Comprehensive income	—	—		168,358		42,090		210,448		45,500		255,948
Issuance of capital stock	29,020	2,902,031		—		—		—		—		2,902,031
Repurchase/redemption of capital stock	(43,898)	(4,389,729)		—		—		—		—		(4,389,729)
Shares reclassified to mandatorily redeemable capital stock	(394)	(39,457)		—		—		—		—		(39,457)
Partial recovery of prior capital distribution to Financing Corporation	—	—		8,541		—		8,541		—		8,541
Cash dividends	—	—		(168,365)		—		(168,365)		—		(168,365)
December 31, 2020	15,278	$	1,527,841	$	919,373	$	457,378	$	1,376,751	$	137,326	$	3,041,918


	Capital Stock - Putable			Retained Earnings
(in thousands)	Shares	Par Value		Unrestricted		Restricted		Total		AOCI		Total Capital
December 31, 2020	15,278	$	1,527,841	$	919,373	$	457,378	$	1,376,751	$	137,326	$	3,041,918

Comprehensive income (loss)	—	—		86,041		—		86,041		(27,135)		58,906
Issuance of capital stock	8,462	846,208		—		—		—		—		846,208
Repurchase/redemption of capital stock	(11,459)	(1,145,930)		—		—		—		—		(1,145,930)
Shares reclassified to mandatorily redeemable capital stock	(11)	(1,069)		—		—		—		—		(1,069)

Cash dividends	—	—		(64,381)		—		(64,381)		—		(64,381)
December 31, 2021	12,270	$	1,227,050	$	941,033	$	457,378	$	1,398,411	$	110,191	$	2,735,652


	Capital Stock - Putable				Retained Earnings
(in thousands)	Shares		Par Value		Unrestricted		Restricted		Total		AOCI		Total Capital
December 31, 2021	12,270		$	1,227,050	$	941,033	$	457,378	$	1,398,411	$	110,191	$	2,735,652
Comprehensive income	—		—		185,391		41,677		227,068		(176,718)		50,350
Issuance of capital stock	53,261		5,326,056		—		—		—		—		5,326,056
Repurchase/redemption of capital stock	(31,189)		(3,118,892)		—		—		—		—		(3,118,892)
Shares reclassified to mandatorily redeemable capital stock	(58)		(5,809)		—		—		—		—		(5,809)
Cash dividends	—		—		(89,242)		—		(89,242)		—		(89,242)
December 31, 2022	$	34,284	$	3,428,405	$	1,037,182	$	499,055	$	1,536,237	$	(66,527)	$	4,898,115

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

Federal Home Loan Bank of Pittsburgh

Notes to Financial Statements

Background Information

The Bank, a federally chartered corporation, is one of 11 district Federal Home Loan Banks (FHLBanks). Each FHLBank operates as a separate entity with its own management, employees and board of directors. The FHLBanks are government-sponsored enterprises (GSEs) that serve the public by increasing the availability of credit for residential mortgages and community development. The Bank provides a readily available, low-cost source of funds to its member institutions. The Bank is a cooperative, which means that current members own nearly all of the outstanding capital stock of the Bank. All holders of the Bank’s capital stock may, to the extent declared by the Board, receive dividends on their capital stock. Regulated financial depositories and insurance companies engaged in residential housing finance that maintain their principal place of business (as defined by Finance Agency regulation) in Delaware, Pennsylvania or West Virginia may apply for membership. Community Development Financial Institutions (CDFIs) which meet membership regulation standards are also eligible to become Bank members. State and local housing associates that meet certain statutory and regulatory criteria may also borrow from the Bank. While eligible to borrow, state and local housing associates are not members of the Bank and, as such, do not hold capital stock.

All members must purchase capital stock in the Bank. The amount of capital stock a member owns is based on membership requirements (membership asset value) and activity requirements (i.e., outstanding advances, letters of credit, and the principal balance of residential mortgage loans sold to the Bank). The Bank considers those members with capital stock outstanding in excess of 10% of total capital stock outstanding to be related parties. See Note 13 - Transactions with Related Parties for additional information.

The Federal Housing Finance Agency (Finance Agency), an independent agency in the executive branch of the U.S. government, supervises and regulates the FHLBanks, Federal Home Loan Mortgage Corporation (Freddie Mac), and Federal National Mortgage Association (Fannie Mae). The Finance Agency’s stated mission is to ensure the housing GSEs fulfill their mission by operating in a safe and sound manner to serve as a reliable source for liquidity and funding for the housing finance market throughout the economic cycle.

As provided by the Federal Home Loan Bank Act (FHLBank Act) and applicable regulations, consolidated obligations are joint and several obligations of all the FHLBanks and are the primary source of funds for the FHLBanks. These funds are primarily used to provide advances, purchase mortgages from members through the MPF® Program and purchase certain investments. See Note 9 - Consolidated Obligations for additional information. The Office of Finance (OF) is a joint office of the FHLBanks established to facilitate the issuance and servicing of the consolidated obligations of the FHLBanks and to prepare the combined quarterly and annual financial reports of all the FHLBanks. Deposits, other borrowings, and capital stock issued to members provide other funds. The Bank primarily invests these funds in short-term investments to provide liquidity. The Bank also provides member institutions with correspondent services, such as wire transfer, safekeeping and settlement with the Federal Reserve.

Notes to Financial Statements (continued)

Note 1 – Summary of Significant Accounting Policies

Basis of Presentation

These financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (GAAP).

Variable Interest Entities (VIEs). The Bank is not the primary beneficiary of any VIEs for which consolidation would be required.

Significant Accounting Policies

Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make subjective assumptions and estimates that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income and expense. The most significant of these estimates include those used in conjunction with fair value estimates and derivatives and hedging activities. Actual results could differ from these estimates significantly.

Fair Value. The fair value amounts, recorded on the Statement of Condition and in the note disclosures for the periods presented, have been determined by the Bank using available market and other pertinent information, and reflect the Bank’s best judgment of appropriate valuation methods. Although the Bank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any valuation technique. Therefore, these fair values may not be indicative of the amounts that would have been realized in current market transactions, although they do reflect the Bank’s judgment of how a market participant would estimate the fair values. See Note 14 - Estimated Fair Values for more information.

Financial Instruments Meeting Netting Requirements. The Bank presents certain financial instruments on a net basis when it has a legal right of offset and all other requirements for netting are met (collectively referred to as the netting requirements). For these financial instruments, the Bank has elected to offset its asset and liability positions, as well as cash collateral received or pledged.

The net exposure for these financial instruments can change on a daily basis; therefore, there may be a delay between the time this exposure change is identified and additional collateral is requested, and the time when this collateral is received or pledged. Likewise, there may be a delay for excess collateral to be returned. For derivative instruments that meet the netting requirements, any excess cash collateral received or pledged is recognized as a derivative liability or derivative asset. See Note 7 - Derivatives and Hedging Activities for additional information regarding these agreements.

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. These investments provide short-term liquidity and are carried at amortized cost. Accrued interest receivable is recorded separately on the Statement of Condition. Interest-bearing deposits can include certificates of deposit and bank notes not meeting the definition of a security. Federal funds sold consist of short-term, unsecured loans generally transacted with counterparties that are considered by the Bank to be of investment quality. The Bank treats securities purchased under agreements to resell as short-term collateralized loans that are classified as assets in the Statement of Condition.

ACL: These investments are evaluated quarterly for expected credit losses. If applicable, an ACL is recorded with a corresponding adjustment to the provision for credit losses. The Bank uses the collateral maintenance provision practical expedient for securities purchased under agreements to resell. Consequently, a credit loss would be recognized if there is a collateral shortfall which the Bank does not believe the counterparty will replenish in accordance with its contractual terms. The credit loss would be limited to the difference between the fair value of the collateral and the investment’s amortized cost. See Note 4 - Investments for details on the allowance methodologies relating to these investments.

Investment Securities. The Bank classifies investment securities as trading, AFS or HTM at the date of acquisition. Purchases and sales of securities are recorded on a trade date basis.

Trading. Securities classified as trading are carried at fair value. The Bank records changes in the fair value of these investments through noninterest income as “Net gains (losses) on investment securities.”

Notes to Financial Statements (continued)

Available-for-Sale (AFS). Securities that are not classified as HTM or trading are classified as AFS and are carried at fair value. The Bank records changes in the fair value of these securities in AOCI. For AFS securities that have been hedged and qualify as a fair value hedge, the Bank records the portion of the change in the fair value of the investment related to the risk being hedged in interest income within the “AFS securities” section together with the related change in the fair value of the derivative and records the remainder of the change in the fair value of the investment in AOCI as “Net unrealized gains (losses) on AFS securities.”

AFS ACL: AFS securities are evaluated quarterly for expected credit losses on an individual security basis. In assessing whether a credit loss exists, the Bank considers whether there would be a shortfall in receiving all cash flows contractually due. If a shortfall is projected to occur, the Bank recognizes an ACL. The ACL is limited to the amount of the AFS security’s unrealized loss, if any. If the AFS security is in an unrealized gain position, the ACL is zero. The ACL excludes uncollectible accrued interest receivable, which is measured separately. See Note 4 - Investments for details on the allowance methodologies relating to AFS securities.

If the Bank intends to sell an AFS security in an unrealized loss position, or more likely than not will be required to sell the security, any ACL is written off and the amortized cost basis is written down to the security’s fair value with any incremental impairment reported in earnings as net gains (losses) on investment securities.

For AFS securities with OTTI recognized prior to January 1, 2020, the accretable yield continues to be used prospectively. Based on the quarterly assessment of expected credit losses, if there is an improvement, the Bank will first recognize a benefit for credit losses up to the amount of the ACL. If the ACL is zero and the increase in cash flows is significant, the Bank will adjust the accretable yield prospectively.

Held-to-Maturity (HTM). Securities that the Bank has both the intent and ability to hold to maturity are classified as HTM and are carried at amortized cost, representing the amount at which an investment is acquired net of periodic principal repayments, amortization of premiums and accretion of discounts. Accrued interest receivable is recorded separately on the Statement of Condition.

Certain changes in circumstances may cause the Bank to change its intent to hold a security to maturity without calling into question its intent to hold other debt securities to maturity. Thus, the sale or transfer of an HTM security due to certain changes in circumstances, such as evidence of significant deterioration in the issuer’s creditworthiness or changes in regulatory requirements, is not considered to be inconsistent with its original classification. Other events that are isolated, nonrecurring, and unusual for the Bank that could not have been reasonably anticipated may cause the Bank to sell or transfer an HTM security without necessarily calling into question its intent to hold other debt securities to maturity. In addition, a sale of a debt security that meets either of the following two conditions would not be considered inconsistent with the original classification of that security:

(1) The sale occurs near enough to its maturity date (for example, within three months of maturity), or call date if exercise of the call is probable that interest-rate risk is substantially eliminated as a pricing factor and the changes in market interest rates would not have a significant effect on the security’s fair value, or

(2) The sale of a security occurs after the Bank has already collected a substantial portion (at least 85%) of the principal outstanding at acquisition due either to prepayments on the debt security or to scheduled payments on a debt security payable in equal installments (both principal and interest) over its term.

HTM ACL: HTM securities are evaluated quarterly for expected credit losses on a pool basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. An ACL is recorded with a corresponding adjustment to the provision for credit losses. The ACL excludes uncollectible accrued interest receivable, which is measured separately. There was no ACL recorded on the Bank’s HTM securities at December 31, 2022 or December 31, 2021. See Note 4 - Investments for details on the allowance methodologies relating to HTM securities.

Premiums and Discounts. The Bank amortizes purchased premiums and accretes purchased discounts on investment securities using the contractual level-yield method (contractual method). The contractual method recognizes the income effects of premiums and discounts over the contractual life of the securities based on the actual behavior of the underlying assets, including adjustments for actual prepayment activities, and reflects the contractual terms of the securities without regard to changes in estimated prepayments based on assumptions about future borrower behavior.

Notes to Financial Statements (continued)

Gains and Losses on Sales. The Bank computes gains and losses on sales of its investment securities using the specific identification method and includes these gains and losses in “Noninterest income (loss)”.

Advances. The Bank reports advances (secured loans to members, former members or housing associates) at amortized cost, which is cost, net of premiums and discounts (including discounts related to AHP) and hedging adjustments. Accrued interest receivable is recorded separately on the Statement of Condition. The Bank amortizes/accretes premiums, discounts and hedging adjustments to interest income using the contractual method. The Bank records interest on advances to interest income as earned.

Advances ACL: Advances are evaluated quarterly for expected credit losses. If deemed necessary, an ACL is recorded with a corresponding adjustment to the provision for credit losses. See Note 5 - Advances for details on the allowance methodology relating to advances.

Commitment Fees. The Bank records fees for standby letters of credit as a deferred credit when the Bank receives the fee and accretes them using the straight-line method over the term of the standby letter of credit.

Advance Modifications. In cases in which the Bank funds a new advance concurrently with or within a short period of time before or after the prepayment of an existing advance, the Bank evaluates whether the new advance meets the accounting criteria to qualify as a modification of an existing advance or whether it constitutes a new advance. The Bank compares the present value of cash flows on the new advance to the present value of cash flows remaining on the existing advance. If there is at least a 10% difference in the present value of cash flows or if, based on a qualitative assessment of the modifications made to the original contractual terms, the Bank will conclude that the modifications are more than minor, and the advance is accounted for as a new advance. In all other instances, the new advance is accounted for as a modification.

Prepayment Fees. The Bank charges a borrower a prepayment fee when the borrower prepays certain advances before the original maturity. In the event that a new advance is issued in connection with a prepayment of an outstanding advance, but the new advance does not qualify as a modification of an existing advance, any prepayment fee, net of hedging activities, is recorded in “Advances” in the interest income section of the Statement of Income. If a new advance qualifies as a modification of an existing advance, any prepayment fee, net of hedging activities, is deferred and amortized using the contractual method.

Mortgage Loans Held for Portfolio. The Bank participates in the MPF Program under which the Bank invests in residential mortgage loans, which are purchased from members that are Participating Financial Institutions (PFIs). The Bank manages the liquidity, interest-rate risk (including prepayment risk) and optionality of the loans, while the PFI may retain the marketing and servicing activities. The Bank and the PFI share in the credit risk of the conventional loans with the Bank assuming the first loss obligation limited by the First Loss Account (FLA), while the PFI assumes credit losses in excess of the FLA, referred to as Credit Enhancement (CE) obligation, up to the amount of the CE obligation as specified in the master commitment. The Bank assumes losses in excess of the CE obligation.

The Bank classifies mortgage loans that it has the intent and ability to hold for the foreseeable future as held for portfolio. Accordingly, these mortgage loans are recorded at amortized cost, which is cost, net of periodic principal repayments and amortization of premiums and accretion of discounts, hedging adjustments, and charge-offs. Accrued interest receivable is recorded separately on the Statement of Condition.

MPF ACL: The Bank performs a quarterly assessment of its mortgage loans to estimate expected credit losses. An ACL is recorded with a corresponding adjustment to the provision for credit losses. The Bank measures expected credit losses on mortgage loans on a collective basis, pooling loans with similar risk characteristics. If a mortgage loan no longer shares risk characteristics with other loans, it is removed from the pool and evaluated for expected credit losses on an individual basis.

When developing the ACL, the Bank measures the estimated loss over the life of a mortgage loan and incorporates the credit enhancements of the MPF Program. If a mortgage loan is purchased at a discount, the discount does not offset the ACL. The Bank includes estimates of expected recoveries within the ACL when expected lifetime credit losses are less than the amounts previously charged-off. The allowance excludes uncollectible accrued interest receivable, as the Bank writes-off accrued interest receivable by reversing interest income if a mortgage loan is placed on nonaccrual status.

The Bank does not purchase mortgage loans with credit deterioration present at the time of purchase. See Note 6 - Mortgage Loans Held for Portfolio for details on the allowance methodologies relating to mortgage loans.

Notes to Financial Statements (continued)

Premiums and Discounts. The Bank defers and amortizes/accretes mortgage loan premiums and discounts paid to and received from the Bank’s PFIs, deferred loan fees or costs, and hedging basis adjustments to interest income using the contractual method.

CE Fees. For conventional mortgage loans, PFIs retain a portion of the credit risk on the loans they sell to the Bank by providing CE either through a direct liability to pay credit losses up to a specified amount or through a contractual obligation to provide Supplemental Mortgage Insurance (SMI). PFIs are paid a CE fee for assuming credit risk, and in some instances all or a portion of the CE fee may be performance-based. CE fees are paid monthly based on the remaining unpaid principal balance of the loans in a master commitment. CE fees are recorded as an offset to mortgage loan interest income. To the extent the Bank experiences losses in a master commitment, it may be able to recapture CE fees paid to the PFIs to offset these losses.

Other Fees. The Bank may receive other non-origination fees, such as delivery commitment extension fees, pair-off fees and price adjustment fees. Delivery commitment extension fees are received when a PFI requests an extension of the delivery commitment period beyond the original stated expiration. These fees compensate the Bank for lost interest as a result of late funding and are recorded as part of the mark-to-market of the delivery commitment derivatives, and as such, eventually become basis adjustments to the mortgage loans funded as part of the delivery commitment. Pair-off fees represent a make-whole provision and are received when the amount funded is less than a specific percentage of the delivery commitment amount and are recorded in noninterest income. Price adjustment fees are received when the amount funded is greater than a specified percentage of the delivery commitment amount; they represent purchase price adjustments to the related loans acquired and are recorded as a part of the carrying value of the loans.

Nonaccrual Loans. The Bank places a conventional mortgage loan on nonaccrual status if it is determined that either (1) the collection of interest or principal is doubtful or (2) interest or principal is past due for 90 days or more, except when the loan is well-secured (e.g., through CE) and in the process of collection. For those mortgage loans placed on nonaccrual status, accrued but uncollected interest is charged against interest income. The Bank records cash payments received as a reduction of principal because the collection of the remaining principal amount due is considered doubtful and cash payments received are applied first solely to principal until the remaining principal amount due is expected to be collected and then as a recovery of any charge-off, if applicable, followed by recording interest income. A loan on nonaccrual status may be restored to accrual when (1) none of its contractual principal and interest is due and unpaid, and the Bank expects repayment of the remaining contractual interest and principal or (2) it otherwise becomes well secured and in the process of collection.

Troubled Debt Restructuring (TDR). The Bank considers a troubled debt restructuring to have occurred when a concession is granted to a borrower for economic or legal reasons related to the borrower’s financial difficulties and that concession would not have been considered otherwise, such as a loan modification. Loans that are discharged in Chapter 7 bankruptcy and have not been reaffirmed by the borrowers are also considered to be troubled debt restructurings, except in cases where all contractual amounts due are expected to be collected as a result of government guarantees or insurance.

Collateral-Dependent Loans. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the sale of the underlying collateral. Loans that are considered collateral-dependent are measured for credit loss based on the fair value of the underlying property less estimated selling costs, with any shortfall recognized as a charge-off.

Charge-off Policy. The Bank evaluates whether to record a charge-off on a conventional mortgage loan upon the occurrence of a confirming event. Confirming events include, but are not limited to, the occurrence of foreclosure, notification of a claim against any of the CE, a loan that is 180 or more days delinquent, or certain loans for which the borrower has filed for bankruptcy. If the loss is expected to be recovered through CE, the Bank recognizes a CE fee receivable for the amount of the loss and assesses it for collectability along with the mortgage loans. The CE fee receivable is recorded in other assets.

BOB Loans. The Bank’s BOB loan program to members is targeted to small businesses, including a specific allotment of funds for minority and women owned small businesses. The program’s objective is to assist in the growth and development of small business, including both their start-up and expansion. The Bank makes funds available to members to extend credit to approved small business borrowers, enabling small businesses to qualify for credit that would otherwise not be available. The intent of the BOB program is to help facilitate community economic development; however, repayment provisions require that the BOB program be accounted for as an unsecured loan. As the members collect directly from the borrowers, the members remit repayment of the loans to the Bank. If the business is unable to repay the loan, it may be forgiven at the member’s request, subject to the Bank’s approval, at which time the BOB loan is charged-off. The Bank places a BOB loan that is delinquent or deferred on non-accrual status and accrued but uncollected interest is reversed. At times, the Bank permits a borrower to defer payment of principal and interest for up to one year. A BOB loan may be restored to accrual when none of its contractual principal and interest due are unpaid.

Notes to Financial Statements (continued)

BOB Loans ACL: The Bank performs a quarterly assessment of its BOB loan portfolio to estimate expected credit losses, which is based on a loan’s probability of default and loss given default. Loss given default is considered to be 100% due to the fact that the BOB program has no collateral or credit enhancements. The probability of default is based on the actual performance of the BOB program. The Bank considers BOB loans that are delinquent to be nonperforming assets.

Real Estate Owned (REO). REO includes assets that have been received in satisfaction of debt through foreclosures. REO is initially recorded at fair value less estimated selling costs and is subsequently carried at the lower of that amount or current fair value less estimated selling costs. The Bank recognizes a charge-off to the allowance for credit losses and/or CE fee receivable if the fair value of the REO less estimated selling costs is less than the recorded investment in the loan at the date of transfer from loans to REO. Any subsequent realized gains, realized or unrealized losses, and carrying costs are included in Noninterest expense in the Statement of Income. REO is recorded in other assets on the Statement of Condition.

Derivatives and Hedging Activities. All derivatives are recognized on the Statement of Condition at fair value and are reported as either derivative assets or derivative liabilities, net of cash collateral, including initial margin, and accrued interest received from or pledged to clearing agents and/or counterparties. Variation margin payments are characterized as daily settlement payments, rather than collateral. The fair value of derivatives is netted by clearing agent and/or counterparty when the netting requirements have been met. If these netted amounts are positive, they are classified as an asset and, if negative, they are classified as a liability. Cash flows associated with derivatives are reflected as cash flows from operating activities in the Statement of Cash Flows, as the Bank does not have any derivatives that met the criteria of a financing derivative.

Derivative Designations. Each derivative is designated as either:

•a qualifying hedge of the change in fair value of a recognized asset or liability or an unrecognized firm commitment (a fair value hedge); or

•a non-qualifying hedge (an economic hedge) for asset and liability management purposes.

Accounting for Fair Value Hedges. If hedging relationships meet certain criteria, including, but not limited to, formal documentation of the hedging relationship, and are expected to be highly effective, they qualify for fair value hedge accounting.

Two approaches to hedge accounting include:

•Long-haul hedge accounting. The application of long-haul hedge accounting requires the Bank to formally assess (both at the hedge’s inception and at least quarterly) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the fair value of hedged items or forecasted transactions attributable to the hedged risk and whether those derivatives may be expected to remain highly effective in future periods. For hedge relationships that meet certain requirements, this assessment may be completed qualitatively.

•Short-cut hedge accounting. Transactions that meet certain criteria qualify for the short-cut method of hedge accounting in which an assumption can be made that the change in fair value of a hedged item, due to changes in the hedged risk, exactly offsets the change in fair value of the related derivative. Under the short-cut method, the entire change in fair value of the interest rate swap is considered to be highly effective at achieving offsetting changes in fair values of the hedged asset or liability. The Bank documents fallback language at hedge inception, including the quantitative method it would use to assess hedge effectiveness and measure hedge results if the short-cut method were to no longer be appropriate during the life of the hedging relationship.

Derivatives are typically executed at the same time as the hedged item, and the Bank designates the hedged item in a qualifying hedge relationship at the trade date. In many hedging relationships, the Bank may designate the hedging relationship upon its commitment to disburse an advance or trade a consolidated obligation in which settlement occurs within normal market settlement conventions. The Bank then records the changes in fair value of the derivative and the hedged item beginning on the trade date.

Net interest settlements, as well as changes in the fair value of a derivative and the related hedged item for designated fair value hedges, are recorded in net interest income in the same line as the hedged item.

Accounting for Economic Hedges. An economic hedge is defined as a derivative, hedging specific or non-specific underlying assets, liabilities or firm commitments, that does not qualify or was not designated for fair value hedge accounting, but is an acceptable hedging strategy under the Bank’s risk management program. These economic hedging strategies also comply with Finance Agency regulatory requirements prohibiting speculative hedge transactions. An economic hedge introduces the potential for earnings variability caused by the changes in fair value of the derivatives that are recorded in the Bank’s income, but that are not offset by corresponding changes in the value of the economically hedged assets, liabilities, or

100

Notes to Financial Statements (continued)

firm commitments. As a result, the Bank recognizes the net interest settlements and the change in fair value of these derivatives in noninterest income as “Net gains (losses) on derivatives” with no offsetting fair value adjustments for the assets, liabilities, or firm commitments.

Accrued Interest Receivables and Payables. The net settlements of interest receivables and payables related to derivatives designated in fair value hedging relationships are recognized as adjustments to the income or expense of the designated hedged item.

Discontinuance of Hedge Accounting. The Bank discontinues hedge accounting prospectively when:

•it determines that the derivative is no longer highly effective in offsetting changes in the fair value of a hedged item attributable to the hedged risk (including hedged items such as firm commitments);

•the derivative and/or the hedged item expires or is sold, terminated, or exercised;

•a hedged firm commitment no longer meets the definition of a firm commitment; or

•management determines that designating the derivative as a hedging instrument is no longer appropriate.

When hedge accounting is discontinued, the Bank either terminates the derivative or continues to carry the derivative on the Statement of Condition at its fair value, ceases to adjust the hedged asset or liability for changes in fair value, and amortizes the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using the contractual method.

When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the Bank continues to carry the derivative on the Statement of Condition at its fair value, removing from the Statement of Condition any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.

Embedded Derivatives. The Bank may issue debt, make advances, or purchase financial instruments in which a derivative instrument is “embedded.” Upon execution of these transactions, the Bank assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the debt, advance or purchased financial instrument (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. The embedded derivative is separated from the host contract, carried at fair value, and designated as a stand-alone derivative instrument (pursuant to an economic hedge) when the Bank determines that certain criteria are met. The Bank had no embedded derivatives requiring separation from the host contract at December 31, 2022 or 2021.

Premises, Software and Equipment. The Bank records premises, software and equipment at cost less accumulated depreciation and amortization and computes depreciation using the straight-line method over the estimated useful lives of the assets, which range from 1 year to 10 years. The Bank amortizes leasehold improvements using the straight-line method over the shorter of the estimated useful life of the improvement or the remaining term of the lease. The Bank capitalizes improvements and major renewals but expenses ordinary maintenance and repairs when incurred. Premises, software and equipment are included in “Other assets” on the Statement of Condition. The Bank includes gains and losses on the disposal of premises, software and equipment in Noninterest income (loss).

At December 31, 2022 and 2021, premises, software, and equipment, net of accumulated depreciation and amortization were $4.3 million and $7.9 million, respectively. For the years ended December 31, 2022, 2021, and 2020, the related depreciation and amortization expense was $3.8 million, $3.3 million, and $2.9 million, respectively.

Hosting arrangements, also known as Software as a Service (SaaS), are assessed for whether they should be accounted for as software or a service contract. SaaS accounted for as a service contract is expensed as incurred, which could result in the SaaS being recognized as a prepaid asset and recorded in Other assets on the Statement of Condition, if appropriate. Implementation costs related to SaaS are recorded as software. At December 31, 2022 and 2021, SaaS accounted for as a service contract was immaterial.

Leases. The Bank leases office space and other facilities, as well as office equipment to run its business operations. The Bank recognizes its lease right-of-use assets in Other assets and the related lease liabilities in Other liabilities in its Statement of Condition. The Bank has elected to account for the lease and non-lease components of its real estate, including leasehold improvement, asset class as a single lease component. The Bank has also elected not to recognize leases with a term of 12 months on the Statement of Condition.

101

Notes to Financial Statements (continued)

At December 31, 2022 and 2021, lease right-of-use assets were $3.9 million and $5.7 million, respectively, and lease liabilities were $4.1 million and $5.9 million, respectively. The Bank recognized operating lease costs in the Other operating expense line of the Statement of Income of $1.7 million, $1.9 million, and $2.0 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Consolidated Obligations. Consolidated obligations are recorded at amortized cost.

Discounts and Premiums. The Bank amortizes premiums and accretes discounts as well as hedging basis adjustments on consolidated obligations to interest expense using the contractual method.

Concessions. The Bank pays concessions to dealers in connection with the issuance of certain consolidated obligations. Concessions paid on consolidated obligations are recorded as a direct deduction from the carrying amount of the debt and amortized using the contractual method. The amortization of such concessions is included in consolidated obligation interest expense.

Off-Balance Sheet Credit Exposures. The Bank evaluates its off-balance sheet credit exposures on a quarterly basis for expected credit losses. If deemed necessary, an allowance for expected credit losses is recorded in other liabilities with a corresponding adjustment to the provision for credit losses. Commitments to purchase MPF Loans are derivatives and therefore do not require an assessment of expected credit losses.

Mandatorily Redeemable Capital Stock. The Bank reclassifies stock subject to redemption from capital stock to a liability after a member provides written notice of redemption, gives notice of intention to withdraw from membership, or attains non-member status by merger or acquisition, relocation, charter termination, voluntary termination or other involuntary termination from membership, because the member’s shares will then meet the definition of a mandatorily redeemable financial instrument. Shares meeting this definition are reclassified to a liability at fair value, which is par plus estimated dividends. Dividends declared on shares classified as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statement of Income. The repurchase or redemption of mandatorily redeemable capital stock is reflected as a financing cash outflow in the Statement of Cash Flows.

If a member cancels its written notice of redemption or notice of withdrawal, the Bank will reclassify mandatorily redeemable capital stock from liabilities to capital. After the reclassification, dividends on the capital stock will no longer be classified as interest expense.

Restricted Retained Earnings (RRE). In accordance with the Joint Capital Enhancement Agreement (JCEA) entered into by the Bank, as amended, the Bank allocates on a quarterly basis 20% of its net income to a separate restricted retained earnings account until the account balance equals at least 1% of the Bank’s average balance of outstanding consolidated obligations for the current quarter. Additionally, the Capital Agreement provides that amounts in restricted retained earnings in excess of 150% of the Bank’s restricted retained earnings minimum (i.e., one percent of the average balance of outstanding consolidated obligations calculated as of the last day of each calendar quarter) may be released from restricted retained earnings. These restricted retained earnings are not available to pay dividends and are presented separately on the Statement of Condition. See Note 11 - Capital for more information.

Discretionary Grants and Contributions. Contributions made are recognized as expense in the period in which the grant or contribution is considered an unconditional promise to give. The Bank’s discretionary grants and contributions include Home4Good and the voluntary housing grant initiative. Discretionary grants and contributions are recognized in Other operating expenses in the Statement of Operations.

Finance Agency Expenses. The portion of the Finance Agency’s expenses and working capital fund paid by the FHLBanks are allocated among the FHLBanks based on the pro-rata share of the annual assessments (which are based on the ratio between each FHLBank’s minimum required regulatory capital and the aggregate minimum required regulatory capital of every FHLBank).

Office of Finance Expenses. The Bank’s proportionate share of the OF operating and capital expenditures is calculated using a formula based upon the following components: (1) two-thirds based upon its share of total consolidated obligations outstanding and (2) one-third based upon an equal pro-rata allocation.

AHP. The FHLBank Act requires each FHLBank to establish and fund an AHP, providing subsidies to members to assist in the purchase, construction, or rehabilitation of housing for very low- and low- or moderate-income households. The Bank charges the required funding for AHP to earnings and establishes a liability. As allowed per AHP regulations, the Bank can

102

Notes to Financial Statements (continued)

elect to allot fundings based on future periods’ required AHP contributions (referred to as Accelerated AHP). The Accelerated AHP allows the Bank to commit and disburse AHP funds to meet the Bank’s mission when it would otherwise be unable to do so based on its normal funding mechanism.

The Bank primarily makes the AHP subsidy available to members as a grant. Alternatively, the Bank could provide the member with an interest rate below a normal advance rate. This will create a discount which will be the present value of the difference between the cash flow generated using an AHP advance rate and the Bank’s cost of funds. If the Bank provides a discounted interest rate, this discount is accreted to interest income using the contractual method over the life of the advance. See Note 10 - AHP for more information.

103

Notes to Financial Statements (continued)

Note 2 – Changes in Accounting Principle and Recently Issued Accounting Standards and Interpretations

The Bank adopted the following new accounting standards during the year ended December 31, 2022.

Standard

Description

Effective Date

Effect on the Financial Statements or Other Significant Matters

ASU 2022-06: Reference Rate Reform: Deferral of the Sunset Date of Topic 848

This ASU defers the sunset date of ASU 2020-04: Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, as amended, from December 31, 2022 to December 31, 2024. ASU 2020-04 provides temporary optional expedients and exceptions to GAAP to ease the potential burden in accounting for reference rate reform to contracts, hedging relationships, and other transactions if certain criteria are met.

This ASU became effective for the Bank immediately upon issuance.

The adoption of this ASU did not impact the Bank’s financial condition or results of operations. The Bank continues to evaluate other optional expedients and the effect on its financial statements has not yet been determined.

The following table provides a brief description of recently issued accounting standards which may have an impact on the Bank.


Standard	Description	Effective Date	Effect on the Financial Statements or Other Significant Matters
ASU 2022-01: Fair Value Hedging – Portfolio Layer Method	This ASU expands the current last-of-layer method to apply fair value hedging by allowing multiple hedged layers of a single closed portfolio under the method. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. Additionally, among other things, this ASU: • expands the scope of the portfolio layer method to include nonprepayable assets • specifies eligible hedging instruments in a single-layer hedge • provides additional guidance on the accounting for and disclosure of hedge basis adjustments under the portfolio layer method, and; • specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio.	This ASU is effective for the Bank beginning on January 1, 2023.	The adoption of this ASU did not have an impact on the Bank’s financial statements. The Bank will continue to assess opportunities enabled by the new guidance to expand its risk management strategies.
ASU 2022-02: Troubled Debt Restructurings and Vintage Disclosures	This ASU eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted the current expected credit losses methodology while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors made to borrowers experiencing financial difficulty. Additionally, this guidance requires disclosure of current-period gross write-offs by year of origination for financing receivables.	This ASU is effective for the Bank beginning on January 1, 2023.	The adoption of this ASU is not expected to have a material impact on the Bank’s financial statements, including the Bank’s MPF portfolio.

Note 3 – Cash and Due from Banks

Cash and due from banks on the Statement of Condition includes cash on hand, cash items in the process of collection, compensating balances, and amounts due from correspondent banks and the Federal Reserve Bank (FRB). The Bank maintains compensating and collected cash balances with commercial banks in return for certain services. These agreements contain no legal restrictions on the withdrawal of funds. The average compensating and collected cash balances for the years ended December 31, 2022 and December 31, 2021 were $180.6 million and $350.0 million, respectively.

