EDGAR 10-K Filing

Company CIK: 1316944
Filing Year: 2025
Filename: 1316944_10-K_2025_0001316944-25-000055.json

---

ITEM 1. BUSINESS
ITEM 1. BUSINESS
At the Federal Home Loan Bank of San Francisco (Bank or we), our purpose is to enhance the availability of credit for residential mortgages and economic development by providing a readily available, competitively priced source of funds for housing and community lenders. We are a wholesale bank-we link our customers to the global capital markets and seek to manage our own liquidity and interest rate risk so that funds are available when our customers need them. By providing needed liquidity and financial risk management tools, our credit programs enhance competition in the mortgage market and benefit homebuyers and communities.
We are one of 11 regional Federal Home Loan Banks (FHLBanks) that serve the United States as part of the Federal Home Loan Bank System (FHLBank System). Each FHLBank operates as a separate federally chartered corporation with its own board of directors, management, and employees. The FHLBanks were organized under the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), and are government-sponsored enterprises (GSEs). The FHLBanks are not government agencies and do not receive financial support from taxpayers. The U.S. government does not guarantee, directly or indirectly, the debt securities or other obligations of the Bank or the FHLBank System. The FHLBanks are regulated by the Federal Housing Finance Agency (Finance Agency), an independent federal agency.
We have a cooperative ownership structure. To access our products and services, a financial institution must be approved for membership and purchase capital stock in the Bank. The member’s capital stock requirement is generally based on its use of our products, subject to a minimum asset-based membership requirement that is intended to reflect the value to the member of having ready access to the Bank as a reliable source of competitively priced funds. The Bank’s capital stock is not publicly traded.
Our members may include federally insured and regulated financial depositories, regulated insurance companies that are engaged in residential housing finance, community development financial institutions (CDFIs) that have been certified by the CDFI Fund of the U.S. Treasury Department, and privately insured, state-chartered credit unions. Financial depositories may include commercial banks, credit unions, industrial loan companies, and savings institutions. CDFIs may include community development loan funds, community development venture capital funds, and privately insured, state-chartered credit unions. All members have their principal place of business located in Arizona, California, or Nevada, the three states that make up the Eleventh District of the FHLBank System.
Our primary business is providing competitively priced, collateralized loans, known as advances, to our members and certain qualifying housing associates. We accept a wide range of collateral types, some of which cannot be readily pledged elsewhere or readily securitized. Members use their access to advances to support their mortgage loan portfolios, lower their funding costs, facilitate asset-liability and liquidity management, offer a wider range of mortgage products to their customers, and improve profitability.
In addition, we provide vital support for housing and communities through our affordable housing program and other voluntary, charitable contributions. Our community programs and targeted initiatives address the unique affordable housing and economic development needs of communities across our district of Arizona, California, and Nevada.
As of December 31, 2024, we had advances and capital stock, including mandatorily redeemable capital stock, outstanding to the following types of institutions:
Advances
(Dollars in millions) Total Number of Institutions Capital Stock Outstanding Number of Institutions Par Value of Advances Outstanding
Commercial banks 64 $ 1,123 64 $ 16,659
Savings institutions 5 71 5 596
Credit unions 80 1,092 80 14,699
Industrial loan companies 1 2 1 22
Insurance companies 5 150 5 1,418
Community development financial institutions 7 20 7 186
Total member institutions 162 2,458 162 33,580
Housing associates eligible to borrow 1 - 1 91
Other nonmember institutions(1)
6 331 6 12,147
Total 169 $ 2,789 169 $ 45,818
(1) Nonmember institutions may be former members or may have acquired the advances and capital stock of a former member. Capital stock held by nonmember shareholders is classified as mandatorily redeemable capital stock, a liability. Nonmember shareholders with advances outstanding are required to meet our applicable credit, collateral, and capital stock requirements, including requirements regarding creditworthiness and collateral borrowing capacity. Nonmembers (including former members and member successors) are not eligible to borrow new advances or renew existing advances as they mature.
Members also benefit from our affordable housing and economic development programs, which provide grants and discounted advances that support members’ involvement in creating affordable housing and revitalizing communities.
Our Business Model
Our cooperative ownership structure has led us to develop a business model that is different from that of a typical financial services firm. Our business model is based on the premise that we maintain a balance between our objective to promote housing, homeownership, and community and economic development through our activities with members and our objective to provide a return on the private capital provided by our members through their investment in our capital stock, maintaining safety and soundness.
We require our members to hold our capital stock to support their activities with the Bank. We leverage this capital stock and our retained earnings by using our GSE status to borrow funds in the capital markets at relatively favorable rates. We lend these funds to our members at rates that are competitive with the lowest costs of most wholesale borrowing alternatives available to our members.
Our financial strategies are designed to enable us to safely expand and contract our balance sheet as our member base and our members' credit needs change. Our capital increases when members are required to purchase additional capital stock as they increase their borrowings, and it contracts when we repurchase excess stock from members as their advances decline. As a result of these strategies, we have been able to achieve our mission by meeting member credit needs and maintaining our adequately capitalized position, while paying dividends (including dividends on mandatorily redeemable capital stock) and repurchasing and redeeming excess stock. Information regarding our dividends and the repurchase of excess stock is provided in “Item 8. Financial Statements and Supplementary Data - Note 11 - Capital - Excess Stock Repurchase, Retained Earnings, and Dividend Framework.”
Products and Services
Advances. We offer our members and housing associates a wide array of fixed and adjustable rate loans, called advances, that are secured with eligible mortgage loans and other collateral. Our advance products are designed to help members and housing associates compete effectively in their markets and meet the credit needs of their communities. For members and housing associates that choose to retain the mortgage loans they originate as assets
(portfolio lenders), advances serve as a funding source for a variety of conforming and nonconforming mortgage loans, including multifamily mortgage loans, and construction loans. As a result, advances support an array of housing market segments, including those focused on low- and moderate-income households. For members or housing associates that sell or securitize mortgage loans and other assets, advances can provide interim funding.
Standby Letters of Credit. We issue standby letters of credit to support certain obligations of members to third parties. Members may use standby letters of credit issued by the Bank to facilitate residential housing finance and community lending, to achieve liquidity and asset-liability management goals, to secure certain state and local agency deposits, and to provide credit support to certain tax-exempt bonds. Our underwriting and collateral requirements for standby letters of credit are generally the same as our underwriting and collateral requirements for advances but may differ in cases where member creditworthiness is impaired.
Housing and Community Investment Programs
FHLBank San Francisco offers grant and credit programs and other resources that promote homeownership, expand access to quality affordable housing, boost economic development, seed or sustain small businesses, and revitalize communities. Our members use our community program grants and discounted credit products to help:
•Create or preserve quality affordable housing for lower-income families and individuals, many with special needs;
•Facilitate sustainable and equitable homeownership for low- to moderate-income families and individuals;
•Deliver skill-building educational programs and life-enhancing social services to underserved communities;
•Support innovative targeted jobs programs and entrepreneurship; and
•Assist local nonprofits and small businesses and advance community-based economic development objectives.
Affordable Housing Program. Through our Affordable Housing Program (AHP), we provide subsidies to assist in the purchase, construction, or rehabilitation of housing for households earning up to 80% of the median income for the area in which they live. Each year, to fund the AHP, we are required by law to set aside 10% of our current year’s net earnings (income before interest expense related to dividends paid on mandatorily redeemable capital stock and the assessment for the AHP), to be awarded in the following year. Since 1990, we have awarded approximately $1.4 billion in AHP subsidies to support the purchase, development, or rehabilitation of approximately 154,600 housing units.
We allocate at least 50% of our annual AHP subsidy to our competitive AHP General Fund under which applications for specific owner-occupied and rental housing projects are submitted by members and are evaluated and scored by the Bank in an annual competitive process. Since 2023, we have offered a competitive Nevada Targeted Fund to which we can allocate up to 20% of our annual AHP subsidy. All subsidies for the competitive AHP General Fund and Nevada Targeted Fund are funded to affordable housing sponsors or developers through our members in the form of direct subsidies or subsidized advances.
We allocate up to 35% of our annual AHP subsidy to our homeownership set-aside program. Under this program, members reserve funds from the Bank to be used as matching grants for eligible first-time homebuyers.
Discounted Credit Programs. We offer members two discounted credit programs available in the form of advances and standby letters of credit. Members may use the Community Investment Program (CIP) to fund mortgages for low- and moderate-income households, to finance first-time homebuyer programs, to create and maintain affordable housing, and to support other eligible lending activities related to housing or economic development for low- and moderate-income people and communities. Members may use the Advances for Community Enterprise (ACE) Program to fund projects and activities that create or retain jobs or provide services or other benefits for low- and moderate-income people and communities. Members may also use ACE Program funds to support eligible community lending and economic development, including small business, community facilities, and public works projects.
Funding Sources
To fund their operations, the FHLBanks issue debt in the form of consolidated obligation bonds and discount notes (jointly referred to as consolidated obligations) through the FHLBanks’ Office of Finance, the fiscal agent for the issuance and servicing of consolidated obligations on behalf of the FHLBanks. The consolidated obligations issued through the Office of Finance use authorized securities dealers and are backed only by the financial resources of the FHLBanks. Due to the FHLBanks’ GSE status and having consolidated obligations rated Aaa/P-1 by Moody’s Investors Service (Moody’s) and AA+/A-1+ by S&P Global Ratings (S&P), the FHLBanks are generally able to raise funds at rates that are typically at a small to moderate spread above U.S. Treasury security yields. Our cooperative ownership structure allows us to pass along the benefit of these low funding rates to our members enabling them to better serve their communities.
As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The regulations provide a general framework for addressing the possibility that an FHLBank may be unable to repay the consolidated obligations for which it is the primary obligor. For more information, see “Item 8. Financial Statements and Supplementary Data - Note 15 - Commitments and Contingencies.” We have never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and through the date of this report, we do not believe that it is probable that we will be asked to do so.
Our status as a GSE is critical to maintaining access to the capital markets. Although consolidated obligations are backed only by the financial resources of the FHLBanks and are not guaranteed by the U.S. government, the capital markets have traditionally treated the FHLBanks’ consolidated obligations as a close alternative to federal agency debt, providing the FHLBanks with access to funding at relatively favorable rates. As of August 16, 2024, S&P rated the FHLBanks’ consolidated obligations AA+/A-1+, and as of February 14, 2024, Moody’s rated them Aaa/P-1. As of August 16, 2024, S&P assigned each of the FHLBanks a long-term credit rating of AA+, and as of February 14, 2024, Moody's assigned each of the FHLBanks a long-term credit rating of Aaa. Changes in the long-term credit ratings of individual FHLBanks do not necessarily affect the credit rating of the consolidated obligations issued on behalf of the FHLBanks. Rating agencies may change or withdraw a rating from time to time because of various factors, including operating results or actions taken, business developments, or changes in their opinion regarding, among other factors, the general outlook for a particular industry or the economy.
Regulations govern the issuance of debt on behalf of the FHLBanks and related activities. All new debt is jointly issued by the FHLBanks through the Office of Finance, which serves as their fiscal agent in accordance with the FHLBank Act and applicable regulations. Pursuant to these regulations, the Office of Finance, often in conjunction with the FHLBanks, has adopted policies and procedures for consolidated obligations that may be issued by the FHLBanks. The policies and procedures relate to the frequency and timing of issuance, issue size, minimum denomination, selling concessions, underwriter qualifications and selection, currency of issuance, interest rate change or conversion features, call or put features, principal amortization features, and selection of clearing organizations and outside counsel. The Office of Finance has responsibility for facilitating and approving the issuance of the consolidated obligations in accordance with these policies and procedures. In addition, the Office of Finance has the authority to redirect, limit, or prohibit the FHLBanks’ requests to issue consolidated obligations that are otherwise allowed by its policies and procedures if it determines that its action is consistent with: (i) the regulatory requirement that consolidated obligations be issued efficiently and at the lowest all-in cost over time, consistent with prudent risk management practices, prudent debt parameters, short- and long-term market conditions, and the FHLBanks’ status as GSEs; (ii) maintaining reliable access to the short-term and long-term capital markets; and (iii) positioning the issuance of debt to take advantage of current and future capital markets opportunities. The authority of the Office of Finance to redirect, limit, or prohibit our requests for issuance of consolidated obligations has never adversely affected our ability to finance its operations. The Office of Finance also services all outstanding FHLBank debt, serves as a source of information for the FHLBanks on developments in the capital markets, and prepares the FHLBanks’ quarterly and annual combined financial reports. In addition, it
administers the Resolution Funding Corporation, established by Congress in 1989 to provide funding for the resolution and disposition of insolvent savings institutions.
Capital
Our capital plan bases the stock purchase requirement on the level of activity an institution has with the Bank, subject to a minimum membership requirement that is intended to reflect the value of having access to the Bank as a funding source. With the approval of our Board, we may adjust these requirements from time to time within the ranges established in the capital plan. In accordance with the FHLBank Act and the Gramm-Leach-Bliley Act of 1999, our capital stock is subject to certain requirements for, among other things, total capital, leverage capital, and risk-based capital in our capital plan. Any changes to our capital plan must be approved by our Board and the Finance Agency.
Our capital stock cannot be publicly traded, and under the capital plan, may be issued, transferred, redeemed, and repurchased only at its par value of $100 per share, subject to certain regulatory and statutory limits. Under the capital plan, a member’s capital stock will be redeemed by the Bank upon five years’ notice from the member, subject to certain conditions. In addition, we have the discretion to repurchase excess stock from members.
Dividends and Retained Earnings. Our Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) summarizes our capital management principles and objectives, as well as its policies and practices with respect to retained earnings, dividend payments, and the repurchase of excess stock.
As required by the regulations governing the operations of the FHLBanks, the Framework is reviewed at least annually by our Board. The Board may amend the Framework from time to time. In September 2023, the Board approved an updated Framework and dividend philosophy to reflect changes in the current interest rate environment and business conditions. The Framework includes a dividend philosophy to endeavor to pay a quarterly dividend rate that is equal to or greater than the current market rate for a highly rated investment and that is sustainable under current and projected earnings while maintaining appropriate levels of capital. The decision to declare any dividend and the dividend rate are at the discretion of our Board, which may or may not choose to follow the dividend philosophy as guidance in the dividend declaration. Our historical dividend rates and the dividend philosophy are not indicative of future dividend declarations. Our Framework may be revised or eliminated in the future, and there can be no assurance as to future dividends.
In accordance with the Framework, we retain certain amounts in restricted retained earnings, which are not made available for dividends in the current dividend period, and maintain an amount of total retained earnings at least equal to the required retained earnings as described in the Framework. We may be restricted from paying dividends if the Bank is not in compliance with any of our minimum capital requirements or if payment would cause the Bank to fail to meet any of our minimum capital requirements. In addition, we may not pay dividends if any principal or interest due on any consolidated obligation has not been paid in full or is not expected to be paid in full, or, under certain circumstances, if we fail to satisfy certain liquidity requirements under applicable regulations.
Retained Earnings - Our Framework assesses the level and adequacy of retained earnings and establishes amounts to be retained in restricted retained earnings, which are not made available in the current dividend period, and maintains an amount of total retained earnings at least equal to our required retained earnings as described in the Framework. The methodology may be revised from time to time, and the level of required retained earnings under the methodology may change due to updating data and assumptions used in the methodology. Our retained earnings requirement may be changed at any time. The Board periodically reviews the retained earnings methodology and analysis to determine whether any adjustments are appropriate.
Dividend Payments - Finance Agency rules state that FHLBanks may declare and pay dividends only from previously retained earnings or current net earnings and may not declare or pay dividends based on projected or anticipated earnings. There is no requirement that the Board declare and pay any dividend. A decision by the Board to declare or not declare a dividend is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks. In
addition, Finance Agency rules do not permit the Bank to pay dividends in the form of capital stock if its excess stock exceeds 1% of its total assets. Excess stock is defined as the aggregate of the capital stock held by each shareholder in excess of its minimum capital stock requirement, as established by our capital plan.
Competition
Demand for our advances is affected by many factors, including the availability and cost of other sources of funding for members, including retail and brokered deposits. We also compete with our members' other suppliers of wholesale funding, both secured and unsecured. These suppliers may include securities dealers, commercial banks, the Federal Reserve System, and other FHLBanks for members with affiliated institutions that are members of other FHLBanks.
Under the FHLBank Act and regulations governing the operations of the FHLBanks, affiliated institutions in different FHLBank districts may be members of different FHLBanks. Members may have access to alternative funding sources through sales of securities under agreements to resell. Some members, particularly larger members, may have access to many more funding alternatives, including independent access to the national and global credit markets. The availability of alternative funding sources for members can significantly influence the demand for our advances and can vary as a result of many factors, including market conditions, members' creditworthiness, members' strategic objectives, and the availability of collateral.
Our ability to compete successfully for the advances business of our members depends primarily on our advances prices, ability to fund advances through the issuance of consolidated obligations at competitive rates, credit and collateral terms, prepayment terms, product features such as embedded option features, ability to meet members' specific requests on a timely basis, capital stock requirements, retained earnings policy, excess stock repurchase policies, and dividends.
In addition, the FHLBanks compete with the U.S. Treasury, Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, sovereign, and supranational entities, for funds raised through the issuance of unsecured debt in the national and global debt markets. Increases in the supply of competing debt products may, in the absence of increases in demand, result in higher debt costs or lower amounts of debt issued at the same cost.
Regulatory Oversight and Examinations
The FHLBanks are supervised and regulated by the Finance Agency, an independent agency in the executive branch of the U.S. government. The Finance Agency is charged with ensuring that the FHLBanks carry out their housing finance mission, remain adequately capitalized and able to raise funds in the capital markets, and operate in a safe and sound manner. The Finance Agency also establishes regulations governing the operations of the FHLBanks.
To assess the safety and soundness of the Bank, the Finance Agency conducts an annual examination of the Bank and other periodic reviews of its financial operations. In addition, we are required to submit information on our financial condition and results of operations each month to the Finance Agency.
Our capital stock is registered with the Securities and Exchange Commission (SEC) under Section 12(g)(1) of the Securities Exchange Act of 1934 (1934 Act) and, as a result, we are required to comply with certain disclosure and reporting requirements of the 1934 Act and to file annual, quarterly, and current reports with the SEC, as well as meet other SEC requirements.
Like other federally chartered corporations, the FHLBanks are subject to general congressional oversight. Each FHLBank must submit annual management reports to Congress, the President, the Office of Management and Budget, and the Comptroller General.
The Comptroller General has authority under the FHLBank Act to audit or examine the Finance Agency and the FHLBanks and to determine the extent to which they fairly and effectively fulfill the purposes of the FHLBank Act. Furthermore, the Government Corporations Control Act provides that the Comptroller General may review any
audit of the financial statements conducted by an independent registered public accounting firm. The Comptroller General may also conduct his or her own audit of any financial statements of an FHLBank.
The U.S. Treasury, or a permitted designee, is authorized under the combined provisions of the Government Corporations Control Act and the FHLBank Act to prescribe: the form, denomination, maturity, interest rate, and conditions to which FHLBank debt will be subject; the way and time FHLBank debt is issued; and the price for which FHLBank debt will be sold. The U.S. Treasury may purchase FHLBank debt up to an aggregate principal amount of $4.0 billion pursuant to the standards and terms of the FHLBank Act.
Human Capital Resources
Our human capital significantly contributes to the Bank’s success in achieving strategic business objectives. In managing our human capital, we focus on providing a comprehensive suite of compensation, benefits, programs, and other rewards, including competitive salaries and benefits, developmental programs and training, and succession planning. During the past year, the Bank has experienced turnover in senior management. In addition, certain key executive roles are held on an interim basis. Despite recent changes, the Bank believes its current skilled workforce, including its leadership, remain well positioned to guide the Bank in achieving its strategic objectives. For more information, see “Part II, Item 10. Directors, Executive officer and Corporate Governance - Executive Officers.”
Workforce Profile - Our workforce is primarily comprised of corporate employees, with our principal operations centralized in one location. As of December 31, 2024, we had 315 employees. The Bank supplements its employees with independent contractors as needed. The Bank’s workforce is sufficiently staffed, and historically has included a number of longer-tenured employees. As of December 31, 2024, the average tenure of our employees was 8.1 years.
Office of Minority and Women Inclusion - The Bank is required by statute (12 U.S.C. § 4520) and regulation to have an Office of Minority and Women Inclusion. Our Office of Minority and Women Inclusion is led by a member of our senior management team, who reports to the President and Chief Executive Officer, and serves as a liaison to the Board. As required by applicable law, we operationalize our commitment to the principles of equal opportunity employment and contracting through the development and execution of a strategic plan that includes quantifiable metrics to measure its effectiveness, and we report regularly on these metrics to management and the Board.
Available Information
The SEC maintains a website at www.sec.gov that contains all electronically filed or furnished SEC reports, including our annual reports on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K, as well as any amendments. On our website at www.fhlbsf.com, we provide a link to the page on the SEC website that lists all of these reports. In addition, we provide direct links from our website to our annual report on Form 10-K and our quarterly reports on Form 10-Q on the SEC website as soon as reasonably practicable after electronically filing or furnishing the reports to the SEC. (Note: The website addresses of the SEC and the Bank have been included as inactive textual references only. Information on those websites is not part of this report.) The Bank is exempt from certain SEC statutes and regulations and the filing of certain reports with the SEC, including proxy statements, otherwise required by public companies whose securities are registered with the SEC.

---

ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
The following discussion summarizes certain of the risks and uncertainties that the Federal Home Loan Bank of San Francisco (Bank or we) faces. The list is not exhaustive and there may be other risks and uncertainties that are not described below that may also affect our business. Any of these risks or uncertainties, if realized, could negatively affect our financial condition or results of operations or limit our ability to fund advances, pay dividends, or redeem or repurchase capital stock.
Market, Financial, and Economic Risks
Natural disasters, pandemics, terrorist attacks, or other catastrophic events could adversely affect our operations, business activities, results of operations, and financial condition.
Natural disasters (such as floods, wildfires, or earthquakes), widespread public health emergencies (such as pandemics), terrorist attacks, civil unrest, geopolitical instability or conflicts (including the ongoing hostilities in Eastern Europe and the Middle East), trade disruptions, economic or other sanctions, or other unanticipated or catastrophic events could create economic and financial disruptions and uncertainties, which may lead to reduced demand for advances and an increased risk of credit losses for the Bank and may adversely affect its cost of funding, access to funding, business activities, operations, reputation, or results of operations. Any of these factors could adversely affect our business activities and results of operations.
Market uncertainty and volatility may adversely affect our business, profitability, or results of operations.
Adverse and volatile conditions in the housing, mortgage, and financial markets could result in a decrease in the availability of credit and liquidity resulting in a disruption in the mortgage industry or the future receivership or failure of impacted financial institutions, including some of our members. We continue to be subject to potential adverse effects on our financial condition, results of operations, ability to pay dividends, and ability to redeem or repurchase capital stock should economic conditions significantly deteriorate.
Weaknesses in the housing and mortgage markets may undermine the need for wholesale funding and have a negative impact on the demand for advances.
A reduction in mortgage lending or mortgage assets held by member institutions may reduce their demand for wholesale funding. This could result in a decline in advance levels and adversely affect our financial condition and results of operations.
Changes in or limits on our ability to access the capital markets could adversely affect our financial condition, results of operations, or ability to fund advances, pay dividends, or redeem or repurchase capital stock.
Our primary source of funds is the sale of Federal Home Loan Bank (FHLBank) System consolidated obligations in the capital markets. Our ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets, such as investor demand and liquidity in the financial markets. The sale of FHLBank System consolidated obligations can also be influenced by factors other than conditions in the capital markets, including legislative and regulatory developments and government programs and policies that affect the relative attractiveness of FHLBank System consolidated obligations. In addition, the level of dealer participation and support also affect liquidity in the agency debt markets. Based on these factors, the availability of funds may become limited or terms may become less acceptable. If funding access or terms are significantly adversely affected, our ability to support and continue our operations could be adversely affected, which could negatively affect our financial condition, results of operations, or ability to fund advances, pay dividends, or redeem or repurchase capital stock.
Changes in interest rates could adversely affect our financial condition, results of operations, member demand for advances, or ability to fund advances on acceptable terms, pay dividends, or redeem or repurchase capital stock.
We realize income primarily from the spread between interest earned on our outstanding advances and investments and interest paid on our consolidated obligations and other liabilities. Although we use various methods and procedures to monitor and manage our exposure to changes in interest rates, we may experience instances when our interest-bearing liabilities will be significantly more sensitive to changes in interest rates than our interest-earning assets, or vice versa. In either case, interest rate movements contrary to our position could negatively affect our financial condition, results of operations, our ability to pay dividends or redeem or repurchase capital stock, or investor demand for consolidated obligations. The impact of changes in interest rates on mortgage-related assets can be exacerbated by prepayments, with the risk that the assets will be refinanced by the obligor in low interest rate environments and the risk that the assets will remain outstanding longer than expected at below-market yields when interest rates increase. The Federal Reserve Bank’s policies directly and indirectly influence interest rates on the Bank’s assets and liabilities and could adversely affect the demand for advances and therefore adversely impact the Bank’s financial condition and results of operations.
Our exposure to credit risk could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.
We assume secured and unsecured credit risk associated with the risk that a borrower or counterparty could default, and we could suffer a loss if we were not able to fully recover amounts owed to us on a timely basis. In addition, we have exposure to credit risk because the market value of an obligation may decline as a result of deterioration in the creditworthiness of the obligor or the credit quality of a security instrument. We have a high concentration of credit risk exposure to certain institutions and their affiliates. Significant credit losses or heightened focus on our credit exposure to individual members due to market events could have an adverse effect on our financial condition, reputation, results of operations, or ability to pay dividends or redeem or repurchase capital stock.
We depend on institutional counterparties to provide credit obligations that are critical to our business. Defaults by one or more of these institutional counterparties on their obligations to the Bank could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.
We face the risk that one or more of our institutional counterparties may fail to fulfill contractual obligations to us. The primary exposures to institutional counterparty risk are with unsecured investment counterparties, derivative counterparties, custodians, mortgage servicers that service the loans we hold as collateral for advances, and third-party providers of supplemental or primary mortgage insurance for mortgage loans purchased under the Mortgage Partnership Finance® (MPF®) Program. A default by a counterparty could result in losses to the Bank if our credit exposure to the counterparty was under-collateralized or our credit obligations to the counterparty were over-collateralized, and could also adversely affect our ability to conduct our operations efficiently and at cost-effective rates, which in turn could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock. (“Mortgage Partnership Finance” and “MPF” are registered trademarks of the FHLBank of Chicago.)
Insufficient collateral protection could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.
We require that all outstanding advances be fully collateralized by eligible collateral types mostly with a nexus to housing. In addition, for mortgage loans that we purchase under the MPF Program, we require that the participating financial institutions fully collateralize the outstanding credit enhancement obligations not covered through the purchase of supplemental mortgage insurance. We evaluate the types of collateral pledged by borrowers and participating financial institutions and assign borrowing capacities to the collateral based on the risks associated with each type of collateral. If we have insufficient collateral before or after an event of payment default by the borrower, or we are unable to liquidate the collateral for the value we assigned to it in the event of a payment
default by a borrower, we could experience a credit loss on advances, which could adversely affect our financial condition, reputation, results of operations, or ability to pay dividends or redeem or repurchase capital stock.
Changes in the credit ratings on FHLBank System consolidated obligations may adversely affect the cost of consolidated obligations.
FHLBank System consolidated obligations are rated AA+/A-1+ by S&P Global Ratings as of August 16, 2024, and Aaa/P-1 by Moody’s Investors Service as of February 14, 2024. Rating agencies may from time to time change a rating or issue negative reports. Because all of the FHLBanks have joint and several liability for all FHLBank consolidated obligations, negative developments at any FHLBank may affect these credit ratings or result in the issuance of a negative report regardless of our own financial condition and results of operations. In addition, because of the FHLBanks’ GSE status, the credit ratings of the FHLBank System and the FHLBanks are generally constrained by the long-term sovereign credit rating of the United States, and any downgrade in that sovereign credit rating may result in a corresponding downgrade to the credit ratings of FHLBank System consolidated obligations. For example, downgrades to the U.S. sovereign credit rating or outlook, which have occurred in the past, may occur again if the U.S. government continues to fail to adequately address, based on the credit rating agencies’ criteria, its fiscal budget deficit or statutory debt limits. Fitch Ratings downgraded the U.S. sovereign credit rating in August 2023, and Moody’s changed the outlook of its rating on the U.S. from stable to negative in November 2023. Any adverse rating change or negative report may adversely affect our cost of funds and the FHLBanks’ ability to issue consolidated obligations on acceptable terms, which could also adversely affect our financial condition or results of operations or limit our ability to make advances on acceptable terms, pay dividends, or redeem or repurchase capital stock.
Under certain inordinate stress conditions, we may not be able to meet our obligations as they come due or meet the credit and liquidity needs of our members in a timely and cost-effective manner.
We seek to be in a position to meet our members’ credit and liquidity needs and pay our obligations without maintaining excessive holdings of low-yielding liquid investments or having to incur unnecessarily high borrowing costs. In addition, we maintain a contingency funding plan designed to enable us to meet our obligations and the liquidity needs of members in the event of operational disruptions or short-term disruptions in the capital markets. Under certain inordinate stress conditions, our efforts to manage our liquidity position, including our contingency funding plan, may not enable us to meet our obligations and the liquidity needs of our members, which could have an adverse effect on our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.
Strategic Execution Risks
Limitations on the payment of dividends and repurchase of excess stock may adversely affect the attractiveness of our business model to members.
Our business model is based on the premise that we maintain a balance between our objective to promote housing, homeownership, and community and economic development through our activities with members and our objective to provide a return on the private capital provided by our members. We achieve this balance by delivering low-cost credit to help our members meet the credit needs of their communities while striving to pay members a reasonable return on their investment in our capital stock. Our financial strategies are designed to enable us to safely expand and contract our balance sheet as our member base and our members’ credit needs change. In addition, we manage our retained earnings to ensure compliance with regulatory capital requirements in the event of significant growth in member business or in the event of significant Bank financial distress. As a result of these strategies, we have historically been able to achieve our mission by meeting member credit needs and maintaining our adequately capitalized position while paying dividends (including dividends on mandatorily redeemable capital stock) and repurchasing and redeeming excess stock. Limitations on the payment of dividends and the repurchase of excess stock may diminish the value of membership from the perspective of a member.
We face competition for advances and access to funding, which could adversely affect our business.
Our primary business is making advances to our members. We compete with other suppliers of wholesale funding, both secured and unsecured, including investment banks, commercial banks, the Federal Reserve Banks, and, in certain circumstances, other FHLBanks. Our members may have access to alternative funding sources, including independent access to deposits, along with the national and global credit markets. These alternative funding sources may offer more favorable terms than we do on our advances, including more flexible credit or collateral standards. In addition, many of our competitors are not subject to the same regulations as the FHLBanks, which may enable those competitors to offer products and terms that we are not able to offer.
The FHLBanks also compete with the U.S. Treasury, Federal Reserve, Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, sovereign, and supranational entities, for funds raised through the issuance of unsecured debt in the national and global debt markets. Increases in the supply of competing debt products may, in the absence of increases in demand, result in higher debt costs or lower amounts of debt issued at the same cost. Increased competition could adversely affect our ability to access funding, reduce the amount of funding available to us, or increase the cost of funding available to us. Any of these results could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.
We have a high concentration of advances and capital with certain institutions and their affiliates, including nonmember institutions, and a loss or change of business activities with any of these institutions, or a material or prolonged decline in demand for advances, could adversely affect our results of operations and financial condition.
Pursuant to our federal charter, membership in the Bank is generally limited to federally-insured depository institutions, insurance companies, and community development financial institutions in our three-state district (see “Item 8. Financial Statements and Supplementary Data - Notes to Financial Statements - Background Information” for more information). Given this limitation to membership eligibility, a loss of members or decreased business activities with members due to withdrawal from membership, acquisition by a nonmember, or liquidation, receivership, or failure could negatively impact our financial condition and results of operations.
The Bank’s ability to fulfill its mission and achieve its business and financial objectives is influenced by its level of membership and advance balances. We currently have a high concentration of advances and capital with certain institutions and their affiliates. For instance, as a result of the receivership and subsequent acquisition of one of our members in May 2023 (see “Item 8. Financial Statements and Supplementary Data - Note 5 - Advances - Concentration Risk” for more information), as of December 31, 2024, a single nonmember accounted for 20% of advances outstanding. Because this borrower is a nonmember, when these advances either mature or are prepaid they cannot be replaced by this borrower, which will adversely affect our level of advance balances in the future.
In addition, mergers and acquisitions have been or could be announced involving certain of the Bank’s members, including some of the Bank’s larger borrowers. The reduction in advance balances and total assets associated with this activity could adversely affect our results of operations, net income, financial condition, and ability to pay dividends. Furthermore, future receiverships or failures of financial institutions may adversely impact our advance levels and our financial condition and results of operations. Although our business model is designed to enable us to expand and contract our balance sheet as our members’ credit needs change, a lack of sufficient advance balances or a prolonged material decline in advances could adversely affect our total assets, net income, financial condition, results of operations, and ability to pay dividends.
A prolonged decline and lack of mortgage-backed securities purchases could adversely affect our results of operations, financial condition, or ability to pay dividends or redeem or repurchase capital stock.
The primary source of the Bank’s earnings is interest income, which includes interest income on MBS. At the time these securities mature, the Bank may be limited in the purchase of other MBS due to, among other things, regulatory guidance on MBS purchases by FHLBanks.
We may become liable for all or a portion of the consolidated obligations for which other FHLBanks are the primary obligors.
As provided by the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), and regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Federal Housing Finance Agency (Finance Agency) to require any FHLBank to repay all or any portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor, whether or not the other FHLBank has defaulted in the payment of those obligations and even though the FHLBank making the repayment received none of the proceeds from the issuance of the obligations. The likelihood of triggering our joint and several liability obligation depends on many factors, including the financial condition and financial performance of the other FHLBanks. If we are required by the Finance Agency to repay the principal or interest on consolidated obligations for which another FHLBank is the primary obligor, our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock could be adversely affected.
If the Bank or any other FHLBank has not paid the principal or interest due on all consolidated obligations, we may not be able to pay dividends or redeem or repurchase any shares of our capital stock.
If the principal or interest due on any consolidated obligations has not been paid in full or is not expected to be paid in full, we may not be able to pay dividends on our capital stock or redeem or repurchase any shares of our capital stock. If another FHLBank defaults on its obligation to pay principal or interest on any consolidated obligations, the regulations governing the operations of the FHLBanks provide that the Finance Agency may allocate outstanding principal and interest payments among one or more of the remaining FHLBanks on a pro rata basis or any other basis the Finance Agency may determine. Our ability to pay dividends or redeem or repurchase capital stock could be affected not only by our own financial condition, but also by the financial condition of one or more of the other FHLBanks.
We could change our policies, programs, and agreements affecting our members.
We could change our policies, programs, and agreements affecting our members from time to time, including, without limitation, policies, programs, and agreements affecting the availability of and conditions for access to our advances and other credit products, the AHP, dividends, the repurchase of capital stock, and other programs, products, and services. These changes could cause our members to obtain financing from alternative sources, which could adversely affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock. In addition, changes to our policies, programs, and agreements affecting our members could adversely affect the value of membership from the perspective of a member.
The failure of the FHLBanks to set aside, in the aggregate, at least $100 million annually for the AHP could result in an increase in our AHP contribution, which could adversely affect our results of operations or ability to pay dividends or redeem or repurchase capital stock.
The FHLBank Act requires each FHLBank to establish and fund an AHP. Annually, the FHLBanks are required to set aside, in the aggregate, the greater of $100 million or 10% of their current year's net earnings (income before interest expense related to dividends paid on mandatorily redeemable capital stock and the assessment for the AHP) for their AHPs. If the FHLBanks do not make the minimum $100 million annual AHP contribution in a given year, we could be required to contribute more than 10% of our current year’s net earnings to the AHP. An increase in our AHP contribution could adversely affect our results of operations or ability to pay dividends or redeem or repurchase capital stock.
Operational Risks
We rely heavily on information systems and other technology. A failure, interruption, or security breach, including events caused by cyberattacks, of our information systems or those of critical vendors and third parties, such as the Federal Reserve Banks, could disrupt our business or adversely affect our financial condition, results of operations, or reputation.
We rely heavily on our information systems, technology vendors, and third parties to conduct and manage our business. If we or one of our critical vendors experience a failure, interruption, or security breach in any information systems or other technology, including events caused by cyberattacks, we may be unable to conduct and manage our business effectively. In addition, such a failure, interruption, or security breach could result in significant losses, a loss of personal and confidential information, or reputational damage. We rely on the Office of Finance for, among other things, the placement of consolidated obligations, our primary source of funds. A disruption in this service would disrupt our access to these funds. Cyberattacks, in particular those on financial institutions and financial market infrastructures, have become more frequent, sophisticated, and difficult to detect or prevent. In the event of a breach resulting in loss of data, such as personally identifiable information or other such data protected by data privacy or other laws, we may be liable for damages, fines, and penalties for such losses under applicable regulatory frameworks despite not being able to limit our liability or damages in the event of such a loss. Furthermore, there have been recent significant advancements in the development of generative artificial intelligence (AI) and predictive data analytics, such as the creation of large language models and machine-learning techniques. The potential integration of AI by some of the Bank’s third-party vendors, and use of AI by outside parties, including potential threat actors, presents risks and challenges that could affect our business in a multitude of unforeseen ways. The Bank does not currently utilize AI in its information systems and technology infrastructure, with the exception of certain third-party platforms. However, the Bank is exploring and testing several possible use cases of AI and continues to evaluate its potential use within the Bank’s operations. The use of AI by outside parties, including some of the Bank’s vendors and suppliers, may result in reputational or competitive harm, disruption of business operations, regulatory action, and/or legal liability to the Bank. In addition, significant initiatives undertaken by the Bank to replace information systems or other technology infrastructures may subject the Bank to a temporary risk of failure or interruption while we are in the process of implementing these new systems or technology infrastructures. Additionally, we maintain two geographically dispersed, colocation data centers which are on electrical grids that are separate from each other and from our principal offices and off-site business continuity facilities. Both data centers are subject to periodic testing to demonstrate adequate operational capability. Although we have implemented a business continuity plan, we may not be able to prevent, swiftly and adequately address, or otherwise mitigate the negative effects of any failure, interruption, or breach. Any failure, interruption, or breach could adversely affect our member business, member relations, risk management, reputation, or profitability, which could then negatively affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.
We may fail to identify and manage risks related to a variety of aspects of our business, including operational risk, legal and compliance risk, interest-rate risk, liquidity risk, market risk, and credit risk.
We have adopted policies, procedures, and controls, and use systems and technology, and have a robust risk governance framework, designed to aid in monitoring and managing these risks. However, we cannot provide complete assurance that these controls, procedures, policies, systems, technology, and risk governance framework, are adequate to identify and manage all the risks inherent in the Bank’s business, including, for example, risks that arise as a result of changes in the business. Failed or inadequate controls, risk management practices, systems, and technology, and failure to adhere to applicable policies and procedures, and the overall risk governance framework, could have an adverse effect on our financial condition and results of operations.
The inability to attract and retain skilled key personnel could adversely affect the business, workforce, and operations of the Bank.
We rely on key personnel and a relatively lean workforce given the size and complexity of our business to manage and conduct our operations. Competition for key skilled personnel has been intense within the financial services
industry and businesses outside the financial services industry, including the technology sector. The Bank’s ability to attract and retain key skilled personnel, including key members of senior management, along with developing and implementing appropriate succession planning, is important for it to effectively conduct its operations and execute its strategic initiatives, while maintaining its risks and financial controls. In 2024 and the first quarter of 2025, the Bank experienced leadership changes and increased attrition among senior management and employees. In addition, certain key executive roles are held on an interim basis. Future leadership transitions and continued elevated rates of attrition may cause uncertainty in, or a disruption to, our business. Failure to attract, motivate, and retain key skilled personnel, including high-quality senior management and executives, or to develop and implement an effective succession plan, could adversely affect the business and operations of the Bank.
Volatile market conditions increase the risk that our financial models will produce unreliable results.
We use market-based inputs in the financial models that we use to inform our operational decisions and to derive estimates for use in our financial reporting processes. While model inputs based on economic conditions and expectations are regularly evaluated and adjusted to changing conditions, sudden significant changes in these conditions may increase the risk that our models could produce unreliable results or estimates that vary widely or prove to be inaccurate.
Restrictions on the redemption, repurchase, or transfer of our capital stock could reduce our ability to redeem or repurchase a member’s capital stock.
Under the Gramm-Leach-Bliley Act of 1999, Finance Agency regulations, and our capital plan, our capital stock must be redeemed upon the expiration of the relevant five-year redemption period, subject to certain conditions. Capital stock may become subject to redemption following a five-year redemption period after a shareholder provides a written redemption notice to the Bank; gives notice of intention to withdraw from membership; attains nonmember status by merger or acquisition, charter termination, or other involuntary membership termination; or after a receiver or other liquidating agent for a member transfers the member's Bank capital stock to a nonmember entity. Only capital stock that is not required to meet the membership capital stock requirement of a shareholder or to support its outstanding activity with the Bank (excess stock) may be redeemed at the end of the redemption period. In addition, we may elect to repurchase some or all of the excess stock of a shareholder at any time at our sole discretion.
There is no guarantee, however, that we will be able to redeem capital stock held by a shareholder even at the end of the redemption period or to repurchase excess stock. If the redemption or repurchase of the capital stock would cause us to fail to meet our minimum regulatory capital requirements or cause the shareholder to fail to maintain its minimum investment requirement, then the redemption or repurchase is prohibited by Finance Agency regulations and our capital plan. In addition, since our capital stock may only be owned by our members (or, under certain circumstances, former members and certain successor institutions), and our capital plan requires our approval before a shareholder may transfer any of its capital stock to another member or nonmember shareholder, we cannot provide assurance that a shareholder would be allowed to transfer any excess stock to another member or nonmember shareholder at any time.
Regulatory Risks
Changes in federal fiscal and monetary policy could adversely affect our business or results of operations.
Our business and results of operations are significantly affected by the fiscal and monetary policies of the federal government and its agencies, including the Federal Reserve Board, which regulates the supply of money and credit in the United States. The Federal Reserve Board’s policies directly and indirectly influence the yield on interest-earning assets and the cost of interest-bearing liabilities, and could adversely affect demand for advances and for consolidated obligations as well as our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock. Fiscal policies of the U.S. government could also indirectly affect the FHLBanks’ cost of funding. For example, sudden or large increases in the supply of Treasury securities could lead to a general increase in short-term market interest rates, including those for short-term GSE debt securities.
Additionally, increases in Treasury issuances could temporarily reduce the capacity of the dealers of consolidated obligations, many of which are also primary dealers for the Federal Reserve Bank of New York, to participate in the issuances of consolidated obligations, which could in turn increase the FHLBanks’ cost of funding. These factors could also cause temporary technical market distortions that may diminish the relative value and pricing of certain consolidated obligations and the FHLBanks’ hedging strategies.
We rely on derivative transactions to reduce our market risk and funding costs, and changes in our credit ratings or the credit ratings of our derivative counterparties, or changes in the legislation or the regulations affecting derivatives, may adversely affect our ability to enter into derivative transactions on cost-effective terms.
Our financial strategies are highly dependent on our ability to enter into derivative transactions on acceptable terms to reduce our market risk and funding costs. Rating agencies may from time to time change a rating or issue negative reports, which may adversely affect our ability to enter into derivative transactions on satisfactory terms in the quantities necessary to manage our interest rate risk and funding costs effectively. Changes in legislation or regulations affecting derivatives may also adversely affect our ability to enter into derivative transactions with acceptable counterparties on satisfactory terms. Any of these changes could negatively affect our financial condition, results of operations, or ability to make advances on acceptable terms, pay dividends, or redeem or repurchase capital stock.
We are affected by federal and state laws and regulations that could change or be applied in a manner detrimental to our operations, or to the ability or motivation to invest in the Bank or use our products and services.
The FHLBanks are GSEs, organized under the authority of and governed by the FHLBank Act, and, as such, are also governed by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 and other federal laws and regulations. From time to time, Congress has amended the FHLBank Act and amended or enacted other legislation in ways that have significantly affected the FHLBanks and the manner in which the FHLBanks carry out their housing finance mission and business operations. New or modified legislation enacted by Congress or states and regulations or policies implemented by the Finance Agency could have a negative effect on our ability to conduct business or on our cost of doing business, or affect our members’ ability or motivation to acquire or own our capital stock or use of our products and services. In addition, new or modified legislation or regulations governing our members may affect our ability to conduct business or our cost of doing business with our members.
Changes in statutory or regulatory requirements or policies, or in their application, could result in changes in, among other things, the FHLBanks’ cost of funds, capital requirements, accounting policies, liquidity management, debt issuance, derivative hedging activities, permissible business activities, additional contributions to the Bank’s AHP, membership base, membership eligibility, our members’ access to our products and services (including whether a member meets required tangible capital levels to access advances), and the size, scope, and nature of the FHLBanks’ lending, investment, and mortgage purchase program activities. These changes could negatively affect our financial condition, results of operations, ability to pay dividends, or ability to redeem or repurchase capital stock. In addition, given the Bank’s relationship with other FHLBanks, events other than another FHLBank’s default on a consolidated obligation can affect us. Events that affect other FHLBanks, such as member failures or capital deficiencies at another FHLBank, could lead the Finance Agency to require or request that one FHLBank provide capital or other assistance to another FHLBank, purchase assets from another FHLBank, or impose other forms of resolution affecting one or more of the other FHLBanks. If we were called upon by the Finance Agency to take any of these steps, it could affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.
On November 7, 2023, the Finance Agency issued the “FHLBank System at 100: Focusing on the Future” report, which is a potential source of important regulatory changes. The report focused on the FHLBank System’s: (1) mission; (2) role as a stable and reliable source of liquidity; (3) role in housing and community development; and (4) operational efficiency, structure, and governance.
We are not able to predict what actions, if any, will ultimately result from the Finance Agency’s recommendations, the timing of any actions, the extent of any changes to the Bank or the FHLBank System, or the ultimate effect on the bank or the FHLBank System, particularly in light of the changes in the Finance Agency’s leadership and potential changes to the regulatory environment affecting the Bank. Furthermore, we are also not able to predict how changes in federal administration will affect the Finance Agency’s actions and regulatory activity. Potential changes to regulatory expectations, policy changes, legislative and regulatory changes, executive orders, or other government actions may result in changes to the FHLBanks’ mission, liquidity role, membership and lending requirements, affordable housing contributions, voluntary programs and support for community investment, or changes to our operations, structure, or governance. Any such changes as well as any resulting increased scrutiny of the Bank and the FHLBank System and its mission and activities could materially affect our financial condition or results of operations, our reputation, and the value of FHLBank membership.
For more details on this Finance Agency report, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Legislative and Regulatory Developments.”
Our members are governed by federal and state laws and regulations that could change in a manner detrimental to their ability or motivation to invest in the Bank or to use our products and services.
Most of our members are highly regulated financial institutions, and the regulatory environment in which our members operate could change in a manner that would negatively affect their ability or motivation to acquire or own our capital stock or use our products and services. Statutory or regulatory changes that make it less attractive to hold our capital stock or use our products and services could negatively affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.
Changes in the status, regulation, and perception of the housing GSEs or in policies and programs relating to the housing GSEs may adversely affect our business activities, future advances balances, the cost of debt issuance, or future dividend payments.
The FHLBanks are GSEs organized under the authority of the FHLBank Act and are authorized to issue debt securities, which are the principal source of funding for the FHLBanks. Negative announcements by any of the housing GSEs, concerning topics such as accounting problems, risk-management issues, or regulatory reform or enforcement actions may create pressure on debt pricing for all GSEs, as investors perceive such instruments as bearing increased risk. Given the FHLBanks’ shared status as GSEs, the scope, timing, and effect of any change in the status of and/or regulatory reform affecting the GSEs, including the ultimate resolution to the conservatorship of Fannie Mae and Freddie Mac and resulting changes in the regulation or status of the GSEs, could have a significant effect on the FHLBank System. In addition, negative news articles, industry reports, and other announcements pertaining to GSEs, including Fannie Mae, Freddie Mac, and any of the FHLBanks, could create pressure on all GSE debt pricing, as investors may perceive that their debt instruments bear increased risk. While there are significant differences between the FHLBank System and Fannie Mae and Freddie Mac, including the FHLBanks’ focus on secured lending in the form of advances as opposed to guaranteeing mortgages and their distinctive cooperative business model, legislation or other regulatory reform affecting the GSEs could inadequately account for these differences, which could negatively change the perception of the risks associated with the GSEs and their debt securities.
As a result of these factors, the FHLBank System may have to pay higher rates on consolidated obligations to make them attractive to investors. If we maintain our current approach to pricing advances, an increase in the cost of issuing consolidated obligations could reduce our net interest spread (the difference between the interest rate received on advances and the interest rate paid on consolidated obligations) and cause our advances to be less profitable. If we increase the price of our advances to avoid a decrease in the net interest spread, the advances may be less attractive to our members, and our outstanding advances balances may decrease. In addition, an increase in the cost of issuing consolidated obligations could reduce our net interest spread on other interest-earning assets. As a result, an increase in the cost of issuing consolidated obligations could negatively affect our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.
General Risk Factors
Significant climate events could adversely affect the members and business of our Bank, and failure to meet investor or other stakeholder expectations regarding natural disasters and environmental matters may damage the reputation of the Bank.
The region where we operate is subject to natural disasters, including risks from floods, wildfires, drought, and other natural disasters. The frequency, intensity, and duration of these events is increasing, which could destroy or damage Bank facilities or member properties, including collateral that members have pledged to secure advances or mortgages, disrupt the business of the Bank or our members, increase the probability of power or other outages, negatively affect the livelihood of our members, or otherwise cause significant economic dislocation in disaster-affected regions. Any of these situations may adversely affect the financial condition and results of operations of the Bank.
Enhanced governmental, regulatory, and societal attention to climate matters and natural disasters, including expanding mandatory and voluntary reporting, diligence, and disclosure on topics such as climate risk, carbon emissions, water usage, waste management, and risk oversight, such as those reflected in the advisory bulletin issued by the FHFA in September 2024 on FHLBank System climate-related risk management, and the new California laws requiring companies doing business in California to disclose greenhouse gas emissions and climate-related financial risks, could expand the nature, scope, and complexity of matters that we are required to control, assess, and report. These issues and rapidly changing laws, regulations, policies, interpretations, and expectations may increase the cost of compliance and internal risk management programs for the Bank and alter the environment in which we do business, which could adversely affect the financial condition and results of operations of the Bank. In addition, the shift toward a lower-carbon economy, driven by policy regulations, low-carbon technology advancement, consumer sentiment, or liability risks, may negatively affect the Bank’s or our members’ business models, asset valuations, and operating costs.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.

---

ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
The Federal Home Loan Bank of San Francisco (Bank) maintains its principal offices in leased premises totaling 96,139 square feet of space at 333 Bush Street in San Francisco, California. The Bank believes these facilities are adequate for the purposes for which they are currently used and are well maintained.

---

ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
The Federal Home Loan Bank of San Francisco (Bank) may be subject to various legal proceedings arising in the normal course of business.
After consultation with legal counsel, the Bank is not aware of any legal proceedings that are expected to have a material effect on its financial condition or results of operations or that are otherwise material to the Bank.

---

ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Federal Home Loan Bank of San Francisco (Bank) has a cooperative ownership structure. The members and certain nonmembers own all the capital stock of the Bank, the majority of the directors of the Bank are officers or directors of members, and the directors are elected by members (or selected by the board of directors to fill mid-term vacancies). There is no established marketplace for the Bank’s capital stock. The Bank’s capital stock is not publicly traded. The Bank issues only one class of capital stock, Class B stock, which, under the Bank’s capital plan, may be redeemed at par value, $100 per share, upon five years’ notice from the shareholder to the Bank, subject to certain statutory and regulatory requirements and to the satisfaction of any ongoing capital stock investment requirements applying to the member.
At the Bank’s discretion and at any time, the Bank may repurchase shares held by a shareholder in excess of its required capital stock holdings. The Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) summarizes the Bank’s capital management principles and objectives, as well as its policies and practices with respect to restricted retained earnings, dividend payments, and the repurchase of excess stock. In September 2023, the Board approved an updated Framework and dividend philosophy to reflect changes in the current interest rate environment and business conditions. The Framework includes a dividend philosophy to endeavor to pay a quarterly dividend rate that is equal to or greater than the current market rate for a highly rated investment and that is sustainable under current and projected earnings while maintaining appropriate levels of capital. The decision to declare any dividend and the dividend rate are at the discretion of the Bank’s board of directors, which may choose to follow the dividend philosophy as guidance in the dividend declaration. The Bank’s historical dividend rates and the dividend philosophy are not indicative of future dividend declarations. The Bank’s dividend policy may be revised or eliminated in the future and there can be no assurance as to future dividends.
As of February 28, 2025, the Bank had 24,628,299 shares of Class B stock held by 331 members and 2,283,801 shares of Class B stock held by 7 nonmembers. Class B stock held by nonmembers is classified as mandatorily redeemable capital stock in the Bank’s Statements of Condition.
Federal Housing Finance Agency (Finance Agency) rules state that Federal Home Loan Banks (FHLBanks) may declare and pay dividends only from previously retained earnings or current net earnings, and may not declare or pay dividends based on projected or anticipated earnings. In addition, Finance Agency rules do not permit the Bank to pay dividends in the form of capital stock if its excess stock exceeds 1% of its total assets. Excess stock is defined as the aggregate of the capital stock held by each shareholder in excess of its minimum capital stock requirement, as established by the Bank’s capital plan.
There is no requirement that the board of directors declare and pay any dividend. A decision by the board of directors to declare or not declare a dividend is a discretionary matter and is subject to the requirements and restrictions of the Federal Home Loan Bank Act and applicable requirements under the regulations governing the operations of the FHLBanks.
Information regarding the Bank’s dividends, including the Bank’s policies and practices with respect to dividend payments, is set forth in “Item 1. Business - Capital - Dividends and Retained Earnings,” and information on the Bank’s capital requirements and additional information regarding the Bank’s dividends is set forth in “Item 8. Financial Statements and Supplementary Data - Note 11 - Capital.”

