EDGAR 10-K Filing

Company CIK: 1325878
Filing Year: 2025
Filename: 1325878_10-K_2025_0001325878-25-000054.json

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ITEM 1. BUSINESS
Item 1: Business
General
One of 11 Federal Home Loan Banks (FHLBanks), Federal Home Loan Bank of Topeka (“we,” “us,” “our,” “FHLBank” or “FHLBank Topeka”) is a federally chartered corporation organized on October 13, 1932 under the authority of the Federal Home Loan Bank Act of 1932, as amended (Bank Act). The FHLBanks are U.S. GSEs. Each FHLBank is a cooperative owned by member institutions located within a defined geographic district and operates as a separate corporate entity with its own management, employees and board of directors. The members purchase capital stock in an FHLBank and generally receive dividends on their capital stock investment. Our defined geographic district is Colorado, Kansas, Nebraska and Oklahoma.
Our mission is to be a reliable provider of funding, liquidity, and services to promote housing, jobs and general prosperity through products and services that assist our members in supporting their communities. Our primary business is making collateralized loans, known as advances, to member institutions (members) and certain qualifying non-members (housing associates) and acquiring residential mortgage loans from members. We also provide members and housing associates with letters of credit and certain correspondent services, such as safekeeping, wire transfers, and cash management. We are generally limited to providing products and services only to members and qualifying non-members. Each FHLBank operates as a separate corporate entity with its own management, employees, and board of directors. Section 1433 of the Bank Act provides that we and the other FHLBanks are exempt from federal, state, and local taxation, except for real property taxes. Management has identified FHLBank Topeka as a single operating segment and allocates resources and assesses financial performance on that basis. We do not have any wholly- or partially-owned subsidiaries and do not have an equity position in any partnerships, corporations, or off-balance sheet special purpose entities.
We are supervised and regulated by the Federal Housing Finance Agency (FHFA), an independent agency in the executive branch of the U.S. government. The FHFA’s mission is to ensure the housing GSEs fulfill their mission by operating in a safe and sound manner to serve as a reliable source of liquidity and funding for housing finance and community investment.
Any federally insured depository institution, federally or privately insured credit union, or insurance company, engaged in residential housing finance can apply for membership in FHLBank. Community development financial institution (CDFI) certified by the CDFI fund of the U.S. Department of the Treasury, including community development loan funds, community development venture capital funds, and state-chartered credit unions without federal insurance, are also eligible to become members. (See Table 37 under Item 7 - "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" for counts and balances by member type.) Community Financial Institutions (CFI) are defined in the Bank Act, as amended by the Housing and Economic Recovery Act of 2008 (Recovery Act) as all institutions insured by the Federal Deposit Insurance Corporation (FDIC) with average total assets over the three-year period preceding measurement of less than $1.0 billion, as adjusted annually for inflation. For 2025, this specified amount was $1.5 billion.
Our members are required to purchase and hold our capital stock as a condition of membership and in proportion to their asset size and business activity with us. All capital stock transactions are governed by our capital plan, which was developed under, is subject to, and operates within specific regulatory and statutory requirements. Our capital stock is not publicly traded and is owned entirely by current or former members and certain non-members that own our capital stock as a result of a merger with or acquisition of a member or by former members that retain capital stock to support advances or other obligations that remain outstanding. Because we operate as a cooperative, as a result of the stock purchase requirements, we conduct business with related parties in the normal course of business. For disclosure purposes, our definition of a related party includes, among other persons, any member institution (or successor) that is known to be the beneficial owner of more than five percent of any class of our voting stock and any person who is, or at any time since the beginning of our last fiscal year was, one of our directors or executive officers. Information on business activities with related parties is provided in Tables 62 and 63 under Item 12 - “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
Our debt and equity securities are exempt from registration under the Securities Act and are “exempted securities” under the Exchange Act. As required by the Recovery Act, each FHLBank has voluntarily registered a class of its equity securities with the Securities and Exchange Commission (SEC) under Section 12(g) of the Exchange Act. As a registrant, FHLBank is subject to the periodic reporting and disclosure regime as administered and interpreted by the SEC. The SEC maintains an Internet site (https://www.sec.gov) that contains reports and other information filed with the SEC. Reports and other information we file with the SEC are also available free of charge through our website at www.fhlbtopeka.com. To access these reports and other information through FHLBank’s website, click on "About Us," then “Investor Relations” and then “SEC Filings”. The information on our website is not, and shall not be deemed to be, a part hereof or incorporated into this or any of our other filings with the SEC. Information on these websites, or that can be accessed through these websites, does not constitute a part of this annual report.