104

Notes to Financial Statements (continued)

Note 4 – Investments

The Bank has short-term investments and may make other investments in debt securities, which are classified as trading, AFS, or HTM as further described below.

Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold

The Bank makes short-term investments 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 BBB or greater (investment grade) by an NRSRO.

Interest-bearing deposits and Federal funds sold are unsecured investments. Federal funds sold 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 December 31, 2022 and December 31, 2021, all investments in interest-bearing deposits and Federal funds sold were repaid according to the contractual terms; no ACL was recorded for these assets at December 31, 2022 and December 31, 2021. Carrying values of interest-bearing deposits and Federal funds exclude accrued interest receivable which was immaterial for all periods presented. At December 31, 2022 and December 31, 2021, none of these investments were with counterparties rated below BBB or with unrated counterparties. These may differ from any internal ratings of the investments by the Bank, if applicable.

Securities purchased under agreements to resell are secured investments. Securities purchased under agreements to resell are generally transacted on an overnight term and have standard market practices that include collateral maintenance provisions. As such, they are evaluated regularly to determine that the securities purchased under agreements to resell are fully collateralized. The counterparty is required to deliver additional collateral if the securities purchased under agreements to resell become under-collateralized, generally by the next business day.

At December 31, 2022 and December 31, 2021, all investments in securities purchased under agreements to resell were repaid according to the contractual terms; no ACL was recorded for these assets at December 31, 2022 and December 31, 2021. Carrying value of securities purchased under agreements to resell exclude accrued interest receivable which was immaterial for all periods presented. At December 31, 2022 and December 31, 2021, none of these investments were with counterparties rated below BBB or with unrated counterparties. These may differ from any internal ratings of the investments by the Bank, if applicable.

Debt Securities

The Bank invests in debt securities, which are classified as trading, AFS, or HTM. Within these investments, the Bank is primarily subject to credit risk related to private label MBS that are supported by underlying mortgage or asset-backed loans. In 2007, the Bank discontinued the purchase of private label MBS. 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, other than certain investments targeted at low-income persons or communities.

Trading Securities. The following table presents the fair value of trading securities by major security type at December 31, 2022 and December 31, 2021.


(in thousands)	December 31, 2022		December 31, 2021

GSE obligations	$	214,008	$	243,262
Total	$	214,008	$	243,262

The following table presents net gains (losses) on trading securities for the years ended December 31, 2022, 2021 and 2020.


	Year ended December 31,
(in thousands)	2022		2021		2020
Net unrealized gains (losses) on trading securities held at year-end	$	(29,502)	$	(13,423)	$	22,099
Net gains (losses) on trading securities sold/matured during the year	—		(8,017)		25,228
Net gains (losses) on trading securities	$	(29,502)	$	(21,440)	$	47,327

105

Notes to Financial Statements (continued)

AFS Securities. The following tables presents AFS securities by major security type at December 31, 2022 and December 31, 2021.


	December 31, 2022
(in thousands)	Amortized Cost(1)		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Non-MBS:
U.S. Treasury obligations	$	5,246,937	$	—	$	3,963	$	(18,407)	$	5,232,493
GSE and TVA obligations	1,111,674		—		16,879		(2,810)		1,125,743
State or local agency obligations	184,310		—		21		(14,068)		170,263
Total non-MBS	$	6,542,921	$	—	$	20,863	$	(35,285)	$	6,528,499
MBS:
U.S. obligations single-family	$	490,952	$	—	$	1,999	$	(9,969)	$	482,982
GSE single-family	1,925,950		—		5,852		(50,765)		1,881,037
GSE multifamily	3,164,964		—		1,364		(10,557)		3,155,771
Private label	140,222		(8,532)		12,443		(1,862)		142,271
Total MBS	$	5,722,088	$	(8,532)	$	21,658	$	(73,153)	$	5,662,061
Total AFS securities	$	12,265,009	$	(8,532)	$	42,521	$	(108,438)	$	12,190,560


	December 31, 2021
(in thousands)	Amortized Cost(1)		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Non-MBS:
U.S. Treasury obligations	$	5,069,716	$	—	$	6,213	$	(697)	$	5,075,232
GSE and TVA obligations	1,449,717		—		43,935		—		1,493,652
State or local agency obligations	198,775		—		8,422		—		207,197
Total non-MBS	$	6,718,208	$	—	$	58,570	$	(697)	$	6,776,081
MBS:
U.S. obligations single-family	$	394,985	$	—	$	3,876	$	(54)	$	398,807
GSE single-family	2,075,683		—		18,377		(991)		2,093,069
GSE multifamily	3,001,730		—		4,526		(1,345)		3,004,911
Private label	164,050		(2,378)		32,826		(73)		194,425
Total MBS	$	5,636,448	$	(2,378)	$	59,605	$	(2,463)	$	5,691,212
Total AFS securities	$	12,354,656	$	(2,378)	$	118,175	$	(3,160)	$	12,467,293

Notes:

(1) 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 $37.4 million and $22.8 million at December 31, 2022 and December 31, 2021.

106

Notes to Financial Statements (continued)

The following tables summarize the AFS securities with gross unrealized losses as of December 31, 2022 and December 31, 2021. The gross unrealized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrealized loss position.


	December 31, 2022
	Less than 12 Months				Greater than 12 Months				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Non-MBS:
U.S. Treasury obligations	$	2,460,913	$	(8,532)	$	388,509	$	(9,875)	$	2,849,422	$	(18,407)
GSE and TVA obligations	39,276		(2,810)		—		—		39,276		(2,810)
State or local agency obligations	160,372		(14,068)		—		—		160,372		(14,068)
Total non-MBS	$	2,660,561	$	(25,410)	$	388,509	$	(9,875)	$	3,049,070	$	(35,285)
MBS:
U.S. obligations single-family	$	315,111	$	(9,511)	$	15,293	$	(458)	$	330,404	$	(9,969)
GSE single-family	1,406,666		(33,614)		146,908		(17,151)		1,553,574		(50,765)
GSE multifamily	2,310,965		(6,738)		548,201		(3,819)		2,859,166		(10,557)
Private label	34,918		(1,682)		2,357		(180)		37,275		(1,862)
Total MBS	$	4,067,660	$	(51,545)	$	712,759	$	(21,608)	$	4,780,419	$	(73,153)
Total	$	6,728,221	$	(76,955)	$	1,101,268	$	(31,483)	$	7,829,489	$	(108,438)


	December 31, 2021
	Less than 12 Months				Greater than 12 Months				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses





Non-MBS:
U.S. Treasury obligations	$	586,346	$	(697)	$	—	$	—	$	586,346	$	(697)
MBS:
U.S. obligations single-family	$	20,188	$	(54)	$	—	$	—	$	20,188	$	(54)
GSE single-family	188,235		(991)		—		—		188,235		(991)
GSE multifamily	634,032		(517)		524,002		(828)		1,158,034		(1,345)
Private label	—		—		2,476		(73)		2,476		(73)
Total MBS	$	842,455	$	(1,562)	$	526,478	$	(901)	$	1,368,933	$	(2,463)
Total	$	1,428,801	$	(2,259)	$	526,478	$	(901)	$	1,955,279	$	(3,160)

Redemption Terms. The amortized cost and fair value of AFS securities by contractual maturity as of December 31, 2022 and December 31, 2021 are presented below. Expected maturities of some securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees. MBS are not presented by contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

107

Notes to Financial Statements (continued)


(in thousands)	December 31, 2022				December 31, 2021
Year of Maturity	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Non-MBS:
Due in one year or less	$	1,566,430	$	1,560,311	$	554,080	$	555,481
Due after one year through five years	2,629,759		2,632,374		3,281,393		3,289,730
Due after five years through ten years	2,204,799		2,206,358		2,685,727		2,723,861
Due after ten years	141,933		129,456		197,008		207,009
Total non-MBS	6,542,921		6,528,499		6,718,208		6,776,081
MBS	5,722,088		5,662,061		5,636,448		5,691,212
Total AFS securities	$	12,265,009	$	12,190,560	$	12,354,656	$	12,467,293

Interest Rate Payment Terms. The following table details interest payment terms at December 31, 2022 and December 31, 2021.


(in thousands)	December 31, 2022		December 31, 2021
Amortized cost of AFS non-MBS:
Fixed-rate	$	6,542,921	$	6,718,208
Variable-rate	—		—
Total non-MBS	$	6,542,921	$	6,718,208
Amortized cost of AFS MBS:
Fixed-rate	$	1,069,749	$	765,556
Variable-rate	4,652,339		4,870,892
Total MBS	$	5,722,088	$	5,636,448
Total amortized cost of AFS securities	$	12,265,009	$	12,354,656

Realized Gains (Losses) on AFS Securities. The following table provides a summary of proceeds, gross gains and losses on sales of AFS securities for 2022, 2021, and 2020.


	Year Ended December 31,
(in thousands)	2022		2021		2020
Proceeds from sale of AFS securities	$	577,197	$	—	$	—
Gross gains on AFS securities	509		—		—
Gross losses on AFS securities	—		—		—

HTM Securities. The following tables presents HTM securities by major security type at December 31, 2022 and December 31, 2021.


	December 31, 2022
(in thousands)	Amortized Cost (1)		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value





MBS:
U.S. obligations single-family	$	162,366	$	155	$	(5,352)	$	157,169
GSE single-family	435,129		74		(63,200)		372,003
GSE multifamily	305,306		—		(10,248)		295,058
Private label	53,670		—		(3,618)		50,052
Total MBS	$	956,471	$	229	$	(82,418)	$	874,282
Total HTM securities (2)	$	956,471	$	229	$	(82,418)	$	874,282

108

Notes to Financial Statements (continued)


	December 31, 2021
(in thousands)	Amortized Cost (1)		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value





MBS:
U.S. obligations single-family	83,154		1,029		—		84,183
GSE single-family	566,032		7,597		(7,978)		565,651
GSE multifamily	494,472		33,651		—		528,123
Private label	70,214		710		(518)		70,406
Total MBS	$	1,213,872	$	42,987	$	(8,496)	$	1,248,363
Total HTM securities (2)	$	1,213,872	$	42,987	$	(8,496)	$	1,248,363

Notes:

(1) Includes adjustments made to the cost basis of an investment for accretion and amortization and excludes accrued interest receivable of $2.4 million and $2.7 million at December 31, 2022 and December 31, 2021.

(2) No ACL was recorded for these securities as of December 31, 2022 and December 31, 2021.

Redemption Terms. The amortized cost and fair value of HTM securities by contractual maturity as of December 31, 2022 and December 31, 2021 are presented below. MBS are not presented by contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.


	December 31, 2022				December 31, 2021
(in thousands)	Amortized Cost		Fair Value		Amortized Cost		Fair Value






MBS	956,471		874,282		1,213,872		1,248,363
Total HTM securities	$	956,471	$	874,282	$	1,213,872	$	1,248,363

Interest Rate Payment Terms. The following table details interest rate payment terms at December 31, 2022 and December 31, 2021.


(in thousands)	December 31, 2022		December 31, 2021




Amortized cost of HTM MBS:
Fixed-rate	$	824,791	$	1,042,367
Variable-rate	131,680		171,505
Total MBS	$	956,471	$	1,213,872
Total HTM securities	$	956,471	$	1,213,872

Debt Securities ACL. For HTM securities, there was no ACL at December 31, 2022 and December 31, 2021. For AFS securities, the Bank recorded an ACL only on its private label MBS at December 31, 2022 and December 31, 2021.

AFS Debt Securities - Rollforward of ACL. The following table presents a rollforward of the ACL on AFS securities for the years ended December 31, 2022 and December 31, 2021.


	Private label MBS
(in thousands)	December 31, 2022		December 31, 2021
Balance, beginning of period	$	2,378	$	2,417

Increases (decreases) for securities in which a previous ACL or OTTI was recorded	6,154		(36)
Reductions for securities sold or matured during the period	—		(3)



Balance, end of period	$	8,532	$	2,378

Debt Securities ACL Methodology. To evaluate investment securities for credit losses at December 31, 2022, the Bank employs the following methodologies by major security type.

109

Notes to Financial Statements (continued)

GSE and Other U.S. Obligations. The Bank invests in GSE and other U.S. obligations, which includes Tennessee Valley Authority obligations, single-family MBS, and GSE single-family and multifamily MBS. These securities are issued by Federal Agencies or U.S. government corporations and include MBS issued by these same entities that are directly supported by underlying mortgage loans. All of these securities are highly-rated. In the case of U.S. obligations, they carry an explicit government guarantee. In the case of GSE securities, they are purchased under an assumption that the issuers’ obligation to pay principal and interest on those securities will be honored. As a result, no ACL was recorded on GSE and other U.S. obligations at December 31, 2022 and December 31, 2021.

The Bank only purchases GSE and other U.S. obligations considered investment quality. At December 31, 2022, all of these GSE and other U.S. obligations, based on amortized cost, were rated BBB or above by a NRSRO, based on the lowest long-term credit rating for each security. These may differ from any internal ratings of the securities by the Bank, if applicable.

State or Local Agency Obligations. The Bank invests in state or local agency obligations, such as municipal securities. These securities are subject to credit risk related to a portfolio of state and local agency obligations (i.e., Housing Finance Agency bonds). The Bank has not experienced any payment defaults on these instruments.

The Bank only purchases state or local agency obligations considered investment quality. At December 31, 2022, all of these state or local agency obligations, based on amortized cost, were rated BBB or above by a NRSRO, based on the lowest long-term credit rating for each security. These may differ from any internal ratings of the securities by the Bank, if applicable.

The Bank evaluates AFS state or local agency obligations for an ACL based on a credit assessment of the issuer, or guarantor. If the Bank determines that an ACL should be recognized, it is limited to the unrealized loss of the state or local agency obligation, including zero if it is in an unrealized gain position. At December 31, 2022 and December 31, 2021, the Bank expected to receive all cash flows contractually due, and no ACL was recorded on AFS state or local agency obligations.

Private Label MBS. The Bank also holds investments in private label MBS. The Bank has not purchased any private label MBS since 2007. However, many of these securities have subsequently experienced significant credit deterioration. As of December 31, 2022, 18.6% of private label MBS (AFS and HTM combined, based on amortized cost) were rated BBB or above by a NRSRO and the remaining securities were either rated less than BBB or were unrated. To determine whether an ACL is necessary on these securities, the Bank uses cash flow analyses.

The Bank's evaluation includes estimating the projected cash flows that the Bank is likely to collect based on an assessment of available information, including the structure of the applicable security and certain assumptions such as:

•the remaining payment terms for the security;

•prepayment speeds based on underlying loan-level borrower and loan characteristics;

•expected default rates based on underlying borrower and loan characteristics;

•expected loss severity based on underlying borrower and loan characteristics;

•expected housing price changes; and

•expected interest-rate assumptions.

The Bank performed a cash flow analysis using a third-party model to assess whether the entire amortized cost basis of its private label MBS securities will be recovered. The projected cash flows are based on a number of assumptions and expectations, and the results of the model can vary with changes in assumptions and expectations. The projected cash flows, determined based on the model approach, reflect a best estimate scenario and include a base case housing price forecast.

110

Notes to Financial Statements (continued)

Note 5 – Advances

General Terms. The Bank offers a wide-range of fixed- and variable-rate advance products with different maturities, interest rates, payment characteristics and optionality. Fixed-rate advances generally have maturities ranging from overnight to 30 years. Variable-rate advances generally have maturities ranging up to 10 years, and the interest rates reset periodically at a fixed spread to LIBOR or SOFR.

The following table details the Bank’s advances portfolio by year of redemption and weighted-average interest rate at December 31, 2022 and December 31, 2021.


(dollars in thousands)	December 31, 2022				December 31, 2021
Year of Redemption	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in 1 year or less	$	28,672,440	4.28	%	$	8,539,301	1.60	%
Due after 1 year through 2 years	21,421,482		4.17		2,076,494		1.59
Due after 2 years through 3 years	13,136,090		4.30		2,031,671		1.36
Due after 3 years through 4 years	4,966,948		4.38		1,031,294		1.97
Due after 4 years through 5 years	865,373		3.37		222,058		1.43
Thereafter	166,538		2.84		178,399		2.60
Total par value	$	69,228,871	4.24	%	$	14,079,217	1.60	%
Deferred prepayment fees	(940)				(1,405)
Hedging adjustments	(371,695)				46,563
Total book value (1)	$	68,856,236			$	14,124,375

Notes:

(1) Amounts exclude accrued interest receivable of $241.8 million and $24.7 million as of December 31, 2022 and December 31, 2021.

The Bank offers certain advances to members that provide a member the right, based upon predetermined exercise dates, to prepay the advance prior to maturity without incurring prepayment or termination fees (returnable advances). The Bank no longer offers a convertible advance product and had none outstanding at December 31, 2022.

At December 31, 2022 and December 31, 2021, the Bank did not have any advances with embedded features that met the requirements to separate the embedded feature from the host contract and designate the embedded feature as a stand-alone derivative.

111

Notes to Financial Statements (continued)

The following table summarizes advances by the earlier of year of redemption or next call date as of December 31, 2022 and December 31, 2021.


	Year of Redemption or Next Call Date
(in thousands)	December 31, 2022		December 31, 2021
Due in 1 year or less	$	28,962,440	$	8,579,301
Due after 1 year through 2 years	21,131,482		2,076,494
Due after 2 years through 3 years	13,136,090		1,991,671
Due after 3 years through 4 years	4,966,948		1,031,294
Due after 4 years through 5 years	865,373		222,058
Thereafter	166,538		178,399
Total par value	$	69,228,871	$	14,079,217

Interest Rate Payment Terms. The following table details interest rate payment terms by year of redemption for advances as of December 31, 2022 and December 31, 2021.


(in thousands)	December 31, 2022		December 31, 2021
Fixed-rate – overnight	$	1,792,810	$	64,000
Fixed-rate – term:
Due in 1 year or less	21,547,006		8,325,202
Thereafter	7,429,914		5,446,816
Total fixed-rate	$	30,769,730	$	13,836,018
Variable-rate:
Due in 1 year or less	5,332,624		150,099
Thereafter	33,126,517		93,100
Total variable-rate	$	38,459,141	$	243,199
Total par value	$	69,228,871	$	14,079,217

Credit Risk Exposure and Security Terms. The Bank’s potential credit risk from advances is primarily concentrated in commercial banks. As of December 31, 2022, the Bank had advances of $54.3 billion outstanding to the five largest borrowers, which represented 78.5% of the total principal amount of advances outstanding. Of these five, three had outstanding advance balances that were in excess of 10% of the total portfolio at December 31, 2022.

As of December 31, 2021, the Bank had advances of $9.0 billion outstanding to the five largest borrowers, which represented 64.0% of the total principal amount of advances outstanding. Of these five, one had outstanding advance balances that were in excess of 10% of the total portfolio at December 31, 2021.

Advances ACL. The Bank manages its total credit exposure (TCE), which includes advances, letters of credit, advance commitments, and other credit product exposure, through an integrated approach. This approach generally requires a credit limit to be established for each borrower and an ongoing review of each borrower’s financial condition in conjunction with the Bank's collateral and lending policies to limit risk of loss while balancing each borrower's need for a reliable source of funding. Eligible collateral and collateral requirements can vary based on the type of member: commercial banks, insurance companies, credit unions, de novo banks and CDFIs.

In addition, the Bank lends to its members in accordance with the FHLBank Act and Finance Agency regulations. Specifically, the FHLBank Act requires the Bank to obtain collateral to fully secure credit products. The estimated value of the collateral required to secure each member’s credit products is calculated by applying collateral weightings, or haircuts, to the value of the collateral. The Bank primarily accepts cash, certain investment securities, residential mortgage loans, deposits, and other real estate related assets as collateral. In addition, Community Financial Institutions (CFIs) are eligible to utilize expanded statutory collateral provisions for small business, agriculture, and community development loans. The Bank’s capital stock owned by the borrowing member is pledged as secondary collateral. Collateral arrangements may vary depending upon

112

Notes to Financial Statements (continued)

borrower credit quality, financial condition and performance, borrowing capacity, and overall credit exposure to the borrower. The Bank can require additional or substitute collateral to help ensure that credit products continue to be secured by adequate collateral. Management of the Bank believes that these policies effectively manage the Bank’s credit risk from credit products.

Based upon the financial condition of the member, the Bank either allows a member to retain physical possession of the collateral assigned to the Bank or requires the member to specifically deliver physical possession or control of the collateral to the Bank or its custodians. However, regardless of the member's financial condition, the Bank always takes possession or control of securities used as collateral. The Bank perfects its security interest in all pledged collateral. The FHLBank Act affords any security interest granted to the Bank by a member (or an affiliate of a member) priority over the claims or rights of any other party, except for claims or rights of a third party that would be otherwise entitled to priority under applicable law and that are held by a bona fide purchaser for value or by a secured party holding a prior perfected security interest.

Using a risk-based approach, the Bank considers the payment status, collateral types and concentration levels, and borrower’s financial condition to be indicators of credit quality on its credit products. At December 31, 2022 and December 31, 2021, the Bank had rights to collateral on a member-by-member basis with a value in excess of its outstanding extensions of credit.

The Bank continues to evaluate and, as necessary, make changes to its collateral guidelines based on current market conditions. At December 31, 2022 and December 31, 2021, the Bank did not have any credit products that were past due, on nonaccrual status, or considered impaired. In addition, the Bank did not have any credit products considered to be TDRs.

The Bank evaluates its advances for an ACL on a collective, or pooled basis unless an individual assessment is deemed necessary because the instruments do not possess similar risk characteristics. The Bank pools advances by member type, as noted above. Based on the collateral held as security, the Bank's credit extension and collateral policies and repayment history on advances, including that the Bank has not incurred any credit losses since inception, the Bank has not recorded any ACL at December 31, 2022 or December 31, 2021.

113

Notes to Financial Statements (continued)

Note 6 – Mortgage Loans Held for Portfolio

Under the MPF Program, the Bank invests in mortgage loans that it purchases from its participating members and housing associates. The Bank’s participating members originate, service, and credit enhance residential mortgage loans that are sold to the Bank. See Note 13 for further information regarding transactions with related parties.

The following table presents balances as of December 31, 2022 and December 31, 2021 for mortgage loans held for portfolio.


(in thousands)	December 31, 2022		December 31, 2021
Fixed-rate long-term single-family mortgages (1)	$	4,388,461	$	4,417,532
Fixed-rate medium-term single-family mortgages (1)	140,270		173,195
Total par value	4,528,731		4,590,727
Premiums	73,703		84,155
Discounts	(10,224)		(1,769)
Hedging adjustments	1,918		6,482
Total mortgage loans held for portfolio (2)	4,594,128		4,679,595
Allowance for credit losses on mortgage loans	(3,240)		(3,412)
Mortgage loans held for portfolio, net	$	4,590,888	$	4,676,183

Note:

(1) Long-term is defined as greater than 15 years. Medium-term is defined as a term of 15 years or less.

(2) Amounts exclude accrued interest receivable of $22.5 million at December 31, 2022 and $22.2 million at December 31, 2021.

The following table details the par value of mortgage loans held for portfolio outstanding categorized by type as of December 31, 2022 and December 31, 2021.


(in thousands)	December 31, 2022		December 31, 2021
Conventional loans	$	4,415,876	$	4,460,732
Government-guaranteed/insured loans	112,855		129,995
Total par value	$	4,528,731	$	4,590,727

Conventional MPF Loans - Credit Enhancements (CE). The conventional MPF loans held for portfolio are required to be credit enhanced as determined through the use of a validated model so the risk of loss is limited to the losses within the Bank's risk tolerance. The Bank and its participating financial institution (PFI) share the risk of credit losses on conventional MPF loan products held for portfolio, by structuring potential losses into layers with respect to each master commitment. After considering the borrower’s equity and any Primary Mortgage Insurance (PMI), credit losses on mortgage loans in a master commitment are then absorbed by the Bank’s First Loss Account (FLA). If applicable to the MPF product, the Bank will withhold a PFI’s scheduled performance CE fee in order to reimburse the Bank for any losses allocated to the FLA (recaptured CE Fees). If the FLA is exhausted, the credit losses are then absorbed by the PFI up to an agreed upon CE amount. The CE amount could be covered by supplemental mortgage insurance (SMI) obtained by the PFI. Thereafter, any remaining credit losses are absorbed by the Bank.

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

114

Notes to Financial Statements (continued)

Credit Quality Indicator for Conventional Mortgage Loans. The following table presents the payment status for conventional mortgage loans at December 31, 2022 and December 31, 2021.


	December 31, 2022
(in thousands)	Origination Year
Payment Status, at amortized cost (1)	Prior to 2018		2018 to 2022		Total
Past due 30-59 days	$	13,369	$	19,806	$	33,175
Past due 60-89 days	4,100		6,321		10,421
Past due 90 days or more	8,216		9,856		18,072
Total past due loans	$	25,685	$	35,983	$	61,668
Current loans	1,109,321		3,307,745		4,417,066
Total conventional loans	$	1,135,006	$	3,343,728	$	4,478,734

	December 31, 2021
	Origination Year
Payment Status, at amortized cost (1)	Prior to 2017		2017 to 2021		Total
Past due 30-59 days	$	11,473	$	16,502	$	27,975
Past due 60-89 days	2,785		4,517		7,302
Past due 90 days or more	9,311		16,455		25,766
Total past due loans	$	23,569	$	37,474	$	61,043
Current loans	1,115,681		3,369,710		4,485,391
Total conventional loans	$	1,139,250	$	3,407,184	$	4,546,434

Note:

(1) The amortized cost at December 31, 2022 and December 31, 2021 excludes accrued interest receivable.

Other Delinquency Statistics. The following table presents the delinquency statistics for the Bank’s mortgage loans at December 31, 2022 and December 31, 2021.


	December 31, 2022
(dollars in thousands)	Conventional MPF Loans			Government-Guaranteed or Insured Loans (2)			Total
In process of foreclosures, included above (1)	$	7,873		$	1,352		$	9,225
Serious delinquency rate (2)	0.4		%	2.9		%	0.5		%
Past due 90 days or more still accruing interest	$	—		$	3,182		$	3,182
Loans on nonaccrual status	$	20,950		$	—		$	20,950

	December 31, 2021
(dollars in thousands)	Conventional MPF Loans			Government-Guaranteed or Insured Loans (2)			Total
In process of foreclosures, included above (1)	$	2,906		$	1,007		$	3,913
Serious delinquency rate (2)	0.6		%	2.4		%	0.6		%
Past due 90 days or more still accruing interest	$	—		$	3,129		$	3,129
Loans on nonaccrual status	$	29,890		$	—		$	29,890

Note:

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

(2) Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total loan portfolio class.

115

Notes to Financial Statements (continued)

Mortgage Loans Held for Portfolio ACL. Conventional MPF - Expected Losses. Conventional loans are evaluated collectively when similar risk characteristics exist. Conventional loans that do not share risk characteristics with other pools are evaluated for expected credit losses on an individual basis. The Bank determines its allowances for credit losses on conventional loans through analyses that include consideration of various loan portfolio and collateral-related characteristics, such as past performance, current conditions, and reasonable and supportable forecasts of expected economic conditions. The Bank uses a third-party model to estimate expected credit losses over the life of the loans. The estimate of the expected credit losses includes coverage of certain losses by PMI, if applicable. The model relies on a number of inputs, such as housing price forecasts and interest rates as well as historical borrower behavior experience. The Bank’s reasonable and supportable forecast for housing prices is two years. The Bank then reverts to historic averages over a three year period. The Bank may incorporate a qualitative adjustment to the model results, if deemed appropriate, based on current market conditions or results.

The estimated credit loss on collateral dependent loans is charged-off against the reserve. However, if the estimated loss can be recovered through CE, a receivable is established, resulting in a net charge-off. A mortgage loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be substantially through the sale of the underlying collateral. The expected credit loss of a collateral dependent mortgage loan to determine the charge-off is equal to the difference between the amortized cost of the loan and the estimated fair value of the collateral, less estimated selling costs. The estimate of the expected credit losses includes coverage of certain losses by PMI, if applicable. The estimated fair value of the collateral is determined based on a value provided by a third-party’s retail-based Automated Valuation Model (AVM). The Bank adjusts the AVM based on the amount it has historically received on liquidations. Expected recoveries of prior charge-offs, as determined by a third-party model, if any, are included in the allowance for credit losses.

Conventional MPF - Expected Recoveries. The Bank recognizes a recovery through the provision for credit losses when expected lifetime credit losses are less than the amounts previously charged-off. This includes potentially recording a negative ACL for certain of the Bank's MPF products. The reduction to the ACL for expected recoveries is partially offset by a reversal of expected CE, resulting in a net impact to the Bank's Statements of Condition.

Conventional MPF - Application of CE. The Bank also incorporates associated CE, if any, to determine its estimate of expected credit losses. The Bank records an ACL for expected credit losses that exceed the amount the Bank expects to receive from available CE. Potential recoveries from CE for conventional loans are evaluated at the individual master commitment level to determine the CE available to recover losses on loans under each individual master commitment.

Conventional MPF - Rollforward of ACL


(in thousands)	2022		2021		2020
Balance, beginning of period	$	3,412	$	4,972	$	7,832
Adjustment for cumulative effect of accounting change - adoption of ASU 2016-13(1)	—		—		(3,875)
(Charge-offs) Recoveries, net (2)	288		1,009		(727)
Provision (reversal) for credit losses	(460)		(2,569)		1,742
Balance, December 31	$	3,240	$	3,412	$	4,972

Note:

(1) As a result of adopting ASU 2016-13, the reduction to the Bank's ACL of $3.9 million was largely offset by a reversal of CE receivable of $3.8 million, resulting in a net impact of adoption of $0.1 million.

(2) Net charge-offs that the Bank does not expect to recover through CE receivable.

Government-Guaranteed or -Insured Mortgage Loans. The Bank invests in government-guaranteed or insured fixed-rate mortgage loans secured by one-to-four family residential properties. Government-guaranteed or insured mortgage loans are those insured or guaranteed by the Federal Housing Administration (FHA), Department of Veterans Affairs (VA), the Rural Housing Service (RHS) of the Department of Agriculture and/or by Housing and Urban Development (HUD). The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable guarantee or insurance with respect to defaulted government-guaranteed or -insured mortgage loans. Any losses on these loans that are not recovered from the issuer or the guarantor are absorbed by the servicer. Therefore, the Bank only has credit risk for these loans if the servicer fails to pay for losses not covered by the guarantee or insurance, but in such instance, the Bank would have recourse against the servicer for such failure. Based on the Bank's assessment of its servicers and the collateral backing the loans, the risk of loss was immaterial. Consequently, the Bank has not recorded an ACL for government-guaranteed or -insured mortgage loans at December 31, 2022 or December 31, 2021. Furthermore, none of these mortgage loans has been placed on non-accrual status

116

Notes to Financial Statements (continued)

because of the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.

Real Estate Owned (REO). The Bank had $0.3 million and $0.4 million of REO reported in Other assets on the Statement

of Condition at December 31, 2022 and December 31, 2021, respectively.

Note 7 – Derivatives and Hedging Activities

Nature of Business Activity. The Bank is exposed to interest rate risk primarily from the effect of interest rate changes on its interest-earning assets and interest-bearing liabilities that finance these assets. The goal of the Bank’s interest rate risk management strategy is not to eliminate interest rate risk but to manage it within appropriate limits. To mitigate the risk of loss, the Bank has established policies and procedures that include guidelines on the amount of exposure to interest rate changes it is willing to accept. In addition, the Bank monitors the risk to its interest income, net interest margin and average maturity of interest-earning assets, and interest-bearing liabilities.

Consistent with Finance Agency requirements, the Bank enters into derivatives to manage the interest rate risk exposures inherent in otherwise unhedged assets and funding positions and to achieve the Bank’s risk management objectives. Finance Agency regulation and the Bank’s Risk Governance Policy prohibit trading in or the speculative use of derivative instruments and limit credit risk arising from these instruments. Derivatives are an integral part of the Bank’s financial management strategy. The Bank may use derivatives to:

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

•preserve a favorable interest rate spread between the yield of an asset (e.g., an advance) and the cost of the related liability (e.g., the consolidated obligation);

•mitigate the adverse earnings effects of the shortening or extension of certain assets (e.g., advances or mortgage assets) and liabilities;

•manage embedded options in assets and liabilities;

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

•protect the value of existing asset or liability positions or firm commitments

Types of Derivatives. The Bank’s Risk Governance Policy establishes guidelines for its use of derivatives. The Bank can use instruments such as the following to reduce funding costs and to manage exposure to interest rate risks inherent in the normal course of business:

•interest rate swaps

•interest rate swaptions

•interest rate caps or floors; and

•futures and forward contracts

Interest Rate Swaps. An interest rate swap is an agreement between two entities to exchange cash flows in the future. The agreement sets the dates on which the cash flows will be exchanged and the manner in which the cash flows will be calculated. One of the simplest forms of an interest rate swap involves the promise by one party to pay cash flows equivalent to the interest on a notional amount at a predetermined fixed rate for a given period of time. In return for this promise, this party receives cash flows equivalent to the interest on the same notional amount at a variable-rate index for the same period of time. The variable rate indexes received or paid by the Bank on derivatives are LIBOR, SOFR or Overnight Index Swap (OIS).

Swaptions. A swaption is an option that gives the buyer the right to enter into a specified interest rate swap at a certain time in the future. When used as a hedge, a swaption can protect the Bank when it is planning to lend or borrow funds in the future against future interest rate changes. The Bank may enter into both payer swaptions and receiver swaptions. A payer swaption is the option to make fixed interest payments at a later date and a receiver swaption is the option to receive fixed interest payments at a later date.

Interest Rate Cap and Floor Agreements. In an interest rate cap agreement, a cash flow is generated if the price or rate of an underlying variable rises above a certain threshold (or cap) price. In an interest rate floor agreement, a cash flow is generated if the price or rate of an underlying variable falls below a certain threshold (or floor) price. Caps and floors are designed as protection against the interest rate on a variable-rate asset or liability falling below or rising above a certain level.

117

Notes to Financial Statements (continued)

Futures and Forwards Contracts. Futures and forwards contracts give the buyer the right to buy or sell a specific type of asset at a specific time at a given price. For example, certain mortgage purchase commitments entered into by the Bank are considered derivatives. The Bank may hedge these commitments by selling to-be-announced (TBA) mortgage-backed securities for forward settlement. A TBA represents a forward contract for the sale of MBS at a future agreed upon date for an established price.