---

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statements contained in this annual report on Form 10-K, including statements describing the objectives, projections, estimates, or predictions of the future of the Federal Home Loan Bank of San Francisco (Bank) or the Federal Home Loan Bank System (FHLBank System), are “forward-looking statements.” These statements may use forward-looking terms, such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “probable,” “plan,” “project,” “should,” “will,” “would,” “possible,” or their negatives or other variations on these terms, and include statements related to, among others, gains and losses on derivatives, plans to pay dividends and redeem or repurchase excess stock, future credit losses, future classification of securities, and reform legislation. The Bank cautions that by their nature, forward-looking statements involve risk or uncertainty that could cause actual results to differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These risks and uncertainties include, among others, the following:
•changes in economic and market conditions, including inflation and rising interest rates, changes in the credit ratings of the United States, including any effects of downgrades in the sovereign credit rating of the United States, and conditions in the mortgage, housing, and capital markets;
•the volatility of market prices, rates, and indices;
•the timing and volume of market activity;
•natural disasters (such as wildfires), pandemics or other widespread public health emergencies, terrorist attacks, civil unrest, geopolitical instability or conflicts (including the ongoing hostilities in Eastern Europe and the Middle East), trade disruptions, economic or other sanctions, or other unanticipated or catastrophic events;
•political events, including legislative, regulatory, judicial, or other developments that affect the Bank, its members, counterparties, or investors in the consolidated obligations of the Federal Home Loan Banks (FHLBanks), such as any government-sponsored enterprise (GSE) reforms, any changes resulting from the Finance Agency’s review and analysis of the FHLBank System, including recommendations published in its “FHLBank System at 100: Focusing on the Future” report, changes in the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), changes in applicable sections of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, or changes in other statutes or regulations applicable to the FHLBanks;
•changes in the Bank’s capital structure and composition;
•changes in the Bank’s capital stock requirements;
•the ability of the Bank to pay dividends or redeem or repurchase capital stock;
•membership changes, including changes resulting from mergers or changes in the principal place of business of Bank members;
•the withdrawal, merger, dissolution, or receivership of one or more large members;
•the soundness of other financial institutions, including Bank members, nonmember borrowers, other counterparties, and the other FHLBanks;
•changes in Bank members’ demand for Bank advances;
•changes in the value or liquidity of collateral underlying advances to Bank members or nonmember borrowers or collateral pledged by the Bank’s derivative counterparties;
•changes in the fair value and economic value of, impairments of, and risks associated with the Bank’s investments in mortgage loans and mortgage-backed securities (MBS) and the related credit enhancement protections;
•changes in the Bank’s ability or intent to hold MBS and mortgage loans to maturity;
•competitive forces, including the availability of other sources of funding for Bank members;
•the willingness of the Bank’s members to do business with the Bank;
•changes in investor demand for consolidated obligations (including the terms of consolidated obligations) or the terms of interest rate exchange or similar agreements;
•the impact of any changes and developments in FHLBank System-wide debt issuance and governance practices;
•the ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which the Bank has joint and several liability;
•changes in key Bank personnel;
•technology changes and enhancements, and the Bank’s ability to develop and support technology and information systems sufficient to manage the risks of the Bank’s business effectively (including cyber-security risks); and
•changes in the FHLBanks’ long-term credit ratings.
Readers of this report should not rely solely on the forward-looking statements and should consider all risks and uncertainties addressed throughout this report, as well as those discussed under “Item 1A. Risk Factors.”
Overview
Net income for 2024 was $402 million, a decrease of $137 million compared with 2023. The decrease was primarily attributable to a decrease in net interest income of $219 million and an increase in other expense of $19 million, partially offset by an increase in other income of $86 million.
The $219 million decrease in net interest income was attributable to lower average balances of advances and short-term investments and higher costs of interest-bearing liabilities. The decrease was also attributable to $106 million of higher net advance prepayment fees in the prior year. These decreases to net interest income were partially offset by lower average balances of consolidated obligation bonds and discount notes, an increase in the average balances of available-for-sale securities, and higher yields on interest-earning assets.
The $86 million increase in other income was primarily driven by $33 million in net realized losses recognized in the prior year from derivatives economically hedging prepaid advances, along with $30 million of other income recognized in 2024 in connection with the termination of a long-term funding arrangement entered into with a member borrower in 2017.
The $19 million increase in other expense was attributable to a $25 million increase in the Bank's charitable contributions in the current year, mainly to fund downpayment assistance grants to middle-income homebuyers (delivered by participating member financial institutions).
As of December 31, 2024, the Bank exceeded all regulatory capital requirements. The Bank exceeded its 4.0% regulatory requirement with a regulatory capital ratio of 8.9% at December 31, 2024. The increase in the regulatory capital ratio from 8.0% at December 31, 2023 mainly resulted from the decrease in total assets during 2024. The Bank also exceeded its risk-based capital requirement of $1.1 billion with $7.3 billion in permanent capital. Total retained earnings increased to $4.5 billion at December 31, 2024, from $4.3 billion at December 31, 2023.
On February 19, 2025, the Bank’s board of directors declared a quarterly cash dividend on the average capital stock outstanding during the fourth quarter of 2024 at an annualized rate of 8.75%. The quarterly dividend rate is consistent with the Bank's dividend philosophy of endeavoring to pay a quarterly dividend rate that is equal to or greater than the current market rate for highly rated investments and that is sustainable under current and projected earnings while maintaining appropriate levels of capital. The quarterly dividend will total $63 million, and the Bank expects to pay the dividend on March 11, 2025.
The Bank will continue to monitor its financial condition, its financial performance, its capital position, overall financial market conditions, and other relevant information as the basis for determining the payment of dividends in future quarters.
The Bank's community programs and targeted initiatives address the unique affordable housing and economic development needs of communities across its district of Arizona, California, and Nevada. The Affordable Housing Program (AHP) is an annual statutory grant program that supports the creation, preservation, or purchase of affordable housing and is funded with 10% of the Bank’s previous year’s net income. Since its inception in 1990, the Bank awarded nearly $1.4 billion in grants to aid the purchase, development, or rehabilitation of over 154,600
affordable homes in the regions the Bank’s members serve. In addition, early in 2024, the Bank’s board of directors approved plans to voluntarily allocate an additional 5% of its 2023 annual net earnings (income before interest expense related to dividends paid on mandatorily redeemable capital stock and the assessment for the AHP) to fund affordable housing and economic development initiatives.
To meet these commitments, the Bank recorded a total allocation of $93 million in 2024, an increase of $14 million compared to 2023. The $93 million allocation included $52 million related to the statutory AHP program and $41 million related to voluntary housing and economic development initiatives. The Bank's voluntary contributions were disbursed through multiple initiatives during 2024, including, but not limited to, $20 million in downpayment assistance grants delivered by Bank members to over 400 homebuyers, $7 million awarded to 84 organizations across Arizona, California, and Nevada through the Access to Housing and Economic Assistance for Development (AHEAD) Program, $2 million benefiting Native American communities for essential infrastructure and affordable housing development, and $1 million delivered through a targeted matching grant program distributed across 45 grants for local housing counseling agencies to expand homeownership opportunities for low- to moderate-income prospective homebuyers.
Following the fourth quarter of 2024, several wildfires, including the Pacific Palisades and Eaton wildfires, caused extensive damage to properties along the Southern California coast and around the Los Angeles metropolitan area. The Bank does not expect that the potential losses resulting from the wildfires will have a material effect on the Bank's financial condition or results of operations. In January 2025, the Bank announced it would contribute $2 million to aid ongoing response and relief efforts and provide front-line support in communities impacted by the wildfires in Southern California and is actively engaging with its members.
Events affecting the financial services industry during 2023 resulted in significant changes in the liquidity of some of the largest regional financial institutions, some of which experienced significant deposit outflows and financial difficulties resulting in liquidation or receivership. Because of these events, the Bank has experienced and may continue to experience a reduction in total assets, capital, and net income since these borrowers, and the advances made to these borrowers, are not likely to be replaced. As of December 31, 2024, advances outstanding from nonmembers totaled $12.1 billion. The loss of Bank members, especially its larger borrowers, may also have the effect of reducing the Bank’s opportunity to grow advances and may impact the Bank’s long-term strategic plan and corporate goals. See “Item 8. Financial Statements and Supplementary Data - Note 5 - Advances” for more information on the Bank’s borrowers and “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition - Risk Management - Concentration Risk” for more information on concentration risk.
Results of Operations
Selected Financial Data and Financial Ratios
2024 2023 2022
Selected Other Data for the Year Ended December 31
Net Interest Margin(1)
0.69 % 0.71 % 0.66 %
Return on Average Assets 0.47 0.47 0.37
Return on Average Equity 5.89 7.60 4.67
Annualized Dividend Rate 8.75 7.49 6.30
Dividend Payout Ratio(2)
49.68 45.05 50.17
Average Equity to Average Assets Ratio 8.02 6.23 8.02
Selected Other Data at Yearend
Regulatory Capital Ratio(3)
8.90 8.02 6.41
Duration Gap (in months) 1.2 1.0 0.9
(1) Net interest margin is calculated as net interest income divided by average interest-earning assets for the year.
(2) This ratio is calculated as dividends paid per share divided by net income per share.
(3) This ratio is calculated as regulatory capital divided by total assets on December 31 of each year. Regulatory capital includes retained earnings, Class B capital stock, and mandatorily redeemable capital stock (which is classified as a liability), but excludes AOCI.
Comparison of 2024 and 2023
Net Interest Income. The primary source of the Bank’s earnings is net interest income, which is the interest income on advances, mortgage loans, and investments, less interest expense on consolidated obligations, deposits, mandatorily redeemable capital stock, and other borrowings. The table that follows presents the average balances of interest-earning asset categories and the sources that funded those interest-earning assets (liabilities and capital) for 2024 and 2023, together with the related interest income and expense. The table also presents the average rates on total interest-earning assets and the average costs of total funding sources.
Average Balance Sheets
2024 2023
(Dollars in millions) Average
Balance Interest
Income/
Expense Average
Rate Average
Balance Interest
Income/
Expense Average Rate
Assets
Interest-earning assets:
Interest-bearing deposits $ 4,298 $ 226 5.26 % $ 4,328 $ 222 5.12 %
Securities purchased under agreements to resell 1,257 66 5.24 5,618 280 4.99
Federal funds sold 5,157 268 5.20 9,923 499 5.03
AFS securities:(1)
MBS(1)(2)
13,686 896 6.55 10,462 702 6.71
Other investments
5,316 290 5.45 4,050 219 5.41
Held-to-maturity (HTM) securities: MBS
1,655 92 5.56 1,994 100 5.01
Advances(3)
52,301 2,767 5.29 76,128 3,999 5.25
Mortgage loans held for portfolio(4)
725 22 2.94 786 26 3.33
Loans to other FHLBanks - - - 9 - 4.90
Total interest-earning assets 84,395 4,627 5.48 113,298 6,047 5.34
Other assets(5)
748 - 635 -
Total Assets $ 85,143 $ 4,627 $ 113,933 $ 6,047
Liabilities and Capital
Interest-bearing liabilities:
Consolidated obligations:
Bonds
$ 60,769 $ 3,143 5.17 % $ 78,340 $ 3,901 4.98 %
Discount notes
14,704 767 5.22 25,479 1,249 4.90
Deposits and other borrowings 1,374 72 5.18 1,239 64 5.16
Mandatorily redeemable capital stock 559 65 11.69 578 32 5.47
Borrowings from other FHLBanks - - - 39 2 4.80
Total interest-bearing liabilities 77,406 4,047 5.23 105,675 5,248 4.97
Other liabilities(5)
908 - 1,164 -
Total Liabilities 78,314 4,047 106,839 5,248
Total Capital 6,829 - 7,094 -
Total Liabilities and Capital $ 85,143 $ 4,047 $ 113,933 $ 5,248
Net Interest Income $ 580 $ 799
Net Interest Spread(6)
0.25 % 0.37 %
Net Interest Margin(7)
0.69 % 0.71 %
Interest-earning Assets/Interest-bearing Liabilities 109.03 % 107.21 %
(1)The average balances of AFS securities are reflected at amortized cost. As a result, the average rates do not reflect changes in fair value.
(2)Interest income includes net prepayment fees received on AFS MBS of $11 million and $6 million in 2024 and 2023, respectively.
(3)Interest income includes net prepayment fees received on advances of $6 million and $106 million in 2024 and 2023, respectively.
(4)Nonperforming mortgage loans are included in average balances used to determine average rate.
(5)Includes forward settling transactions and valuation adjustments for certain cash items received/(paid).
(6)Net interest spread is calculated as the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.
(7)Net interest margin is calculated as net interest income for the year divided by average interest-earning assets.
Net interest income in 2024 was $580 million, a 27% decrease from $799 million in 2023. The decrease in net interest income compared to 2023 was attributable to lower average balances of advances and short-term investments and higher costs of interest-bearing liabilities. The decrease was also attributable to $100 million of higher net advance prepayment fees in the prior year. During 2024, the Bank recognized net prepayment fees within interest income of $6 million, comprising $1 million in prepayment fees received from borrowers and $21 million in hedging-related net realized gains associated with the prepaid advances, offset by $16 million in prepayment fees paid to borrowers. In contrast, during 2023, the Bank recognized net prepayment fees within interest income of $106 million, comprising $291 million in prepayment fees received from borrowers, offset by $45 million in prepayment fees paid to borrowers and $140 million in hedging-related net realized losses associated with the prepaid advances. These decreases to net interest income were partially offset by lower average balances of consolidated obligation bonds and discount notes, an increase in the average balances of available-for-sale securities, and higher yields on interest-earning assets.
Prepayment Fees, Net. The Bank charges borrowers prepayment fees or pays borrowers prepayment credits when the principal on certain advances is paid before original maturity. The Bank records prepayment fees from borrowers net of any associated fair value adjustments related to prepaid advances that were in hedging relationships. The net amount of prepayment fees received from borrowers recorded as interest income is reflected in the Statements of Income for the years ended December 31, 2024, 2023, and 2022, as follows:
2024 2023
Prepayment fees received/(paid)
$ (15) $ 246
Fair value adjustments 21 (140)
Net $ 6 $ 106
Advance principal prepaid $ 1,982 $ 54,720
Member demand for wholesale funding from the Bank can vary greatly depending on a number of factors, including economic and market conditions, competition from other wholesale funding sources, member deposit inflows and outflows, the activity level of the primary and secondary mortgage markets, and strategic decisions made by individual member institutions. In addition, events affecting the financial services industry contributed to the liquidation or receivership of some of the Bank’s larger borrowers during 2023. The loss of Bank members through liquidation, receivership, or acquisition by nonmember institutions, especially involving some of the Bank’s larger borrowers, has had the effect of reducing aggregate member demand for wholesale funding, as nonmembers (including former members and member successors) are not eligible to borrow new advances or renew existing advances as they mature. This has resulted in lower levels of advance balances and a reduction in total interest income earned from advances. As a result of the inability of nonmembers to seek new advances from the Bank, the Bank’s level of advances and the associated net interest income in the future will be determined by many factors including the Bank members’ ability to generate new business to seek new advances or consolidation within the banking industry. The loss of advances outstanding to nonmember borrowers is likely to have an adverse impact over time on the Bank’s financial performance and may reduce the Bank’s ability to grow advances in the future and impact the Bank’s long-term strategic plans and operations.
See “Item 8. Financial Statements and Supplementary Data - Note 5 - Advances” for more information on the Bank’s largest members and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview” for information on the loss of the Bank’s largest borrowers and its potential effect on the Bank’s opportunity to grow advances.
The following table details the changes in interest income and interest expense for 2024 compared to 2023. Changes in both volume and interest rates influence changes in net interest income, net interest spread, and net interest margin.
Change in Net Interest Income: Rate/Volume Analysis
2024 Compared to 2023
Increase/
(Decrease) Attributable to Changes in(1)
(In millions) Volume
Rate
Interest income:
Interest-bearing deposits $ 4 $ (2) $ 6
Securities purchased under agreements to resell (214) (228) 14
Federal funds sold (231) (247) 16
AFS securities:
MBS(2)
194 211 (17)
Other investments(2)
71 69 2
HTM securities: MBS (8) (18) 10
Advances(2)
(1,232) (1,261) 29
Mortgage loans held for portfolio (4) (2) (2)
Total interest income
(1,420) (1,478) 58
Interest expense:
Consolidated obligations:
Bonds(2)
(758) (904) 146
Discount notes(2)
(482) (558) 76
Deposits and other borrowings 8 8 -
Mandatorily redeemable capital stock 33 (1) 34
Borrowings from other FHLBanks (2) (2) -
Total interest expense
(1,201) (1,457) 256
Net interest income $ (219) $ (21) $ (198)
(1)Combined rate/volume variances, a third element of the calculation, are allocated to the rate and volume variances based on their relative sizes.
(2)Interest income/(expense) and average rates include the interest effect of associated interest rate exchange agreements.
The net interest margin was 69 basis points for 2024, 2 basis points lower than the net interest margin for 2023. The decrease in net interest margin is primarily the result of the decrease in the average balances of higher-yielding advances and short-term investments as well as an increase in costs of interest-bearing liabilities to 5.23% for 2024 compared to 4.97% for 2023. These effects were partially offset by higher yields on interest-earning assets to 5.48% for 2024 compared to 5.34% for 2023 and a decrease in the average balances of consolidated obligations. The net interest spread was 25 basis points for 2024, 12 basis points lower than the net interest spread for 2023, which was 37 basis points. The decrease in net interest spread was primarily a result of higher average balances and costs of interest-bearing liabilities, which were partially offset by higher average balances and yields on interest-earning assets.
The following tables present the effect of derivatives and hedging activities on net interest income. There were no interest rate exchange agreements associated with discount notes in 2023.
(In millions) Advances AFS Securities Consolidated Obligation Bonds Consolidated Obligation Discount Notes
Total
(Amortization)/accretion of hedging activities $ (23) $ (101) $ - $ - $ (124)
Net gain/(loss) on derivatives and hedged items 6 3 (1) (1) 7
Net interest settlements on derivatives 564 523 (487) (2) 598
Price alignment amount(1)
(28) (28) (2) - (58)
Total effect on net interest income $ 519 $ 397 $ (490) $ (3) $ 423
(In millions) Advances AFS Securities Consolidated Obligation Bonds Total
(Amortization)/accretion of hedging activities $ (25) $ (102) $ - $ (127)
Net gain/(loss) on derivatives and hedged items (215) 1 (5) (219)
Net interest settlements on derivatives 632 456 (571) 517
Price alignment amount(1)
(45) (34) - (79)
Total effect on net interest income $ 347 $ 321 $ (576) $ 92
(1)This amount relates to derivatives for which variation margin on cleared derivatives is characterized as a daily settled contract.
Other Income/(Loss). The following table presents the components of “Other Income/(Loss)” for 2024 and 2023.
(In millions) 2024 2023
Net gain/(loss) on advances and consolidated obligation bonds held under fair value option $ (12) $ (1)
Net gain/(loss) on derivatives 53 (25)
Standby letters of credit fees 19 20
Termination of long-term funding arrangement
30 -
Other, net 3 13
Total Other Income/(Loss) $ 93 $ 7
Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held Under Fair Value Option - Under the fair value option, the Bank has elected to carry certain assets and liabilities at fair value. In general, transactions elected for the fair value option are in economic hedge relationships. Gains or losses on these transactions are generally offset by losses or gains on the derivatives that economically hedge these instruments.
The net gain/(loss) on advances and consolidated obligation bonds held under the fair value option is primarily driven by the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to the actual terms and volume of the advances and consolidated obligation bonds during the period.
Additional information about advances and consolidated obligation bonds held under the fair value option is provided in “Item 8. Financial Statements and Supplementary Data - Note 14 - Fair Value.”
Net Gain/(Loss) on Derivatives - Accounting guidance requires the Bank to carry all of its derivative instruments on the Statements of Condition at fair value. Certain derivatives are associated with assets or liabilities but do not qualify as fair value hedges. These economic hedges are recorded on the Statements of Condition at fair value with the unrealized gain or loss recorded in earnings without any offsetting unrealized gain or loss from the associated asset or liability.
The following table shows the accounting classification of economic hedges and the categories of hedged items that contributed to the gains and losses on derivatives that were recorded in “Net gain/(loss) on derivatives” for 2024 and 2023.
Sources of Gains/(Losses) Recorded in Net Gain/(Loss) on Derivatives
2024 Compared to 2023
(In millions) 2024 2023
Hedged Item Gain/(Loss) on Economic
Hedges Interest Income/
(Expense) on Economic
Hedges
Net Gain/(Loss)
Gain/(Loss) on Economic
Hedges Interest Income/
(Expense) on Economic
Hedges
Net Gain/(Loss)
Advances:
Elected for fair value option $ 7 $ 59 $ 66 $ (33) $ 48 $ 15
Not elected for fair value option (21) 28 7 (49) 36 (13)
Consolidated obligation bonds:
Elected for fair value option 14 (21) (7) 27 (34) (7)
Not elected for fair value option 14 (26) (12) 28 (37) (9)
Consolidated obligation discount notes:
Not elected for fair value option 2 - 2 1 (8) (7)
Price alignment amount(1)
(3) - (3) (4) - (4)
Total $ 13 $ 40 $ 53 $ (30) $ 5 $ (25)
(1) This amount relates to derivatives for which variation margin on cleared derivatives is characterized as a daily settled contract.
During 2024, net gains on derivatives totaled $53 million compared to net losses of $25 million in 2023. These amounts included interest income of $40 million and $5 million resulting from net settlements on derivative instruments used in economic hedges in 2024 and 2023, respectively. Excluding the impact of interest income or expense from net settlements on derivative instruments used in economic hedges, the gains or losses on economic hedges were primarily associated with the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors during the period.
The Bank cannot predict the ongoing impact of these valuation adjustments and the effects of these valuation adjustments may lead to significant volatility in future earnings, including earnings available for dividends.
Additional information about derivatives and hedging activities is provided in “Item 8. Financial Statements and Supplementary Data - Note 13 - Derivatives and Hedging Activities.”
Termination of Long-Term Funding Arrangement - In connection with certain litigation involving its PLRMBS previously disclosed, the Bank entered into a long-term funding arrangement in 2017 with a member, under which the member agreed to obtain or maintain certain advances from the Bank. During 2024, the Bank terminated the long-term funding arrangement in accordance with its settlement terms and recognized $30 million of other income.
Other Expense. During 2024, other expenses increased to $219 million, compared to $200 million in 2023. The $19 million increase in other expense was primarily attributable to a $25 million increase in voluntary housing and community investment contributions. These charitable contributions, which were in addition to the Bank’s statutory AHP assessment, decreased the Bank’s net income and retained earnings in 2024. The Bank continues to evaluate funding of programs meeting community needs for affordable housing, funding for businesses, and community development, and may change the levels of voluntary contributions in the future, which may further impact the Bank’s net income and retained earnings. The increase in other expense was partially offset by a $5 million decrease in other operating expense.
Voluntary housing and community investment contributions and AHP assessment. In 2024, the Bank allocated a total of $93 million for affordable housing, community investment, and voluntary charitable programs, of which $52 million related to the statutory AHP assessment and $41 million related to voluntary housing and community investment contributions as presented in the Bank's Statements of Income.
In 2024, the Board approved plans to voluntarily allocate 5% of the Bank’s 2023 net earnings (income before interest expense related to dividends paid on mandatorily redeemable capital stock and the assessment for the AHP) to fund economic development and homeownership grant programs. These charitable contributions, in addition to the Bank’s statutory 10% AHP assessment, decreased the Bank’s net income and retained earnings for 2024.
The following table presents the calculation of the 5% commitment for voluntary contributions for 2024.
(Dollars in millions)
2023 2024
Income/(loss) before assessment $ 602
Interest expense: mandatorily redeemable capital stock 32
Income/(loss) before assessment and interest expense: mandatorily redeemable capital stock $ 634
Commitment % 5 %
Unadjusted 5% commitment $ 32
Adjusted for:
2024 make-whole contribution: AHP(1)
2023 make-whole contribution: AHP(1)
2024 make-whole contribution: voluntary contributions(2)
2023 carry forward(3)
Adjusted 5% voluntary contributions $ 41
(1) Voluntary make-whole contributions to restore the 2023 and 2024 required AHP from the effects of voluntary housing contributions, which lowered the respective years' Income/(Loss) Before Assessment.
(2) A voluntary make-whole contribution to restore the 2024 committed 5% voluntary contribution from the effects of 2023 voluntary contributions, which lowered the 2023 Income/(Loss) Before Assessment.
(3) A voluntary carry forward amount that was the remaining from the Bank’s 2023 5% commitment and was paid out during 2024.
The following table presents the components of the voluntary housing and community investment contributions by attribute for 2024.
(In millions)
Voluntary contributions by attribute
Affordable housing $ 21
Economic development 11
Voluntary contributions paid $ 32
Voluntary contributions to AHP(1)
Voluntary housing and community investment contributions presented in the Statements of Income $ 41
(1) Represents all voluntary contributions to AHP, including voluntary make-whole contributions.
Make-Whole Contribution for AHP. Since net income before the assessment for AHP was reduced by voluntary contributions, the assessment amount for AHP was effectively lowered by the voluntary contributions amount. Therefore, a voluntary make-whole contribution was recorded to restore in good faith the 2024 AHP assessment amount to what it would be before the effects of voluntary contributions, as presented in the following table.
(Dollars in millions)
Income/(loss) before assessment and interest expense: mandatorily redeemable capital stock $ 519
Statutory AHP assessment percentage 10 %
Statutory AHP assessment 52
2024 make-whole contribution: AHP(1)
Total statutory AHP assessment and AHP make-whole contribution $ 56
(1) A voluntary make-whole contribution to restore the 2024 required AHP contribution from the effects of voluntary housing contributions, which lowered 2024’s Income/(Loss) Before Assessment.
The following table demonstrates the total AHP assessment in the absence of voluntary contributions for 2024.
(Dollars in millions)
Income/(loss) before assessment and interest expense: mandatorily redeemable capital stock $ 519
Voluntary housing and community investment contributions 41
Income/(loss) before assessment and interest expense: mandatorily redeemable capital stock and voluntary housing and community investment contributions 560
Statutory AHP assessment percentage 10 %
Total AHP assessment without voluntary contributions $ 56
The Bank continues to evaluate funding of programs meeting community needs for affordable housing, funding for businesses, and community development, and may change the levels of voluntary contributions in the future, which may further impact the Bank’s net income and retained earnings. Voluntary programs include, but are not limited to, AHEAD, Nevada Capacity Building, middle-income downpayment assistance, and other targeted community initiatives.
Access to Housing and Economic Assistance for Development (AHEAD) Program. AHEAD Program grants, funded annually at the discretion of the Bank’s board of directors, provide funding for targeted economic development projects and non-AHP-eligible housing initiatives that create or preserve jobs, deliver social services, training, or education programs, or provide other services and programs that benefit low- and moderate-income communities. AHEAD Program applications are submitted by members working with local community groups, and awards are based on project eligibility and evaluation of the applications. In 2024, we awarded $7 million in AHEAD Program grants, and since 2004, we have awarded over $32 million in AHEAD program grants.
Nevada Capacity Building Program. The purpose of the Nevada Housing Coalition (NHC) has been to build capacity for affordable housing development in Nevada and to address the state’s limited infrastructure for its future development. The funds were used to improve development resources in the state, grow its affordable housing ecosystem, and better position Nevada to secure and deploy affordable housing dollars from a variety of existing and new sources. Capacity building efforts included delivering critical training to practitioners on the nuances of securing and applying for affordable housing dollars, increasing the state’s affordable housing project pipeline, and ultimately ensuring more housing options for all Nevadans. In 2024, the Bank disbursed $110 thousand in support of the NHC’s purpose (for a total of $350 thousand committed and disbursed funds in 2023 and 2024).
Middle-Income Downpayment Assistance. In 2024, the Bank’s board of directors expanded this program by doubling its commitment to $20 million for a matching grant program to help put sustainable homeownership within reach for more families and individuals. This grant program is intended to help families and individuals who qualify as first-time homebuyers and earn just over 80% up to 140% of area median income (AMI), based on the location of the property to be purchased and adjusted for household size. The goal is to expand access to affordable and sustainable homeownership opportunities for first-time homebuyers. In 2024, the Bank disbursed $20 million through 32 members in support of over 400 homebuyers in Arizona, California, and Nevada.
In 2024, the Bank also funded two targeted community initiatives for its district, disbursing $2 million for essential infrastructure and affordable housing development benefiting Native American communities and $1 million in grants delivered through a targeted matching grant program, distributed to 45 local HUD-approved Housing
Counseling Agencies to help them expand capacity to serve more low- to moderate-income aspiring and at-risk homebuyers.
Affordable Housing Program. The FHLBank Act requires each FHLBank to establish and fund an affordable housing program (AHP). Each FHLBank’s AHP provides subsidies to members, who use the funds to assist in the purchase, construction, or rehabilitation of housing for households earning up to 80% of the median income for the area in which they live. Subsidies may be in the form of direct grants or below-market interest rate advances.
To fund the AHP, the FHLBanks must set aside at least, in the aggregate, the greater of $100 million or 10% of the current year's net earnings (income before interest expense related to dividends paid on mandatorily redeemable capital stock and the assessment for the AHP). To the extent that the aggregate 10% calculation is less than $100 million, the FHLBank Act requires that each FHLBank contribute such prorated sums as may be required to ensure that the aggregate contribution of the FHLBanks equals at least $100 million. The proration would be made on the basis of the income of the FHLBanks for the previous year. In the aggregate, the FHLBanks set aside $718 million and $752 million for their AHPs in 2024 and 2023, respectively, and there was no AHP shortfall in either of those years.
The Bank’s total AHP assessments equaled $52 million in 2024 and $63 million in 2023.
Return on Average Equity. Return on average equity was 5.89% for 2024, compared to 7.60% for 2023. The decrease reflected lower net income for 2024, which decreased 25% to $402 million in 2024 from $539 million in 2023, which was partially offset by a relatively smaller decrease in average equity to $6.8 billion in 2024 from $7.1 billion in 2023.
Dividends and Retained Earnings. In 2024, the Bank paid dividends at an annualized rate of 8.75%, totaling $265 million, including $209 million in dividends on capital stock and $56 million in dividends on mandatorily redeemable capital stock. In 2023, the Bank paid dividends at an annualized rate of 7.49%, totaling $275 million, including $243 million in dividends on capital stock and $32 million in dividends on mandatorily redeemable capital stock.
The Bank paid these dividends in cash. Dividends on capital stock are recognized as dividends on the Statements of Capital Accounts, and dividends on mandatorily redeemable capital stock are recognized as interest expense on the Statements of Income.
For more information, see “Item 1. Business - Capital - Dividends and Retained Earnings,” “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital,” and “Item 8. Financial Statements and Supplementary Data - Note 11 - Capital - Excess Stock Repurchase, Retained Earnings, and Dividend Framework.”
For a comparison of 2023 and 2022 results of operations, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” in the Bank’s 2023 Form 10-K.
Financial Condition
Total assets were $81.7 billion at December 31, 2024, compared to $92.8 billion at December 31, 2023. This decline was primarily driven by a reduction in advances. Advances decreased by $15.7 billion, or 26%, to $45.6 billion at December 31, 2024, from $61.3 billion at December 31, 2023. Average advances were $52.3 billion for 2024, a 31% decrease from $76.1 billion for 2023. Advances declined primarily due to maturities of advances acquired by nonmembers in connection with certain Bank member acquisitions. Investments at December 31, 2024, were $35.0 billion, a net increase of $4.7 billion from $30.3 billion at December 31, 2023, attributable to net purchases of
$2.7 billion in short-term investments and $2.0 billion in U.S. Treasury securities. Average MBS investments were $15.3 billion for 2024, a 22% increase from $12.5 billion for 2023.
Advances outstanding at December 31, 2024, included net unrealized losses of $181 million, including $198 million representing unrealized losses on hedged advances, which was offset by $17 million representing unrealized gains on economically hedged advances that are carried at fair value in accordance with the fair value option. Advances outstanding at December 31, 2023, included net unrealized losses of $375 million, of which $371 million represented unrealized losses on hedged advances and hedging activities and $4 million represented unrealized losses on economically hedged advances that are carried at fair value in accordance with the fair value option. The change in the net unrealized gains/losses on advances from December 31, 2023, to December 31, 2024, was primarily attributable to the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to advance terms and volumes during the period.
Total liabilities were $74.7 billion at December 31, 2024, a decrease of $11.5 billion from $86.2 billion at December 31, 2023, primarily reflecting a $10.9 billion decrease in consolidated obligations outstanding to $72.6 billion at December 31, 2024, from $83.5 billion at December 31, 2023. Average consolidated obligations were $75.5 billion for 2024 and $103.8 billion for 2023.
The average balances of interest-bearing demand and overnight deposits were $932 million, $870 million, and $817 million, and the weighted average interest rates paid on interest-bearing demand and overnight deposits were 5.03%, 5.01%, and 1.38% in 2024, 2023, and 2022, respectively. The average balances of term deposits were $8 million, $8 million, and $32 million, and the weighted average interest rates paid on term deposits were 5.05%, 4.55%, and 2.86% in 2024, 2023, and 2022, respectively. All Bank deposits are uninsured.
Consolidated obligations outstanding at December 31, 2024, included net unrealized gains of $363 million on hedged consolidated obligation bonds and unrealized gains of $14 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. Consolidated obligations outstanding at December 31, 2023, included net unrealized gains of $645 million on hedged consolidated obligation bonds and unrealized gains of $29 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. The change in the net unrealized gains on the consolidated obligation bonds from December 31, 2023, to December 31, 2024, were primarily attributable to the effects of changes in market interest rates, interest rate spreads, interest rate volatility, and other market factors relative to consolidated obligation bond terms and volumes during the period.
As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of December 31, 2024, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of the FHLBanks was $1.2 trillion at both December 31, 2024 and 2023.
For further information and discussion of the Bank’s joint and several liability for FHLBank consolidated obligations, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition” and “Item 8. Financial Statements and Supplementary Data - Note 15 - Commitments and Contingencies.”
Accumulated other comprehensive income was $63 million at December 31, 2024, an increase of $135 million compared to a loss of $72 million at December 31, 2023, mainly attributable to an improvement in the fair values of investment securities classified as AFS, which primarily reflected tighter interest rate spreads for the Bank’s agency MBS portfolio.
Advances-Related Products. The advances-related products consist of advances and other credit products.
The following table presents the advances portfolio by product type at December 31, 2024 and 2023.
2024 2023
(Dollars in millions) Par Value Percentage of Total Par Value Par Value Percentage of Total Par Value
Adjustable - SOFR $ 4,455 10 % 2,055 2 %
Adjustable - SOFR, callable at borrower’s option 2,400 5 3,000 5
Subtotal adjustable rate advances 6,855 15 5,055 7
Fixed 5,711 12 10,240 17
Fixed - amortizing 33 - 47 -
Fixed - with PPS(1)
142 - 209 1
Fixed - with FPS(1)
24,563 54 38,144 62
Fixed - callable at borrower’s option with FPS(1)
310 1 340 1
Fixed - putable at Bank’s option with FPS(1)
4,560 10 1,353 2
Subtotal fixed rate advances 35,319 77 50,333 83
Daily variable rate 3,644 8 6,322 10
Total par value $ 45,818 100 % $ 61,710 100 %
(1)Partial prepayment symmetry (PPS) and full prepayment symmetry (FPS) are product features under which the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. The Bank no longer offers advances with PPS, and any prepayment credit on an advance with PPS would be limited to the lesser of 10% of the par value of the advance or the gain recognized on the termination of the associated interest rate swap, which may also include a similar contractual gain limitation.
The types of advances by contractual maturity at December 31, 2024, and 2023, are presented in the following table.
2024 2023
(Dollars in millions) Par Value Percentage of Total Par Value Par Value Percentage of Total Par Value
Fixed:
Within 1 year $ 15,204 33 % $ 23,850 39 %
After 1 year through 3 years 11,525 25 18,663 30
After 3 years through 5 years 3,269 7 5,453 9
After 5 years through 15 years 408 1 617 1
Thereafter 10 - 10 -
Subtotal fixed rate advances 30,416 66 48,593 79
Fixed - callable at borrower’s option:
After 3 years through 5 years 10 - - -
After 5 years through 15 years 300 1 340 1
Subtotal fixed - callable at borrower’s option advances 310 1 340 1
Fixed - putable:
Within 1 year 2 - - -
After 1 year through 3 years 2,054 4 289 -
After 3 years through 5 years 845 2 750 1
After 5 years through 15 years 1,659 4 314 1
Subtotal fixed rate - putable advances 4,560 10 1,353 2
Fixed - amortizing:
Within 1 year 12 - 15 -
After 1 year through 3 years 8 - 18 -
After 3 years through 5 years 6 - 5 -
After 5 years through 15 years 7 - 9 -
Subtotal fixed - amortizing advances 33 - 47 -
Adjustable and variable:
Within 1 year 8,094 18 8,375 13
After 1 year through 3 years 5 - - -
Subtotal adjustable and variable rate advances 8,099 18 8,375 13
Adjustable - callable at borrower’s option:
Within 1 year 400 1 3,000 5
After 1 year through 3 years 2,000 4 - -
Subtotal adjustable - callable at borrower’s option advances 2,400 5 3,000 5
Overdrawn and overnight deposit accounts - - 2 -
Total par value $ 45,818 100 % $ 61,710 100 %
For a discussion of advances credit risk, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Advances.”
Mortgage-Related Products. The mortgage-related products consist of MBS investments and mortgage loans acquired through the Mortgage Partnership Finance® (MPF®) Program. (“Mortgage Partnership Finance” and “MPF” are registered trademarks of the FHLBank of Chicago.)
MBS Investments - The Bank’s MBS portfolio was $15.3 billion at both December 31, 2024 and 2023. During 2024, the Bank’s MBS portfolio was flat as a result of $952 million in purchases and a $129 million increase in the fair values of MBS investments classified as AFS, partially offset by a $304 million decrease in basis adjustments
and $722 million in principal repayments. Average MBS investments were $15.3 billion in 2024, an increase of $2.8 billion from $12.5 billion in 2023. For a discussion of the composition of the Bank’s MBS portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Investments.”
Interest rate payment terms for MBS classified as AFS and HTM at December 31, 2024 and 2023, are shown in the following table:
(In millions) 2024 2023
Amortized cost of AFS securities:
Fixed rate $ 13,069 $ 12,797
Adjustable rate 699 778
Total AFS securities $ 13,768 $ 13,575
Amortized cost of HTM securities:
Fixed rate $ 149 $ 202
Adjustable rate 1,340 1,645
Total HTM securities $ 1,489 $ 1,847
Mortgage Loans - Mortgage loan balances were $693 million at December 31, 2024, a decrease of $61 million from $754 million at December 31, 2023. Average mortgage loans were $725 million in 2024, a decrease of $61 million from $786 million in 2023.
Mortgage loan balances by contractual maturity at December 31, 2024, were as follows:
(In millions) 2024
Within 1 year $ 26
After 1 year through 5 years 111
After 5 years through 15 years 268
Thereafter 253
Total unpaid principal balance $ 658
For more information on the Bank’s mortgage loan portfolio, see “Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies,” “Item 8. Financial Statements and Supplementary Data - Note 6 - Mortgage Loans Held for Portfolio,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk.”
For information on the Bank’s management of interest rate risk and market risk related to the mortgage-related products, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Market Risk.”
Liquidity and Capital Resources
The Bank’s financial strategies are designed to enable the Bank to expand and contract its balance sheet as membership composition and member credit needs change. The Bank’s liquidity and capital resources are designed to support its financial strategies. The Bank’s primary source of liquidity is its access to the debt capital markets through consolidated obligation issuance, which is described in “Item 1. Business - Funding Sources.” The Bank’s status as a GSE is critical to maintaining its access to the capital markets. Although consolidated obligations are backed only by the financial resources of the FHLBanks and are not guaranteed by the U.S. government, the capital markets have traditionally treated the FHLBanks’ consolidated obligations as comparable to federal agency debt, providing the FHLBanks with access to funding at relatively favorable rates. The maintenance of the Bank’s capital resources is governed by its capital plan.
Liquidity
The Bank seeks to maintain the liquidity necessary to repay maturing consolidated obligations for which it is the primary obligor, meet other obligations and commitments, meet expected and unexpected member credit demands, and may be used for investment opportunities. The Bank monitors its financial position in order to meet these objectives.
The Bank is also able to contract its balance sheet as borrowers’ credit needs decrease. As changing borrower credit needs result in reduced advances, borrowers will have capital stock in excess of the amount required by the Bank’s capital plan. The Bank’s capital plan allows the Bank to repurchase a borrower’s excess stock, including mandatorily redeemable capital stock, at the Bank’s discretion, subject to certain statutory and regulatory requirements and the Bank’s Risk Management Policy, Capital Plan, and the Framework. Surplus stock is defined as any stock holdings in excess of 115% of a member’s or former member’s minimum stock requirement. The Bank may also allow its consolidated obligations to mature without replacement or repurchase and retire outstanding consolidated obligations, allowing its balance sheet to contract.
The Bank is not able to predict future trends in member credit needs since they are driven by complex interactions among a number of factors, including members’ mortgage loan growth, other asset portfolio growth, deposit growth, and the attractiveness of advances compared to other wholesale borrowing alternatives. The Bank regularly monitors current trends and anticipates future debt issuance needs with the objective of being prepared to fund its members’ credit needs and appropriate investment opportunities.
Short-term liquidity management practices are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Liquidity Risk.” The Bank manages its liquidity needs to enable it to meet all of its contractual obligations on a timely basis, to support its members’ credit needs, and to pay operating expenditures as they come due. At December 31, 2024, the Bank’s contractual obligations on operating leases were $48 million due through 2029 and $14 million due thereafter.
The Bank maintains contingency funding plans to help its obligations and member credit needs in the event of short-term operational disruptions at the Bank or the Office of Finance or short-term disruptions of the capital markets. For further information and discussion of the Bank’s joint and several liability for FHLBank consolidated obligations, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition” and “Item 8. Financial Statements and Supplementary Data - Note 15 - Commitments and Contingencies.” Additional information with respect to the Bank’s consolidated obligations is presented in “Item 8. Financial Statements and Supplementary Data - Note 8 - Consolidated Obligations” and “Note 15 - Commitments and Contingencies.”
In addition, “Item 8. Financial Statements and Supplementary Data - Note 11 - Capital” includes a discussion of the Bank’s mandatorily redeemable capital stock, and “Item 8. Financial Statements and Supplementary Data - Note 12 - Employee Retirement Plans and Incentive Compensation Plans” includes a discussion of the Bank’s retirement plans and related expenses and commitments.
The Bank enters into derivative financial instruments, which create contractual obligations, as part of the Bank’s market risk management. “Item 8. Financial Statements and Supplementary Data - Note 13 - Derivatives and Hedging Activities” includes additional information regarding derivative financial instruments.
Capital
The Bank’s ability to expand as member credit needs increase is based, in part, on the capital stock requirements for advances. A member is required to maintain sufficient capital stock to support its advances and letters of credit activity with the Bank. Unless a member already has sufficient excess stock, it must increase its capital stock investment in the Bank as its balance of outstanding advances increases. The activity-based capital stock requirement is currently 2.7% for outstanding advances and 0.1% of notional balances for outstanding letters of credit. The Bank’s minimum regulatory capital-to-assets ratio requirement is currently 4.0%; therefore, the Bank
maintains a certain required level of retained earnings to support capital compliance and business growth. For more information, see “Item 1. Business - Capital - Dividends and Retained Earnings” and “Item 8. Financial Statements and Supplementary Data - Note 11 - Capital - Excess Stock Repurchase, Retained Earnings, and Dividend Framework.” Because the Bank’s capital plan does not provide for the issuance of Class A stock (non-permanent capital that is redeemable upon six months’ notice), regulatory capital for the Bank is composed of retained earnings and Class B stock, including mandatorily redeemable capital stock (which is classified as a liability for financial reporting purposes), and excludes AOCI.
Retained Earnings - The Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) assesses the level and adequacy of retained earnings and establishes amounts to be retained in restricted retained earnings, which are not made available in the current dividend period, and maintains an amount of total retained earnings at least equal to its required retained earnings as described in the Framework. The Bank satisfies its retained earnings requirement with both restricted retained earnings (i.e., amounts related to the Joint Capital Enhancement (JCE) Agreement) and unrestricted retained earnings. The board of directors periodically reviews the retained earnings methodology and analysis to determine whether any adjustments are appropriate.
Excess Stock - The Bank’s practice is to repurchase the surplus capital stock of all members and the excess stock of all former members on a daily schedule. The Bank calculates the amount of stock to be repurchased each business day based on the shareholder’s capital stock outstanding after all stock transactions are completed for the day, ensuring that each member and former member would continue to meet its minimum capital stock requirement after the repurchase. The Bank may change this practice at any time.
A member may schedule redemption of its excess stock following a five-year redemption period, subject to certain conditions, by providing a written redemption notice to the Bank. Capital stock may also become subject to redemption following a five-year redemption period after a member gives notice of intention to withdraw from membership or attains nonmember status by merger or acquisition, charter termination, or other involuntary membership termination, or after a receiver or other liquidating agent for a member transfers the member’s Bank capital stock to a nonmember entity. Capital stock required to meet a withdrawing member’s membership capital stock requirement may only be redeemed at the end of the five-year redemption period, subject to statutory and regulatory limits and other conditions.
The Bank is required to redeem any mandatorily redeemable capital stock that is in excess of a former member’s minimum stock requirement on or after the expiration of the five-year redemption date.
The Bank will continue to monitor its financial condition, its financial performance, its capital position, overall financial market conditions, and other relevant information as the basis for determining the repurchase of excess stock in future quarters.
On April 11, 2024, the Bank submitted to the Finance Agency an application of proposed amendments to its capital plan. On September 4, 2024, the Finance Agency issued its approval of the application of proposed amendments. The amendments to the Bank's capital plan, which became effective on November 15, 2024, primarily provide the Bank’s Board the option to establish two subclasses of stock for the potential purpose of enabling the declaration of different dividend rates on Membership and Activity stock. The Bank is still assessing the potential establishment of two subclasses of stock and has made no determination at this time. Without further action by the Board, there is no impact on member stock holdings or stock purchase requirements resulting from the amendments to the capital plan.
Provisions of the Bank’s capital plan are more fully discussed in “Item 8. Financial Statements and Supplementary Data - Note 11 - Capital.”
Regulatory Capital Requirements
Under the Housing and Economic Recovery Act of 2008 (Housing Act), the Director of the Finance Agency is responsible for setting the risk-based capital standards for the FHLBanks. The FHLBank Act and regulations governing the operations of the FHLBanks require that the Bank’s minimum capital stock requirement for shareholders must be sufficient to enable the Bank to meet its regulatory requirements for total capital, leverage capital, and risk-based capital. The Bank must maintain: (i) total regulatory capital in an amount equal to at least 4% of its total assets, (ii) leverage capital in an amount equal to at least 5% of its total assets, and (iii) permanent capital in an amount that is greater than or equal to its risk-based capital requirement.
The Finance Agency requires each FHLBank to maintain a ratio of at least 2% of capital stock to total assets in order to help preserve the cooperative structure incentives that encourage members to remain fully engaged in the oversight of their investment in the FHLBank. The Finance Agency will consider the proportion of capital stock to assets, measured on a daily average basis at monthend, when assessing each FHLBank’s capital management practices. As of December 31, 2024 and 2023, the Bank complied with this capital guidance.
Because the Bank issues only Class B stock, regulatory capital and permanent capital for the Bank are both composed of retained earnings and Class B stock, including mandatorily redeemable capital stock (which is classified as a liability for financial reporting purposes). Regulatory capital and permanent capital do not include AOCI. Leverage capital is defined as the sum of permanent capital, weighted by a 1.5 multiplier, plus non-permanent capital.
The risk-based capital requirement is equal to the sum of the Bank’s credit risk, market risk, and 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 an FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined.
The following table shows the Bank’s compliance with the Finance Agency’s capital requirements at December 31, 2024 and 2023. The Bank’s risk-based capital requirement decreased to $1.1 billion at December 31, 2024, from $1.2 billion at December 31, 2023.
Regulatory Capital Requirements
2024 2023
(Dollars in millions) Required Actual Required Actual
Risk-based capital $ 1,058 $ 7,272 $ 1,210 $ 7,446
Total regulatory capital $ 3,269 $ 7,272 $ 3,713 $ 7,446
Total regulatory capital ratio 4.00 % 8.90 % 4.00 % 8.02 %
Leverage capital $ 4,087 $ 10,908 $ 4,641 $ 11,169
Leverage ratio 5.00 % 13.35 % 5.00 % 12.03 %
The Bank’s capital requirements are discussed further in “Item 8. Financial Statements and Supplementary Data - Note 11 - Capital.”
Risk Management
The Bank has an integrated corporate governance and internal control framework designed to support effective management of the Bank’s business activities and the risks inherent in these activities. As part of this framework, the Bank’s board of directors has adopted a Risk Governance Policy that outlines the key roles and responsibilities of the board of directors and management and sets forth how the Bank is organized to achieve its risk management objectives, including the implementation of the Bank’s strategic objectives, risk management strategies, corporate governance, and standards of conduct. The policy also establishes an independent risk oversight function to identify, assess, measure, monitor, and report on the enterprise risk profile in relation to its risk appetite and risk management capabilities of the Bank.
The Bank’s Risk Appetite Framework links risk-taking and risk-mitigating activities to the achievement of the Bank’s strategic objectives and helps bring forth key metrics within the Bank to enable better risk insights and decision making. The framework includes the Bank’s risk appetite statements and related qualitative statements and quantitative risk metrics and tolerances, as established by the board of directors and performed by management to monitor and manage risk accordingly. The Risk Committee and the Board review and approve the Risk Appetite Framework on at least an annual basis.
The Risk Management Policy establishes risk limits, guidelines, and standards for the Bank’s management of financial risk (credit risk, market risk, liquidity risk, and mortgage asset risk), operational risk (people, process, and systems risk), strategic risk, and legal, regulatory, and compliance risk in accordance with Finance Agency regulations and in consideration of industry leading practices, the risk tolerances established by the board of directors, and other applicable guidelines in connection with the Bank’s overall risk management practices.
Strategic Risk
Strategic risk is defined as the possibility of an adverse impact on the Bank’s ability to fulfill its mission and to meet ongoing business and profitability objectives that results from external factors that may occur in both the short- and long-term. Such factors may include, but are not limited to, continued financial services industry consolidation; changes in the membership base and demand for Bank products; the concentration of borrowing among a limited number of borrowers; the introduction of new competing products and services; increased inter-FHLBank and non-FHLBank competition; or significant adverse changes to the effectiveness and competitiveness of the Bank’s products, services, or business model associated with regulatory and legislative changes.
The identification of strategic risks is an integral part of the Bank’s annual planning process, and the Bank’s strategic plan identifies initiatives and plans to address these risks.
Operational Risk
Operational risk is defined as the risk of loss to the Bank resulting from inadequate or failed internal processes, resources, and systems, and from external events. The Bank’s operational risk is controlled through internal programs and controls designed to minimize the risk of operational losses.
Legal, Regulatory, and Compliance Risk
Legal risk is the potential for losses arising from legal disputes impacting the Bank. Regulatory and compliance risk is defined as noncompliance with laws, rules, regulations, agreements, prescribed practices, and ethical standards. The board of director's risk management objective is to manage and mitigate the impact of noncompliance with all regulations and laws applicable to the Bank. Additionally, the Bank will put in place the necessary processes, controls, and frameworks to comply with legal and regulatory requirements. This includes, but is not limited to, directing resources to compliance programs to train personnel and increase awareness of those regulatory areas that pose the highest level of risk to the Bank.
Financial Risk
Financial risk is defined as the variance of the Bank’s financial position or ability to operate due to investment decisions and financial risk management practices specifically related to capital, credit, market (including hedging and funding), mortgage asset, and liquidity risks. Subsequent sections of this document outline the definitions and management of various risk components of the Bank’s financial risk tolerances, as determined by the board of directors.
On August 16, 2024, S&P Global Ratings (S&P) affirmed the long-term issuer credit ratings on all of the FHLBanks at AA+. On February 14, 2024, Moody’s Investors Service (Moody’s) affirmed the Aaa long-term ratings of the FHLBank System.
Changes in the long-term credit ratings of individual FHLBanks do not necessarily affect the credit rating of the consolidated obligations issued on behalf of the FHLBanks. Rating agencies may change or withdraw a rating from time to time because of various factors, including operating results or actions taken, business developments, or changes in their opinion regarding, among other factors, the general outlook for a particular industry or the economy.
Concentration Risk
Concentration risk for the Bank is defined as the risk of economic loss arising from a disproportionately large volume of financial transactions with a limited number of individual members or counterparties.
Advances. If the Bank’s borrowers were to prepay their advances (subject to the Bank’s limitations on the amount of advances prepayments from a single borrower in a day or a month) or repay the advances as they came due and no other advances were made to replace them, the Bank’s assets would decrease significantly and income could be adversely affected. The timing and magnitude of the impact would depend on a number of factors, including: (i) the amount of advances prepaid or repaid and the period over which the advances were prepaid or repaid, (ii) the amount and timing of any decreases in capital, (iii) the profitability of the advances, (iv) the size and profitability of the Bank’s investments, (v) the extent to which debt matured as the advances were prepaid or repaid, and (vi) the ability of the Bank to extinguish debt or transfer it to other FHLBanks and the costs to extinguish or transfer the debt. The Bank’s financial strategies are designed to enable it to expand and contract its balance sheet in view of changes in membership composition and member credit needs. Under the Bank’s capital plan, the Bank may not be required to repurchase all of a shareholder’s excess stock at the Bank’s discretion, subject to certain statutory and regulatory requirements.
The Bank has a high concentration of advances with certain institutions and their affiliates. Advances outstanding to the Bank’s top 10 borrowers and their affiliates decreased by $14.5 billion to $29.3 billion, or 64% of total advances outstanding, at December 31, 2024, from $43.8 billion, or 71% of total advances outstanding, at December 31, 2023. The Bank held a security interest in collateral from each of its top 10 advances borrowers and their affiliates sufficient to support their respective advances outstanding, and the Bank does not expect to incur any credit losses on the advances of its top 10 advances borrowers and their affiliates.
Several of the Bank’s top 10 advance borrowers and their affiliates at yearend 2022 have been acquired by nonmember institutions or were involved in voluntary liquidation, or Federal Deposit Insurance Corporation (FDIC) receivership during 2023 . The loss of advances outstanding to these borrowers is likely to have an adverse impact on the Bank’s advance balances, and, over time, its financial performance. As of December 31, 2024 and 2023, nonmembers accounted for $12.1 billion, or 27%, and $26.0 billion, or 42%, of total advances outstanding, respectively. Nonmembers accounted for $805 million, or 29%, of the Bank’s interest income from advances for 2024. Because these borrowers are nonmembers, when these advances either mature or are prepaid they cannot be replaced by these borrowers, which will adversely affect the Bank’s level of advance balances and total interest income from advances in the future. As a result of the inability of nonmembers to seek new advances, the level of advances and their associated net interest income in the future will be determined by member business, which will be subject to a number of factors including, but not limited to, a member’s ability to generate new business to seek new advances, consolidation within the banking industry, and the economy in general. JPMorgan was the Bank’s largest nonmember borrower as of December 31, 2024. As of December 31, 2024 and 2023, JPMorgan, as a nonmember, had $9.3 billion and $23.8 billion of advances outstanding from the Bank, respectively, assumed from First Republic Bank, that represented approximately 20% and 39% of the Bank's total advances outstanding December 31, 2024 and 2023, respectively. Additionally, at December 31, 2024 and 2023, JPMorgan, as a nonmember, had $49 million and $68 million, respectively, in letters of credit outstanding from the Bank, assumed from First Republic Bank. At December 31, 2024 and 2023, JPMorgan, as a nonmember, held $252 million and $643 million of the Bank’s capital stock, respectively.
See “Item 8. Financial Statements and Supplementary Data - Note 5 - Advances - Concentration Risk” for more information on the concentration in advances.
MPF Program. As of December 31, 2024, Fremont Bank represented $225 million of the outstanding mortgage loan balance, or 34% of the Bank’s total outstanding mortgage loan balance. As of December 31, 2023, Fremont Bank represented $243 million of the outstanding mortgage loan balance, or 34% of the Bank’s total outstanding mortgage loan balance. No other institution represented 20% or more of the Bank's total outstanding mortgage loans at December 31, 2024 and 2023.
Capital Stock. No institution held 10% or more of the Bank’s outstanding capital stock, including mandatorily redeemable capital stock, as of December 31, 2024. JPMorgan Chase, National Association, a nonmember, held $643 million, or 20% of the Bank’s outstanding capital stock, including mandatorily redeemable capital stock, as of December 31, 2023.
Derivative Counterparties. The Bank currently utilizes an approved clearing house, LCH Ltd, and the Bank currently has two approved clearing agents. The Bank monitors the clearing agents through its unsecured credit system. The clearing agents are approved by the Bank’s Credit Committee. The clearing agents also have approved counterparty trading limits with the Bank, subjecting them to annual credit reviews and on-going credit quality surveillance by the Bank’s Credit Department. The parent companies of the clearing agents are monitored through annual reviews, as well as through the Bank’s daily monitoring tools, which include reviewing equity triggers, debt triggers, and credit default swap spread triggers. In addition, exposures to the clearing agents are monitored daily on a swap counterparty report. The Bank does not anticipate any credit losses on its cleared derivatives as of December 31, 2024.
Liquidity Risk
Liquidity risk is defined as the risk that the Bank will be unable to meet its obligations as they come due or meet the credit needs of its members and eligible nonmember borrowers in a timely and cost-effective manner. The Bank is required to maintain minimum levels of liquidity for operating needs and for contingency purposes in accordance with Finance Agency regulations and guidelines and with the Bank’s own Risk Management Policy.
The Bank generally manages operational, contingent, and refinancing risks using a portfolio of cash and short-term investments, U.S. Treasury securities, and access to the debt capital markets. In addition, the Bank maintains alternate sources of funds, detailed in its contingency funding plan, which also includes an explanation of how sources of funds may be allocated under stressed market conditions, such as short-term operational disruptions at the Bank or the Office of Finance or short-term disruptions in the debt capital markets.
The Finance Agency has established base case liquidity guidelines, which may be amended from time to time, that each FHLBank maintain sufficient liquidity at least equal to its anticipated cash outflows, assuming no new consolidated obligation issuance, renewal of all maturing advances, a specified percentage drawdown notional on letters of credit balances, and certain Treasury investments as a source of funds. The Finance Agency’s guidance provides that base case liquidity should generally be maintained for 10 to 30 days. The Bank actively monitors and manages refinancing risk. Finance Agency guidance specifies tolerance levels related to the size of each FHLBank’s funding gaps to measure refinancing risk as the difference between assets and liabilities that are scheduled to mature during a specified period, expressed as a percentage of total assets. The guidance limits three-month and one-year funding gaps between the range of -10% to -20% and -25% to -35%, respectively. Funding gaps are measured at monthend, using the average ratio for the three most recent month ends. The Bank is also required to perform an annual liquidity stress test and to report the results to the Finance Agency.
In addition to the Finance Agency’s guidelines on contingent liquidity, the Bank models its cash commitments and expected cash flows daily to determine its projected liquidity position. If a market or operational disruption occurred that prevented the issuance of new consolidated obligations, the Bank could meet its obligations by: (i) allowing short-term liquid investments to mature, (ii) using eligible securities as collateral for repurchase agreement borrowings, and (iii) if necessary, allowing advances to mature without renewal. In addition, the Bank may be able
to borrow on a short-term unsecured basis from other financial institutions (federal funds purchased) or other FHLBanks (inter-FHLBank borrowings).
As of December 31, 2024 and 2023, the Bank held total sources of funds in an amount that would have allowed the Bank to meet its liquidity needs without issuing new consolidated obligations for over ten days, in accordance with the Finance Agency guidance. In addition, the Bank’s funding gap positions as of December 31, 2024 and 2023, were within the tolerance levels provided by the Finance Agency guidance.
In addition, Section 11(i) of the FHLBank Act authorizes the U.S. Treasury to purchase certain obligations issued by the FHLBanks aggregating not more than $4.0 billion under certain conditions. There were no such purchases by the U.S. Treasury during the years ended December 31, 2024 and 2023.
Credit Risk
Credit risk is defined as the risk that the borrower or counterparty will fail to meet its financial obligations in accordance with agreed upon terms as a result of deterioration in the creditworthiness of the obligor. The Bank manages credit risk by setting credit and collateral terms based on a borrower’s creditworthiness.