Application of Derivatives. The Bank documents at inception all relationships between derivatives designated as hedging instruments and hedged items, its risk management objectives and strategies for undertaking various hedge transactions, and its method of assessing hedge effectiveness for all derivatives designated in an accounting hedge relationship. This process includes linking all derivatives that are designated as fair value hedges to (1) assets and liabilities on the Statement of Condition, or (2) firm commitments.

Derivative financial instruments are designated by the Bank as follows:

•a qualifying fair value hedge of an associated financial instrument or firm commitment; or

•a non-qualifying economic hedge to manage certain defined risks on the Statement of Condition. These hedges are primarily used to: (1) manage mismatches between the coupon features of assets and liabilities, (2) offset prepayment risks in certain assets, (3) mitigate the income statement volatility that occurs when financial instruments are recorded at fair value and hedge accounting is not permitted, or (4) to reduce exposure to reset risk.

There are two approaches to fair value hedge accounting - long-haul hedge accounting and short-cut hedge accounting. Refer to Note 1 - Summary of Significant Accounting Policies for more details.

Derivative transactions may be executed either with a counterparty (referred to as uncleared derivatives) or cleared through a Futures Commission Merchant (i.e., clearing agent) with a Derivatives Clearing Organization (referred to as cleared derivatives). The Bank is not a derivatives dealer and does not trade derivatives for short-term profit. The Bank transacts uncleared derivatives with counterparties that are large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations.

Types of Hedged Items. The Bank has the following types of hedged items:

Investments. The Bank primarily invests in certificates of deposit, U.S. Treasuries, U.S. agency obligations, MBS, and the taxable portion of state or local housing finance agency obligations, which may be classified as HTM, AFS or trading securities. The interest rate and prepayment risks associated with these investment securities are managed through a combination of debt issuance and derivatives. The Bank may manage the prepayment and interest rate risk by funding investment securities with consolidated obligations that have call features or by hedging the prepayment risk with caps or floors, callable swaps or swaptions. The Bank may manage duration risk by funding investment securities with consolidated obligations that contain call features. The Bank may also manage the risk arising from changing market prices and volatility of investment securities by entering into economic derivatives that generally offset the changes in fair value of the securities. Derivatives hedging trading securities (carried at fair value) or HTM securities (carried at amortized cost) are designated as economic hedges. Derivatives hedging AFS securities may be designated as either fair value or economic hedges.

Advances. The Bank offers a wide range of fixed- and variable-rate advance products with different maturities, interest rates, payment characteristics, and optionality. The Bank may use derivatives to manage the repricing and/or options characteristics of advances to match more closely the characteristics of the funding liabilities. In general, whenever a member executes a fixed-rate advance or a variable-rate advance with embedded options, the Bank may simultaneously execute a derivative that offsets the terms and embedded options, if any, in the advance. For example, the Bank may hedge a fixed-rate advance with an interest rate swap where the Bank pays a fixed-rate and receives a variable-rate, effectively converting the fixed-rate advance to a variable-rate advance. This type of hedge is typically treated as a fair value hedge. In addition, the Bank may hedge a callable, prepayable or convertible advance by entering into a cancellable interest-rate swap.

Mortgage Loans. The Bank invests in fixed-rate mortgage loans. The prepayment options embedded in these mortgage loans can result in extensions or contractions in the expected repayment of these investments, depending on changes in estimated prepayment speeds. The Bank manages the interest rate and prepayment risks associated with mortgage loans through a combination of debt issuance and, at times, derivatives, such as interest rate caps and floors, swaptions and callable swaps.

118

Notes to Financial Statements (continued)

Although these derivatives are valid economic hedges against the prepayment risk of the loans, they are not specifically linked to individual loans and, therefore, do not receive hedge accounting.

Consolidated Obligations. The Bank may enter into derivatives to hedge the interest rate risk associated with its specific debt issuances. The Bank manages the risk arising from changing market prices and volatility of a consolidated obligation by matching the cash inflow on the derivative with the cash outflow on the consolidated obligation.

For instance, in a typical transaction, fixed-rate consolidated obligations are issued by the Bank, and the Bank simultaneously enters into a matching derivative in which the counterparty pays fixed cash flows designed to mirror, in timing and amount, the cash outflows the Bank pays on the consolidated obligation. The Bank pays a variable cash flow that closely matches the interest payments it receives on short-term or variable-rate advances. The fixed-rate obligation and matching derivative are treated as fair value hedge relationships.

This strategy of issuing consolidated obligations while simultaneously entering into derivatives enables the Bank to offer a wider range of attractively-priced advances to its members and may allow the Bank to reduce its funding costs. The continued attractiveness of this strategy depends on yield relationships between the Bank’s consolidated obligations and derivative markets. If conditions change, the Bank may alter the types or terms of the consolidated obligations that it issues.

Firm Commitments. The Bank’s mortgage loan purchase commitments are considered derivatives and are recorded at fair value. When the mortgage loan purchase commitment derivative settles, the current market value of the commitment is included with the basis of the mortgage loan and amortized accordingly. Because the market in which the purchase of MPF loans differs from the principal market, the transaction price may not equal fair value on the date of the inception of the commitment and may result in a gain or loss for the Bank.

The Bank may also hedge a firm commitment for a forward starting advance through the use of an interest rate swap. In this case, the interest-rate swap functions as the hedging instrument for both the firm commitment and the subsequent advance and is treated as a fair value hedge. Because the firm commitment ends at the same exact time that the advance is settled, the fair value change associated with the firm commitment is effectively rolled into the basis of the advance.

119

Notes to Financial Statements (continued)

Financial Statement Effect and Additional Financial Information. Derivative Notional Amounts. The notional amount of derivatives serves as a factor in determining periodic interest payments or cash flows received and paid. However, the notional amount of derivatives reflects the Banks' involvement in the various classes of financial instruments and represents neither the actual amounts exchanged nor the overall exposure of the Bank to credit and market risk; the overall risk is much smaller. 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. Additionally, notional values are not meaningful measures of the risks associated with derivatives.

The following tables summarize the notional amount and fair value of derivative instruments and total derivatives 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.


	December 31, 2022
(in thousands)	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	69,039,626	$	53,340	$	985,134
Derivatives not designated as hedging instruments:
Interest rate swaps	$	2,176,879	$	2,112	$	24,457

Interest rate caps or floors	975,000		5,164		—
Mortgage delivery commitments	10,287		10		41
Total derivatives not designated as hedging instruments:	$	3,162,166	$	7,286	$	24,498
Total derivatives before netting and collateral adjustments	$	72,201,792	$	60,626	$	1,009,632
Netting adjustments and cash collateral (1)			168,370		(996,194)
Derivative assets and derivative liabilities as reported on the Statement of Condition			$	228,996	$	13,438


	December 31, 2021
(in thousands)	Notional Amount of Derivatives		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	25,597,234	$	1,061	$	70,643

Derivatives not designated as hedging instruments:
Interest rate swaps	$	1,084,988	$	27	$	3,046
Interest rate caps or floors	1,005,000		1,357		—
Mortgage delivery commitments	24,822		2		131
Total derivatives not designated as hedging instruments	$	2,114,810	$	1,386	$	3,177
Total derivatives before netting and collateral adjustments	$	27,712,044	$	2,447	$	73,820
Netting adjustments and cash collateral (1)			180,406		(67,975)
Derivative assets and derivative liabilities as reported on the Statement of Condition			$	182,853	$	5,845

Note:

(1) Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, cash collateral including accrued interest held or placed with the same clearing agent and/or counterparties. Cash collateral posted including accrued interest was $1,166.4 million for December 31, 2022 and $248.7 million for December 31, 2021. Cash collateral received was $1.9 million for December 31, 2022 and $0.3 million for December 31, 2021.

120

Notes to Financial Statements (continued)

The following table presents, by type of hedged item, the gains (losses) on derivatives and the related hedged items in fair value hedging relationships, which also includes amortization of basis adjustments related to hedged items in discontinued fair value hedge relationships and the impact of those derivatives on the Bank’s net interest income. Also included is the amortization of basis adjustments related to mortgage delivery commitments, which are characterized as derivatives, but are not designated in fair value hedge relationships.


(in thousands)	Gains/(Losses) on Derivative		Gains/ (Losses) on Hedged Item		Net Interest Settlements		Effect of Derivatives on Net Interest Income		Total Interest Income/ (Expense) Recorded in the Statement of Income
2022
Hedged item type:
Advances	$	418,403	$	(418,262)	$	(7,674)	$	(7,533)	$	992,336
AFS securities	528,989		(525,632)		30,422		33,779		264,785
Mortgage loans held for portfolio	—		(1,378)		—		(1,378)		135,086
Consolidated obligations - discount notes	(6,625)		7,057		5,717		6,149		(464,352)
Consolidated obligations – bonds	(991,964)		991,737		(69,233)		(69,460)		(775,104)
Total	$	(51,197)	$	53,522	$	(40,768)	$	(38,443)


(in thousands)	Gains/(Losses) on Derivative		Gains/ (Losses) on Hedged Item		Net Interest Settlements		Effect of Derivatives on Net Interest Income		Total Interest Income/ (Expense) Recorded in the Statement of Income
2021
Hedged item type:
Advances	$	203,228	$	(203,344)	$	(140,979)	$	(141,095)	$	139,905
AFS securities	121,467		(119,855)		(46,758)		(45,146)		96,438
Mortgage loans held for portfolio	—		(3,468)		—		(3,468)		126,360
Consolidated obligations – bonds	(105,498)		105,526		51,805		51,833		(222,781)
Total	$	219,197	$	(221,141)	$	(135,932)	$	(137,876)


(in thousands)	Gains/(Losses) on Derivative		Gains/(Losses) on Hedged Item		Net Interest Settlements		Effect of Derivatives on Net Interest Income		Total Interest Income/ (Expense) Recorded in the Statement of Income
2020
Hedged item type:
Advances	$	(77,223)	$	77,129	$	(185,860)	$	(185,954)	$	625,473
AFS securities	(84,465)		82,308		(21,131)		(23,288)		166,842
Mortgage loans held for portfolio	—		(3,219)		—		(3,219)		155,271
Consolidated obligations – bonds	(7,336)		8,061		66,820		67,545		(530,962)
Total	$	(169,024)	$	164,279	$	(140,171)	$	(144,916)

121

Notes to Financial Statements (continued)

The following table presents the cumulative amount of fair value hedging adjustments and the related carrying amount of the hedged items.


(in thousands)	December 31, 2022
Hedged item type	Carrying Amount of Hedged Assets/Liabilities (1)		Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Assets/Liabilities		Fair Value Hedging Adjustments for Discontinued Hedging Relationships		Total Amount of Fair Value Hedging Adjustments
Advances	$	9,516,520	$	(370,776)	$	(918)	$	(371,694)
AFS securities	6,265,480		(513,825)		873		(512,952)
Consolidated obligations - discount notes	17,481,373		(7,057)		—		(7,057)
Consolidated obligations – bonds	33,603,677		(1,072,289)		10		(1,072,279)


(in thousands)	December 31, 2021
Hedged item type	Carrying Amount of Hedged Assets/Liabilities (1)		Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Assets/Liabilities		Fair Value Hedging Adjustments for Discontinued Hedging Relationships		Total Amount of Fair Value Hedging Adjustments
Advances	$	8,952,529	$	46,583	$	(20)	$	46,563
AFS securities	5,968,405		11,667		1,012		12,679
Consolidated obligations – bonds	10,633,898		(80,686)		146		(80,540)

Note:

(1) Includes carrying value of hedged items in current fair value hedging relationships.

The following table presents net gains (losses) related to derivatives not designated as hedging instruments in noninterest income.



	Year ended December 31,
(in thousands)	2022		2021		2020
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps	$	20,942	$	15,449	$	(85,298)

Interest rate caps or floors	2,663		184		758
Net interest settlements	(5,864)		(5,440)		(11,467)
To Be Announced (TBA)	74		—		38
Mortgage delivery commitments	(2,917)		(4,311)		4,724
Other	1		—		148
Total net gains (losses) related to derivatives not designated as hedging instruments	$	14,899	$	5,882	$	(91,097)
Other - price alignment amount on cleared derivatives (1)	(655)		11		187
Net gains (losses) on derivatives	$	14,244	$	5,893	$	(90,910)

Notes:

(1) This amount is for derivatives for which variation margin is characterized as a daily settled contract.

The Bank had no active cash flow hedging relationships during 2022, 2021 or 2020.

122

Notes to Financial Statements (continued)

Managing Credit Risk on Derivatives. The Bank is subject to credit risk due to the risk of nonperformance by counterparties to its derivative transactions. The Bank manages counterparty credit risk through credit analysis, collateral requirements, and adherence to the requirements set forth in its policies, U.S. Commodity Futures Trading Commission regulations, and Finance Agency regulations.

Uncleared Derivatives. For uncleared derivatives, the degree of credit risk depends on the extent to which netting arrangements are included in such contracts to mitigate the risk. The Bank requires collateral agreements with collateral delivery thresholds on all uncleared derivatives.

Uncleared derivative transactions executed on or after September 1, 2022 are subject to two-way initial margin requirements, as mandated by regulatory requirements issued in response to the Wall Street Reform and Consumer Protection Act, if the Bank’s average aggregate uncleared derivative notional amount, and the initial margin requirement to an individual counterparty exceed specified thresholds. The initial margin is required to be certain investment securities that are held at a third-party custodian and do not change ownership, except upon the occurrence of certain events, including an event of default due to bankruptcy, insolvency, or similar proceeding. As of December 31, 2022, the Bank did not exceed initial margin thresholds and was not required to post two-way initial margin.

Generally, the Bank’s ISDA agreements for uncleared derivatives have collateral delivery thresholds set to zero (subject to minimum transfer amounts). The Bank has a small number of legacy trades that require the Bank to post additional collateral with its counterparties if there is deterioration in the Bank’s credit rating and the net liability position exceeds the relevant threshold. As of December 31, 2022, the net liability position of these trades, collateral posted and potential additional credit contingent collateral amounts are all immaterial.

Cleared Derivatives. For cleared derivatives, Derivative Clearing Organizations (Clearing Houses) are the Bank's counterparties. The Clearing Houses notify the clearing agent of the required initial and variation margin. The requirement that the Bank post initial margin and exchange variation margin settlement payments through the clearing agent, which notifies the Bank on behalf of the Clearing Houses, exposes the Bank to institutional credit risk in the event that the clearing agent or the Clearing Houses fail to meet their respective obligations. The use of cleared derivatives is intended to mitigate credit risk exposure through the use of a central counterparty instead of individual counterparties. Collateral postings and variation margin settlement payments are made daily, through a clearing agent, for changes in the value of cleared derivatives. Initial margin is the amount calculated based on anticipated exposure to future changes in the value of a swap and protects the Clearing Houses from market risk in the event of default by one of their respective clearing agents. Variation margin is paid daily to settle the exposure arising from changes in the market value of the position. The Bank uses either CME Clearing or LCH Ltd as the Clearing House for all cleared derivative transactions. Variation margin payments are characterized as settled to market, rather than collateral. Initial margin is considered collateralized to market.

Based on credit analyses and collateral requirements, the Bank does not anticipate credit losses related to its derivative agreements. See Note 14 - Estimated Fair Values for discussion regarding the Bank's fair value methodology for derivative assets and liabilities, including an evaluation of the potential for the fair value of these instruments to be affected by counterparty credit risk.

For cleared derivatives, the Clearing House determines initial margin requirements and generally credit ratings are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including but not limited to credit rating downgrades. The Bank was not required by its clearing agents to post additional initial margin at December 31, 2022.

Offsetting of Derivative Assets and Derivative Liabilities. When it has met the netting requirements, 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. The Bank has analyzed the enforceability of offsetting rights incorporated in its cleared derivative transactions and determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable law upon an event of default including a bankruptcy, insolvency or similar proceeding involving the Clearing Houses or the Bank’s clearing agent, or both. Based on this analysis, the Bank nets derivative fair values on all of its transactions through a particular clearing agent with a particular Clearing House (including settled variation margin) into one net asset or net liability exposure. Initial margin posted to the clearing house is presented as a derivative asset.

123

Notes to Financial Statements (continued)

The following tables present separately the fair value of derivative instruments meeting or not meeting netting requirements. Gross recognized amounts do not include the related collateral received from or pledged to counterparties. Net amounts reflect the adjustments of collateral received from or pledged to counterparties.


December 31, 2022
	Derivative Instruments Meeting Netting Requirements
(in thousands)	Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral		Net amounts after netting adjustments and cash collateral		Derivative Instruments Not Meeting Netting Requirements (1)		Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Uncleared	$	43,901	(41,679)		$	2,222	10		$	2,232
Cleared	16,715		210,049		226,764		—		226,764
Total	$	60,616	$	168,370	$	228,986	$	10	$	228,996

Derivative Liabilities
Uncleared	$	1,003,917	(992,167)		$	11,750	41		$	11,791
Cleared	5,674		(4,027)		1,647		—		1,647
Total	$	1,009,591	$	(996,194)	$	13,397	$	41	$	13,438


December 31, 2021
	Derivative Instruments Meeting Netting Requirements
(in thousands)	Gross Recognized Amount		Gross Amounts of Netting Adjustments and Cash Collateral		Net amounts after netting adjustments and cash collateral		Derivative Instruments Not Meeting Netting Requirements (1)		Total Derivative Assets and Total Derivative Liabilities
Derivative Assets
Uncleared	$	1,972	(1,700)		$	272	2		$	274
Cleared	473		182,106		$	182,579	—		182,579
Total Derivative Assets	$	2,445	$	180,406	$	182,851	$	2	$	182,853

Derivative Liabilities
Uncleared	$	71,083	(67,502)		$	3,581	131		$	3,712
Cleared	2,606		(473)		2,133		—		2,133
Total Derivative Liabilities	$	73,689	$	(67,975)	$	5,714	$	131	5,845

Note:

(1) Represents derivatives that are not subject to an enforceable netting agreement (e.g., mortgage delivery commitments).

124

Notes to Financial Statements (continued)

Note 8 – Deposits

The Bank offers demand and overnight deposits to both members and to qualifying nonmembers and term deposits to members. Noninterest-bearing demand and overnight deposits are generally comprised of funds collected by members pending disbursement to the mortgage loan holders, as well as member funds deposited at the FRB.

The following table details interest-bearing and noninterest-bearing deposits as of December 31, 2022 and 2021.


	December 31,
(in thousands)	2022		2021
Interest-bearing:
Demand and overnight	$	525,549	$	918,706


Noninterest-bearing:
Demand and overnight	27,730		168,801
Total deposits	$	553,279	$	1,087,507

Note 9 – Consolidated Obligations

Consolidated obligations consist of bonds and discount notes. The FHLBanks issue consolidated obligations through the OF as their agent. In connection with each debt issuance, each FHLBank specifies the amount of debt it wants to have issued on its behalf. The OF tracks the amount of debt issued on behalf of each FHLBank. The Bank records as a liability its specific portion of consolidated obligations for which it is the primary obligor.

The Finance Agency and the U.S. Secretary of the Treasury oversee the issuance of FHLBank debt through the OF. Bonds may be issued to raise short-, intermediate-, and long-term funds for the FHLBanks and are not subject to any statutory or regulatory limits on their maturity. Discount notes are issued primarily to raise short-term funds and have original maturities of up to one year. These notes generally sell at less than their face amount and are redeemed at par value when they mature.

Although the Bank is primarily liable for its portion of consolidated obligations, the Bank is also jointly and severally liable with the other ten FHLBanks for the payment of principal and interest on all consolidated obligations of each of the FHLBanks. The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations whether or not the consolidated obligation represents a primary liability of such FHLBank.

Although an FHLBank has never paid the principal or interest payments due on a consolidated obligation on behalf of another FHLBank, if one FHLBank is required to make such payments, Finance Agency regulations provide that the paying FHLBank is entitled to reimbursement from the non-complying FHLBank for any payments made on its behalf and other associated costs, including interest, to be determined by the Finance Agency. If the Finance Agency determines that the non-complying FHLBank is unable to satisfy its repayment obligations, then the Finance Agency may allocate the outstanding liabilities of the non-complying FHLBank among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding. However, the Finance Agency reserves the right to allocate the outstanding liabilities for the consolidated obligations among the FHLBanks in any other manner it may determine to ensure that the FHLBanks operate in a safe and sound manner. The par amounts of the 11 FHLBanks’ outstanding consolidated obligations were $1,181.7 billion at December 31, 2022 and $652.9 billion at December 31, 2021.

Regulations require the Bank to maintain unpledged qualifying assets equal to its participation of the consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; obligations of or fully guaranteed by the United States; obligations, participations, or other instruments of or issued by Fannie Mae or Ginnie Mae; mortgages, obligations or other securities which are or ever have been sold by Freddie Mac; and such securities as fiduciary and trust funds may invest in under the laws of the state in which the Bank is located. Any assets subject to a lien or pledge for the benefit of holders of any issue of consolidated obligations are treated as if they are free from lien or pledge for purposes of compliance with these regulations.

General Terms. Consolidated obligations are issued with either fixed-rate coupon payment terms or variable-rate coupon payment terms that are indexed to specified indices, such as SOFR. To meet the specific needs of certain investors in consolidated obligations, both fixed-rate bonds and variable-rate bonds may contain features which may result in complex coupon payment terms and call options. When such consolidated obligations are issued, the Bank may enter into derivatives containing offsetting features that effectively convert the terms of the bond to those of a simple variable-rate bond or a fixed-rate bond. The Bank has no outstanding consolidated obligations denominated in currencies other than U.S. dollars.

125

Notes to Financial Statements (continued)

Interest Rate Payment Terms. With respect to interest payments, consolidated obligation bonds may also have the following terms:

Step-up Bonds generally pay interest at increasing fixed rates at specified intervals over the life of the bond. These bonds generally contain provisions enabling the Bank to call bonds at its option on the step-up dates; and

The following table details interest rate payment terms for the Bank’s consolidated obligation bonds at December 31, 2022 and December 31, 2021.


(in thousands)	December 31, 2022		December 31, 2021
Par value of consolidated bonds:
Fixed-rate	$	39,983,295	$	20,650,400
Step-up	3,124,000		1,560,000
Floating-rate	14,408,000		925,000

Total par value	57,515,295		23,135,400
Bond premiums	47,515		62,536
Bond discounts	(14,069)		(7,469)
Concession fees	(5,008)		(4,188)
Hedging adjustments	(1,072,278)		(80,541)
Total book value	$	56,471,455	$	23,105,738

Maturity Terms. The following table presents a summary of the Bank’s consolidated obligation bonds outstanding by year of contractual maturity and weighted-average interest rate at December 31, 2022 and December 31, 2021.


	December 31, 2022				December 31, 2021
(dollars in thousands) Year of Contractual Maturity	Amount		Weighted Average Interest Rate		Amount		Weighted Average Interest Rate
Due in 1 year or less	$	30,747,975	3.72	%	$	5,748,625	1.17	%
Due after 1 year through 2 years	11,491,385		3.09		2,243,000		1.74
Due after 2 years through 3 years	3,263,725		2.16		3,520,275		1.32
Due after 3 years through 4 years	6,557,800		1.25		1,683,725		1.27
Due after 4 years through 5 years	1,850,300		3.09		6,300,800		1.10
Thereafter	3,604,110		2.37		3,638,975		1.90

Total par value	$	57,515,295	3.12	%	$	23,135,400	1.35	%

The following table presents the Bank’s consolidated obligation bonds outstanding between noncallable and callable as of December 31, 2022 and December 31, 2021.


(in thousands)	December 31, 2022		December 31, 2021
Noncallable	$	35,816,795	$	11,476,400
Callable	21,698,500		11,659,000
Total par value	$	57,515,295	$	23,135,400

126

Notes to Financial Statements (continued)

The following table presents consolidated obligation bonds outstanding by the earlier of contractual maturity or next call date as of December 31, 2022 and December 31, 2021.


(in thousands)	December 31,
Year of Contractual Maturity or Next Call Date	2022		2021
Due in 1 year or less	$	47,036,975	$	17,067,625
Due after 1 year through 2 years	6,573,385		2,025,000
Due after 2 years through 3 years	1,049,725		1,151,275
Due after 3 years through 4 years	1,035,800		848,725
Due after 4 years through 5 years	392,300		596,800
Thereafter	1,427,110		1,445,975

Total par value	$	57,515,295	$	23,135,400

Consolidated Obligation Discount Notes. Consolidated obligation discount notes are issued to raise short-term funds. Discount notes are consolidated obligations with original maturities up to one year. These notes are issued at less than their face amount and redeemed at par value when they mature. The following table details the Bank’s consolidated obligation discount notes as of December 31, 2022 and December 31, 2021.


	December 31,
(dollars in thousands)	2022			2021
Book value	$	33,745,478		$	10,493,617
Par value	34,007,058			10,494,933
Weighted average interest rate (1)	4.25		%	0.04		%

Note:

(1) Represents yield to maturity excluding concession fees and hedging adjustments.

127

Notes to Financial Statements (continued)

Note 10 – Affordable Housing Program (AHP)

In support of the goal of providing funding for affordable housing and economic development, the Bank administers a number of programs, some mandated and some optional set-asides, which make funds available through member financial institutions. In all of these programs, Bank funds flow through member financial institutions into areas of need that are served by our members. AHP, mandated by the Act, is the largest and primary public policy program of the FHLBanks. The Act requires the Bank to contribute 10% of its current year net income (as defined by a Finance Agency advisory bulletin as GAAP net income before interest expense related to mandatorily redeemable capital stock and the assessment for AHP) to AHP and make these funds available for use in the subsequent year. Each year, the Bank’s Board adopts an implementation plan that defines the structure of the program pursuant to the AHP regulations.

Each FHLBank provides subsidies in the form of direct grants or below-market interest rates on advances to members who provide the funds to assist in the purchase, construction or rehabilitation of housing for very low and low-or moderate-income households. Annually, the FHLBanks must collectively recognize AHP assessment expense equal to the greater of 10% of its annual income subject to assessment, or the prorated sum required to ensure the aggregate contribution by the FHLBanks is no less than $100 million for each year. The Bank accrues this expense monthly based on its net income. The Bank reduces the AHP liability as members use subsidies.

If the Bank experienced a net loss during a quarter, but still had net earnings for the year, the Bank’s obligation to the AHP would be calculated based on the Bank’s year-to-date net income. If the Bank had net income in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. If the Bank experienced a net loss for a full year, the Bank would have no obligation to the AHP for the year since each FHLBank’s required annual AHP contribution is limited to its annual net income. If the aggregate 10% calculation described above was less than $100 million for all the FHLBanks, each FHLBank would be required to contribute a prorated sum to ensure that the aggregate contributions by the FHLBanks equal $100 million. The proration would be made on the basis of an FHLBank’s income in relation to the income of all FHLBanks for the previous year. There was no shortfall in assessments below the $100 million minimum amount for the years ended 2022, 2021 or 2020. If an FHLBank finds that its required contributions are contributing to the financial instability of that FHLBank, it may apply to the Finance Agency for a temporary suspension of its contributions under the Act. The Bank did not make any such application in 2022, 2021 or 2020. The Bank awards commitments that are disbursed over 24 to 36 months. The Bank has outstanding AHP commitments of $48.5 million, $68.6 million and $72.0 million as of December 31, 2022, 2021 and 2020, respectively.

The following table presents a rollforward of the AHP payable for 2022, 2021, and 2020.


(in thousands)	2022		2021		2020
Balance, beginning of the year	$	81,152	$	102,186	$	112,289
Assessments	25,410		9,974		25,227
Payments and subsidy usage, net	(30,734)		(31,008)		(35,330)
Balance, end of the year	$	75,828	$	81,152	$	102,186

128

Notes to Financial Statements (continued)

Note 11 – Capital

The Bank is subject to three capital requirements under its current Capital Plan Structure and the Finance Agency rules and regulations. Regulatory capital does not include AOCI, but does include mandatorily redeemable capital stock.

•Risk-based capital (RBC). Under this capital requirement, the Bank must maintain at all times permanent capital, defined as the amounts paid-in for Class B stock and retained earnings, in an amount at least equal to the sum of its credit risk, market risk, and operational risk capital requirements, all of which are calculated in accordance with the rules and regulations of the Finance Agency. The Finance Agency may require the Bank to maintain a greater amount of minimum capital levels than is required based on the Finance Agency rules and regulations.

•Total regulatory capital. Under this capital requirement, the Bank is required to maintain at all times a total capital-to-assets ratio of at least 4.0%. Total regulatory capital is the sum of permanent capital, Class A stock, any general loss allowance, if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the Finance Agency as available to absorb losses; and

•Leverage capital. Under this third capital requirement, the Bank is required to maintain at all times a leverage capital-to-assets ratio of at least 5.0%. Leverage capital is defined as the sum of (i) permanent capital weighted 1.5 times and (ii) all other components of total capital.

At December 31, 2022, the Bank was in compliance with all regulatory capital requirements.

The Bank has two subclasses of capital stock: B1 membership stock and B2 activity stock. The Bank had $309.0 million in B1 membership stock and $3,119.4 million in B2 activity stock at December 31, 2022. The Bank had $352.1 million in B1 membership stock and $874.9 million in B2 activity stock at December 31, 2021.

The following table demonstrates the Bank’s compliance with the regulatory capital requirements at December 31, 2022 and December 31, 2021.


	December 31, 2022						December 31, 2021
(dollars in thousands)	Required			Actual			Required			Actual
Regulatory capital requirements:
RBC	$	441,078		$	4,992,405		$	406,676		$	2,647,918
Total capital-to-asset ratio	4.0		%	5.2		%	4.0		%	7.0		%
Total regulatory capital	3,845,647			4,992,405			1,506,051			2,647,918
Leverage ratio	5.0		%	7.8		%	5.0		%	10.6		%
Leverage capital	4,807,058			7,488,607			1,882,564			3,971,878

The Finance Agency has established four capital classifications for the FHLBanks: adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized. On December 15, 2022, the Bank received final notification from the Finance Agency that it was considered “adequately capitalized” for the quarter ended September 30, 2022. As of the date of this filing, the Bank has not received final notice from the Finance Agency regarding its capital classification for the quarter ended December 31, 2022.

Mandatorily Redeemable Capital Stock. The Bank is a cooperative whose member financial institutions and former members own all of the relevant Bank’s issued and outstanding capital stock. Shares cannot be purchased or sold except between the Bank and its members at the shares’ par value of $100, as mandated by the Bank’s Capital Plan.

At December 31, 2022 and December 31, 2021, the Bank had $27.8 million and $22.5 million, respectively, in capital stock subject to mandatory redemption with payment subject to a five-year waiting period and the Bank meeting its minimum regulatory capital requirements. The estimated dividends on mandatorily redeemable capital stock recorded as interest expense were $1.6 million, $3.7 million, and $16.6 million during 2022, 2021 and 2020.

129

Notes to Financial Statements (continued)

The following table provides the related dollar amounts for activities recorded in mandatorily redeemable capital stock during 2022, 2021, and 2020.


	December 31,
(in thousands)	2022		2021		2020
Balance, beginning of the period	$	22,457	$	142,807	$	343,575
Capital stock subject to mandatory redemption reclassified from capital	5,809		1,069		39,457
Redemption/repurchase of mandatorily redeemable stock	(503)		(121,419)		(240,225)
Balance, end of the period	$	27,763	$	22,457	$	142,807

As of December 31, 2022, the total mandatorily redeemable capital stock reflected the balance for six institutions. Three institutions were merged out of district and are considered to be non-members and one relocated and became a member of another FHLBank at which time the membership with the Bank terminated. Two other institutions have notified the Bank of their intention to voluntarily redeem their capital stock and withdraw from membership. These institutions will continue to be members of the Bank until the withdrawal period is completed.

The following table shows the amount of mandatorily redeemable capital stock by contractual year of redemption at December 31, 2022 and December 31, 2021.


	December 31,
(in thousands)	2022		2021
Due in 1 year or less	$	20,000	$	—
Due after 1 year through 2 years	—		20,000
Due after 2 years through 3 years	34		—
Due after 3 years through 4 years	527		26
Due after 4 years through 5 years	5,571		459
Past contractual redemption date due to remaining activity	1,631		1,972
Total	$	27,763	$	22,457

Under the terms of the Bank’s Capital Plan, membership capital stock is redeemable five years from the date of membership termination or withdrawal notice from the member. If the membership is terminated due to a merger or consolidation, the membership capital stock is deemed to be excess stock and is repurchased. The activity capital stock (i.e., supporting advances, letters of credit and MPF) relating to termination, withdrawal, mergers or consolidation is recalculated based on the underlying activity. Any excess activity capital stock is repurchased on an ongoing basis as part of the Bank’s excess stock repurchase program that is in effect at the time. Therefore, the redemption period could be less than five years if the stock becomes excess stock. However, the redemption period could extend beyond five years if the underlying activity is still outstanding.

Dividends and Retained Earnings. In accordance with the Joint Capital Enhancement Agreement (JCEA), entered into by the Bank, as amended, the Bank allocates on a quarterly basis 20% of its net income to a separate restricted retained earnings account (RRE) until the account balance equals at least 1% of the Bank's average balance of outstanding consolidated obligations for the current quarter. These RRE are not available to pay dividends and are presented separately from other retained earnings on the Statement of Condition. Additionally, the Capital Agreement provides that amounts in restricted retained earnings in excess of 150% of the Bank’s restricted retained earnings minimum (i.e., one percent of the average balance of outstanding consolidated obligations calculated as of the last day of each calendar quarter) may be released from restricted retained earnings. As a result of increased consolidated obligations, an allocation of net income was made to RRE during the second, third, and fourth quarters of 2022. At December 31, 2022, retained earnings were $1,536.2 million, including $1,037.2 million of unrestricted retained earnings and $499.0 million of RRE.

130

Notes to Financial Statements (continued)

Dividends paid by the Bank are subject to Board approval and may be paid in either capital stock or cash; historically, the Bank has paid cash dividends only. These dividends are based on stockholders' average balances for the previous quarter.

Dividends paid in 2022, 2021 and 2020 are presented in the table below.


	Dividend - Annual Yield
	2022		2021		2020
	Membership	Activity	Membership	Activity	Membership	Activity
February	1.25%	5.25%	2.50%	5.75%	4.50%	7.75%
April	1.25%	5.25%	2.50%	5.75%	3.00%	6.25%
July	2.25%	6.25%	1.25%	5.25%	3.00%	6.25%
October	3.25%	7.25%	1.25%	5.25%	3.00%	6.25%

In February 2023, the Bank paid a quarterly dividend equal to an annual yield of 4.00% on membership stock and 7.95% on activity stock.

The following table summarizes the changes in AOCI for 2022, 2021 and 2020.