Advances. The Bank manages the credit risk of advances and other credit products by setting the credit and collateral terms available to individual institutions based on their creditworthiness and on the quality and value of the assets they pledge as collateral. The Bank also has procedures to assess the mortgage loan quality and documentation standards of institutions that pledge mortgage loan collateral. In addition, the Bank has collateral policies and restricted lending procedures in place to help manage its exposure to institutions that experience difficulty in meeting their capital requirements or other standards of creditworthiness. The Bank reviews and updates its credit and collateral policies and procedures to reflect appropriate risk tolerance thresholds and risk limits on at least an annual basis. These credit and collateral policies balance the Bank’s dual goals of meeting the needs of members and housing associates as a reliable source of liquidity and mitigating credit risk by adjusting credit and collateral terms available to an institution in view of deterioration in the institution’s creditworthiness. The Bank has never experienced a credit loss on an advance.
The Bank determines the maximum amount and maximum term of the advances it will make to a member or housing associate based on the Bank’s credit analysis of the institution’s creditworthiness in accordance with the Bank’s credit and collateral policies and regulatory requirements.
To identify the credit strength of each institution, other than insurance companies, community development financial institutions (CDFIs), and housing associates, the Bank assigns each institution an internal credit quality rating from one to 10, with one as the highest credit quality rating. These ratings are based on results from the Bank’s credit model, which incorporates financial, regulatory, and other qualitative information, including regulatory examination reports.
The Bank determines the maximum amount and maximum term of the advances it will make to an insurance company based on an ongoing risk assessment that considers the member's financial and regulatory standing and other qualitative information deemed relevant by the Bank. This evaluation results in the assignment of an internal credit quality rating from one to ten, with one as the highest credit quality rating.
The Bank determines the maximum amount and maximum term of the advances it will make to a CDFI based on an ongoing risk assessment that considers information from the CDFI’s audited annual financial statements, supplemented by additional information deemed relevant by the Bank. This evaluation results in the assignment of an internal credit quality rating from A to E, with A as the highest credit quality rating.
The Bank determines the maximum amount and maximum term of the advances it will make to a housing associate based on an ongoing risk assessment that considers the housing associate’s financial and regulatory standing and other qualitative information deemed relevant by the Bank.
The Bank underwrites and actively monitors the financial condition and performance of all borrowers and potential borrowers to determine and periodically assess creditworthiness. In accordance with the FHLBank Act, an institution may pledge the following eligible assets to secure advances:
•one-to-four-family first lien residential mortgage loans;
•securities issued, insured, or guaranteed by the U.S. government or any of its agencies, including without limitation MBS backed by Fannie Mae, Freddie Mac, or Ginnie Mae;
•cash or deposits in the Bank;
•certain other real estate-related collateral, such as certain privately issued MBS, multifamily loans, commercial real estate loans, and second lien residential mortgage loans or home equity loans; and
•small business, small farm, and small agribusiness loans that are fully secured by collateral (such as real estate, equipment and vehicles, accounts receivable, and inventory) from community financial institutions.
The Housing Act defines community financial institutions as depository institutions insured by the Federal Deposit Insurance Corporation with average total assets over the preceding three-year period below a defined threshold, to be adjusted for inflation annually by the Finance Agency. The average total asset cap for 2024 was $1.5 billion.
Under the Bank’s written lending agreements with its borrowers, its credit and collateral policies, and applicable statutory and regulatory provisions, the Bank has the right to take a variety of actions to address credit and collateral concerns, including calling for the borrower to pledge additional or substitute collateral (including ineligible collateral) at any time that advances are outstanding to the borrower, and requiring the delivery of all pledged collateral. In addition, if a borrower fails to repay any advance or is otherwise in default on its obligations to the Bank, the Bank may foreclose on and liquidate the borrower’s collateral and apply the proceeds toward repayment of the borrower’s obligations to the Bank. The Bank’s collateral policies are designed to address changes in the value of collateral and the risks and costs relating to foreclosure and liquidation of collateral, and the Bank periodically adjusts the amount it is willing to lend against various types of collateral to reflect these factors.
The Bank perfects its security interest in securities collateral by taking delivery of all securities at the time they are pledged. The Bank perfects its security interest in loan collateral by filing a Uniform Commercial Code-1 financing statement for each borrower that pledges loans. The Bank may also require delivery of loan collateral under certain conditions (for example, from a newly formed institution or when a borrower's creditworthiness deteriorates below a certain level). In addition, the FHLBank Act provides that any security interest granted to the Bank by any member or member affiliate has priority over the claims and rights of any other party, including any receiver, conservator, trustee, or similar entity that has the rights of a lien creditor, unless these claims and rights would be entitled to priority under otherwise applicable law or are held by bona fide purchasers for value or by parties that have actual perfected security interests.
Pursuant to the Bank’s lending agreements with its members, nonmembers, and housing associates, the Bank limits extensions of credit to an individual institution to a percentage of the market value or unpaid principal balance of the institution’s pledged collateral, known as the borrowing capacity, which the Bank can change from time to time. The borrowing capacity percentage varies according to several factors, including the charter type of the institution, the collateral type, the value assigned to the collateral, the results of the Bank’s collateral field review, the pledging method used for loan collateral (specific identification or blanket lien), the amount of loan data provided (detailed or summary reporting), the data reporting frequency (monthly or quarterly), the institution’s financial strength and condition, and any institution-specific collateral risks. Under the terms of the Bank’s lending agreements, the aggregate borrowing capacity of an institution’s pledged eligible collateral must meet or exceed the total amount of its outstanding advances, other extensions of credit, and certain other obligations and liabilities.
In addition, the total amount of advances made available to each institution may be limited by the financing availability assigned by the Bank, which is generally expressed as a percentage of an institution’s assets, which the Bank can change from time to time. The amount of financing availability is generally determined by each institution’s creditworthiness.
When a nonmember financial institution acquires some or all of the assets and liabilities of a member, including outstanding advances and Bank capital stock, the Bank may allow the advances to remain outstanding, at its
discretion. The nonmember borrower is required to meet the Bank’s applicable credit, collateral, and capital stock requirements, including requirements regarding creditworthiness and collateral borrowing capacity.
The Bank had a long-term funding arrangement with a member borrower that was terminated during the first quarter of 2024.
The following tables present a summary of the status of the credit outstanding and overall collateral borrowing capacity of the Bank’s borrowers as of December 31, 2024 and 2023.
Borrower Credit Outstanding and Collateral Borrowing Capacity
by Unused Borrowing Capacity
December 31, 2024
(Dollars in millions)
Unused Borrowing Capacity
Number of Borrowers
with Credit Outstanding
Credit
Outstanding(1)
Collateral
Borrowing
Capacity(2)
0% - 10% 10 $ 5,719 $ 5,877
11% - 25% 6 10,362 12,103
26% - 50% 23 19,877 35,439
More than 50% 162 29,396 137,135
Total 201 $ 65,354 $ 190,554
December 31, 2023
(Dollars in millions)
Unused Borrowing Capacity
Number of Borrowers
with Credit Outstanding Credit
Outstanding(1)
Collateral
Borrowing
Capacity(2)
0% - 10% 6 $ 28,055 $ 29,699
11% - 25% 8 3,565 4,203
26% - 50% 24 14,557 25,969
More than 50% 180 34,991 163,199
Total 218 $ 81,168 $ 223,070
(1)Includes advances, letters of credit, the market value of swaps, estimated prepayment fees for certain borrowers, and the credit enhancement obligation on MPF loans.
(2)Collateral borrowing capacity does not represent any commitment to lend on the part of the Bank.
Based on the Bank’s credit and collateral policies, its credit analysis of borrowers’ financial condition and the collateral pledged as security for advances, the Bank expects to collect all amounts due according to the contractual terms of the advances. Therefore, no allowance for credit losses on advances is deemed necessary by the Bank as of December 31, 2024. The Bank has never experienced any credit losses on advances.
Securities pledged as collateral are assigned borrowing capacities that reflect the securities’ market valuations and market liquidation risks. The securities collateral pledged largely consists of agency pools and collateralized mortgage obligations, agency debt, and U.S. Treasury securities.
Most institutions may choose to pledge loan collateral by specific identification or under a blanket lien. Insurance companies, CDFIs, and housing associates are required to pledge loan collateral by specific identification with monthly reporting. All other borrowers pledging by specific identification must provide a detailed listing of all the loans pledged to the Bank on a monthly basis.
The Bank may require certain de novo institutions (chartered within the last three years), insurance companies, CDFIs, and housing associates to deliver pledged loan collateral to the Bank. Other considerations for delivery of pledged collateral may include the institution’s creditworthiness, satisfactory maintenance of its collateral, and the status of the Bank’s priority of security interest.
As of December 31, 2024, of the loan collateral pledged to the Bank, 20% was pledged by 23 institutions by specific identification, 45% was pledged by 117 institutions under a blanket lien with detailed reporting, and 35%
was pledged by 139 institutions under a blanket lien with summary reporting. For each institution that pledges loan collateral, the Bank conducts loan collateral field reviews once every six months or every one, two, or three years, depending on the risk profile of the institution and the types of collateral pledged.
As of December 31, 2024, the Bank’s maximum borrowing capacities as a percentage of the assigned market value of mortgage loan collateral pledged under a blanket lien with detailed reporting were as follows: 84% for first lien residential mortgage loans, 81% for multifamily mortgage loans, 81% for commercial mortgage loans, and 69% for second lien residential mortgage loans. The maximum borrowing capacity for small business, small agribusiness, and small farm loans was 50% of the unpaid principal balance, although most of these loans are pledged under blanket lien with summary reporting, with a maximum borrowing capacity of 25%. The highest borrowing capacities are available to institutions that pledge under a blanket lien with detailed reporting because the detailed loan information allows the Bank to assess the value of the collateral more precisely and because additional collateral is pledged under the blanket lien that may not receive borrowing capacity but may be liquidated to repay advances in the event of default. The Bank may review and change the maximum borrowing capacity for any type of loan collateral at any time.
The following table presents the mortgage loan collateral pledged at December 31, 2024 and 2023.
Composition of Loan Collateral Pledged
(In millions) 2024 2023
Loan Type Unpaid Principal
Balance Borrowing
Capacity Unpaid Principal
Balance Borrowing
Capacity
First lien residential mortgage loans $ 130,538 $ 89,568 $ 162,389 $ 103,893
Second lien residential mortgage loans and home equity lines of credit 13,183 6,421 14,112 6,735
Multifamily mortgage loans 35,095 22,245 56,957 34,656
Commercial mortgage loans 71,907 45,632 83,713 50,891
Loan participations(1)
963 343 1,369 468
Small business, small farm, and small agribusiness loans 1,443 356 1,632 420
Total $ 253,129 $ 164,565 $ 320,172 $ 197,063
(1)The unpaid principal balance for loan participations is 100% of the outstanding loan amount. The borrowing capacity for loan participations is based on the participated amount pledged to the Bank.
The Bank holds a security interest in subprime residential mortgage loans pledged as collateral by members and by nonmembers. Subprime loans are defined as loans with a borrower FICO score of less than or equal to 660 at origination, or if the original FICO score is not available, as loans with a current borrower FICO score of less than or equal to 660. At December 31, 2024 and 2023, the unpaid principal balance of these loans totaled $5.5 billion and $3.7 billion, respectively. The Bank reviews and assigns borrowing capacities to subprime mortgage loans as it does for all other types of loan collateral, taking into account the known credit attributes in the pricing of the loans. All advances, including those made to borrowers pledging subprime mortgage loans, are required to be fully collateralized. The Bank limits the amount of borrowing capacity that may be supported by subprime collateral. At December 31, 2024 and 2023, the borrowing capacity of these loans totaled $3.9 billion and $2.1 billion, respectively.
MPF Program. The Bank and any participating financial institution share in the credit risk of the mortgage loans sold to the Bank by that institution under the MPF Traditional product as specified in a master agreement. After June 30, 2021, the Bank no longer directly purchases, or facilitates the purchase of, mortgage loans from its members.
The Bank performs a quarterly assessment of its mortgage loans held for portfolio to estimate expected credit losses. An allowance for credit losses is recorded with a corresponding adjustment to the provision for/(reversal of) credit losses. The Bank measures expected credit losses on mortgage loans on a loan-level basis, factoring in the credit enhancement structure at the master commitment level.
Delinquencies amounted to 3.89% of the total mortgage loans in the Bank’s portfolio as of December 31, 2024, and 3.30% of the total mortgage loans in the Bank’s portfolio as of December 31, 2023.
The following table presents risk elements and credit ratios for the Bank’s mortgage loans at December 31, 2024 and 2023. The amount of charge-offs and recoveries of allowance for credit losses on the mortgage loan portfolio were de minimis for the years ended December 31, 2024 and 2023.
Unpaid Principal Balance (Dollars in millions)
2024 2023
Average loans outstanding during the period $ 688 $ 746
Mortgage loans held for portfolio $ 658 $ 716
Nonaccrual loans $ 16 $ 15
Allowance for credit losses on mortgage loans held for portfolio $ 1 $ 1
Ratio of net charge-offs to average loans outstanding during the period 0.01 % - %
Ratio of allowance for credit losses to mortgage loans held for portfolio 0.13 % 0.13 %
Ratio of nonaccrual loans to mortgage loans held for portfolio 2.42 % 2.12 %
Ratio of allowance for credit losses to nonaccrual loans 5.43 % 6.18 %
Investments. The Bank has adopted credit policies and exposure limits for investments that promote risk limitation, diversification, and liquidity. These policies determine eligible counterparties and restrict the amounts and terms of the Bank’s investments with any given counterparty according to the Bank’s own capital position as well as the capital and creditworthiness of the counterparty.
The Bank monitors its investments for substantive changes in relevant market conditions and any declines in fair value. For securities in an unrealized loss position because of factors other than movements in interest rates, such as widening of mortgage asset spreads, the Bank considers whether it expects to recover the entire amortized cost basis of the security by comparing the expectations of the present value of the cash flows to be collected from the security with the amortized cost basis of the security.
When the fair value of an individual investment security falls below its amortized cost, the Bank evaluates whether an allowance for credit losses is necessary on the security. The Bank recognizes an allowance for credit losses when it determines that it will be unable to recover the entire amortized cost basis of the security and the fair value of the investment security is less than its amortized cost. The Bank considers its intent to hold the security and whether it is more likely than not that the Bank will be required to sell the security before its anticipated recovery of the remaining cost basis, and other factors. The Bank generally views changes in the fair value of the securities caused by movements in interest rates to be temporary.
The following table presents the Bank’s investment credit exposure at December 31, 2024, based on the lowest of the long-term credit ratings provided by Moody’s, S&P, or Fitch Ratings (Fitch) ratings.
Carrying Value
(In millions) Credit Rating(1)
Investment Type AAA AA A BBB Below Investment Grade Unrated Total
U.S. obligations - Treasury securities $ - $ 6,510 $ - $ - $ - $ - $ 6,510
MBS:
Other U.S. obligations - single-family - 29 - - - - 29
MBS - GSEs:
GSEs - single-family(2)
4 488 2 - 1 - 495
GSEs - multifamily - 13,709 - - - - 13,709
Total MBS - GSEs 4 14,197 2 - 1 - 14,204
PLRMBS - 15 21 30 519 473 1,058
Total MBS 4 14,241 23 30 520 473 15,291
Total securities 4 20,751 23 30 520 473 21,801
Interest-bearing deposits - 546 3,219 - - - 3,765
Securities purchased under agreements to resell(3)
- 5,500 - - - 2,250 7,750
Federal funds sold
- 895 750 - - - 1,645
Total investments $ 4 $ 27,692 $ 3,992 $ 30 $ 520 $ 2,723 $ 34,961
(1)Credit ratings grades of BB and lower are considered below investment grade.
(2)The Bank has one security guaranteed by Fannie Mae but rated below investment grade at December 31, 2024, because of extraordinary expenses incurred during bankruptcy of the security's sponsor in 2008.
(3)Unrated counterparties for these investments were broker-dealers, qualifying for limited trading programs authorized by the Bank.
Bank policies set forth the creditworthiness requirements for member and nonmember counterparties for unsecured credit. All federal funds counterparties (members and nonmembers) must be federally insured financial institutions or domestic branches of foreign commercial banks. Finance Agency ratings for members and nonmember counterparties are mapped to equivalent internal credit quality ratings on a rating scale of FHFA 1 through FHFA 7, reflecting progressively lower credit quality. The Bank uses internal credit quality ratings to determine maximum limits to members and nonmembers. The Bank will determine the counterparty’s credit rating by using primary sources such as proprietary external ratings, other credit and fixed income research, company reports, and market-based indications.
The Bank’s unsecured investment credit limits and terms for member counterparties may be less restrictive than for nonmember counterparties because the Bank has access to more information about members to assist in evaluating the member counterparty credit risk.
The Bank actively monitors its credit exposures and the credit quality of its counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, likelihood of parental or sovereign support, and the current market perceptions of the counterparties. The Bank may also consider general macroeconomic and market conditions and political stability when establishing limits on unsecured investments with U.S. branches and agency offices of foreign commercial banks. As a result of deteriorating financial condition or concerns about adverse economic or market developments, the Bank may reduce limits or terms on unsecured investments or suspend a counterparty.
Finance Agency regulations limit the amount of unsecured credit that an individual FHLBank may extend to a single counterparty. In addition, the FHLBanks are prohibited by Finance Agency regulation from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks.
Under Finance Agency regulations, the total amount of unsecured credit that an FHLBank may extend to a group of affiliated counterparties for term extensions of unsecured credit and overnight federal funds sales, combined, may
not exceed 30% of the FHLBank’s total capital. These limits on affiliated counterparty groups are in addition to the limits on extensions of unsecured credit applicable to any single counterparty within the affiliated group.
The following table presents the unsecured credit exposure with counterparties by investment type at December 31, 2024 and 2023.
Carrying Value(1)
(In millions) 2024 2023
Interest-bearing deposits $ 3,765 $ 2,922
Federal funds sold 1,645 3,861
Total $ 5,410 $ 6,783
(1)Excludes unsecured investment credit exposure to U.S. government agencies and instrumentalities, government-sponsored enterprises, and supranational entities and does not include related accrued interest as of December 31, 2024 and 2023.
The following table presents the credit ratings of the unsecured investment credit exposures presented by the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks, based on the lowest of the credit ratings provided by Moody’s, S&P, or Fitch ratings. This table does not reflect the foreign sovereign government’s credit rating. At December 31, 2024, 30% of the Bank’s total unsecured investments were to U.S. branches and agency offices of foreign commercial banks. At December 31, 2024, all of the unsecured investments held by the Bank had overnight maturities.
Carrying Value(1)
(In millions) Credit Rating(2)
Domicile of Counterparty AA A Total
Domestic $ 546 $ 2,869 $ 3,415
U.S. subsidiaries of foreign commercial banks - 350 350
Total domestic and U.S. subsidiaries of foreign commercial banks 546 3,219 3,765
U.S. branches and agency offices of foreign commercial banks:
Australia 495 - 495
Finland 400 - 400
Netherlands - 750 750
Total U.S. branches and agency offices of foreign commercial banks 895 750 1,645
Total unsecured credit exposure $ 1,441 $ 3,969 $ 5,410
(1)Excludes unsecured investment credit exposure to U.S. government agencies and instrumentalities, government-sponsored enterprises, and supranational entities and does not include related accrued interest as of December 31, 2024.
(2)Does not reflect changes in ratings, outlook, or watch status occurring after December 31, 2024. These ratings represent the lowest rating available for each unsecured investment owned by the Bank, based on the ratings provided by Fitch, Moody’s, or S&P. The Bank’s internal rating may differ from this rating.
The Bank’s MBS investments include PLRMBS, all of which were AAA-rated at the time of purchase, and agency residential MBS, which are backed by Fannie Mae, Freddie Mac, or Ginnie Mae. Some of the PLRMBS were issued by or purchased from members, former members, or their affiliates. The Bank has investment credit limits and terms for these investments that do not differ for members and nonmembers. Regulatory policy limits total MBS investments, to three times the Bank’s regulatory capital at the time of purchase. At December 31, 2024, the Bank’s MBS portfolio was 219% of Bank regulatory capital (as determined in accordance with regulations governing the operations of the FHLBanks).
The Bank executes all MBS investments without preference to the status of the counterparty or the issuer of the investment as a nonmember, member, or affiliate of a member.
At December 31, 2024, PLRMBS representing 6% of the amortized cost of the Bank’s MBS portfolio were labeled Alt-A by the issuer. These PLRMBS are generally collateralized by mortgage loans that are considered less risky than subprime loans but more risky than prime loans. These loans are generally made to borrowers with credit
scores that are high enough to qualify for a prime mortgage loan, but the loans may not meet standard underwriting guidelines for documentation requirements, property type, or loan-to-value ratios.
As of December 31, 2024, the Bank’s investment in MBS had gross unrealized losses totaling $51 million, $28 million of which were related to PLRMBS. These gross unrealized losses related to PLRMBS were primarily attributable to illiquidity in the MBS market and market expectations of the credit performance of loan collateral underlying these securities, which caused these assets to be valued at discounts to their amortized cost.
For its agency MBS, the Bank expects to recover the entire amortized cost basis of these securities because the Bank determined that the strength of the issuers’ guarantees through direct obligations or support from the U.S. government is sufficient to protect the Bank from losses. As a result, the Bank determined that, as of December 31, 2024, all of the gross unrealized losses on its agency MBS are temporary.
If conditions in the housing and mortgage markets and general business and economic conditions deteriorate, the fair value of MBS may decline further, and the Bank may experience additional credit losses on PLRMBS in future periods. Additional credit losses could adversely affect the Bank’s earnings and retained earnings and its ability to pay dividends and repurchase capital stock. The Bank cannot predict whether it will be required to record an allowance for credit losses on its PLRMBS in the future.
The following table presents the maturity (based on contractual final principal payment) and yield characteristics of the Bank’s investment portfolio as of December 31, 2024.
(Dollars in millions) Within One Year After One Year But
Within Five Years After Five Years But
Within Ten Years After Ten Years Carrying Value
AFS securities:
U.S. Treasury obligations $ 3,183 $ 3,327 $ - $ - $ 6,510
MBS:
GSEs multifamily:
Freddie Mac - 478 1,202 - 1,680
Fannie Mae - 4,206 6,933 26 11,165
Subtotal GSEs multifamily - 4,684 8,135 26 12,845
PLRMBS - - 21 936 957
Total AFS securities $ 3,183 $ 8,011 $ 8,156 $ 962 $ 20,312
Yield on AFS securities(1)
1.70 % 3.47 % 4.13 % 9.57 % 3.75 %
HTM securities:
MBS:
Other U.S. obligations - single-family - Ginnie Mae $ - $ - $ - $ 29 $ 29
GSEs single-family:
Freddie Mac - - - 88 88
Fannie Mae - - 22 385 407
Subtotal GSEs single-family - - 22 473 495
GSEs multifamily:
Freddie Mac - 392 - - 392
Fannie Mae - 472 - - 472
Subtotal GSEs multifamily - 864 - - 864
PLRMBS - 5 84 12 101
Total HTM securities $ - $ 869 $ 106 $ 514 $ 1,489
Yield on HTM securities(1)
- % 5.21 % 5.55 % 4.95 % 5.14 %
(1) The weighted average yields on AFS and HTM securities are calculated as the sum of each debt security using the period end balances multiplied by the coupon rate adjusted by the impact of amortization and accretion of premiums and discounts, divided by the total debt securities in the applicable HTM or AFS portfolio. The result is then multiplied by 100 to express it as a percentage.
Derivative Counterparties. The Bank has adopted credit policies and exposure limits for uncleared derivatives counterparty credit exposure. Interest rate exchange agreements may be either uncleared or cleared at a clearing house.
Uncleared Derivatives - The Bank’s uncleared derivatives activity is subject to uncleared derivatives regulatory requirements mandating the exchange of variation margin and initial margin if exposure to a counterparty exceeds certain specified thresholds. The Bank selects only highly rated derivative dealers and major banks (derivative dealer counterparties) that meet the Bank’s eligibility criteria to act as counterparties for its uncleared derivative activities. In addition, for all uncleared derivative transactions, the Bank has entered into master netting agreements and credit support agreements with all its derivative dealer counterparties that provide for delivery of margin to limit the Bank’s net unsecured credit exposure to these counterparties. Under these policies and agreements, the amount of unsecured credit exposure to an individual derivative dealer counterparty is set at zero (subject to a minimum transfer amount).
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 notional amount of uncleared derivative transactions exceeds a
specified threshold. The initial margin is required to be held at a third-party custodian and does not change ownership. The Bank, or its counterparty, can only take ownership upon the occurrence of certain events, including an event of default due to bankruptcy, insolvency, or similar proceeding.
All uncleared derivative transactions entered into by the Bank are fully collateralized and subject to a minimum transfer amount, in accordance with variation margin requirements issued by the U.S. Federal bank regulatory agencies and the U.S. Commodity Futures Trading Commission.
Additional information related to uncleared margin rules for uncleared derivative transactions are included in “Item 8. Financial Statements and Supplementary Data - Note 13 - Derivatives and Hedging Activities.”
The Bank is subject to the risk of potential nonperformance by its counterparty in a derivative transaction. A counterparty must deliver or return variation margin to the Bank if the total unsecured exposure to that counterparty exceeds the minimum transfer amount. In addition, if an initial margin threshold is exceeded, the Bank will post and collect initial margin to further protect against potential counterparty nonperformance.
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, 2024.
Cleared Derivatives - In a cleared derivatives transaction, the Bank is subject to nonperformance by the clearing house and its futures commission merchant or clearing agent. The requirement that the Bank post initial margin and settle variation margin through a clearing agent to the clearing house exposes the Bank to institutional credit risk if its futures commission merchant, or clearing agent, fails to meet its obligations. The use of a clearing house, or central counterparty, lowers overall credit risk exposure because it employs standard valuation and initial and variation margin processes and is specifically designed to withstand remote but plausible futures commission merchant default credit events. Variation margin is settled for changes in the value of the portfolio, and initial margin is posted for changes in risk profile of the portfolio. The Bank does not anticipate any credit losses on its cleared derivatives as of December 31, 2024.
The increase or decrease in the credit exposure net of cash collateral, from one period to the next, may be affected by changes in several variables, such as interest rates, the size and composition of the portfolio, market values of derivatives, and accrued interest. Based on the master netting arrangements, its credit analyses, and the collateral requirements in place with each counterparty, the Bank does not expect to incur any credit losses on its derivative agreements.
The following table presents the Bank’s credit exposure to its derivative dealer counterparties as of December 31, 2024.
December 31, 2024
(In millions)
Counterparty Credit Rating(1)
Notional Amount Net Fair Value of Derivatives Before Collateral Cash Collateral Pledged
to/ (from) Counterparty Noncash Collateral Pledged
to/ (from) Counterparty Net Credit
Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives
AA $ 594 $ 38 $ (38) $ - $ -
A 6,536 363 (362) - 1
Cleared derivatives(2)
62,056 16 13 504 533
Total derivative positions with credit exposure to nonmember counterparties 69,186 $ 417 $ (387) $ 504 $ 534
Derivative positions without credit exposure 20,690
Total notional $ 89,876
(1)The credit ratings grades used by the Bank are based on the lower of Moody's or S&P ratings.
(2)Represents derivative transactions cleared with LCH Ltd, the Bank’s clearing house, which was rated AA- with a stable outlook by S&P at December 31, 2024 and 2023.
Market Risk
Market risk is defined as the risk to the Bank’s market value of capital and future earnings (excluding the impact of any cumulative net gains or losses on derivatives and associated hedged items and on financial instruments carried at fair value) as a result of movements in market interest rates, interest rate spreads, interest rate volatility, and other market factors (market rate factors). This profile reflects the Bank’s objective of maintaining a conservative asset-liability mix and its commitment to providing value to its members through products and dividends without subjecting their investments in Bank capital stock to significant market risk.
The Bank’s Risk Appetite Framework includes a market risk management objective aimed at maintaining a relatively low adverse exposure of the market value of capital and future earnings (excluding the impact of any cumulative net gains or losses on derivatives and associated hedged items and on financial instruments carried at fair value) to changes in market rate factors.
Market risk identification and measurement are primarily accomplished through market value of capital sensitivity analyses and projected earnings and adjusted net interest income as a percent of the capital sensitivity analyses. The Risk Appetite Framework approved by the Bank’s board of directors establishes market risk limits and market risk measurement standards at the product level. Additional guidelines approved by the Bank’s Enterprise Risk Committee apply to the Bank’s advances-related products and the mortgage-related products. These guidelines provide limits that are monitored at the product level and are consistent with the Bank’s Risk Appetite Framework. Market risk is managed for each product regularly. Compliance with Bank limits and guidelines is reviewed by the Bank’s board of directors on a regular basis, along with a corrective action plan if applicable.
Market Value of Capital Sensitivity - The Bank uses market value of capital sensitivity (the interest rate sensitivity of the net fair value of all assets, liabilities, and interest rate exchange agreements) as an important measure of the Bank’s exposure to changes in interest rates.
The Bank’s market value of capital sensitivity risk limits for the potential adverse impact of an instantaneous parallel shift of a plus or minus 100-basis-point change in interest rates from current rates (base case) is no worse than a 3.0% change in the estimated market value of capital. In addition, the risk limits for the potential adverse impact of an instantaneous plus or minus 100-basis-point change in interest rates measured from interest rates that are 200 basis points above or below the base case is no worse than 4.0% of the estimated market value of capital. In the case where a market risk sensitivity compliance metric cannot be estimated with a parallel shift in interest rates
because of prevailing low interest rates, the sensitivity metric is not reported. The Bank’s measured market value of capital sensitivity was within the limits as of December 31, 2024.
To determine the Bank’s estimated risk sensitivities to interest rates for the market value of capital sensitivity, the Bank uses a third-party proprietary asset and liability system to calculate estimated market values under alternative interest rate scenarios. The system analyzes all of the Bank’s financial instruments, including derivatives, on a transaction-level basis using sophisticated valuation models with consistent and appropriate behavioral assumptions and current position data. The system also includes a third-party mortgage prepayment model.
At least annually, the Bank reexamines the major assumptions and methodologies used in the model, including valuation methods, discounting curves, and mortgage prepayment assumptions. The Bank also compares the mortgage prepayment assumptions in the third-party model to other sources, including actual mortgage prepayment history.
The following table presents the sensitivity of the market value of capital (the market value of all of the Bank’s assets, liabilities, and associated interest rate exchange agreements, with mortgage assets valued using market spreads implied by current market prices) to changes in interest rates. The table presents the estimated percentage change in the Bank’s market value of capital that would be expected to result from changes in interest rates under different interest rate scenarios, using market spread assumptions as of December 31, 2024 and 2023.
Market Value of Capital Sensitivity
Estimated Percentage Change in Market Value of Bank Capital
for Various Changes in Interest Rates
Interest Rate Scenario(1)
2024 2023
+200 basis-point change
-2.4 % -2.3 %
+100 basis-point change
-1.2 -1.1
-100 basis-point change(2)
+1.2 +1.0
-200 basis-point change(2)
+2.3 +1.8
(1)Instantaneous change from actual rates at dates indicated.
(2)Interest rates for each maturity are limited to non-negative rates.
The Bank’s estimates of the sensitivity of the market value of capital to changes in interest rates as of December 31, 2024, are comparable with the estimates as of December 31, 2023. Compared to December 31, 2023, interest rates as of December 31, 2024, have decreased 114 basis points for the one-month Treasury bill, increased 56 basis points for the five-year Treasury note, and increased 72 basis points for the 10-year Treasury note.
The Bank’s Risk Management Policy provides guidelines for the payment of dividends and the repurchase of excess stock based on the ratio of the Bank’s estimated market value of total capital to par value of capital stock. If this ratio at the end of any quarter is: (i) less than 100% but greater than or equal to 90%, any dividend would be limited to an annualized rate no greater than the daily average of the federal funds effective rate for the applicable quarter (subject to certain conditions), and any excess stock repurchases would not exceed $500 million (subject to certain conditions); (ii) less than 90% but greater than or equal to 70%, any dividend and any excess stock repurchases would be subject to the same limitations and conditions as in (i) above, except that any excess stock repurchases would not exceed 4% of the Bank’s outstanding capital stock as of the repurchase date; and (iii) less than 70%, the Bank would not pay a dividend, not repurchase excess stock (but continue to redeem excess stock as provided in the Bank’s capital plan), limit the acquisition of certain assets, and review the Bank’s risk policies. A decision by the board of directors to declare or not declare any dividend or repurchase any excess stock is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks. The ratio of the Bank’s estimated market value of total capital to par value of capital stock was 264% as of December 31, 2024.
Net Interest Income as a Percent of Capital - The Bank assesses the impact of interest rate changes on its projected earnings by monitoring its adjusted net interest income as a percent of capital. Adjusted net interest income includes
interest income and expense associated with net settlements from economic hedges, excludes interest income and expense associated with changes in fair value for instruments designated as fair value hedges, and excludes interest expense related to mandatorily redeemable capital stock.
The measurement is based on current period economic earnings that exclude the effects of unrealized net gains or losses resulting from the Bank’s derivatives and associated hedged items and from financial instruments carried at fair value, which will generally reverse through changes in future valuations and settlements of contractual interest cash flows over the remaining contractual terms to maturity or by the call or put date of the assets and liabilities held under the fair value option, hedged assets and liabilities, and derivatives. Economic earnings also exclude the interest expense on mandatorily redeemable capital stock.
The Bank’s Risk Appetite Framework incorporates a limit on the adverse sensitivity of projected net interest income as a percent of capital. The Bank’s net interest income on capital sensitivity limit to the potential adverse impact of an instantaneous parallel shift of a plus or minus 200 basis-point change in interest rates from current rates (base case) to no worse than a -210 basis-points change from the base-case projected net interest income on capital. With the indicated interest rate shifts, the net interest income on capital for the 12-month horizon is projected to remain within the limit of -210 basis-points.
Duration Gap - Duration gap is the difference between the estimated durations (market value sensitivity) of assets and liabilities (including the impact of interest rate exchange agreements) and reflects the extent to which estimated maturity and repricing cash flows for assets and liabilities are matched. The Bank monitors duration gap analysis and does not have a risk limit. In 2024 and 2023, the Bank’s assets durations exceeded its liabilities durations, as shown in the following table.
Duration Gap Analysis
2024 2023
(Dollars in millions) Amount
(In millions) Duration Gap(1)
(In months)
Amount
(In millions) Duration Gap(1)
(In months)
Assets $ 81,735 2.1 $ 92,828 1.8
Liabilities 74,731 0.9 86,160 0.8
Net $ 7,004 1.2 $ 6,668 1.0
(1)Duration gap values include the impact of interest rate exchange agreements.
The Bank manages the performance and interest rate risks of the advances-related products and mortgage-related products within prescribed guidelines and policy limits.
Advances-Related Products - Interest rate risk arises from the advances-related products primarily through the use of shareholder-contributed capital and retained earnings to fund fixed rate investments of targeted amounts and maturities. In general, advances result in very little net interest rate risk for the Bank because most fixed rate advances with original maturities greater than three months and all advances with embedded options are simultaneously hedged with an interest rate swap with terms to offset the advance. The interest rate swap generally is maintained as a hedge for the life of the advance. These hedged advances effectively create a pool of variable rate assets, which, in combination with the strategy of raising debt swapped to variable rate liabilities, creates an advances portfolio with low net interest rate risk.
Money market investments used for liquidity management generally have maturities of one month or less. In addition, to increase the Bank’s liquidity position, the Bank invests in Treasury securities, generally with terms up to four years. These fixed rate investments are swapped to variable rate investments.
The interest rate risk in advances-related products is primarily associated with the Bank’s strategy for investing capital. The Bank’s strategy is generally to invest 50% of capital in short-term (maturities of three months or less) and 50% intermediate-term (laddered maturities of up to four years). However, this strategy may be altered from time to time depending on market conditions. The strategy to invest 50% of capital in short-term assets is intended to mitigate the market value of capital risks associated with the potential repurchase or redemption of excess stock. Excess stock usually results from a decline in a borrower’s outstanding advances or by a membership termination. Under the Bank’s capital plan, capital stock, when repurchased or redeemed, is required to be repurchased or redeemed at its par value of $100 per share, subject to certain regulatory and statutory limits. The strategy to invest 50% of capital in short to intermediate maturities is intended to take advantage of the higher earnings available from a generally positively sloped yield curve, when intermediate-term investments generally have higher yields than short-term investments.
The Bank updates the repricing and maturity gaps for actual asset, liability, and derivative transactions that occur in the advances-related products regularly. The Bank regularly compares the targeted repricing and maturity gaps to the actual repricing and maturity gaps to identify rebalancing needs for the targeted gaps. On a weekly basis, the Bank evaluates the projected impact of expected maturities and scheduled repricing of assets, liabilities, and interest rate exchange agreements on the interest rate risk of the advances-related products. These analyses are used to measure and manage potential reinvestment risk (when the remaining term of advances is shorter than the remaining term of the financing) and potential refinancing risk (when the remaining term of advances is longer than the remaining term of the financing).
Because of the short-term and variable rate nature of the assets, liabilities, and derivatives of the advances-related products, the Bank’s interest rate risk guidelines address the amounts of net assets that are expected to mature or reprice in a given period. The market value sensitivity analyses and net interest income simulations are also used to identify and measure risk and variances to the target interest rate risk exposure in the advances-related products.
Mortgage-Related Products - The Bank’s mortgage assets include MBS, most of which are classified as HTM or AFS, with a small amount classified as trading, and mortgage loans held for portfolio purchased under the MPF Program. The Bank is exposed to interest rate risk from the mortgage-related products because the principal cash flows of the mortgage assets and the liabilities that fund them are not exactly matched through time and across all possible interest rate scenarios, given the effect of mortgage prepayments.
The Bank manages the interest rate risk and market risk of the mortgage-related products through selected funding and hedging strategies. The total carrying value of MBS and mortgage loans at December 31, 2024, was $16.0 billion, including $15.3 billion in MBS and $694 million in mortgage loans. The total carrying value of MBS and mortgage loans at December 31, 2023, was $16.1 billion, including $15.3 billion in MBS and $755 million in mortgage loans. Floating rate securities, and fixed rate multifamily securities that have been converted to floating rate through the use of interest rate swaps, were $14.9 billion, or 93%, of MBS and mortgage loans at December 31, 2024, and $14.9 billion, or 92%, of MBS and mortgage loans at December 31, 2023. Intermediate and long-term fixed rate assets, whose interest rate and market risks have been partially offset through the use of fixed rate callable debt, fixed rate non-callable debt, and certain interest rate swaps, were $1.1 billion, or 7%, of MBS and mortgage loans, at December 31, 2024, and $1.2 billion, or 8%, of MBS and mortgage loans at December 31, 2023.
The estimated market risk of the mortgage-related products is managed both at the time an asset is purchased and on an ongoing basis for the total portfolio. At the time of purchase (for all significant mortgage asset acquisitions), the Bank analyzes the estimated earnings sensitivity and estimated market value sensitivity, taking into consideration the estimated mortgage prepayment sensitivity of the mortgage assets and anticipated funding and hedging activities under various interest rate scenarios. The related funding and hedging transactions are executed at or close to the time of purchase of a mortgage asset.
At least monthly, the Bank reviews the estimated market risk profile of the entire portfolio of mortgage assets and related funding and hedging transactions. The Bank then considers rebalancing strategies to modify the estimated mortgage portfolio market risk profile. Periodically, the Bank performs more in-depth analyses, which include an analysis of the impacts of non-parallel shifts in the yield curve and assessments of the impacts of unanticipated mortgage prepayment behavior. Based on these analyses, the Bank may take actions to rebalance the mortgage
portfolio’s market risk profile. These rebalancing strategies may include entering into new funding and hedging transactions, forgoing or modifying certain funding or hedging transactions normally executed with new mortgage purchases, or terminating certain funding and hedging transactions for the mortgage asset portfolio.
The Bank manages the estimated interest rate risk associated with mortgage assets, including mortgage prepayment risk, through a combination of debt issuance and derivatives. The Bank may obtain funding through callable and non-callable FHLBank System debt and may execute derivative transactions to achieve principal cash flow patterns and market value sensitivities for the liabilities and derivatives that provide a significant offset to the interest rate and mortgage prepayment risks associated with the mortgage assets. Debt issued to finance mortgage assets may be fixed rate debt, callable fixed rate debt, adjustable rate debt, or callable adjustable rate debt. Derivatives may be used as temporary hedges of anticipated debt issuance or long-term hedges of debt used to finance the mortgage assets. The derivatives used to hedge the interest rate risk of fixed rate mortgage assets generally may be callable and non-callable pay-fixed interest rate swaps.
As discussed above in “Market Risk - Market Value of Capital Sensitivity,” the Bank uses market value of capital sensitivity as a primary market value metric for measuring the Bank’s exposure to interest rates. The Bank’s interest rate risk limits and guidelines for the mortgage-related products address the market value of capital sensitivity of the assets, liabilities, and derivatives of the mortgage-related products.
The following table presents results of the estimated market value of capital sensitivity analysis attributable to the mortgage-related products as of December 31, 2024 and 2023.
Market Value of Capital Sensitivity
Estimated Percentage Change in Market Value of Bank Capital
Attributable to the Mortgage-Related Products for Various Changes in Interest Rates
Interest Rate Scenario(1)
2024 2023
+200 basis-point change -0.6 % -0.3 %
+100 basis-point change -0.3 -0.1
-100 basis-point change(2)
+0.2 +0.1
-200 basis-point change(2)
+0.5 0.0
(1)Instantaneous change from actual rates at dates indicated.
(2)Interest rates for each maturity are limited to non-negative rates.
The mortgage portfolio’s estimates of the sensitivity of the market value of capital to changes in interest rates as of December 31, 2024, are comparable with the estimates as of December 31, 2023.
Interest Rate Exchange Agreements
A derivative transaction or interest rate exchange agreement is a financial contract whose fair value is generally derived from changes in the value of an underlying asset or liability. The Bank uses interest rate swaps; interest rate cap and floor agreements; and callable and putable interest rate swaps (collectively, interest rate exchange agreements) to manage its exposure to market risks inherent in its ordinary course of business, including its lending, investment, and funding activities.
The Bank uses interest rate exchange agreements to implement the following hedging strategies for addressing market risk:
•To convert fixed rate advances and consolidated obligations to adjustable rate structures, which reduces the Bank’s exposure to fixed interest rates.
•To reduce the interest rate sensitivity and modify the repricing frequency of assets and liabilities.
•To obtain callable fixed rate equivalent funding by entering into a callable pay-fixed interest rate swap in connection with the issuance of a short-term discount note. The callable fixed rate equivalent funding is used to reduce the Bank’s exposure to prepayment of mortgage assets.
•To offset an embedded option in advances and consolidated obligations.
The following table summarizes the Bank’s interest rate exchange agreements by type of hedged item, hedging instrument, associated hedging strategy, accounting designation as specified under the accounting for derivative instruments and hedging activities, and notional amount as of December 31, 2024 and 2023.
Interest Rate Exchange Agreements
(In millions) Notional Amount
Hedging Instrument Hedging Strategy Hedge Designation 2024 2023
Hedged Item: Advances
Pay fixed, receive adjustable interest rate swap Fixed rate advance converted to an adjustable rate Fair Value Hedge $ 24,307 $ 37,696
Received fixed, pay adjustable interest rate swap Adjustable rate advance converted to a fixed rate Economic Hedge(1)
1,585 1,710
Pay fixed, receive adjustable interest rate swap Fixed rate advance converted to an adjustable rate Economic Hedge(1)
2,014 4,217
Pay fixed, receive adjustable interest rate swap; swap may be callable at the Bank’s option or putable at the counterparty’s option Fixed rate advance (with or without an embedded cap) converted to an adjustable rate; advance and swap may be callable or putable; matched to advance accounted for under the fair value option Economic Hedge(1)
5,269 1,902
Subtotal Economic Hedges(1)
8,868 7,829
Total 33,175 45,525
Hedged Item: Non-Callable Bonds
Receive fixed, pay adjustable interest rate swap
Fixed rate non-callable bond converted to an adjustable rate
Fair Value Hedge 5,893 11,013
Receive fixed, pay adjustable interest rate swap
Fixed rate non-callable bond converted to an adjustable rate
Economic Hedge(1)
- 565
Receive fixed or structured, pay adjustable interest rate swap Fixed rate or structured rate non-callable bond converted to an adjustable rate; matched to non-callable bond accounted for under the fair value option Economic Hedge(1)
285 225
Subtotal Economic Hedges(1)
285 790
Total 6,178 11,803
Hedged Item: Callable Bonds
Receive fixed, pay adjustable interest rate swap with an option to call at the counterparty’s option
Fixed rate callable bond converted to an adjustable rate; swap is callable
Fair Value Hedge 15,885 23,699
Receive fixed, pay adjustable interest rate swap with an option to call at the counterparty’s option
Fixed rate callable bond converted to an adjustable rate; swap is callable
Economic Hedge(1)
590 655
Receive fixed or structured, pay adjustable interest rate swap with an option to call at the counterparty’s option
Fixed or structured rate callable bond converted to an adjustable rate; swap is callable; matched to callable bond accounted for under the fair value option
Economic Hedge(1)
165 408
Subtotal Economic Hedges(1)
755 1,063
Total 16,640 24,762
Hedged Item: Discount Notes
Receive fixed, pay adjustable interest rate swap
Discount note converted to short-term adjustable rate to hedge repricing gaps Fair Value Hedge 9,786 -
Pay fixed, receive adjustable callable interest rate swap Discount note, which may have been previously converted to an adjustable rate, converted to fixed rate callable debt that offsets the prepayment risk of mortgage assets Economic Hedge(1)
50 50
Receive fixed, pay adjustable interest rate swap
Discount note converted to short-term adjustable rate to hedge repricing gaps Economic Hedge(1)
2,735 15,174
Subtotal Economic Hedges(1)
2,785 15,224
Total 12,571 15,224
Interest Rate Exchange Agreements (continued)
(In millions) Notional Amount
Hedging Instrument Hedging Strategy Hedge Designation 2024 2023
Hedged Item: Investment Securities
Pay fixed, receive adjustable interest rate swap Fixed rate investment securities converted to an adjustable rate Fair Value Hedge 20,134 17,680
Hedged Item: Offsetting Derivatives
Pay fixed, receive adjustable interest rate swap and receive fixed, pay adjustable interest rate swap Interest rate swap used to offset the economic effect of interest rate swap that is no longer designated to advances, investments, or consolidated obligations Economic Hedge(1)
1,178 2,443
Total Notional Amount $ 89,876 $ 117,437
(1)Economic hedges are derivatives that are matched to balance sheet instruments or other derivatives that do not meet the requirements for hedge accounting under the accounting for derivative instruments and hedging activities.
Although the Bank uses interest rate exchange agreements to achieve the specific financial objectives described above, certain transactions do not qualify for hedge accounting (economic hedges). An economic hedge introduces the potential for earnings variability caused by changes in the fair value of the derivatives that are recorded in the Bank’s income but are not offset by corresponding changes in the value of the economically hedged assets and liabilities. Finance Agency regulations and the Bank’s Risk Management Policy prohibit the speculative use of interest rate exchange agreements, and the Bank does not trade derivatives for profit.
It is the Bank’s policy to use interest rate exchange agreements only to reduce the market risk exposures inherent in the otherwise unhedged asset and funding positions of the Bank and to achieve other financial objectives of the Bank, such as obtaining low-cost funding for advances and mortgage assets. The primary objective of the financial management practices of the Bank is to preserve and enhance the long-term economic performance and risk management of the Bank. In accordance with the accounting for derivative instruments and hedging activities, reported net income and other comprehensive income will likely exhibit period-to-period volatility, which may be significant.
Critical Accounting Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, if applicable, and the reported amounts of income, expenses, gains, and losses during the reporting period. Changes in these judgments, estimates, and assumptions could potentially affect the Bank’s financial position and results of operations significantly. Although the Bank believes these judgments, estimates, and assumptions to be reasonably accurate based on historical experience and other relevant factors, actual results may differ.
The Bank has identified accounting for derivatives and hedging activities as a critical accounting estimate because it requires management to make subjective or complex judgments about matters, including forward interest rate assumptions, that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. The complexity of derivatives accounting, particularly the assessment of hedge effectiveness and fair value measurement, require careful judgment and can significantly impact the Bank's financial reporting.
This policy and the judgments, estimates, and assumptions are also described in “Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies.”
Derivatives and Hedging Activities
Accounting for derivatives and hedging activities includes the following assumptions and estimates by the Bank: (i) assessing whether the hedging relationship qualifies for hedge accounting, (ii) assessing whether an embedded derivative should be bifurcated, (iii) calculating the estimated effectiveness of the hedging relationship, and (iv) estimating the fair value of the derivatives. The judgments and assumptions that are most critical to the application of this accounting policy are those affecting whether a hedging relationship qualifies for hedge accounting under the requirements of U.S. GAAP and the estimation of fair value of the derivatives, which have a significant impact on the actual results being reported.
Fair Value. The fair values of interest rate-related derivatives and hedged items are estimated using internally developed discounted cash flow models that use market-observable inputs, such as swap rates and volatility assumptions.
Assessment of Effectiveness. The Bank measures its effectiveness for its fair value hedge relationships using the long-haul method, in which the change in fair value of the hedged item must be measured separately from the change in fair value of the derivative. The Bank designs effectiveness testing criteria based on its knowledge of the hedged item and hedging instrument that were employed to create the hedging relationship. The Bank uses regression analysis to evaluate effectiveness results, which must fall within established tolerances. Effectiveness testing is performed at inception and on at least a weekly basis for both prospective considerations and retrospective evaluations.
Hedge Discontinuance. When a hedging relationship fails the effectiveness test, the Bank immediately discontinues hedge accounting for that relationship. In addition, the Bank discontinues hedge accounting when a hedged firm commitment no longer meets the required criteria of a firm commitment. Hedge discontinuance may also occur for certain other changes to hedged items such as changes in maturity dates or strike rates.
Sensitivity. To assess potential fair value accounting sensitivity related to hedging activities on GAAP net income, the Bank performs sensitivity analyses. At December 31, 2024, the fair value of the Bank’s hedge relationships were most sensitive to interest rates and funding spreads:
•The Bank estimated that an instantaneous parallel decrease of 100 basis points in interest rates and an improvement of 20 basis points in funding spreads would result in a combined increase of approximately $27 million in the fair value of derivatives and associated hedged items;
•The Bank estimated that an instantaneous parallel increase of 100 basis points in interest rates and a deterioration of 20 basis points in funding spreads would result in a combined decrease of approximately $28 million in the fair value of derivatives and associated hedged items.
For additional discussion of the Bank’s accounting for derivatives, see “Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies” and “Item 8. Financial Statements and Supplementary Data - Note 13 - Derivatives and Hedging Activities.”
Recently Issued Accounting Guidance and Interpretations
See “Item 8. Financial Statements and Supplementary Data - Note 2 - Recently Issued and Adopted Accounting Guidance” for a discussion of recently issued accounting standards and interpretations.
Legislative and Regulatory Developments
Certain significant legislative and regulatory actions and developments are summarized in this section.
Certain early actions by the new federal executive administration suggest the Bank’s regulatory environment is changing. For example, on January 20, 2025, the administration ordered all executive departments and agencies to, among other things, not propose or issue any rule until a department or agency head appointed or designated by the president reviews and approves the rule. This order applies to proposed rules, among other regulatory actions,
including those discussed in this Legislative and Regulatory Developments section. As a result, there is uncertainty with respect to the ultimate result of the impacted regulatory actions and their ultimate effects on the Bank and the FHLBank System.
Finance Agency’s Review and Analysis of the FHLBank System
On November 7, 2023, the Finance Agency issued a written report titled “FHLBank System at 100: Focusing on the Future,” (System at 100 Report) presenting its review and analysis of the FHLBank System and the actions and recommendations that it plans to pursue in service of its vision for the future of the FHLBank System. The report focused on four broad themes as part of a multi-year collaborative effort with the FHLBanks, their member institutions, and other stakeholders to:
•update and clarify its regulatory statement of the FHLBanks' mission;
•clarify the FHLBanks' liquidity role;
•expand the FHLBanks' housing and community development focus; and
•promote the FHLBanks' operational efficiency.
The Finance Agency has since issued rulemakings and requests for input and made legislative recommendations for the FHLBank System in its 2023 Report to Congress issued on June 14, 2024, consistent with proposed plans and actions included in the System at 100 Report.
Given the current regulatory environment, the Bank is not able to predict what actions, if any, will ultimately result from the Finance Agency’s recommendations in the report, the timing of any such actions, the extent of any changes to the Bank or the FHLBank System, or the ultimate effect on the Bank or the FHLBank System of any such actions. For further discussion of the related risks, see “Item 1A. Risk factors - Regulatory Risks.”
Agreements Regarding the Process to End the Conservatorships of Fannie Mae and Freddie Mac (the Enterprises)
The Enterprises have been in conservatorship since September 2008. On January 2, 2025, the Finance Agency and the U.S. Department of the Treasury entered into certain agreements one of which, among other things, sets out a process that would govern the resolution of the conservatorships of the Enterprises other than in the instances of receivership of the Enterprises. Under applicable law, the Bank is permitted to invest in Enterprise unsecured debt in an amount of up to 100% of its regulatory capital, which consists of Class B stock, retained earnings, and mandatorily redeemable capital stock. However, the amount of such debt in which the Bank is permitted to invest could be reduced or eliminated entirely depending on the nature of the resolution of the Enterprises’ conservatorships. Further, the resolution of the Enterprises’ conservatorships could result in heightened competition with the Enterprises for the purchase of mortgage loans. For example, the Enterprises currently operate subject to certain asset and indebtedness limitations. However, the resolution of their conservatorships could result in such limitations being lifted resulting in increases of their purchases of mortgage loans, which could result in upward pressure on mortgage loan prices. As a result, the Bank’s opportunities to purchase mortgage loans or the profitability from its investments in mortgage loans could be reduced. In addition, the resolution of the Enterprises’ conservatorships could result in an actual or perceived competitive advantage to the Enterprises in the issuance of unsecured debt relative to the FHLBanks, thereby resulting in less favorable debt funding costs for the Bank.
Finance Agency Final Rule on Fair Lending, Fair Housing, and Equitable Housing Finance Plans
On May 16, 2024, the Finance Agency published in the Federal Register its final rule that specifies requirements related to the FHLBanks’ compliance with fair housing and fair lending laws and related regulations, including the Fair Housing Act and the Equal Credit Opportunity Act, and prohibitions on unfair or deceptive acts or practices under the Federal Trade Commission Act (the FTC Act). The final rule (i) addresses the enforcement authority of the Finance Agency; (ii) articulates standards related to boards of directors’ oversight of fair housing, fair lending, and the prohibitions on unfair or deceptive acts or practices under the FTC Act; and (iii) requires each FHLBank to annually report actions it voluntarily takes to address barriers to sustainable housing opportunities for underserved communities (Equitable Housing Report Requirements). The final rule became effective on July 15, 2024, except that the Equitable Housing Report Requirements will become effective on February 15, 2026. The Finance Agency has since issued advisory bulletins setting forth its expectations regarding the FHLBanks’ compliance with the final
rule. The Bank has reviewed this rule and related advisory bulletins and has taken steps to comply with the requirements and proceed in accordance with the guidance. The Bank expects to continue to make progress in these efforts.
Advisory Bulletin on FHLBank Member Credit Risk Management
On September 27, 2024, the Finance Agency issued an advisory bulletin setting forth the Finance Agency’s expectations that an FHLBank’s underwriting and credit decisions should reflect, among other factors, a member’s financial condition and not rely solely on the collateral securing the member’s credit obligations. The advisory bulletin provides guidance for the FHLBanks to implement policies for credit risk governance, member credit assessment, and monitoring of credit conditions, among other considerations. It also provides guidance on the oversight of members in financial distress by recommending implementation of escalation policies; processes for coordination with members’ prudential regulators; and management policies addressing default, failure, and insolvency situations. The Bank has reviewed this advisory bulletin and has taken steps to comply with the requirements and proceed in accordance with the guidance. The Bank expects to continue to make progress in these efforts.
Advisory Bulletin Federal Home Loan Bank System Climate-Related Risk Management and California Climate Disclosure Laws
On September 30, 2024, the Finance Agency issued an advisory bulletin setting forth the Finance Agency’s expectation that each FHLBank should integrate climate-related risk management into its existing enterprise risk management framework over time. The advisory bulletin provides that an effective framework should address climate-related risk governance, such as selection of the related risk appetite and setting strategy and objectives, establishing and implementing plans to mitigate and monitor and report material exposures to such risks, and establishing roles and responsibilities for the board of directors and management. The advisory bulletin requires the FHLBanks to establish metrics that track exposure to climate-related risks and collect related data to quantify risk exposures; conduct climate-related scenario analyses; implement processes to report and communicate climate-related risks to internal stakeholders; and have a plan to respond to natural disasters and support climate resiliency. The advisory bulletin also requires the Bank to identify and incorporate climate-related legal and compliance risk into its existing enterprise risk management framework, including applicable climate-related regulations and federal and state disclosure requirements.
In 2023, the state of California passed several climate-related disclosure laws, including the California Climate Corporate Data Accountability Act and the California Greenhouse Gases: Climate-Related Financial Risk Act, which among other things, require specific disclosures on greenhouse gas emissions created by an organization, as well as disclosures around climate-related risks and the associated response to those risks, for any entity doing business in California with annual revenues in excess of certain thresholds. Implementation for certain aspects is expected to be required beginning in 2026 (for fiscal year 2025), following adoption of enacting regulations by the applicable state regulator.
The Bank continues to monitor developments relevant to these and other climate-related disclosure laws and regulations, including the SEC’s final rule on the enhancement and standardization of climate-related disclosures and notes recent statements from the Acting SEC Chair that indicate that the SEC could take steps to rescind the rule. The Bank has reviewed this advisory bulletin and the other climate-related laws and regulations and has taken steps to comply with the requirements and proceed in accordance with the guidance. The Bank expects to continue to make progress in these efforts.
Proposed Rule on FHLBank System Boards of Directors and Executive Management
On November 4, 2024, the Finance Agency published a notice of proposed rulemaking in the Federal Register that would revise regulations addressing boards of directors and overall corporate governance of the FHLBanks and the Office of Finance. If adopted as proposed, it would, among other things: (1) affect director compensation by allowing the Director of the Finance Agency to establish an annual amount of director compensation that the Director determines is reasonable; (2) require the Bank to complete and submit background checks to the Finance Agency on every nominee for a directorship; (3) change public interest independent director qualifications, in part,
by requiring a person to have advocated for, or otherwise acted primarily on behalf of or for the direct benefit of, consumers or the community to meet the representation requirement; (4) expand the list of qualifying experiences for all Bank independent directors to include artificial intelligence, information technology and security, climate-related risk, Community Development Financial Institutions business models, and modeling; and (5) establish a review process for director performance and participation, together with a process for removing Bank directors for cause. Other proposed revisions address, among other things, Bank conflicts of interest policies, covering all Bank employees, including specific limitations on executive officers and senior management, and record retention.
Several of the proposed revisions could result in significant changes to the nomination, election, and retention of the Bank’s board of directors. Additional director eligibility requirements and limitations on, and potential reductions or limitations to, director compensation resulting from the proposed rule could hinder the Bank’s ability to recruit and retain the talent and expertise that are critical to the Bank’s ability to satisfy its mission, particularly given the growing complexities of the finance industry. The Bank continues to consider the effects that the proposed rule could have on it.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See “Item 7. Management’s Discussion and Analysis of Results of Operations and Financial Condition - Risk Management - Market Risk.”

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
Financial Statements:
Management's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Statements of Condition as of December 31, 2024 and 2023
Statements of Income for the Years Ended December 31, 2024, 2023, and 2022
Statements of Comprehensive Income/(Loss) for the Years Ended December 31, 2024, 2023, and 2022
Statements of Capital Accounts for the Years Ended December 31, 2024, 2023, and 2022
Statements of Cash Flows for the Years Ended December 31, 2024, 2023, and 2022
Notes to Financial Statements
Note 1 - Summary of Significant Accounting Policies
Note 2 - Recently Issued and Adopted Accounting Guidance
Note 3 - Cash and Due from Banks
Note 4 - Investments
Note 5 - Advances
Note 6 - Mortgage Loans Held for Portfolio
Note 7 - Deposits
Note 8 - Consolidated Obligations
Note 9 - Affordable Housing Program
Note 10 - Accumulated Other Comprehensive Income
Note 11 - Capital
Note 12 - Employee Retirement Plans and Incentive Compensation Plans
Note 13 - Derivatives and Hedging Activities
Note 14 - Fair Value
Note 15 - Commitments and Contingencies
Note 16 - Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks
Management's Report on Internal Control Over Financial Reporting
The management of the Federal Home Loan Bank of San Francisco (Bank) is responsible for establishing and maintaining adequate internal control over the Bank's financial reporting. The Bank’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. There are inherent limitations in the ability of internal control over financial reporting to provide absolute assurance of achieving financial reporting objectives. These inherent limitations include the possibility of human error and the circumvention or overriding of controls. Accordingly, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. These inherent limitations are known features of the financial reporting process, however, and it is possible to design into the process safeguards to reduce, although not eliminate, this risk.
Management assessed the effectiveness of the Bank’s internal control over financial reporting as of December 31, 2024. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control - Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concludes that, as of December 31, 2024, the Bank maintained effective internal control over financial reporting. The effectiveness of the Bank's internal control over financial reporting as of December 31, 2024, has been audited by PricewaterhouseCoopers LLP, the Bank's independent registered public accounting firm, as stated in its report appearing on the following page, which expressed an unqualified opinion on the effectiveness of the Bank’s internal control over financial reporting as of December 31, 2024.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of the Federal Home Loan Bank of San Francisco
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying statements of condition of the Federal Home Loan Bank of San Francisco (the “FHLBank”) as of December 31, 2024 and 2023, and the related statements of income, of comprehensive income/(loss), of capital accounts, and of cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, 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.
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.
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 13 and 14 to the financial statements, the FHLBank uses derivatives to reduce funding costs and to manage its exposure to interest rate risks. The total notional amount of derivatives as of December 31, 2024, was $90 billion, of which 85% were designated as hedging instruments, and the fair value of derivative assets and liabilities as of December 31, 2024, was $30 million and $8 million, respectively. The fair values of interest rate-related derivatives and hedged items are estimated using internally developed discounted cash flow models that use market-observable inputs, such as swap rates 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 swap rates 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 models, 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 prices for a sample of interest rate-related derivatives and hedged items and comparison of management’s estimate to the independently developed ranges. Developing the independent range of prices involved testing the completeness and accuracy of data provided by management and independently developing the swap rates and volatility assumptions.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
March 6, 2025
We have served as the FHLBank’s auditor since 1990.
Federal Home Loan Bank of San Francisco
Statements of Condition
(In millions-except par value) December 31,
2024 December 31,
Assets:
Cash and due from banks $ 2 $ 5
Interest-bearing deposits 3,765 2,922
Securities purchased under agreements to resell 7,750 3,650
Federal funds sold 1,645 3,861
Available-for-sale (AFS) securities, net of allowance for credit losses of $30 and $31, respectively (amortized cost of $20,274 and $18,105, respectively)(a)
20,312 18,014
Held-to-maturity (HTM) securities (fair values of $1,469 and $1,818, respectively)
1,489 1,847
Advances (includes $5,286 and $1,898 at fair value under the fair value option, respectively)
45,637 61,335
Mortgage loans held for portfolio, net of allowance for credit losses of $1 and $1, respectively
693 754
Accrued interest receivable 181 184
Derivative assets, net 30 16
Other assets 231 240
Total Assets $ 81,735 $ 92,828
Liabilities:
Deposits $ 1,061 $ 962
Consolidated obligations:
Bonds (includes $436 and $604 at fair value under the fair value option, respectively)
58,174 64,297
Discount notes 14,378 19,187
Total consolidated obligations 72,552 83,484
Mandatorily redeemable capital stock 331 706
Accrued interest payable 412 520
Affordable Housing Program (AHP) payable 140 133
Derivative liabilities, net 8 2
Other liabilities 227 353
Total Liabilities 74,731 86,160
Commitments and Contingencies (Note 15)
Capital:
Capital stock-Class B-Putable ($100 par value) issued and outstanding:
25 shares and 25 shares, respectively
2,458 2,450
Unrestricted retained earnings 3,668 3,475
Restricted retained earnings 815 815
Total Retained Earnings 4,483 4,290
Accumulated other comprehensive income/(loss) (AOCI) 63 (72)
Total Capital 7,004 6,668
Total Liabilities and Capital $ 81,735 $ 92,828
(a) At December 31, 2024 and 2023, $504 million and $771 million, respectively, of these securities were pledged as collateral that may be repledged.
The accompanying notes are an integral part of these financial statements.
Federal Home Loan Bank of San Francisco
Statements of Income
For the Years Ended December 31,
(In millions) 2024 2023 2022
Interest Income:
Advances $ 2,767 $ 3,999 $ 1,226
Interest-bearing deposits 226 222 55
Securities purchased under agreements to resell 66 280 117
Federal funds sold 268 499 214
AFS securities 1,186 921 408
HTM securities 92 100 56
Mortgage loans held for portfolio 22 26 46
Total Interest Income 4,627 6,047 2,122
Interest Expense:
Consolidated obligations:
Bonds 3,143 3,901 715
Discount notes 767 1,249 821
Deposits 72 64 18
Borrowings from other FHLBanks - 2 1
Mandatorily redeemable capital stock 65 32 -
Total Interest Expense 4,047 5,248 1,555
Net Interest Income 580 799 567
Provision for/(reversal of) credit losses - 4 15
Net Interest Income After Provision for/(Reversal of) Credit Losses 580 795 552
Other Income/(Loss):
Net gain/(loss) on advances and consolidated obligation bonds held under fair value option (12) (1) (65)
Net gain/(loss) on derivatives 53 (25) (9)
Private-label residential mortgage-backed securities (PLRMBS) trust settlement
- - 28
Standby letters of credit fees 19 20 17
Termination of long-term funding arrangement
30 - -
Other, net 3 13 (2)
Total Other Income/(Loss) 93 7 (31)
Other Expense:
Compensation and benefits 106 104 93
Other operating expense 59 64 56
Federal Housing Finance Agency 9 9 7
Office of Finance 6 7 6
Voluntary housing and community investment contributions
41 16 3
Other, net (2) - (3)
Total Other Expense 219 200 162
Income/(Loss) Before Assessment 454 602 359
AHP assessment 52 63 36
Net Income/(Loss) $ 402 $ 539 $ 323
The accompanying notes are an integral part of these financial statements.
Federal Home Loan Bank of San Francisco
Statements of Comprehensive Income/(Loss)
For the Years Ended December 31,
(In millions) 2024 2023 2022
Net Income/(Loss) $ 402 $ 539 $ 323
Other Comprehensive Income/(Loss):
Net unrealized gain/(loss) on AFS securities 129 (47) (354)
Net change in pension and postretirement benefits 6 4 (6)
Total other comprehensive income/(loss) 135 (43) (360)
Total Comprehensive Income/(Loss) $ 537 $ 496 $ (37)
The accompanying notes are an integral part of these financial statements.
Federal Home Loan Bank of San Francisco
Statements of Capital Accounts
Capital Stock
Class B-Putable Retained Earnings Total
Capital
(In millions) Shares Par Value Restricted Unrestricted Total AOCI
Balance, December 31, 2021 21 $ 2,061 $ 708 $ 3,124 $ 3,832 $ 331 $ 6,224
Comprehensive income/(loss) 40 283 323 (360) (37)
Issuance of capital stock 68 6,740 6,740
Repurchase of capital stock (50) (4,997) (4,997)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net (1) (46) (46)
Transfers from restricted retained earnings (16) 16 - -
Cash dividends paid on capital stock
(161) (161) (161)
Balance, December 31, 2022 38 $ 3,758 $ 732 $ 3,262 $ 3,994 $ (29) $ 7,723
Comprehensive income/(loss) 83 456 539 (43) 496
Issuance of capital stock 32 3,161 3,161
Repurchase of capital stock (32) (3,217) (3,217)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net (13) (1,252) (1,252)
Cash dividends paid on capital stock
(243) (243) (243)
Balance, December 31, 2023 25 $ 2,450 $ 815 $ 3,475 $ 4,290 $ (72) $ 6,668
Comprehensive income/(loss) - 402 402 135 537
Issuance of capital stock 17 1,720 1,720
Repurchase of capital stock (17) (1,676) (1,676)
Capital stock reclassified from/(to) mandatorily redeemable capital stock, net - (36) (36)
Cash dividends paid on capital stock
(209) (209) (209)
Balance, December 31, 2024 25 $ 2,458 $ 815 $ 3,668 $ 4,483 $ 63 $ 7,004
The accompanying notes are an integral part of these financial statements.
Federal Home Loan Bank of San Francisco
Statements of Cash Flows
For the Years Ended December 31,
(In millions) 2024 2023 2022
Cash Flows from Operating Activities:
Net Income/(Loss) $ 402 $ 539 $ 323
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
Depreciation and amortization/(accretion) (2) 21 270
Provision for/(reversal of) credit losses - 4 15
Change in net fair value adjustment on advances and consolidated obligation bonds held under the fair value option 12 1 65
Change in net derivatives and hedging activities (52) (652) 1,302
PLRMBS trust settlement - - (28)
Other adjustments, net 6 5 6
Net change in:
Accrued interest receivable (10) 127 (272)
Other assets (5) (43) 27
Accrued interest payable (109) 188 302
Other liabilities 6 56 (33)
PLRMBS contingent liability - - (41)
Total adjustments (154) (293) 1,613
Net cash provided by/(used in) operating activities 248 246 1,936
Cash Flows from Investing Activities:
Net change in:
Interest-bearing deposits (701) 1,096 (3,167)
Securities purchased under agreements to resell (4,100) 3,350 8,500
Federal funds sold 2,216 858 629
Trading securities:
Proceeds from maturities and paydowns - 1 251
AFS securities:
Proceeds from sales - - 28
Proceeds from maturities and paydowns 516 260 1,270
Purchases (2,957) (5,152) (5,159)
HTM securities:
Proceeds from maturities and paydowns 359 332 1,015
Advances:
Repaid 883,175 1,368,658 1,704,744
Originated (867,282) (1,340,253) (1,778,003)
Mortgage loans held for portfolio:
Principal collected 58 59 179
Other investing activities, net - (2) (2)
Net cash provided by/(used in) investing activities 11,284 29,207 (69,715)
Federal Home Loan Bank of San Francisco
Statements of Cash Flows (continued)
For the Years Ended December 31,
(In millions) 2024 2023 2022
Cash Flows from Financing Activities:
Net change in deposits and other financing activities 203 26 412
Net proceeds/(payments) on derivative contracts with financing elements
20 20 (10)
Net proceeds from issuance of consolidated obligations:
Bonds 55,714 85,638 70,127
Discount notes 71,409 128,658 216,863
Payments for matured and retired consolidated obligations:
Bonds (62,141) (97,575) (16,086)
Discount notes (76,164) (145,374) (205,111)
Proceeds from issuance of capital stock 1,720 3,161 6,740
Payments for repurchase/redemption of mandatorily redeemable capital stock (411) (551) (44)
Payments for repurchase of capital stock (1,676) (3,217) (4,997)
Cash dividends paid (209) (243) (161)
Net cash provided by/(used in) financing activities (11,535) (29,457) 67,733
Net increase/(decrease) in cash and due from banks (3) (4) (46)
Cash and due from banks at beginning of the period 5 9 55
Cash and due from banks at end of the period $ 2 $ 5 $ 9
Supplemental Disclosures:
Interest paid $ 4,164 $ 5,307 $ 1,078
Supplemental Disclosures of Noncash Investing and Financing Activities:
Transfers of HTM securities to AFS securities - 2 17
Transfers of capital stock to mandatorily redeemable capital stock 36 1,252 46
The accompanying notes are an integral part of these financial statements.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements
Background Information
The Federal Home Loan Bank of San Francisco (Bank), a federally chartered corporation exempt from ordinary federal, state, and local taxation except real property taxes, is one of 11 regional Federal Home Loan Banks (FHLBanks). The FHLBanks are government-sponsored enterprises (GSEs) that serve the public by enhancing the availability of credit for residential mortgages and targeted community development by providing a readily available, competitively priced source of funds to their member institutions. Each FHLBank is operated as a separate entity with its own management, employees, and board of directors. The Bank does not have any special purpose entities or any other type of off-balance sheet conduits. The Bank has a cooperative ownership structure. Regulated financial depositories and insurance companies engaged in residential housing finance, with principal places of business located in Arizona, California, and Nevada, are eligible to apply for membership. In addition, authorized community development financial institutions are eligible to be members of the Bank. All members and former members are required to hold shares of capital stock in the Bank sufficient to meet their minimum stock requirement. State and local housing authorities that meet certain statutory criteria may also borrow from the Bank. While eligible to borrow, these housing authorities are not members of the Bank, and, as such, are not required to hold capital stock. To access the Bank’s products and services, a financial institution must be approved for membership and purchase capital stock in the Bank. The minimum capital stock requirement is generally based on use of Bank products, subject to a minimum asset-based membership requirement that is intended to reflect the value to the member of having ready access to the Bank as a reliable source of competitively priced funds. Bank capital stock is issued, transferred, redeemed, and repurchased at its par value of $100 per share, subject to certain regulatory and statutory limits. It is not publicly traded. All shareholders may receive dividends on their capital stock, to the extent declared by the Bank’s board of directors. The Bank conducts business with its members and nonmembers in the ordinary course of business. See Note 16 - Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks for more information.
The Federal Housing Finance Agency (Finance Agency), an independent federal agency in the executive branch of the United States government, supervises and regulates the FHLBanks and the FHLBanks’ Office of Finance. The Office of Finance is a joint office of the FHLBanks that facilitates the issuance and servicing of the debt instruments (consolidated obligations) of the FHLBanks and prepares the combined quarterly and annual financial reports of the FHLBanks.
The primary source of funds for the FHLBanks is the proceeds from the sale to the public of the FHLBanks’ consolidated obligations through the Office of Finance using authorized securities dealers. As provided by the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), or regulations governing the operations of the FHLBanks, all the FHLBanks have joint and several liability for all FHLBank consolidated obligations. Other funds are provided by deposits, other borrowings, and the issuance of capital stock. The Bank primarily uses these funds to provide advances.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Note 1 - Summary of Significant Accounting Policies
Use of Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make a number of judgments, estimates, and assumptions that may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of income, expenses, gains, and losses during the reporting period. The most significant of these estimates is the accounting for derivatives and hedging activities. Actual results could differ significantly from these estimates.
Estimated Fair Values. A portion of the Bank’s financial instruments lack an available liquid trading market as characterized by frequent exchange transactions between a willing buyer and willing seller. Therefore, the Bank uses financial models employing significant assumptions and present value calculations for the purpose of determining estimated fair values. Thus, the fair values may not represent the actual values of the financial instruments that could have been realized as of yearend or that will be realized in the future.
Fair values for certain financial instruments are based on quoted prices, market rates, or replacement rates for similar financial instruments as of the last business day of the year. The estimated fair values of the Bank’s financial instruments and related assumptions are detailed in Note 14 - Fair Value.
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 cost. The Bank invests in federal funds sold with counterparties that are considered by the Bank to be of investment quality. Interest-bearing deposits include interest-bearing deposits in banks not meeting the definition of a security. Interest income on these investments is accrued as earned and recorded in interest income on the Statements of Income. Accrued interest receivable is recorded separately on the Statements of Condition.
These investments are evaluated quarterly for expected credit losses. If applicable, an allowance for credit loss is recorded with a corresponding adjustment to the provision for/(reversal of) credit losses. The Bank treats securities purchased under agreements to resell as collateralized financing arrangements. 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 interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold.
Investment Securities. The Bank classifies investments as trading, available-for-sale (AFS), or held-to-maturity (HTM) at the date of acquisition. Within these investments, the Bank is primarily subject to credit risk related to private-label residential mortgage-backed securities (PLRMBS) that are supported by underlying mortgage loans. 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 at the time of purchase. Purchases and sales of securities are recorded on a trade date basis.
The Bank classifies certain investments as trading. These securities are held for liquidity purposes and carried at fair value with changes in the fair value of these investments recorded in other income/(loss). The Bank does not participate in speculative trading practices and holds these investments indefinitely as the Bank periodically evaluates its liquidity needs.
The Bank classifies certain securities as AFS and carries these securities at their fair value. Unrealized gains and losses on these securities are recognized in accumulated other comprehensive income (AOCI).
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
HTM securities are carried at cost, adjusted for periodic principal repayments, amortization of premiums and accretion of discounts. The Bank classifies these investments as HTM securities because the Bank has the positive intent and ability to hold these securities until maturity.
Certain changes in circumstances may cause the Bank to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future. Thus, the sale or transfer of an HTM security because of certain changes in circumstances, such as evidence of significant deterioration in the issuer's creditworthiness or changes in regulatory requirements, is not considered to be inconsistent with its original classification. Other events that are isolated, nonrecurring, and unusual for the Bank that could not have been reasonably anticipated may cause the Bank to sell or transfer an HTM security without calling into question its intent to hold other debt securities to maturity. In addition, sales of debt securities that meet either of the following two conditions may be considered as maturities for purposes of the classification of securities: (i) the sale occurs near enough to its maturity date (or call date if exercise of the call is probable) that interest rate risk is substantially eliminated as a pricing factor and changes in market interest rates would not have a significant effect on the security's fair value, or (ii) the sale occurs after the Bank has already collected a substantial portion (at least 85%) of the principal outstanding at acquisition because of prepayments on the debt security or scheduled payments on a debt security payable in equal installments over its term.
The Bank calculates the amortization of purchase premiums and accretion of purchase discounts on investments using the level-yield method on a retrospective basis over the estimated life of the securities. This method requires a retrospective adjustment of the effective yield each time the Bank changes the estimated life as if the new estimate had been known since the original acquisition date of the securities. The Bank uses nationally recognized, market-based, third-party prepayment models to project estimated lives.
On a quarterly basis, the Bank evaluates its individual AFS investment securities in an unrealized loss position for impairment. A security is considered impaired when its fair value is less than its amortized cost basis. With respect to any debt security, a credit loss is defined as the amount by which the amortized cost basis exceeds the present value of the cash flows expected to be collected. If a credit loss exists but the entity does not intend to sell the debt security and it is not more likely than not that the entity will be required to sell the debt security before the anticipated recovery of its remaining amortized cost basis (the amortized cost basis less any current-period credit loss), an allowance for credit losses is recorded with a corresponding adjustment to the provision for/(reversal of) credit losses. The allowance is limited by the amount of the unrealized loss. Accrued interest receivable is recorded separately on the Statements of Condition.
If management intends to sell an impaired security classified as AFS, or more likely than not will be required to sell the security before expected recovery of its amortized cost basis, any allowance for credit losses is written off and the amortized cost basis is written down to the security’s fair value at the reporting date with any incremental impairment reported in earnings as net unrealized gain/(loss) on AFS securities. If management does not intend to sell an impaired security classified as AFS and it is not more likely than not that management will be required to sell the debt security, then the credit portion of the difference is recognized as an allowance for credit losses and any remaining difference between the security’s fair value and amortized cost is recorded to net unrealized gain/(loss) on AFS securities within other comprehensive income/(loss).
On a quarterly basis, the Bank evaluates its HTM investment securities for expected credit losses on a pool basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. If necessary, an allowance for credit losses is recorded with a corresponding adjustment to the provision for/(reversal of) credit losses. For improvements in impaired HTM securities with an allowance for credit losses, the allowance for credit losses associated with recoveries may be derecognized up to its full amount. Accrued interest receivable is recorded separately on the Statements of Condition. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
See Note 4 - Investments for details on the allowance methodologies relating to AFS and HTM securities.
To determine whether an allowance for credit loss is necessary on PLRMBS, the Bank uses cash flow analyses.
At each quarter end, the Bank compares the present value of the cash flows expected to be collected on its PLRMBS, using the effective interest rate, to the amortized cost basis of the securities to determine whether a credit loss exists. The expected credit losses are measured using:
•expected housing price changes;
•expected interest rate assumptions;
•the remaining payment terms for the security;
•expected default rates based on underlying loan-level borrower and loan characteristics;
•loss severities on the collateral supporting each unique PLRMBS based on underlying loan-level borrower and loan characteristics; and
•prepayment speeds based on underlying loan-level borrower and loan characteristics.
The expected cash flows are based on a number of assumptions and expectations, and the results of these models can vary significantly with changes in these assumptions and expectations. The cash flows determined reflect management’s expectations and include a base case housing price forecast for near- and long-term horizons.
For all the PLRMBS in its AFS and HTM portfolios, the Bank does not intend to sell any security and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.
Financial Instruments Meeting Netting Requirements. The Bank presents certain financial instruments, including derivative instruments and securities purchased under agreements to resell, on a net basis when they have a legal right of offset and all other requirements for netting are met (collectively referred to as the netting requirements). The Bank has elected to offset its derivative asset and liability positions, as well as cash collateral received or pledged, when the netting requirements are met. The Bank did not have any offsetting liabilities related to its securities purchased under agreements to resell for the periods presented.
The net exposure for these financial instruments can change on a daily basis; therefore, there may be a delay between the time this exposure change is identified and additional collateral is requested, and the time this collateral is received or pledged. Likewise, there may be a delay for excess collateral to be returned. For derivative instruments that meet the netting requirements, any excess cash collateral received or pledged is recognized as a derivative liability or derivative asset. Additional information regarding these agreements is provided in Note 13 - Derivatives and Hedging Activities. Based on the fair value of the related collateral held, the securities purchased under agreements to resell were fully collateralized for the periods presented.
Variable Interest Entities. The Bank’s investments in variable interest entities (VIEs) relate to PLRMBS. On an ongoing basis, the Bank performs a quarterly evaluation to determine whether it is the primary beneficiary in any VIE. As the Bank does not have the power to significantly affect the economic performance of these investments, the Bank determined that it is not a primary beneficiary of any of these VIEs and concluded that consolidation accounting is not required as of December 31, 2024. In addition, the Bank does not design, sponsor, transfer, service, or provide credit liquidity support in any of its investments in VIEs. The Bank’s maximum loss exposure for these investments is limited to the carrying value.
Advances. The Bank reports advances (loans to members, former members or their successors, or housing associates) either at amortized cost or at fair value when the fair value option is elected. Advances carried at amortized cost are evaluated quarterly for expected credit losses and reported net of hedging adjustments. The Bank recognizes hedging adjustments resulting from the discontinuation of a hedging relationship to interest income using a level-yield methodology. Interest on advances is credited to income as earned. For advances carried at fair value, the Bank recognizes contractual interest in interest income. Accrued interest receivable is recorded separately on the
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Statements of Condition. The advances carried at amortized cost are evaluated quarterly for expected credit losses. If deemed necessary, an allowance for credit losses is recorded with a corresponding adjustment to the provision for/(reversal of) credit losses.
See Note 5 - Advances for details on the allowance methodologies relating to advances.
Advance Modifications. In cases in which the Bank funds an advance concurrent with or within a short period of time before or after the prepayment of a previous advance to the same member, at market rates, the subsequent advance is accounted for as a new advance. The Bank does not issue advances at non-market rates. If a member makes a request for a modification to an existing advance, the Bank compares the present value of the cash flows on the modified advance to the present value of the cash flows remaining on the original advance. If there is at least a 10% difference in the present value of cash flows or if the Bank concludes the difference between the advances is more than minor based on a qualitative assessment of the modifications made to the original contractual terms, then the advance is accounted for as a new advance. In all other instances, the new advance is accounted for as a modification. Modification requests with a difference in cash flows that is more than minor are not accepted by the Bank.
Prepayment Fees. When a borrower prepays certain advances prior to the original maturity, the Bank may charge the borrower a prepayment fee. For certain advances with full or partial prepayment symmetry, the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. The Bank no longer offers advances with partial prepayment symmetry.
For prepaid advances that are hedged and meet the hedge accounting requirements, the Bank terminates the hedging relationship upon prepayment and records the associated fair value gains and losses, adjusted for the prepayment fees, in interest income. If a new advance represents a modification of an original hedged advance, the fair value gains or losses on the advance and the prepayment fees are included in the carrying amount of the modified advance, and gains or losses and prepayment fees are amortized in interest income over the life of the modified advance using the level-yield method. If the modified advance is also hedged and the hedge meets the hedge accounting requirements, the modified advance is marked to fair value after the modification, and subsequent fair value changes are recorded in interest income on advances. If the prepayment represents an extinguishment of the original hedged advance, the prepayment fee and any fair value gain or loss are immediately recognized in interest income.
For prepaid advances that are not hedged or that are hedged but do not meet the hedge accounting requirements, the Bank records prepayment fees in interest income unless the Bank determines that the new advance represents a modification of the original advance. If the new advance represents a modification of the original advance, the prepayment fee on the original advance is deferred, recorded in the basis of the modified advance, and amortized over the life of the modified advance using the level-yield method. This amortization is recorded in interest income.
Mortgage Loans Held for Portfolio. Under the Mortgage Partnership Finance® (MPF®) Program, the Bank purchased from members, for its own portfolio, conventional conforming fixed rate mortgage loans under the MPF Traditional product. After June 30, 2021, the Bank no longer directly purchases, or facilitates the purchase of, mortgage loans from our members.
The Bank classifies mortgage loans as held for portfolio and, accordingly, reports them at their principal amount outstanding net of unamortized premiums, unamortized credit enhancement fees paid as a lump sum at the time loans are purchased, discounts, and unrealized gains and losses from loans initially classified as mortgage loan commitments. The Bank aggregates the mortgage loans by similar characteristics (type, maturity, interest rate, and acquisition date) in determining prepayment estimates. A retrospective adjustment is required each time the Bank changes the estimated amounts as if the new estimate had been known since the original acquisition date of the assets. The Bank uses nationally recognized, market-based, third-party prepayment models to project estimated lives.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
The Bank performs a quarterly assessment of its mortgage loans held for portfolio to estimate expected credit losses. An allowance for credit losses is recorded with a corresponding adjustment to the provision for/(reversal of) credit losses. The Bank measures expected credit losses on mortgage loans on a loan-level basis, factoring in the credit enhancement structure at the master commitment level.
When developing the allowance for credit losses, the Bank measures the estimated loss over the remaining life of a mortgage loan, which also considers how the Bank’s credit enhancements mitigate credit losses. The Bank includes estimates of expected recoveries within the allowance for credit losses. If a loan is purchased at a discount, the discount does not offset the allowance for credit losses. Accrued interest receivable is recorded separately on the Statements of Condition. 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.
A past due loan is one where the borrower has failed to make a scheduled full payment of principal and interest within 30 days of its due date. The Bank places a mortgage loan on nonaccrual status when the collection of the contractual principal or interest from the participating financial institution is doubtful, when the collection of the contractual principal or interest from the participating financial institution is reported 90 days or more past due, or when the loan is in foreclosure, except when the loan is well-secured (e.g., through credit enhancements) and in the process of collection. Loans that are on nonaccrual status and that are considered collateral-dependent are measured for credit losses based on the fair value of the underlying property less estimated selling costs. Loans are considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be substantially through the sale of the underlying collateral; that is, if it is considered likely that the borrower will default and there is no credit enhancement to offset losses under the master commitment, or the collectability or availability of credit enhancement is deemed to be uncertain. Collateral-dependent loans are credit deteriorated if the fair value of the underlying collateral less estimated selling costs is insufficient to recover the unpaid principal balance on the loan.
When a mortgage loan is placed on nonaccrual status, accrued but uncollected interest is reversed against interest income. The Bank records cash payments received on nonaccrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful. If the collection of the remaining principal amount due is considered doubtful, then cash payments received would be applied first solely to principal until the remaining principal amount due is expected to be collected and then as a recovery of any charge-off, if applicable, followed by recording interest income. A loan on 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. All loan modifications are evaluated to determine whether a modification made to a borrower results in a new loan or is a continuation of the existing loan.
An MPF loan that shares similar risk characteristics with other loans is evaluated for credit losses on a collective basis. MPF loans that do not share risk characteristics with other loans are individually evaluated for credit losses. MPF loans that are identified for individual evaluation are either delinquent or classified as nonaccrual, in process of foreclosing on the collateral, or have been modified in response to a borrower’s financial difficulty. Credit loss is measured by factoring in expected cash flow shortfalls incurred as of the reporting date, as well as the economic loss attributable to delaying the original contractual principal and interest due dates, if applicable.
For all mortgage loans that are more than 180 days past due and that have any outstanding balance in excess of the fair value of the property, less costs to sell, the excess is charged off at the end of the month.
The Bank did 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.
Other Fees. Letter of credit fees are recorded as other income/(loss) over the term of the letter of credit.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Derivatives and Hedging Activities. All derivatives are recognized on the Statements of Condition at their fair values, including accrued interest, net of cash collateral received from or pledged to clearing agents or counterparties, including accrued interest, and are reported as either derivative assets or derivative liabilities. The fair values of derivatives are netted by clearing agent or counterparty when the netting requirements have been met. If these netted amounts are positive, they are classified as an asset, and if negative, they are classified as a liability. Cash flows associated with derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be a financing derivative.
The Bank uses London Clearing House (LCH) Ltd for all cleared derivative transactions. The rulebook of LCH Ltd characterizes variation margin as daily settlement payments, and initial margin is considered cash collateral.
Each derivative is designated as one of the following:
(1)a qualifying hedge of the change in fair value of (i) a recognized asset or liability or (ii) an unrecognized firm commitment (a fair value hedge); or
(2)a non-qualifying hedge of an asset or liability for asset-liability management purposes or of certain advances and consolidated obligation bonds for which the Bank elected the fair value option (an economic hedge).
If hedging relationships meet certain criteria, including but not limited to formal documentation of the hedging relationship and an expectation to be hedge effective, they are eligible for hedge accounting, and the offsetting changes in fair value of the hedged items attributable to the hedged risk may be recorded in earnings. The application of hedge accounting generally requires the Bank to evaluate the effectiveness of the hedging relationships at inception and on an ongoing basis and to calculate the changes in fair value of the derivatives and the related hedged items independently. This is known as the long-haul method of hedge accounting.
Derivatives are typically executed at the same time as the hedged item, and the Bank designates the hedged item in a qualifying hedge relationship as of the trade date. In many hedging relationships, the Bank may designate the hedging relationship upon its commitment to disburse an advance or trade a consolidated obligation in which settlement occurs within the shortest period of time possible for the type of instrument based on market settlement conventions. The Bank records the changes in the fair value of the derivatives and the hedged item beginning on the trade date.
Changes in the fair value of a derivative that is designated as a fair value hedge, along with changes in the fair value of the hedged asset or liability (hedged item) that are attributable to the hedged risk (including changes that reflect gains or losses on firm commitments), are recorded in net interest income in the same line as the earnings effect of the hedged item. Net gains and losses on derivatives and hedging activities for qualifying hedges recorded in net interest income include unrealized and realized gains and losses, which include net interest settlements. 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 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 Accumulated Other Comprehensive Income (AOCI) as “Net unrealized gain/(loss) on AFS securities.” The Bank hedges the benchmark risk component of cash flows in a fair value hedge.
Changes in the fair value of a derivative designated as an economic hedge are recorded in current period earnings with no fair value adjustment to an asset or liability. An economic hedge is defined as a derivative hedging certain advances and consolidated obligation bonds for which the Bank elected the fair value option, or hedging specific or non-specific underlying assets, liabilities, or firm commitments, that does not qualify or was not designated for fair value hedge accounting, but is an acceptable hedging strategy under the Bank's risk management program. These economic hedging strategies also comply with Finance Agency regulatory requirements prohibiting speculative hedge transactions. An economic hedge introduces the potential for earnings variability caused by the changes in fair value of the derivatives that are recorded in the Bank's income but are not offset by corresponding changes in
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
the value of the economically hedged assets, liabilities, or firm commitments. Changes in the fair value of these non-qualifying hedges are recorded in other income/(loss) as “Net gain/(loss) on derivatives.” In addition, the net interest settlements associated with these non-qualifying hedges are recorded in other income/(loss) as “Net gain/(loss) on derivatives.” Cash flows associated with these stand-alone derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be designated as a financing derivative.
The Bank discontinues hedge accounting prospectively when: (i) it determines that the derivative is no longer highly effective in offsetting changes in the fair value of a hedged item (including hedged items such as firm commitments or forecasted transactions); (ii) the derivative or the hedged item expires or is sold, terminated, or exercised; (iii) it is no longer probable that the forecasted transaction will occur in the originally expected period; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; (v) it determines that designating the derivative as a hedging instrument is no longer appropriate; (vi) a critical term on the hedged item changes; or (vii) it decides to use the derivative to offset changes in the fair value of other derivatives or instruments carried at fair value.
When hedge accounting is discontinued, the Bank either terminates the derivative or continues to carry the derivative on the Statements of Condition at its fair value, ceases to adjust the hedged asset or liability for changes in fair value, and amortizes the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using a level-yield methodology.
When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the Bank continues to carry the derivative on the Statements of Condition at its fair value, removing from the Statements of Condition any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.
The Bank may be the primary obligor on consolidated obligations and may make advances in which derivative instruments are embedded. Upon execution of these transactions, the Bank assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance or debt (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When it is determined that: (i) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and designated as a stand-alone derivative instrument equivalent to an economic hedge. However, the entire contract is carried on the Statements of Condition at fair value and no portion of the contract is designated as a hedging instrument if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current period earnings (such as an investment security classified as trading, as well as hybrid financial instruments that are eligible for the fair value option), or if the Bank cannot reliably identify and measure the embedded derivative for purposes of separating the derivative from its host contract.
Premises, Software, and Equipment. Premises, software, and equipment are included in other assets on the Statements of Condition. The Bank records premises, software, and equipment at cost less accumulated depreciation and amortization. At December 31, 2024 and 2023, premises, software, and equipment were $22 million and $26 million, respectively, which was net of accumulated depreciation and amortization of $81 million and $76 million, respectively. Improvements and major renewals are capitalized; ordinary maintenance and repairs are expensed as incurred. Depreciation is computed on the straight-line method over the estimated useful lives of assets ranging from 3 to 10 years, and leasehold improvements are amortized on the straight-line method over the estimated useful life of the improvement or the remaining term of the lease, whichever is shorter. Depreciation and amortization expense was $5 million for 2024, $5 million for 2023, and $6 million for 2022.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Consolidated Obligations. Consolidated obligations are recorded at amortized cost unless the Bank has elected the fair value option, in which case the consolidated obligations are carried at fair value.
Consolidated obligations, consisting of bonds and discount notes, are jointly issued by the FHLBanks through the Office of Finance, which serves as the FHLBanks’ agent. As provided by the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act) or by regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. For a discussion of the joint and several liability regulation, see “Note 15 - Commitments and Contingencies.” In connection with each issuance of consolidated obligations, each FHLBank specifies the type, term, and amount of debt it requests to have issued on its behalf. The Office of Finance tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks and records as a liability its specific portion of the consolidated obligations issued and is the primary obligor for that portion of the consolidated obligations issued. The Finance Agency and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office of Finance.
Consolidated obligation bonds may be issued to raise short-, intermediate-, and long-term funds for the FHLBanks. The maturity of consolidated obligation bonds generally ranges from 6 months to 15 years, but the maturity is not subject to any statutory or regulatory limits. Consolidated obligation discount notes are primarily used to raise short-term funds. These notes are issued at less than their face amount and redeemed at par value when they mature.
Regulations require the FHLBanks to maintain, for the benefit of investors in consolidated obligations, in the aggregate, unpledged qualifying assets in an amount equal to the consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; assets with an assessment or credit rating at least equivalent to the current assessment or credit rating of the consolidated obligations; obligations, participations, mortgages, or other securities of or issued by the United States or an agency of the United States; and such securities as fiduciary and trust funds may invest in under the laws of the state in which the FHLBank is located. Any assets subject to a lien or pledge for the benefit of holders of any issue of consolidated obligations are treated as if they were free from lien or pledge for the purposes of compliance with these regulations
Mandatorily Redeemable Capital Stock. The Bank reclassifies the capital stock subject to redemption from capital to a liability after a member provides the Bank with a written notice of redemption; gives notice of intention to withdraw from membership; attains nonmember status by merger or acquisition, charter termination, or other involuntary membership termination; or after a receiver or other liquidating agent for a member transfers the member's Bank capital stock to a nonmember entity, resulting in the member's shares then meeting the definition of a mandatorily redeemable financial instrument. Shares meeting this definition are reclassified to a liability at fair value. Dividends declared on shares classified as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repayment of these mandatorily redeemable financial instruments (by repurchase or redemption of the shares) is reflected as a financing cash outflow in the Statements of Cash Flows once settled. See Note 11 - Capital for more information.
If a member cancels its written notice of redemption or notice of withdrawal or if the Bank allows the transfer of mandatorily redeemable capital stock to a member, the Bank reclassifies mandatorily redeemable capital stock from a liability to capital. After the reclassification, dividends on the capital stock are no longer classified as interest expense.
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 on these off-balance sheet exposures is recorded in other liabilities with a corresponding adjustment to the provision for/(reversal of) credit losses. See Note 15 - Commitments and Contingencies for details on the allowance methodologies relating to off-balance sheet credit exposure.
Termination of Long-Term Funding Arrangement. The Bank recognized $30 million as income in 2024 in connection with the termination of a long-term funding arrangement entered into with a member borrower in 2017.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Finance Agency Expenses. The FHLBanks fund a portion of the costs of operating the Finance Agency, and each FHLBank is assessed a proportionate share of those costs. The Finance Agency allocates its expenses and working capital fund among the FHLBanks based on the ratio between each FHLBank's minimum required regulatory capital and the aggregate minimum required regulatory capital of all the FHLBanks.
Office of Finance Expenses. Each FHLBank is assessed a proportionate share of the cost of operating the Office of Finance, which facilitates the issuance and servicing of consolidated obligations. The Office of Finance allocates its operating and capital expenditures among the FHLBanks as follows: (1) two-thirds of the assessment is based on each FHLBank’s share of total consolidated obligations outstanding, and (2) one-third of the assessment is based on an equal pro rata allocation.
Voluntary Housing and Community Investment Contributions. The Bank's voluntary contributions to Affordable Housing Program (AHP) and certain other housing and community investment initiatives are recorded in a separate line within Other Expense on the Statements of Income. Voluntary AHP is expensed when the Bank's board of directors approves the irrevocable terms of the award, and the likelihood of award is probable and the amount is estimable. Other voluntary housing and community investment initiatives consist of voluntary grants and contributions. These voluntary grants and contributions are recognized as an expense in the period in which the grant or contribution is considered an unconditional promise to give.
Affordable Housing Program Assessment. As more fully discussed in Note 9 - Affordable Housing Program, the FHLBank Act requires each FHLBank to establish and fund an AHP. The Bank charges the required funding for the AHP to earnings and establishes a liability. The AHP funds provide subsidies to members to assist in the purchase, construction, or rehabilitation of housing for households earning up to 80% of the median income for the area in which they live. Subsidies may be in the form of direct grants or below-market interest rate advances.
Segment Reporting. The Bank engages in business activities to provide funding, liquidity, and services to members. The Bank manages these operations as one operating segment.
The Bank’s primary business is providing advances to its members and certain qualifying housing associates. In addition, the Bank maintains a portfolio of investments and mortgage loans. The primary source of funding is the sale of FHLBank System consolidated obligations in the capital markets. The Bank is capitalized through the purchase of capital stock by its members. The Bank’s net income is primarily attributable to the difference between the interest income earned on advances and investments, and the interest expense paid on consolidated obligations. The Bank manages risk and monitors financial performance across the entire balance sheet. As such, the Bank’s quantitative disclosures related to its segment are disclosed within the Statements of Income and Statements of Condition.
The chief operating decision maker (CODM) is the interim president and chief executive officer. The CODM assesses performance and allocation of resources primarily based on net interest income derived from total assets and total liabilities as reported in the Statements of Condition, and net income as reported in the Bank’s Statements of Income. These measures are used for benchmarking and budget analysis. Other items, including significant expenses, such as compensation and benefits, other operating expense, and voluntary housing and community investment contributions, reported to the CODM include those reported in the Bank’s Statements of Income and notes to the financial statements.
Note 2 - Recently Issued and Adopted Accounting Guidance
The following table provides a summary of recently issued and adopted accounting standards that may have an effect on the Bank’s financial statements.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Accounting Standards Update (ASU) Description Effective Date Effect on the Financial Statements or Other Significant Matters
Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures
(ASU 2023-07)
This guidance improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses, including if an entity only has a single reportable segment.
This guidance became effective for the Bank for the annual period ended December 31, 2024, and for interim and annual periods thereafter.
The adoption of this guidance did not have any effect on the Bank’s financial condition, results of operations, or cash flows, and did not have a material effect on the Bank’s disclosures.
Disaggregation of Income Statement Expenses (ASU 2024-03)
This update requires disclosure, in the notes to the financial statements, of specified information about certain costs and expenses on an interim and annual basis.
This guidance becomes effective for the Bank for the annual period ending December 31, 2027, and for interim and annual periods thereafter. Early adoption is permitted.
The Bank does not intend to adopt this guidance early. The adoption of this guidance may affect the Bank’s disclosures but it will not have any effect on the Bank’s financial condition, results of operations, or cash flows.
Note 3 - Cash and Due from Banks
Cash on hand, cash items in the process of collection, and amounts due from correspondent banks and the Federal Reserve Bank are included in Cash and due from banks on the Statements of Condition.
Cash and due from banks includes certain compensating balances, where the Bank maintains collected cash balances with commercial banks in consideration for certain services. There are no legal restrictions under these agreements on the withdrawal of these funds. The average collected cash balances were approximately $7 million for 2024 and $10 million for 2023.
Note 4 - Investments
The Bank makes short-term investments in interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold, and may make other investments in debt securities, which are classified as trading, AFS, or HTM.
Interest-Bearing Deposits, Securities Purchased under Agreements to Resell, and Federal Funds Sold. Federal funds sold are unsecured loans that are generally transacted on an overnight term. Finance Agency regulations include a limit on the amount of unsecured credit the Bank may extend to a counterparty. At December 31, 2024 and 2023, all investments in interest-bearing deposits and federal funds sold were repaid or expected to be repaid according to the relevant contractual terms. No allowance for credit losses was recorded for these assets at December 31, 2024 and 2023. Carrying values of interest-bearing deposits and federal funds sold exclude accrued interest receivable of $15 million and a de minimis amount, respectively, as of December 31, 2024, and $16 million and $2 million, respectively, as of December 31, 2023.
Based upon the collateral held as security and collateral maintenance provisions with its counterparties, the Bank determined that no allowance for credit losses was needed for its securities purchased under agreements to resell at December 31, 2024 and 2023. The carrying value of securities purchased under agreements to resell excludes $1 million and $2 million of accrued interest receivable as of December 31, 2024 and 2023, respectively.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Debt Securities
Available-for-Sale Securities. The amortized cost and fair value of AFS securities by major security type as of December 31, 2024 and 2023, were as follows:
December 31, 2024
(In millions) Amortized
Cost(1)
Allowance for Credit Losses Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated Fair Value
U.S. Treasury obligations $ 6,506 $ - $ 4 $ - $ 6,510
MBS:
Government Sponsored Enterprises (GSEs) - multifamily 12,790 - 62 (7) 12,845
PLRMBS 978 (30) 31 (22) 957
Total MBS 13,768 (30) 93 (29) 13,802
Total $ 20,274 $ (30) $ 97 $ (29) $ 20,312
December 31, 2023
(In millions) Amortized
Cost(1)
Allowance for Credit Losses Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated Fair Value
U.S. Treasury obligations $ 4,530 $ - $ 4 $ - $ 4,534
MBS:
GSEs - multifamily 12,500 - 4 (83) 12,421
PLRMBS 1,075 (31) 35 (20) 1,059
Total MBS 13,575 (31) 39 (103) 13,480
Total $ 18,105 $ (31) $ 43 $ (103) $ 18,014
(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, net charge-offs, and valuation adjustments for hedging activities, and excludes accrued interest receivable of $92 million and $68 million at December 31, 2024 and 2023, respectively.
At December 31, 2024, the amortized cost of the Bank’s MBS classified as AFS included premiums of $51 million, discounts of $175 million, and previous credit losses related to the prior methodology of evaluating credit losses of $293 million for PLRMBS. At December 31, 2023, the amortized cost of the Bank’s MBS classified as AFS included premiums of $58 million, discounts of $191 million, and previous credit losses related to the prior methodology of evaluating credit losses of $312 million for PLRMBS.
The following tables summarize the AFS securities with unrealized losses as of December 31, 2024 and 2023. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position.
December 31, 2024
Less Than 12 Months 12 Months or More Total
(In millions) Estimated
Fair Value Gross Unrealized
Losses Estimated
Fair Value Gross Unrealized
Losses Estimated
Fair Value Gross Unrealized
Losses
MBS - GSEs - multifamily $ 1,350 $ 3 $ 668 $ 4 $ 2,018 $ 7
PLRMBS 62 3 244 19 306 22
Total $ 1,412 $ 6 $ 912 $ 23 $ 2,324 $ 29
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
December 31, 2023
Less Than 12 Months 12 Months or More Total
(In millions) Estimated
Fair Value Gross
Unrealized
Losses Estimated
Fair Value Gross Unrealized
Losses Estimated
Fair Value Gross Unrealized
Losses
MBS - GSEs - multifamily $ 7,517 $ 45 $ 3,525 $ 38 $ 11,042 $ 83
PLRMBS 30 1 283 19 313 20
Total $ 7,547 $ 46 $ 3,808 $ 57 $ 11,355 $ 103
Redemption Terms - The amortized cost and estimated fair value of U.S. Treasury securities classified as AFS by contractual maturity (based on contractual final principal payment) and of MBS classified as AFS as of December 31, 2024 and 2023, are shown below. Expected maturities of MBS classified as AFS will differ from contractual maturities because borrowers may have the right to call or prepay the underlying obligations with or without call or prepayment fees.
December 31, 2024
(In millions)
Year of Contractual Maturity Amortized
Cost Estimated
Fair Value
U.S. Treasury obligations:
Due in 1 year or less $ 3,181 $ 3,183
Due after 1 year through 5 years 3,325 3,327
Total U.S. Treasury obligations
$ 6,506 $ 6,510
MBS 13,768 13,802
Total $ 20,274 $ 20,312
December 31, 2023
(In millions)
Year of Contractual Maturity Amortized
Cost Estimated
Fair Value
U.S. Treasury obligations:
Due in 1 year or less $ 145 $ 145
Due after 1 year through 5 years
4,385 4,389
Total U.S. Treasury obligations
4,530 4,534
MBS 13,575 13,480
Total $ 18,105 $ 18,014
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Held-to-Maturity Securities. The Bank classifies the following securities as HTM because the Bank has the positive intent and ability to hold these securities to maturity:
December 31, 2024
(In millions) Amortized
Cost(1)
Gross
Unrecognized
Holding
Gains(2)
Gross
Unrecognized
Holding
Losses(2)
Estimated
Fair Value
MBS - Other U.S. obligations - single-family $ 29 $ - $ (1) $ 28
MBS - GSEs:
MBS - GSEs - single-family 495 2 (13) 484
MBS - GSEs - multifamily 864 - (2) 862
Subtotal MBS - GSEs 1,359 2 (15) 1,346
PLRMBS 101 - (6) 95
Total $ 1,489 $ 2 $ (22) $ 1,469
December 31, 2023
(In millions) Amortized
Cost(1)
Gross
Unrecognized
Holding
Gains(2)
Gross
Unrecognized
Holding
Losses(2)
Estimated
Fair Value
MBS - Other U.S. obligations - single-family $ 49 $ - $ (1) $ 48
MBS - GSEs:
MBS - GSEs - single-family 605 1 (16) 590
MBS - GSEs - multifamily 1,069 - (5) 1,064
Subtotal MBS - GSEs 1,674 1 (21) 1,654
PLRMBS 124 - (8) 116
Total $ 1,847 $ 1 $ (30) $ 1,818
(1) Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and net charge-offs, and excludes accrued interest receivable of $5 million and $6 million at December 31, 2024 and 2023, respectively.
(2) Gross unrecognized holding gains/(losses) represent the difference between estimated fair value and net carrying value.
Expected maturities of MBS classified as HTM will differ from contractual maturities because borrowers may have the right to call or prepay the underlying obligations with or without call or prepayment fees.
At December 31, 2024, the amortized cost of the Bank’s MBS classified as HTM included premiums of $2 million and discounts of $2 million. At December 31, 2023, the amortized cost of the Bank’s MBS classified as HTM included premiums of $2 million and discounts of $3 million.
Allowance for Credit Losses on AFS and HTM Securities. The following table presents a rollforward of the allowance for credit losses on PLRMBS classified as AFS for the years ended December 31, 2024, 2023, and 2022. The Bank recorded no allowance for credit losses associated with HTM securities during the years ended December 31, 2024, 2023, and 2022.
(In millions) 2024 2023 2022
Balance, beginning of the period $ 31 $ 30 $ 17
(Charge-offs)/recoveries (1) (3) (2)
Provision for/(reversal of) credit losses - 4 15
Balance, end of the period $ 30 $ 31 $ 30
To evaluate investment securities for expected credit loss at December 31, 2024 and 2023, the Bank employed the following methodologies, based on the type of security.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
AFS and HTM Securities (Excluding PLRMBS) - The Bank’s AFS and HTM securities are principally U.S. obligations and MBS issued by Ginnie Mae, Freddie Mac, and Fannie Mae that are backed by single-family or multifamily mortgage loans. The Bank only purchases securities considered investment quality. Excluding PLRMBS investments, at December 31, 2024 and 2023, substantially all of AFS securities and HTM securities, based on amortized cost, were rated A, or above, by a Nationally Recognized Statistical Rating Organization (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.
At December 31, 2024 and 2023, certain of the Bank’s AFS and HTM securities were in an unrealized loss position. These losses are considered temporary as the Bank expects to recover the entire amortized cost basis on these investment securities and neither intends to sell these securities nor considers it more likely than not that it will be required to sell these securities before its anticipated recovery of each security's remaining amortized cost basis. Further, the securities: (i) were all highly rated or had short remaining terms to maturity; (ii) had not experienced, nor did the Bank expect, any payment defaults on the instruments; and (iii) in the case of U.S. Treasury, GSE, or other agency obligations, carry an implicit or explicit government guarantee such that the Bank considers the risk of nonpayment to be zero. As a result, no allowance for credit losses was recorded on these AFS or HTM securities at December 31, 2024 and 2023.
Private-Label Residential Mortgage-Backed Securities - The Bank also holds investments in PLRMBS. The Bank has not purchased any PLRMBS since the first quarter of 2008. However, many of these securities have subsequently experienced significant credit deterioration. As of December 31, 2024 and 2023, approximately 3% and 4%, respectively, of PLRMBS (AFS and HTM combined, based on amortized cost) were rated A, or above, by an NRSRO; and the remaining securities were either rated less than A, or were unrated. To determine whether an allowance for credit loss is necessary on these securities, the Bank uses cash flow analyses. For information on the cash flow analyses, see “Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies.”
For PLRMBS with previous credit losses related to the prior methodology of evaluating credit losses (securities for which the Bank determined that it does not expect to recover the entire amortized cost basis), measurement of the credit loss amount for PLRMBS classified as Level 3 as of December 31, 2024, uses significant inputs and assumptions that include, based on unpaid principal balance, the weighted average percentage of prepayment rates of 9.1%; default rates of 6.2%; and loss severities of 63.7%. The weighted average percentage of the related current credit enhancement for these securities, based on unpaid principal balance, was 8.5% as of December 31, 2024. Credit enhancement is defined as the percentage of subordinated tranches, excess spread, and over-collateralization, if any, in a security structure that will generally absorb losses before the Bank will experience a loss on the security.
In general, the Bank elects to transfer any PLRMBS that incurred a credit loss during the applicable period from the Bank’s HTM portfolio to its AFS portfolio at their fair values. There were no transfers of PLRMBS from the Bank’s HTM portfolio to its AFS portfolio during the year ended December 31, 2024. The Bank transferred PLRMBS from its HTM portfolio to its AFS portfolio with an amortized cost and fair value at the time of the transfer of $2 million during the year ended December 31, 2023, and with an amortized cost of $17 million and fair value of $20 million at the time of transfer during the year ended December 31, 2022.
For the Bank’s PLRMBS, the Bank recorded a de minimis provision for credit losses during the year ended December 31, 2024. The Bank recorded a provision for credit losses of $4 million during the year ended December 31, 2023. The provisions recorded in 2024 and 2023 were largely because of declines in the fair values on its PLRMBS, the present value of expected cash flows of certain PLRMBS, and decreased expectations of the performance of loan collateral underlying these securities. The Bank recorded a provision for credit losses of $15 million during the year ended December 31, 2022, largely because of declines in the fair values on its PLRMBS, the present value of expected cash flows of certain PLRMBS affected by higher interest rates, and decreased expectations of the performance of loan collateral underlying these securities.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
The total net accretion recognized in interest income associated with PLRMBS with previous credit losses related to the prior methodology of evaluating credit losses totaled $12 million, $34 million, and $55 million for the years ended December 31, 2024, 2023, and 2022, respectively.
Note 5 - Advances
The Bank offers a wide range of fixed and adjustable rate advance products with different maturities, interest rates, payment characteristics, and option features. Fixed rate advances generally have maturities ranging from one day to 30 years. Adjustable rate advances generally have maturities ranging from less than one year to 15 years, with the interest rates resetting periodically at a fixed spread to a specified index.
Redemption Terms. The following table presents advances outstanding by redemption term and weighted-average interest rate at December 31, 2024 and 2023.
(Dollars in millions) 2024 2023
Redemption Term Amount
Outstanding(1)
Weighted
Average
Interest Rate Amount
Outstanding(1)
Weighted
Average
Interest Rate
Overdrawn demand and overnight deposit accounts $ - - % $ 2 5.15 %
Within 1 year(2)
23,712 4.30 35,241 4.87
After 1 year through 2 years 11,067 3.81 12,532 3.88
After 2 years through 3 years 4,526 3.97 6,437 3.23
After 3 years through 4 years 3,264 4.13 2,548 3.62
After 4 years through 5 years 865 3.76 3,660 4.07
After 5 years 2,384 3.68 1,290 3.71
Total par value 45,818 4.09 % 61,710 4.38 %
Valuation adjustments for hedging activities (198) (371)
Valuation adjustments under fair value option 17 (4)
Total $ 45,637 $ 61,335
(1)Carrying amounts exclude accrued interest receivable of $63 million and $85 million at December 31, 2024 and 2023, respectively.
(2)Advances outstanding with redemption terms within three months totaled $15.1 billion and $16.8 billion at December 31, 2024 and 2023, respectively.
All of the Bank’s advances are prepayable at the borrower’s option. However, when advances are prepaid, the borrower is charged a prepayment fee intended to make the Bank financially indifferent to the borrower’s decision to repay the advance prior to its maturity date, which is required by Finance Agency regulations. In addition, for certain advances with full or partial prepayment symmetry, the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. The Bank no longer offers advances with partial prepayment symmetry. The Bank had advances with full prepayment symmetry outstanding totaling $29.4 billion at December 31, 2024, and $39.8 billion at December 31, 2023. The Bank had advances with partial prepayment symmetry outstanding totaling $142 million at December 31, 2024, and $209 million at December 31, 2023. Some advances may be repaid on specified call dates without prepayment fees (callable advances). The Bank had callable advances outstanding totaling $2.7 billion at December 31, 2024, and $3.3 billion at December 31, 2023.
The Bank had putable advances totaling $4.6 billion at December 31, 2024, and $1.4 billion at December 31, 2023. At the Bank’s discretion, the Bank may terminate these advances on predetermined exercise dates and offer replacement funding at prevailing market rates, subject to certain conditions. The Bank would typically exercise such termination rights when interest rates increase relative to contractual rates.
The following table summarizes advances at December 31, 2024 and 2023, by the earlier of the year of redemption term or next call date for callable advances and by the earlier of the year of redemption term or next put date for putable advances.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Earlier of Redemption
Term or Next Call Date Earlier of Redemption
Term or Next Put Date
(In millions) 2024 2023 2024 2023
Overdrawn demand and overnight deposit accounts $ - $ 2 $ - $ 2
Within 1 year 26,023 35,561 27,676 36,115
After 1 year through 2 years 9,066 12,542 10,646 13,000
After 2 years through 3 years 4,526 6,437 3,487 6,149
After 3 years through 4 years 3,264 2,558 2,886 2,551
After 4 years through 5 years 855 3,660 398 2,917
After 5 years 2,084 950 725 976
Total par value $ 45,818 $ 61,710 $ 45,818 $ 61,710
Concentration Risk. The following tables present the concentration in advances to the top 10 borrowers and their affiliates at December 31, 2024 and 2023. The tables also present the interest income from these advances before the impact of interest rate exchange agreements hedging these advances for the years ended December 31, 2024 and 2023.
December 31, 2024
(Dollars in millions)
Name of Borrower
Advances
Outstanding Percentage of
Total
Advances
Outstanding Interest
Income from
Advances(1)
Percentage of
Total Interest
Income from
Advances
JPMorgan Chase, National Association(2)
$ 9,315 20 % $ 731 33 %
Western Alliance Bank 5,100 11 205 9
East West Bank 3,500 8 147 7
First Technology Federal Credit Union(3)
2,907 6 83 4
U.S. Bank, National Association(4)
2,050 5 47 2
SchoolsFirst Federal Credit Union 1,600 3 77 3
First Foundation Bank(5)
1,400 3 53 2
Bank of America California, National Association 1,150 3 72 3
Wescom Central Credit Union 1,140 3 52 2
Banc of California, National Association 1,100 2 24 1
Subtotal 29,262 64 1,491 66
Others 16,556 36 754 34
Total par value $ 45,818 100 % $ 2,245 100 %
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
December 31, 2023
(Dollars in millions)
Name of Borrower
Advances
Outstanding Percentage of
Total
Advances
Outstanding Interest
Income from
Advances(1)
Percentage of
Total Interest
Income from
Advances
JPMorgan Chase, National Association(2)
$ 23,833 39 % $ 1,018 31 %
Western Alliance Bank 6,200 10 199 6
City National Bank 3,000 5 353 11
First Technology Federal Credit Union(3)
2,414 4 132 4
U.S. Bank, National Association(4)
2,052 3 153 5
SchoolsFirst Federal Credit Union 1,823 3 48 1
Bank of America California, National Association 1,450 2 68 2
Luther Burbank Savings(3)(6)
1,152 2 44 1
Wells Fargo National Bank West 1,000 2 78 2
First Foundation Bank 900 1 46 1
Subtotal 43,824 71 2,139 64
Others 17,886 29 1,187 36
Total par value $ 61,710 100 % $ 3,326 100 %
(1) Interest income amounts exclude the interest effect of interest rate exchange agreements with derivative counterparties; as a result, the total interest income amounts will not agree to the Statements of Income. The amount of interest income from advances can vary depending on the amount outstanding, terms to maturity, interest rates, and repricing characteristics.
(2) A nonmember. On May 1, 2023, the California Department of Financial Protection and Innovation (DFPI) closed First Republic Bank and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. On the same date, the FDIC transferred all of the deposits and substantially all of the assets of First Republic Bank, including $28.1 billion in advances outstanding from the Bank, to JPMorgan Chase, National Association, a nonmember. These advances outstanding are fully collateralized and are not expected to result in any credit loss to the Bank.
(3) An officer or director of the member was a Bank director during 2024 and 2023.
(4) A nonmember. On December 1, 2022, U.S. Bancorp, a nonmember (the parent company of U.S. Bank, National Association), announced that it completed its acquisition of MUFG Union Bank, National Association.
(5) An officer or director of the member was a Bank director during 2024.
(6) On February 29, 2024, Washington Federal Bank, a nonmember, announced it completed its acquisition of Luther Burbank Savings. On the same date, Washington Federal Bank assumed all of the assets and liabilities of Luther Burbank Savings, including $1.2 billion in advances outstanding from the Bank. These advances outstanding are fully collateralized and are not expected to result in any credit loss to the Bank.
Credit Risk Exposure and Security Terms. The Bank manages its credit exposure related to advances through an integrated approach that provides for a credit limit to be established for each borrower, includes an ongoing review of each borrower’s financial condition, and is coupled with conservative collateral and lending policies to limit the risk of loss.
In addition, the Bank lends to member financial institutions that have their principal place of business in Arizona, California, or Nevada, in accordance with federal law and Finance Agency’s regulations. Specifically, the Bank is required to obtain sufficient collateral to fully secure credit products up to the member’s total credit limit. Borrowers may pledge the following eligible assets to secure advances:
•one-to-four-family first lien residential mortgage loans;
•securities issued, insured, or guaranteed by the U.S. government or any of its agencies, including without limitation MBS backed by Fannie Mae, Freddie Mac, or Ginnie Mae;
•cash or deposits in the Bank;
•certain other real estate-related collateral, such as certain privately issued MBS, multifamily loans, commercial real estate loans, and second lien residential mortgage loans or home equity loans; and
•small business, small farm, and small agribusiness loans that are fully secured by collateral (such as real estate, equipment and vehicles, accounts receivable, and inventory) from members that are community financial institutions.
The Bank has advances outstanding to former members and member successors, which are subject to the security terms above. The Bank requires each borrowing member to execute a written Advances and Security Agreement,
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
which describes the lending relationship between the Bank and the borrower. At December 31, 2024 and 2023, the Bank had a perfected security interest in collateral pledged by each borrowing member, or by the member's affiliate on behalf of the member, and by each nonmember borrower, with an estimated value in excess of the outstanding credit products for that borrower. Based on the financial condition of the borrower, the Bank may either (i) allow the borrower or the pledging affiliate to retain physical possession of loan collateral pledged to the Bank, provided that the borrower or the pledging affiliate agrees to hold the collateral for the benefit of the Bank, or (ii) require the borrower or the pledging affiliate to deliver physical possession of loan collateral to the Bank or its custodial agent. All securities collateral is required to be delivered to the Bank’s custodial agent. All loan collateral pledged to the Bank is subject to a Uniform Commercial Code-1 financing statement.
Section 10(e) of the FHLBank Act affords any security interest granted to the Bank by a member or any affiliate of the member or any nonmember borrower priority over claims or rights of any other party, except claims or rights that (i) would be entitled to priority under otherwise applicable law and (ii) are held by bona fide purchasers for value or secured parties with perfected security interests.
At December 31, 2024 and 2023, none of the Bank’s credit products were past due or on nonaccrual status. There were no modifications to credit products related to borrowers experiencing financial difficulty during the years ended December 31, 2024 and 2023.
Based on the collateral pledged as security for advances, the Bank’s credit analyses of borrowers’ financial condition, repayment history on advances, and the Bank’s credit extension and collateral policies as of December 31, 2024, the Bank expects to collect all amounts due according to the contractual terms. Therefore, no allowance for credit losses on advances was deemed necessary by the Bank as of December 31, 2024 and 2023.
Interest Rate Payment Terms. Interest rate payment terms for advances at December 31, 2024 and 2023, are detailed below:
(In millions) 2024 2023
Par value of advances:
Fixed rate:
Due within 1 year $ 15,218 $ 23,866
Due after 1 year 20,101 26,467
Total fixed rate 35,319 50,333
Adjustable rate:
Due within 1 year
8,494 11,377
Due after 1 year 2,005 -
Total adjustable rate 10,499 11,377
Total par value $ 45,818 $ 61,710
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Note 6 - Mortgage Loans Held for Portfolio
Mortgage loans held for portfolio consist of single-family mortgage loans purchased from participating financial institutions under the MPF program. The following table presents information as of December 31, 2024 and 2023, on mortgage loans held for portfolio, all of which are secured by one- to four-unit residential properties and single-unit homes.
(In millions) 2024 2023
Fixed rate medium-term mortgage loans(1)
$ 10 $ 12
Fixed rate long-term mortgage loans(1)
648 704
Subtotal 658 716
Unamortized premiums 37 41
Unamortized discounts (1) (2)
Mortgage loans held for portfolio(2)
694 755
Less: Allowance for credit losses (1) (1)
Total mortgage loans held for portfolio, net $ 693 $ 754
(1)Medium-term loans have original contractual terms of 15 years or less, and long-term loans have contractual terms of more than 15 years.
(2)Excludes accrued interest receivable of $5 million at December 31, 2024 and 2023.
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. A past due loan is one where the borrower has failed to make a scheduled full payment of principal and interest within 30 days of its due date. Other delinquency statistics include nonaccrual loans and loans in process of foreclosure. The following table presents the payment status for mortgage loans and other delinquency statistics for the Bank’s mortgage loans at December 31, 2024 and 2023.
(Dollars in millions)
Payment Status, at Amortized Cost(1)
2024 2023
30 - 59 days delinquent $ 8 $ 5
60 - 89 days delinquent 2 4
90 days or more delinquent 17 16
Total past due 27 25
Total current loans 667 730
Total mortgage loans held for portfolio $ 694 $ 755
In process of foreclosure, included above(2)
$ 1 $ 2
Nonaccrual loans(3)
$ 17 $ 16
Serious delinquencies as a percentage of total mortgage loans outstanding(4)
2.48 % 2.17 %
(1) The amortized cost in a loan is the unpaid principal balance of the loan, adjusted for net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs.
(2) Includes loans for which the servicer has reported a decision to foreclose or to pursue a similar alternative, such as deed-in-lieu. Loans in process of foreclosure are included in past due or current loans depending on their delinquency status.
(3) At December 31, 2024 and 2023, $5 million of mortgage loans on nonaccrual status did not have an associated allowance for credit losses because these loans were either previously charged off to the expected recoverable value or the fair value of the underlying collateral, including any credit enhancements, is greater than the amortized cost of the loans.
(4) Represents loans that are 90 days or more past due or in the process of foreclosure as a percentage of the recorded investment of total mortgage loans outstanding.
Allowance for Credit Losses on Mortgage Loans Held for Portfolio. At both December 31, 2024 and 2023, the allowance for credit losses on the mortgage loan portfolio was $1 million. The amount of charge-offs and recoveries of allowance for credit losses on the mortgage loan portfolio were de minimis for the years ended December 31, 2024, 2023, and 2022.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
For more information related to the Bank’s accounting policies for mortgage loans held for portfolio, see “Note 1 - Summary of Significant Accounting Policies.”
Note 7 - Deposits
The Bank maintains demand deposit accounts that are directly related to the extension of credit to members and offers short-term deposit programs to members and qualifying nonmembers. In addition, a member that services mortgage loans held for portfolio may deposit in the Bank funds collected in connection with the mortgage loans, pending disbursement of these funds. The Bank classifies these types of deposits as non-interest-bearing deposits. Deposits classified as demand, overnight, and other pay interest based on a daily interest rate. Term deposits pay interest based on a fixed rate determined at the issuance of the deposit.
Deposits outstanding as of December 31, 2024 and 2023, were as follows:
(In millions)
2024 2023
Demand and overnight interest-bearing deposits
$ 1,055 $ 957
Non-interest-bearing deposits 6 5
Total $ 1,061 $ 962
Note 8 - Consolidated Obligations
General Terms. Consolidated obligation bonds are generally issued with either fixed rate payment terms or adjustable rate payment terms. In addition, to meet the specific needs of certain investors, fixed rate and adjustable rate consolidated obligation bonds may contain certain embedded features, such as call options and complex coupon payment terms. In general, when such consolidated obligation bonds are issued for which the Bank is the primary obligor, the Bank simultaneously enters into interest rate exchange agreements containing offsetting features to, in effect, convert the terms of the bond to the terms of a simple adjustable rate bond.
In addition to having fixed rate or simple adjustable rate coupon payment terms, consolidated obligations may, for example, include:
•Callable bonds, which the Bank may call at its option on predetermined call dates according to the terms of the bond offerings;
•Step-up callable bonds, which pay interest at increasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank’s option on the step-up dates according to the terms of the bond offerings;
•Step-down callable bonds, which pay interest at decreasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank’s option on the step-down dates according to the terms of the bond offerings;
•Conversion callable bonds, which have coupon rates that convert from fixed to adjustable or from adjustable to fixed on predetermined dates and can generally be called at the Bank’s option on predetermined call dates according to the terms of the bond offerings.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Redemption Terms. The following is a summary of the Bank’s participation in consolidated obligation bonds at December 31, 2024 and 2023.
(Dollars in millions) 2024 2023
Contractual Maturity Amount
Outstanding Weighted
Average
Interest Rate Amount
Outstanding Weighted
Average
Interest Rate
Within 1 year $ 39,657 4.40 % $ 42,821 4.84 %
After 1 year through 2 years 12,005 2.96 13,105 4.70
After 2 years through 3 years 1,920 2.62 5,938 1.34
After 3 years through 4 years 1,487 3.50 1,345 1.75
After 4 years through 5 years 2,706 4.35 942 2.98
After 5 years 777 2.76 826 2.35
Total par value 58,552 4.00 % 64,977 4.37 %
Unamortized discounts (1) (6)
Valuation adjustments for hedging activities (363) (645)
Fair value option valuation adjustments (14) (29)
Total $ 58,174 $ 64,297
The Bank’s participation in consolidated obligation bonds outstanding includes callable bonds. When a callable bond for which the Bank is the primary obligor is issued, the Bank may simultaneously enter into an interest rate swap (wherein the Bank pays a variable rate and receives a fixed rate) with a call feature that mirrors the call option embedded in the bond (a sold callable option in a swap). The combined callable swaps and callable bonds enable the Bank to meet its funding needs at lower costs relative to similar tenor non-callable debt, while effectively converting the Bank’s net payment to an adjustable rate.
The Bank’s participation in consolidated obligation bonds at December 31, 2024 and 2023, was as follows:
(In millions)
2024 2023
Par value of consolidated obligation bonds:
Non-callable
$ 40,207 $ 38,945
Callable
18,345 26,032
Total par value
$ 58,552 $ 64,977
The following is a summary of the Bank’s participation in consolidated obligation bonds outstanding at December 31, 2024 and 2023, by the earlier of the year of contractual maturity or next call date.
(In millions)
Earlier of Contractual
Maturity or Next Call Date 2024 2023
Within 1 year $ 49,795 $ 55,291
After 1 year through 2 years 7,608 9,160
After 2 years through 3 years 1,101 378
After 3 years through 4 years 12 100
After 4 years through 5 years 9 12
After 5 years 27 36
Total par value $ 58,552 $ 64,977
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
The Bank’s participation in consolidated obligation discount notes, all of which are due within one year, was as follows:
(Dollars in millions) Carrying Value
Par Value
Weighted Average
Interest Rate (1)
December 31, 2024 $ 14,378 $ 14,460 4.41 %
December 31, 2023 $ 19,187 $ 19,321 5.23 %
(1)Represents yield to maturity excluding concession fees.
Interest Rate Payment Terms. Interest rate payment terms for consolidated obligation bonds at December 31, 2024 and 2023, are detailed in the following table.
(In millions) 2024 2023
Par value of consolidated obligation bonds:
Fixed rate $ 23,410 $ 37,464
Adjustable rate 34,692 26,880
Step-up 450 633
Total consolidated obligation bonds, par value
$ 58,552 $ 64,977
Note 9 - Affordable Housing Program
The FHLBank Act requires each FHLBank to establish an AHP. Each FHLBank provides subsidies to members, which use the funds to assist in the purchase, construction, or rehabilitation of housing for households earning up to 80% of the median income for the area in which they live. Subsidies may be in the form of direct grants or below-market interest rate advances. Annually, the FHLBanks must set aside for their AHPs, in the aggregate, the greater of $100 million or 10% of the current year's net earnings (income before interest expense related to dividends paid on mandatorily redeemable capital stock and the assessment for AHP).
The Bank accrues its AHP assessment monthly based on its net earnings. If the Bank experienced a net loss during a quarter but still had net earnings for the year, the Bank’s obligation to the AHP would be calculated based on the Bank’s year-to-date net earnings. If the Bank had net earnings in subsequent quarters, it would be required to contribute additional amounts to meet its calculated annual obligation. If the Bank experienced a net loss for a full year, the amount of the AHP liability would be equal to zero, since each FHLBank’s required annual AHP contribution is limited to its annual net earnings. However, if the result of the aggregate 10% calculation is less than $100 million for the FHLBanks combined, then the FHLBank Act requires that each FHLBank contribute such prorated sums as may be required to ensure that the aggregate contribution of the FHLBanks equals $100 million. The proration would be made on the basis of an FHLBank’s income in relation to the income of all the FHLBanks for the previous year. There was no AHP shortfall, as described above, in 2024, 2023, or 2022. If an FHLBank finds that its required AHP assessments are contributing to the financial instability of that FHLBank, it may apply to the Finance Agency for a temporary suspension of its contributions. The Bank did not make such an application in 2024, 2023, or 2022.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
The Bank’s total AHP assessments are charged to earnings each year and recognized as a liability. As subsidies are disbursed, the AHP liability is reduced.
The AHP liability was as follows:
(In millions) 2024 2023 2022
Balance, beginning of the period $ 133 $ 111 $ 115
AHP assessments 52 63 36
AHP voluntary contributions 9 - -
AHP grant payments (54) (41) (40)
Balance, end of the period $ 140 $ 133 $ 111