(in thousands)	Net Unrealized Gains(Losses) on AFS		Non-credit OTTI Gains(Losses) on AFS		Net Unrealized Gains (Losses) on Hedging Activities		Pension and Post-Retirement Plans		Total
December 31, 2019	$	45,155	$	51,704	$	149	$	(5,182)	$	91,826
Other comprehensive income (loss) before reclassification:
Adoption of ASU -2016-13	51,704		(51,704)		—		—
Net unrealized gains (losses)	46,733		—		—		—		46,733

Amortization on hedging activities	—		—		(149)		—		(149)
Pension and post-retirement	—		—		—		(1,084)		(1,084)
December 31, 2020	$	143,592	$	—	$	—	$	(6,266)	$	137,326

December 31, 2020	$	143,592	$	—	$	—	$	(6,266)	$	137,326
Other comprehensive income (loss) before reclassification:

Net unrealized gains (losses)	(28,577)		—		—		—		(28,577)

Pension and post-retirement	—		—		—		1,442		1,442
December 31, 2021	$	115,015	$	—	$	—	$	(4,824)	$	110,191


December 31, 2021	$	115,015	$	—	$	—	$	(4,824)	$	110,191
Other comprehensive income (loss) before reclassification:
Net unrealized gains (losses)	(180,423)		—		—		—		(180,423)
Reclassifications from OCI to net income:
Reclassification adjustment for net (gains) losses included in net income	(509)		—		—		—		(509)
Pension and post-retirement	—		—		—		4,214		4,214
December 31, 2022	$	(65,917)	$	—	$	—	$	(610)	$	(66,527)

131

Notes to Financial Statements (continued)

Note 12 – Employee Retirement Plans

Qualified Defined Benefit Multiemployer Plan. The Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions (Defined Benefit Plan), a tax qualified defined benefit pension plan. The Defined Benefit Plan is treated as a multiemployer plan for accounting purposes, but operates as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (IRC). As a result, certain multiemployer plan disclosures are not applicable to the Defined Benefit Plan. Under the Defined Benefit Plan, contributions made by a participating employer may be used to provide benefits to employees of other participating employers because assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer. Also, in the event a participating employer is unable to meet its contribution requirements, the required contributions for the other participating employers could increase proportionately. The plan covers officers and employees of the Bank that meet certain eligibility requirements and were hired prior to January 1, 2019.

The Defined Benefit Plan operates on a fiscal year from July 1 through June 30. The Defined Benefit Plan files one Form 5500 on behalf of all employers who participate in the plan. The Employer Identification Number 13-5645888, and the three-digit plan number is 333. There are no collective bargaining agreements in place at the Bank.

The Defined Benefit Plan’s annual valuation process includes calculating the plan’s funded status and separately calculating the funded status of each participating employer. The funded status is defined as the market value of the plan’s assets divided by the funding target (100% of the present value of all benefit liabilities accrued at that date). As permitted by ERISA, the Defined Benefit Plan accepts contributions for the prior plan year up to eight and a half months after the asset valuation date. As a result, the market value of assets at the valuation date (July 1) will increase by any subsequent contributions designated for the immediately preceding plan year ended June 30 that the plan’s participants may choose to make.

The most recent Form 5500 available for the Defined Benefit Plan is for the fiscal year ended June 30, 2021. The Bank’s contributions to the Defined Benefit Plan during 2022 and 2021 were less than 5% of the total plan contributions during each of the plan years ended June 30, 2021 and 2020.


(dollars in thousands)	2022				2021				2020
Net pension cost charged to compensation and benefit expense for the year ended December 31	$	2,642			$	3,370			$	3,572
Defined Benefit Plan funded status as of July 1	118.9		%	(a)	130.6		%	(b)	108.5		%
Bank’s funded status as of July 1	155.0		%		170.8		%		141.1		%

(a) The Defined Benefit Plan’s funded status as of July 1, 2022 is preliminary and may increase because the plan’s participants are permitted to make contributions for the plan year ended June 30, 2022 through March 15, 2023. The final funded status will not be available until the Form 5500 is filed (this Form 5500 is due April 2023).

(b) The funded status disclosed is preliminary as the Form 5500 had not been filed when disclosed.

Included in the net pension costs above are discretionary contributions of $2.0 million, $2.7 million and $3.0 million in 2022, 2021 and 2020, respectively. As the Defined Benefit Plan's year-end is June 30, the Bank's discretionary contributions, which occur during the Bank's calendar year, may be allocated to multiple Defined Benefit Plan years.

Qualified Defined Contribution Plan. The Bank also maintains a defined contribution plan for its employees. The Bank’s contributions consist of a matching contribution equal to a percentage of voluntary employee contributions, subject to certain limitations. For those employees that meet certain eligibility requirements and were hired on or after January 1, 2019, the Bank will make an additional contribution to the plan equal to a percentage of the eligible employee’s plan salary. The Bank recognized $1.7 million, $1.6 million and $1.6 million in expense related to plan contributions during 2022, 2021 and 2020, respectively.

Nonqualified Supplemental Deferred Compensation Plans. In addition, the Bank maintains nonqualified deferred compensation plans, available to select employees and directors, which are, in substance, unfunded supplemental defined contribution retirement plans. The plans’ liabilities consist of the accumulated compensation deferrals and accrued earnings (losses) on the deferrals. The Bank’s obligation from these plans was $17.7 million and $18.4 million at December 31, 2022 and December 31, 2021, respectively, and the Bank recognized operating expenses of $(1.5) million, $2.1 million, and $1.1 million for 2022, 2021 and 2020, respectively. Although the nonqualified compensation plans are unfunded, the Bank owns mutual funds held in a Rabbi trust to help secure the Bank’s obligation to participants and to partially offset the earnings (losses) of certain deferred compensation agreements. The fair value of the mutual funds was $13.9 million and $14.2 million at December 31, 2022 and December 31, 2021, respectively.

132

Notes to Financial Statements (continued)

Post-retirement Health Benefit Plan. The Bank sponsors an unfunded retiree benefits program that includes health care and life insurance benefits for eligible retirees. Employees who retired prior to January 1, 1992 receive health care benefits at the Bank’s expense after age 65. Employees retiring after January 1, 1992 participate in a health reimbursement account (HRA). At the discretion of the Bank, the amount can be modified. A limited life insurance benefit is provided at the Bank’s expense for retirees who retired prior to January 1, 2009. Employees who retired after January 1, 1992 but prior to January 1, 2009 were required to meet specific eligibility requirements of age 65 or age 60 with a minimum of 10 years of service at the time of retirement to be eligible for retiree health and life insurance benefits. The Accumulated Post-retirement Benefit Obligation (APBO) was $2.1 million and $2.5 million at December 31, 2022 and December 31, 2021, respectively.

Supplemental Executive Retirement Plan (SERP). The Bank also maintains an unfunded SERP, a nonqualified defined benefit retirement plan, for executives hired prior to January 1, 2019. The SERP is intended to ensure, among other things, that participants receive the full amount of benefits to which they would have been entitled under the qualified defined benefit pension plan in the absence of limits on benefits levels imposed by the Internal Revenue Service. The accumulated benefit obligation for the SERP was $9.5 million and $10.4 million at December 31, 2022 and December 31, 2021, respectively. As noted above, all nonqualified plans maintained by the Bank are unfunded; however, the Bank is the beneficiary of certain mutual funds held in a Rabbi trust which assets help secure the Bank’s obligation to participants. The fair value of the mutual funds was $2.1 million at both December 31, 2022 and December 31, 2021.

The Post-retirement Health Benefit Plan and SERP are not material to the Bank. However, the following table sets forth their benefit obligations recorded in Other liabilities on the Statements of Condition and amounts recognized in AOCI. In addition, the Bank recognized $1.8 million, $3.3 million, and $2.5 million in expense related to these two plans during 2022, 2021 and 2020, respectively, of which the service cost component was recognized in Compensation and benefits expense and all other costs were recognized in Other operating expense on the Statements of Income.


	SERP				Post-retirement Health Benefit Plan				Total
(in thousands)	2022		2021		2022		2021		2022		2021
Benefit obligations	$	11,741	$	13,885	$	2,060	$	2,511	$	13,801	$	16,396
Unrealized actuarial gains (losses) in AOCI	$	(1,255)	$	(4,924)	$	644	$	100	$	(611)	$	(4,824)

133

Notes to Financial Statements (continued)

Note 13 – Transactions with Related Parties

The Bank is a cooperative whose member institutions own the capital stock of the Bank and may receive dividends on their investments. In addition, certain former members that still have outstanding transactions are also required to maintain their investment in Bank capital stock until the transactions mature or are paid off. All loans, including BOB loans and letters of credit, are issued to members and all mortgage loans held for portfolio are purchased from members. The Bank also maintains demand deposit accounts for members primarily to facilitate settlement activities that are directly related to advances and mortgage loan purchases. These transactions with members are entered into in the normal course of business and represent member activity. In the ordinary course of business, the Bank may utilize products and services, provided at normal market rates and terms, from its members to support its operations. In instances where the member also has an officer or a director who is a Director of the Bank, those transactions are subject to the same eligibility and credit criteria, as well as the same terms and conditions, as all other transactions. Related parties are defined as those parties meeting any one of the following criteria: (1) other FHLBanks in the System; (2) members with capital stock outstanding in excess of 10% of total capital stock outstanding; or (3) members and nonmember borrowers that have an officer or director who is a Director of the Bank.

The following table includes significant outstanding related party member activity balances.


	December 31,
(in thousands)	2022		2021
Advances	$	42,401,975	$	6,948,649
Letters of credit (1)	16,928,206		15,717,397
MPF loans	263,795		145,193
Deposits	32,335		44,415
Capital stock	1,891,978		510,256

Note:

(1) Letters of credit are off-balance sheet commitments.

The following table summarizes the effects on the Statement of Income corresponding to the related party member balances above. Amounts related to interest expense on deposits were immaterial for the periods presented.


	Year ended December 31,
(in thousands)	2022		2021		2020
Interest income on advances (1)	$	644,622	$	152,444	$	434,423
Interest income on MPF loans	10,897		50,200		24,875
Letters of credit fees	10,003		18,574		2,984

Note:

(1) Interest income on advances includes contractual interest income and prepayment fees. The effect of derivative activities is not included.

The following table summarizes the effect of the MPF activities with FHLBank of Chicago.


	Year ended December 31,
(in thousands)	2022		2021		2020
Servicing fee expense	$	3,562	$	3,669	$	3,909


	December 31,
(in thousands)	2022		2021
Interest-bearing deposits maintained with FHLBank of Chicago	$	5,119	$	5,409

From time to time, the Bank may borrow from or lend to other FHLBanks on a short-term uncollateralized basis. The amount loaned by the bank to other FHLBanks and repaid was $1.8 billion in 2022, none in 2021, and $5.0 million in 2020. The amount borrowed from and repaid to other FHLBanks was $2.0 billion in 2022, $5.0 million in 2021 and $30.0 million in 2020.

134

Notes to Financial Statements (continued)

Subject to mutually agreed upon terms, on occasion an FHLBank may transfer at fair value its primary debt obligations to another FHLBank. During 2022, 2021 and 2020, there were no transfers of debt between the Bank and another FHLBank.

From time to time, a member of one FHLBank may be acquired by a member of another FHLBank. When such an acquisition occurs, the two FHLBanks may agree to transfer at fair value the loans of the acquired member to the FHLBank of the surviving member. The FHLBanks may also agree to the purchase and sale of any related hedging instrument. The Bank had no such activity during 2022, 2021 and 2020.

Note 14 – Estimated Fair Values

Fair value amounts have been determined by the Bank using available market information and appropriate valuation methods. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). These estimates are based on recent market data and other pertinent information available to the Bank at December 31, 2022 and December 31, 2021. Although the management of the Bank believes that the valuation methods are appropriate and provide a reasonable determination of the fair value of these financial instruments, there are inherent limitations in any valuation technique. Therefore, these fair values are not necessarily equal to the amounts that would be realized in current market transactions, although they do reflect the Bank’s judgment of how a market participant would estimate the fair values.

The carrying value and estimated fair value of the Banks’ financial instruments at December 31, 2022 and December 31, 2021 are presented in the table below.

Fair Value Summary Table


	December 31, 2022
(in thousands)	Carrying Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral (1)		Estimated Fair Value
Assets:
Cash and due from banks	$	13,242	$	13,242	$	—	$	—	$	—	$	13,242
Interest-bearing deposits	2,471,135		2,471,135		—		—		—		2,471,135
Securities purchased under agreement to resell (2)	3,200,000		—		3,200,137		—		—		3,200,137
Federal funds sold	3,050,000		—		3,050,141		—		—		3,050,141
Trading securities	214,008		—		214,008		—		—		214,008
AFS securities	12,190,560		—		12,048,289		142,271		—		12,190,560
HTM securities	956,471		—		824,230		50,052		—		874,282
Advances	68,856,236		—		68,548,367		—		—		68,548,367
Mortgage loans held for portfolio, net	4,590,888		—		4,039,588		—		—		4,039,588
BOB loans, net	22,998		—		—		22,998		—		22,998
Accrued interest receivable	310,081		—		310,081		—		—		310,081
Derivative assets	228,996		—		60,626		—		168,370		228,996
Liabilities:
Deposits	$	553,279	$	—	$	553,279	$	—	$	—	$	553,279
Discount notes	33,745,478		—		33,739,166		—		—		33,739,166
Bonds	56,471,455		—		55,694,094		—		—		55,694,094
Mandatorily redeemable capital stock (3)	27,763		28,321		—		—		—		28,321
Accrued interest payable (3)	287,539		—		286,981		—		—		286,981
Derivative liabilities	13,438		—		1,009,632		—		(996,194)		13,438

135

Notes to Financial Statements (continued)


	December 31, 2021
(in thousands)	Carrying Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral (1)		Estimated Fair Value
Assets:
Cash and due from banks	$	428,190	$	428,190	$	—	$	—	$	—	$	428,190
Interest-bearing deposits	528,476		528,476		—		—		—		528,476
Securities purchased under agreement to resell (2)	1,670,000		—		1,670,004		—		—		1,670,004
Federal funds sold	1,975,000		—		1,975,008		—		—		1,975,008
Trading securities	243,262		—		243,262		—		—		243,262
AFS securities	12,467,293		—		12,272,868		194,425		—		12,467,293
HTM securities	1,213,872		—		1,177,957		70,406		—		1,248,363
Advances	14,124,375		—		14,169,479		—		—		14,169,479
Mortgage loans held for portfolio, net	4,676,183		—		4,719,966		—		—		4,719,966
BOB loans, net	22,501		—		—		22,501		—		22,501
Accrued interest receivable	74,660		—		74,660		—		—		74,660
Derivative assets	182,853		—		2,447		—		180,406		182,853

Liabilities:
Deposits	$	1,087,507	$	—	$	1,087,507	$	—	$	—	$	1,087,507
Discount notes	10,493,617		—		10,492,517		—		—		10,492,517
Bonds	23,105,738		—		23,205,896		—		—		23,205,896
Mandatorily redeemable capital stock (3)	22,457		22,752		—		—		—		22,752
Accrued interest payable (3)	59,123		—		58,829		—		—		58,829
Derivative liabilities	5,845		—		73,820		—		(67,975)		5,845

Notes:

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

(2) Based on the fair value of the related collateral held, the securities purchased under agreements to resell were fully collateralized for the periods presented. There were no offsetting liabilities related to these securities at December 31, 2022 and December 31, 2021. These instruments’ maturity term is overnight.

(3) The estimated fair value amount for the mandatorily redeemable capital stock line item includes accrued dividend interest; this amount is excluded from the estimated fair value for the accrued interest payable line item.

Fair Value Hierarchy. The fair value hierarchy is used to prioritize the inputs used to measure fair value by maximizing the use of observable inputs. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of the market observability of the fair value measurement for the asset or liability.

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 reporting entity can access on the measurement date. An active market for the asset or liability is a market in which the transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

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

136

Notes to Financial Statements (continued)

Level 3 Inputs - Valuations derived from techniques in which one or more significant inputs are not observable in the market. Valuation techniques include pricing models, discounted cash flow methodologies 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.

Summary of Valuation Methodologies 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 nonrecurring basis in the Statement of Condition are listed below.

Investment Securities – non-MBS. The Bank uses either the income or market approach to determine the estimated fair value of non-MBS investment securities.

For instruments that use the income approach, the significant inputs include a market-observable interest rate curve and a discount spread, if applicable. The market-observable interest rate curves and the related instrument types are as follows:

•U.S. Treasury curve: certificates of deposit

•CO curve: GSE and other U.S. obligations

The Bank uses a market approach for its state and local agency bonds and U.S. Treasury obligations. For state and local agency bonds, the Bank obtains prices from multiple designated third-party vendors when available, and the default price is the average of the prices obtained. Otherwise, the approach is generally consistent with the approach outlined below for Investment Securities - MBS. For U.S. Treasury obligations, prices are obtained from a third-party vendor based on daily trade activity or dealer quotes. For certain short-term U.S. Treasury obligations, market prices are not available, and the Bank uses an income approach.

Investment Securities – MBS. To value MBS holdings, the Bank obtains prices from multiple third-party pricing vendors, when available. The pricing vendors use various proprietary models to price MBS. The inputs to those models are derived from various sources including, but not limited to: benchmark yields, reported trades, dealer estimates, issuer spreads, benchmark securities, bids, offers and other market-related data. Since many MBS do not trade on a daily basis, the pricing vendors use available information such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to determine the prices for individual securities, as applicable. Each pricing vendor has an established challenge process in place for all MBS valuations, which facilitates resolution of potentially erroneous prices identified by the Bank.

During the year, the Bank conducts reviews of its pricing vendors to enhance its understanding of the vendors' pricing processes, methodologies and control procedures. To the extent available, the Bank also reviews the vendors' independent auditors' reports regarding the internal controls over their valuation processes.

The Bank's valuation technique first requires the establishment of a median price for each security. All prices that are within a specified tolerance threshold of the median price are included in the cluster of prices that are averaged to compute a default price. Prices that are outside the threshold (outliers) are subject to further analysis (including, but not limited to, comparison to prices provided by an additional third-party valuation service, prices for similar securities, and/or non-binding dealer estimates) to determine if an outlier is a better estimate of fair value. If an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair value, then the outlier (or the other price as appropriate) is used as the price rather than the default price. If, on the other hand, the analysis confirms that an outlier (or outliers) is (are) in fact not representative of fair value and the default price is the best estimate, then the default price is used as the final price. In all cases, the final price is used to determine the fair value of the security. If all prices received for a security are outside the tolerance threshold level of the median price, then there is no default price, and the final price is determined by an evaluation of all outlier prices as described above.

As of December 31, 2022, for substantially all of its MBS, the Bank received a price from all of its vendors and the default price was the final price. Based on the Bank’s reviews of the pricing methods including inputs and controls employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or, in those instances in which there were outliers or significant yield variances, the Bank’s additional analyses), the Bank believes the final prices are representative of the prices that would have been received if the assets had been sold at the measurement date (i.e., exit prices) and further that

137

Notes to Financial Statements (continued)

the fair value measurements are classified appropriately in the fair value hierarchy. There continues to be unobservable inputs and a lack of significant market activity for private label MBS; therefore, the Bank classified private label MBS as Level 3.

Derivative Assets/Liabilities. The Bank bases the fair values of derivatives with similar terms on market prices, when available. However, market prices do not exist for many types of derivative instruments. Consequently, fair values for these instruments are estimated using standard valuation techniques such as discounted cash flow analysis and comparisons to similar instruments. Estimates developed using these methods are highly subjective and require judgment regarding significant matters such as the amount and timing of future cash flows, volatility of interest rates and the selection of discount rates that appropriately reflect market and credit risks. In addition, the fair value estimates for these instruments include accrued interest receivable/payable which approximate their carrying values due to their short-term nature.

The discounted cash flow analysis used to determine the net present value of derivative instruments utilizes market-observable inputs (inputs that are actively quoted and can be validated to external sources). Inputs by class of derivative are as follows:

Interest-rate related:

•Discount rate assumption. SOFR curve for cleared derivatives and SOFR uncleared derivatives. Overnight Index Swap (OIS) curve for all other uncleared derivatives.

•Forward interest rate assumption (rates projected in order to calculate cash flows through the designated term of the hedge relationship). LIBOR Swap curve, OIS curve or SOFR curve.

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

Mortgage delivery commitments:

•TBA securities prices. Market-based prices of TBAs are determined by coupon class and expected term until settlement and a pricing adjustment reflective of the secondary mortgage market.

The Bank is subject to credit risk on uncleared derivatives transactions due to the potential nonperformance by the derivatives counterparties. To mitigate this risk, the Bank has entered into netting arrangements and security agreements that provide for delivery of collateral at specified levels. As a result, uncleared derivatives are recognized as collateralized-to-market and the fair value of uncleared derivatives excludes netting adjustments and collateral. The Bank has evaluated the potential for fair value adjustment due to uncleared counterparty credit risk and has concluded that no adjustments are necessary.

The Bank’s credit risk exposure on cleared derivatives is mitigated through the delivery of initial margin to offset future changes in value and daily delivery of variation margin to offset changes in market value. This is executed through the use of a central counterparty, either CME clearing or LCH Ltd. Variation margin payments are daily settlement payments rather than collateral. Initial margin continues to be treated as collateral and accounted for separately.

The fair values of derivatives are netted by clearing agent and/or by counterparty pursuant to the provisions of each of the Bank’s netting agreements. If these netted amounts are positive, they are classified as an asset and, if negative, as a liability.

Impaired Mortgage Loans Held for Portfolio and REO. The estimated fair values of impaired mortgage loans held for portfolio and real estate owned are determined based on values provided by a third party's retail-based AVM. The Bank adjusts the AVM value based on the amount it has historically received on liquidation.

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

138

Notes to Financial Statements (continued)

Fair Value Measurements. The following tables present, for each hierarchy level, the Bank’s assets and liabilities that are measured at fair value on a recurring or non-recurring basis on its Statement of Condition at December 31, 2022 and December 31, 2021. The Bank measures certain mortgage loans held for portfolio at fair value when a charge-off is recognized and subsequently when the fair value of collateral less costs to sell is lower than the carrying amount. Real estate owned is measured using fair value when the assets' fair value less costs to sell is lower than the carrying amount.


	December 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral(1)		Total
Recurring fair value measurements - Assets:
Trading securities:
Non MBS:

GSE obligations	—		214,008		—		—		214,008
Total trading securities	$	—	$	214,008	$	—	$	—	$	214,008
AFS securities:
Non-MBS:
U.S. Treasury obligations	$	—	$	5,232,493	$	—	$	—	$	5,232,493
GSE and TVA obligations	—		1,125,743		—		—		1,125,743
State or local agency obligations	—		170,263		—		—		170,263
MBS:
U.S. obligations single-family	—		482,982		—		—		482,982
GSE single-family	—		1,881,037		—		—		1,881,037
GSE multifamily	—		3,155,771		—		—		3,155,771
Private label	—		—		142,271		—		142,271
Total AFS securities	$	—	$	12,048,289	$	142,271	$	—	$	12,190,560
Derivative assets:
Interest rate related	$	—	$	60,616	$	—	$	168,370	$	228,986
Mortgage delivery commitments	—		10		—		—		10
Total derivative assets	$	—	$	60,626	$	—	$	168,370	$	228,996
Total recurring assets at fair value	$	—	$	12,322,923	$	142,271	$	168,370	$	12,633,564
Recurring fair value measurements - Liabilities
Derivative liabilities:
Interest rate related	$	—	$	1,009,591	$	—	$	(996,194)	$	13,397
Mortgage delivery commitments	—		41		—		—		41
Total recurring liabilities at fair value	$	—	$	1,009,632	$	—	$	(996,194)	$	13,438
Non-recurring fair value measurements - Assets
Impaired mortgage loans held for portfolio	$	—	$	—	$	5,240	$	—	$	5,240
REO	—		—		403		—		403
Total non-recurring assets at fair value	$	—	$	—	$	5,643	$	—	$	5,643

139

Notes to Financial Statements (continued)


	December 31, 2021
(in thousands)	Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral(1)		Total
Recurring fair value measurements - Assets:
Trading securities:
Non MBS:

GSE and TVA obligations	—		243,262		—		—		243,262
Total trading securities	$	—	$	243,262	$	—	$	—	$	243,262
AFS securities:
Non MBS:

U.S. Treasury obligations	$	—	$	5,075,232	$	—	$	—	$	5,075,232
GSE and TVA obligations	—		1,493,652		—		—		$	1,493,652
State or local agency obligations	—		207,197		—		—		207,197
MBS:
U.S. obligations single-family	—		398,807		—		—		398,807
GSE single-family	—		2,093,069		—		—		2,093,069
GSE multifamily	—		3,004,911		—		—		3,004,911
Private label	—		—		194,425		—		194,425
Total AFS securities	$	—	$	12,272,868	$	194,425	$	—	$	12,467,293
Derivative assets:
Interest rate related	$	—	$	2,445	$	—	$	180,406	$	182,851
Mortgage delivery commitments	—		2		—		—		2
Total derivative assets	$	—	$	2,447	$	—	$	180,406	$	182,853
Total recurring assets at fair value	$	—	$	12,518,577	$	194,425	$	180,406	$	12,893,408
Recurring fair value measurements - Liabilities
Derivative liabilities:
Interest rate related	$	—	$	73,689	$	—	$	(67,975)	$	5,714
Mortgage delivery commitments	—		131		—		—		131
Total recurring liabilities at fair value	$	—	$	73,820	$	—	$	(67,975)	$	5,845
Non-recurring fair value measurements - Assets
Impaired mortgage loans held for portfolio	$	—	$	—	$	10,570	$	—	$	10,570
REO	—		—		478		—		478
Total non-recurring assets at fair value	$	—	$	—	$	11,048	$	—	$	11,048

Notes:

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

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Notes to Financial Statements (continued)

Level 3 Disclosures for all Assets and Liabilities That Are Measured at Fair Value on a Recurring Basis. The following table presents a reconciliation of all assets and liabilities that are measured at fair value on the Statement of Condition using significant unobservable inputs (Level 3) for the years ended December 31, 2022, 2021 or 2020. For instruments carried at fair value, the Bank reviews the fair value hierarchy classifications each quarter. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in/out at fair value in the quarter in which the changes occur. There were no Level 3 transfers during 2022, 2021 or 2020.


	AFS Private Label MBS Year Ended December 31, 2022		AFS Private Label MBS Year Ended December 31, 2021		AFS Private Label MBS Year Ended December 31, 2020
Balance, beginning of period	$	194,425	$	252,600	$	326,146
Total gains (losses) (realized/unrealized) included in:

(Provision) reversal for credit losses	(6,154)		39		(2,417)
Accretion of credit losses in interest income	9,271		9,651		11,635

Net unrealized gains (losses) on AFS in OCI	(22,172)		(4,239)		(14,530)


Purchases, issuances, sales, and settlements:

Settlements	(33,099)		(63,626)		(68,234)
Balance at December 31	$	142,271	$	194,425	$	252,600
Total amount of gains for the periods presented included in earnings attributable to the change in unrealized gains or (losses) relating to assets and liabilities still held at December 31	$	2,798	$	9,467	$	9,218
Change in unrealized gains (losses) for the period included in other comprehensive income for assets held December 31	$	(22,172)	$	(4,239)	$	(14,530)

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Notes to Financial Statements (continued)

Note 15 – Commitments and Contingencies

The following table presents the Bank’s various off-balance sheet commitments which are described in detail below.


(in thousands)	December 31, 2022						December 31, 2021
Notional amount	Expiration Date Within One Year		Expiration Date After One Year		Total		Total
Standby letters of credit outstanding (1) (2)	$	22,126,676	$	—	$	22,126,676	$	19,419,734
Commitments to fund additional advances and BOB loans	373		—		373		12,206
Commitments to purchase mortgage loans	10,287		—		10,287		24,822
Unsettled consolidated obligation discount notes, at par	15,370		—		15,370		—
Unsettled consolidated obligation bonds, at par	1,080,000		—		1,080,000		82,000

Notes:

(1) Excludes approved requests to issue future standby letters of credit of $0.0 million at December 31, 2022 and $357.5 million at December 31, 2021.

(2) Letters of credit in the amount of $2.2 billion at December 31, 2022 and $4.3 billion at December 31, 2021, have renewal language that permits the letter of credit to be renewed for an additional period with a maximum renewal period of approximately five years.

Commitments to Extend Credit on Standby Letters of Credit, Additional Advances and BOB Loans. Standby letters of credit are issued on behalf of members for a fee. A standby letter of credit is a financing arrangement between the Bank and its member. If the Bank is required to make payment for a beneficiary’s draw, these amounts are withdrawn from the member’s Demand Deposit Account (DDA). Any remaining amounts not covered by the withdrawal from the member’s DDA are converted into a collateralized overnight advance.

Unearned fees related to standby letters of credit are recorded in other liabilities and had a balance of $4.2 million at December 31, 2022 and $4.3 million at December 31, 2021. The Bank manages the credit risk of each member on the basis of the member's TCE to the Bank which includes its standby letters of credit. The Bank has established parameters for the review, assessment, monitoring and measurement of credit risk related to these standby letters of credit as described in Note 5 - Advances.

Based on management’s credit analyses, collateral requirements, and adherence to the requirements set forth in Bank policy and Finance Agency regulations, the Bank has not recorded any additional liability on advance commitments and standby letters of credit, which are collateralized at the time of issuance. The Bank records a liability with respect to BOB commitments, which is reflected in Other liabilities on the Statement of Condition.

The Bank does not have any legally binding or unconditional unused lines of credit for advances at December 31, 2022 or December 31, 2021. However, within the Bank’s Rollover (weekly/monthly) advance product, there were conditional lines of credit outstanding of $9.6 billion at December 31, 2022 and $11.9 billion at December 31, 2021.

Commitments to Purchase Mortgage Loans. The Bank may enter into commitments that unconditionally obligate the Bank to purchase mortgage loans under the MPF Program. These delivery commitments are generally for periods not to exceed 60 days. Such commitments are recorded as derivatives.

Pledged Collateral. The Bank may pledge cash and securities, as collateral, related to derivatives. Refer to Note 7 - Derivatives and Hedging Activities in this Form 10-K for additional information about the Bank's pledged collateral and other credit-risk-related contingent features.

Legal Proceedings. The Bank is subject to legal proceedings arising in the normal course of business. The Bank would record an accrual for a loss contingency when it is probable that a loss has been incurred and the amount can be reasonably estimated. After consultation with legal counsel, management does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on the Bank’s financial condition, results of operations, or cash flows.

Notes 1, 5, 7, 9, 10, 11 and 13 also discuss other commitments and contingencies.

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Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A: Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of the Bank’s management, including the chief executive officer and chief financial officer (principal financial officer), the Bank conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the 1934 Act). Based on this evaluation, the Bank’s chief executive officer and chief financial officer (principal financial officer) concluded that the Bank’s disclosure controls and procedures were effective as of December 31, 2022.

Management’s Report on Internal Control Over Financial Reporting

See Item 8. Financial Statements and Supplementary Data — Management’s Annual Report on Internal Control over Financial Reporting in this Form 10-K.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting that occurred during the fourth quarter of 2022 that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting.

Item 9B: Other Information

None

Item 9C: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

PART III

Item 10: Directors, Executive Officers and Corporate Governance

As required by the Housing Act, the Bank’s Board is comprised of a combination of industry directors elected by the Bank’s member institutions (Member Directors) on a state-by-state basis and independent directors elected by a plurality of the Bank’s members (Independent Directors). No member of the Bank’s management may serve as a director of an FHLBank. The Bank’s Board currently includes nine Member Directors and seven Independent Directors. Of the 16 Directors, 10 identify as male and six as female. Three of the Directors identify as racial/ethnic minority. The Housing Act requires that all of the Bank's Directors be elected by the Bank's members.

Nomination of Member Directors

Member Directors are required by statute and regulation to meet certain specific criteria in order to be eligible to be elected and serve as Bank Directors. To be eligible, an individual must: (1) be an officer or director of a Bank member institution located in the state in which there is an open Bank Director position; (2) the member institution must be in compliance with the minimum capital requirements established by its regulator; and (3) the individual must be a U.S. citizen. See 12 U.S.C. §1427 and 12 C.F.R. §§1261 et. seq. These criteria are the only permissible eligibility criteria that Member Directors must meet. The FHLBanks are not permitted to establish additional eligibility criteria or qualifications for Member Directors or nominees. For Member Directors, each eligible institution may nominate representatives from member institutions in its respective state to serve four-year terms on the Board of the Bank.

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As a matter of statute and regulation, only FHLBank stockholders may nominate and elect Member Directors. FHLBank Boards are not permitted to nominate or elect Member Directors. Specifically, institutions, which are members required to hold stock in the Bank as of the record date (i.e., December 31 of the year prior to the year in which the election is held), are entitled to participate in the election process. With respect to Member Directors, under Finance Agency regulations, no director, officer,

employee, attorney, or agent of the Bank (except in his/her personal capacity) may, directly or indirectly, support the nomination or election of a particular individual for a Member Directorship.

Because of the laws and regulations governing FHLBank Member Director nominations and elections, an FHLBank does not know what factors a Bank’s member institution considers in selecting Member Director nominees or electing Member Directors. Under 12 C.F.R. §1261.9, if an FHLBank’s Board has performed a self-assessment, then, in publishing the nomination or election announcement, that FHLBank can include a statement indicating to the FHLBank’s members participating in the election what skills or experience the Board believes would enhance the FHLBank’s Board. In 2022, 2021 and 2020, the Bank included a statement in its nomination announcement that candidate diversity should be considered by members when nominating candidates for Member Directorships.

Nomination of Independent Directors

For the remainder of directors (referred to as Independent Directors), the members elect these individuals on a district-wide basis to four-year terms. Independent Directors cannot be officers or directors of a Bank member. Independent Director nominees must meet certain statutory and regulatory eligibility criteria and must have experience in, or knowledge of, one or more of the following areas: auditing and accounting, derivatives, financial management, organizational management, project development, and risk management practices. In the case of a public interest Independent Director nominee, such nominee must have four years’ experience representing consumer or community interests in banking services, credit needs, housing, or consumer financial protection. See 12 C.F.R. §1261.7.

Finance Agency regulations permit a Bank Director, officer, attorney, employee, or agent and the Bank’s Board and Advisory Council to support the candidacy of any person nominated by the Board for election to an Independent Directorship. Under the Finance Agency regulation governing Independent Directors, members are permitted to recommend candidates to be considered by the Bank to be included on the nominee slate and the Bank maintains a standing notice soliciting nominations for Independent Director positions on its public website.