All subsidies were distributed in the form of direct grants in 2024, 2023, and 2022.
Voluntary contributions to support other housing and community investments (non-AHP) are recorded on the Combined Statements of Income. The following table presents a rollforward of the voluntary contribution liability balance (non-AHP):
(In millions) 2024 2023 2022
Balance, beginning of the period $ - $ - $ -
Voluntary housing and community investment contributions, net of AHP voluntary contributions
32 16 3
Voluntary housing and community investment payments
(32) (16) (3)
Balance, end of the period $ - $ - $ -
Note 10 - Accumulated Other Comprehensive Income/(Loss)
The following table summarizes the changes in AOCI for the years ended December 31, 2024, 2023, and 2022:
(In millions) Net Unrealized Gain/(Loss) on AFS Securities Pension and Postretirement Benefits Total
AOCI
Balance, December 31, 2021
$ 340 $ (9) $ 331
Other comprehensive income/(loss):
Net change in pension and postretirement benefits (6) (6)
Net change in fair value (354) (354)
Net current period other comprehensive income/(loss) (354) (6) (360)
Balance, December 31, 2022
$ (14) $ (15) $ (29)
Other comprehensive income/(loss):
Net change in pension and postretirement benefits 4 4
Net change in fair value (47) (47)
Net current period other comprehensive income/(loss) (47) 4 (43)
Balance, December 31, 2023
$ (61) $ (11) $ (72)
Other comprehensive income/(loss):
Net change in pension and postretirement benefits 6 6
Net change in fair value 129 129
Net current period other comprehensive income/(loss) 129 6 135
Balance, December 31, 2024
$ 68 $ (5) $ 63
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Note 11 - Capital
Capital Requirements. The Bank issues a single class of capital stock, Class B stock, with a par value of $100 per share, which may be redeemed (subject to certain conditions) upon five years' notice by the member to the Bank. In addition, at its discretion, under certain conditions, the Bank may repurchase excess stock at any time (see “Excess Stock” below for more information). The Bank’s capital stock may be issued, redeemed, and repurchased only at its stated par value, subject to certain statutory and regulatory requirements. The Bank may only redeem or repurchase capital stock from a shareholder if, following the redemption or repurchase, the shareholder will continue to meet its minimum capital stock requirement and the Bank will continue to meet its regulatory requirements for total capital, leverage capital, and risk-based capital.
Under the Housing and Economic Recovery Act of 2008, the Director of the Finance Agency is responsible for setting the risk-based capital standards for the FHLBanks. The FHLBank Act and regulations governing the operations of the FHLBanks require that the Bank’s minimum capital stock requirement for shareholders must be sufficient to enable the Bank to meet its regulatory requirements for total capital, leverage capital, and risk-based capital. The Bank must maintain: (i) total regulatory capital in an amount equal to at least 4% of its total assets, (ii) leverage capital in an amount equal to at least 5% of its total assets, and (iii) permanent capital in an amount that is greater than or equal to its risk-based capital requirement.
The Finance Agency requires each FHLBank to maintain a ratio of at least 2% of capital stock to total assets in order to help preserve the cooperative structure incentives that encourage members to remain fully engaged in the oversight of their investment in the FHLBank. The Finance Agency will consider the proportion of capital stock to assets, measured on a daily average basis at monthend, when assessing each FHLBank’s capital management practices. As of December 31, 2024 and 2023, the Bank complied with this capital guidance.
Because the Bank issues only Class B stock, regulatory capital and permanent capital for the Bank are both composed of retained earnings and Class B stock, including mandatorily redeemable capital stock (which is classified as a liability for financial reporting purposes). Regulatory capital and permanent capital do not include AOCI. Leverage capital is defined as the sum of permanent capital, weighted by a 1.5 multiplier, plus non-permanent capital.
The risk-based capital requirement is equal to the sum of the Bank’s credit risk, market risk, and 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 an FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined.
As of December 31, 2024 and 2023, the Bank complied with these capital rules and requirements as shown in the following table.
2024 2023
(Dollars in millions) Required Actual Required Actual
Risk-based capital $ 1,058 $ 7,272 $ 1,210 $ 7,446
Total regulatory capital $ 3,269 $ 7,272 $ 3,713 $ 7,446
Total regulatory capital ratio 4.00 % 8.90 % 4.00 % 8.02 %
Leverage capital $ 4,087 $ 10,908 $ 4,641 $ 11,169
Leverage ratio 5.00 % 13.35 % 5.00 % 12.03 %
The Bank’s capital plan requires each shareholder to own capital stock in an amount equal to the greater of its membership capital stock requirement or its activity-based capital stock requirement. The Bank may adjust these requirements from time to time within ranges established in the capital plan. Any changes to the capital plan must be approved by the Bank’s board of directors (Board) and the Finance Agency.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
A member's membership capital stock requirement is 1% of its membership asset value. The membership capital stock requirement for a member is capped at $15 million. The Bank may adjust the membership capital stock requirement for all members within a range of 0.5% to 1.5% of a member's membership asset value and may adjust the cap for all members within an authorized range of $10 million to $50 million. A member's membership asset value is determined by multiplying the amount of the member's membership assets by the applicable membership asset factors as determined by the Bank. Membership assets are generally defined as assets (other than Bank capital stock) of a type that could qualify as collateral to secure a member's indebtedness to the Bank under applicable law, whether or not the assets are pledged to the Bank or accepted by the Bank as eligible collateral.
The activity-based capital stock requirement is the sum of 2.7% of the member's outstanding advances, plus 0.1% of notional balances for outstanding letters of credit, plus 0.0% of any portion of any mortgage loan purchased and held by the Bank. The Bank may adjust the activity-based capital stock requirement for all members within ranges established in the capital plan of 2.0% to 5.0% of the member's outstanding advances, 0.1% to 1.0% of the member’s notional balances of outstanding letters of credit, and 0.0% to 5.0% of any portion of any mortgage loan purchased and held by the Bank.
Any member may withdraw from membership and, subject to certain statutory and regulatory restrictions, have its capital stock redeemed after giving the required notice. Members that withdraw from membership may not reapply for membership for five years, in accordance with Finance Agency rules.
Mandatorily Redeemable Capital Stock. The Bank has a cooperative ownership structure under which members, former members, and certain other nonmembers own the Bank’s capital stock. Former members and certain other nonmembers are required to maintain their investment in the Bank's capital stock until their outstanding transactions are paid off or until their capital stock is redeemed following the relevant five-year redemption period for capital stock or is repurchased by the Bank, in accordance with the Bank's capital requirements. Capital stock cannot be issued, repurchased, redeemed, or transferred except between the Bank and its members (or their affiliates and successors) at the capital stock's par value of $100 per share.
The Bank will not redeem or repurchase capital stock required to meet the minimum capital stock requirement until five years after the member's membership is terminated or after the Bank receives notice of the member's withdrawal, and the Bank will redeem or repurchase only the amounts that are in excess of the capital stock required to support activity (advances and letters of credit) that may remain outstanding after the five-year redemption period has expired. In both cases, the Bank will only redeem or repurchase capital stock if certain statutory and regulatory conditions are met. In accordance with the Bank’s current practice, if activity-based capital stock becomes excess stock because an activity no longer remains outstanding, the Bank may repurchase the excess activity-based capital stock at its discretion, subject to certain statutory and regulatory conditions. See Note 1 - Summary of Significant Accounting Policies for more information.
The Bank had mandatorily redeemable capital stock totaling $331 million outstanding to seven institutions at December 31, 2024, and $706 million outstanding to six institutions at December 31, 2023. These amounts have been classified as a liability on the Bank’s Statements of Condition. The changes in mandatorily redeemable capital stock for the years ended December 31, 2024, 2023, and 2022, were as follows:
(In millions) 2024 2023 2022
Balance at the beginning of the period $ 706 $ 5 $ 3
Reclassified from/(to) capital during the period 36 1,252 46
Repurchase/redemption
(411) (551) (44)
Balance at the end of the period $ 331 $ 706 $ 5
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
The following table presents mandatorily redeemable capital stock amounts by contractual year of redemption at December 31, 2024 and 2023.
(In millions)
Contractual Year of Redemption
2024 2023
Year 2
$ 1 $ -
Year 3
3 1
Year 4
309 2
Year 5
18 702
Past contractual redemption date because of remaining activity(1)
- 1
Total $ 331 $ 706
(1) Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because there is activity outstanding to which the mandatorily redeemable capital stock relates.
A member may cancel its notice of redemption or notice of withdrawal from membership by providing written notice to the Bank prior to the end of the relevant five-year redemption period or the membership termination date. If the Bank receives the notice of cancellation within 30 months following the notice of redemption or notice of withdrawal, the member is charged a fee equal to fifty cents multiplied by the number of shares of capital stock affected. If the Bank receives the notice of cancellation more than 30 months following the notice of redemption or notice of withdrawal (or if the Bank does not redeem the member's capital stock because following the redemption the member would fail to meet its minimum capital stock requirement), the member is charged a fee equal to one dollar multiplied by the number of shares of capital stock affected. In certain cases, the board of directors may waive a cancellation fee for bona fide business purposes.
The Bank’s capital stock is putable by the shareholder. There are significant statutory and regulatory restrictions on redemption. These include:
•The Bank cannot redeem capital stock if the redemption would cause it to fail to meet minimum capital requirements for total capital, leverage capital, and risk-based capital. If the Bank fails to meet these requirements, all capital stock becomes nonredeemable.
•Redemption may also be prohibited if the Bank incurs, or is likely to incur, losses that would affect its ability to meet regulatory capital requirements, lead to negative retained earnings, or create an unsafe financial condition.
•The Bank’s board of directors may require additional capital stock purchases from members to meet statutory and regulatory capital requirements.
•If the Bank becomes insolvent, liquidated, or merged with another FHLBank, the redemption value will be determined in the liquidation or merger process. Shareholders will receive the par value of their capital stock and any retained earnings, subject to Finance Agency limitations. The Board will determine shareholder rights in a merger, in accordance with Finance Agency terms.
•The Bank cannot redeem capital stock if it has not fully paid the principal or interest on any consolidated obligations issued by the Office of Finance.
•Capital stock redemption is prohibited if the Bank fails to provide the required quarterly certification to the Finance Agency before declaring or paying dividends.
•Redemption may also be blocked if the Bank is unable to meet statutory or regulatory liquidity requirements or fulfill its obligations, or if it enters into an agreement with another FHLBank for financial assistance.
Mandatorily redeemable capital stock is considered capital for determining the Bank's compliance with its regulatory capital requirements. Based on Finance Agency interpretation, the classification of certain shares of the Bank’s capital stock as mandatorily redeemable does not affect the definition of total capital for purposes of: determining the Bank’s compliance with its regulatory capital requirements, calculating its mortgage-backed securities investment authority (300% of total capital), calculating its unsecured credit exposure to other GSEs
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
(limited to 100% of total capital), or calculating its unsecured credit limits to other counterparties (various percentages of total capital depending on the rating of the counterparty).
Excess Stock Repurchase, Retained Earnings, and Dividend Framework. The Bank’s Excess Stock Repurchase, Retained Earnings, and Dividend Framework (Framework) assesses the level and adequacy of retained earnings and establishes amounts to be retained in restricted retained earnings, which are not made available in the current dividend period, and maintains an amount of total retained earnings at least equal to its required retained earnings as described in the Framework. The methodology may be revised from time to time, and the required level of required retained earnings under the methodology may change due to updating data and assumptions used in the methodology. In January 2025, the required level of retained earnings was increased from $1.4 billion to $1.6 billion attributable to higher non-MBS investment balances. The Bank’s retained earnings requirement may be changed at any time. The Board periodically reviews the retained earnings methodology and analysis to determine whether any adjustments are appropriate.
In September 2023, the Board approved an updated Framework and dividend philosophy to reflect changes in the current interest rate environment and business conditions. The Framework includes a dividend philosophy to endeavor to pay a quarterly dividend rate that is equal to or greater than the current market rate for a highly rated investment and that is sustainable under current and projected earnings while maintaining appropriate levels of capital. The decision to declare any dividend and the dividend rate is at the discretion of the Bank’s Board, which may choose to follow or not follow the dividend philosophy as guidance in the dividend declaration. The Board may also revise or eliminate the dividend philosophy in the future. The Bank’s historical dividend rates and the dividend philosophy are not indicative of future dividend declarations.
The Bank satisfies its retained earnings requirement with both restricted retained earnings (i.e., amounts related to the Joint Capital Enhancement (JCE) Agreement) and unrestricted retained earnings. In accordance with the JCE Agreement, each FHLBank is required to reclassify an amount equal to 20% of its net income each quarter to a separate restricted retained earnings account until the balance of the account, calculated as of the last day of each calendar quarter, equals at least 1% of that FHLBank's average balance of outstanding consolidated obligations for the calendar quarter. Under the JCE Agreement, these restricted retained earnings will not be available to pay dividends. The JCE Agreement also provides that amounts in restricted retained earnings in excess of 150% of the Bank’s restricted retained earnings minimum may be released from restricted retained earnings.
Dividend Payments - Finance Agency rules state that FHLBanks may declare and pay dividends only from previously retained earnings or current net earnings and may not declare or pay dividends based on projected or anticipated earnings. In addition, Finance Agency rules do not permit the Bank to pay dividends in the form of capital stock if its excess stock exceeds 1% of its total assets. Excess stock is defined as the aggregate of the capital stock held by each shareholder in excess of its minimum capital stock requirement, as established by the Bank’s capital plan. Excess stock totaled $111 million, or 0.14% of total assets as of December 31, 2024. Excess stock totaled $118 million, or 0.13% of total assets as of December 31, 2023.
In 2024, the Bank paid dividends at an annualized rate of 8.75%, totaling $265 million, including $209 million in dividends on capital stock and $56 million in dividends on mandatorily redeemable capital stock. In 2023 and 2022, the Bank paid dividends on capital stock at an annualized rate of 7.49%, totaling $243 million, and 6.30%, totaling $161 million, respectively. The Bank paid $32 million and a de minimis amount of dividends on mandatorily redeemable capital stock in 2023 and 2022, respectively.
For the periods referenced above, the Bank paid dividends in cash. Dividends on capital stock are recognized as dividends on the Statements of Capital Accounts, and dividends on mandatorily redeemable capital stock are recognized as interest expense on the Statements of Income.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
On February 19, 2025, the Bank’s board of directors declared a quarterly cash dividend on the capital stock outstanding during the fourth quarter of 2024 at an annualized rate of 8.75%, totaling $63 million. The Bank expects to pay the dividend on March 11, 2025.
Excess Stock - The Bank’s capital plan provides that the Bank may repurchase some or all of a shareholder’s excess stock at the Bank’s discretion, subject to certain statutory and regulatory requirements. The Bank may also repurchase all of a member’s excess stock at a member’s request, at the Bank’s discretion, subject to certain statutory and regulatory requirements. A shareholder’s excess stock is defined as any capital stock holdings in excess of the shareholder’s minimum capital stock requirement, as established by the Bank’s capital plan. The Bank’s practice is to repurchase the surplus capital stock of all members and the excess stock of all former members on a daily schedule. Surplus capital stock is defined as any stock holdings in excess of 115% of a member’s minimum stock requirement. The Bank calculates the amount of stock to be repurchased each business day based on the shareholder’s capital stock outstanding after all stock transactions are completed for the day, ensuring that each shareholder would continue to meet its minimum capital stock requirement after the repurchase. The Bank may change this practice at any time.
The Bank is required to redeem any mandatorily redeemable capital stock that is in excess of a former member’s minimum stock requirement on or after the expiration of the five-year redemption date. During 2024, 2023, and 2022, the Bank redeemed a de minimis amount in mandatorily redeemable capital stock, for which the five-year redemption period had expired, at its $100 par value per share. The stock was redeemed on the scheduled redemption dates or, for stock that was not excess stock on its scheduled redemption date because of outstanding activity with the Bank, on the first available repurchase date after the stock was no longer required to support outstanding activity with the Bank.
Concentration. No institution held 10% or more of the Bank’s outstanding capital stock, including mandatorily redeemable capital stock, as of December 31, 2024. JPMorgan Chase, National Association, a nonmember, held $643 million, or 20% of the Bank’s outstanding capital stock, including mandatorily redeemable capital stock, as of December 31, 2023.
On May 1, 2023, the California DFPI closed First Republic Bank and appointed the FDIC as receiver. On the same date, the FDIC transferred all of the deposits and substantially all of the assets of First Republic Bank, including the advances outstanding from the Bank, to JPMorgan Chase, National Association, a nonmember. Upon assumption of the advances outstanding by JPMorgan Chase, National Association, the Bank transferred $759 million of capital stock of the Bank, held by First Republic Bank, to JPMorgan Chase, National Association and reclassified that capital stock to mandatorily redeemable as a liability in the Bank’s Statements of Condition.
Note 12 - Employee Retirement Plans and Incentive Compensation Plans
Defined Benefit Plans
Qualified Defined Benefit Plan. The Bank provides retirement benefits through a Bank-sponsored Cash Balance Plan, a qualified defined benefit plan. The Cash Balance Plan is provided to all employees who have completed six months of Bank service. Under the plan, during the years ended December 31, 2024 and 2023, each eligible Bank employee accrued benefits annually equal to 6% of the employee's annual compensation, plus 6% interest on the benefits accrued to the employee through the prior yearend. The Cash Balance Plan is funded through a qualified trust established by the Bank.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Non-Qualified Defined Benefit Plans. The Bank sponsors the following non-qualified defined benefit retirement plans:
•Benefit Equalization Plan, a non-qualified retirement plan restoring benefits offered under the Cash Balance Plan that are limited by laws governing the plan. See below for further discussion of the defined contribution portion of the Benefit Equalization Plan.
•Supplemental Executive Retirement Plan (SERP), a non-qualified unfunded retirement benefit plan available to the Bank's eligible senior officers, which generally provides a service-linked supplemental cash balance annual contribution credit to SERP participants and an annual interest credit of 6% on the benefits accrued to the SERP participants through the prior yearend.
•Deferred Compensation Plan, a non-qualified retirement plan available to all eligible Bank employees, which provides make-up retirement benefits that would have been earned under the Cash Balance Plan had the compensation not been deferred. The make-up benefits vest according to the corresponding provisions of the Cash Balance Plan. See below for further discussion of the defined contribution portion of the Deferred Compensation Plan.
Postretirement Health Benefit Plan. The Bank provides a postretirement health benefit plan to employees that meet certain eligibility criteria. Changes in health care cost trend rates will not have a material effect on the Bank's accumulated postretirement benefit obligation or service and interest costs because benefit plan premiums are generally paid by the retirees.
Amounts recognized in AOCI for the defined benefit Cash Balance Plan, the non-qualified defined benefit plans, and postretirement health benefit plan at December 31, 2024 and 2023, consist of:
2024 2023
(In millions) Cash Balance
Plan Non-Qualified Defined Benefit Plans
Postretirement Health Benefit Plan
Cash Balance
Plan Postretirement Health Benefit Plan
Net loss/(gain) $ 8 $ (2) $ (1) $ 12 $ (1)
The following table presents obligations and funded status of retirement plans at December 31, 2024 and 2023.
2024 2023
(In millions) Cash Balance Plan Non-Qualified Defined Benefit Plans Postretirement Health Benefit Plan
Cash Balance Plan Non-Qualified Defined Benefit Plans Postretirement Health Benefit Plan
Projected benefit obligation $ 83 $ 15 $ 1 $ 80 $ 15 $ 1
Accumulated benefit obligation 83 14 1 80 15 1
Fair value of plan assets 101 - - 96 - -
Funded/(unfunded) status
18 (15) (1) 16 (15) (1)
The Bank uses a discount rate to determine the present value of its future benefit obligations. The discount rate was determined based on the Financial Times Stock Exchange (FTSE) Pension Discount Curve at the measurement date. The FTSE Pension Discount Curve is a yield curve that reflects the market-observed yields for high-quality fixed income securities for each maturity. The projected benefit payments for each year from the plan are discounted using the spot rates on the yield curve to derive a single equivalent discount rate. The discount rate is reset annually on the measurement date. The discount rate used to determine the benefit obligations for the Cash Balance Plan and non-qualified defined benefit plans was 5.25% for 2024 and 4.50% for 2023. The discount rate used to determine the benefit obligations for the postretirement health benefit plan was 5.50% for 2024 and 4.75% for 2023.
The table below presents the fair values of the Cash Balance Plan's assets as of December 31, 2024 and 2023, by asset category. See Note 14 - Fair Value for further information regarding the three levels of fair value measurement.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
2024 2023
(In millions) Fair Value Measurement Using: Fair Value Measurement Using:
Asset Category Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Cash and cash equivalents $ 3 $ - $ - $ 3 $ 1 $ - $ - $ 1
Equity mutual funds 61 - - 61 59 - - 59
Fixed income mutual funds 30 - - 30 29 - - 29
Real estate mutual funds 4 - - 4 4 - - 4
Other mutual funds 3 - - 3 3 - - 3
Total $ 101 $ - $ - $ 101 $ 96 $ - $ - $ 96
The Cash Balance Plan is administered by the Bank's Retirement Committee, which establishes the plan's Statement of Investment Policy and Objectives. The Retirement Committee has adopted a strategic asset allocation based on a stable distribution of assets among major asset classes. These asset classes include domestic large-, mid-, and small-capitalization equity investments; international equity investments; real return investments; and fixed income investments. The Retirement Committee has set the Cash Balance Plan's target allocation percentages for a mix of 60% equity, 10% real return, and 30% fixed income. The Retirement Committee reviews the performance of the Cash Balance Plan on a regular basis.
The Cash Balance Plan's weighted average asset allocation at December 31, 2024 and 2023, by asset category was as follows:
Asset Category 2024 2023
Cash and cash equivalents 2 % 1 %
Equity mutual funds 61 62
Fixed income mutual funds 30 30
Real estate mutual funds 4 4
Other mutual funds 3 3
Total 100 % 100 %
The Bank did not contribute in 2024 and does not expect to contribute in 2025 to the Cash Balance Plan. The Bank contributed $2 million in 2024 and expects to contribute de minimis amounts in 2025 to the non-qualified defined benefit plans and postretirement health benefit plan.
The following are the estimated future benefit payments, which reflect expected future service, as appropriate:
(In millions)
Year
Cash Balance
Plan Non-Qualified
Defined Benefit
Plans
2025 $ 5 $ -
2026 5 1
2027 5 1
2028 6 1
2029 42 3
Years 2030-2034 27 11
Defined Contribution Plans
Retirement Savings Plan. The Bank sponsors a qualified defined contribution retirement 401(k) savings plan, the Federal Home Loan Bank of San Francisco Savings Plan (Savings Plan). Contributions to the Savings Plan consist
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
of elective participant contributions of up to 75% of each participant's base compensation and a Bank matching contribution of up to 6% of each participant's base compensation. The Bank contributed approximately $3 million during each of the years ended December 31, 2024, 2023, and 2022.
Benefit Equalization Plan. The Bank sponsors a non-qualified retirement plan restoring benefits offered under the Savings Plan that have been limited by laws governing the plan. Contributions made to the plan during the years ended December 31, 2024, 2023, and 2022, were de minimis.
Deferred Compensation Plan. The Bank maintains a deferred compensation plan that is available to all eligible Bank employees. The defined contribution portion of the plan consists of two components: (i) employee or director deferral of current compensation, and (ii) make-up matching contributions for employees that would have been made by the Bank under the Savings Plan had the compensation not been deferred. The make-up benefits under the Deferred Compensation Plan vest according to the corresponding provisions of the Savings Plan. The Deferred Compensation Plan liability consists of the accumulated compensation deferrals and accrued earnings on the deferrals, as well as the make-up matching contributions and any accrued earnings on the contributions. The Bank’s obligation for this plan at December 31, 2024 and 2023, was $63 million and $58 million, respectively.
Incentive Compensation Plans
The Bank provides incentive compensation plans for all employees. Other liabilities include $15 million and $16 million for incentive compensation at December 31, 2024 and 2023, respectively.
Note 13 - Derivatives and Hedging Activities
General. The Bank may enter into interest rate swaps (including callable, putable, and basis swaps) and cap and floor agreements (collectively, interest rate exchange agreements or derivatives). Most of the Bank’s interest rate exchange agreements are executed in conjunction with the origination of advances, the issuance of consolidated obligations, or the investment in fixed rate assets to create variable rate structures. The interest rate exchange agreements are generally executed at the same time the advances, consolidated obligations, and investments are transacted and generally have the same maturity dates as the related hedged instrument. 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. Derivatives may be either uncleared or cleared. In an uncleared derivative transaction, the Bank’s counterparty is the executing bank or broker-dealer. In a cleared derivative transaction, the Bank may execute the transaction with an executing bank or broker-dealer, either on or off a swap execution facility, but in either case, the Bank’s counterparty is a derivatives clearing organization (clearing house) once the derivative transaction has been accepted for clearing. The Bank is not a derivatives dealer and does not trade derivatives for short-term profit.
Additional uses of interest rate exchange agreements include: (i) offsetting embedded features in assets and liabilities, (ii) hedging anticipated issuance of debt, (iii) matching against consolidated obligation discount notes to create the equivalent of callable or non-callable fixed rate debt, (iv) modifying the repricing frequency of assets and liabilities, (v) matching against certain advances and consolidated obligations for which the Bank elected the fair value option, and (vi) exactly offsetting other derivatives cleared at a clearing house. The Bank’s use of interest rate
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
exchange agreements results in one of the following classifications: (i) a fair value hedge of an underlying financial instrument or (ii) an economic hedge of assets, liabilities, or other derivatives.
The Bank primarily uses interest rate swaps, which are agreements between two entities to exchange cash flows in the future. The agreement sets the dates on which the cash flows will be paid and the manner in which the cash flows will be calculated. One of the simplest forms of an interest rate swap involves the promise by one party to pay cash flows equivalent to the interest on a notional principal amount at a predetermined fixed rate for a given period of time. In return for this promise, the party receives cash flows equivalent to the interest on the same notional principal amount at a variable rate for the same period of time. The variable rate received or paid by the Bank in most interest rate exchange agreements is based on a daily repricing index, such as the Secured Overnight Financing Rate (SOFR) or the effective federal funds rate (EFFR).
Hedging Activities. The Bank documents at inception all relationships between derivatives designated as hedging instruments and hedged items, its risk management objectives and strategies for undertaking various hedge transactions, and its method of assessing hedge effectiveness. Derivatives designated as fair value hedges may be transacted to hedge: (i) assets and liabilities on the Statements of Condition, (ii) firm commitments, or (iii) forecasted transactions. The Bank also formally assesses (both at hedge inception and on an ongoing basis) whether the hedging derivatives have been effective in offsetting changes in the fair value of hedged items attributable to the hedged risk and whether those derivatives may be expected to remain effective hedges in future periods. The Bank typically uses regression analyses or other statistical analyses to assess the effectiveness of its hedges. When it is determined that a derivative has not been or is not expected to be effective as a hedge, the Bank discontinues hedge accounting prospectively.
The Bank may have the following types of hedged items:
Investments - The Bank may invest in U.S. Treasury and agency obligations as well as agency MBS. In the past, the Bank has also invested in PLRMBS rated AAA at the time of acquisition. The interest rate and prepayment risk associated with these investment securities is managed through a combination of debt issuance and derivatives. The Bank may manage prepayment risk and interest rate risk by funding investment securities with consolidated obligations that have call features or with a combination of consolidated obligations and callable swaps. This type of hedge is treated as either a fair value hedge or an economic hedge. The Bank may also execute callable swaps in conjunction with the issuance of certain liabilities to create funding that is economically equivalent to fixed rate callable debt. This type of hedge is treated as an economic hedge. Investment securities may be classified as trading, AFS, or HTM.
The Bank may also manage the risk arising from changing market prices or cash flows of investment securities classified as trading or AFS by entering into interest rate exchange agreements that offset the changes in fair value or cash flows of the securities. Hedge relationships that involve AFS securities are designated as fair value hedges.
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 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 gain/(loss) on AFS securities.”
Advances - The Bank offers a wide range of advances structures to meet members’ funding needs. These advances may have maturities up to 30 years with fixed or adjustable rates and may include early termination features or options. The Bank may use derivatives to adjust the repricing and options characteristics of advances to more closely match the characteristics of the Bank’s funding liabilities. In general, whenever a member executes a fixed rate advance, fixed rate advance with embedded options, or a variable rate advance with embedded options, the Bank will simultaneously execute an interest rate exchange agreement with terms that offset the terms and any embedded options in the advance. The combination of the advance and the interest rate exchange agreement effectively creates a variable rate asset. Fixed rate advances without options that are offset with an interest rate
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
exchange agreement are generally treated as fair value hedges. Advances with embedded options are recorded using the fair value option and are economically hedged using interest rate exchange agreements.
Mortgage Loans - Prior to June 30, 2021, the Bank invested in fixed rate mortgage loans. The prepayment options embedded in mortgage loans can result in extensions or contractions in the expected repayment of these investments, depending on changes in estimated prepayment speeds. The Bank manages the interest rate risk and prepayment risk associated with fixed rate mortgage loans through a combination of debt issuance and derivatives. The Bank uses both callable and non-callable debt to achieve cash flow patterns and market value sensitivities for liabilities similar to those expected on the mortgage loans. Net income could be reduced if the Bank replaces prepaid mortgage loans with lower-yielding assets and the Bank’s higher funding costs are not reduced accordingly.
The Bank may execute callable swaps in conjunction with the issuance of short-term or adjustable rate consolidated obligations to create funding that is economically equivalent to fixed rate callable bonds. This type of hedge is treated as an economic hedge.
Consolidated Obligations - Consolidated obligation bonds may be structured to meet the Bank’s or the investors’ needs. Common structures include fixed rate bonds with or without call options and adjustable rate bonds with or without embedded options. In general, when bonds are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that offset the terms and embedded options, if any, of the consolidated obligation bond. This combination of the consolidated obligation bond and the interest rate exchange agreement effectively creates an adjustable rate bond. These transactions generally receive fair value hedge accounting treatment.
When the Bank issues consolidated obligation discount notes, it may also simultaneously enter into an interest rate exchange agreement to convert the fixed rate discount note to an adjustable rate discount note. This type of hedge is treated as either a fair value hedge or an economic hedge.
In addition, when certain consolidated obligation bonds for which the Bank has elected the fair value option are issued, the Bank simultaneously executes an interest rate exchange agreement with terms that economically offset the terms of the consolidated obligation bond. However, this type of hedge is treated as an economic hedge because these combinations do not meet the requirements for fair value hedge accounting treatment.
Offsetting Derivatives - The Bank enters into derivatives to offset the economic effect of other derivatives that are no longer designated to advances, investments, or consolidated obligations. Offsetting derivatives do not receive hedge accounting treatment and are separately marked to market through earnings. The net result of the accounting for these derivatives does not significantly affect the operating results of the Bank.
The notional amount of an interest rate exchange agreement serves as a factor in determining periodic interest payments or cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor the overall exposure of the Bank to credit risk and market risk. The risks of derivatives can be measured meaningfully on a portfolio basis by taking into account the counterparties, the types of derivatives, the items being hedged, and any offsets between the derivatives and the items being hedged.
For more information related to the Bank’s accounting policies for derivatives, see Note 1 - Summary of Significant Accounting Policies.
The following table summarizes the notional amount and fair value of derivative instruments, including the effect of netting adjustments and cash collateral as of December 31, 2024 and 2023. For purposes of this disclosure, the derivative values include the fair value of derivatives and related accrued interest.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
2024 2023
(In millions) Notional
Amount of
Derivatives Derivative
Assets Derivative
Liabilities Notional
Amount of
Derivatives Derivative
Assets Derivative
Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps $ 76,005 $ 713 $ 399 $ 90,088 $ 795 $ 705
Derivatives not designated as hedging instruments:
Interest rate swaps 13,871 39 59 27,349 36 87
Total derivatives before netting and collateral adjustments $ 89,876 752 458 $ 117,437 831 792
Netting adjustments and cash collateral(1)
(722) (450) (815) (790)
Total derivative assets and total derivative liabilities $ 30 $ 8 $ 16 $ 2
(1) Amounts represent the application of the netting requirements that allow the Bank to settle positive and negative positions, and also cash collateral, including accrued interest, held or placed with the same clearing agents or counterparty. Cash collateral posted, including accrued interest, was $210 million and $353 million at December 31, 2024 and 2023, respectively. Cash collateral received, including accrued interest, was $482 million and $378 million at December 31, 2024 and 2023, respectively.
The following tables present, by type of hedged item, the gains and losses on fair value hedging relationships and the impact of those derivatives on the Bank’s Statements of Income for the years ended December 31, 2024, 2023, and 2022.
Interest Income/(Expense)
(In millions) Advances AFS Securities Consolidated Obligation Bonds Consolidated Obligations
Discount Notes (2)
Total interest income/(expense) presented in the Statements of Income $ 2,767 $ 1,186 $ (3,143) $ (767)
Gain/(loss) on fair value hedging relationships
Derivatives(1)
$ 360 $ 655 $ (209) $ 1
Hedged items
159 (258) (281) (4)
Net gain/(loss) on derivatives and hedging activities recorded in net interest income
$ 519 $ 397 $ (490) $ (3)
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Interest Income/(Expense)
(In millions) Advances AFS Securities Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income $ 3,999 $ 921 $ (3,901)
Gain/(loss) on fair value hedging relationships
Derivatives(1)
$ 117 $ 91 $ (138)
Hedged items
230 230 (438)
Net gain/(loss) on derivatives and hedging activities recorded in net interest income
$ 347 $ 321 $ (576)
Interest Income/(Expense)
(In millions) Advances AFS Securities Consolidated Obligation Bonds
Total interest income/(expense) presented in the Statements of Income $ 1,226 $ 408 $ (715)
Gain/(loss) on fair value hedging relationships
Derivatives(1)
$ 814 $ 1,202 $ (1,038)
Hedged items (804) (1,247) 944
Net gain/(loss) on derivatives and hedging activities recorded in net interest income $ 10 $ (45) $ (94)
(1)Includes net interest settlements.
(2)There were no fair value hedging relationships on consolidated obligation discount notes during the years ended December 31, 2023 and 2022.
The following tables present the cumulative basis adjustments on hedged items designated as fair value hedges and the related amortized cost of the hedged items as of December 31, 2024 and 2023.
(In millions) Advances AFS Securities Consolidated Obligation Bonds Consolidated Obligation Discount Notes (2)
Amortized cost of hedged asset/(liability)(1)
$ 24,880 $ 19,296 $ (22,142) $ (9,702)
Fair value hedging basis adjustments:
Active hedging relationships included in amortized cost $ (230) $ (1,191) $ 364 $ (4)
Discontinued hedging relationships included in amortized cost 32 512 - -
Total amount of fair value hedging basis adjustments $ (198) $ (679) $ 364 $ (4)
(In millions) Advances AFS Securities Consolidated Obligation Bonds
Amortized cost of hedged asset/(liability)(1)
$ 38,338 $ 17,029 (34,121)
Fair value hedging basis adjustments:
Active hedging relationships included in amortized cost $ (427) $ (1,053) 645
Discontinued hedging relationships included in amortized cost 56 621 -
Total amount of fair value hedging basis adjustments $ (371) $ (432) $ 645
(1)Includes only the portion of amortized cost representing the hedged items in fair value hedging relationships.
(2)There were no fair value hedging relationships on consolidated obligation discount notes at December 31, 2023.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
The following table presents the components of net gain/(loss) on derivatives as presented in the Statements of Income for the years ended December 31, 2024, 2023, and 2022.
(In millions) 2024 2023 2022
Derivatives not designated as hedging instruments Gain/(Loss) Gain/(Loss) Gain/(Loss)
Economic hedges:
Interest rate swaps $ 16 $ (26) $ 34
Net interest settlements 40 5 (42)
Total net gain/(loss) related to derivatives not designated as hedging instruments 56 (21) (8)
Price alignment amount(1)
(3) (4) (1)
Net gain/(loss) on derivatives $ 53 $ (25) $ (9)
(1) This amount relates to derivatives for which variation margin on cleared derivatives is characterized as a daily settled contract.
Credit Risk. The Bank is subject to credit risk from potential nonperformance by counterparties to the interest rate exchange agreements. All of the Bank’s agreements governing uncleared derivative transactions contain master netting provisions to help mitigate the credit risk exposure to each counterparty. The Bank manages counterparty credit risk through credit analyses and collateral requirements and by following the requirements of the Bank’s risk management policies, credit guidelines, and Finance Agency and other regulations. The Bank also requires credit support agreements on all uncleared derivatives.
For cleared derivatives, the clearing house is the Bank’s counterparty. The requirement that the Bank post initial margin and settle variation margin through a clearing agent to the clearing house exposes the Bank to institutional credit risk if its futures commission merchant, or clearing agent, fails to meet its obligations. The use of a clearing house, or central counterparty, lowers overall credit risk exposure because it employs standard valuation and initial and variation margin processes and is specifically designed to withstand remote but plausible futures commission merchant default credit events. Variation margin is settled for changes in the value of the portfolio, and initial margin is posted for changes in risk profile of the portfolio. The Bank analyzed the enforceability of offsetting rights applicable to its cleared derivative transactions and determined that the exercise of those offsetting rights by a non-defaulting party under these transactions should be upheld under applicable bankruptcy law and Commodity Futures Trading Commission rules in the event of a clearing house or clearing agent insolvency and under applicable clearing house rules upon a non-insolvency-based event of default of the clearing house or clearing agent. Based on this analysis, the Bank presents a net derivative receivable or payable for all of its transactions through a particular clearing agent with a particular clearing house.
Based on the Bank’s credit analyses and the collateral requirements, the Bank does not expect to incur any credit losses on its derivative transactions.
The Bank’s agreements for uncleared derivative transactions contain provisions that link the Bank’s credit rating from Moody’s Investors Service and S&P Global Ratings to various rights and obligations. Certain of these derivative agreements provide that, if the Bank’s long-term debt rating falls below a specified rating (ranging from A3/A- to Baa3/BBB-), the Bank’s counterparty would have the right, but not the obligation, to terminate all of its outstanding derivative transactions with the Bank; the Bank’s agreements with its clearing agents for cleared derivative transactions have similar provisions with respect to the debt rating of FHLBank System consolidated bonds. If this occurs, the Bank may choose to enter into replacement hedges, either by transferring the existing transactions to another counterparty or entering into new replacement transactions, based on prevailing market rates. The aggregate fair value of all uncleared derivative instruments with credit risk-related contingent features that were in a net derivative liability position (before cash collateral and related accrued interest) at December 31, 2024, was $202 million, for which the Bank posted cash collateral of $197 million in the ordinary course of business.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
The Bank may present derivative instruments, related cash collateral received or pledged, and associated accrued interest by clearing agent or by counterparty on a net basis when the netting requirements have been met.
The following table presents separately the fair value of derivative assets and derivative liabilities that have met the netting requirements, including the related collateral received from or pledged to counterparties as of December 31, 2024 and 2023.
2024 2023
(In millions) Derivative Assets Derivative Liabilities Derivative Assets Derivative Liabilities
Derivative instruments meeting netting requirements
Gross recognized amount
Uncleared $ 730 $ 452 $ 826 $ 778
Cleared 22 6 5 14
Total gross recognized amount 752 458 831 792
Gross amount of netting adjustments and cash collateral
Uncleared (729) (444) (814) (776)
Cleared 7 (6) (1) (14)
Total gross amounts of netting adjustments and cash collateral (722) (450) (815) (790)
Total derivative assets and total derivative liabilities $ 30 $ 8 $ 16 $ 2
Net amount(1)
Uncleared $ 1 $ 8 $ 12 $ 2
Cleared 29 - 4 -
Total net amount $ 30 $ 8 $ 16 $ 2
(1) Any over-collateralization at the Bank’s individual clearing agent and/or counterparty level is not included in the determination of the net amount. At December 31, 2024 and 2023, the Bank had additional net exposure of $504 million and $771 million, respectively, due to instances where non-cash collateral to a counterparty exceeded the Bank’s net derivative position.
Note 14 - Fair Value
The following fair value amounts have been determined by the Bank using available market information and the Bank’s best judgment of appropriate valuation methods. These estimates are based on pertinent information available to the Bank at December 31, 2024 and 2023. Although the Bank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a portion of the Bank’s financial instruments, in certain cases fair values cannot be precisely quantified or verified and may change as economic and market factors and evaluation of those factors change. The Bank continues to refine its valuation methodologies as markets and products develop and the pricing for certain products becomes more or less transparent. While the Bank believes that its valuation methodologies are appropriate and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a materially different estimate of fair value as of the reporting date. U.S. 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). Therefore, the fair values are not necessarily indicative of the amounts that would be realized in current market transactions, although they do reflect the Bank’s judgment as to how a market participant would estimate the fair values. The fair value summary table does not represent an estimate of the overall market value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of total assets and liabilities.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
The following tables present the net carrying value or carrying value, as applicable, the estimated fair value, and the fair value hierarchy level of the Bank’s financial instruments at December 31, 2024 and 2023. The Bank records trading securities, AFS securities, derivative assets, derivative liabilities, certain advances, certain consolidated obligations, and certain other assets at fair value on a recurring basis, and on occasion certain mortgage loans held for portfolio and certain other assets at fair value on a nonrecurring basis. The Bank records all other financial assets and liabilities at amortized cost. Refer to the following tables for further details about the financial assets and liabilities held at fair value on either a recurring or non-recurring basis.
(In millions) Carrying
Value(1)
Estimated Fair Value Level 1 Level 2 Level 3 Netting Adjustments and Cash Collateral(2)
Assets
Cash and due from banks $ 2 $ 2 $ 2 $ - $ - $ -
Interest-bearing deposits 3,765 3,765 3,765 - - -
Securities purchased under agreements to resell 7,750 7,750 - 7,750 - -
Federal funds sold 1,645 1,645 - 1,645 - -
AFS securities 20,312 20,312 - 19,355 957 -
HTM securities 1,489 1,469 - 1,374 95 -
Advances 45,637 45,596 - 45,596 - -
Mortgage loans held for portfolio 693 576 - 576 - -
Accrued interest receivable 181 181 - 181 - -
Derivative assets, net(2)
30 30 - 752 - (722)
Other assets(3)
17 17 17 - - -
Liabilities
Deposits 1,061 1,061 - 1,061 - -
Consolidated obligations:
Bonds 58,174 57,985 - 57,985 - -
Discount notes 14,378 14,376 - 14,376 - -
Total consolidated obligations 72,552 72,361 - 72,361 - -
Mandatorily redeemable capital stock 331 331 331 - - -
Accrued interest payable 412 412 - 412 - -
Derivative liabilities, net(2)
8 8 - 458 - (450)
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
(In millions) Carrying
Value(1)
Estimated Fair Value Level 1 Level 2 Level 3 Netting Adjustments and Cash Collateral(2)
Assets
Cash and due from banks 5 5 5 - - -
Interest-bearing deposits 2,922 2,922 2,922 - - -
Securities purchased under agreements to resell 3,650 3,650 - 3,650 - -
Federal funds sold 3,861 3,861 - 3,861 - -
AFS securities 18,014 18,014 - 16,955 1,059 -
HTM securities 1,847 1,818 - 1,702 116 -
Advances 61,335 61,216 - 61,216 - -
Mortgage loans held for portfolio 754 634 - 634 - -
Accrued interest receivable 184 184 - 184 - -
Derivative assets, net(2)
16 16 - 831 - (815)
Other assets(3)
17 17 17 - - -
Liabilities
Deposits 962 962 - 962 - -
Consolidated obligations:
Bonds 64,297 64,037 - 64,037 - -
Discount notes 19,187 19,182 - 19,182 - -
Total consolidated obligations 83,484 83,219 - 83,219 - -
Mandatorily redeemable capital stock 706 706 706 - - -
Accrued interest payable 520 520 - 520 - -
Derivative liabilities, net(2)
2 2 - 792 - (790)
(1) For certain financial instruments, the amounts represent net carrying value, which includes an allowance for credit losses.
(2) 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 with the same clearing agents or counterparty.
(3) Includes publicly traded mutual funds held in a grantor trust.
Fair Value Hierarchy. The fair value hierarchy is used to prioritize the fair value methodologies and valuation techniques as well as the inputs to the valuation techniques used to measure fair value for assets and liabilities carried at fair value on the Statements of Condition. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of market observability of the fair value measurement for the asset or liability. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). An entity must disclose the level within the fair value hierarchy in which the measurements are classified for all financial assets and liabilities measured on a recurring or non-recurring basis.
The application of the fair value hierarchy to the Bank’s financial assets and financial liabilities that are carried at fair value either on a recurring or non-recurring basis is as follows:
•Level 1 - Quoted prices (unadjusted) for identical assets or liabilities in an active market that the reporting entity can access on the measurement date. 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 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
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
assets or liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals, and implied volatilities); and (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means.
•Level 3 - Unobservable inputs for the asset or liability. Valuations are derived from techniques that use significant assumptions not observable in the market, which include pricing models, discounted cash flow models, or similar techniques.
A financial instrument’s categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.
The following assets and liabilities, including those for which the Bank has elected the fair value option, are carried at fair value on the Statements of Condition as of December 31, 2024:
•Trading securities
•AFS securities
•Certain advances
•Derivative assets and liabilities
•Certain consolidated obligation bonds
•Certain other assets
For instruments carried at fair value, the Bank reviews the fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. For the periods presented, the Bank did not have any reclassifications for transfers in or out of level 3 of the fair value hierarchy.
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 Statements of Condition are listed below.
Investment Securities - MBS - To value its MBS, the Bank obtains prices from multiple designated third-party pricing vendors when available. The pricing vendors use various proprietary models to price these securities. The inputs to those models are derived from various sources including, but not limited to: benchmark yields, reported trades, dealer estimates, issuer spreads, prices on benchmark securities, bids, offers, and other market-related data. Since many securities do not trade on a daily basis, the pricing vendors use available information as applicable, such as benchmark yield curves, benchmarking of like securities, sector groupings, and matrix pricing, to determine the prices for individual securities. Each pricing vendor has an established challenge process in place for all security valuations, which facilitates resolution of price discrepancies identified by the Bank.
At least annually, the Bank conducts reviews of the multiple pricing vendors to update and confirm its understanding of the vendors’ pricing processes, methodologies, and control procedures.
The Bank’s valuation technique for estimating the fair values of its MBS first requires the establishment of a median vendor price for each security. If three prices are received, the middle price is the median price; if two prices are received, the average of the two prices is the median price; and if one price is received, it is the median price (and also the default fair value) subject to additional validation. All vendor prices that are within a specified tolerance threshold of the median price are included in the cluster of vendor prices that are averaged to establish a default fair value. All vendor prices that are outside the threshold (outliers) are subject to further analysis including, but not limited to, comparison to prices provided by an additional third-party valuation service, dealer price estimates for similar securities, and the use of internally modeled prices, which are deemed to be reflective of all relevant facts and circumstances that a market participant would consider. Such analysis is also applied in those limited instances where no third-party vendor price or only one third-party vendor price is available in order to arrive at an estimated fair value. If an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
value, then the outlier (or the other price, as appropriate) is used as the fair value rather than the default fair value. If, instead, the analysis confirms that an outlier is (or outliers are) not representative of fair value and the default fair value is the best estimate, then the default fair value is used as the fair value.
If all vendor prices received for a security are outside the tolerance threshold level of the median price, then there is no default fair value, and the fair value is determined by an evaluation of all outlier prices (or the other prices, as appropriate) as described above.
As of December 31, 2024, multiple vendor prices were received for most of the Bank’s MBS, and the fair value estimates for most of those securities were determined in accordance with the Bank’s valuation technique based on these vendor prices. Based on the Bank’s reviews of the pricing methods employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or, in those instances in which there were outliers, the Bank’s additional analyses), the Bank believes that its fair value estimates are reasonable and that the fair value measurements are classified appropriately in the fair value hierarchy. Based on limited market liquidity for PLRMBS, the fair value measurements for these securities were classified as Level 3 within the fair value hierarchy.
Investment Securities - Non-MBS - To determine the estimated fair values of non-MBS investments, the Bank uses a market approach using prices from third-party pricing vendors, generally consistent with the methodologies for MBS. The Bank believes that its methodologies result in fair values that are reasonable and similar in all material respects based on the nature of the financial instruments being measured.
Advances Recorded Under the Fair Value Option - Because quoted prices are not available for advances, the fair values are measured using model-based valuation techniques (such as calculating the present value of future cash flows and reducing the amount for accrued interest receivable).
The Bank’s primary inputs for measuring the fair value of advances recorded under the fair value option are market-based consolidated obligation yield curve (CO Curve) inputs obtained from the Office of Finance. The CO Curve is then adjusted to reflect the rates on replacement advances with similar terms and collateral. These spread adjustments are not market-observable and are evaluated for significance in the overall fair value measurement and the fair value hierarchy level of the advance. The Bank obtains market-observable inputs for complex advances recorded under the fair value option. These inputs may include volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew). The discount rates used in these calculations are the replacement advance rates for advances with similar terms. Pursuant to the Finance Agency’s advances regulation, advances with an original term to maturity or repricing period greater than six months generally require a prepayment fee sufficient to make the Bank financially indifferent to the borrower’s decision to prepay the advances. The Bank determined that no adjustment is required to the fair value measurement of advances for prepayment fees. The Bank also did not adjust its fair value measurement of advances recorded under the fair value option for creditworthiness primarily because advances were fully collateralized.
Other Assets - The estimated fair value of grantor trust assets is based on quoted market prices.
Derivative Assets and Liabilities - In general, derivative instruments transacted and held by the Bank for risk management activities are traded in over-the-counter markets where quoted market prices are not readily available. These derivatives are interest rate-related. For these derivatives, the Bank measures fair value using internally developed discounted cash flow models based on standard valuation techniques that use market-observable inputs, such as swap rates and volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew), adjusted for counterparty credit risk and prepayment assumptions, as necessary. The Bank uses the SOFR curve and the Overnight Index Swap curve for the discount rate and forward interest rate assumptions for derivatives indexed to SOFR and Overnight Index Swap, respectively.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
The Bank is subject to credit risk because of the risk of potential nonperformance by its derivative counterparties. To mitigate this risk, the Bank executes uncleared derivative transactions only with highly rated derivative dealers and major banks (derivative dealer counterparties) that meet the Bank’s eligibility criteria. In addition, the Bank has entered into master netting agreements and bilateral credit support agreements with all active derivative dealer counterparties that provide for delivery of margin at specified levels to limit the Bank’s net unsecured credit exposure to these counterparties. Under these policies and agreements, the amount of unsecured credit exposure to an individual derivative dealer counterparty is set at zero (subject to a minimum transfer amount). The Bank clears its cleared derivative transactions only through clearing agents that meet the Bank’s eligibility requirements, and the Bank’s credit exposure to the clearing house is secured by variation margin received from the clearing house. The Bank evaluated the potential for the fair value of the instruments to be affected by counterparty credit risk and determined that no adjustments to the overall fair value measurements were required.
The fair values of the derivative assets and liabilities include accrued interest receivable/payable and cash collateral remitted to/received from counterparties. The estimated fair values of the accrued interest receivable/payable and cash collateral approximate their carrying values because of their short-term nature. The fair values of derivatives that met the netting requirements are presented on a net basis. If these netted amounts are positive, they are classified as an asset and, if negative, they are classified as a liability.
Consolidated Obligations Recorded Under the Fair Value Option - Because quoted prices in active markets are not generally available for identical liabilities, the Bank measures fair values using internally developed models that use primarily market-observable inputs. The Bank’s primary input for measuring the fair value of consolidated obligation bonds is a market-based CO Curve obtained from the Office of Finance. The Office of Finance constructs the CO Curve using the Treasury yield curve as a base curve, which is adjusted by indicative consolidated obligation spreads obtained from market-observable sources. These market indications are generally derived from pricing indications from dealers, historical pricing relationships, and market activity for similar liabilities, such as recent GSE issuances or secondary market activity. For consolidated obligation bonds with embedded options, the Bank also obtains market-observable inputs, such as volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaption volatility and volatility skew).
Adjustments may be necessary to reflect the Bank’s credit quality or the credit quality of the FHLBank System when valuing consolidated obligation bonds measured at fair value. The Bank monitors its own creditworthiness and the creditworthiness of the other FHLBanks and the FHLBank System to determine whether any adjustments are necessary for creditworthiness in its fair value measurement of consolidated obligation bonds. The credit ratings of the FHLBank System and any changes to the credit ratings are the basis for the Bank to determine whether the fair values of consolidated obligations recorded under the fair value option have been significantly affected during the reporting period by changes in the instrument-specific credit risk.
Subjectivity of Estimates Related to Fair Values of Financial Instruments. Estimates of the fair value of financial assets and liabilities using the methodologies described above are subjective and require judgments regarding significant matters, such as the amount and timing of future cash flows, prepayment speed assumptions, expected interest rate volatility, methods to determine possible distributions of future interest rates used to value options, and the selection of discount rates that appropriately reflect market and credit risks. Changes in these judgments may have a material effect on the fair value estimates.
Fair Value Measurements. The following tables present the fair value of assets and liabilities, which are recorded on a recurring or nonrecurring basis at December 31, 2024 and 2023, by level within the fair value hierarchy.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
December 31, 2024
Fair Value Measurement Using: Netting Adjustments
and Cash Collateral(1)
(In millions) Level 1 Level 2 Level 3 Total
Recurring fair value measurements - Assets:
AFS securities:
U.S. Treasury obligations $ - $ 6,510 $ - $ - $ 6,510
MBS:
GSEs - multifamily - 12,845 - - 12,845
PLRMBS - - 957 - 957
Subtotal AFS MBS - 12,845 957 - 13,802
Total AFS securities - 19,355 957 - 20,312
Advances(2)
- 5,286 - - 5,286
Derivative assets, net: interest rate-related - 752 - (722) 30
Other assets 17 - - - 17
Total recurring fair value measurements - Assets $ 17 $ 25,393 $ 957 $ (722) $ 25,645
Recurring fair value measurements - Liabilities:
Consolidated obligation bonds(3)
$ - $ 436 $ - $ - $ 436
Derivative liabilities, net: interest rate-related - 458 - (450) 8
Total recurring fair value measurements - Liabilities $ - $ 894 $ - $ (450) $ 444
Nonrecurring fair value measurements - Assets:(4)
Impaired mortgage loans held for portfolio $ - $ - $ 1 $ - $ 1
Total nonrecurring fair value measurements - Assets $ - $ - $ 1 $ - $ 1
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
December 31, 2023
Fair Value Measurement Using:
Netting Adjustments
and Cash Collateral(1)
(In millions) Level 1
Level 2 Level 3 Total
Recurring fair value measurements - Assets:
U.S. Treasury obligations $ - $ 4,534 $ - $ - $ 4,534
MBS:
GSEs - multifamily - 12,421 - - 12,421
PLRMBS - - 1,059 - 1,059
Subtotal AFS MBS - 12,421 1,059 - 13,480
Total AFS securities - 16,955 1,059 - 18,014
Advances(2)
- 1,898 - - 1,898
Derivative assets, net: interest rate-related - 831 - (815) 16
Other assets 17 - - - 17
Total recurring fair value measurements - Assets $ 17 $ 19,684 $ 1,059 $ (815) $ 19,945
Recurring fair value measurements - Liabilities:
Consolidated obligation bonds(3)
$ - $ 604 $ - $ - $ 604
Derivative liabilities, net: interest rate-related - 792 - (790) 2
Total recurring fair value measurements - Liabilities $ - $ 1,396 $ - $ (790) $ 606
Nonrecurring fair value measurements - Assets:(4)
Impaired mortgage loans held for portfolio $ - $ - $ 22 $ - $ 22
Total nonrecurring fair value measurements - Assets $ - $ - $ 22 $ - $ 22
(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 agents or counterparty.
(2)Represents advances recorded under the fair value option at December 31, 2024 and 2023.
(3)Represents consolidated obligation bonds recorded under the fair value option at December 31, 2024 and 2023.
(4)The fair value information presented is as of the date the fair value adjustment was recorded during the years ended December 31, 2024 and 2023.
The following table presents a reconciliation of the Bank’s AFS PLRMBS that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2024, 2023, and 2022.
(In millions) 2024 2023 2022
Balance, beginning of the period $ 1,059 $ 1,182 $ 1,608
Total gain/(loss) realized and unrealized included in:
Interest income 12 33 55
(Provision for)/reversal of credit losses - (4) (14)
Other income/(loss) - - 28
Unrealized gain/(loss) included in AOCI (5) (15) (146)
Settlements (109) (139) (366)
Transfers of HTM securities to AFS securities - 2 17
Balance, end of the period $ 957 $ 1,059 $ 1,182
Total amount of unrealized gain/(loss) for the period included in AOCI relating to assets held at the end of the period $ (5) $ (15) $ (146)
Total amount of gain/(loss) for the period included in earnings attributable to the change in unrealized gains/(losses) relating to assets held at the end of the period
$ 12 $ 29 $ 41
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Fair Value Option. The fair value option provides an entity with an irrevocable option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments not previously carried at fair value. It requires an entity to display the fair value of those assets and liabilities for which the entity has chosen to use fair value on the face of the Statements of Condition. Fair value is used for both the initial and subsequent measurement of the designated assets, liabilities, and commitments, with the changes in fair value recognized in net income. Interest income and interest expense on advances and consolidated obligation bonds carried at fair value are recognized solely on the contractual amount of interest due or unpaid. Any consolidated obligation bond underwriting fees or concessions will be immediately recognized in other income/(loss) or other expense.
The Bank elected the fair value option for certain financial instruments as follows:
•Adjustable rate advances with embedded caps and floors;
•Callable fixed rate advances;
•Putable fixed rate advances;
•Fixed rate advances with partial prepayment symmetry;
•Callable or non-callable floating rate consolidated obligation bonds with embedded caps;
•Convertible consolidated obligation bonds;
•Adjustable or fixed rate range accrual consolidated obligation bonds;
•Ratchet consolidated obligation bonds;
•Adjustable rate advances indexed to certain indices such as the Prime Rate, U.S. Treasury bill, and EFFR;
•Adjustable rate consolidated obligation bonds indexed to certain indices like the Prime Rate and U.S. Treasury bill;
•Step-up callable bonds, which pay interest at increasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank’s option on the step-up dates according to the terms of the bond offerings; and
•Step-down callable bonds, which pay interest at decreasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank’s option on the step-down dates according to the terms of the bond offerings.
The Bank has elected the fair value option for certain financial instruments to assist in mitigating potential earnings volatility that can arise from economic hedging relationships in which the carrying value of the hedged item is not adjusted for changes in fair value. The potential earnings volatility associated with recording fair value changes of only the hedging derivative is the Bank’s primary reason for electing the fair value option for financial assets and liabilities that do not qualify for hedge accounting or that have not previously met or may be at risk for not meeting the hedge effectiveness requirements.
The following table presents the net gain/(loss) recognized in earnings on advances and consolidated obligation bonds held under fair value option for the years ended December 31, 2024, 2023, and 2022:
(In millions) 2024 2023 2022
Advances
$ 4 $ 28 $ (119)
Consolidated obligation bonds
(16) (29) 54
Total
$ (12) $ (1) $ (65)
For instruments for which the fair value option has been elected, the related contractual interest income and contractual interest expense are recorded as part of net interest income on the Statements of Income. The remaining changes in fair value for instruments for which the fair value option has been elected are recorded as net gain/(loss) on financial instruments held under the fair value option in the Statements of Income. For advances and consolidated obligations recorded under the fair value option, the Bank determined that none of the remaining changes in fair value were related to instrument-specific credit risk for the years ended December 31, 2024, 2023,
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
and 2022. In determining that there has been no change in instrument-specific credit risk period to period, the Bank primarily considered the following factors:
•The Bank is a federally chartered GSE, and as a result of this status, the consolidated obligations have historically received the same credit ratings as the government bond credit rating of the United States, even though they are not obligations of the United States and are not guaranteed by the United States.
•The Bank is jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations of each of the FHLBanks.
The following table presents the difference between the aggregate remaining contractual principal balance outstanding and aggregate fair value of advances and consolidated obligation bonds for which the Bank elected the fair value option at December 31, 2024 and 2023:
2024 2023
(In millions) Principal Balance
Fair Value Fair Value
Over/(Under)
Principal Balance Principal Balance Fair Value Fair Value
Over/(Under)
Principal Balance
Advances(1)
$ 5,269 $ 5,286 $ 17 $ 1,902 $ 1,898 $ (4)
Consolidated obligation bonds 450 436 (14) 633 604 (29)
(1) At December 31, 2024 and 2023, none of these advances were 90 days or more past due or had been placed on nonaccrual status.
Note 15 - Commitments and Contingencies
As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The regulations provide a general framework for addressing the possibility that an FHLBank may be unable to repay the consolidated obligations for which it is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of December 31, 2024, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par value of the outstanding consolidated obligations of the FHLBanks was $1.2 trillion at December 31, 2024 and 2023.
The joint and several liability regulation provides a general framework for addressing the possibility that an FHLBank may be unable to repay its participation in the consolidated obligations for which it is the primary obligor. In accordance with this regulation, the president of each FHLBank is required to provide a quarterly certification that, among other things, the FHLBank will remain capable of making full and timely payment of all its current obligations, including direct obligations.
In addition, the regulation requires that an FHLBank must provide written notice to the Finance Agency if at any time the FHLBank is unable to provide the quarterly certification; projects that it will be unable to fully meet all of its current obligations, including direct obligations, on a timely basis during the quarter; or negotiates or enters into an agreement with another FHLBank for financial assistance to meet its obligations. If an FHLBank gives any one of these notices (other than in a case of a temporary interruption in the FHLBank’s debt servicing operations resulting from an external event such as a natural disaster or a power failure), it must promptly file a consolidated obligations payment plan for Finance Agency approval specifying the measures the FHLBank will undertake to make full and timely payments of all its current obligations.
Notwithstanding any other provisions in the regulation, the regulation provides that the Finance Agency in its discretion may at any time order any FHLBank to make any principal or interest payment due on any consolidated obligation. To the extent an FHLBank makes any payment on any consolidated obligation on behalf of another
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
FHLBank, the paying FHLBank is entitled to reimbursement from the FHLBank that is the primary obligor, which will have a corresponding obligation to reimburse the FHLBank for the payment and associated costs, including interest.
The regulation also provides that the Finance Agency may allocate the outstanding liability of an FHLBank for consolidated obligations among the other FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding or in any other manner it may determine to ensure that the FHLBanks operate in a safe and sound manner.
Off-balance sheet commitments as of December 31, 2024 and 2023, were as follows:
2024 2023
(In millions) Expire Within
One Year Expire After
One Year Total Total
Standby letters of credit outstanding $ 9,966 $ 9,531 $ 19,497 $ 19,418
Commitments to fund additional advances
5 - 5 -
Standby letters of credit are generally issued for a fee on behalf of members to support their obligations to third parties. If the Bank is required to make a payment for a beneficiary’s drawing under a letter of credit, the amount is immediately due and payable by the member to the Bank and is charged to the member’s demand deposit account with the Bank. The Bank monitors the creditworthiness of members that have standby letters of credit. The value of the Bank’s obligations related to standby letters of credit is recorded in other liabilities on the Statements of Condition and amounted to $55 million and $57 million at December 31, 2024 and 2023, respectively. Standby letters of credit are fully collateralized at the time of issuance. Based on the Bank’s credit analyses of members’ financial condition and collateral requirements, the Bank does not anticipate any credit losses and did not record any additional liability for credit losses on the letters of credit outstanding or other off-balance sheet commitments as of December 31, 2024 and 2023.
There were $5 million in commitments to fund advances at December 31, 2024. There were no commitments to fund advances at December 31, 2023. Advances funded under advance commitments are fully collateralized at the time of funding.
The Bank has pledged securities as collateral related to its cleared and uncleared derivatives. See Note 13 - Derivatives and Hedging Activities for additional information about the Bank’s pledged collateral and other credit risk-related contingent features.
The Bank may be subject to various legal proceedings that may arise in the ordinary course of business. After consultation with legal counsel, the Bank does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on its financial condition, results of operations, or cash flows.
Other commitments and contingencies are discussed in Note 1 - Summary of Significant Accounting Policies, Note 5 - Advances, Note 8 - Consolidated Obligations, Note 9 - Affordable Housing Program, Note 11 - Capital, Note 12 - Employee Retirement Plans and Incentive Compensation Plans, and Note 13 - Derivatives and Hedging Activities.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
Note 16 - Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks
Transactions with Members and Nonmembers. The Bank has a cooperative ownership structure under which current member institutions, certain former members, and certain other nonmembers own the capital stock of the Bank. Former members and nonmembers that have outstanding transactions with the Bank are required to maintain their investment in the Bank’s capital stock until their outstanding transactions mature or are paid off or until their capital stock is redeemed following the five-year redemption period for capital stock or is repurchased by the Bank, in accordance with the Bank’s capital requirements. (For further information on concentration risk, see Note 11 - Capital and Note 5 - Advances.)
Under the FHLBank Act and Finance Agency regulations, each member eligible to vote is entitled to cast by ballot one vote for each share of stock that it was required to hold as of the record date, which is December 31, of the year prior to each election, subject to the limitation that no member may cast more votes than the average number of shares of the Bank’s stock that are required to be held by all members located in such member's state. All transactions with members, nonmembers, and their affiliates are entered into in the ordinary course of business. As of and for the three-year period ended December 31, 2024, no shareholder owned 10% or more of the total voting interests in the Bank because of this statutory limit on members' voting rights.
All advances are made to members, and all mortgage loans held for portfolio were purchased from members. The Bank also maintains deposit accounts for members, certain former members, and certain other nonmembers primarily to facilitate settlement activities that are directly related to advances and mortgage loan purchases. All transactions with members and their affiliates are entered into in the ordinary course of business.
The Bank may invest in federal funds sold, interest-bearing deposits, commercial paper, and MBS, and executes derivative transactions with members or their affiliates. The Bank purchases MBS through securities brokers or dealers and executes all MBS investments without preference to the status of the counterparty or the issuer of the investment as a nonmember, member, or affiliate of a member. When the Bank executes non-MBS investments with a member, the Bank may give consideration to the member’s secured credit and the Bank’s advances pricing.
As an additional service to its members, the Bank has in the past entered into offsetting interest rate exchange agreements, acting as an intermediary between exactly offsetting derivative transactions with members and other counterparties. These transactions were executed at market rates.
The FHLBank Act requires the Bank to establish an AHP. Through the AHP, the Bank provides subsidies to members, who use the funds to assist in the purchase, construction, or rehabilitation of housing for households earning up to 80% of the median income for the area in which they live. Subsidies may be in the form of direct grants or below-market interest rate advances. Only Bank members, along with their nonmember AHP project sponsors, may submit AHP applications. All AHP subsidies are made in the ordinary course of business.
The FHLBank Act also requires the Bank to establish a Community Investment Program and authorizes the Bank to offer additional Community Investment Cash Advance (CICA) programs. Under these programs, the Bank provides subsidies in the form of grants and below-market interest rate advances to members or standby letters of credit to members for community lending and economic development projects. Only Bank members may submit applications for CICA subsidies. All CICA subsidies are made in the ordinary course of business.
In instances where the member has an officer or director serving on the Bank’s board of directors, all of the aforementioned transactions with the member are subject to the same eligibility and credit criteria, as well as the same conditions, as comparable transactions with all other members, in accordance with regulations governing the operations of the FHLBanks.
Federal Home Loan Bank of San Francisco
Notes to Financial Statements (continued)
The following tables set forth information at the dates and for the periods indicated with respect to transactions with members that have an officer or director serving on the Bank’s board of directors.
(In millions) December 31, 2024 December 31, 2023
Assets:
Advances $ 5,713 $ 5,762
Mortgage loans held for portfolio 70 74
Accrued interest receivable 9 5
Liabilities:
Deposits $ 16 $ 34
Capital:
Capital Stock $ 190 $ 191
(In millions) 2024 2023 2022
Interest Income:
Advances $ 192 $ 271 $ 114
Mortgage loans held for portfolio 3 3 1
Interest Expense:
Deposits
1 1 -
All transactions with members, nonmembers, and their affiliates are entered into in the ordinary course of business.
Transactions with Other FHLBanks. The Bank may occasionally enter into transactions with other FHLBanks. These transactions are summarized below.
Deposits with other FHLBanks. The Bank may, from time to time, maintain deposits with other FHLBanks. Deposits with other FHLBanks totaled de minimis amounts at December 31, 2024 and 2023, and were recorded as “Interest-bearing deposits” in the Statements of Condition.
Overnight Funds. The Bank may borrow or lend unsecured overnight funds from or to other FHLBanks. All such transactions are at current market rates. Interest income and interest expense related to these transactions with other FHLBanks are included in interest income and interest expense in the Statements of Income. Balances outstanding at period end with other FHLBanks, if any, are identified in the Bank’s financial statements. During the years ended December 31, 2024, 2023, and 2022, the Bank extended overnight loans to other FHLBanks for $210 million, $2.6 billion, and $2.4 billion, respectively. The amount of interest income for these advances was de minimis for the years ended December 31, 2024, 2023, and 2022. During the years ended December 31, 2024, 2023, and 2022, the Bank borrowed $80 million, $5.5 billion, and $10.4 billion, respectively, from other FHLBanks. Interest expense related to these borrowings was de minimis for the year ended December 31, 2024, and was $2 million and $1 million for the years ended December 31, 2023 and 2022, respectively.
MPF Mortgage Loans. The Bank pays a transaction services fee to the FHLBank Chicago that is assessed monthly based on the amount of mortgage loans in which the Bank invested and which remain outstanding on its Statements of Condition. For the years ended December 31, 2024 and 2023, the Bank recorded a de minimis amount in transaction services fee expense to the FHLBank Chicago. For the year ended December 31, 2022, the Bank recorded $1 million in transaction services fee expense to the FHLBank Chicago, which was recorded in the Statements of Income as other expense.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The senior management of the Federal Home Loan Bank of San Francisco (Bank) is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports filed or submitted under the Securities Exchange Act of 1934 (1934 Act) is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Bank’s disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Bank’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the Bank’s disclosure controls and procedures, the Bank’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Bank’s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures.
Management of the Bank has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with the participation of the principal executive officer and principal financial officer as of the end of the period covered by this report. Based on that evaluation, the Bank’s president and chief executive officer and executive vice president and chief financial officer have concluded that the Bank’s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this report.
Internal Control Over Financial Reporting
Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the 1934 Act as a process designed by, or under the supervision of, the Bank’s principal executive and principal financial officers and effected by the Bank’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and includes those policies and procedures that:
•pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Bank;
•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the Bank are being made only in accordance with authorizations of management and directors of the Bank; and
•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
During the three months ended December 31, 2024, there were no changes in the Bank’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Bank’s internal control over financial reporting. For management’s assessment of the Bank’s internal control over financial reporting, refer to “Item 8. Financial Statements and Supplementary Data - Management’s Report on Internal Control Over Financial Reporting.”
Consolidated Obligations
The Bank’s disclosure controls and procedures include controls and procedures for accumulating and communicating information in compliance with the Bank’s disclosure and financial reporting requirements relating to the joint and several liability for the consolidated obligations of the Federal Home Loan Banks (FHLBanks). Because the FHLBanks are independently managed and operated, the Bank’s management relies on information that is provided or disseminated by the Federal Housing Finance Agency (Finance Agency), the Office of Finance, and the other FHLBanks, as well as on published FHLBank credit ratings, in determining whether the joint and several liability regulation is reasonably likely to result in a direct obligation for the Bank or whether it is reasonably possible that the Bank will accrue a direct liability.
The Bank’s management also relies on the operation of the joint and several liability regulation. The joint and several liability regulation requires that each FHLBank file with the Finance Agency a quarterly certification that it will remain capable of making full and timely payment of all of its current obligations, including direct obligations, coming due during the next quarter. In addition, if an FHLBank cannot make such a certification or if it projects that it may be unable to meet its current obligations during the next quarter on a timely basis, it must file a notice with the Finance Agency. Under the joint and several liability regulation, the Finance Agency may order any FHLBank to make principal and interest payments on any consolidated obligations of any other FHLBank, or allocate the outstanding liability of an FHLBank among all remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding or on any other basis.

---

ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
None.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The board of directors (Board) of the Federal Home Loan Bank of San Francisco (Bank) is composed of member directors and nonmember independent directors. Each year the Federal Housing Finance Agency (Finance Agency) designates the total number of director positions for the Bank for the following year. Member director positions are allocated to each of the three states in the Bank’s district. The allocation is based on the number of shares of capital stock required to be held by the members in each of the three states as of December 31 of the preceding calendar year (the record date), with at least one member director position allocated to each state and at least three member director positions allocated to California. Of the eight member director positions designated by the Finance Agency for 2024, one was allocated to Arizona, six were allocated to California, and one was allocated to Nevada. Of the seven member director positions designated by the Finance Agency for 2025, one was allocated to Arizona, five were allocated to California, and one was allocated to Nevada. The nonmember independent director positions on the Board must be at least two-fifths of the number of member director positions and at least two of them must be public interest director positions. The Finance Agency designated seven nonmember independent director positions for 2024 and six nonmember independent director positions for 2025, two of which were public interest director positions in both years.
The Bank holds elections each year for the director positions with terms ending at yearend, with new terms beginning the following January 1. For member director positions, members located in the relevant states as of the record date are eligible to participate in the election for the state in which they are located. For nonmember independent director positions, all members located in the district as of the record date are eligible to participate in the election. For each director position to be filled, an eligible institution may cast one vote for each share of capital stock it was required to hold as of the record date (according to the requirements of the Bank’s capital plan), except that an eligible institution's votes for each director position to be filled may not exceed the average number of shares of capital stock required to be held by all of the members in that state as of the record date. In the case of an election to fill more than one member director position for a state, an eligible institution may not cumulate or divide its block of eligible votes. Interim vacancies in director positions are filled by the Board. The Board does not solicit proxies, nor are eligible institutions permitted to solicit or use proxies to cast their votes in an election.
Candidates for member director positions are not nominated by the Bank’s Board. As provided for in the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), member director candidates are nominated by the institutions eligible to participate in the election in the relevant state. Candidates for nonmember independent director positions are nominated by the Board, following consultation with the Bank’s Affordable Housing Advisory Council, and are reviewed by the Finance Agency. The Bank’s Governance Committee performs certain functions that are similar to the functions of a nominating committee with respect to the nomination of nonmember independent directors. If only one individual is nominated by the Board for each open nonmember independent director position, that individual must receive at least 20% of the eligible votes to be declared elected; and if two or more individuals are nominated by the Board for any single open nonmember independent director position, the individual receiving the highest number of votes cast in the election must be declared elected by the Bank.
Each member director must be a citizen of the United States and must be an officer or director of a member of the Bank (located in the state to which the director position has been allocated) that meets all minimum capital requirements established by the member's appropriate Federal banking agency or appropriate state regulator. There are no other eligibility or qualification requirements in the FHLBank Act or the regulations governing the Federal Home Loan Banks (FHLBanks) for member directors. Each nonmember independent director must be a United States citizen and must maintain a principal residence in a state in the Bank’s district (or own or lease a residence in the district and be employed in the district). In addition, the individual may not be an officer of any FHLBank or a director, officer, or employee of any member of the Bank or of any recipient of advances from the Bank. Each nonmember independent director who serves as a public interest director must have more than four years of personal experience in representing consumer or community interests in banking services, credit needs, housing, or financial consumer protection. Each nonmember independent director other than a public interest director must have
knowledge of, or experience in, financial management, auditing or accounting, risk management practices, derivatives, project development, organizational management, or law.
The term for each director position is four years (unless a shorter term is assigned by the Finance Agency for staggering purposes), and directors are subject to a limit on the number of consecutive terms they may serve. A director elected to three consecutive full terms on the Board is not eligible for election to a term that begins earlier than two years after the expiration of the third consecutive term. On an annual basis, the Bank’s Board performs a Board assessment that includes consideration of the directors' backgrounds, experience, expertise, Board service, and other factors. Also on an annual basis, each director certifies to the Bank that he or she continues to meet all applicable statutory and regulatory eligibility and qualification requirements. In connection with the election or appointment of a nonmember independent director, the nonmember independent director completes an application form providing information to demonstrate his or her eligibility and qualifications to serve on the Board. As of the filing date of this Form 10-K, nothing has come to the attention of the Board or management to indicate that any of the current Board members do not continue to possess the necessary experience, qualifications, attributes, or skills expected of the directors to serve on the Bank’s Board, as described in each director's biography below.
Information regarding the current directors and executive officers of the Bank is provided below. There are no family relationships among the directors or executive officers of the Bank, and there are no arrangements or understandings between any of the directors or executive officers of the Bank and any other person pursuant to which such directors or officers were selected as directors or executive officers of the Bank. The Bank’s Code of Conduct for Senior Officers, which applies to the president and chief executive officer, all executive vice presidents, all leadership team members as designated by the chief executive officer from time to time, the Bank’s controller and deputy controller, and such other employees serving in a financial reporting oversight role as determined from time to time by the chief financial officer, and any amendments or waivers to the code are disclosed on the Bank’s website located at www.fhlbsf.com.
The charter of the Audit Committee of the Bank’s Board is available on the Bank’s website at www.fhlbsf.com.
Board of Directors
The following table sets forth information, as of February 28, 2025, regarding each of the Bank’s directors.
Name Age Director
Since Expiration of
Current Term
F. Daniel Siciliano, Chair(1)
54 2017 2028
Brian M. Riley, Vice Chair(2)(5)(6)(7)
60 2015 2026
David Adame(1)(7)(8)
61 2022 2025
Banafsheh Akhlaghi(1)(5)(7)(8)
56 2022 2025
Laura Archuleta(1)(6)
60 2024 2027
Jeffrey K. Ball(3)(5)(6)
60 2018 2028
Marangal (Marito) Domingo(3)
64 2018 2025
Ana E. Fonseca(3)(7)(8)
59 2022 2027
Lori R. Gay(1)
62 2021 2028
Matthew Hendricksen(4)(7)(8)
45 2020 2027
Chang M. Liu(3)
58 2023 2026
Joan C. Opp(3)(5)(6)
58 2018 2025
Silvio Tavares(1)(5)(6)(8)
53 2024 2027
(1) Elected as a nonmember independent director by the Bank members eligible to vote.
(2) Elected by the Bank’s Arizona members eligible to vote.
(3) Elected by the Bank’s California members eligible to vote.
(4) Elected by the Bank’s Nevada members eligible to vote.
(5) Member of the Audit Committee in 2025.
(6) Member of the Audit Committee in 2024. Former Directors Simone Lagomarsino and Gary Trujillo were also on the Audit Committee in 2024.
(7) Member of the Compensation and Human Resources Committee in 2025.
(8) Member of the Compensation and Human Resources Committee in 2024.
The Board has determined that Audit Committee Chair Joan C. Opp, Audit Committee Vice Chair Jeffrey K. Ball, and Audit Committee members Brian M. Riley and Silvio Tavares are “audit committee financial experts” within the meaning of the Securities and Exchange Commission (SEC) rules. For information concerning the experience through which these individuals acquired the attributes required to be deemed audit committee financial experts, refer to the biographical information below. The Bank is required by SEC rules to disclose whether the audit committee financial experts are independent and is required to use a definition of independence from a national securities exchange or national securities association. The Bank has elected to use the National Association of Securities Dealers Automated Quotations (NASDAQ) definition of independence, and under that definition, all of the Bank’s audit committee financial experts are independent. In addition, all of the Bank’s audit committee financial experts are independent according to the rules governing the FHLBanks applicable to members of the audit committees of the boards of directors of the FHLBanks and the independence rules under Section 10A(m) of the Securities Exchange Act of 1934.
F. Daniel Siciliano, Chair
F. Daniel Siciliano is a Stanford Law School non-resident fellow (CodeX) and co-founder of Stanford’s Rock Center for Corporate Governance. He has previously served as professor of the practice of law, faculty director of the Rock Center for Corporate Governance, and associate dean for executive education and special programs at Stanford Law School, Stanford, California. Mr. Siciliano is currently president and CEO of Nikkl, Inc. and CEO of Linqto, Inc., both fintechs that helps individuals and companies access and deploy capital to optimize returns in previously inefficient private markets. Mr. Siciliano is the chair of the board of Silicon Valley Directors’ Exchange, and serves on the board and as chair of audit for the Latino Corporate Directors Education Foundation. As of 2011, he has been an advisory board member and visiting professor for the Corporate Governance Center and Law School of Pontificia Universidad Católica de Chile. Previously, he was co-founder, chief executive officer, and executive chair of LawLogix Group, Inc., a privately held software technology company from 2000 to October 2015. Mr. Siciliano’s current and previous positions as a law professor and director at Stanford’s Rock Center for Corporate Governance, his previous experience as an executive officer of a software technology company, and his
involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Siciliano’s qualifications to serve on the Bank’s Board.
Brian M. Riley, Vice Chair
Brian M. Riley has been a director of Oxford Life Insurance Company, Phoenix, Arizona, since November 2019. He has also been the president and chief executive officer of Foothills Bank (a division of Glacier Bank, Kalispell, Montana) since March 2020. Previously, Mr. Riley was the president and chief executive officer of State Bank of Arizona (formerly Mohave State Bank), Lake Havasu City, Arizona, from March 2009 to February 2020. He also served as director, president, and chief executive officer of State Bank Corp., the holding company for State Bank of Arizona, from March 2009 to February 2020. Mr. Riley has also served as a director of Clearinghouse CDFI, Lake Forest, California, since August 2018. He was the chief financial officer of Mohave State Bank from April 2008 to March 2009. Prior to that, he was chief executive officer of Harbor Bank and Trust, a financial institution in Southport, Connecticut. Mr. Riley has over 30 years of experience in banking, including serving as president and chief executive officer of PriVest Bank, Costa Mesa, California, and holding other executive positions with Provident Savings Bank, Riverside, California, and Metro Commerce Bank, San Rafael, California. Mr. Riley is a director of the Arizona Bankers Association. Mr. Riley’s current positions as a director of a Bank member and a principal executive officer of a financial institution, his previous executive positions with other financial institutions, and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Riley’s qualifications to serve on the Bank’s Board.
David Adame
David Adame has served as president and chief executive officer of Chicanos Por La Causa (CPLC), one of the nation’s largest community development corporations from 2015 until 2023. Mr. Adame served as chief operating officer and chief financial officer from 2008 to 2015, before taking on the position of president and chief executive officer. Previously, Mr. Adame was vice president of Arizona operations for McCormack Baron & Salazar, responsible for overseeing the firm’s role in Henson Village, a HOPE VI project in Phoenix. He served as senior deputy director of Fannie Mae’s Arizona partnership office from 1997 to 2003. Prior to that, he worked at JPMorgan Chase & Co. (then called Bank One Arizona) for eight years. Mr. Adame previously served on the Bank’s Affordable Housing Advisory Council from 2016 to 2021. Mr. Adame’s experience in representing community interests in housing, health and human services, education, economic development, and advocacy, and his management skills, as indicated by his background, support Mr. Adame’s qualifications to serve as a public interest director on the Bank’s Board.
Banafsheh Akhlaghi
Banafsheh Akhlaghi is president and chief executive officer of Akhlaghi Law, Mill Valley, California, an international private law practice founded in 2010. She has over 20 years of experience as founder of a civil rights nonprofit, consultant to the United Nations, and Regional Director with Amnesty International. Her expertise includes Environmental, Social, Governance (ESG), Risk Management, Legal and Business Strategy, Diversity & Inclusion, and Public Policy. She has been a member since 2010 and was previously chair of, the Legal Services Trust Fund Commission of the State Bar of California, focusing on legal advocacy for underserved and underrepresented populations and homelessness prevention. Ms. Akhlaghi’s current position as a principal in a law firm, her expertise in governance and risk management, and her management skills, as indicated by her background, support Ms. Akhlaghi’s qualifications to serve on the Bank’s Board.
Laura Archuleta
Laura Archuleta is president and CEO of Jamboree Housing Corporation, Irvine, California, a nonprofit housing development company. Ms. Archuleta leads the development, acquisition, renovation, and management of
affordable housing across California. Under her visionary leadership for over two decades, Jamboree's portfolio has expanded to a substantial $3.2 billion, providing homes for over 20,000 residents, including low-income families, seniors, transitional age youth, and individuals with special needs. Her commitment to bridging diverse interests and fostering collaboration is evident in her ability to unite stakeholders from all walks of life, achieving common goals and creating innovative solutions to address California's pressing housing demand. She also brings decades of experience serving on numerous boards, including the Cal State Fullerton Philanthropic Foundation Board of Governors, California Housing Consortium, and California Building Industry Association (CBIA). She is a founding member of UC Irvine's Livable Cities Lab, which leverages academic expertise to study the impact of affordable housing. Ms. Archuleta’s current position as the principal executive officer of a developer of affordable housing properties in California, and her management skills, as indicated by her background, support Ms. Archuleta’s qualifications to serve on the Bank’s Board.
Jeffrey (Jeff) K. Ball
Jeffrey (Jeff) K. Ball is the president and chief executive officer of the Orange County Business Council where he represents the interests of local businesses and organizations in promoting the region’s economic prosperity. He is the founder of First Pacific Bank (formerly Friendly Hills Bank), Whittier, California, where he previously served as president and chief executive officer and is currently vice chair. He also currently serves on the board of directors as vice chair for Mobility21, and Data Center, Inc., where he is chair of the audit committee. Prior to opening First Pacific Bank he held several office positions with Bank of America Corporation focused on both commercial and investment banking. Mr. Ball is a leading advocate for the importance of financial education in all communities and was the lead petitioner in the establishment of Kinetic Academy, a K-8 charter school in Huntington Beach, California where he currently serves as chair. Mr. Ball is a past chair of the California Bankers Association, past president of the Whittier Host Lions Club, and past founding chair of the Whittier Union High School District Foundation. Mr. Ball is a public member of the Accrediting Commission for Community and Junior Colleges, serves on the board of governors of the Los Angeles Area Chamber of Commerce and previously served by appointment on the Legal Services Trust Fund Commission of the California State Bar, which he previously chaired. Mr. Ball frequently guest lectures on financial and economic principles at high schools and universities across the nation. Mr. Ball’s current position as a director and previous service as an executive officer of a Bank member, his previous officer positions with other financial institutions, and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Ball’s qualifications to serve on the Bank’s Board.
Marangal (Marito) Domingo
Marangal (Marito) Domingo joined First Technology Federal Credit Union, San Jose, California, in March 2013, and currently serves as chief financial officer and chief credit officer. Prior to that, he was executive vice president and chief financial officer of Pacific Trust Bank from 2011 to 2012. Mr. Domingo has over 20 years of experience in banking, including serving as chief financial officer for Doral Bank, senior vice president of finance for Treasury Bank, chief executive officer of Downey Savings, head of capital markets for Washington Mutual Bank, and treasurer for American Savings. He has also served on the Mortgage Bankers Association’s Residential Board of Governors and as a member of the board of directors for the National Equity Fund (affordable housing), Greater Los Angeles Chamber of Commerce, the Beaverton Education Foundation, and SMART Reading. Mr. Domingo’s current position as an executive officer of a Bank member, his previous executive positions with other financial institutions, and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Domingo’s qualifications to serve on the Bank’s Board.
Ana E. Fonseca
Ana E. Fonseca has 37 years’ experience in the financial services industry and has been the president and chief executive officer of Logix Federal Credit Union, Valencia, California, since January 2019. From April 2002 through December 2018, she held leadership roles including executive vice president/chief operating officer and executive
vice president/chief financial officer. She is experienced in developing and executing strategies to achieve long term profitable growth, sustain high levels of customer delight, and build high performing teams and has overseen fiscal operations, sales and revenue growth, customer service/experience, lending, risk management, facilities management, information technology, data and financial analytics and business operations. Ms. Fonseca’s current position as the principal executive officer of a Bank member, and her involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by her background, support Ms. Fonseca’s qualifications to serve on the Bank’s Board.
Lori R. Gay
Lori R. Gay has been president and chief executive officer of Neighborhood Housing Services of Los Angeles County (NHS) since 1990. NHS serves as a community development financial institution and full-service real estate firm. Ms. Gay has served on numerous boards of directors, including the Federal Reserve Bank of San Francisco, Los Angeles Branch, the California Organized Investment Network, and the California Housing Finance Agency. Ms. Gay’s current position as the principal executive officer of an affordable homeownership services provider responsible for reaching families with financial counseling and affordable lending and redevelopment services and her management skills, and her involvement in and knowledge of corporate governance, finance, auditing, internal controls, risk management, financial reporting, and financial management, as indicated by her background, support Ms. Gay’s qualifications to serve as a public interest director on the Bank’s Board.
Matthew Hendricksen
Mr. Hendricksen is a senior vice president with Employers Holdings, Inc. (EMPLOYERS®), overseeing the treasury and investment operations of Employers Insurance Company of Nevada, Employers Compensation Insurance Company, Employers Preferred Insurance Company, Employers Assurance Company, and Cerity Insurance Company. During his 20-plus year career, Mr. Hendricksen has specialized in investments, derivatives, collateral operations, risk management, and insurance regulations. Mr. Hendricksen’s current position as an officer of a Bank member and his involvement in and knowledge of finance, accounting, internal controls, risk management, and financial management, as indicated by his background, support Mr. Hendricksen’s qualifications to serve on the Bank’s Board.
Chang M. Liu
Chang M. Liu is president and chief executive officer of Cathay Bank and its holding company Cathay General Bancorp, where he serves on both entities’ board of directors. Mr. Liu has over 31 years of experience in the financial services industry. Mr. Liu joined Cathay Bank in 2014 as senior vice president and assistant chief lending officer. He has held various leadership positions of increasing responsibilities, including executive vice president and chief lending officer in 2016 and chief operating officer in 2018. Before being named president, Mr. Liu was responsible for managing and overseeing all commercial and real estate lending, business development, and various operations. Mr. Liu also serves as a member of the Western Bankers Association board of directors and the American Cancer Society’s CEOs Against Cancer group, on the board of advisors for the UCLA Anderson Forecast, and serves on the board of directors of Foothill Family Service. Mr. Liu’s current position as the principal executive officer of a Bank member, and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Liu’s qualifications to serve on the Bank’s Board.
Joan C. Opp
Joan C. Opp has been the president and chief executive officer of Stanford Federal Credit Union, Palo Alto, California, since May 2010. From February 2002 to April 2010, she was executive vice president and chief financial officer for Texas Trust Credit Union overseeing accounting, information technology, marketing and business services, as well as three credit union service organizations. Prior to that, Ms. Opp was a partner with the CPA firm of Clifton Gunderson, LLP, and is a Certified Public Accountant. Ms. Opp serves on the board of
directors of Velera. Ms. Opp’s current position as the principal executive officer of a Bank member, her previous executive positions with other financial institutions, and her involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by her background, support Ms. Opp’s qualifications to serve on the Bank’s Board.
Silvio Tavares
Silvio Tavares has been president and CEO of VantageScore, South San Francisco, California since 2001. VantageScore is one of the most widely used credit scores in North America and was used over 19 billion times in 2022, including by over 200 million U.S. consumers. Under his leadership, VantageScore is now used by nine of the top 10 banks in the U.S. and by more than 3,000 banks and fin-techs overall. Silvio is an experienced financial services public company board director, chief executive officer, and executive and has served on several public company boards including as Audit Committee Chair and Compensation Committee Chair. Mr. Tavares also previously held senior executive roles at several Fortune 500 financial services technology companies, including Visa and Fiserv’s First Data business. He holds a J.D. degree from the Boston University School of Law; an M.B.A. degree from the Boston College Carroll School of Management; and a B.S. degree in Electrical Engineering from Tufts University. He has invented or co-invented over 15 patents in financial data technology, risk management and machine learning technologies. Mr. Tavares’s current experience as an executive officer of a leading credit modeling company, his previous experience as an executive officer in financial services, and his involvement in and knowledge of corporate governance, finance, auditing, accounting, internal controls, risk management, financial reporting, and financial management, as indicated by his background, support Mr. Tavares’ qualifications to serve on the Bank’s Board.
Executive Officers
Joseph E. Amato
Joseph E. Amato, 66, is currently serving as interim president and chief executive officer and chief financial officer of the Federal Home Loan Bank of San Francisco. He has held the position of chief financial officer since May 13, 2021. Upon the effective date of Michael S. Hennessy’s appointment as chief financial officer, Mr. Amato will step down from his role as chief financial officer but remain as the interim president and chief executive officer of the Bank. Mr. Amato joined the Bank as executive vice president and senior financial officer on October 9, 2020, and served as the Bank’s interim chief financial officer from January 4, 2021, until his appointment as the Bank’s chief financial officer. Prior to joining the Bank, Mr. Amato was chief financial officer at the Federal Home Loan Bank of Des Moines from May 2016 to June 2019. Prior to that, Mr. Amato served in various leadership capacities at Freddie Mac from 2001 until 2016, including serving as senior vice president and CFO, investments and financial planning. Previously, Mr. Amato served in various roles at Fannie Mae. Mr. Amato received a B.S. from the University of Maryland and an M.B.A. from the George Washington University.
Arlene Coyle
Arlene Coyle, 52, is currently serving as executive vice president and chief audit executive. She has held the position of chief audit executive since May 2019. Ms. Coyle joined the Bank in February 2016 as assistant vice president, internal audit, and was promoted to vice president in February 2017. Ms. Coyle has over 25 years of internal audit and regulatory experience in the financial services industry. Before joining the Bank, she worked at TIAA in their internal audit function. Prior to TIAA, she worked as a bank examiner for the Federal Reserve System, supporting community and regional banks. She has a Certification in Risk Management Assurance and is a Certified Internal Auditor, and a Certified Financial Services Auditor.
Kwame Fields
Kwame Fields, 49, is currently serving as senior vice president, chief information security officer and also leads the Bank’s Office of Minority and Women Inclusion (OMWI). Mr. Fields has held the positions of chief information security officer since December 2017 and head of the Bank’s OMWI since July 2021. Mr. Fields has over 25 years of information security and risk management experience across multiple industries. Prior to joining the Bank, he was a vice president at E*TRADE, where he had worked since 2014. He led the technology and security oversight and governance organization and was a principal in the creation of their diversity and inclusion council. Prior to that, Mr. Fields held a number of other management roles and oversight positions with responsibility for managing a wide range of information security, business continuity, information technology risk management, and diversity initiatives. Mr. Fields is a Certified Information Systems Security Professional and a Certified Diversity Professional.
Kelly Gear
Kelly Gear, 52, is currently serving as senior vice president, and chief strategy officer. She has held the position of chief strategy officer since January 2022. Ms. Gear joined the Bank in August 2011 as vice president of IT planning and program services. Ms. Gear has over 25 years of management consulting and organizational leadership experience across highly regulated industries, including financial services, pharmaceuticals, and aerospace and defense. Prior to joining the Bank, Ms. Gear served on several executive committees overseeing large-scale global business transformations and strategic initiatives for PricewaterhouseCoopers and Johns Manville, a Berkshire Hathaway company. She is Certified Lean Six Sigma Black Belt and a Certified Diversity Professional.
Michael S. Hennessy
Michael S. Hennessy, 49, was appointed on February 19, 2025, to serve as executive vice president and chief financial officer of the Bank, effective April 1, 2025. Mr. Hennessy has served in a variety of roles since joining the Bank in 2005, including as senior vice president, finance and analytics officer since 2019 and as vice president, capital markets and treasury from 2015-2019. Prior to joining the Bank, Mr. Hennessy was a vice president in fixed income sales and trading at both Lehman Brothers and Bank of America. Mr. Hennessy received bachelor’s degrees in economics and molecular and cell biology from the University of California, Berkeley, and is a CFA charter holder.
James Ho
James Ho, 39, is currently serving as interim chief risk officer of the Bank. Prior to his appointment in January 2025, he served as senior vice president, enterprise risk officer beginning in February 2023. Mr. Ho joined the Bank in June 2016 as assistant vice president, quantitative analytics management. In July 2019, Mr. Ho was promoted to managing director, data science and data risk officer, a position he held until his appointment as senior vice president, enterprise risk management. Mr. Ho is responsible for managing the Bank’s operational risk, compliance risk, BSA/AML risk, data science, insurance program, and has oversight of credit and collateral, model and market risk programs. Prior to joining the Bank, he served in various consulting and management roles at Tresalia Asset Management, Fiduciary Research and Consulting, and FactSet Research Systems.
Anne Segrest McCulloch
Anne Segrest McCulloch, 66, is currently serving as executive vice president, chief legal officer, and corporate secretary. She has held the positions of chief legal officer and corporate secretary since November 2021. She provides legal counsel to the Bank’s management and board of directors on legal and regulatory matters affecting the development and execution of the Bank’s business strategies, policies, and practices. She also directs and manages the Bank’s legal staff, outside counsel, and public affairs team. Ms. McCulloch is a seasoned financial services and housing industry executive and regulatory attorney. Prior to joining the Bank, Ms. McCulloch was president and chief executive office of Housing Partnership Equity Trust from April 2017 through November 17,
2021. Previously, she held several senior positions in the housing sector, including senior vice president, credit and housing access, for Fannie Mae through March 2017.
Maxine Moir
Maxine Moir, 54, is currently serving as executive vice president and chief human resources officer. She has held the position of chief human resources officer since February 2020. Previously, Ms. Moir was senior vice president and director of human resources from July 2017 to February 2020. Prior to joining the Bank, Ms. Moir served as director, global human resources business partner, at BlackRock, where she provided human resources support for the iShares business. Her experience also includes 17 years of progressively more complex human resources executive responsibilities at Bank of America, where she led regional and national teams. Ms. Moir holds a Senior Certified Professional credential from the Society of Human Resources Management.
Gregory A. Ward
Gregory A. Ward, 55, is currently serving as executive vice president and chief operating officer. He has held the position of chief operating officer since November 2022. He is responsible for the Bank’s operations, information technology, information security, procurement, corporate services, and community investment departments. Mr. Ward joined the Bank in 2013 as vice president, internal audit, and was promoted to deputy director in June 2016 and to director in January 2017, and has held various positions with increasing responsibilities during his tenure, most recently as chief risk officer from May 2019 to October 2022. Before joining the Bank, he worked with Ernst & Young LLP for 12 years in its Financial Services Advisory Practice. Prior to his tenure at Ernst & Young, Mr. Ward worked in the captive insurance industry in Bermuda and for Price Waterhouse in the United Kingdom in its external audit practice. He is a Chartered Accountant, Certified Internal Auditor, Certified Anti-Money Laundering Specialist, and Project Management Professional.
Anthony (Tony) T. Wong
Anthony T. Wong, 59, is currently serving as executive vice president and chief banking officer. He has held the position of chief banking officer since April 2020. Previously, Mr. Wong was senior vice president, member financial services, and chief marketing officer. He joined the Bank in 1995 and has held various positions with increasing responsibilities during his tenure. Prior to joining the Bank, he worked in the capital markets group at Barclays Global Investors (formerly Wells Fargo Nikko Investment Advisors). Mr. Wong began his career as a registered investment advisor with the retail brokerage division of Lehman Brothers. He is a Certified Mortgage Banker, Accredited Mortgage Professional, and Certified Diversity Professional.
Insider Trading Policy
The Bank is cooperatively owned. The Bank’s member institutions (and, in limited circumstances, the Bank’s former member institutions) own the Bank’s capital stock. No individuals (including the Bank’s directors, officers, or employees) may own the Bank’s capital stock. The Bank’s capital stock is not publicly traded, and no market mechanism exists for the disposition of its capital stock outside of its cooperative structure. Members must purchase and maintain capital stock in the Bank as a condition of membership and may be required to purchase additional capital stock in order to transact with the Bank. Transactions in the Bank’s capital stock are governed by applicable regulatory requirements and the Bank’s capital plan. For more information on the Bank’s capital plan see “Item 8. Financial Statements and Supplementary Data - Note 11 - Capital.”
In addition, the Bank’s primary source of funding is the issuance of debt securities, which are consolidated obligations issued as bonds and discount notes, that are sold by dealers to investors in the public. Information with respect to the Bank’s consolidated obligations is presented in “Item 8. Financial Statements and Supplementary Data - Note 8 - Consolidated Obligations.”
The Bank has adopted an Insider Trading Policy aimed at promoting compliance with insider trading laws, rules, and regulations applicable to the Bank.

---

ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
This section provides information on the compensation program of the Federal Home Loan Bank of San Francisco (Bank) for our named executive officers for 2024. Our named executive officers for 2024 are individuals who served as our principal executive officer, our principal financial officer, and our other three most highly compensated executive officers.
Compensation and Human Resources Committee and Regulatory Oversight
The Compensation and Human Resources Committee (Compensation Committee) of the Bank’s board of directors (Board) is responsible for, among other things, reviewing and making recommendations to the full Board regarding compensation and incentive plan awards for the Bank’s eligible senior executive officers (the president and each executive vice president). For 2025 and 2024, the Compensation Committee consists of five members of the Board. The Compensation Committee acts pursuant to a Board-approved charter and may rely on the assistance, advice, and recommendations of the Bank’s management and other advisors and may refer specific matters to other committees of the Board. In addition, the Risk Committee of the Board is responsible for oversight of the Bank’s enterprise-wide risk management framework, including overseeing an annual executive incentive compensation risk assessment of the Bank’s compensation policies and practices for the Bank’s senior executive officers.
Certain members of management assist the Compensation Committee in its responsibilities by providing compensation and performance information regarding our executive officers.
With respect to the compensation of the named executive officers of a Federal Home Loan Bank (FHLBank), the Federal Housing Finance Agency (Finance Agency) provides certain oversight of FHLBanks, including the Bank executive officer compensation, and requires that an FHLBank, including the Bank, provide the Finance Agency with copies of all materials related to the compensation decisions of the FHLBank’s Board for its review and non-objection prior to the compensation decisions taking effect.
The Finance Agency has issued a rule setting forth requirements and processes with respect to compensation provided to executive officers by FHLBanks, including the Bank. The rule addresses the authority of the Director of the Finance Agency to: (i) approve named executive officer agreements that provide for compensation in connection with termination of employment and (ii) review the compensation arrangements of named executive officer of the FHLBanks and to prohibit an FHLBank from providing compensation to any named executive officer that the Director of the Finance Agency determines is not reasonable and comparable with compensation for employment in other similar businesses involving similar duties and responsibilities.
Our Executive Compensation Philosophy and Executive Compensation Program
The Bank has a Board-approved Executive Compensation Philosophy that forms the basis of our executive compensation program. The goal of our executive compensation program is to set compensation at a level which allows us to attract, motivate, and retain talented executives who can enhance our business performance and help us fulfill our mission. Our executive compensation program provides total remuneration, which includes base salary, short- and long-term cash incentive compensation, and retirement and other benefits which reflect total compensation that is consistent with individual performance, business results, job responsibility levels and the competitive market.
The Bank’s Executive Compensation Philosophy states that total compensation is intended to align the interests of the executives and key employees with the short- and long-term interests of the Bank; to ensure an appropriate level of competitiveness within the marketplace from which the Bank recruits executive talent; and to encourage the executives and other key employees to remain employed by the Bank. The Bank’s Executive Compensation Philosophy provides that total remuneration (base salary, short- and long-term cash incentives, and retirement
benefits) is also intended to motivate executives to deliver exceptional performance without encouraging unnecessary or excessive risk-taking.
Total Compensation is Intended to Reward Contributions to the Bank’s Corporate Goals and Performance Targets and Achievement of Individual Performance Goals. We have structured our executive compensation program to reward contributions by executives in support of the Bank’s corporate goals and performance targets, including those set forth in the Bank’s strategic plan, and achievement of individual performance goals. In addition to base salary, our cash incentive compensation plans create an award program for executives who contribute to and influence achievement of the Bank’s mission and other key objectives contained in the Bank’s strategic plans, and who are responsible for the Bank’s performance. The Bank’s overall executive compensation programs reward sustained performance through the balanced use of short- and long-term incentives, which represent a substantial portion of pay-at-risk, and through competitive retirement benefits, which promote the alignment of executive and Bank interests over the long term.
Each Year, the Bank Establishes Specific Corporate Goals Consistent with the Bank’s Strategic Plan. For 2024, the Board adopted four corporate goals: the Business and Financial goal, the Risk Management goal, the Affordable Housing and Community Investment goal, and the Diversity, Equity, and Inclusion (DEI) and People goal.
The Business and Financial Goal
The Business and Financial goal for 2024 was comprised of three goal components: (i) Financial Performance - Adjusted Return on Capital (AROC); (ii) Operating Efficiency - Operating Expense Management; and (iii) Member Business - Advances and Letters of Credit Volume.
The Financial Performance goal component recognized that an adequate financial return on the private capital that members contribute to the Bank is important to members as shareholders and was expressed as a target percentage of AROC. The Target (100%) level of achievement was 5.75% and equal to the 2024 base case financial projections in the Bank’s 2024-2026 Strategic Plan (Plan). The Minimum achievement level was 4.07%, equal to the Plan pessimistic scenario. The Maximum goal was 7.30%, reflecting the Plan optimistic scenario plus an add-on of 0.75% to increase the challenge of the goal.
The Operating Efficiency goal component incentivizes operating at or below the Bank’s approved 2024 operating expense budget of $165 million and demonstrates the importance of cost management and operating efficiency. The Target (100%) level of achievement was set at the 2024 operating expense budget, or $165 million. The Minimum achievement level was set equal to 2024 operating expenses, which are 2.0% higher than the 2024 operating expense budget, while the Maximum level of achievement was set equal to 2024 operating expenses, which are 3.0% lower than the 2024 operating expense budget.
The Member Business - Advances and Letters of Credit Volume goal was designed to focus management on member business and measure how well the Bank maintained and increased the volume of advances and letters of credit outstanding to members, which is key to enhancing the Bank’s member business franchise and fulfilling the Bank’s mission. The Board set the Target level of achievement based on various assumptions, such as economic forecasts, member information, potential member business, historical goal performance, industry trends and events, and current market environment and conditions, such that the relative difficulty of achieving the Target volume level was commensurate with extending credit to members in a safe and sound manner. The Target for the advances and letters of credit volume goal was set equal to $50 billion, equal to the 2024 base case in the Plan. The Maximum level of achievement for this goal component was $71 billion, reflecting the Plan optimistic scenario plus an add-on of $10 billion to increase the challenge of the goal. The Minimum achievement level was set equal to the Plan pessimistic scenario of $34 billion.
The Risk Management Goal
The Risk Management goal was comprised of two components: (i) Key Risk Indicator (KRI) Performance; and (ii) Information Security Risk Management.
The KRI Performance goal component was designed to focus management on maintaining prudent risk management practices across capitalization, leverage, liquidity, and market risk dimensions. These KRIs represent critical elements of the Bank’s strategic risk posture. The Board set the Target level of achievement of the KRI goal at 36 out of 48. The Maximum and Minimum levels of achievement for this goal component were 45 and 24 out of 48, respectively.
The Information Security Risk Management goal was designed to improve the Bank’s information security first line of defense by incentivizing the workforce to complete all optional InfoSec training modules in a month, achieve a minimum score on each module assessment, pass a simulated phishing campaign, and accurately report at least one real phish email. As employees increase their knowledge of information security concepts, practices, and resources they will become better equipped to identify, report, and appropriately react to information security attacks that may directly or indirectly target them. The levels of achievement were informed by the percent of the workforce that satisfied the goal requirements in the preceding years. The Target level of achievement was 60%, versus 30% in 2022 and 55% in 2023, and the Minimum and Maximum levels of achievement were set equal to 30% and 80%, respectively.
The Affordable Housing and Community Investment Goal
The Affordable Housing and Community Investment goal for 2024 was comprised of three components: (i) the Middle Income Downpayment Assistant (MDPA) Program; (ii) the Tribal Nations Program (TNP) Outreach; and (iii) the Community Investment Program Product Utilization.
The first Affordable Housing and Community Investment goal component was designed to increase member participation in the Bank’s MDPA program. The program supports affordable homeownership, which is a core part of the Bank’s mission, and addresses a key housing need identified in the Bank’s Targeted Community Lending Plan (TCLP). The goal incentivizes management to connect and educate members and HUD-approved Housing Counseling Agencies and obtain unique member applications to the MDPA program. The Target level of achievement was 47 member applications; informed by 40 member applications in 2023 and the potential impact of changes to the program, including the funding allocation, maximum grant amount, homebuyer income limits, and documentation requirements. The Minimum and Maximum levels of achievement were 42 and 52, respectively. The Bank’s TNP provides technical assistance for tribes to apply for affordable housing funding, which is a core part of the Bank’s mission and a key housing need identified in the Bank’s Targeted Community Lending Plan.
The second Affordable Housing and Community Investment goal is designed to focus management to engage in outreach as a critical first step to ultimately increase participation by tribal communities in the Bank programs. The goal levels were set above prior year performance to improve tribal nations capacity building through increased engagement in Native American housing outreach events with tribes and tribal organizations.
Consistent with the Bank’s public policy purpose, the third Affordable Housing and Community Investment goal component was designed to focus management on meeting the Bank’s objective of making advances and credit programs that promote and assist housing and community economic development activities available to members. Achievement in this area is a key element of the Bank’s mission objectives, and the participation of Bank members is critical. This goal included achievement levels for: (i) the percent of unique members that used an advance or letter of credit under the Community Investment Program (CIP) or Advances for Community Enterprise (ACE) Program and (ii) the percent of unique members that received an award in the Access to Housing and Economic Assistance for Development (AHEAD) Program during 2024.
The Diversity, Equity, and Inclusion (DEI) and People Goal
The DEI and People goal for 2024 comprised of four equally weighted goals: (i) DEI - Capital Markets; (ii) DEI - Supplier Diversity; (iii) Workforce Diversity; and (iv) Workforce Talent.
The DEI Capital Markets goal is designed to focus management on increasing the percentage of debt issuance activity through diverse dealers. The Target level of achievement required 20% of certain debt issuance products to
be issued through diverse dealers and was informed by diverse dealer issuance activity in 2022 and 2023. The Minimum and Maximum levels of achievement were set at 10% and 40%, respectively.
The DEI Supplier Diversity goal was designed to drive management to engage diverse suppliers in bid opportunities in accordance with the Bank’s procurement policy. The Target level of achievement was 85%. The Minimum and Maximum levels of achievement were set at 75% and 100%, respectively.
The Workforce Diversity goal incentivizes increased participation from diverse employees in meaningful professional development programs. The Target level of achievement of 35% diverse employee participation was higher than past participation and was designed to ensure equitable delivery of professional development. The Minimum and Maximum levels of achievement were set at 20% and 50%, respectively.
The Workforce Talent goal component incentivizes management to retain and develop critical team members by aiming to keep voluntary turnover low. This goal also supported the Bank’s talent development objectives and minimize the loss of subject matter expertise. The Target level of achievement of 7% voluntary turnover, excluding retirements, considered recent workforce trends, historical turnover rates, and is in-line with expectations for 2024. The Minimum and Maximum levels of achievement were set at 14% and 4%, respectively.
Each Year, the Bank Establishes Individual Goals for Executives Consistent with the Bank’s Strategic Plan. The individual performance goals established for executive officers are generally based on the Bank’s Strategic Plan and reflect strategic objectives that will enable the Bank to successfully achieve its mission. The Bank’s 2024 strategic objectives were to: (i) enhance membership value and business utilization; (ii) continually improve organizational performance; (iii) attract, develop, inspire, and retain high performing talent; and (iv) expand community investment impact across the district.
The Bank’s Executive Incentive Compensation Plans were Designed to Calculate Executive Officers' Achievement Levels on a Weighted Basis to Ensure a Proper Balance in Achieving the Bank’s Mission in a Safe and Sound Manner. With respect to each of the named executive officers for 2024, the achievement levels of each of the four Bank corporate goals (the Business and Financial goal, the Risk Management goal, the Affordable Housing and Community Investment goal, and the DEI and People goal) were weighted at 80% in the aggregate with the individual goal weighted at 20% of the total weighted achievement level for each officer. See “Elements of Our Executive Compensation Program - Executive Incentive Plan” below for the individual corporate goal weights.
The weightings of the Bank’s corporate goals were approved by the Board and were designed to appropriately focus senior management on accomplishing the Bank’s mission and strategic plan. See “Elements of Our Executive Compensation Program - Executive Incentive Plan” below for a discussion of the relative weights given to corporate goals and individual goals for each component of the Executive Incentive Plan (EIP) for 2024 for the named executive officers.
Our Executive Compensation Program is Designed to Enable the Bank to Compete for Highly Qualified Executive Talent. Our members are best served when we attract and retain talented executives with competitive and fair compensation packages. In 2024, the Bank evaluated total remuneration around the median 50th percentile of the financial services marketplace from which the Bank recruits executive talent, including global, national, regional and diversified financial institutions, while maintaining an appropriate alignment with the practices of other FHLBanks. Our named executive officers are required to have the same depth of knowledge and experience that comparable financial services and banking firms require.
For purposes of developing comparative compensation information, the companies with comparable positions were financial services and banking firms with similar business sophistication and complexity. In supporting compensation decisions, the Compensation Committee uses and considers compensation information for comparable positions at these companies. Each element of compensation may vary somewhat above or below the market median for the related positions in the comparison groups. Furthermore, compensation levels for individual positions may also be adjusted to recognize additional factors, such as regional salary differences, recruitment or
retention, special duties or responsibilities, sustained performance results, leadership succession planning, and internal equity considerations.
Since 2014, the Compensation Committee has engaged McLagan Partners, Inc. (McLagan), a leading global management consulting firm providing consulting and benchmarking services for the financial services industry, for the purpose of providing the Compensation Committee with annual competitive market compensation reference and comparative information. In 2024, McLagan assessed the Bank’s competitive market position with respect to its executive compensation program. McLagan used market data collected from its compensation surveys and publicly available proxy data. McLagan used standardized peer group data from three groups: commercial banks with incumbents located in metro San Francisco and metro New York; the other FHLBanks; and public proxy peers with assets between $10 billion and $20 billion. When comparing Bank executives with those at commercial banks, the closest comparable roles/realistic employment opportunities were used. When comparing Bank executives to executive roles at other FHLBanks, overall functional heads were used. When using the $10 billion to $20 billion peer group for comparison, actual functional roles or salary rank was used. The Compensation Committee used the McLagan market data as a reference point for evaluating 2024 executive compensation levels and to check, evaluate, and compare the reasonableness and appropriateness of the levels of compensation provided to our senior executives.
Allocation of Short-Term Cash Incentive Compensation and Long-Term Cash Incentive Compensation. Our objective is to compensate our senior executives, including our named executive officers, with a balanced combination of base salary and short- and long-term cash incentive compensation.
We believe that a balanced approach in delivering short- and long-term cash incentive compensation is most appropriate for the Bank because we believe our executives should be focused on achievement of both short- and long-term goals. Consistent with the Bank’s three-year strategic plans and its Executive Compensation Philosophy, long-term cash incentive compensation helps provide a competitive total cash compensation package and enhances the Bank’s ability to attract and retain key executives.
The Bank’s short-term cash incentive compensation component of the EIP rewards the named executive officers and other executive officers for the Bank’s achievement of its annual corporate goals and performance targets and for the officer's achievement of his or her individual goals. The Bank’s long-term cash incentive compensation component of the EIP ties long-term cash incentive rewards to the sustainability of goal achievements over a long-term period. This structure is designed to promote the Bank’s long-term health by deterring behavior or inappropriate risk-taking that could lead to material financial loss at the Bank. This approach for long-term compensation is consistent with developing practices to better recognize risk outcomes in incentive-based compensation decision making and balance risk and reward.
Elements of Our Executive Compensation Program
Base Salary Compensation
Base salary compensation is a key component of the Bank’s executive compensation program and helps the Bank successfully attract and retain executive talent. Base salary for the named executive officers is based on a combination of factors, including comparative salary information from industry salary surveys that include financial institutions in the Bank’s peer groups. Other factors include the named executive officer's relevant experience and accomplishments and level of responsibility at the Bank and perceived market competition for executives with comparable levels of experience. The Board considers any base salary adjustments for the named executive officers, effective as of the beginning of each year, based on the individual's performance and contributions to the Bank’s achievements or to help more appropriately align total remuneration with comparable positions in the financial services marketplace. Base salary adjustments for the named executive officers are subject to review and non-objection from the Finance Agency. For the base salaries of the current named executive officers, see the discussion in “Compensation Tables - Narrative to Summary Compensation Table and Grants of Non-Equity Incentive Plan-Based Awards Table - At Will Employees.”
Executive Incentive Plan
The EIP is designed to attract and retain senior executive officers and to motivate and focus their efforts on achieving the Bank’s business plan and accomplishing its goals and objectives while maintaining the safety and soundness of the Bank. The EIP is a cash-based incentive plan that provides award opportunities based on achievement of performance goals and the satisfaction of certain qualifiers.
The EIP provides for an annual total incentive award (Annual Award) for a one-year performance period. Fifty percent (50%) of the Annual Award is earned and vested after the last day of the one-year performance period (Year-End Award). The remaining fifty percent (50%) is deferred (Deferred Award) for a three-year period (“Deferral Performance Period”) during which payment is conditioned upon the satisfaction of certain “qualifiers” (discussed below) that recognize the risk outcomes of executive decision making. Deferred Awards may be reduced or subject to forfeiture if qualifiers are not met during the Deferral Performance Period. The deferral component of the EIP ties long-term cash incentive rewards to the sustainability of goal achievements, which is intended to, among other things, promote the Bank’s long-term health by deterring behavior or inappropriate risk-taking that could lead to material financial loss to the Bank.
Performance goals and qualifiers are the factors established by the Board for each performance period and are taken into consideration in determining the amount of an award. Under the EIP for 2024, the Board established the following 2024 performance goals for the Annual Award: the Business and Financial goal; Risk Management goal, Affordable Housing and Community Investment goal, and DEI and People goal. The Board defined “Minimum,” “Target,” and “Maximum” achievement levels for each performance goal to determine the amount of the award. Performance goal measures range from 75% of Target (Minimum) to 150% of Target (Maximum). The Board may adjust the performance goals and qualifiers for any performance period to ensure the purposes of the EIP are served. In determining the appropriate performance goals and qualifiers the Board will, among other things:
•balance risk and financial results in a manner that does not encourage participants to expose the Bank to imprudent risks;
•make such a determination in a manner designed to ensure that a participant’s overall compensation is balanced and not excessive in amount and that the awards are consistent with the Bank’s policies regarding compensation arrangements; and
• monitor the success of the performance goals and qualifiers, taking into account weighting established in prior years and making appropriate adjustments in the future, as needed, so that payments appropriately incentivize participants, appropriately reflect risk, and align with regulatory guidance.
For the 2024 performance goals, the following table shows the goal weights for the senior executive officers eligible to participate in the EIP (including the named executive officers and the chief risk officer).
Senior Executive Officers (other than the Chief Risk Officer)
Chief Risk Officer
Corporate Goal Weight Goal Weight (includes individual goals) Corporate Goal Weight Goal Weight (includes individual goals)
Individual N/A 20.0 % N/A 20.0 %
Business and Financial 35.0 % 28.0 % 22.0 % 18.0 %
Risk Management 20.0 % 16.0 % 50.0 % 40.0 %
The Affordable Housing and Community Investment
30.0 % 24.0 % 19.0 % 15.0 %
DEI and People
15.0 % 12.0 % 9.0 % 7.0 %
Total 100.0 % 100.0 % 100.0 % 100.0 %
The achievement levels in the EIP for 2024 were designed to reward senior executive officers for achievement of the Bank’s corporate goals and objectives as described above, based on a Target level of achievement for all corporate goals and the officer's individual goal(s). The Maximum achievement level was designed to reward senior executive officers when the Bank and the individual officer achievements far exceed the Target level. The Maximum achievement level is the most optimistic achievement level based on reasonable business, market, and economic assumptions and conditions.
The performance goal measures and plan design were intended to appropriately motivate and reward the Bank’s senior executive officers based on the total achievement of all goals, considering each senior executive officer’s role in the Bank’s performance. Setting the performance goal measure ranges based on a percentage of base salary for 2024 is intended to be consistent with our Executive Compensation Philosophy of evaluating total remuneration around the median 50th percentile of the total remuneration in the financial services marketplace from which the Bank recruits executive talent.
The total incentive awards under the EIP, i.e., the Annual Awards, are determined by multiplying the percentage of achievement for each goal by the respective performance goal weights to arrive at each participating officer's total weighted achievement level. The individual goal achievement is also determined based on the officer’s individual performance for the year. Each participating officer's total weighted achievement level is then used to determine each participating officer's cash incentive compensation award under the EIP.
The following table shows the total incentive award levels for the Annual Awards and the allocation of the Annual Award opportunities between the Year-End Awards and the Deferred Awards for 2024 under the EIP for the eligible senior executive officers.
Total Annual Award as % of Base Salary Year-End Award as % of Base Salary Deferred Award as % of Base Salary
Title Minimum Target
Maximum Minimum Target
Maximum Minimum Target
Maximum
CEO 50.0 % 80.0 % 100.0 % 25.0 % 40.0 % 50.0 % 25.0 % 40.0 % 50.0 %
Senior Executive Officers (other than the CEO) 40.0 % 65.0 % 85.0 % 20.0 % 32.5 % 42.5 % 20.0 % 32.5 % 42.5 %