In 2022, 2021 and 2020, the Bank’s Independent Director nomination notice included a statement encouraging members to consider diversity. In addition, in 2022 the Bank’s Board determined that there was a need for, FHLBank Board institutional knowledge and leadership experience, on the Board and included this information in its election materials. Prior to finalizing the Independent Director nominee slate, the Board (or representatives thereof) is required to consult with the Bank’s Affordable Housing Advisory Council and the slate must be sent to the Finance Agency for its review.

In 2022, the Board selected incumbent director Mr. Glenn R. Brooks as an independent director nominee based on a determination that he met the required regulatory qualifications. Mr. Glenn R. Brooks was elected to the Bank’s Board in 2022 (for a term beginning January 2023).

In 2021, the Board selected incumbent director Mr. Thomas H. Murphy and Ms. Barbara Adams as independent director nominees based on a determination that each met the required regulatory qualifications. Mr. Murphy and Ms. Adams were each elected to the Bank’s Board in 2021 (for a term beginning January 2022). In addition, Ms. Adams met the qualifications to serve as a public interest director and was designated as a public interest director as well. In the case of Mr. Murphy, he had information technology expertise which the Board had identified as a skill need on the Board.

In 2020, the Board selected incumbent director Dr. Howard B. Slaughter, Jr. and Mr. Romulo L. Diaz, Jr., Esq. as independent director nominees based on a determination that each met the required regulatory qualifications. Dr. Slaughter and Mr. Diaz were each elected to the Board by the Bank’s members in 2020 (for a term beginning January 2021). In addition, Dr. Slaughter and Mr. Diaz each also met the qualifications to serve as a public interest director and each was designated as a public interest director as well.

In 2019, the Board selected incumbent directors Ms. Angel L. Helm and Ms. Louise M. Herrle as independent director nominees based on a determination that each met the required regulatory qualifications. Ms. Helm and Ms. Herrle were each elected to the Board by the Bank’s members in 2019 (for a term beginning January 2020).

2022 Member and Independent Director Elections

Voting rights and process with regard to the election of Member and Independent Directors are set forth in 12 U.S.C. §1427 and 12 C.F.R. §1261. For the election of both Member Directors and Independent Directors, each eligible institution is

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entitled to cast one vote for each share of stock that it was required to hold as of the record date (December 31 of the preceding year); however, the number of votes that each institution may cast for each directorship cannot exceed the average number of shares of stock that were required to be held by all member institutions located in that state on the record date. The only matter submitted to a vote of shareholders in 2022 was the election of vacant Member and Independent Directors, which occurred in the fourth quarter of 2022 as described below. The Bank conducted these elections to fill the open Member and Independent Directorships for 2022 designated by the Finance Agency.

In 2022, the nomination and election of Member Directors and Independent Directors was conducted electronically. No meeting of the members was held in regard to the election. The Board of the Bank does not solicit proxies, nor are eligible institutions permitted to solicit or use proxies to cast their votes in an election for Member or Independent Directors. The election was conducted in accordance with 12 C.F.R. Part 1261. There were three Member Director seats up for election in 2022, one in each of Pennsylvania, Delaware and West Virginia. The Pennsylvania Member Director re-elected was Ms. Jeane M. Vidoni. The Delaware and West Virginia Member Directors newly elected were Ms. Blanche L. Jackson and Mr. H. Charles Maddy. The Independent Director re-elected was Mr. Glenn R. Brooks. Information about the results of the 2022 Member and Independent Director elections, including the votes cast, was reported in the Form 8-K filed on November 17, 2022, as amended on December 20, 2022.

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Information Regarding Current FHLBank Directors

The following table sets forth certain information (ages as of February 28, 2023) regarding each of the Directors currently serving on the Bank’s Board. No Director of the Bank is related to any other Director or executive officer of the Bank by blood, marriage, or adoption.




Name	Age	Director Since	Term Expires	Board Committees
William C. Marsh (Member)1	56	2012	2023	(g)(h)(i)
Louise M. Herrle (Independent)2	65	2018	2023	(g)(h)(i)
Barbara Adams (Independent)	71	2022	2025	(a)(d)(h)(i)
Pamela C. Asbury (Member)3	58	2015	2023	(c)(e)(g)(h)(i)
Thomas Bailey (Member)	61	2022	2025	(a)(d)(h)(i)
Glenn R. Brooks (Independent)4	59	2015	2026	(d)(e)(g)(h)(i)
Romulo L. Diaz, Jr., Esq. (Independent)	76	2021	2024	(b)(f)(h)(i)
James V. Dionise (Member)	61	2021	2024	(a)(b)(g)(h)(i)
Angel L. Helm (Independent)5	60	2019	2023	(a)(b)(g)(h)(i)
Blanche L. Jackson (Member)	57	2023	2026	(a)(d)(h)(i)
H. Charles Maddy, III (Member)	59	2023	2026	(b)(e)(h)(i)
Joseph W. Major (Member)	67	2022	2025	(c)(f)(h)(i)
Brendan J. McGill (Member)	54	2017	2024	(c)(f)(g)(h)(i)
Thomas H. Murphy (Independent)6	60	2016	2025	(c)(e)(g)(h)(i)
Dr. Howard B. Slaughter, Jr. (Independent)7	65	2020	2024	(c)(e)(g)(h)(i)
Jeane M. Vidoni (Member)	62	2019	2026	(d)(f)(g)(h)(i)

(a) Member of Audit Committee

(b) Member of Finance Committee

(d) Member of Affordable Housing, Products and Services Committee

(e) Member of Operational Risk Committee

(f) Member of Human Resources

(g) Member of Executive Committee

(h) Member of Enterprise Risk Management (ERM) Committee. This is a committee of the whole Board

(i) Member of Diversity, Equity & Inclusion (DEI) Committee. This is a committee of the whole Board

1 Serves on the Executive, DEI and ERM Committees and as a non-voting ex-officio member of each other standing Board committee.

2 Serves on the Executive, DEI and ERM Committees and as a non-voting ex-officio member of each other standing Board committee. Pursuant to Finance Agency Regulation, Ms. Herrle was originally elected by the Board, effective September 10, 2018, to fill a seat vacated for a term ending December 31, 2019.

3 Ms. Asbury was originally elected in 2015 by the Board to fill a seat vacated by a Delaware Member Director for a term ending December 31, 2015.

4 Pursuant to Finance Agency Regulation, Mr. Glenn R. Brooks was originally elected by the Board, effective January 1, 2015, to fill a seat vacated by an Independent Director for a term ending December 31, 2018. He was again elected in 2018 to fill a seat vacated by an Independent Director for a term ending December 31, 2022.

5 Pursuant to Finance Agency Regulation, Ms. Helm was originally elected by the Board to fill a seat, effective April 1, 2019, vacated by an Independent Director for a term ending December 31, 2019.

6 Pursuant to Finance Agency Regulation, Mr. Murphy was originally elected by the Board effective November 14, 2016 to fill a seat vacated for a term ending December 31, 2017.

7 Pursuant to Finance Agency Regulation, Dr. Slaughter was originally elected by the Board, effective January 1, 2020, to fill a seat vacated by an Independent Director for a term ending December 31, 2020

William Marsh joined the Board of Directors of the Bank in January 2012. Since January 2023 Mr. Marsh has served as Senior Vice President and Regional President - Pennsylvania for Farmers National Bank Corp. and since October 2022 as Executive Vice President and ESG Officer for Peoples Security Bank and Trust Company. From January 2009 to January 2023 he had been Chairman of the Board, President and Chief Executive Officer of Emclaire Financial Corp. and The Farmers National Bank of Emlenton – prior to that he served as Executive Vice President and Chief Financial Officer of these entities since June 2006. Mr. Marsh has served as the chief financial officer and executive of a number of publicly traded bank holding companies since 1994. Prior to that he served as an audit manager with the international accounting firm, KPMG. Mr. Marsh is a CPA.

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Louise Herrle joined the Board of Directors of the Bank in September 2018. Ms. Herrle is a senior corporate finance executive with extensive experience in developing and leading innovative global debt finance programs and in capital market risk management. Most recently, Ms. Herrle was the Managing Director of Capital Markets for Incapital, LLC, and retired from that position in 2019. In addition, she has provided financial advisory services to Fortune 100 companies and was the leading architect of a financing platform for social impact investments. Ms. Herrle has received multiple awards for excellence in corporate financing and was a featured speaker for industry events and conferences throughout her career. She is the former Executive Board Chair of Strong Women, Strong Girls, Inc. and continues to serve on the Finance Committee, as an advisor for Strategic Planning and is a member of the Emeritus Board. Other board positions include serving on the Advisory Board of Power Forward Inc. and as a Cabinet Member of the Capital Campaign for Light of Life Rescue Mission. Ms. Herrle received her BSBA degree from Robert Morris University, and in 2020 became NACD (National Association of Corporate Directors) Directorship Certified.

Barbara Adams joined the Board of Directors of the Bank in January 2022. Ms. Adams serves on the board of directors of FS KKR Capital Corp. (NYSE:FSK), successor by merger to FSIC II, FSIC III and FSIC IV, on whose boards Ms. Adams also served at various times beginning in 2012. In October 2022, Ms. Adams was elected to serve as a trustee of KKR FS Income Trust, an affiliate of FSK. Ms. Adams served as the executive vice president–legal affairs and general counsel of the Philadelphia Housing Authority from August 2011 to April 2016, and as a trustee of each of the Philadelphia Housing Authority Retirement Income Trust and the Philadelphia Housing Authority Defined Contribution Pension Plan from November 2011 to April 2016. She served as the general counsel of the Commonwealth of Pennsylvania (the “Commonwealth”) from June 2005 until January 2011. Prior to her appointment as general counsel to the Commonwealth, Ms. Adams was a partner at the law firm of Duane Morris LLP. Ms. Adams served as the housing policy committee co-chair for Governor-elect Edward G. Rendell’s transition team and served on the housing policy committee for Governor-elect Tom Wolf’s transition team. She is currently a member of the board and secretary of the Philadelphia Energy Authority and a member of the board and of the executive committee and the co-Vice Chair of the Committee of Seventy. Ms. Adams is a graduate of Temple University (now Beasley) School of Law and a graduate of Smith College.

Pamela Asbury joined the Board of Directors of the Bank in January 2015. Ms. Asbury is Vice President of the U.S. life insurance companies of Genworth Financial, Inc., including Genworth Life Insurance Company and has over 36 years of experience in the insurance industry. She currently serves as Senior Director, Long Term Care Inforce Products with previous leadership roles in Institutional Markets and Closed Block management. Ms. Asbury received her undergraduate degree from Virginia Commonwealth University’s School of Business.

Thomas Bailey joined the Board of Directors of the Bank in January 2022. Mr. Bailey serves as President and Chief Executive Officer of Brentwood Bank. Prior to assuming the Chief Executive Officer title, Mr. Bailey served as Brentwood Bank’s Chief Financial Officer, overseeing financial and regulatory reporting, asset/liability management, and Brentwood Bank’s investment portfolio. Mr. Bailey serves as Pennsylvania’s Independent Community Bankers of America Federal Delegate and is also an active member and Director of the Pennsylvania Association of Community Bankers (PACB), a state banking trade organization. He previously served as the PACB’s chairman from 2008 to 2009. Since 2016, he has served as Treasurer of the BP Education Foundation within the Bethel Park School District. Mr. Bailey received his Bachelors in Economics from the University of Pittsburgh and holds various banking certificates. Most recently he earned the University of Virginia Darden School of Business’s Strategic Thinking and Action certificate.

Glenn R. Brooks joined the Board of Directors of the Bank in January 2015 and was reelected to the Board of Directors in 2022 for a term beginning January 2023. He is President of Leon N. Weiner & Associates, Inc., a Wilmington, Delaware based homebuilding, development and property management firm. The Weiner organization and its affiliated companies have developed and constructed more than 4,500 homes and 9,000 apartments as well as several hotels, office and retail properties. He is responsible for the strategic direction of the firm along with personal and professional development of the officers and employees of the company. He is a member of the firm’s Board of Directors. He has been employed by the firm since 1986. Mr. Brooks served on the Bank’s Affordable Housing Advisory Council between 2004 and 2012. He served as Vice Chairman of the Council in 2006 and 2007 and as Chairman from 2008 to 2010. Mr. Brooks served as the Chairman of the Building Committee of Grove United Methodist Church in West Chester, Pennsylvania from 2009 through 2010. He also served as the President of the Board of Trustees for five years and served on the church’s Finance and Steering Team from 2015 through 2018. Mr. Brooks sits on the Multifamily Board of Trustees and served as Chairman of the Housing Credit Group Committee of the National Association of Homebuilders in 2015 and 2016. In 2021 he was appointed and currently serves on the board of managers of a privately held de novo hospitality company, Retreat Hotels and Resorts, LLC. He holds a Bachelor of Business Degree from the College of William & Mary in Virginia. Mr. Brooks is a NACD Board Leadership Fellow and earned a Certificate in Corporate Governance from Drexel University.

Romulo L. Diaz, Jr, Esq.. joined the Board of Directors of the Bank in January 2021. Mr. Diaz is the Principal of Turtle on Post LLC, a nonprofit and board advisory services company. Prior to founding Turtle on Post LLC in 2020, Mr. Diaz served as Vice President and General Counsel of PECO Energy, an Exelon company, from 2012 to 2020 and as Vice President of Governmental and External Affairs from 2009 to 2012. He has wide-ranging experience, including experience with government and public policy, regulated industries, strategic planning, operations, legal and risk management, corporate governance, and

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ESG matters. He has served as a senior executive in public and private sector organizations and as a director on numerous governmental and nonprofit boards for more than 25 years. He currently serves on the boards of the Center City District of Philadelphia, Latino Corporate Directors Education Foundation, National Association of Corporate Directors (Philadelphia Chapter), Pan American Association of Philadelphia, Pennsylvania Energy Development Authority, and Philadelphia Museum of Art and on the advisory board of PBJ Marketing, LLC. Mr. Diaz earned his B.A. in Plan II Liberal Arts Honors from the University of Texas at Austin and his J.D. from the University of Texas School of Law.

James Dionise joined the Board of Directors of the Bank in January 2021. Mr. Dionise is a Director and the President and Chief Executive Officer of Mars Bancorp, Inc. and its wholly-owned banking subsidiary, Mars Bank. Mr. Dionise began his tenure with Mars Bank in 2007 as Executive Vice President and Chief Operating Officer. In 2008, Mr. Dionise was named President and Chief Executive Officer and elected to its Board of Directors. Prior to joining Mars Bank, Mr. Dionise held financial executive management-level positions with First National Bank of Pennsylvania, Great American Federal, MBNA and PNC Bank. Mr. Dionise began his professional career in 1983 advancing to audit manager with the accounting firm Ernst & Young and is a CPA.

Angel Helm joined the Board of Directors of the Bank in April 2019. Ms. Helm is the former Managing Director of Wells Fargo Securities, from where she retired in 2012. In May 2021, Ms. Helm joined Answers Pet Food Company as a consultant for the purpose of reviewing, revising and implementing new business operation strategies for this troubled organization. Previously in January 2020, Ms. Helm served as Interim Chief Executive Officer of Safe Berks, an agency that provides a safe haven and ongoing support system for victims of domestic violence and sexual assault. She also formerly served as Interim Chief Executive Officer of Olivet Boys and Girls Club of Reading and Berks County. Ms. Helm is a Trustee of Caron Treatment Centers, a leading addiction treatment facility, where she currently serves as Finance Committee Chair and as a member of the Executive and Compensation Committees. In July 2020, Ms. Helm joined the Board of Directors of Tower Health System, headquartered in Reading, PA where she currently is a member of the Finance Committee. She served on the Board of Directors of Alvernia University in Pennsylvania for six years where she co-chaired the successful University’s $9 million capital campaign and previously served as Enrollment Committee Chair. Ms. Helm earned her MBA from St. Joseph’s University and received her B.A. in Business/Managerial Economics from Gettysburg College.

Blanche Jackson is the current Chief Executive Officer of Stepping Stones Community Federal Credit Union in Wilmington, Delaware which is a low-income designated, minority depository institution and a CDFI. Ms. Jackson has served as CEO of Stepping Stones since 2018. She volunteered for over 10 years with the nonprofit organization and board of directors to help charter and launch the credit union which was chartered in 2011. Its critical mission is to provide an inclusive and affordable option for everyone to have access to a federally insured financial institution. Ms. Jackson has been able to leverage her 20+ years of experience in leading financial institutions to accelerate the growth of the credit union and provide access to affordable credit for its membership. She is responsible for ensuring the adequacy and soundness of the credit union’s financial structure. Ms. Jackson's career started at the Delaware State Police Federal Credit Union where she was employed for over 20 years. As the Executive Vice President, she was responsible for the day-to-day operations as well as overseeing the accounting and finance department which included asset liability management and its associated risks. She was also responsible for the oversight of the lending department, which included an in-house mortgage department, and for implementing the Freddie Mac seller/servicer program. She is also a current member of the board of directors of Inclusiv and serves as its Treasurer. Inclusiv is a certified CDFI intermediary that provides capital, builds capacity, and advocates for member community development credit unions. Inclusiv serves over 18 million residents of low-income urban, rural, and reservation-based communities across the U.S. and in Puerto Rico. In addition to her experience with Stepping Stones, Ms. Jackson has held a variety of leadership positions at other credit unions: COO, Tidemark Federal Credit Union, 2016 – 2018 and EVP, Delaware State Police Federal Credit Union, 1998 – 2016. Ms. Jackson holds a, BS in Finance and holds the following certifications: Certified Chief Executive (CCE) – Credit Union Executive Society certified in May 2017, Nationally Certified Compliance Officer (NCCO) – National Association of Federal Credit Union certified in April 1999. Ms. Jackson received her B.S. in Finance from Wilmington University

H. Charles Maddy, III is President and CEO of Summit Financial Group, Inc., a $3.76 billion financial holding company headquartered in Moorefield, West Virginia and has served as a member of its Board of Directors since 1993. He also serves as Chairman of Summit’s banking subsidiary, Summit Community Bank. MR. Maddy is a native West Virginian, born in Hinton. Mr. Maddy graduated Valedictorian from Greenbrier West High School in 1981 and attended Concord College from which he graduated magna cum laude with a B.S. in Business Administration and concentration in accounting in 1985. Mr. Maddy began his professional career as a staff accountant at Arnett & Foster, CPA’s and was promoted each year of his tenure with the firm. He became a Certified Public Accountant in 1987. In 1988, when Mr. Maddy joined Summit (formerly known as South Branch Valley National Bank), its assets totaled $80 million and operated three branches in West Virginia’s Eastern Panhandle. Today, under Mr. Maddy’s leadership, Summit’s community bank operates 45 full-service banking locations in West Virginia, Virginia, and Kentucky and has assets totaling over $3.8 billion. Mr. Maddy has extensive responsibilities that require an understanding of a wide range of business principles and issues. These include: Developing and overseeing implementation of the Company’s short-term performance goals as well as long-term strategic plans and initiatives.

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Joseph W. Major joined the Board of Directors of the Bank in January 2022. Mr. Major is the Founder, Chairman of the Board and Chief Executive Officer of The Victory Bank. Mr. Major formerly served as the President and Chief Executive Officer of Patriot Bank Corp and Patriot Bank, and as President of Vartan National Bank. Mr. Major served as a director of The First National Bank of Liverpool and a director of ETA, a bank data processing service bureau located in central Pennsylvania. Mr. Major served on the boards of the Pennsylvania Bankers Association and the Pennsylvania Bankers Service Corporation from 2010-2019. He also served as Chairman of the Pennsylvania Bankers Association, and as a Director of the PA Bankers Advanced School of Banking. Mr. Major is a standing faculty member for the Pennsylvania Banker’s Advanced School of Banking as well as the BankWork$ program. Mr. Major earned a Bachelor of Science in Business and a Juris Doctorate from the University of Akron.

Brendan J. McGill joined the Board of Directors of the Bank in January 2017. Mr. McGill is President and Chief Executive Officer of Harleysville Bank. Mr. McGill has served as a Director and President of Harleysville Financial Corporation since September 2014 and as Chief Operating Officer since June 2010. Previously, Mr. McGill served as Executive Vice President and Chief Financial Officer from May 2009 until September 2014. From February 2000 until May 2009, Mr. McGill served as the company’s Senior Vice President, Treasurer and Chief Financial Officer. Mr. McGill joined the Harleysville Bank in September 1999 as Senior Vice President, Chief Financial Officer and Treasurer.

Thomas H. Murphy joined the Board of Directors of the Bank in November 2016. He is the Chief Information Officer (CIO) at the University of Pennsylvania, where he is responsible for the central IT organization, information systems and computing. He has been the CIO at the University of Pennsylvania since 2013. From 2004 through 2012, Mr. Murphy was the Senior Vice President and Global CIO for AmerisourceBergen, a provider of pharmaceutical and healthcare services. He joined AmerisourceBergen from Royal Caribbean Cruise Lines where he also held the title of Global CIO. Mr. Murphy is the Chairperson of the Chief Information Security Officer coalition, co-founder and Board Member of the Technology Business Management Council, and is on the National Leadership Board of the Professional Development Academy.

Dr. Howard B. Slaughter, Jr. joined the Board of Directors of the Bank in January 2020. Dr. Slaughter is President and Chief Executive Officer of Habitat for Humanity of Greater Pittsburgh (Habitat Pittsburgh). Prior to joining Habitat Pittsburgh, he was President and Chief Executive Officer of Christian Management Enterprises, LLC. Dr. Slaughter serves on the boards of the Pennsylvania Economic Development Financing Authority, the Housing Alliance of Pennsylvania, the Howard Hanna Free Care Fund Foundation and the Mount Ararat Community Activity Center. He is also a member of the Operational Committee of the Pennsylvania Community Development Bank. He previously served on the board of the Pittsburgh Foundation, as well as on the Consumer Advisory Board of the Consumer Financial Protection Bureau and the Bank’s Affordable Housing Advisory Council. Dr. Slaughter is a veteran of the U.S. Navy. He also served in the 479th Field Artillery Brigade in the U.S. Army Reserves. He earned his doctorate degree in information systems and communications from Robert Morris University, a master’s degree in public management from Carnegie Mellon University’s H. John Heinz III School of Public Management, an MBA degree from Point Park University, a Bachelor of Arts degree from Carlow University and an Associate in Science degree in Financial Services from the Community College of Allegheny County.

Jeane M. Vidoni joined the Board of Directors of the Bank in January 2019. As President and CEO of Penn Community Bank, Ms. Vidoni oversees Pennsylvania’s second largest mutual financial institution. She chairs the Community Depository Institutions Advisory Council (CDIAC) of the Federal Reserve Bank of Philadelphia and has been named Chair of the National CDIAC for calendar year 2023. Ms. Vidoni’s distinguished career in banking has spanned more than three decades. She has served in senior positions at local, regional and national financial institutions throughout the Philadelphia region over the course of her professional career. Prior to her tenure at Penn Community Bank, she held leadership roles at several financial institutions, including President and CEO of First Federal of Bucks County; Senior Vice President, Retail Distribution and Sales Incentives at Citizens Bank; Senior Vice President, Sales Manager at Harleysville National Bank; and Senior Vice President, Head of Retail Banking at Progress Bank. Ms. Vidoni earned her Masters in Business Administration from St. Joseph’s University and her BS degree in Business Administration from Muhlenberg College.

Audit Committee

The Audit Committee has a written charter adopted by the Bank’s Board of Directors. The Audit Committee is responsible for the appointment, compensation, and oversight of the Bank’s independent Registered Public Accounting Firm (RPAF) and Chief Internal Auditor. The Audit Committee also pre-approves all auditing services and approves all audit engagement fees, as well as any permitted non-audit services to be performed for the Bank by the independent RPAF. The independent RPAF

reports directly to the Audit Committee. The Bank’s Chief Internal Auditor also reports directly to the Audit Committee. The Audit Committee assists the Board in fulfilling its responsibilities for general oversight of:

•The Bank’s financial reporting processes and the audit of the Bank’s financial statements, including the integrity of the Bank’s financial statements;

•The Bank’s administrative, operating, and internal accounting controls;

•The Bank’s compliance with legal and regulatory requirements;

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•The internal audit and independent auditors’ qualifications, independence and inclusion of diversity; and

•The performance of the Bank’s internal audit function and independent auditors.

Currently, the Audit Committee is composed of Messrs. Dionise (Chair) and Bailey (Vice Chair), and Mses. Adams, Helm and Jackson. The Audit Committee regularly holds separate sessions with the Bank’s management, internal auditors, and independent RPAF.

The Board has determined that Mses. Adams and Helm, and Messrs. Dionise and Bailey are “audit committee financial experts” within the meaning of the SEC rules. The Bank is required for the purposes of SEC rules regarding disclosure to use a definition of independence of a national securities exchange or a national securities association and to disclose whether the “audit committee financial expert” is “independent” under that definition. The Board has elected to use the New York Stock Exchange definition of independence, and under that definition, Messrs. Dionise and Bailey and Ms. Jackson are not independent. Mses. Adams and Helm are independent under that definition. All of the Directors presently serving on the Audit Committee are independent according to the Finance Agency rules applicable to members of the audit committees of the Boards of Directors of the FHLBanks.

Executive Officers

The following table sets forth certain information (ages as of February 28, 2023) regarding the executive officers of the Bank.




Executive Officer	Age	Capacity In Which Serves
Winthrop Watson	68	President and Chief Executive Officer
Edward V. Weller	60	Chief Financial Officer
John P. Cassidy	59	Chief Technology and Operations Officer
Mark S. Evanco	59	Chief Business Development and Strategy Officer
Pritha Madhavan	49	Deputy Chief Information Officer
Carolyn M. McKinney	60	Chief Human Resources Officer
David G. Paulson	58	Chief Operating Officer
Michael A. Rizzo	61	Chief Risk Officer
Julie F. Spiker	59	General Counsel and Corporate Secretary

Winthrop Watson was appointed by the Board of Directors as President and Chief Executive Officer effective January 1, 2011. Previously, he was Chief Operating Officer, a position that he assumed in November 2009. Prior to joining the Bank, Mr. Watson worked at J.P. Morgan for 24 years in a variety of capital markets and financial institution roles most recently as Managing Director in its Asia Pacific investment banking business. Earlier, Mr. Watson led the building of the company’s investment and commercial banking franchise for U.S. government-sponsored enterprises. Mr. Watson serves as a director of the Office of Finance of the Federal Home Loan Banks and is Chairman of the Board of the Pentegra Defined Benefit Plan. He is involved in the community as a board member of the Pittsburgh Ballet Theater and the Pennsylvania Economy League of Greater Pittsburgh. Mr. Watson holds an MBA from Stanford University and a BA from the University of Virginia.

Edward Weller was appointed CFO effective March 1, 2023. Mr. Weller joined the Bank in 2011 as Controller with promotion to Chief Accounting Officer in 2013. Mr. Weller has more than 25 years of senior level finance/accounting leadership experience. With both a CPA and CMA, Ted holds an MBA from the University of Pittsburgh and a BA from Grove City College.

John P. Cassidy joined the Bank in 1999. In January 2020, Mr. Cassidy was promoted to Chief Technology and Operations Officer, having previously served as the Bank’s Chief Information Officer since 2012. He previously served as the Director of Information Technology since 2005. As Chief Technology and Operations Officer, Mr. Cassidy leads the Bank’s information technology and cyber security divisions as well as the member services and operations teams. Prior to joining the Bank, Mr. Cassidy held various IT leadership positions at DuPont, GMAC Mortgage, and Electronic Data Systems. In addition to a BS degree in Computer Science, Mr. Cassidy has an MBA with a focus on Information Technology from the Katz Graduate School of Business at the University of Pittsburgh.

Mark S. Evanco joined the Bank in 2014. In February 2021, Mr. Evanco was promoted to Chief Business Development and Strategy Officer, having previously served as the Bank’s Senior Director of Business Development and Strategy. As Chief Business Development and Strategy Officer, Mr. Evanco oversees the core activities of member business development and provides leadership to key member-facing activities, including business development, new membership, product development, Marketing/Communications and Mortgage Partnership Finance (MPF). Prior to joining the Bank, Mr. Evanco held various key

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leadership positions in the Treasury and Capital Markets areas of PNC Bank, N.A. and PNC Capital Markets, LLC. Mr. Evanco holds a BS degree in Business Administration, with concentrations in Finance and Management Information Systems, from the University of Buffalo.

Pritha Madhavan was appointed Deputy Chief Information Officer effective March 1, 2023. Ms. Madhavan joined the Bank in 2014 as Director, Planning and Architecture and was promoted to Senior Director. She leads the Information Technology business applications, solutions and data management teams, and also directs Bankwide work around efficiency, productivity and technology investment planning. Ms. Madhavan has more than 20 years of financial services IT leadership experience. Prior to joining the bank she worked for Bank of America.

Carolyn M. McKinney joined the Bank in December 2015 as Director, Human Resources and became Chief Human Resources Officer in March 2017. In her role, Ms. McKinney is responsible for strategic human resources leadership, including design and implementation of key initiatives in diversity and inclusion, talent management, organizational development and compliance. She advises the Board of Directors on executive performance management, succession planning and total rewards strategy, among other matters on which she advises them. Prior to joining the Bank in 2015, Ms. McKinney was Vice President, Human Resources at Peoples Natural Gas LLC. A certified Senior HR professional, Ms. McKinney holds a Bachelor of Fine Arts degree from Carnegie Mellon University, a Master of Science degree in Human Resource Management from La Roche College and has served on several regional non-profit boards, including Habitat for Humanity of Greater Pittsburgh.

David G. Paulson, Chief Operating Officer, joined the Bank in March 2010 as Director, Mortgage Finance and Balance Sheet Management. Mr. Paulson became the Managing Director of Capital Markets in 2012, Chief Financial Officer in 2013, and Chief Operating Officer in 2020. Mr. Paulson came to the Bank from National City Corporation, where he worked for 14 years in a number of capacities, including as Senior Vice President, Interest Rate Risk and Chief Investment Portfolio Manager. Prior to that, Mr. Paulson was a portfolio manager at Integra Financial Corporation. He holds a BS in Finance and an MBA, both from Duquesne University.

Michael A. Rizzo joined the Bank in March 2010 and is the Bank’s Chief Risk Officer. Mr. Rizzo served as the Chief Risk Officer of Residential Finance Group, the U.S. residential mortgage lending unit of GMAC ResCap and as Chief Credit Officer for Ally (GMAC) Bank mortgage operations. Previous experience includes approximately 15 years in risk and portfolio management roles with Provident Bank in Cincinnati, FleetBoston Financial Corporation and BankBoston. During his seven years with the Office of the Comptroller of the Currency, Mr. Rizzo was a commissioned national bank examiner and a CPA. He holds a BS degree in Accounting from Bucknell University and is a former board member and chair of Habitat for Humanity of Greater Pittsburgh.

Julie F. Spiker originally joined the bank in 1989 as an attorney in the Bank’s legal department. From May 1995 through November 2000, she served as general counsel for the Federal Home Loan Bank of Des Moines. She returned to the Bank in December 2000 and was promoted to General Counsel in March 2020. Ms. Spiker is responsible for the legal, government relations, and corporate secretary functions of the Bank. Ms. Spiker earned her BA in English and Economics at the University of Virginia in 1985 and her Juris Doctorate from Duquesne University in 1989. With over 30 years of FHLBank experience, Ms. Spiker provides advice and counsel on legal, ethics, compliance, legislative, policy and other issues affecting the Bank, manages Bank attorneys, provides direction to other Legal Department staff, serves as Legal advisor to the Bank’s Board of Directors, and provides direct support to the Board Governance and Public Policy Committee.

Each executive officer serves at the pleasure of the Board of Directors.

Code of Business Conduct

The Bank has adopted a code of ethics for all of its employees and directors, including its Chief Executive Officer, Chief Operating Officer , Chief Financial Officer (principal financial officer), Controller, and those individuals who perform similar functions. A copy of the code of ethics, referred to as the Code of Business Conduct, is on the Bank’s public website, www.fhlb-pgh.com, and will be provided without charge upon written request to the Legal Department of the Bank at 601 Grant Street, Pittsburgh, Pennsylvania 15219, Attention: General Counsel. Any amendments or waivers to the Bank’s Code of Business Conduct that apply to the Bank's Chief Executive Officer, Chief Operating Officer, Chief Financial Officer (principal financial officer), Controller, and those individuals who perform similar functions will be posted to the Bank’s public website.

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Item 11: Executive Compensation

Compensation Discussion and Analysis

Introduction

This Compensation Discussion and Analysis (CD&A) presents information related to the Bank's compensation program for its Principal Executive Officer (the CEO) and other Named Executive Officers (other Executives and/or NEO). The information includes, among other things, the objectives of the Bank's compensation program and the elements of compensation the Bank provides to its CEO and other Executives.

The Bank's Board has determined that it is necessary to consider the nature, level, and cumulative effect of all elements of the Bank's compensation and benefits program to establish each element of the program at the appropriate level.

2022 Compensation Philosophy

The Bank's compensation program is designed to:

•Attract, motivate, and retain staff critical to the Bank's long-term success and thereby

•Enable the Bank to meet its public policy mission while balancing the evolving needs of customers and shareholders.

For 2022, the Bank's CEO and other Executives were compensated through a mix of base salary, incentive compensation awards, benefits, and perquisites. Base salary was the core component of the total compensation package. The Bank's executive compensation for the CEO and other Executives was benchmarked against three peer groups: (1) commercial banks (using a “Divisional Head” benchmark); (2) other FHLBanks (using an “Overall Functional Heads” benchmark); and (3) named executive officer benchmarks from publicly traded banks/financial institutions with $10 billion to $20 billion in assets (using “Salary Rank” and “Job Specific” matches).

The peer group data was collected and analyzed by the Bank’s compensation consultant, McLagan, an Aon Hewitt company. For certain positions, when considering data from the larger peer group companies, and with input from McLagan, applicable job specific benchmarks for the Bank’s CEO and other Executives were identified, as they were determined to be market comparable and represented realistic employment opportunities. Typically, the identified positions at the larger peer group institutions were at a lower level than the comparative Bank executive officer title (e.g., comparison of the CEO position to a COO or similar position(s) at such larger peer group companies). The Bank targets the median total compensation for the benchmarked positions. See the table below setting forth the peer companies used in benchmarking both base salary and incentive compensation. The Bank does not offer equity-based compensation as is typically offered in publicly traded financial services institutions; however, the Bank’s incentive compensation and enhanced retirement benefits taken together for the CEO and other Executives provide a competitive compensation package.

For 2022, the Bank executive officer incentive compensation plan (in which the CEO and other Executives participated) continued to be aligned with market practices and provided for deferral of 50% of the incentive award, with payment of such deferred amount contingent on the Bank meeting ongoing performance criteria over the long-term performance period.

As part of an overall review of the Bank's compensation programs, the Bank evaluated the various aspects of these programs, taking into consideration associated risk as it pertains to the expectations and goals of each element of compensation. The Bank does not offer commission or similar bonus compensation programs. The Bank does, however, offer incentive compensation plans with performance goals that are consistent with the risk appetite of the Bank. Additionally, to encourage long term performance, the Bank's incentive compensation plans for its CEO and other Executives require deferred payment of a portion of earned incentive compensation and condition the payment of these deferred amounts based on continuing to meet certain performance requirements. Details regarding the 2022 incentive compensation goals are discussed below.

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As discussed above, for 2022, the Bank engaged McLagan to perform a base salary and incentive compensation benchmarking review for the CEO and other Executives which, along with consideration of the CEO’s and other Executives’ performance, is used to establish their annual base salaries. The following is a list of peers used in the benchmarking.


Ally Financial Inc.	Customers Bank	ICBC Financial Services	Renasant Corporation
Apple Financial Holdings	CVB Financial Corp.	Independent Bank - TX	Royal Bank of Canada
Arvest Bank	CVB Financial Corporation	Independent Bank Group, Inc.	Sallie Mae
Associated Bank	Dime Community Bancshares, Inc.	ING	Sandy Spring Bancorp, Inc.
Australia & New Zealand Banking Group	Eagle Bancorp, Inc.	International Bancshares Corporation	Sandy Spring Bank
Axos Financial, Inc.	East West Bancorp, Inc.	JP Morgan Chase	Santander Bank, N.A.
Bank of America	Enterprise Financial Services Corp	KBC Bank	Signature Bank – NY
Bank of New York Mellon	Fannie Mae	KeyCorp	Silvergate Capital Corporation
Bank of North Dakota	FB Financial Corporation	Lloyds Banking Group	Societe Generale
Bank of Nova Scotia	Federal Home Loan Banks (1)	M&T Bank Corporation	Standard Chartered Bank
Bank of the West	Federal Reserve Banks (2)	Macquarie Bank	State Street Corporation
Banner Bank	Fifth Third Bank	Mechanics Bank	Sterling National Bank
Banner Corporation	First Busey Corporation	Merchants Bancorp	Sumitomo Mitsui Trust Bank
Berkshire Bank	First Citizens Bank - NC	MUFG Bank, Ltd.	SVB Financial Group
Berkshire Hills Bancorp, Inc.	First Financial Bancorp - OH	National Australia Bank	Synovus Financial Corporation
BMO Financial Group	First Financial Bancorp.	Natixis	TD Securities
BNP Paribas	First Financial Bankshares, Inc.	NatWest	Texas Capital Bank
BOK Financial Corporation	First Foundation Inc.	NBT Bancorp Inc.	TFS Financial Corporation
Bremer Financial Corporation	First Interstate BancSystem, Inc.	Nomura Securities	TowneBank
Brown Brothers Harriman	First Merchants Bank	Nord/LB	TriState Capital Bank
Capital One	First Merchants Corporation	Northern Trust Corporation	Truist
CIBC World Markets	First National Bank of Omaha	Northwest Bancshares, Inc.	Trustmark Corporation
Citigroup	First Republic Bank	Northwest Bank – PA	U.S. Bancorp
Citizens Financial Group	First United Bank - OK	OceanFirst Bank	UMB Financial Corporation
City National Bank	Freddie Mac	OceanFirst Financial Corp.	Valley National Bancorp
Comerica	Frost Bank	OneMain Financial	Washington Federal, Inc.
Commerce Bank	Hancock Whitney Bank	Pinnacle Financial Partners, Inc.	Washington Trust Bank
Commerzbank	Heartland Financial USA, Inc	PlainsCapital Bank	Webster Bank
Commonwealth Bank of Australia	Helaba Landesbank Hessen-Thuringen	PNC Bank	Wells Fargo Bank
Community Bank System, Inc.	Home Bancshares, Inc. (Conway, AR)	Provident Financial Services	WesBanco, Inc.
Crédit Agricole CIB	Hope Bancorp, Inc.	Provident Financial Services, Inc.	WSFS Financial Corporation
Credit Industriel et Commercial – N.Y.	HSBC	Rabobank	Zions Bancorporation
Customers Bancorp, Inc.	Huntington Bancshares, Inc.	Regions Financial Corporation

Notes:

(1) The Federal Home Loan Bank group includes all of the other Federal Home Loan Banks.

(2) Includes Federal Reserve Banks in Atlanta, Boston, Chicago, Kansas City, Minneapolis, New York, Richmond, San Francisco and St. Louis.

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Human Resources Committee's Role and Responsibilities

The Human Resources Committee of the Board (formerly known as the Human Resources, Diversity, Equity and Inclusion Committee), is responsible for establishing and overseeing the CEO's compensation and overseeing other Executives' compensation. This includes setting the objectives of and reviewing performance under the Bank's compensation, benefits, and perquisites programs for the CEO and other Executives.

Additionally, the Human Resources Committee has adopted the practice of periodically retaining compensation and benefit consultants and other advisors, as well as reviewing analysis from the Bank's Human Resources Department (HR Department), to assist in performing its duties regarding the CEO's and other Executives' compensation.

Role of the Federal Housing Finance Agency

The FHLBank’s regulator, the Finance Agency, has been granted certain authority over executive compensation. Specifically under the Housing Act: (1) the Director of the Finance Agency is authorized to prohibit executive compensation that is not reasonable and comparable with compensation in similar businesses; (2) if an FHLBank is undercapitalized, the Director of the Finance Agency may restrict executive compensation; and (3) if an FHLBank is determined to be in a troubled condition, the Finance Agency may reduce or prohibit certain golden parachute payments in the event that an FHLBank is subject to a triggering event (for example, insolvency, subject to appointment of a conservator or receiver). Under the Finance Agency Executive Compensation Regulation, additional advance notice and approval requirements are imposed in regard to an FHLBank entering into or adopting: (1) employment agreements; (2) severance policy/agreements; (3) incentive compensation award payouts; (4) material modifications to nonqualified plans; and (5) ad hoc termination payments. The Finance Agency has implemented this authority by requiring the FHLBanks to submit to the Agency for non-objection salary, incentive compensation and benefits changes which affect an FHLBank’s NEOs.

The Finance Agency has established the following standards against which it will evaluate the compensation of each FHLBank executive: (1) each individual executive's compensation should be reasonable and comparable to that offered to executives in similar positions at comparable financial institutions; (2) such compensation should be consistent with sound risk management and preservation of the par value of FHLBank stock; (3) a significant percentage of incentive-based compensation should be tied to longer-term performance indicators; and (4) the Board should promote accountability and transparency with respect to the process of setting compensation.

Determining the CEO's Cash Compensation

For 2022, the Human Resources Committee used the analysis from McLagan for benchmarking the CEO's cash compensation, and factored in 2022 budget parameters, a competitive talent market and lack of a CEO salary increase in 2021. In determining Mr. Watson's cash compensation (including both base salary and incentive compensation), it was compared to the median for all the peer groups as listed in the tables above. After consideration of this analysis and budget consideration, the Board granted a salary increase of 5% resulting in a 2022 CEO salary of $971,311.

Determining Other Executives' Cash Compensation

In 2022, other Executives' base salaries and incentive compensation levels were determined by the CEO and validated using the results of the McLagan study and were reviewed and approved by the Human Resources Committee. The annual review of the McLagan study, 2022 budget parameters in a competitive talent market, and corresponding Board review of these findings validated the appropriateness of compensation levels for the CEO and other Executives. Salaries are reflected in the Summary Compensation Table presented in this Item 11. Executive Compensation.

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Executive Officer Incentive Plans

2022 Executive Officer Incentive Compensation Plan (2022 Plan). The 2022 Plan is designed to retain and motivate the CEO and other Executives and reward (1) achievement of key annual goals and (2) maintenance of satisfactory financial condition and member value over the longer term. The 2022 Plan established the following award opportunity levels (expressed as a percentage of base salary):


Participant Level	Threshold	Target	Maximum
CEO	60%	75%	100%
COO	55%	70%	85%
CTOO	50%	65%	80%
Other NEOs	40%	55%	70%

The Board has evaluated the performance of the CEO and other Executives against the incentive goals for 2022 set forth in the Non-Equity Incentive Plan Compensation section following the Summary Compensation Table below and determined the total incentive award (if any) based on that performance. The total incentive award was divided into two parts: (1) a current incentive award; and (2) a deferred incentive award, payable in installments. The following table illustrates how the 2022 current awards and deferred incentive award installments would be paid under the 2022 Plan:


Payment	Description	Payment Year*
Current Incentive Award	50% of total award	2023
Deferred Incentive Award installment	Up to 33 1/3% of deferred incentive award	2024
Deferred Incentive Award installment	Up to 33 1/3% of deferred incentive award	2025
Deferred Incentive Award installment	Up to 33 1/3% of deferred incentive award	2026

* Payment will be made no later than March 15 in the year indicated.

Payment of each deferred incentive award installment under the 2022 Plan is contingent on the Bank continuing to meet certain Bank performance criteria and the participant meeting his or her requirements described below. The amount of the deferred incentive award payout opportunity is set forth in the Grants of Plan-Based Awards table. See “Stated Bank Performance Criteria, 2022” under Grants of Plan-Based Awards table for details regarding the Bank performance criteria.

Participant Requirements of Continued Employment and Satisfactory Performance. Participants who terminate employment with the Bank for any reason other than death, disability, involuntary termination without cause or retirement (as defined in the 2022 Plan) prior to the current incentive award payout date will not be eligible for an award. Participants who terminate employment due to retirement or involuntary termination (other than for cause) after the current incentive award payout date but before completion of the payment of all corresponding deferred incentive award installments shall receive such deferred incentive award installment payments at the same time as such payments are made to plan participants who are current Bank employees. Participants who otherwise resign employment before the completion of the payment of all corresponding deferred incentive award installments shall not receive payment of such installments. In the event of a participant’s employment termination due to death or disability, the participant shall receive payout of deferred award installments. Any participant who is terminated by the Bank for cause (as defined in the 2022 Plan) shall not receive payment of unpaid deferred incentive award installments. Finally, the plan provides for vesting of deferred award installments in the event of a Change in Control. See Exhibit 10.14 to the 2021 Form 10-K for the full terms of the 2022 Plan.

In addition to deferred incentive award installment payments, the Bank also maintains a clawback policy in its Executive Officer Incentive Compensation Plan. The policy authorizes the Board to clawback incentive-based compensation paid to executive officers in the event of gross misconduct, gross negligence, materially inaccurate financial statements, erroneous performance metrics related to incentive goal calculation or conviction of a felony. The Board may, in its sole discretion, decline to adjust the terms of any outstanding award if it determines that such adjustment would violate applicable law or result in adverse tax consequences to an executive or the Bank. Under the policy, the Board will utilize its discretion to reduce the amount of any current incentive award payment and any deferred incentive award installment payment if it determines that (i) operational errors or omissions resulted in material revisions to the financial results, information submitted to the Finance Agency, or data used to determine incentive award payment amounts, (ii) the submission of information to the SEC, the Office of Finance, and/or the Finance Agency has not been provided in a timely manner or (iii) the Bank fails to make sufficient progress, as determined by the Finance Agency and communicated to Bank management and/or the Board by the Finance Agency, in the timely remediation of examination, monitoring, and other supervisory findings and matters requiring executive management’s attention.

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2023 Executive Officer Incentive Compensation Plan (2023 Plan). The 2023 Plan is materially the same as the 2022 Plan noted above with the same performance requirements, clawback mechanism and award eligibility levels. Following December 31, 2023, the Board will evaluate performance against the incentive goals set forth under the Grants of Plan-Based Awards table applicable to awards granted for 2023 and determine the total incentive award (if any) based on that performance. The total incentive award will be divided into two parts: (1) a current incentive award; and (2) a deferred incentive award, payable in installments. The following table illustrates how the 2023 current awards and deferred incentive award installments would be paid under the 2023 Plan:


Payment	Description	Payment Year*
Current Incentive Award	50% of total award	2024
Deferred Incentive Award installment	Up to 33 1/3% of deferred incentive award	2025
Deferred Incentive Award installment	Up to 33 1/3% of deferred incentive award	2026
Deferred Incentive Award installment	Up to 33 1/3% of deferred incentive award	2027

* Payment will be made no later than March 15 in the year indicated.

Payment of each deferred incentive award installment under the 2023 Plan is contingent on the Bank continuing to meet certain Bank performance criteria and the participant meeting his or her requirements described below. The amount of the deferred incentive award payout opportunity is set forth in the Grants of Plan-Based Awards table. See “Stated Bank Performance Criteria, 2023” under Grants of Plan-Based Awards table for details regarding the Bank performance criteria.

Participant Requirements of Continued Employment and Satisfactory Performance. These terms in the 2023 Plan are the same as set forth in the 2022 Plan described above. See Exhibit 10.13 to this Form 10-K for the full terms of the 2023 Plan.

Additional Incentives for Other Executives

From time to time, the CEO has recommended for the other Executives, and the Board has approved, additional incentive awards in connection with specific projects or other objectives of a unique, challenging, and time-sensitive nature. No such additional incentive awards were granted for any of the other Executives in 2022.

Perquisites and Other Benefits

The Board views the perquisites afforded to the CEO and other Executives as an element of the total compensation program, provided primarily as a benefit associated with their overall position duties and responsibilities. Examples of perquisites for the CEO and/or other Executives may include the following:

•Personal use of a Bank-owned/leased automobile;

•Financial and tax planning;

•Payment of relocation expenses; and

•Business club membership.

•Parking

The Bank may also provide a tax gross-up for some of the perquisites offered, including relocation benefits. Perquisites for the CEO and other Executives are detailed on the Summary Compensation Table and accompanying narrative, where an individual’s aggregate perquisites are $10,000 or more.1

Employee Benefits

The Board and Bank management are committed to providing competitive, high-quality benefits designed to promote health, well-being, and income protection for all employees. The Bank offers all employees a core level of benefits and the opportunity to choose from a variety of optional benefits. Core and optional benefits offered include, but are not limited to, medical, dental, prescription drug, vision, long-term disability, short-term disability, flexible spending accounts, worker's compensation insurance, and life and accident insurance. The CEO and other Executives participate in these benefits on the same basis as all other full-time employees. In addition, the CEO and other Executives are eligible for individual disability income insurance if the individual’s salary exceeds the monthly long-term disability limit.

1 For 2023, an upgraded club membership was approved for David Paulson, with an initiation fee of $10,000 and annual expected dues.

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Qualified and Nonqualified Defined Benefit Plans

The Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions (Pentegra Defined Benefit Plan), a tax-qualified, multi-employer defined-benefit retirement plan. The Pentegra Defined Benefit Plan is a funded, noncontributory plan that covers eligible employees.

•For all employees hired prior to January 1, 2008, benefits under the Pentegra Defined Benefit Plan are based upon a 2% accrual rate, the employees' years of benefit service and the average annual salary for the three consecutive years of highest salary during benefit service. The regular form of retirement benefits provides a single life annuity, with a guaranteed minimum 12-year payment. A lump-sum payment and other additional payment options are also available. Employees are not vested until they have completed five years of employment. The benefits are not subject to offset for Social Security or any other retirement benefits received.

•For all employees hired between January 1, 2008 and December 31, 2018, benefits under the Pentegra Defined Benefit Plan are based upon a 1.5% accrual rate, the employees' years of benefit service and the average annual salary for the five consecutive years of highest salary during benefit service. The regular form of retirement benefit payment is guaranteed for the life of the retiree but not less than 120 monthly installments. If a retiree dies before 120 monthly installments have been paid, the beneficiary would be entitled to the commuted value of such unpaid installments paid in a lump sum. Employees are not vested until they have completed five years of employment. The benefits are not subject to offset for Social Security or any other retirement benefits received.

•Employees hired on or after January 1, 2019 are not eligible to participate in the Pentegra Defined Benefit Plan and will not accrue benefits. For all employees hired prior to January 1, 2019, benefits will continue to accrue. If an employee was terminated prior to January 1, 2019 and then is subsequently re-hired on or after January 1, 2019, he/she is not eligible to re-join the Pentegra Defined Benefit Plan. The CEO and other Executives were hired prior to January 1, 2019 and are not impacted by this change in benefits.

The CEO and other Executives also participate in a Supplemental Executive Retirement Plan (SERP). The SERP provides the CEO and other Executives with a retirement benefit that the Bank is unable to offer under the Pentegra Defined Benefit Plan due to Internal Revenue Code (IRC) and Pentegra Defined Benefit Plan limitations, including the IRC limitations on qualified pension plan benefits for employees earning cash compensation of at least $305,000 for 2022.

As a nonqualified plan, the SERP benefits do not receive the same tax treatment and funding protection as the Pentegra Defined Benefit Plan, and the Bank's obligations under the SERP are a general obligation of the Bank. The terms of the SERP provide for distributions from the SERP upon termination of employment with the Bank or in the event of the death or disability of the employee. Payment options under the SERP include annuity and lump-sum options.

Qualified and Nonqualified Defined Contribution Plans

Eligible employees have the option to participate in the Federal Home Loan Bank of Pittsburgh Defined Contribution Plan (Thrift Plan), a qualified defined contribution plan under the IRC. Subject to IRC and Thrift Plan limitations, employees can contribute up to 50% of their base salary in the Thrift Plan. The Bank matches 100% of employee contributions up to 6% of total eligible earnings. This matching contribution is immediately vested.

For all employees hired on or after January 1, 2019, the Bank will also contribute under the Thrift Plan an amount equal to 4% of total eligible earnings annually if the following eligibility requirements are met: (1) employed on December 31; and (2) completed 1,000 hours of service during the plan year. This contribution vests after 3 years of service. The CEO and other Executives were hired prior to January 1, 2019 and are not impacted.

In addition to the Thrift Plan, the CEO and other Executives are also eligible to participate in the Supplemental Thrift Plan, an unfunded nonqualified defined contribution plan that, in many respects, mirrors the Thrift Plan. The Supplemental Thrift Plan ensures, among other things, that the CEO and other Executives whose benefits under the Thrift Plan would otherwise be restricted by certain provisions of the IRC or limitations in the Thrift Plan are able to make elective pretax deferrals and receive the Bank matching contributions on those deferrals. In addition, the Supplemental Thrift Plan permits deferrals of Bank matching contributions on the current portion of the incentive compensation awards, subject to the limits on deferrals of compensation under the Supplemental Thrift Plan. Participants are permitted to elect to defer a portion of their deferred incentive awards to this Plan as well. Any such awards which are deferred to the Supplemental Thrift Plan are subject to a separate payment election.

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The CEO and other Executives may defer up to 80% of their eligible cash compensation, less their contributions to the qualified Thrift Plan. For each deferral period in the Supplemental Thrift Plan, the Bank credits a matching contribution equal to:

•200% on employee’s 3% contribution, up to 6% of total eligible earnings; less

•The Bank's matching contribution to the qualified Thrift Plan.

The terms of the Supplemental Thrift Plan generally provide for distributions upon termination of employment with the Bank, in the event of the death of the employee or upon disability, at the discretion of the Human Resources and Diversity, Equity & Inclusion Committee, and in accordance with applicable IRC and other applicable requirements. Payment options under the Supplemental Thrift Plan include a lump-sum payment and annual installments for up to 10 years. No loans are permitted from the Supplemental Thrift Plan.

The current incentive award portion of any incentive compensation award for the CEO and other Executives is eligible for a Bank matching contribution under the Supplemental Thrift Plan; any incentive award installments further deferred to the Supplemental Thrift Plan are not eligible for a Bank matching contribution. In addition, if a Supplemental Thrift Plan participant has contributed the maximum amount of employee contributions under the qualified Thrift Plan but was credited with matching Bank contributions to the Thrift Plan at a limited level due to IRC or Thrift Plan limitations, the participant shall be credited with an additional Bank contribution to the Supplemental Thrift Plan calculated after taking into account the Bank matching contributions actually credited to the Thrift Plan for the plan year. A description of the Supplemental Thrift Plan is also contained in the Supplemental Thrift Plan filed as Exhibit 10.1 to the Bank’s Second Quarter 2019 Form 10-Q.

Rabbi Trust Arrangements

The Bank has established Rabbi trusts to partially help secure benefits under both the SERP and Supplemental Thrift Plan. See the Pension Benefits Table and Nonqualified Deferred Compensation Table and narratives below for more information.

Additional Retirement Benefits

The Bank offers post-retirement medical benefit dollars in the form of a Health Reimbursement Account (HRA) for eligible retirees and their spouses age 65 and older. HRA dollars can be used to purchase individual healthcare coverage and other eligible out-of-pocket healthcare expenses.

Severance Policy (excluding Change-in-Control)

The Bank provides severance benefits to the CEO and other Executives. These benefits reflect the potential difficulty employees may encounter in their search for comparable employment within a short period of time. The Board determined that such severance arrangements are a common practice in the marketplace.

The Bank's severance policy is designed to help bridge this gap in employment. The policy provides the following for other Executives:

•Four weeks' base salary continuation per year of service, with a minimum of 26 weeks and a maximum of 52 weeks;

•Taxable compensation in the amount equivalent to the amount the Bank pays for medical coverage for its active employees for the length of the salary continuation; and

•Individualized outplacement service for a maximum of 12 months.

The Board provided a separate severance agreement as part of the employment offer for the CEO. It is the same as above except that it provides for severance in the amount of 12 months of salary which is more fully described in the Post-Termination Compensation Table below.

Change-in-Control (CIC) Agreements

The Bank has entered into CIC agreements with the CEO and other Executives. The Board believes that CIC agreements are an important recruitment and retention tool and that such agreements enable the CEO and other Executives to effectively perform and meet their obligations to the Bank if faced with the possibility of consolidation with another FHLBank. These agreements are a common practice in the marketplace.

In the event of a merger of the Bank with another FHLBank, where the merger results in the termination of employment (including resignation for “good reason” as defined under the CIC agreement) for the CEO or any other Executives, each such individual(s) is (are) eligible for severance payments under his/her CIC agreement. Such severance is in lieu of severance under

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the severance policy discussed above. The severance policy (and in the case of the CEO, his separate severance agreement) continues to apply to employment terminations of the other Executives, other than those resulting from a Bank merger.

Benefits under the CIC agreement for the CEO and other Executives are as follows:

•2.99 times base salary (CEO); two times base salary (other Executives);

•For the CEO, a payment of 2.99 times target incentive award opportunity in the year of termination, a pro-rated incentive payment in the year of termination and a payment equal to the additional benefit that the CEO would have received under the Bank’s qualified and nonqualified retirement plans calculated as if the CEO had three additional years of both age and service at the time of separation from the Bank;

•For the other Executives, a payment of two times target incentive award opportunity in the year of termination, a pro-rated incentive payment in the year of termination and a payment equal to the additional benefit that the other Executives would have received under the Bank’s qualified and nonqualified retirement plans calculated as if the other Executives had two additional years of both age and service at the time of separation from the Bank;

•An amount equal to three (CEO) or two (other Executives) times six percent of the Executive’s annual compensation (as defined in the Supplemental Thrift Plan) at the time of separation from the Bank;

•Taxable compensation equivalent to the Bank’s monthly contribution to its active employees’ medical plan coverage for the benefits continuation period of 18 months; and

•Individualized outplacement service for a maximum of 12 months and financial planning.

See Exhibit 10.9.1 to the Bank’s second quarter 2016 Form 10-Q for details regarding the change-in-control agreements.

Compensation Committee Interlocks and Insider Participation

During 2022, the following directors served on the Bank’s Human Resources Committee: Mr. Brendan J. McGill, Chair, Ms. Jeane M. Vidoni, Vice Chair, Mr. Romulo L. Diaz, Mr. Bradley E. Ritchie and Mr. Joseph W. Major. No member of the Bank’s Human Resources Committee has at any time been an officer or employee of the Bank. None of the Bank’s executive officers have served, or are serving, on the Board of Directors or the compensation committee of any entity whose executive officers served on the Bank’s Human Resources Committee or Board of Directors. With respect to related party transactions, if any, and the independence of the Directors serving on the Human Resources Committee during 2022, see Item 13. Certain Relationships and Related Transactions and Director Independence of this Form 10-K.

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Compensation Committee Report

The Human Resources Committee has reviewed and discussed the CD&A with management. Based on that review and discussion, the Human Resources Committee has recommended to the Board that the CD&A be included in the Bank’s 2022 Form 10-K.

The Human Resources Committee of the Board of Directors:

Mr. Brendan J. McGill Chair

Ms. Jeane M. Vidoni Vice Chair

Mr. Romulo L. Diaz, Jr., Esq.

Mr. Joseph W. Major

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Summary Compensation Table (SCT)


Name and Principal Position	Year	Salary		Bonus	Non-Equity Incentive Plan Compensation		Change in Pension Value and Nonqualified Deferred Compensation (6)		All Other Compensation		Total
Winthrop Watson (1) President and CEO	2022	$	971,311	$—	$	944,860	$	—	$	78,777	$	1,994,948
	2021	925,058		—	817,444		198,000		86,015		2,026,517
	2020	925,058		—	922,767		520,000		84,480		2,452,305

David G. Paulson (2) Chief Operating Officer	2022	$	519,750	$—	$	427,494	$	—	$	44,055	$	991,299
	2021	495,000		—	362,114		128,000		45,739		1,030,853
	2020	495,000		—	403,430		415,000		43,644		1,357,074

John P. Cassidy (3) Chief Technology and Operations Officer	2022	$	477,750	$—	$	362,862	$	—	$	40,337	$	880,949
	2021	455,000		—	295,015		337,000		41,737		1,128,752
	2020	455,000		—	320,281		896,000		38,727		1,710,008
Michael A. Rizzo (4) Chief Risk Officer	2022	421,954		$—	$	293,199	$	—	$	30,377	$	745,530
	2021	407,685		—	259,677		99,000		29,523		795,885
	2020	407,685		—	296,155		317,000		28,780		1,049,620

Julie F. Spiker (5) General Counsel & Corporate Secretary	2022	$	396,680	$—	$	238,335	$	—	$	23,819	$	658,834
	2021	376,000		—	166,702		414,000		22,580		979,282

Notes:

(1) For 2022, Mr. Watson’s non-equity incentive plan compensation was the incentive plan described above and was based on the 2022 performance against goals as set forth below as well as deferred incentive earned in 2022 under the 2019, 2020, and 2021 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $76,569 and the remainder is insurance premium contributions. For 2021, Mr. Watson’s non-equity incentive plan compensation was the incentive plan described in the Bank’s 2021 Form 10-K as well as deferred incentive earned in the 2018, 2019, and 2020 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $80,690 and the remainder is insurance premium contributions. For 2020, Mr. Watson’s non-equity incentive plan compensation was the incentive plan described in the Bank’s 2020 Form 10-K as well as deferred incentive earned in the 2017, 2018, and 2019 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $79,159 and the remainder is insurance premium contributions.

(2) For 2022, Mr. Paulson’s non-equity incentive plan compensation was the incentive plan described above and was based on the 2022 performance against goals as set forth below as well as deferred incentive earned in 2022 under the 2019, 2020, and 2021 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $39,583 and the remainder is insurance premium contributions. For 2021, Mr. Paulson’s non-equity incentive plan compensation was the incentive plan described in the Bank’s 2021 Form 10-K as well as deferred incentive earned in the 2018, 2019, and 2020 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $41,500 and the remainder is insurance premium contributions. For 2020, Mr. Paulson’s non-equity incentive plan compensation was the incentive plan described in the Bank’s 2020 Form 10-K as well as deferred incentive earned in the 2017, 2018, and 2019 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $40,033 and the remainder is insurance premium contributions.

(3) For 2022, Mr. Cassidy’s non-equity incentive plan compensation was the incentive plan described above and was based on the 2022 performance against goals as set forth below as well as deferred incentive earned in 2022 under the 2019, 2020, and 2021 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $35,920 and the remainder is insurance premium contributions. For 2021, Mr. Cassidy’s non-equity incentive plan compensation was the incentive plan described in the Bank’s 2021 Form 10-K as well as deferred incentive earned in the 2018, 2019, and 2020 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $37,464 and the remainder is insurance premium contributions. For 2020, Mr. Cassidy’s non-equity incentive plan compensation was the incentive plan described in the Bank’s 2020 Form 10-K as well as deferred incentive earned in the 2017, 2018, and 2019 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $35,197 and the remainder is insurance premium contributions.

(4) For 2022, Mr. Rizzo’s non-equity incentive plan compensation was the incentive plan described above and was based on the 2022 performance against goals as set forth below as well as deferred incentive earned in 2022 under the 2019, 2020, and 2021 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $25,318 and the

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remainder is insurance premium contributions. For 2021, Mr. Rizzo’s non-equity incentive plan compensation was the incentive plan described above and was based on the 2021 performance against goals as set forth below as well as deferred incentive earned in 2021 under the 2018, 2019, and 2020 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $24,462 and the remainder is insurance premium contributions. For 2020, Mr. Rizzo’s non-equity incentive plan compensation was based on the 2020 performance against goals as set forth below as well as deferred incentive earned in the 2017, 2018, and 2019 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $24,462 and the remainder is insurance premium contributions.

(5) For 2022, Ms. Spiker’s non-equity incentive plan compensation was the incentive plan described above and was based on the 2022 performance against goals as set forth below as well as deferred incentive earned in 2022 under the 2019 Key Incentive Plan, and 2020 and 2021 Executive Officer Incentive Compensation Plans. All other compensation included employer contributions to defined contribution plans of $23,802 and the remainder is insurance premium contributions. For 2021, Ms. Spiker’s non-equity incentive plan compensation was the incentive plan described in the Bank’s 2021 Form 10-K as well as deferred incentive earned in 2021 under the 2018 and 2019 Key Employee Incentive Plans, and 2020 Executive Officer Incentive Compensation Plan. All other compensation included employer contributions to defined contribution plans of $22,561 and the remainder is insurance premium contributions.

(6) The change in pension value is the sum of the change in the Pentegra Defined Benefit Plan and the change in the SERP as described below. No amount of above market earnings on nonqualified deferred compensation is reported because above market rates are not possible under the Supplemental Thrift Plan, the only such plan that the Bank offers. During 2022, for Mr. Watson, Mr. Paulson, Mr. Cassidy, Mr. Rizzo and Ms. Spiker, the increase in interest rate for fiscal 2022 drove the change in pension value for such year to be negative (-$173,000, - $243,000, -$504,000, -$158,000 and -$587,000, respectively). In accordance with SEC disclosure requirements, these negative amounts are not included in this table.

CEO Pay Ratio

Consistent with SEC rules, the Bank is providing the following information regarding the relationship of the annual compensation of the Bank’s employees and the annual total compensation of the Bank’s CEO. For the year ended December 31, 2022, the annual total compensation of the CEO, as reported in the SCT above was $1,994,948 and the median of the annual total compensation of all of the Bank’s employees (not including the CEO), calculated as described below, was $163,602. Based on this information, the ratio of the annual total compensation of the CEO to the median of the annual total compensation of all employees (not including the CEO), was 12.2 to 1.

To identify the median of the annual total compensation of all of the Bank’s employees, as well as to determine the annual total compensation of the Bank’s median employee, the Bank took the following steps. First, the Bank determined that, as of December 1, 2022, the Bank’s employee population consisted of 223 individuals (not including the CEO), all located in the United States. This population consisted of full-time, part-time and temporary employees. The Bank selected December 1, 2022 for purposes of identifying its median employee as such date provided the Bank with adequate time to gather data regarding its employees.

Second, the Bank identified the median employee by comparing the amount of salary or wages, as applicable (including overtime), and cash incentive awards as reflected in the Bank’s payroll records for the entire fiscal year ending December 31, 2022 for each of the employees (not including the CEO) who were employed by the Bank on December 1, 2022, and ranking such compensation for all such employees from lowest to highest. In making this determination, the Bank annualized the salary or wages, as applicable (excluding overtime which was a nominal amount and not readily estimable due to fluctuations), of 32 employees who were hired in 2022 but did not work for the Bank for the entire year. The cash incentive awards forming a part of the calculation to identify the median employee were paid to employees in 2022 for the 2021 performance year in accordance with the Bank’s employee and executive incentive plans. The Bank determined this approach to be an appropriate measure for purposes of identifying its median employee. As a result of a change in the Bank’s employee population during 2022, the Bank performed the above calculation to identify the median employee for the year ending December 31, 2022, rather than use the same median employee identified in the Bank’s 2021 Form 10-K for the year ending December 31, 2021.

For any employee not eligible to receive the cash incentive awards paid during 2022 for the 2021 performance year, the Bank estimated the cash incentive award such employee would have received had the employee been employed the entire plan year. The estimated incentive was determined using the newly hired employees’ base salary and their incentive compensation opportunity level based on (1) the Bank’s performance as it relates to the 2021 Bankwide goals (refer to these goals in Exhibit 10.14 in the Bank’s 2021 Form 10-K) and (2) the incentive compensation payouts in 2022 for similar positions in their respective departments.

The above described compensation measure used to identify the median employee was applied consistently to all employees included in the calculation. The Bank determined this compensation measure reasonably reflects the annual compensation of all Bank employees as required by SEC rules.

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Finally, after determining the median employee as set forth above, the annual total compensation for the median employee of $163,602 was then calculated in the same manner as shown for the CEO in the SCT. The annual total compensation amount of the median employee includes among other things, amounts attributable to the change in pension value, which varies among employees based upon their tenure at the Bank. All other compensation includes employer contributions to defined contribution plans and insurance premium contributions. The above is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of the CEO to the median of the annual total compensation of all of the Bank’s employees.

Non-Equity Incentive Plan Compensation

Under the 2022 Plan, the actual annual award opportunity for January 1, 2022, through December 31, 2022, and payouts are based on a percentage of the executive's base salary as of December 31, 2022. Each goal includes performance measures at threshold, target and maximum. The specific performance goals and total weighting for each goal for the CEO and other Executives are as follows.

A.Optimize member use of core products by year-end 2022. Core products include: Advances, MPF, letters of credit, safekeeping and five community investment products (Affordable Housing Program, Community Lending Program, Banking On Business, First Front Door, and Home4Good) (30% weighting);

B.Profitability as measured by adjusted earnings relative to GAAP capital in excess of the full-year average Federal funds rate within identified risk parameters (30% weighting);

C.Key risk indicator (KRI) performance of 11 KRIs over 12 months (10% weighting);

D.Peer operating expense scorecard - basket of three metrics (10% weighting);

E.Diversity and inclusion strategic plan (10% weighting); and

F.Technology Resilience and Efficiency objectives (10% weighting).