Vesting of any award is subject to the participant receiving a satisfactory performance rating and being actively employed on the last day of the relevant performance period, except in certain cases, such as termination because of death or disability, retirement, reduction in force, department reorganization, substantial job modification, or termination for Good Reason or without Cause, or “Change in Control” (as defined in the EIP), and subject to certain conditions being met. In such cases, the EIP provides that a Deferred Award will be treated as fully vested as of the date of termination and the relevant pro rata portion of the Annual Award will be treated as vested for that portion of the relevant performance period based on the assumption that the Bank would have achieved the applicable performance goals at the Target level and satisfied the qualifiers for the relevant performance period.
The following are the performance qualifiers for 2024 for any awards under the EIP: (i) no submission of material information to a regulatory or a reporting agency is significantly past due; (ii) the Bank makes sufficient progress, as determined by the Board, in the timely remediation of significant examination, monitoring, and other supervisory findings; (iii) no material risk management deficiency exists at the Bank; (iv) no operational errors or omissions result in material revisions to the financial results, information submitted to the Finance Agency, or data used to determine incentive payouts; (v) the Bank has sufficient capital to pay dividends and the ability to repurchase or redeem capital stock; and (vi) the Bank maintains a regulatory capital ratio of at least 4.25%.
The EIP provides that awards may be reduced, eliminated, or forfeited in certain circumstances. Under the EIP, the Board may reduce or eliminate any award not yet paid if the Board finds that a serious, material safety and soundness issue or a serious, material risk management deficiency exists at the Bank, or if: (i) errors or omissions result in material revisions to the Bank’s financial results, information submitted to a regulatory or a reporting agency, or information used to determine incentive compensation payouts; (ii) information submitted to a regulatory or a reporting agency is untimely; or, (iii) the Bank does not make appropriate progress, as determined by the Board, in the timely remediation of examination, monitoring, or other supervisory findings and matters requiring attention.
In addition, if the Bank realizes actual losses during the Deferral Performance Period, or other measures or aspects of performance related to the Annual Performance Period or Deferral Performance Period are realized that would have caused a reduction in the amount of the final award (i.e., the amount of the earned and vested Annual Award and Deferred Award) calculated for the Annual Performance Period or Deferral Performance Period, then the remaining amount of the final award to be paid at the end of the Deferral Performance Period may be reduced to reflect this additional information. Furthermore, if a participant breaches the terms of a non-solicitation and non-disclosure agreement with the Bank executed as a condition to participating in the EIP, all the participant’s unpaid vested and unvested awards may be forfeited.
Finally, if during the most recent examination of the Bank by the Finance Agency, the Finance Agency identifies an unsafe or unsound practice or condition that is material to the financial operation of the Bank within the participant’s area(s) of responsibility, and such unsafe or unsound practice or condition is not subsequently resolved to the satisfaction of the Board, then all or a portion of a participant’s unpaid award (vested and unvested) may be forfeited as determined in the sole discretion of the Board. Any future payments for a vested award will cease, and the Bank will have no further obligation to make such payments.
The amount of any award will be determined at the sole discretion of the Board. If the qualifiers are satisfied, the Bank’s GAAP Return on Capital rate (GAAP income divided by average GAAP capital) measured for the relevant calendar year is applied to any Deferred Awards. The applicable interest rate will be measured and applied separately for each calendar year that is part of a Deferral Performance Period. Awards, if any, under the EIP are to be paid in accordance with the terms of the EIP following Board approval and completion of any required Finance Agency review. The EIP for 2024 also includes a “cap” on the total incentive award payout for any particular year where the sum of the Year-End Award plus the Deferred Award vesting after three years and the interest earned on such Deferred Award does not exceed the senior executive officers’ base salary for that calendar year.
The amount of any earned and vested Annual Award or Deferred Award may be modified at the Board’s discretion to account for performance that is not captured in the relevant performance goals and qualifiers. The Board, in its discretion, may also consider “Extraordinary Occurrences” when assessing performance results and determining any of the awards. “Extraordinary Occurrences” mean those events that, in the opinion and discretion of the Board, are
outside the significant influence of the participant or the Bank and are likely to have a significant unanticipated effect, whether positive or negative, on the Bank’s operating or financial results. The EIP for 2024 also provides that the Board may apply a “multiplier” to an individual’s Annual Award to account for individual performance not captured in his or her individual performance goals, positive or negative, but not to result in an award level below Minimum or above Maximum.
For additional information regarding awards granted under the EIP for 2024, see the discussion in “Compensation Tables - Narrative to Summary Compensation Table and Grants of Non-Equity Incentive Plan-Based Awards Table - Non-Equity Incentive Compensation and Non-Equity Long-Term Incentive Payouts,” which discussion is herein incorporated by reference.
Savings Plan
The Bank’s Savings 401(k) Plan (Savings Plan) is a tax-qualified defined contribution 401(k) retirement benefit plan that is available to all eligible employees, including the named executive officers. Each eligible employee may contribute between 2% and 75% of base salary to the Savings Plan. For employees who have completed at least six months of service, the Bank matches the employee's contribution up to 6% of base salary. Employees are always fully vested in employer matching contributions.
For 2024, the maximum annual before-tax employee contribution to the Savings Plan was limited to $23,000 (or $30,500 for participants age 50 and over), and not more than $345,000 of an employee’s annual compensation could be considered in computing the employee's benefits under the Savings Plan.
Cash Balance Plan
The Cash Balance Plan is a tax-qualified defined benefit plan that covers employees who have completed a minimum of six months of service, including the named executive officers. Each year, eligible employees accrue benefits equal to 6% of their total annual compensation (which includes base salary and short-term cash incentive compensation) plus interest equal to 6% of their account balances accrued through the prior year, referred to as the annual benefit component of the Cash Balance Plan. For 2024, the Internal Revenue Code (IRC) limited the amount of annual compensation that could be considered in calculating an employee's benefits under the Cash Balance Plan to $345,000.
The benefits under the Cash Balance Plan annual benefit component are fully vested after an employee completes three years of service, or when the participant reaches age 65. Vested amounts are generally payable in a lump sum or as an annuity when the employee leaves the Bank.
Benefit Equalization Plan
The Benefit Equalization Plan (BEP) is an unfunded and non-tax-qualified plan that is designed to restore retirement benefits lost because of compensation and benefits limitations imposed on the Savings Plan and the Cash Balance Plan under the IRC.
Annual compensation is determined based on the definition of compensation provided in the respective tax-qualified plans. Participation in the BEP is available to all employees, including the named executive officers, whose benefits under the tax-qualified plans are restricted because of the IRC limitations discussed above.
An employee's benefits that would have been credited under the Cash Balance Plan but for the limitations imposed on the plan under the IRC are credited as Supplemental Cash Balance Benefits under the BEP and the credits accrue interest at an annual rate of 6% until distributed. Each year, employees may also elect to defer compensation earned over the IRC compensation limits to the BEP. For each year that a participant makes deferrals to the BEP, lost matching contribution (up to a maximum of 6% of base salary in the aggregate) under the Savings Plan (participant deferrals and Bank matching contributions are referred to herein as Supplemental BEP Savings Benefits) are
credited to the participant’s BEP account. The make-up benefits under the BEP vest according to the corresponding provisions of the Savings Plan and the Cash Balance Plan.
Under the BEP, a participant's Supplemental Cash Balance Benefits are payable in the form of a lump sum, single life annuity, 50% survivor annuity, or 75% survivor annuity upon termination of employment, a set date or age after termination of employment, becoming disabled after termination of employment, or death. Under the BEP, a participant's Supplemental BEP Savings Benefits are payable in a lump sum or two to ten annual installments, and payments may commence at termination of employment, retirement, disability, death, or a specific date after termination of employment. In addition, a participant's elections with respect to the time and form of benefit payments are irrevocable unless the election is made 12 months prior to the scheduled distribution date and the new scheduled distribution date is delayed at least five years. If a participant does not elect the time or form of payment, his or her distribution will be a lump sum at termination of employment.
Participants are permitted each calendar year to elect a different time and form of distribution for deferrals made in that calendar year.
Notwithstanding a participant’s election of a form of payment, the Bank may instead, in its sole discretion, pay a participant’s entire account balance in a single lump sum payment, so long as the participant’s account balance is less than the applicable dollar limit under IRC Section 402(g), which in 2024 is $23,000. Such payment is known as a limited cash out and applies to a participant’s Supplemental Cash Balance Benefit and Supplemental BEP Savings Benefit, including excess contributions and matching contributions.
Deferred Compensation Plan
Our Deferred Compensation Plan (DCP) is an unfunded and non-tax-qualified deferred compensation plan, consisting of three components for employees: (1) employee deferral of current compensation; (2) make-up matching contributions that would have been made by the Bank under the Savings Plan had the base salary compensation not been deferred; and (3) make-up retirement benefits that would have been earned under the Cash Balance Plan had any amount of total annual compensation (base salary and short-term cash incentive compensation) not been deferred. See discussion in “Compensation Tables - Narrative to Non-Qualified Deferred Compensation Table.” The DCP is made available to all Bank employees including the named executive officers and directors as to their director fees.
Under the DCP, participants' make-up Cash Balance Plan benefits are payable in the form of a lump sum, single life annuity, 50% survivor annuity, or 75% survivor annuity upon termination of employment, a set date or age after termination of employment, becoming disabled after termination of employment, or death. If a participant does not elect a time or form of payment, the benefit is paid in a lump sum upon termination of employment.
A participant's deferred compensation and the Bank’s make-up Savings Plan matching contributions credited under the DCP (including earnings on such amounts) are payable in a lump sum or two to ten annual installments, and payments may commence at termination of employment, retirement, disability, death, or a specific date no earlier than one year from the end of the deferral period. Participant elections regarding the time and form of payment are generally irrevocable unless certain conditions are met. If a participant does not elect the time or form of payment, his or her distribution will be a lump sum at termination of employment.
Notwithstanding a participant’s election of a form of payment, the Bank may instead, in its sole discretion, pay a participant’s entire account balance in a single lump sum payment, so long as the participant’s account balance is less than the applicable dollar limit under IRC Section 402(g), which in 2024 is $23,000. Such payment is known as a limited cash out and applies to a participant’s make-up Cash Balance Plan benefits, including participant deferrals and the Bank’s contributions.
Supplemental Executive Retirement Plan
Effective January 1, 2003, the Bank began providing a Supplemental Executive Retirement Plan (SERP) to the Bank’s eligible senior executive officers, including the named executive officers (other than Mr. Amato). This plan is an unfunded and non-tax-qualified retirement benefit plan that provides a cash balance-style benefit in addition to the tax-qualified benefits under the Cash Balance Plan.
The SERP supplements the Cash Balance Plan benefits to provide a competitive postretirement compensation package that is intended to help the Bank attract and retain key senior executive officers who are critical to the success of the Bank.
Benefits under the SERP are based on total annual compensation (base salary and short-term cash incentive compensation, including any deferrals under the Savings Plan, BEP, or DCP) and years of credited service as presented in the table below.
Years of Credited Service
(As Defined in the Plan) Amount of Contribution for President (Percentage of Total Annual Compensation) Amount of Contribution for Other Participants (Percentage of Total Annual Compensation)
Fewer than 5 25 % 20 %
5 or more 35 % 25 %
Participants accrue annual interest equal to 6% of balances accrued through the prior yearend. In addition, SERP benefits are limited to the extent that any participant's total retirement income exceeds fifty percent (50%) of the participant's final average pay. Final average pay is defined as a participant's highest average annual compensation during any three consecutive years of participation in the SERP. Annual benefits accrued under the SERP for any plan year commencing after January 1, 2018, will vest at the earlier of five years of employment with the Bank from the date the senior executive officer became a participant in the SERP, or when the participant reaches age 62.
The normal form and time of payment of benefits under the SERP is a lump sum upon the earlier of termination of employment, disability, or death. Upon a timely election, a participant may elect optional forms of payment to commence after termination of employment as specified in the SERP.
If a participant's employment is terminated for cause (as defined in the plan), only the unvested portion of the participant’s SERP account would be forfeited.
Other Elements of Compensation
The Bank provides to all employees, including the named executive officers, health, dental, and vision insurance and an employee assistance program for the employees and their spouses/partners and children, for which the Bank pays approximately 80% of the premiums and the employee pays approximately 20%. In addition, the Bank provides long-term disability and basic life insurance coverage to all employees at no cost to the employees.
The Bank makes available limited retiree healthcare benefits for eligible employees who retire from the Bank. To be classified as a Bank retiree eligible to enroll for retiree healthcare benefits, a Bank employee must be 55 years of age with a minimum of 10 years of Bank service on the date that his or her employment with the Bank terminates.
Perquisites
On occasion, the Bank may pay for resort activities for employees, including our named executive officers, in connection with business-related meetings; and in some cases, the Bank may pay the expenses for spouses/partners accompanying employees to these meetings or other Bank-sponsored events. Perquisites are valued at the actual amounts paid to the provider of the perquisites.
COMPENSATION COMMITTEE REPORT
The Compensation and Human Resources Committee (Compensation Committee) acts as the compensation committee on behalf of the Bank’s Board. In fulfilling its oversight responsibilities, the Compensation Committee reviewed and discussed with management the Compensation Discussion and Analysis set forth in this annual report on Form 10-K.
Based on the Compensation Committee's review of the Compensation Discussion and Analysis and the discussions the Compensation Committee has had with management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this annual report on Form 10-K, which will be filed with the Securities and Exchange Commission.
Compensation and Human Resources Committee
Banafsheh Akhlaghi, Chair
Matthew Hendricksen, Vice Chair
David Adame
Ana Fonseca
Brian Riley
COMPENSATION TABLES
Summary Compensation Table
(In whole dollars)
Name and Principal Position Year Base Salary
Bonus
Non-Equity
Incentive
Compensation(1)
Change in
Pension Value and
Non-Qualified
Deferred
Compensation(2)
All Other(3)(4)
Compensation
Total
Alanna McCargo(5)
2024 $ 500,625 $ - $ - $ 138,729 $ 188,164 (6)
$ 827,518
President and CEO
Teresa Bazemore(7)
2024 604,971 - 495,574 351,735 1,027,011 (8)
2,479,291
Former President and CEO
2023 964,600 - 874,300 479,772 62,357 2,381,029
2022 910,000 - 904,200 415,827 178,381 (9)
2,408,408
Joseph Amato(10)
2024 540,000 - 425,889 49,656 24,578 1,040,123
EVP and CFO
2023 500,000 177,417 (11)
378,200 47,001 31,357 1,133,975
2022 500,000 177,418 (11)
421,800 49,204 30,368 1,178,790
Greg Ward(12)
2024 545,900 - 431,844 209,805 36,475 1,224,024
EVP and
2023 530,000 - 438,998 362,570 35,521 1,367,089
Chief Operating Officer
2022 485,000 - 448,044 (13)
- (14)
32,494 965,538
Anne Segrest McCulloch(15)
2024 513,713 - 371,200 203,163 24,233 1,112,309
EVP and
2023 498,750 - 377,300 195,118 33,087 1,104,255
Chief Legal Officer
2022 476,649 112,500 (16)
400,700 160,413 104,386 (17)
1,254,648
Tony Wong(18)
2024 450,110 - 345,462 207,650 29,576 1,032,798
EVP and
2023 437,000 - 330,500 281,494 29,122 1,078,116
Chief Banking Officer
2022 417,000 - 343,400 29,708 27,874 817,982
(1)The amounts reflect the total Annual Awards earned under the EIP for services performed during the respective fiscal year. Fifty percent (50%) of the total Annual Awards are vested after the last day of the one-year performance period, i.e., the Year-End Award. The remaining fifty percent (50%) of the total Annual Awards are deferred and vested on the last day of a three-year performance period, i.e., the Deferred Award. Any payout of the Deferred Awards under the EIP is subject to the satisfaction of certain requirements and qualifiers, and completion of Finance Agency review. The amounts also reflect interest for any vested Deferred Awards under the EIP. For the total Annual Award for 2024 under the EIP for 2024, see the discussion in “Narrative to Summary Compensation Table and Grants of Non-Equity Incentive Plan-Based Awards Table - Non-Equity Incentive Compensation and Non-Equity Long-Term Incentive Payouts.”
(2)Represents the aggregate change in actuarial present value of each of the named executive officers' accumulated benefits under the Bank’s qualified and non-qualified defined benefit plans to the extent applicable (i.e., Cash Balance Plan; frozen FIRF; restored benefits under the Benefit Equalization Plan (BEP); make-up retirement benefits under the Deferred Compensation Plan (DCP); and Supplemental Executive Retirement Plan (SERP)). There are no above-market or preferential earnings on the named executive officers' DCP accounts.
(3)Includes perquisites and premiums for disability and life insurance paid by the Bank. On occasion, the Bank pays for resort activities for employees in connection with Board meetings and other business-related meetings; and, in some cases, the Bank may pay the expenses for spouses accompanying employees to these meetings or other Bank-sponsored events. Perquisites are valued at the actual amounts paid to the provider of the perquisites. The value of some perquisites is not reasonably quantifiable but is known to be de minimis.
(4)Includes the Bank’s matching contributions under the Savings Plan and the Bank’s restored and make-up matching amounts credited under the BEP and DCP.
(5)Ms. McCargo became president and CEO effective June 10, 2024. On February 1, 2025, Ms. McCargo transitioned into a non-employee advisory role and will serve in such advisory role through December 31, 2025. See “Employment Agreements and Arrangements - McCargo Employment Agreement.”
(6)Of this amount, $176,989 represents relocation costs to Ms. McCargo. Pending Finance Agency non-objection, Ms. McCargo will be issued $1,476,951 under the terms of the separation agreement.
(7)Ms. Bazemore served as president and CEO until June 9, 2024.
(8)Of this amount, $993,538 represents severance payment to Ms. Bazemore.
(9)Of this amount, $120,000 represents reimbursement of relocation costs to Ms. Bazemore.
(10)Mr. Amato became the interim CFO effective January 5, 2021, and the CFO effective May 13, 2021. Effective January 30, 2025, Mr. Amato was appointed by the Board to additionally serve as the Interim President and Chief Executive Officer.
(11)Represents payment of a discretionary special award in recognition of service as CFO.
(12)Mr. Ward, who previously served as chief risk officer, became chief operating officer effective November 1, 2022.
(13)This amount represents an award earned by Mr. Ward in the amount of $336,900 under the Bank’s EIP for 2022 as the Bank’s chief risk officer, $75,300 under the EIP for 2022 as the Bank’s chief operating officer, and $35,844 in interest for the Deferred Award under the EIP for 2018.
(14)In accordance with the Securities and Exchange Commission (SEC) rules, negative changes in pension value are not included in this table. The negative change in pension value for Mr. Ward is $70,498.
(15)Ms. McCulloch became the chief legal officer effective November 18, 2021. On December 27, 2024, the Board of Directors accepted the resignation of Ms. McCulloch as Executive Vice President, Chief Legal Officer, and Corporate Secretary, which she had tendered following a proposed restructuring of her position. No date has been determined yet for when Ms. McCulloch’s resignation will take effect.
(16)Represents a sign-on payment.
(17)Of this amount, $75,924 represents reimbursement of relocation costs to Ms. McCulloch.
(18)Mr. Wong, who previously served as chief marketing officer and acting chief banking officer, became chief banking officer in May 2021.
Grants of Non-Equity Incentive Plan-Based Awards
(In whole dollars) Estimated Payout Ranges(1)
Name EIP for 2024
Plan Period Payout Date Minimum
Target
Maximum
Alanna McCargo
Year-End Award 2024
February 2025
$ 124,950 $ 199,950 $ 249,950
Deferred Award 2025-2027
February 2028
124,950 199,950 249,950
Teresa Bazemore Year-End Award 2024
February 2025
123,850 198,150 247,700
Deferred Award 2025-2027
February 2028
123,850 198,150 247,700
Joseph Amato Year-End Award 2024
February 2025
108,000 175,500 229,500
Deferred Award 2025-2027
February 2028
108,000 175,500 229,500
Greg Ward Year-End Award 2024
February 2025
109,200 177,400 232,000
Deferred Award 2025-2027
February 2028
109,200 177,400 232,000
Anne Segrest McCulloch Year-End Award 2024
February 2025
102,750 166,950 218,350
Deferred Award 2025-2027
February 2028
102,750 166,950 218,350
Tony Wong Year-End Award 2024
February 2025
90,000 146,300 191,300
Deferred Award 2025-2027
February 2028
90,000 146,300 191,300
(1)The estimated payouts for the Year-End Award and the Deferred Award each represent 50% of the total Annual Awards under the EIP for 2024 that could have been earned by the respective executive officers for 2024. Actual amounts of both the Year-End Award and Deferred Award under the EIP for 2024 for each named executive officer are included in the Summary Compensation Table. Any payout of the Deferred Awards under the EIP for 2024 is subject to the satisfaction of certain requirements and qualifiers, and completion of Finance Agency review. See the discussion in “Compensation Discussion and Analysis - Elements of our Executive Compensation Program - Executive Incentive Plan.”
Narrative to Summary Compensation Table and Grants of Non-Equity Incentive Plan-Based Awards Table
At Will Employees
All employees of the Bank are “at will” employees, including the named executive officers. The named executive officers may resign at any time, and the Bank may terminate their employment at any time with or without cause and with or without notice, subject to contractual obligations, if any.
The 2024 annual base salaries as of December 31, 2024, for the 2024 named executive officers who served as of December 31, 2024, were as follows: Alanna McCargo, $890,000; Joseph Amato, $540,000; Greg Ward, $545,900; Anne Segrest McCulloch, $513,713; and Tony Wong, $450,110.
Corporate Senior Officer Severance Policy. The Corporate Senior Officer Severance Policy (Senior Officers' Policy) is applicable to the executive vice presidents (other than Mr. Amato), and any senior vice president as of December 31, 2018, who are defined in the Senior Officers’ Policy as “Corporate Senior Officer.”
The Senior Officers' Policy provides severance benefits if the employee's employment is terminated because the employee's job or position is eliminated or because the job or position is substantially modified so that the employee is no longer qualified or cannot perform the revised job. For these officers, severance is equal to the greater of (i) 12 weeks of base salary, or (ii) the sum of three weeks of base salary, plus three weeks of base salary for each full year of service and three weeks of base salary prorated for each partial year of service at the Bank to a maximum of 52 weeks of base salary. These officers also receive one month of continued health and life insurance benefits and, at the Bank’s discretion, outplacement assistance.
In the event a Corporate Senior Officer is involuntarily terminated without “Cause” under certain circumstances or voluntarily terminated with “Good Reason” (as defined by the Senior Officers' Policy) in connection with a Change in Control, upon the Bank’s timely receipt of a separation agreement and release, the officer will receive severance pay in a lump sum equal to one year of base salary.
In addition, in the event of a qualifying termination in connection with a Change in Control, each Corporate Senior Officer will be entitled to continued health and life insurance coverage under the Bank’s group health and life insurance policies, at the Bank’s expense, for a period of 12 months immediately following the effective date of separation. However, the Bank will immediately cease paying such premiums prior to the end of the 12-month period if the executive officer accepts employment with another employer that provides comparable benefits in terms of cost and scope of coverage during the 12-month period. If the Bank is not in compliance with any applicable regulatory capital or regulatory leverage requirement or if any of the payments required to be made to a Corporate Senior Officer pursuant to the Senior Officers' Policy would cause the Bank to fall below such applicable regulatory requirements, such payment will be delayed until the Bank achieves compliance with its regulatory capital requirements.
The Board believes that the level of severance benefits for each named executive officer who is a Senior Corporate Officer under the Senior Officers’ Policy is appropriate because it is reasonable to believe that finding a comparable position at another institution at a comparable compensation level could take up to one year, and possibly longer, depending on the economic environment at the time, and that the distraction of this uncertainty may have a detrimental impact on the executive's performance. If the employment of any of the 2024 named executive officers who are eligible under the Senior Officers’ Policy currently serving had been terminated on December 31, 2024, because the employee's job or position had been eliminated or because the job or position had been substantially modified so that the employee was no longer qualified or could not perform the revised job, the approximate value of the severance benefits payable to the executive (subject to Finance Agency review) applying the Senior Officers’ Policy would have been as follows: Anne Segrest McCulloch, $122,330; Greg Ward, $383,447; and Tony Wong, $450,438.
On December 27, 2024, the Board of Directors accepted the resignation of Anne Segrest McCulloch which she had tendered following a proposed restructuring of her position. Ms. McCulloch’s action qualifies as resignation for “Good Reason” under the EIP. Accordingly, pursuant to the terms of the EIP, and subject to her execution of a release, Ms. McCulloch will vest in an award for the 2024 performance period, the payout of which will be made in accordance with the EIP and as determined in the Board’s discretion subject to the achievement of certain performance goals, and in certain deferred awards payable in 2026, 2027, 2028, and 2029 (the “Deferred Awards”). Any payout of the Deferred Awards remains subject to the satisfaction of certain requirements and qualifiers, and completion of Finance Agency review.
Employment Agreements and Arrangements
McCargo Employment Agreement. The Bank entered into an employment agreement with Alanna McCargo dated May 7, 2024, with an initial term of three years and one-year terms thereafter, unless terminated at any time by either the Bank or Ms. McCargo. Under the terms of the agreement, Ms. McCargo was to initially receive a base annual salary of $890,000.
Ms. McCargo will also be eligible to participate in the Bank’s various executive incentive and employee benefit plans, including the Bank’s Executive Incentive Plan (EIP) and Supplemental Executive Retirement Plan (SERP). Under Ms. McCargo’s employment agreement, the amount of Bank annual contribution credits under the SERP will be as follows: 25% of total annual compensation for less than 5 years of credited service and 35% of total annual compensation for 5 or more years of credited service. Under Ms. McCargo’s employment agreement, the Bank will provide reimbursement of relocation costs up to $250,000.
The employment agreement also provides that if Ms. McCargo’s employment is terminated due to the expiration of the initial three-year term and the Board decided not to extend her employment for any additional term, Ms. McCargo would be entitled to all Accrued Benefits (as defined in her employment agreement) and to receive a
severance payment equal to twelve (12) months of base salary and a pro-rata portion of the EIP award for the year in which the termination occurs; and all Deferred Awards will be treated as fully vested (Severance Payment).
The employment agreement further provides that if Ms. McCargo was terminated without Cause (as defined in her employment agreement) or for Good Reason (as defined in her employment agreement) at any time, Ms. McCargo would be entitled to receive severance payments equal to the Severance Payment and all Accrued Benefits. Had Ms. McCargo been terminated under these circumstances on December 31, 2024, the approximate value of the benefits, payable to Ms. McCargo, excluding amounts of any Accrued Benefits, would have been $3,333,200.
As previously reported on Form 8-K filed on January 30, 2025, Ms. McCargo departed the Bank as an employee and Ms. McCargo’s employment is terminated as of such date. On the same date, Ms. McCargo and the Bank entered into an advisory agreement (the “Advisory Agreement”), under which Ms. McCargo will advise on transition, strategic and/or regulatory matters through December 31, 2025, unless terminated earlier pursuant to the terms and conditions of the Advisory Agreement. In exchange, the Bank has agreed to pay Ms. McCargo $80,000 within thirty (30) days of the execution of the agreement, a monthly fee of $15,000 and $250,000 upon completion of the term of Ms. McCargo’s advisory service, subject to Ms. McCargo executing a release of claims in favor of the Bank and agreeing to various other covenants.
In connection with Ms. McCargo’s transition, on January 30, 2025, Ms. McCargo and the Bank entered into a separation agreement (the “Separation Agreement”), under which Ms. McCargo has executed releases of claims in favor of the Bank and agreed to various post-employment covenants, including, but not limited to, standard non-disparagement and cooperation provisions. In exchange, the Bank will pay Ms. McCargo cash payments totaling $1,476,951 (less applicable withholdings). The Separation Agreement, and the payment of severance benefits thereunder, is subject to review by the Federal Housing Finance Agency.
The Board has formed a search committee of the Board, as previously disclosed, to conduct a search for Ms. McCargo’s successor and to evaluate and propose qualified candidates for approval to the Board. Effective January 30, 2025, the Bank appointed Mr. Joseph Amato, the Bank’s current Executive Vice President and Chief Financial Officer, to serve as the Bank’s Interim President and Chief Executive Officer.
Bazemore Employment Agreement. The Bank entered into an employment agreement with Teresa Bryce Bazemore dated February 19, 2021, with an initial term of three years and one-year terms thereafter, unless terminated at any time by either the Bank or Ms. Bazemore. Under the terms of the agreement, Ms. Bazemore will initially receive a base annual salary of $875,000 and a sign-on payment of $100,000 paid in the following installments: $50,000 shall be paid 30 days from the start of her employment, and $50,000 shall be paid six months from the start of her employment, which installments are subject to clawbacks in certain circumstances.
The employment agreement provides for a severance payment equal to (i) two times Ms. Bazemore’s Salary (as defined in the employment agreement); and (ii) two times Ms. Bazemore’s Annual Incentive Amounts (as defined in the employment agreement) and continued benefits if Ms. Bazemore’s employment is terminated under certain circumstances in connection with a Change in Control (as defined in the employment agreement) of the Bank.
Ms. Bazemore will also be eligible to participate in the Bank’s various executive incentive and employee benefit plans, including the Bank’s Executive Incentive Plan (EIP) and Supplemental Executive Retirement Plan (SERP). Under Ms. Bazemore’s employment agreement, the amount of Bank annual contribution credits under the SERP will be as follows: 25% of total annual compensation for less than 5 years of credited service and 35% of total annual compensation for 5 or more years of credited service. Under Ms. Bazemore’s employment agreement, the Bank will provide reimbursement of relocation costs up to $250,000.
The employment agreement also provides that if Ms. Bazemore’s employment is terminated due to the expiration of the initial three-year term and the Board decided not to extend her employment for any additional term, Ms. Bazemore would be entitled to all Accrued Benefits (as defined in her employment agreement) and to receive a severance payment equal to twelve (12) months of base salary and a pro-rata portion of the EIP award for the year in which the termination occurs; and all Deferred Awards will be treated as fully vested (Severance Payment). The
employment agreement further provides that if Ms. Bazemore was terminated without Cause (as defined in her employment agreement) or for Good Reason (as defined in her employment agreement) at any time, Ms. Bazemore would be entitled to receive severance payments equal to the Severance Payment and all Accrued Benefits.
As previously reported on Form 8-K filed on August 3, 2023, the Board, on July 28, 2023, determined not to renew Ms. Bazemore’s employment agreement at the end of the original three-year term on March 14, 2024.
On February 29, 2024, the Bank and Ms. Bazemore entered into an amendment to her employment agreement (Amendment No. 1) to mutually extend the term of her employment to June 30, 2024. On May 7, 2024, the Bank and Ms. Bazemore entered into another amendment (Amendment No. 2) to her employment agreement entered into on February 19, 2021 (and as amended by Amendment No. 1 on February 29, 2024), which provides that, commencing June 10, 2024, Ms. Bazemore shall not serve as the Bank’s President and Chief Executive Officer, and through the term of Ms. Bazemore’s employment agreement ending on June 30, 2024, Ms. Bazemore shall be employed in the position of Executive Vice President, Special Advisor. The remaining terms and conditions of Ms. Bazemore’s employment agreement, as amended, including all compensation, benefits, covenants, rights and obligations, and amendments thereto, remain in full force and effect.
Amato Employment Agreement. The Bank entered into an employment agreement with Joseph Amato dated October 7, 2020, for an initial term of six (6) months (Initial Term) and six (6) automatic extensions of one-month terms thereafter (each referred to as an Automatic One Month Extension Term). Mr. Amato’s initial employment agreement provided that Mr. Amato would receive a base annual salary of $500,000 and a sign-on payment of $50,000, which is subject to a repayment if Mr. Amato’s employment is terminated for Cause or Without Good Reason (as defined in his employment agreement) during the term of his employment agreement. Additionally, Mr. Amato’s employment agreement provided that he would be eligible for a fully discretionary Special Award of up to $300,000 to be received in two parts in recognition of his service as Interim CFO and based on his performance in connection with his duties and responsibilities as the Bank’s principal financial officer. The first 50% of the Special Award ($150,000) was paid at the end of the Initial Term and eligibility for up to the second 50% of the Special Award ($150,000) shall accrue on a pro rata basis over the course of any subsequent Automatic One Month Extension Term.
The initial employment agreement also provided that Mr. Amato acknowledges and agrees that notwithstanding any terms to the contrary in the Bank’s EIP, SERP, and Corporate Senior Officer Severance Policy, such plans and policy would not apply to him in connection with his employment under the employment contract; and the Special Award is in lieu of any and all payments or rights that might otherwise have been available to him under such plans and policy.
On July 7, 2021, the Bank entered into an amendment to Mr. Amato’s employment agreement (Amendment No. 1) to extend the term of his employment to March 31, 2023, and, effective May 13, 2021, to serve as the Bank’s chief financial officer (CFO) for the extended term (Second Term). In connection with the extension of Mr. Amato’s term of employment, Mr. Amato served for one Automatic One Month Extension Term. Amendment No. 1 provides an option to mutually elect to extend his Second Term for another year, until March 31, 2024 (Mutual Extension).
Amendment No. 1 provided that Mr. Amato will be eligible for a second special award of up to $354,835 in recognition of his service as the Bank’s CFO (Second Special Award). The first 50% of the Second Special Award ($177,418) was paid in 2022. The second 50% of the Second Special Award ($177,417) was paid in 2023.
Additionally, Amendment No. 1 provided that beginning with the Second Term, Mr. Amato will also be eligible to participate in the Bank’s EIP. For the Second Term, Mr. Amato continued to acknowledge that the SERP and the Corporate Senior Officer Severance Policy will not apply to him during the Second Term or any Mutual Extension.
Amendment No. 1 also provided that, upon the expiration of the Second Term or any Mutual Extension, Mr. Amato shall be entitled to receive a severance payment equal to the EIP Annual Award (defined in the EIP to include both the short-term incentive component and the long-term incentive component) as set forth in the Bank’s EIP, which will be treated as vested, on a pro rata basis for the performance period of the year when the expiration of his
employment agreement occurs, and any Deferred Awards (as defined in the EIP) will be treated as fully vested, all of which is to be paid out as and when due in accordance with the EIP (Severance Payment).
On October 19, 2022, in accordance with the Mutual Extension, the Bank and Mr. Amato entered into an amendment to his employment agreement to mutually extend the term of his employment following the expiration of the Second Term to March 31, 2024 (Amendment No. 2).
On October 30, 2023, the Bank and Mr. Amato entered into a third amendment to his employment agreement (Amendment No. 3) to mutually extend the term of his employment to September 30, 2024 (Third Term), with an automatic extension until March 31, 2025, unless a non-renewal notice is provided by either the Bank or Mr. Amato at least one month prior to the end of the Third Term or any automatic extension thereof. Amendment No. 3 also amended Mr. Amato’s base annual salary to $540,000, effective January 1, 2024.
Under the terms of Amendment No. 2, as amended by Amendment No. 3, in recognition of Mr. Amato’s extended service as the Bank’s Executive Vice President and CFO, Mr. Amato will be eligible for a fully discretionary “Third Special Award” of up to an amount equal to the actual foregone benefits under the Bank’s SERP and Cash Balance Plan (and related Benefit Equalization Plan) for the 2020 to 2025 plan years reduced by any payments made under the Second Special Award (as defined in Amendment No. 1) and the Third Special Award (as defined in Amendment No.2) and further reduced by any benefits under the Bank’s Cash Balance Plan (and related Benefit Equalization Plan) that become fully vested in recognition of his service as CFO and based on his performance in connection with his duties and responsibilities as the Bank’s principal financial officer.
If Mr. Amato’s employment is terminated at any time by the Bank without Cause or if he terminates his employment for Good Reason, then Mr. Amato shall be entitled to receive an amount equal to his remaining salary, as well as all Accrued Benefits. In addition, Mr. Amato will be entitled to any earned but unpaid amount of the fully discretionary Third Special Award on a pro rata basis for the period up to the date the termination occurs and shall be entitled to receive the Severance Payment (but if Mr. Amato is otherwise entitled to any EIP Awards by operation of the EIP and receives such amount(s), then Mr. Amato would receive the greater of such EIP Awards or the EIP Awards calculated as Severance Payment, but in no event shall Mr. Amato receive both). Had Mr. Amato been terminated under these circumstances on December 31, 2024, the approximate value of the benefits, payable to Mr. Amato, excluding amounts of any Accrued Benefits, would have been $626,178.
Non-Equity Incentive Compensation and Non-Equity Long-Term Incentive Payouts
For 2024, Ms. Bazemore, as president and chief executive officer, was awarded a (prorated) Annual Award under the EIP of $432,300. Ms. Bazemore’s award was based on the Bank’s 2024 overall achievement level of 122.7%, which comprised the following achievement levels for the Bank’s four corporate goals: 107.8% for the Business and Financial goal; 124.5% for the Risk Management goal; 137.5% for the Affordable Housing and Community Investment goal; and 125.4% for the DEI and People goal, along with her 2024 achievement level for her individual goal.
Based on the achievement levels for the Bank’s four corporate goals and the achievement levels of the other 2024 named executive officers for their respective individual goals, the following Annual Awards under the EIP for 2024 were awarded: Joseph Amato, $401,000; Greg Ward, $394,500; Anne Segrest McCulloch, $371,200; and Tony Wong, $325,300.
The total Annual Award for each named executive officer represents the amount for their Year-End Award and the amount for their Deferred Award, each of which is fifty percent (50%) of their Annual Award approved by the Board under the EIP for 2021. The payment of their Deferred Award is deferred for the three-year performance period and is subject to applicable requirements and qualifiers as described in “Compensation Discussion and Analysis - Elements of Our Executive Compensation Program - Executive Incentive Plan,” which discussion is herein incorporated by reference.
The following table shows the two components of the total Annual Awards for the named executive officers approved by the Board under the EIP for 2024.
(In whole dollars) EIP for 2024
Named Executive Officers Year-End Awards(1)
Deferred Awards(2)
Annual Awards
Alanna McCargo
$ - $ - $ -
Teresa Bazemore 216,150 216,150 432,300
Joseph Amato 200,500 200,500 401,000
Greg Ward
197,250 197,250 394,500
Anne Segrest McCulloch 185,600 185,600 371,200
Tony Wong 162,650 162,650 325,300
Total $ 1,924,300
(1)The Year-End Award is 50 percent of the total Annual Award and is included in the Summary Compensation Table.
(2)The Deferred Award is 50 percent of the total Annual Award and remains subject to the satisfaction of applicable qualifiers and will not be paid until 2028. The Deferred Awards are also subject to modification and forfeiture under the terms of the EIP.
In reviewing the Bank’s 2024 performance, the Board recognized the named executive officers’ efforts, in particular, leading the Bank through a period of leadership transition and continued economic uncertainty.
To support the achievement level of the Business and Financial goal for 2024, the financial performance goal as measured by full year AROC was 5.84%, the operating efficiency goal as measured by full year operating expenses was $164.1 million (below the Bank’s 2024 operating expense budget), and the member business volume goal as measured by the average daily balance for advances and letters of credit outstanding during 2024 was $54.2 billion.
For the accomplishments relating to the Business and Financial goal for 2024 discussed above, management received an overall achievement level between Target and Maximum, or 107.8%.
To support the achievement level of the Risk Management goal for 2024, the key risk indicator performance goal was 36 out of 48, and the Information Security Risk Management goal as measured by the percent of the Bank’s workforce that became a Security Champion was 79.6%.
For the accomplishments relating to the Risk Management goal for 2024 discussed above, management received an overall achievement level of 124.5%, or between Target and Maximum.
For the first goal component of the Affordable Housing and Community Investment goal for 2024, management obtained applications from 59 members for the Bank's Middle Income Downpayment Assistance Program.
To support the achievement level of the second goal component of the Affordable Housing and Community Investment goal for 2024, the Bank participated in 15 Native American housing outreach events. The Bank’s outreach and collaboration with Tribal Nations Program partners (Arizona Housing Coalition, California Coalition for Rural Housing and Nevada Housing Coalition), resulted in four AHP General Fund and Nevada Targeted Fund applications and 12 AHEAD program applications, and 3 Tribal Nations Program applications for Native American projects.
To support the achievement level of the third goal component of the Affordable Housing Investment goal for 2024, the community investment product utilization goal as measured by the percent of members that used advances, letters of credit, and credit programs that promote and assist housing and community economic development activities was 22.0%.
For the accomplishments relating to the Affordable Housing and Community Investment goal for 2024 mentioned above, management received an overall achievement level of 137.5%.
To support the achievement level of the DEI and People goal for 2024, management increased debt issuance activities with diverse dealers, increased potential opportunities for business engagement with diverse suppliers,
increased the percent of diverse employees that completed professional development opportunities, and progressed talent management strategies by achieving a voluntary employee turnover rate, excluding retirements, of 5%.
For the accomplishments relating to the DEI and People goal for 2024 mentioned above, management received an overall achievement level of 125.4%.
Pension Benefits Table
The following table provides the present value of accumulated retirement and pension-related benefits payable as of December 31, 2024, to each of the named executive officers upon the normal retirement age of 65 under the Bank’s qualified and non-qualified defined benefit plans.
(In whole dollars)
Name Plan Name Years of
Credited
Service Present Value of
Accumulated
Benefits(1)
Payments
During Last
Fiscal Year
Alanna McCargo
Cash Balance Plan - $ - $ -
Financial Institutions Retirement Fund N/A - -
Benefit Equalization Plan - - -
Deferred Compensation Plan - - -
Supplemental Executive Retirement Plan(2)
0.500 138,729 -
Teresa Bazemore Cash Balance Plan 2.667 76,684 -
Financial Institutions Retirement Fund N/A - -
Benefit Equalization Plan 2.667 177,054 -
Deferred Compensation Plan 2.667 - -
Supplemental Executive Retirement Plan(2)
3.250 - (1,198,974)
Joseph Amato Cash Balance Plan 3.667 80,686 -
Financial Institutions Retirement Fund N/A - -
Benefit Equalization Plan 3.667 37,486 -
Deferred Compensation Plan 3.667 38,207 -
Supplemental Executive Retirement Plan(3)
N/A - -
Greg Ward Cash Balance Plan 10.667 257,725 -
Financial Institutions Retirement Fund N/A - -
Benefit Equalization Plan 10.667 203,248 -
Deferred Compensation Plan 10.667 - -
Supplemental Executive Retirement Plan(2)
8.000 1,451,939 -
Anne Segrest McCulloch Cash Balance Plan 2.583 53,806 -
Financial Institutions Retirement Fund N/A - -
Benefit Equalization Plan 2.583 52,229 -
Deferred Compensation Plan 2.583 - -
Supplemental Executive Retirement Plan(2)
3.083 464,052 -
Tony Wong Cash Balance Plan 29.250 869,515 -
Financial Institutions Retirement Fund 0.250 2,078 -
Benefit Equalization Plan 29.250 138,983 -
Deferred Compensation Plan 29.250 43,728 -
Supplemental Executive Retirement Plan(2)
3.667 579,593 -
(1)For purposes of this table, the present value of accumulated benefits as of December 31, 2024 (measured December 31, 2024) was calculated using a discount rate of 5.25%, which is consistent with the assumptions used in the Bank’s financial statements. Actual benefit payments under each plan may differ based on the applicable discount rate under the terms of the relevant plan. The Bank withdrew from the FIRF, a multiple-employer tax-qualified
defined benefit plan, on December 31, 1995. Prior to the Bank withdrawing from the FIRF, Mr. Wong was a participant in the plan. Amounts under the BEP and the DCP represent the present value of only the pension-related benefits accumulated for the named executive officer.
(2)For the purposes of this table, the years of credited service for the SERP represent the years of participation since the inception of the SERP in 2003 or the first year in which the participant initially became active in the SERP. For purposes of determining the amount of Bank contribution in the SERP table, the years of credited service are defined in the SERP.
(3)In accordance with Mr. Amato’s employment agreement, the SERP will not apply to him while he is employed under his employment agreement.
Narrative to Pension Benefits Table
For information regarding the plans in the table, see the discussion in our Compensation Discussion and Analysis under “Cash Balance Plan,” “Benefit Equalization Plan,” “Deferred Compensation Plan,” and “Supplemental Executive Retirement Plan.” The valuation method and material assumptions used in quantifying the present value of the current accrued benefits in the table are consistent with the assumptions used in the Bank’s financial statements. See the discussion in “Item 8. Financial Statements and Supplementary Data - Note 12 - Employee Retirement Plans and Incentive Compensation Plans.”
Non-Qualified Deferred Compensation Table
The following table reflects the non-qualified Deferred Compensation Plan balances as of December 31, 2024, for the named executive officers.
(In whole dollars)
Name and Principal Position Last Fiscal Year Beginning of
Year Balance 2024 Executive Contributions(1)
2024 Bank
Contributions
Aggregate
Earnings/
(Losses) Aggregate
(Withdrawals)/
Distributions Yearend 2024
Aggregate Balance
Alanna McCargo
2024 $ - $ - $ - $ - $ - $ -
President and CEO
Teresa Bazemore 2024 - - - - - -
Former President and CEO
Joseph Amato 2024 365,507 276,839 5,760 73,152 - 721,258
EVP and CFO
Greg Ward 2024 - - - - - -
EVP and
Chief Operating Officer
Anne Segrest McCulloch 2024 - - - - - -
EVP and
Chief Legal Officer
Tony Wong 2024 334,622 - - 35,364 - 369,986
EVP and
Chief Banking Officer
(1)The 2024 executive contributions made by Mr. Amato are included in the “Non-Equity Incentive Payment” column in the Summary Compensation Table.
Narrative to Non-Qualified Deferred Compensation Table
The Non-Qualified Deferred Compensation Table presents information about our DCP, which is designed to allow Bank officers to defer up to 100% of base salary and short- and long-term incentive cash compensation awards, as applicable. Directors may also participate in the DCP to defer up to 100% of their director fees.
The Bank’s matching contribution under the Savings Plan is calculated based on an officer's base salary after deferring base salary compensation under the DCP. As a result, an officer who defers base salary compensation forgoes the Bank’s matching contribution on the portion of compensation that is deferred. To compensate for this, the Bank makes a contribution credit to the officer's DCP balance to restore the benefit under the Savings Plan that would otherwise be lost as a result of deferring base salary compensation, and these “make up matching contributions” are also reflected in the table.
Participants may direct the investments of deferred amounts into core mutual funds or into a brokerage account. Participants may change these investment directions at any time. All investment earnings accumulate to the benefit of the participants on a tax-deferred basis. Brokerage fees relating to purchases and sales are charged against the value of the participant's deferred balance in the plan. The Bank pays all set-up and annual account administration fees.
Income taxes are deferred until a participant receives payment of funds from the plan. Participants may elect payouts in a lump sum or over a payout period from 2 to 10 years. A participant may change any previously elected payment schedule by submitting a written election. Any written election to change the payment schedule must be made at least 12 months prior to the original payout date, and the new payout date, in most cases, must be at least 5 years from the original payout date.
CHIEF EXECUTIVE OFFICER (CEO) PAY RATIO
For the year ended December 31, 2024, the ratio of the Bank’s CEO’s total compensation for 2024 to the Bank’s median of the annual total compensation for 2024 of all our employees, except the CEO (Median Employee) is 5.57:1. For total compensation for the Bank’s CEO and the Median Employee, the Bank used the same elements of compensation presented in the Summary Compensation Table and calculated total compensation in the same manner total compensation is calculated for the Summary Compensation Table for both employees. The calculation also included amounts attributable to change in pension value, which will vary among employees based upon their tenure at the Bank. For 2024, the total annualized compensation of the Median Employee was $250,528, and the total annualized compensation of the CEO was $1,396,079.
The Bank identified the Median Employee by calculating the 2024 total compensation (using the same elements of compensation in the Summary Compensation Table and in the same manner total compensation is calculated for the Summary Compensation Table) for each of the employees who were employed by the Bank on December 31, 2024, and ranking the 2024 total compensation for all such employees (a list of 313 employees) from lowest to highest, excluding the CEO. The employees in the calculation included all full-time and part-time employees, and the Bank annualized compensation for all such employees.
DIRECTOR COMPENSATION
We provide our directors with compensation for the performance of their duties as members of the Board and for the amount of time spent on the Bank’s business.
Director Compensation Table
For the Year Ended December 31, 2024
(In whole dollars)
Name of Directors serving during 2024
Fees Earned
or Paid in Cash
F. Daniel Siciliano(1)
$ 150,000
Brian M. Riley(2)
136,500
Simone Lagomarsino(4)
130,000
David Adame 129,708
Banafsheh Akhlaghi 130,000
Laura Archuleta 123,000
Jeffrey K Ball 130,000
Marangal L. Domingo(3)
130,000
Ana F. Fonseca(3)
123,000
Lori Gay 129,708
Matthew Hendricksen 132,500
Chang M. Liu(3)
129,708
Joan C. Opp(3)
132,500
Silvio Tavares 123,000
Gary Trujillo(5)
51,626
Total $ 1,881,250
(1)Mr. Siciliano began serving as Chair during 2024 and is serving as Chair in 2025.
(2)Mr. Riley began serving as Vice Chair in 2024 and is serving Vice Chair in 2025.
(3)The Bank offers a matching gift program to all employees and directors whereby the Bank will match charitable donations to eligible nonprofits up to $1,000. For the year ended 2024, the Bank made $1,000 matching contributions on behalf of directors Domingo, Fonseca, Liu, and Opp.
(4)Ms. Lagomarsino’s term as a member of the Board expired effective December 31, 2024.
(5)Mr. Trujillo resigned as a member of the Board effective May 24, 2024.
On occasion, the Bank pays for resort activities for directors in connection with Board meetings and other business-related meetings, and, in some cases, the Bank may pay the expenses for spouses accompanying directors to these meetings or other Bank-sponsored events. The value of these perquisites is considered de minimis and not included in the table above.
The 2024 Board Compensation and Expense Reimbursement Policy (2024 Directors Compensation Policy) provided the directors with compensation for the performance of their duties as members of the Board and the amount of time spent on official Bank business, as set forth below.
(In whole dollars)
Position Maximum Annual
Service Fee Maximum Annual
Meeting Fees Total
Maximum Annual
Compensation
Chair $ 95,000 $ 55,000 $ 150,000
Vice Chair 81,500 55,000 136,500
Audit, Compensation and HR, and Risk Committee Chairs 77,500 55,000 132,500
All Other Committee Chairs 75,000 55,000 130,000
Other Directors 68,000 55,000 123,000
Under the 2024 Directors Compensation Policy, service fees for the above positions were paid for serving as a director during and between regularly scheduled meetings of the Board. The maximum annual service fee was prorated and paid with the meeting fee, if applicable, at the conclusion of each two-month service period on the Board (month end February, April, June, August, October, and December). In addition, each director received a fee of $11,000 for attending any portion of five of the six regularly scheduled two-day Board meetings, subject to the annual maximum of $55,000.
The 2024 Directors Compensation Policy provided that a director may receive a meeting fee for participation in one regularly scheduled Board meeting by videoconference. No other fee was paid for participation in meetings of the Board or Board committees by videoconference or participation in other Bank or FHLBank System activities. The president of the Bank was authorized to interpret the 2024 Directors Compensation Policy, as necessary, according to applicable statutory, regulatory, and policy limits.
Under the 2024 Directors Compensation Policy, the final prorated service fee was to be withheld if a director did not attend (in person, by telephone, or virtually) at least 75% of all regular and special meetings of the Board and the director's assigned committees for the year, or if the Board determined a director had consistently demonstrated a lack of engagement and participation in meetings attended. In addition, the meeting fee attendance requirement provided that a director would receive a meeting fee only if the director attended the regular Board meeting, as well as at least one assigned committee meeting during the Board’s regularly scheduled two-day meetings.
The Bank reimbursed directors for necessary and reasonable travel, subsistence, and other related expenses incurred in connection with the performance of their official duties, which may have included participation in meetings or activities for which no fee was paid.
For expense reimbursement purposes, directors' official duties included:
•Meetings of the Board and Board committees,
•Meetings requested by the Finance Agency and FHLBank System committees,
•Meetings of the Council of FHLBanks and its committees,
•Meetings of the Bank’s Affordable Housing Advisory Council,
•Events attended on behalf of the Bank when requested by the president in consultation with the Board chair,
•Other events attended on behalf of the Bank with the prior approval of the Board chair,
•Director education events attended that are consistent with the Bank’s Director Education Guidelines, and with the prior approval of the Board chair (and in the case of the Board chair, the chair of the Governance Committee), and
•National Association of Corporate Directors Annual Meeting.
The 2024 Directors Compensation Policy also provides that directors may receive up to an additional $1,500 in compensation in the form of expense reimbursement for meals and travel for a spouse or significant other. The 2024 Directors Compensation Policy also provided the opportunity to participate in the Bank’s Charitable Contribution Matching Gift Program.
The Board adopted a Compensation and Expense Reimbursement Policy for 2025, which is substantially similar to the 2024 Directors Compensation Policy. Director service fees increased for the Board Chair, Vice Chair, and the Chairs of the Audit, Compensation & Human Resources, and Risk Committees for 2025.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information about those stockholders that are beneficial owners of more than 5% of the Federal Home Loan Bank of San Francisco’s outstanding capital stock, including mandatorily redeemable capital stock, as of February 28, 2025.
Name and Address of Beneficial Owner
Number of
Shares Held Percentage of
Outstanding
Shares
JPMorgan Chase, National Association(1)
1,536,792 5.7 %
383 Madison Avenue
New York, New York 10179
(1) A nonmember.
The following table sets forth information about those members (or their holding companies) with officers or directors serving as directors of the Federal Home Loan Bank of San Francisco as of February 28, 2025.
Director Name Name of Institution City State Number of
Shares Held Percentage of
Outstanding
Shares
Jeffrey K. Ball First Pacific Bank Whittier CA 20,337 0.1 %
Marangal (Marito) Domingo First Technology Federal Credit Union San Jose CA 848,758 3.2
Ana E. Fonseca Logix Federal Credit Union Valencia CA 172,500 0.6
Matthew Hendricksen Employers Insurance Company of Nevada Reno NV 6,020 -
Matthew Hendricksen Employers Assurance Company Reno NV 12,312 -
Matthew Hendricksen Employers Compensation Insurance Company Reno NV 14,964 0.1
Matthew Hendricksen Employers Preferred Insurance Company Reno NV 18,635 0.1
Matthew Hendricksen Cerity Insurance Company Reno NV 4,681 -
Chang M. Liu Cathay Bank Los Angeles CA 172,500 0.6
Joan C. Opp Stanford Federal Credit Union Palo Alto CA 178,538 0.7
Brian M. Riley Oxford Life Insurance Company Phoenix AZ 63,088 0.2
Brian M. Riley Clearinghouse CDFI Lake Forest CA 36,874 0.1
Total 1,549,207 5.7 %