Adjusted earnings referenced above are quantified in the table below.


(in thousands)
2022 GAAP net income	$	227,068
Adjustments:
Advance prepayment fees	$	(1,901)
Mortgage delivery commitments	2,917
Earnings at risk (EaR) and unrealized gain/loss on securities	871
Derivative ineffectiveness	(3,632)
Voluntary Housing Grant	10,200
Subtotal - adjustments	$	8,455
AHP	(845)
Adjusted earnings (non-GAAP)	$	234,678

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The table below includes the performance goal, weighting, achievement levels, and payout percentages for the NEOs per the terms of the 2022 Plan.


		To Achieve:				Payout (2)
Goal (1)	Weighting	Threshold Payout	Target Payout	Maximum Payout	2022 Results	CEO	COO	CTOO	Other NEOs
A	30%	700	725	775	798	30.0%	25.5%	24.0%	21.0%
B	30%	173	208	243	486	30.0%	25.5%	24.0%	21.0%
C	10%	110	119	128	121	8.1%	7.3%	6.8%	5.8%
D	10%	Rank 9	Rank 6	Rank 3	Rank 3	10.0%	8.5%	8.0%	7.0%
E	10%	1 of 3	2 of 3	3 of 3	3	10.0%	8.5%	8.0%	7.0%
F	10%	3 of 5	4 of 5	5 of 5	5	10.0%	8.5%	8.0%	7.0%
Total Payout						98.1%	83.8%	78.8%	68.8%

Notes:

(1) Refer to the incentive goal scorecard attached to the 2022 Plan which is Exhibit 10.14 to the Bank’s 2021 Form 10-K.

(2) For performance achievement between threshold and target or target and maximum, the 2022 Plan provides for interpolation to determine the incentive compensation payout. To calculate payout for achievement between target and maximum, linear interpolation was used.


Named Executive Officer	Salary on which incentive is based (1)		Maximum incentive payout % potential	Maximum incentive payout potential $ (2)		2022 actual incentive payout (A)		2021 deferred incentive $ (B)		2020 deferred incentive $ (C)		2019 deferred incentive $ (D)		Total incentive payout (3)
Winthrop Watson	$	971,311	100%	$	971,311	$	476,212	$	127,003	$	174,894	$	166,752	$	944,860
David G. Paulson	$	519,750	85%	$	441,788	$	217,862	$	58,307	$	81,933	$	69,392	$	427,494
John P. Cassidy	$	477,750	80%	$	382,200	$	188,313	$	50,372	$	70,572	$	53,604	$	362,862
Michael A. Rizzo	$	421,954	70%	$	295,368	$	145,222	$	39,359	$	54,740	$	53,878	$	293,199
Julie F. Spiker	$	396,680	70%	$	277,676	$	136,524	$	36,300	$	50,486	$	15,026	$	238,335

Notes:

(1) Base salary in effect on December 31, 2022 used to calculate payouts.

(2) NEOs will be paid 50% of the incentive payout for 2022 in 2023 (see column A) and the remaining amount will be deferred and contingently payable in 2024, 2025 and 2026.

(3) Total incentive payout includes the sum of columns (A) (B) (C) and (D). As noted below, if both of the Stated Bank Performance Criteria are met in the preceding year, deferred incentive payments will be at 125% of the deferred amount.

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The following table illustrates for each participant the maximum amount of unpaid deferred installments as of December 31, 2022 distributable under the 2019, 2020, 2021 and 2022 plans.


Name and Principal Position	Amount Distributable in 2023		Amount Distributable in 2024		Amount Distributable in 2025		Amount Distributable in 2026		Total (1)
Winthrop Watson President and CEO	$	468,648	$	500,318	$	325,424	$	198,422	$	1,492,812
David G. Paulson Chief Operating Officer	$	209,632	$	231,015	$	149,083	$	90,776	$	680,506
John P. Cassidy Chief Technology and Operations Officer	$	174,549	$	199,408	$	128,836	$	78,464	$	581,257
Michael A. Rizzo Chief Risk Officer	$	147,977	$	154,608	$	99,868	$	60,509	$	462,962
Julie F. Spiker (2) General Counsel & Corporate Secretary	$	101,811	$	143,671	$	93,185	$	56,885	$	395,551

Notes:

(1) Based on the provisions of the 2019, 2020, 2021 and 2022 Executive Officer Incentive Compensation Plans, the deferral amount from the 2019 2020, 2021 and 2022 plan years includes a 25% increase since the deferral criteria were assumed to have been met at the maximum level payout.

(2) Ms. Spiker’s amounts distributable in 2023 includes deferral amounts based on the provisions of the 2019 Key Employee Incentive Compensation Plan and 2020 and 2021 Executive Officer Incentive Compensation Plans. Amounts distributable in 2024, 2025, and 2026 only include deferral amounts based on the provisions of the 2020, 2021, and 2022 Executive Officer Incentive Compensation Plans.

Change in Pension Value

The Pentegra Defined Benefit Plan provides a benefit of 2.00% of a participant's highest 3-year average earnings, multiplied by the participant's years of benefit service for employees hired prior to January 1, 2008; or 1.50% of a participant's highest 5-year average earnings, multiplied by the participant's years of benefit service for employees hired on or after January 1, 2008. Earnings are defined as base salary as in effect for each month of such year. Earnings are subject to an annual IRS limit of $305,000 for 2022. Annual benefits provided under the Pentegra Defined Benefit Plan also are subject to IRS limits, which vary by age and benefit payment type. As noted above, employees hired on or after January 1, 2019 are not eligible to participate in the Pentegra Defined Benefit Plan and will not accrue benefits.

The participant's accrued benefits are calculated as of December 31, 2022 and December 31, 2021. The present value is calculated using the accrued benefit at each date multiplied by a present value factor based on an assumed age 65 retirement date. As of December 31, 2022, 55% of the benefit is valued using the PRI-2012 mortality table for white collar workers (with mortality improvement scale MP-2021) and 45% of the benefit is valued using the IRS Applicable Mortality table for lump sums projected to 2022. As of December 31, 2021, 55% of the benefit is valued using the PRI-2012 mortality table for white collar workers (with mortality improvement scale MP-2020) and 45% of the benefit is valued using the IRS Applicable Mortality table for lump sums projected to 2021. The interest rates used are 5.02% as of December 31, 2022 and 2.83% as of December 31, 2021. The difference between the present value of the December 31, 2022 accrued benefit and the present value of the December 31, 2021 accrued benefit is the “change in pension value” for the Pentegra Defined Benefit Plan.

The SERP provides benefits under the same terms and conditions as the Pentegra Defined Benefit Plan, except earnings are defined as base salary as in effect for each month of such year plus incentive compensation. Also, the SERP does not limit annual earnings or benefits. Benefits provided under the Pentegra Defined Benefit Plan are an offset to the benefits provided under the SERP. The participants' benefits are calculated as of December 31, 2022 and December 31, 2021. The present value is calculated by multiplying the benefits accrued at each date by a present value factor based on an assumed age 65 retirement date. As of December 31, 2022, the benefit is valued using the PRI-2012 mortality table for white collar workers (with mortality improvement scale MP-2021). As of December 31, 2022, the benefit is valued using the PRI-2012 mortality table for white collar workers (with mortality improvement scale MP-2020). As of December 31, 2022, the benefit is valued using an interest rate o 5.02% for the age 65 present value factor and then the age 65 present value factor is discounted back to current age using an interest rate of 4.75%. As of December 31, 2021, the benefit is valued using an interest rate of 2.83% for the age 65 present value factor and then the age 65 present value factor is discounted back to current age using an interest rate of 2.0%. The difference between the present value of the December 31,2022 accrued benefit and the present value of the December 31, 2021 accrued benefit is the “change in pension value” for the SERP.

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The total change in pension value is the sum of the change in the Pentegra Defined Benefit Plan and the change in the SERP.

Grants of Plan-Based Awards

The following table is based on salary as of December 31, 2022 and shows the value of non-equity incentive plan awards granted to the CEO and other Executives in 2022 or future periods, as applicable. Note that these amounts are based on the potential awards available under the terms of the 2022 Plan, not actual performance. Actual performance under the 2022 Plan is as reflected in the SCT and in the detailed incentive award tables set forth below the SCT.

2022 Grants


				Estimated Future Payouts under Non-Equity Incentive Plan Awards
Name and Principal Position		Performance Achieved in 2022		Amount Payable 2023		Amount Payable 2024		Amount Payable 2025		Amount Payable 2026
Name and Principal Position		Total Opportunity		50% Payout		Deferred Amount		Deferred Amount		Deferred Amount
Winthrop Watson President and CEO	Threshold	$	582,787	$	291,393	$	121,414	$	121,414	$	121,414
	Target	$	728,483	$	364,242	$	151,767	$	151,767	$	151,767
	Max	$	971,311	$	485,656	$	202,356	$	202,356	$	202,356
David G. Paulson Chief Operating Officer	Threshold	$	285,863	$	142,931	$	59,555	$	59,555	$	59,555
	Target	$	363,825	$	181,913	$	75,797	$	75,797	$	75,797
	Max	$	441,788	$	220,894	$	92,039	$	92,039	$	92,039
John P. Cassidy Chief Technology and Operations Officer	Threshold	$	238,875	$	119,438	$	49,766	$	49,766	$	49,766
	Target	$	310,538	$	155,269	$	64,695	$	64,695	$	64,695
	Max	$	382,200	$	191,100	$	79,625	$	79,625	$	79,625
Michael A. Rizzo Chief Risk Officer	Threshold	$	168,782	$	84,391	$	35,163	$	35,163	$	35,163
	Target	$	232,075	$	116,037	$	48,349	$	48,349	$	48,349
	Max	$	295,368	$	147,684	$	61,535	$	61,535	$	61,535
Julie F. Spiker General Counsel & Corporate Secretary	Threshold	$	158,672	$	79,336	$	33,057	$	33,057	$	33,057
	Target	$	218,174	$	109,087	$	45,453	$	45,453	$	45,453
	Max	$	277,676	$	138,838	$	57,849	$	57,849	$	57,849

Notes: As described above in the 2022 Plan, payment of each deferred incentive award installment is contingent on the participant meeting the required criteria and the Bank meeting the Stated Bank Performance Criteria described below. For the 2022 Plan, the first year payout is 50% of the award amount and then 33 1/3% of the remaining 50% in each deferral installment over the next three years based on whether or not the stated payment criteria were met. The deferred amount shown for each of the years 2024, 2025, and 2026 is 125% of the maximum deferred amount if both MV/CS and retained earnings levels are maintained, which we have assumed are met in each year for purposes of this calculation.

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Stated Bank Performance Criteria, 2022. Payment of each deferred incentive award installment in 2024, 2025, and 2026 related to December 31, 2022 incentive is contingent on the Bank continuing to meet the following stated Bank performance criteria as well as being contingent on the participant continuing to meet his/her requirements. In no event shall the aggregate amount of any current incentive award and deferred incentive award installments paid to a participant in any payment year exceed 100% of the participant's base salary.

•MV/CS - The annual MV/CS must have an average above 105% (the annual average amount will be calculated using the ending amount of each month during the year); and

•Retained Earnings Level - Have retained earnings that exceed the Bank's retained earnings target at each year-end of the applicable deferred payment period.

Each of the two stated criteria above is equal to 50% of the deferred incentive payment amount. At least one of these criteria above must have been met in the preceding year for any installment payment to be made. If both of these criteria are met in the preceding year, the payment will be made at 125% of the deferred amount. The Board will also consider the following criteria and may exercise its discretion to adjust an award:

•Remediation of Examination Findings. This criterion is defined as the Bank making sufficient progress, as determined by the Finance Agency and communicated to Bank management or the Board, in the timely remediation of examination, monitoring, and other supervisory findings and matters requiring executive management attention; and

•Timeliness of Finance Agency, SEC, and OF Filings. This criterion is defined as SEC periodic filings, call report filings with the Finance Agency, and FRS filings with the OF that are timely filed and no material restatement by the Bank is required.

2023 Grants


			Estimated Future Payouts under Non-Equity Incentive Plan Awards
Name and Principal Position		Performance Achieved in 2023	Amount Payable 2024	Amount Payable 2025	Amount Payable 2026	Amount Payable 2027
		Total Opportunity	50% Payout	Deferred Amount	Deferred Amount	Deferred Amount
Winthrop Watson President and CEO	Threshold	$623,582	$311,791
	Target	$779,477	$389,739
	Max	$1,039,303	$519,651	$216,521	$216,521	$216,521
David G. Paulson Chief Operating Officer	Threshold	$305,873	$152,936
	Target	$389,293	$194,646
	Max	$472,713	$236,356	$98,482	$98,482	$98,482
John P. Cassidy Chief Technology and Operations Officer	Threshold	$255,596	$127,798
	Target	$332,275	$166,138
	Max	$408,954	$204,477	$85,199	$85,199	$85,199
Michael A. Rizzo Chief Risk Officer	Threshold	$177,221	$88,610
	Target	$243,678	$121,839
	Max	$310,136	$155,068	$64,612	$64,612	$64,612
Julie F. Spiker General Counsel & Corporate Secretary	Threshold	$171,366	$85,683
	Target	$235,628	$117,814
	Max	$299,890	$149,945	$62,477	$62,477	$62,477

Notes: As described above in the 2023 Plan, payment of each deferred incentive award installment is contingent on the participant meeting the required criteria and the Bank meeting the Stated Bank Performance Criteria described below. For the 2023 Plan, the first year payout is 50% of the award amount and then 33 1/3% of the remaining 50% in each deferral installment over the next three years based on whether or not the stated payment criteria were met. The deferred amount shown for each of the years 2025, 2026, and 2027 is 125% of the maximum deferred amount if both MV/CS and retained earnings levels are maintained, which we have assumed is met in each year for purposes of this calculation.

Estimated future payouts presented above were calculated based on the executives' base salary as of January 1, 2023. The actual amount of the payout will be based on the executives' base salary at December 31, 2023.

Under the 2023 Plan, the actual annual award opportunity for January 1, 2023, through December 31, 2023, and payouts are based on a percentage of the executive's base salary as of December 31, 2023. Each goal includes performance measures at

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threshold, target and maximum. The specific performance goals and total weighting for each goal for the CEO and other Executives are as follows.

•Optimize member use of core products by year-end 2023. Core products include: Advances, MPF, letters of credit, safekeeping and five community investment products (Affordable Housing Program, Community Lending Program, Banking On Business, First Front Door and Home4Good) (35% weighting);

•Profitability as measured by adjusted earnings relative to total GAAP capital in excess of full year average Federal funds rate within identified risk parameters (Board duration of equity limits) (35% weighting);

•KRI performance of 11 KRIs over 12 months (10% weighting);

•Diversity, equity, and inclusion select metrics around workforce and marketplace (10% weighting); and

•Cloud technology migration objectives as measured by four critical strategic milestones (10% weighting).

Adjusted earnings and other measures referenced above are as defined in the 2023 Plan. See Exhibit 10.13 to this Form 10-K.

Stated Bank Performance Criteria, 2023. Payment of each deferred incentive award installment in 2025, 2026, and 2027 related to December 31, 2023 is contingent on the Bank continuing to meet the stated Bank performance criteria as well as being contingent on the participant continuing to meet his/her requirements. In no event shall the aggregate amount of any current incentive award and deferred incentive award installments paid to a participant in any payment year exceed 100% of the participant's base salary.

•MV/CS - The annual MV/CS must have an average above 105% (the annual average amount will be calculated using the ending amount of each month during the year); and

•Retained Earnings Level - Have retained earnings that exceed the Bank's retained earnings target, defined as retaining earnings that cover both risk target and capital compliance, at each year-end of the applicable deferred payment period.

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Pension Benefits


Name and Principal Position	Plan Name	Number of Years Credited Service	Present Value of Accumulated Benefit		Payments During Last Fiscal Year
Winthrop Watson President and CEO	Pentegra Defined Benefit Plan	12.58	$	637,000	$—
	SERP	13.08	$	2,582,000	$—
David G. Paulson Chief Operating Officer	Pentegra Defined Benefit Plan	12.25	$	475,000	$—
	SERP	12.75	$	736,000	$—
John P. Cassidy Chief Technology and Operations Officer	Pentegra Defined Benefit Plan	22.75	$	1,333,000	$—
	SERP	23.25	$	1,776,000	$—
Michael A. Rizzo Chief Risk Officer	Pentegra Defined Benefit Plan	12.33	$	568,000	$—
	SERP	12.83	$	606,000	$—
Julie F. Spiker General Counsel & Corporate Secretary	Pentegra Defined Benefit Plan	33.16	$	2,067,000	$—
	SERP	27.83	$	1,237,000	$—

The description of the Pentegra Defined Benefit Plan contained in the Summary Plan Description for the Financial Institutions Retirement Fund and the description of the SERP contained in the Supplemental Executive Retirement Plan are included as Exhibit 10.5 to the 2013 Form 10-K and Exhibit 10.5.2 to the Bank’s First Quarter 2015 Form 10-Q. See “Qualified and Non-Qualified Defined Benefit Plans” under “Compensation Discussion and Analysis” in this Item 11. of this Form 10-K for the different purposes for each plan.

This table represents an estimate of retirement benefits payable at normal retirement age in the form of the actuarial present value of the accumulated benefit. The amounts were computed as of the same plan measurement date that the Bank uses for financial statement reporting purposes. The same assumptions were used that the Bank uses to derive amounts for disclosure for financial reporting, except the above information assumed normal retirement age as defined in the plan. See narrative discussion of the “Change in Pension Value” column under the SCT.

Compensation used in calculating the benefit for the Pentegra Defined Benefit Plan includes base salary only. Compensation used in calculating the benefit for the SERP includes the current incentive award portion of any award under the Bank’s executive compensation plan. Benefits under the SERP vest after completion of 5 years of employment (the vesting requirement under the Pentegra Defined Benefit Plan) subject to the forfeiture for cause provisions of the SERP.

Normal Retirement: Upon termination of employment at or after age 65 where an executive has met the vesting requirement of completing 5 years of employment, an executive hired prior to January 1, 2008 is entitled to a normal retirement benefit under the Pentegra Defined Benefit Plan equal to: 2% of his/her highest three-year average salary multiplied by his/her years' of benefit service. Under the SERP normal retirement benefit, the executive also would receive 2% of his/her highest three-year average incentive payment (as defined in the SERP) for such same three-year period multiplied by his/her years of benefit service. An executive hired on or after January 1, 2008 is entitled to a normal retirement benefit under the Pentegra Defined Benefit Plan equal to: 1.5% of his/her highest five-year average salary multiplied by his/her years of benefit service. Under the SERP normal retirement benefit, the executive also would receive 1.5% of his/her highest five-year average incentive payment (as defined in the SERP) for such same five-year period multiplied by his/her years of benefit service. At December 31, 2022, Mr. Watson was eligible for normal retirement benefits.

Early Retirement: Upon termination of employment prior to age 65, executives meeting the 5 year vesting and age 45 (age 55 if hired on or after January 1, 2008) early retirement eligibility criteria are entitled to an early retirement benefit. The early retirement benefit amount, for those hired prior to January 1, 2008, is calculated by taking the normal retirement benefit amount and reducing it by 3% times the difference between the age of the early retiree and age 65. For example, if an individual retires at age 61, the early retirement benefit amount would be 88% of the normal retirement benefit amount, a total reduction of 12%. The early retirement benefit amount, for those hired after January 1, 2008, is calculated by taking the normal retirement benefit amount and reducing it by 4% (for ages 55 through 59) and 6% (for ages 60 through 64) times the difference between the age of the early retiree and age 65. At December 31, 2022, Mr. Paulson, Mr. Cassidy, Mr. Rizzo, and Ms. Spiker were eligible for early retirement benefits.

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Non-Qualified Deferred Compensation


Name and Principal Position	Executive Contributions in 2022	Registrant Contributions in 2022	Aggregate Earnings (Losses) in 2022	Aggregate Withdrawals/Distributions	Aggregate Balance at December 31, 2022
Winthrop Watson (1) President and CEO	$491,050	$69,284	$(1,122,820)	$—	$	6,430,113
David G. Paulson (2) Chief Operating Officer	$174,869	$34,385	$(88,822)	$—	$	1,498,893
John P. Cassidy (3) Chief Technology and Operations Officer	$197,888	$20,392	$(357,770)	$—	$	1,570,673
Michael A. Rizzo Chief Risk Officer	$84,992	$20,044	$(212,358)	$—	$	1,262,748
Julie F. Spiker General Counsel & Corporate Secretary	$39,005	$15,203	$(35,655)	$—	$	226,856

Notes:

(1) For Mr. Watson, balance as of December 31, 2022 includes further deferral of deferred incentive compensation of $256,319 and applicable investment losses of $142,470.

(2) For Mr. Paulson, balance as of December 31, 2022 includes further deferral of deferred incentive compensation of $44,435 and applicable investment losses of $7,448.

(3) For Mr. Cassidy, balance as of December 31, 2022 includes further deferral of deferred incentive compensation of $174,121 and applicable investment losses of $128,550.

See descriptions in the Qualified and Nonqualified Defined Contribution Plans section of the CD&A. A description of the Supplemental Thrift Plan is in Exhibit 10.1 to the Bank’s Second Quarter 2019 Form 10-Q.

Amounts shown as "Executive Contributions in 2022" were deferred and reported as "Salary" and “Non-Equity Incentive Plan Compensation” in the SCT. Amounts shown as "Registrant Contributions in 2022" are reported as "All Other Compensation" in the SCT. Amounts shown as “Aggregate Earnings (Losses) in 2022” have not been reported in the SCT as none of the CEO or other Executives received above-market preferential earnings. All contributions comprising a portion of the “Aggregate Balance at December 31, 2022” were included in the compensation reported in the SCT and in prior years’ Summary Compensation Tables, as applicable.

The CEO and other Executives may defer up to 80% of their total cash compensation (base salary and annual incentive compensation), less their contributions to the qualified thrift plan. All benefits are fully vested at all times and subject to the forfeiture for cause provisions of the Supplemental Thrift Plan.

The investment options available under the nonqualified deferred compensation plan are closely matched to those available under the qualified defined contribution plan. Investment options include stock funds, bond funds, money market funds and target retirement funds.

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Post-Termination Compensation

The CEO and other Executives would have received the benefits below in accordance with the Bank's severance policy (or in the case of the CEO the terms of his separate agreement, as applicable) if their employment had been severed without cause during 2022.

Post-Termination Compensation - Severance (Excluding Change-In-Control)


Name and Principal Position	Base Salary			Medical Coverage (1)			Executive Outplacement (2)			Total
	Length	Amount		Length	Amount		Length	Amount
Winthrop Watson President and CEO	52 weeks	$	971,311	52 weeks	$	13,808	12 months	$	15,000	$	1,000,119
David G. Paulson Chief Operating Officer	48 weeks	$	479,769	48 weeks	$	12,746	12 months	$	15,000	$	507,515
John P. Cassidy Chief Technology and Operations Officer	52 weeks	$	477,750	52 weeks	$	13,808	12 months	$	15,000	$	506,558
Michael A. Rizzo Chief Risk Officer	48 weeks	$	389,496	48 weeks	$	12,746	12 months	$	15,000	$	417,242
Julie F. Spiker General Counsel & Corporate Secretary	52 weeks	$	396,680	52 weeks	$	15,758	12 months	$	15,000	$	427,438

Notes:

(1) Additional taxable compensation equivalent to the Bank’s share of medical coverage costs for its active employees.

(2) Estimated cost based on one year of individualized outplacement services with a firm of the Bank's choosing.

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Under the CIC Agreements, in the event of employment termination other than for cause (including constructive discharge) following a change in control event, in place of the severance benefits above, the CEO and other Executives would instead receive the benefits below.

Post-Termination Compensation - Change-In-Control


Name and Principal Position	Base Salary (1)		Potential Incentive Award (2) (7)		Medical Coverage (3)		Outplace- ment Services and Financial Planning (4)		Additional Severance Amount (5)*	Accelerated Deferred Incentive Installment Amount (7)		Severance/ Defined Contribution Match Amount (6)*		Total
Winthrop Watson President and CEO	$	2,904,220	$	2,178,165	$	20,713	$	30,000	$1,570,000	$	1,492,813	$	304,943	$	8,500,853
David G. Paulson Chief Operating Officer	$	1,039,500	$	727,650	$	20,713	$	30,000	$600,000	$	680,506	$	106,029	$	3,204,397
John P. Cassidy Chief Technology and Operations Officer	$	955,500	$	621,075	$	20,713	$	30,000	$1,323,000	$	581,257	$	94,595	$	3,626,139
Michael A. Rizzo Chief Risk Officer	$	843,908	$	464,149	$	20,713	$	30,000	$548,000	$	462,962	$	78,483	$	2,448,216
Julie F. Spiker General Counsel & Corporate Secretary	$	793,360	$	436,348	$	23,637	$	30,000	$968,000	$	395,551	$	73,782	$	2,720,679

* Includes both qualified and nonqualified plans

Notes:

(1) CIC agreements stipulate 2.99 times base salary (CEO) and two times base salary (other Executives).

(2) CIC agreements stipulate an amount equal to 2.99 times (CEO) and two times (other Executives) the payout award that could have been received at target payout amount.

(3) CIC agreements stipulate 18 months of additional taxable compensation equivalent to the Bank’s share of medical coverage costs for its active employees.

(4) CIC agreements stipulate 12 months of outplacement services and $15,000 for financial planning for eligible participants.

(5) CIC agreements stipulate additional severance in an amount equivalent to the additional benefit that the CEO and other Executives would receive for three (CEO) and two (other Executives) additional years of both age and service at the same annual compensation at the time of separation from the Bank under the qualified and nonqualified defined benefit plans.

(6) CIC agreements stipulate additional severance in an amount equivalent to 2.99 times (CEO) and two times (other Executives) years of defined contribution match. Note that compensation for the defined contribution match includes base compensation and annual incentive.

(7) The 2019, 2020, and 2021 Executive Officer Incentive Compensation Plans provide for vesting of the remaining unpaid deferred award installments that correspond to each participant’s 2019, 2020, and 2021 current incentive award. The 2022 Executive Officer Incentive Compensation Plan also provides for vesting of deferred award installments in the event of a Change in Control. As a result, the unpaid deferred award installments for each participant that correspond to the 2022 current incentive award would also be paid out upon a CIC event along with the 2019, 2020, and 2021 Plans’ unpaid deferred installments. This payment is in addition to any current incentive award payout reflected in the SCT. The unpaid deferred installments that would vest for each participant are as set forth above in the deferred installments table. See Exhibit 10.15 to the Bank’s 2018 Form 10-K for the terms of the 2019 Plan. See Exhibit 10.15 to the Bank’s 2019 Form 10-K for the terms of the 2020 Plan. See Exhibit 10.15 to the Bank’s 2020 Form 10-K for the terms of the 2021 Plan. See Exhibit 10.14 to the Bank’s 2021 Form 10-K for the terms of the 2022 Plan.

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DIRECTOR COMPENSATION

The Bank's directors were compensated in accordance with the 2022 Directors’ Compensation Policy (2022 Compensation Policy) as adopted by the Bank's Board. Under the 2022 Compensation Policy, the total annual director fees were paid as a combination of a quarterly retainer fee and per meeting fees. The following table sets forth the maximum fees that Bank directors could earn in 2022.


	Retainer Fees		Meeting Fees		Total
Board Chair	$	70,000	$	72,500	$	142,500
Board Vice Chair	$	61,248	$	61,252	$	122,500
Committee Chair	$	61,248	$	61,252	$	122,500
Director	$	57,496	$	55,004	$	112,500

The 2022 Compensation Policy fee levels were as set forth in Exhibit 10.4.1 to the Bank's 2021 Form 10-K. The Finance Agency has determined that the payment of director compensation is subject to Finance Agency review. Compensation can exceed the guidelines under the 2022 Compensation Policy based on a director assuming additional responsibilities, such as chairing a Committee or Board meeting. The following table sets forth the compensation of the Bank’s director’s for services rendered in 2022.


Name	Fees Earned or Paid in Cash		All Other Compensation		Total Compensation
William C. Marsh (Chair)	$	142,492	$	17	$	142,509
Louise M. Herrle (Vice Chair)	122,496		17		122,513
Barbara Adams	112,492		17		112,509
Pamela C. Asbury	122,496		17		122,513
Thomas Bailey	112,492		17		112,509
Glenn R. Brooks	122,496		17		122,513
Romulo L. Diaz, Jr., Esq.	112,492		17		112,509
James V. Dionise	112,492		17		112,509
Angel L. Helm	122,496		17		122,513
Joseph Major	112,492		17		112,509
Brendan J. McGill	122,496		17		122,513
Lynda A. Messick	122,496		17		122,513
Thomas H. Murphy	117,392		17		117,409
Bradford E. Ritchie	122,496		17		122,513
Dr. Howard B. Slaughter, Jr.	112,492		17		112,509
Jeane M. Vidoni	114,472		17		114,489

"Total Compensation" does not include previously deferred director fees for prior years' service and earnings on such fees for those directors participating in the Bank's nonqualified deferred compensation deferred fees plan for directors. The plan allows directors to defer their fees for the year in total and receive earnings based on returns available under or comparable to certain publicly available mutual funds, including equity funds and money market funds. No Bank matching contributions are made under the plan. Directors who attended all Board and applicable Committee meetings in 2022 received the maximum total fees. In 2022, the Bank had a total of 6 Board meetings (and 1 additional interim meeting) and 35 Board Committee meetings (and 9 additional interim meetings). There was 1 Board Executive Committee meeting in 2022.

"All Other Compensation" for each includes $17 per director annual premium for director travel and accident insurance.

For 2023, the Bank's Board adopted and received non-objection from the Finance Agency its 2023 Directors' Compensation Policy with the basis for fee payment being a combination of quarterly retainer and per-meeting fees, as was the case under the 2022 Directors’ Compensation Policy. In general, the 2023 Directors’ Compensation Policy provides for total fees for the Chair of $152,000; $130,000 for the Vice Chair and for each of the Committee Chairs; and $120,000 for each of the other Directors. See Exhibit 10.4.1 to this Annual Report filed on Form 10-K.

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Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Generally, the Bank may issue capital stock only to members. As a result, the Bank does not offer any compensation plan under which equity securities of the Bank are authorized for issuance.

Institutions Holding 5% or More of Outstanding Capital Stock

as of February 28, 2023


Name	Address	Capital Stock		% of Total Capital Stock
PNC Bank, N.A. (a)	222 Delaware Avenue Wilmington, Delaware 19899	$	1,307,900,000	37.1	%
T.D.Bank, N.A.	2035 Limestone Road Wilmington, Delaware 19808	637,794,400		18.1	%
Santander Bank, N.A.	824 North Market Street, Suite 100 Wilmington, Delaware 19801	240,472,800		6.8	%
Ally Bank (b)	200 West Civic Centre Drive Sandy, Utah 84070	226,000,000		6.4	%

(a) For Bank membership purposes, principal place of business is Pittsburgh, PA.

(b) For Bank membership purposes, principal place of business is Horsham, PA.

Additionally, due to the fact that a majority of the Board of the Bank is elected from the membership of the Bank, these elected directors are officers and/or directors of member institutions that own the Bank’s capital stock. These institutions are provided in the following table.

Capital Stock Outstanding to Member Institutions

Whose Officers and/or Directors Served as a Director of the Bank

as of February 28, 2023


Name	Address	Capital Stock		% of Total Capital Stock
Penn Community Bank	3969 Durham Road Doylestown, Pennsylvania 18902	$	14,933,900	0.4	%
Summit Community Bank, Inc.	300 North Main Street Moorefield, West Virginia 26836	7,362,400		0.2	%
Genworth Life Insurance Company	251 Little Falls Drive Wilmington, Delaware 19808	7,101,400		0.2	%
Peoples Security Bank and Trust Company	150 N. Washington Avenue Scranton, Pennsylvania 18503	5,406,300		0.2	%
Brentwood Bank	411 McMurray Road Bethel Park, Pennsylvania 15102	4,106,300		0.1	%
Mars Bank	145 Grand Avenue Mars, Pennsylvania 16046	2,623,100		0.1	%
Harleysville Bank	271 Main Street Harleysville, Pennsylvania 19438	2,396,500		0.1	%
Victory Bank	548 North Lewis Road Limerick, Pennsylvania 19468	747,300		*
Stepping Stones Credit Union	603 N Church St Wilmington, DE 19801	10,000		*

*Less than 0.1%.

Note: In accordance with Section 10(c) of the Act and the terms of the Bank’s security agreement with each member, the capital stock held by each member is pledged to the Bank as additional collateral to secure that member’s loans and other indebtedness to the Bank.

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Item 13: Certain Relationships and Related Transactions, and Director Independence

Corporate Governance Guidelines

The Bank has adopted corporate governance guidelines titled “Corporate Governance Principles” which are available at www.fhlb-pgh.com by first clicking “About Us” and then “Corporate Governance Principles and Standards”. The Corporate Governance Principles are also available in print to any member upon written request to the Bank, 601 Grant Street, Pittsburgh, Pennsylvania 15219, Attention: General Counsel. These principles were adopted by the Board of Directors to best ensure that the Board of Directors is independent from management, that the Board of Directors adequately performs its function as the overseer of management and to help ensure that the interests of the Board of Directors and management align with the interests of the Bank’s members.

On an annual basis, each director and executive officer is obligated to complete a director and officer questionnaire which requires disclosure of any transactions with the Bank in which the director or executive officer, or any member of his or her immediate family, has a direct or indirect material interest. All directors must adhere to the Bank’s Code of Business Conduct which addresses conflicts of interest. Under the Code of Business Conduct, only the Board can grant a waiver of the Code’s requirements in regard to a director or executive officer.

Bank’s Cooperative Structure

All members are required by law to purchase capital stock in the Bank. The capital stock of the Bank can be purchased only by members. As a cooperative, the Bank’s products and services are provided almost exclusively to its members. In the ordinary course of business, transactions between the Bank and its members are carried out on terms that are established by the Bank, including pricing and collateralization terms that treat all similarly situated members on a nondiscriminatory basis. Loans included in such transactions did not involve more than the normal risk of collectability or present other unfavorable terms. Currently, nine of the Bank’s sixteen directors are officers or directors of members. In recognition of the Bank’s status as a cooperative, in correspondence from the Office of Chief Counsel of the Division of Corporation Finance of the SEC, dated September 28, 2005, transactions in the ordinary course of the Bank’s business with member institutions are excluded from SEC Related Person Transaction disclosure requirements. No individual director or executive officer of the Bank or any of their immediate family members has been indebted to the Bank at any time.