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Capital stock ownership is a prerequisite to transacting any member business with the Federal Home Loan Bank of San Francisco (Bank). The members, former members, and certain other nonmembers own all the capital stock of the Bank, the majority of the directors of the Bank are officers or directors of members, and the Bank conducts its advances and purchased mortgage loan business almost exclusively with members or member successors. The Bank extends credit in the ordinary course of business to members with officers or directors who serve as directors of the Bank and to members owning more than 5% of the Bank’s capital stock (5% shareholders) on market terms that are no more favorable to them than the terms of comparable transactions with other members. In addition, the Bank may transact short-term investments, federal funds sold, and mortgage-backed securities (MBS) with members and their affiliates that have officers or directors who serve as directors of the Bank or with 5% shareholders. All investments are market rate transactions, and all MBS are purchased through securities brokers or dealers. The Bank may also be the primary obligor on debt issued in the form of Federal Home Loan Bank (FHLBank) System consolidated obligations using underwriters and dealers, and may enter into interest rate exchange agreements with counterparties, that may be affiliates of Bank members with officers or directors who serve as directors of the Bank or affiliates of members and nonmembers owning more than 5% of the Bank’s capital stock, which are transactions in the ordinary course of the Bank’s business and are market rate transactions.
The FHLBank Act requires the Bank to establish an Affordable Housing Program (AHP) and a CIP and authorizes the Bank to offer additional Community Investment Cash Advance (CICA) programs. Only Bank members may submit applications for these programs. All AHP and CICA subsidies are made in the ordinary course of business.
In instances where an AHP or CICA transaction involves a member that owns more than 5% of the Bank’s capital stock (or an affiliate of such a member), a member with an officer or director who is a director of the Bank, or an entity with an executive officer, director, controlling shareholder, or general partner who serves as a director of the Bank (and that has a direct or indirect interest in the subsidy), the transaction is subject to the same eligibility and other program criteria and requirements as all other comparable transactions and to the regulations governing the operations of the relevant program.
The Bank may also use members that have officers or directors who serve as directors of the Bank or 5% shareholders or their affiliates as securities custodians and derivative dealer counterparties. These financial relationships are conducted in the ordinary course of business on terms and conditions similar to those that would be available for comparable services if provided by unaffiliated entities.
The Bank does not have a written policy to have the board of directors (Board) review, approve, or ratify transactions with members that are outside the ordinary course of business because such transactions rarely occur. However, it has been the Bank’s practice to report to the Board all transactions between the Bank and its members that are outside the ordinary course of business, and, on a case-by-case basis, seek Board approval or ratification.
Director Independence
General
Under the rules of the Securities and Exchange Commission (SEC), the Bank is required to identify directors who are independent, and members of the Board’s Audit Committee and Compensation and Human Resources Committee and any committee performing similar functions to a nominating committee who are not independent, using the independence definition of a national securities exchange or automated quotation system. The Bank’s capital stock is not listed on a national securities exchange or automated quotation system, and the Bank’s board of directors is not subject to the independence requirement of any such exchange or automated quotation system. The Bank is subject to the independence standards for directors serving on the Audit Committee set forth in the rules of the Federal Housing Finance Agency (Finance Agency), and looks to the Finance Agency’s independence standards to determine independence for all directors, whether or not they serve on the Audit Committee. In addition, for purposes of compliance with the SEC’s disclosure rules only, the Board has evaluated director independence using the definition of independence articulated in the rules of the National Association of Securities Dealers Automated Quotations (NASDAQ).
In addition to the independence rules and standards above, the FHLBanks are required to comply with the rules issued by the SEC under Section 10A(m) of the Securities Exchange Act of 1934, which includes a substantive independence rule prohibiting a director from being a member of the Audit Committee if he or she, other than in his or her capacity as a member of the Audit Committee, the Bank’s board of directors, or any other Board committee, accepts any consulting, advisory, or other compensatory fee from the Bank or is an “affiliated person” of the Bank as defined by the SEC rules (the person controls, is controlled by, or is under common control with the Bank).
Director Independence under the Finance Agency Regulations
The Finance Agency director independence rule provides that a director is sufficiently independent to serve as a member of the Audit Committee if that director does not have a disqualifying relationship with the Bank or its management that would interfere with the exercise of that director’s independent judgment. Disqualifying relationships under the Finance Agency’s independence standards include, but are not limited to: (i) employment with the Bank at any time during the last five years; (ii) acceptance of compensation from the Bank other than for service as a director; (iii) being a consultant, advisor, promoter, underwriter, or legal counsel for the Bank at any time within the last five years; or (iv) being an immediate family member of an individual who is or who has been a Bank executive officer within the past five years.
Although the Finance Agency’s independence standard only applies by regulation to members of the Audit Committee, the Bank’s Board looks to this standard for purposes of determining independence of all Bank directors.
The independence standard imposed on the Audit Committee under the Finance Agency regulations takes into account the fact that the Bank was created by Congress; the Bank has a cooperative ownership structure; the Bank is statutorily required to have member directors who are either an officer or director of a Bank member; the Bank was created to provide its members with products and services; and the Bank’s board of directors is statutorily required to administer the affairs of the Bank fairly and impartially and without discrimination in favor of or against any member borrower. The Finance Agency’s independence standards do not include as a disqualifying relationship any business relationships between a director’s member institution and the Bank. Consistent with the rule, the Bank’s Board does not believe that the statutorily prescribed business relationships between a director’s member institution and the Bank interfere with the director’s exercise of his or her independent judgment. The national securities exchanges’ independence definitions, including those of the NASDAQ, do not generally take into account the cooperative nature of the Bank. Accordingly, the Bank’s Board believes that the appropriate standard for measuring director independence is the Finance Agency’s independence standards.
Applying the Finance Agency independence standards, the Board has determined that all directors who served in 2024 were, and all current directors are, independent.
Director Independence under the NASDAQ Rules
For purposes of compliance with the SEC’s disclosure rules only, the Board has evaluated director independence using the definition of independence articulated in the NASDAQ rules. The NASDAQ standard requires the Board to make an affirmative determination that the director does not have a relationship with the Bank that would impair his or her independence. “Independent director” under the NASDAQ rules means a person other than an executive officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
In addition, the NASDAQ rules set forth seven relationships that automatically preclude a determination of director independence. Among other things, a director is not considered to be independent if the director is, or has a family member who is, a partner in, or a controlling shareholder or an executive officer of, any organization to which the Bank made, or from which the Bank received, payments for property or services in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenues for that year, or $200,000 (the payment and revenue relationship test), whichever is more.
Using the NASDAQ rules, the Board affirmatively determined that in its opinion Mr. Adame, Ms. Akhlaghi, Ms. Archuleta, Ms. Gay, Mr. Siciliano, and Mr. Tavares, who are current nonmember directors and are not employed by and do not serve as a director of any member institution, are independent and, to the extent they served as nonmember directors in 2024, were independent in 2024 under the NASDAQ rules because they have no relationship with the Bank that would interfere with their exercise of independent judgment in carrying out their responsibilities.
Using the NASDAQ rules, the Board affirmatively determined that in its opinion the following current member directors are independent and, to the extent they served as member directors in 2024, were independent in 2024 under the NASDAQ rules because they have no relationship with the Bank that would interfere with their exercise of independent judgment in carrying out their responsibilities as directors: Mr. Ball, Mr. Domingo, Ms. Fonseca, Mr. Hendricksen, Mr. Liu, Ms. Opp, and Mr. Riley. Using the NASDAQ rules, the following former nonmember director who served in 2024 was considered independent by the Board because he had no relationship with the Bank that would interfere with his exercise of independent judgment in carrying out his responsibilities as a director: Mr. Trujillo. Using the NASDAQ rules, the following former member director who served in 2024 was considered independent by the Board because she had no relationship with the Bank that would interfere with her exercise of independent judgment in carrying out her responsibilities as a director: Ms. Lagomarsino.
In making these determinations, the Board recognized that during their directorships the member directors were employed by or served as a director of a member institution that may have conducted business with the Bank in the ordinary course of the Bank’s and the member institution’s respective businesses. The Board determined that these ordinary course customer relationships with the member institutions that had or have member directors on the Board would not interfere with the member directors’ exercise of independent judgment or their independence from management under the NASDAQ rules. This determination is based on the fact that the Bank was created by Congress, the Bank has a cooperative ownership structure, the Bank is statutorily required to have member directors who are either an officer or director of a Bank member, the Bank was created to provide its members with products and services, and the Board is statutorily required to administer the affairs of the Bank fairly and impartially and without discrimination in favor of or against any member borrower.
Audit Committee Independence
The Board has an Audit Committee. Under the Finance Agency’s independence standards and NASDAQ rules, all Audit Committee members who served in 2024 were independent and all current Audit Committee members are independent.
All Audit Committee members who served in 2024 and all current Audit Committee members met the substantive independence rules under Section 10A(m) of the 1934 Act.
Compensation and Human Resources Committee Independence
The Board has a Compensation and Human Resources Committee. Using the Finance Agency’s director independence standards, all Compensation and Human Resources Committee members who served in 2024 were independent, and all current Compensation and Human Resources Committee members are independent.
Under the NASDAQ rules, to be considered an independent compensation committee member, a director must meet the definition under the general NASDAQ independence rules, and the board of directors must affirmatively determine the independence of any director who will serve on the company’s compensation committee and must consider all factors specifically relevant to determining whether such a director has a relationship to the company that is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member. Relevant factors must include the source of compensation of directors, including any consulting, advisory, or other compensatory fee paid by the company to the directors and whether the director is affiliated with the company.
Governance Committee
The Board has a Governance Committee that performs certain functions that are similar to those of a nominating committee with respect to the nomination of nonmember independent directors. Using the Finance Agency’s director independence standards, all Governance Committee members who served in 2024 were independent and all current Governance Committee members are independent.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth the aggregate fees billed to the Federal Home Loan Bank of San Francisco (Bank) for the years ended December 31, 2024 and 2023, by its external accounting firm, PricewaterhouseCoopers LLP.
(In millions) 2024 2023
Audit fees $ 1.3 $ 1.4
All other fees - -
Total $ 1.3 $ 1.4
Audit Fees. Audit fees during 2024 and 2023 were for professional services rendered in connection with the audits of the Bank’s annual financial statements, the review of the Bank’s quarterly financial statements included in each Quarterly Report on Form 10-Q, and the audit of the Bank’s internal control over financial reporting.
All Other Fees. All other fees for 2024 and 2023 were for consulting and advisory services. The Bank is exempt from all federal, state, and local taxation, and no tax consulting fees were paid during 2024 and 2023.
Audit Committee Pre-Approval Policy
In accordance with the Securities and Exchange Commission rules and regulations implementing the Securities Exchange Act of 1934 (SEC rules), all audit, audit-related, and non-audit services proposed to be performed by the Bank’s independent auditor must be pre-approved by the Audit Committee to ensure that they do not impair the auditor’s independence. The SEC rules require that proposed services either be specifically pre-approved on a case-by-case basis (specific pre-approval services) or be pre-approved without case-by-case review under policies and procedures established by the Audit Committee that are detailed as to the particular service and do not delegate Audit Committee responsibilities to management (general pre-approval services).
The Bank’s Audit Committee has adopted a policy, the Independent Auditor Services Pre-Approval Policy (Policy), setting forth the procedures and conditions pursuant to which services proposed to be performed by the Bank’s independent auditor may be approved. Under the Policy, unless services to be provided by the independent auditor have received general pre-approval, they require specific pre-approval by the Audit Committee. Any proposed
services exceeding the pre-approved maximum fee amounts set forth in the appendices to the Policy will also require specific pre-approval by the Audit Committee.
The Policy is designed to be detailed as to the particular services that may be provided by the independent auditor and to provide for the Audit Committee to be informed of each service provided by the independent auditor. The Policy is also intended to ensure that the Audit Committee does not delegate to management its responsibilities in connection with the approval of services to be provided by the independent auditor.
For both specific pre-approval and general pre-approval of services, the Audit Committee considers whether the proposed services are consistent with the SEC rules on auditor independence and whether the provision of the services by the independent auditor would impair the independent auditor’s independence. The Audit Committee also considers (i) whether the independent auditor is positioned to provide effective and efficient services, given its familiarity with the Bank’s business, management, culture, accounting systems, risk profile, and other factors, and (ii) whether having the independent auditor provide the service may enhance the Bank’s ability to manage or control risk or improve audit quality. The Audit Committee also considers the total amounts of fees for audit, audit-related, and non-audit services for a given calendar year in deciding whether to pre-approve any such services and may choose to determine, for a particular calendar year, the appropriate ratio between the total amount of fees for audit and audit-related services and the total amount of fees for permissible non-audit services.
The Audit Committee annually reviews and pre-approves the services that may be provided by the independent auditor during a given calendar year without specific pre-approval from the Audit Committee.
The Audit Committee has delegated to its chair and vice chair individually specific pre-approval authority for additional audit or audit-related services to be provided by the independent auditor, provided that the estimated fee for each type of proposed service does not exceed $50,000 and the total aggregated fees for all services pre-approved by each individual under this delegated authority do not exceed $100,000 in a calendar year. The chair or vice chair, as the case may be, is required to report to the Audit Committee any services pre-approved under the delegated authority.
In 2024 and 2023, 100% of the audit-related fees and all other fees were pre-approved by the Audit Committee.
PART IV

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements
The financial statements included as part of this Form 10-K are identified in the Index to Audited Financial Statements appearing in “Item 8. Financial Statements and Supplementary Data” of this Form 10-K.
(2) Financial Statement Schedules
All financial statement schedules are omitted because they are either not applicable or the required information is shown in the financial statements or the notes thereto.
(b) Exhibits
Exhibit No. Description
3.1
Organization Certificate and resolutions relating to the organization of the Federal Home Loan Bank of San Francisco, incorporated by reference to Exhibit 3.1 to the Bank's Registration Statement on Form 10 filed with the Securities and Exchange Commission on June 30, 2005 (Commission File No. 000-51398)
3.2
Bylaws of the Federal Home Loan Bank of San Francisco, as amended and restated on May 13, 2024, incorporated by reference to Exhibit 3.1 to the Bank’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 16, 2024 (Commission File No. 000-51398)
4.1
Description of Registered Securities
4.2
Capital Plan, as amended and restated effective November 15, 2024
10.1
Form of Director Indemnification Agreement, incorporated by reference to Exhibit 10.2 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2017 (Commission File No. 000-51398)
10.2
Form of Director Indemnification Agreement, effective November 5, 2018, incorporated by reference to Exhibit 10.3 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 8, 2019 (Commission File No. 000-51398)
10.3
Form of Director Indemnification Agreement, effective May 15, 2021, incorporated by reference to Exhibit 10.1 to the Bank’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 7, 2021 (Commission File No. 000-51398)
10.4
Form of Director Indemnification Agreement, effective July 28, 2022, incorporated by reference to Exhibit 10.5 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2023 (Commission File No. 000-51398)
10.5
Form of Senior Officer Indemnification Agreement, incorporated by reference to Exhibit 10.3 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2017 (Commission File No. 000-51398)
10.6
Form of Senior Officer Indemnification Agreement, effective June 9, 2021, incorporated by reference to Exhibit 10.2 to the Bank’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 7, 2021 (Commission File No. 000-51398)
10.7
Employment Agreement by and among the Federal Home Loan Bank of San Francisco and Joseph E. Amato, dated October 7, 2020, as amended, incorporated by reference to Exhibit 10.1 to the Bank's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 3, 2023 (Commission File No. 000-51398)
10.8
Employment Agreement by and among the Federal Home Loan Bank of San Francisco and Teresa Bryce Bazemore, dated February 19, 2021, incorporated by reference to Exhibit 10.1 to the Bank's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 23, 2021 (Commission File No. 000-51398)
10.9
Amendment No. 1 to Employment Agreement by and among the Federal Home Loan Bank of San Francisco and Teresa Bryce Bazemore, dated February 29, 2024, incorporated by reference to Exhibit 10.1 to the Bank's Current Report on Form 8-K filed with the Securities and Exchange Commission on February 29, 2024 (Commission File No. 000-51398)
10.10
Amendment No. 2 to Employment Agreement by and among the Federal Home Loan Bank of San Francisco and Teresa Bryce Bazemore, dated May 7, 2024, incorporated by reference to Exhibit 10.2 to the Bank's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 8, 2024 (Commission File No. 000-51398)
10.11
Independent Contractor Consulting Services Agreement by and among the Federal Home Loan Bank of San Francisco and Teresa Bryce Bazemore, dated May 7, 2024, incorporated by reference to Exhibit 10.3 to the Bank's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 8, 2024 (Commission File No. 000-51398)
10.12
Employment Agreement by and among the Federal Home Loan Bank of San Francisco and Alanna McCargo, dated May 7, 2024, incorporated by reference to Exhibit 10.1 to the Bank's Current Report on Form 8-K filed with the Securities and Exchange Commission on May 8, 2024 (Commission File No. 000-51398)
10.13
Board Resolution for 2025 Board of Directors Compensation and Expense Reimbursement Policy
10.14
Executive Incentive Plan, as amended and restated on September 26, 2024
10.15
Supplemental Executive Retirement Plan, as amended and restated effective January 29, 2021, incorporated by reference to Exhibit 10.10 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 12, 2021 (Commission File No. 000-51398)
10.16
Original Deferred Compensation Plan, as restated, incorporated by reference to Exhibit 10.13 to Bank's Registration Statement on Form 10 filed with the Securities and Exchange Commission on June 30, 2005 (Commission File No. 000-51398)
10.17
Deferred Compensation Plan, as amended and restated effective January 1, 2020, incorporated by reference to Exhibit 10.10 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 6, 2020 (Commission File No. 000-51398)
10.19
10.18
Corporate Senior Officer Severance Policy, as amended and restated on July 30, 2021, incorporated by reference to Exhibit 10.1 to the Bank’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 5, 2021 (Commission File No. 000-51398)
10.19
Amended and Restated Federal Home Loan Bank P&I Funding and Contingency Plan Agreement, effective as of January 1, 2017, by and among the Office of Finance and each of the Federal Home Loan Banks, incorporated by reference to Exhibit 10.23 to the Bank’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2017 (Commission File No. 000-51398)
10.20
Joint Capital Enhancement Agreement, as amended August 5, 2011, with the other 11 Federal Home Loan Banks, incorporated by reference to Exhibit 99.1 to the Bank's Current Report on Form 8-K filed with the Securities and Exchange Commission on August 5, 2011 (Commission File No. 000-51398)
19.1
Insider Trading Policy of Federal Home Loan Bank of San Francisco, as amended and restated on December 6, 2024
31.1
Certification of the Interim President and Chief Executive Officer, and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1
Certification of the Interim President and Chief Executive Officer, and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1++
Audit Committee Report
101.INS Inline XBRL Instance Document - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
++ The report contained in Exhibit 99.1 is being furnished and will not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.