Related Person Transaction Policy

In addition to the Bank’s Code of Business Conduct which continues to govern potential director and executive officer conflicts of interest, originally effective January 31, 2007, most recently updated effective December 15, 2022, the Bank adopted a written Related Person Transaction Policy. The Policy is subject to annual review and approval and was most recently re-approved by the Board in February 2023. In accordance with the terms of the Policy, the Bank will enter into Related Person Transactions that are not in the ordinary course of Bank business only when the Governance and Public Policy Committee of the Board determines that the Related Person Transaction is in the best interests of the Bank and its investors. Ordinary course of Bank business is defined as providing the Bank’s products and services, including affordable housing products, to member institutions on terms no more favorable than the terms of comparable transactions with similarly situated members. A Related Person Transaction subject to disclosure is a transaction, arrangement or relationship (or a series of transactions, arrangements or relationships) in which the Bank was, is or will be a participant, the amount involved exceeds $120,000 and in which a Related Person had, has or will have a direct or indirect material interest. A Related Person is any director or executive officer of the Bank, any member of their immediate families or any holder of 5 percent or more of the Bank’s outstanding capital stock. A transaction with a company with which a Related Person is associated is deemed pre-approved where the Related Person: (1) serves only as a director of such company; (2) is only an employee (and not an executive officer) of such company; or (3) is the beneficial owner of less than 10 percent of such company’s shares.

Related Person Transactions

On February 19, 2009, the Governance and Public Policy Committee approved the Bank entering into interest bearing deposit, Federal funds, unsecured note purchase (including TLGP investments) and other money market transactions with Bank members, including five (5) percent or greater shareholders of the Bank and Member Directors’ institutions. Beginning in 2011, the Governance and Public Policy Committee continued re-authorization in regard to additional member money market transactions annually. All such transactions must be in accordance with the terms of the Bank’s investment and counterparty policy statements and limits.

The Bank did not engage in any Federal funds transactions with related persons during 2022. Additionally, from January 1 through February 28, 2023, the Bank had no Federal funds transactions with related persons.

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In 2022, the Bank had funds on deposit with JP Morgan Chase Bank, N.A. (JP Morgan) (acquired Bank stock via merger of the Bank’s former member, Chase Bank USA, N.A.). In 2022, the maximum amount of Bank funds on deposit at JP Morgan was $614,152,254 and JP Morgan paid the Bank $7,692,529 in interest on such deposits.

In addition, in 2022 the Bank had a maximum notional amount of $1,276,454,904 in derivatives transactions outstanding with JP Morgan under an ISDA master agreement executed with JP Morgan in 1995. The Governance and Public Policy Committee has ratified and authorized continued derivative transactions meeting the terms of the Bank’s applicable credit and other policies with JP Morgan. As of February 28, 2023, the notional amount of derivatives transactions outstanding with JP Morgan under the above-referenced ISDA master agreement was $2,518,879,377.

Under the terms of the Bank’s Related Person Transaction Policy as most recently approved, the Governance and Public Policy Committee annually reviews previously approved Related Person Transactions to determine whether to authorize any new Related Person Transactions with each Related Person that the Committee has previously approved. Such re-authorization applies solely to new Related Person Transactions with such entity(ies) and does not affect the authorized status of any existing and outstanding Related Person Transactions. In February 2023, the Committee considered the previously approved member/stockholder money market transactions as described above and determined to continue the authorization of new such money market transactions with such entities.

Director Independence

Under the Act, Bank management is not allowed to serve on the Bank’s Board. Consequently, all directors of the Bank are outside directors. As discussed in Item 10. Directors, Executive Officers and Corporate Governance in this Form 10-K, directors are classified under the Act as either being a Member Director or an Independent Director. By statute, the Board cannot expand or reduce the number of directors that serve on the Board. Only the Finance Agency has the authority to determine how many seats exist on the Board, which is currently set at 16. As of February 28, 2023, the Board was comprised of 16 directors: nine Member Directors and seven Independent Directors. Currently, the Board has its full complement of Directors.

The Bank’s Directors are prohibited from personally owning stock in the Bank. In addition, the Bank is required to determine whether its directors are independent under two distinct director independence standards. First, the Act and Finance Agency Regulations establish substantive independence criteria, including independence criteria for directors who serve on the Bank’s Audit Committee. Second, the SEC rules require, for disclosure purposes, that the Bank’s Board apply the independence criteria of a national securities exchange or automated quotation system in assessing the independence of its directors.

The Act and Finance Agency Regulations. Following the enactment of the Housing Act amendments to the Act on July 30, 2008, an individual is not eligible to be an Independent Bank director if the individual serves as an officer, employee, or director of any member of the Bank, or of any recipient of loans from the Bank. During 2022 and through February 28, 2023, none of the Bank’s Independent Directors were an officer, employee or director of any member or of any institution that received advances from the Bank.

Effective on enactment of the Housing Act, the FHLBanks are required to comply with the substantive Audit Committee director independence standards under Section 10A(m) of the Exchange Act. Rule 10A-3(b)(ii)(B) implementing Section 10A(m) provides that in order to be considered to be independent, a member of an audit committee may not: a) accept directly or indirectly a compensatory fee (other than from the issuer for service on the Board) or b) be an affiliated person of the issuer, defined as someone who directly or indirectly controls the issuer. The SEC implementing regulations provide that a person will be deemed not to control an issuer if the person does not own directly or indirectly more than 10% of any class of voting equity securities. The existence of this safe harbor does not create a presumption in any way that a person exceeding the ownership requirement controls or is otherwise an affiliate of a specified person. In regard to the Bank and the other FHLBanks, this provision of the Housing Act raises an issue whether a Member Director whose institution is a 10% or greater Bank shareholder could be viewed as an affiliate of the Bank, rendering such Member Director ineligible to serve on the Bank’s Audit Committee. Because of the cooperative structure of the FHLBanks, the limited items on which FHLBank stockholders may vote and the statutory cap limiting the votes that any one member may cast for a director to the state average, it is not clear that the fact that a Member Director’s institution that is a 10% or greater Bank shareholder is an affiliate of the Bank. Nevertheless, none of the Bank’s current Audit Committee members nor those who served during 2022 were Member Directors from institutions that were 10% or greater Bank shareholders.

In addition, the Finance Agency director independence standards prohibit individuals from serving as members of the Bank’s Audit Committee if they have one or more disqualifying relationships with the Bank or its management that would interfere with the exercise of that individual’s independent judgment. Disqualifying relationships considered by the Board are: employment with the Bank at any time during the last five years; acceptance of compensation from the Bank other than for service as a director; being a consultant, advisor, promoter, underwriter or legal counsel for the Bank at any time within the last five years; and being an immediate family member of an individual who is or who has been within the past five years, a Bank

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executive officer. As of February 28, 2023 and as of the date of this filing, all members of the Audit Committee were independent under the substantive Act and Finance Agency regulatory criteria.

SEC Rules. Pursuant to the SEC rules applicable to the Bank for disclosure purposes, the Bank’s Board has adopted the independence standards of the New York Stock Exchange (NYSE) to determine which of its directors are independent, which members of its Human Resources Committee are not independent, which members of its Audit Committee are not independent and whether the Bank’s Audit Committee financial expert is independent. As the Bank is not a listed company, the NYSE director independence standards are not substantive standards that are applied to determine whether individuals can serve as members of the Bank’s Board or its Human Resources or Audit Committees.

After applying the NYSE independence standards, the Board determined that, for purposes of the SEC disclosure rules, as of February 28, 2023, all seven of the Bank’s Independent Directors, Adams, Brooks, Diaz, Helm, Herrle, Murphy and Slaughter, are independent. In determining that Director Brooks was independent, the Board considered that Leon N. Weiner & Associates, Inc., the organization for which Director Brooks serves as President, received an AHP grant in the amount of $405,000 from the Bank in 2020 and that Leon N. Weiner Education Foundation, a charitable organization for which Mr. Brooks serves as Vice President, received a $10,000 charitable contribution from the Bank in 2021, and a $5,000 charitable contribution in 2022. In determining that Director Herrle was independent, the Board considered that Light of Light Rescue Mission, a non-profit organization for which Ms. Herrle has provided volunteer assistance, received AHP grants in the amounts of $749,999 and $750,000 in 2019 and 2020, respectively. The Board also considered that Light of Life Rescue Mission received a $1,200 charitable contribution from the Bank in 2021, and a $5,000 charitable contribution in 2022. Finally, in determining that Director Slaughter was independent, the Board considered that Habitat for Humanity of Greater Pittsburgh, the non-profit organization for which Director Slaughter serves as President and Chief Executive Officer, received AHP grants in the amounts of $225,000 and $300,000 in 2018 and 2019, respectively. The Board also considered that Habitat for Humanity of Greater Pittsburgh received charitable contributions of $10,000 in each of 2020, 2021, and $5,000 in 2022.

The Board was unable to affirmatively determine that there are no material relationships (as defined in the NYSE rules) between the Bank and its nine Member Directors, and on February 17, 2023 concluded that none of the Bank’s current Member Directors was independent under the NYSE independence standards. In making this determination, the Board considered the cooperative relationship between the Bank and its Member Directors. Specifically, the Board considered the fact that each of the Bank’s Member Directors are officers or directors of a Bank member institution, and each member institution has access to, and is encouraged to use, the Bank’s products and services. Furthermore, the Board considered the appropriateness of making a determination of independence with respect to the Member Directors based on a member’s given level of business as of a particular date, when the level of each member’s business with the Bank is dynamic and the Bank’s desire as a cooperative is to increase its level of business with each of its members. As the scope and breadth of a member’s business with the Bank changes, such member’s relationship with the Bank might, at any time, constitute a disqualifying transaction or business relationship under the NYSE’s independence standards. For former Member Directors Messick and Ritchie, who served on the Board in 2022 but not in 2023, the Board determined that they were not independent as well.

The Board’s Human Resources Committee has responsibility for overseeing executive compensation. Applying the NYSE independence standards for compensation committee members, the Board determined that the current Member Directors serving on the Human Resources Committee, Messrs. Major, McGill and Ms. Vidoni, are not independent. The Board determined that Independent Director Mr. Diaz is independent. With respect to former Member Director Mr. Ritchie, who served on the Committee in 2022 but not in 2023, the Board determined that he was not independent under the NYSE standards.

The Board has a standing Audit Committee. The Board determined that the Member Directors serving as members of the Bank’s Audit Committee, Messrs. Bailey and Dionise and Ms. Jackson, are not independent under the NYSE standards for Audit Committee members. The Board determined that Independent Directors Mses. Adams and Helm, who are serving as members of the Bank’s Audit Committee, are independent under the NYSE standards. With respect to former Member Director Ms. Messick, who served on the Audit Committee in 2022 but not in 2023, the Board determined that she was not independent under the NYSE standards. All of the Bank’s Audit Committee members are independent under the Finance Agency independence standards.

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Item 14: Principal Accountant Fees and Services

The following table sets forth the aggregate fees billed to the Bank for 2022 and 2021 by its independent registered public accounting firm, PricewaterhouseCoopers LLP.


(in thousands)	2022		2021
Audit fees	$	897	$	854
Audit-related fees	99		81
All other fees	4		4
Total fees	$	1,000	$	939

Audit fees consist of fees billed for professional services rendered for the audits of the financial statements, reviews of interim financial statements, and audits of the Bank’s internal controls over financial reporting for the years ended December 31, 2022 and 2021.

Audit-related fees consist of fees billed during 2022 and 2021 for assurance and related services reasonably related to the performance of the audit or review of the financial statements. Audit-related fees were for assurance and related services primarily for accounting consultations and fees related to participation in, and presentations at, conferences. All other fees were for the annual license of accounting research software and disclosure compliance checklist.

The Bank is exempt from all Federal, state and local income taxation with the exception of real estate property taxes and certain employer payroll taxes. There were no tax fees paid during 2022 and 2021.

The Audit Committee approves the annual engagement letter for the Bank’s audit. All other services provided by the independent accounting firm are pre-approved by the Audit Committee. The Audit Committee delegates to the Chair of the Audit Committee the authority to pre-approve non-audit services not prohibited by law to be performed by the independent auditors, subject to any single request involving a fee of $100,000 or higher being circulated to all Audit Committee members for their information and comment. The Chair shall report any decision to pre-approve such services to the full Audit Committee at its next meeting.

The Bank paid additional fees to PricewaterhouseCoopers LLP in the form of assessments paid to the OF. These fees were approximately $45 thousand and $36 thousand for 2022 and 2021, respectively. These fees were classified as Other Expense - Office of Finance on the Statement of Income and were not included in the totals above.

PART IV

Item 15: Exhibits and Financial Statement Schedules

(a)(1) Financial Statements

The following financial Statements of the Federal Home Loan Bank of Pittsburgh, set forth in Item 8 above, are filed as part of this Report.

Management’s Report on Internal Control over Financial Reporting

Report of Independent Registered Public Accounting firms (PCAOB ID 238)

Statements of Income for each of the years ended December 31, 2022, 2021 and 2020

Statements of Comprehensive Income for each of the years ended December 31, 2022, 2021 and 2020

Statements of Condition as of December 31, 2022 and 2021

Statements of Cash Flows for each of the years ended December 31, 2022, 2021 and 2020

Statements of Changes in Capital for each of the years ended December 31, 2022, 2021 and 2020

Notes to Financial Statements

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(2) Financial Statement Schedules

The schedules required by the applicable accounting regulations of the Securities and Exchange Commission that would normally appear in Item 8. Financial Statements and Supplementary Data are included in the Earnings Performance and Financial Condition sections within Item 7. Management’s Discussion and Analysis.

(b) Index of Exhibits

The following is a list of the exhibits filed or furnished with the Bank’s 2022 Form 10-K or incorporated herein by reference.


Exhibit No.	Description	Method of Filing +
3.1	Certificate of Organization	Incorporated by reference to the correspondingly numbered Exhibit to the Bank’s registration statement on Form 10 filed with the SEC on June 9, 2006.
3.2	The Bylaws of the Federal Home Loan Bank of Pittsburgh as amended effective March 10, 2016	Incorporated by reference to Exhibit 3.2.1 to the Bank's Form 10-K filed with the SEC on March 10, 2016.
4.1	Bank Capital Plan, as amended and restated effective October 6, 2014	Incorporated by reference to Exhibit 4.1 to the Bank’s Form 10-K filed with the SEC on March 9, 2022.
4.2	Description of Registered Securities	Incorporated by reference to Exhibit 4.2 to the Bank’s Form 10-K filed with the SEC on March 10, 2020.
10.1	2021 Severance Policy*	Incorporated by reference to Exhibit 10.1.2 to the Bank’s Form 10-K filed with the SEC on March 9, 2022
10.1.2	2022 Severance Policy*	Filed herewith.
10.2	Services Agreement with FHLBank of Chicago	Incorporated by reference to Exhibit 10.7 to the Bank’s registration statement on Form 10 filed with the SEC on June 9, 2006.
10.3	Amended and Restated Federal Home Loan Banks P&I Funding and Contingency Plan Agreement	Incorporated by reference to the correspondingly numbered Exhibit to the Bank’s Form 10-Q filed with the SEC on May 9, 2017.
10.4	2022 Directors’ Compensation Policy*	Incorporated by reference to Exhibit 10.4.1 to the Bank’s Form 10-K filed with the SEC on March 9, 2022.
10.4.1	2023 Directors’ Compensation Policy*	Filed herewith.
10.5	Supplemental Executive Retirement Plan Amended and Restated Effective June 26, 2007, Revised December 19, 2008, December 18, 2009, October 26, 2012 and March 26, 2015*	Incorporated by reference to Exhibit 10.5.2 to the Bank's Form 10-Q filed with the SEC on May 7, 2015.
10.5.1	Pentegra Defined Benefit Plan for Financial Institutions Summary Plan Description Dated July 1, 2013*	Incorporated by reference to the correspondingly numbered Exhibit to the Bank's Form 10-K filed with the SEC on March 13, 2014.
10.6	Supplemental Thrift Plan Amended and Restated Effective June 26, 2007, Revised September 26, 2007, December 19, 2008, December 18, 2009, October 26, 2012, March 26, 2015, and June 21, 2019*	Incorporated by reference to Exhibit 10.1 to the Bank’s Form 10-Q filed with the SEC on August 8, 2019.
10.6.1	Federal Home Loan Bank of Pittsburgh Defined Contribution Plan Summary Plan Description Dated July 1, 2020*	Incorporated by reference to Exhibit 10.6.1 to the Bank’s Form 10-K filed with the SEC on March 9, 2021.
10.6.2	Amendment to the Federal Home Loan Bank of Pittsburgh Defined Contribution Plan, as restated effective July 1, 2020*	Incorporated by reference to Exhibit 10.6.2 to the Bank’s Form 10-K filed with the SEC on March 9, 2022
10.7	Mortgage Partnership Finance® Services Agreement Dated August 31, 2007, with FHLBank of Chicago	Incorporated by reference to Exhibit 10.17 to the Bank's Form 10-Q filed with the SEC on November 7, 2007.
10.7.1	Mortgage Partnership Finance® Consolidated Interbank Agreement dated July 22, 2016	Incorporated by reference to Exhibit 10.7.1 to the Bank's Form 10-Q filed with the SEC on August 9, 2016.

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Exhibit No.	Description	Method of Filing +
10.8	August 2016 Form of Executive Officer Severance (CIC) Agreement*	Incorporated by reference to Exhibit 10.9.1 to the Bank’s Form 10-Q filed with the SEC on August 9, 2016.
10.9	2019 Executive Officer Incentive Compensation Plan*	Incorporated by reference to Exhibit 10.15 to the Bank’s Form 10-K filed on March 11, 2019.
10.10	2020 Executive Officer Incentive Compensation Plan*	Incorporated by reference to Exhibit 10.15 to the Bank’s Form 10-K filed with the SEC on March 10, 2020.
10.11	2021 Executive Officer Incentive Compensation Plan*	Incorporated by reference to Exhibit 10.15 to the Bank’s Form 10-K filed with the SEC on March 9, 2021.
10.12	2022 Executive Officer Incentive Compensation Plan*	Incorporated by reference to Exhibit 10.14 to the Bank’s Form 10-K filed with the SEC on March 9, 2022
10.13	2023 Executive Officer Incentive Compensation Plan	Filed herewith.
10.14	Offer Letter for Winthrop Watson*	Incorporated by reference to Exhibit 10.15 to the Bank's Form 10-Q filed with the SEC on November 12, 2009.
10.15	Joint Capital Enhancement Agreement dated February 28, 2011	Incorporated by reference to Exhibit 99.1 of the Bank's Form 8-K filed with the SEC on March 1, 2011.
10.16	Amended Joint Capital Enhancement Agreement dated August 5, 2011	Incorporated by reference to Exhibit 99.1 of the Bank's Form 8-K filed with the SEC on August 5, 2011.
10.17	Form of Director and Officer Indemnification Agreement*	Incorporated by reference to Exhibit 10.1 to the Bank’s Form 10-Q filed with the SEC on May 7, 2019.
24.0	Power of Attorney	Filed herewith.
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer	Filed herewith.
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for the Principal Financial Officer	Filed herewith.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Chief Executive Officer	Furnished herewith.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for the Principal Financial Officer	Furnished herewith.
99.1	Federal Home Loan Bank of Pittsburgh Board of Directors Audit Committee Charter	Filed herewith.
99.2	Report of the Audit Committee	Furnished herewith.
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.	Filed herewith.
101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith.
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	Filed herewith.

+ Incorporated document references to filings by the registrant are to SEC File No. 000-51395.

* Denotes management contract or compensatory plan.

Item 16: Form 10-K Summary

None

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GLOSSARY


ABS: Asset-Backed Securities
ACL: Allowance for credit losses
AMA: Acquired member assets
APBO: Accumulated Post-retirement Benefit Obligation
The Alternative Reference Rates Committee (ARRC): ARRC is a group of private-market participants convened by the Federal Reserve Board and the New York Fed to help ensure a successful transition from U.S. dollar (USD) LIBOR to a more robust reference rate, its recommended alternative, the Secured Overnight Financing Rate (SOFR).
Accumulated Other Comprehensive Income (Loss) (AOCI): Represents gains and losses of the Bank that have not yet been realized; balance is presented in the Equity section of the Statement of Condition.
Advance: Secured loan made to a member
Affordable Housing Program (AHP): Bank program that provides primarily direct grants and/or subsidized loans to assist members in meeting communities’ affordable housing needs. Each FHLBank sets aside 10% of its pre-assessment income to fund the program with a minimum $100 million annual contribution by all 11 FHLBanks.
Banking On Business (BOB): Bank program that assists eligible small businesses with start-up and expansion.
CECL: Current Expected Credit Losses
The Coronavirus Aid, Relief, and Economic Security Act: CARES Act
Capital stock: The five-year redeemable stock issued by the Bank pursuant to its capital plan.
Collateral: Property subject to a security interest that secures the discharge of an obligation (e.g., mortgage or debt obligation); a security interest that the Bank is required by statute to obtain and thereafter maintain beginning at the time of origination or renewal of a loan.
Collateralized mortgage obligation (CMO): Type of bond that divides cash flows from a pool of mortgages into multiple classes with different maturities or risk profiles.
Committee on Uniform Securities Identification Procedures (CUSIP): CUSIP-based identifiers provide a unique name for a wide range of global financial instruments including equity and debt issues, derivatives and syndicated loans. The CUSIP consists of a combination of nine characters, both letters and numbers, which identify a company or issuer and the type of security.
Community Development Financial Institution (CDFI): Private institutions that provide financial services dedicated to economic development and community revitalization in underserved markets; include community development loan funds, venture capital funds and state-chartered credit unions without Federal deposit insurance. Effective February 4, 2010, CDFIs were eligible to become Bank members.
Community Financial Institution (CFI): Bank member that has deposits insured under the FDIC and is exempt from the requirement of having at least 10% of total assets in residential mortgage loans.
Community Lending Program (CLP): Bank program that funds community and development projects. When loans are repaid, the money is available to be lent to other projects.
Consolidated Obligation (CO): Bonds and discount notes that are the joint and several liability of all 11 FHLBanks and are issued and serviced through the OF. These instruments are the primary source of funds for the FHLBanks.
Conventional loan/mortgage: Mortgage that is neither insured nor guaranteed by the FHA, VA or any other agency of the Federal government.
Cost of funds: Estimated cost of issuing FHLBank System consolidated obligations and discount notes.
Credit enhancement (CE) fee: Fee payable monthly by an MPF Bank to a PFI in consideration of the PFI’s obligation to fund the realized loss for a Master Commitment; based on fee rate applicable to such Master Commitment and subject to terms of the Master Commitment and applicable MPF mortgage product, which may include performance and risk participation features.
Delivery commitment: Mandatory commitment of the parties, evidenced by a written, machine- or electronically generated transmission issued by an MPF Bank to a PFI accepting the PFI’s oral mortgage loan delivery commitment offer.
Demand Deposit Account (DDA): The account each member maintains with the Bank. All incoming and outgoing wires, loan credits and debits, as well as any principal and interest payments from securities and loans are posted into the DDA.
Duration: A common measure of the price sensitivity of an asset or liability to specified changes in interest rates.
FFIEC: Federal Financial Institutions Examination Council

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Federal Deposit Insurance Corporation (FDIC): Federal agency established in 1933 that guarantees (with limits) funds on deposit in member banks and performs other functions such as making loans to or buying assets from member banks to facilitate mergers or prevent failures.
Federal Home Loan Bank Act of 1932 (the Act): Enacted by Congress in 1932 creating the FHLBank Board, whose role was to supervise a series of discount banks across the country. The intent was to increase the supply of money available to local institutions that made home loans and to serve them as a reserve credit resource. The FHLBank Board became the Federal Housing Board in 1989, which was replaced by the Federal Housing Finance Agency in 2008.
Federal Home Loan Bank Office of Finance (OF): FHLBank System’s centralized debt issuance facility that also prepares combined financial statements, selects/evaluates underwriters, develops/maintains the infrastructure needed to meet FHLBank System goals and administers REFCORP.
Federal Home Loan Mortgage Corporation, (Freddie Mac or FHLMC): GSE chartered by Congress in 1970 to keep money flowing to mortgage lenders in support of homeownership and rental housing.
Federal Housing Administration (FHA): Government agency established in 1934 and insures lenders against loss on residential mortgages.
Federal Housing Finance Agency (FHFA or Finance Agency): Independent regulatory agency (established on enactment of the Housing Act) of the executive branch ensuring the FHLBanks, Federal National Mortgage Association and Federal Home Loan Mortgage Corporation operate in a safe and sound manner, carry out their statutory missions and remain adequately capitalized and able to raise funds in the capital markets.
Federal National Mortgage Association (Fannie Mae or FNMA): GSE established in 1938 to expand the flow of mortgage money by creating a secondary market.
Federal Reserve Bank (FRB): One part of the Federal Reserve System. There are a total of 12 regional privately-owned FRBs located in major cities throughout the U.S., which divide the nation into 12 districts. The FRBs act as fiscal agents for the U.S. Treasury; each have their own nine-member board of directors. The FRBs are located in Boston, New York City, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.
Federal Reserve Board (Federal Reserve): Governing body over the Federal Reserve System, the Federal Reserve is responsible for: (1) conducting the nation’s monetary policy; (2) supervising and regulating banking institutions; (3) maintaining the stability of the financial system and containing systemic risk; and (4) providing financial services to depository institutions, the U.S. government and foreign official institutions.
Federal Reserve System: Central banking system of the U.S.
First Loss Account (FLA): Notational account established by an MPF Bank for each Master Commitment based on and in the amount required under the applicable MPF mortgage product description and Master Commitment.
Generally Accepted Accounting Principles (GAAP): Accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. GAAP includes not only broad guidelines of general application, but also detailed practices and procedures. Those conventions, rules, and procedures provide a standard by which to measure financial presentations.
Government National Mortgage Association (Ginnie Mae or GNMA): GSE established by Congress in 1968 that guarantees securities backed by a pool of mortgages.
Government-sponsored enterprise (GSE): A private organization with a government charter whose function is to provide liquidity for the residential loan market or another identified government purpose.
HELOC: Home Equity Line of Credit
Housing and Economic Recovery Act of 2008 (the Housing Act or HERA): Enacted by Congress in 2008; designed primarily to address the subprime mortgage crisis. Established the Finance Agency, replacing the Federal Housing Finance Board and the Office of Federal Housing Enterprise Oversight.
Internal Credit Rating (ICR): A scoring system used by the Bank to measure the financial condition of a member or housing associate and is based on quantitative and qualitative factors.
Joint and several liability: Obligation for which multiple parties are each individually and all collectively liable for payment.
Loan to Value (LTV): The loan-to-value (LTV) ratio expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property.
London Interbank Offered Rate (LIBOR): Offer rate that a Euromarket bank demands to place a deposit at (or equivalently, make a loan to) another Euromarket bank in London. LIBOR is frequently used as the reference rate for the floating-rate coupon in interest rate swaps and option contracts such as caps and floors.
Master Commitment: A document executed by a PFI and an MPF Bank, which provides the terms under which the PFI will deliver mortgage loans to the MPF Bank.

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Master Servicer: Financial institution that the MPF Provider has engaged to perform various master servicing duties on its behalf in connection with the MPF Program.
Maximum Borrowing Capacity (MBC): Total possible borrowing limit for an individual member. This is determined based on the type and amount of collateral each member has available to pledge as security for Bank advances. It is computed using specific asset balances (market and/or book values) from qualifying collateral categories, which are discounted by applicable collateral weighting percentages. The MBC is equal to the aggregate collateral value net of any pledged assets.
Mortgage-backed securities (MBS): Investment instruments backed by mortgage loans as security.
Mortgage Partnership Finance® (MPF®) Program: FHLBank of Chicago program offered by select FHLBanks to their members to provide an alternative for funding mortgages through the creation of a secondary market.
National Credit Union Administration (NCUA): Independent federal agency that charters and supervises federal credit unions, backed by the full faith and credit of the U.S. government.
Nationally Recognized Statistical Rating Organization (NRSRO): Credit rating agency registered with the SEC. Currently nine firms are registered as NRSROs.
OIS: Overnight Index Swap rate based on the Federal Funds Effective rate
ORERC: Other real estate-related collateral.
Other-than-Temporary Impairment (OTTI): From an accounting standpoint, an “impairment” of a debt or equity security occurs when the fair value of the security is less than its amortized cost basis, i.e., whenever a security has an unrealized loss.
PMI: Primary Mortgage Insurance
Pair-off fee: A fee assessed against a PFI when the aggregate principal balance of mortgages funded or purchased under a delivery commitment falls above or below the tolerance specified.
Participating Financial Institution (PFI): Bank member participating in the MPF Program, which is legally bound to originate, sell and/or service mortgages in accordance with the PFI Agreement, which it signs with the MPF Bank of which it is a member.
Permanent capital: Retained earnings plus capital stock; capital stock includes mandatorily redeemable capital stock.
QCR: Qualifying Collateral Report
RBC: Risk Based Capital
ROE: Return on Equity
RRE: Restricted Retained Earnings
Real Estate Owned (REO): Mortgaged property acquired by a servicer on behalf of the mortgagee, through foreclosure or deed in lieu of foreclosure.
Resolution Funding Corporation (REFCORP): Mixed-ownership, government corporation created by Congress in 1989 to issue “bailout” bonds and raise industry funds to finance activities of the Resolution Trust Corporation, and merge or close insolvent institutions inherited from the disbanded Federal Savings and Loan Insurance Corporation. Mixed-ownership corporations are those with capital stock owned by both the United States and borrowers or other private holders.
SERP: Supplemental Executive Retirement Plan.
Servicer: Institution approved to service mortgages funded or purchased by an MPF Bank. The term servicer refers to the institution acting in the capacity of a servicer of mortgages for an MPF Bank under a PFI Agreement.
Secured Overnight Financing Rate (SOFR): A secured interbank overnight interest rate and reference rate established as an alternative to LIBOR.
Software-as-a-service (SaaS): SaaS is a software distribution model in which a third-party provider hosts applications and makes them available to customers over the Internet.
Standby letter of credit: Document issued by the FHLBanks on behalf of a member as a guarantee against which funds can be drawn, that is used to facilitate various types of business transactions the member may have with third parties. Standby is defined as the Bank standing by to make good on the obligation made by the member to the beneficiary.
Supplemental Mortgage Insurance (SMI) policy: Any and all supplemental or pool mortgage guarantee insurance policies applicable to mortgages delivered under the Master Commitment.
TDR: Troubled Debt Restructure
TVA: Tennessee Valley Authority

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TAP auction debt: Term used to address multiple FHLBank debt issuances within a given quarter which have the same terms. As an FHLBank issues debt with terms similar to other FHLBank debt already issued, the FHLBank ‘taps’ the original issuance and is assigned the same CUSIP; this creates one larger, more liquid issue.
Total Credit Exposure (TCE): In addition to total credit products, it includes accrued interest on all outstanding advances and estimated potential prepayment fee amounts, where applicable, for advances to members in full delivery collateral status.
Underlying: A specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates or other variable. An underlying may be the price or rate of an asset or liability, but is not the asset or liability itself.
Variable Interest Entities (VIEs): An entity (the investee) in which the investor holds a controlling interest that is not based on the majority of voting rights. It is closely related to the concept of a special purpose entity. The importance of identifying a VIE is that a company needs to consolidate such entities if it is the primary beneficiary of the VIE.
Veterans Affairs, Department of (VA): Federal agency with oversight for programs created for veterans of the U.S. armed forces. Mortgage loans granted by a lending institution to qualified veterans or to their surviving spouses may be guaranteed by the VA.
Weighted average coupon (WAC): Weighted average of the interest rates of loans within a pool or portfolio.
Weighted average life (WAL): The average amount of time that will elapse from the date of a security’s issuance until each dollar of principal is repaid. The WAL of mortgage loans or MBS is only an assumption. The average amount of time that each dollar of principal is actually outstanding is influenced by, among other factors, the rate at which principal, both scheduled and unscheduled, is paid on the mortgage loans.

184

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) 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 Pittsburgh

(Registrant)

By: /s/Winthrop Watson

Winthrop Watson

President and Chief Executive Officer

Date: March 8, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Capacity	Date
/s/ Winthrop Watson Winthrop Watson	President and Chief Executive Officer (Principal Executive Officer)	March 8, 2023
/s/ Edward V. Weller Edward V. Weller	Chief Financial Officer (Principal Financial Officer)	March 8, 2023
/s/ David G. Paulson David G. Paulson	Chief Operating Officer	March 8, 2023
*/s/ William C. Marsh William C. Marsh	Chairman of the Board of Directors	March 8, 2023
*/s/ Louise M. Herrle Louise M. Herrle	Vice Chairman of the Board of Directors	March 8, 2023
*/s/ Barbara Adams Barbara Adams	Director	March 8, 2023
*/s/ Pamela C. Asbury Pamela C. Asbury	Director	March 8, 2023
*/s/ Thomas Bailey Thomas Bailey	Director	March 8, 2023
*/s/ Glenn R. Brooks Glenn R. Brooks	Director	March 8, 2023

185


Signature	Capacity	Date
*/s/ Romulo L. Diaz, Jr., Esq. Romulo L. Diaz, Jr., Esq.	Director	March 8, 2023
*/s/ James V. Dionise James V. Dionise	Director	March 8, 2023
*/s/ Angel L. Helm Angel L. Helm	Director	March 8, 2023
*/s/ Blanche L. Jackson Blanche L. Jackson	Director	March 8, 2023
*/s/ H. Charles Maddy H. Charles Maddy	Director	March 8, 2023
*/s/ Joseph W. Major Joseph W. Major	Director	March 8, 2023
*/s/ Brendan J. McGill Brendan J. McGill	Director	March 8, 2023
*/s/ Thomas H. Murphy Thomas H. Murphy	Director	March 8, 2023
*/s/ Dr. Howard B. Slaughter, Jr. Dr. Howard B. Slaughter, Jr.	Director	March 8, 2023
*/s/ Jeane M. Vidoni Jeane M. Vidoni	Director	March 8, 2023
*By: /s/ Julie F. Spiker Julie F. Spiker, Attorney-in-fact, pursuant to Power of Attorney filed herewith

186

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Legalese
Litigous
Readability	8th grade Avg

Federal Home Loan Bank of Pittsburgh 10-K2022 FY Annual report

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