FHFA regulations require that our strategic business plan describes how our business activities will achieve our mission, consistent with the FHFA’s core mission achievement guidance. Our strategic business plan includes a balance sheet management strategy consistent with this guidance, which includes emphasis on the issuance of advances and acquisition of member mortgage loans through the MPF Program. The Primary Mission Asset ratio, as defined by the FHFA, is calculated as average advances and average mortgage loans to average consolidated obligations less average U.S. Treasury securities classified as trading or available for sale with maturities of ten years or less utilizing par balances. As of December 31, 2024, our Primary Mission Asset ratio was 78 percent. We generally intend to maintain the Primary Mission Asset ratio within the range of 70 to 80 percent, which exceeds the FHFA's recommended minimum ratio of 70 percent. This ratio, however, is dependent on several variables, such as member demand for our advance and mortgage loan products, and we may be unable to maintain the ratio at this level indefinitely.
We obtain our funds from several sources. Our primary funding source is the issuance of FHLBank debt issued to the public in the capital markets, known as “consolidated obligations,” through the FHLBanks’ Office of Finance, a joint office of the FHLBanks that facilitates the issuance and servicing of the consolidated obligations, as its agent. The FHFA and the U.S. Secretary of the Treasury oversee the issuance of all FHLBank debt. Generally, consolidated obligations are traded in the over-the-counter market. All 11 FHLBanks are jointly and severally liable for the repayment of all consolidated obligations. Although consolidated obligations are not obligations of or guaranteed by the U.S. government, the FHLBanks, as GSEs, have historically been able to borrow at the more favorable rates generally available to GSEs. Historically, our GSE status and credit ratings on our consolidated obligations have provided us with excellent capital markets access. Deposits, other borrowings and the proceeds from the issuance of capital stock to members are also sources of our funds.
Products and Services
Advances: We fulfill our mission by making advances to our members and housing associates. The following table summarizes the advance product offerings as of December 31, 2024:
Product
Description
Maturity
Overnight Line of Credit Advances
Reprices and matures daily, non-prepayable
Overnight
Short-term Fixed Rate Advances
Non-amortizing, non-prepayable
3 days to 93 days
Fixed rate Advances
Amortizing or non-amortizing, prepayable with a fee
94 days to 360 months
Adjustable Rate Advances
Non-amortizing, prepayable with fee (if any) on interest rate reset dates
1 month to 120 months
Callable Advances
Fixed or variable, with an option to prepay without a fee on specified dates
12 months to 360 months for fixed rate, 4 months to 180 months for variable rate
Putable Advances
Fixed rate, member sells option that allows advance to be put (called away) after a predetermined lockout period
24 months to 180 months, with initial lockout periods ranging between 6 and 60 months
Forward Settling Advances
Commitment to lock in rate and term of a fixed rate advance
Up to 24 months prior to settlement date
Advances are required by FHFA regulation to be priced no lower than the cost to issue debt with matching terms and conditions in the marketplace plus the administrative and operating expenses associated with making such advances.
We also offer a variety of specialized advance products to address housing and community development needs. These advance products address needs for low-cost funding to create affordable rental and homeownership opportunities, and for commercial and economic development activities, including those that benefit low- and moderate-income neighborhoods. Refer to Item 1 - “Business - Other Mission-Related Activities” for more details.
In addition to members, we also make advances to housing associates. To qualify as a housing associate, the applicant must: (1) be approved under Title II of the National Housing Act of 1934; (2) be a chartered institution having succession; (3) be subject to the inspection and supervision of a governmental agency; (4) lend its own funds as its principal activity in the mortgage field; and (5) have a financial condition that demonstrates that advances may be safely made. Housing associates are not subject to certain provisions of the Bank Act that are applicable to members, such as the capital stock purchase requirements, but the same regulatory lending requirements generally apply to them as apply to members. Restrictive collateral provisions apply if the housing associate does not qualify as a state housing finance agency (HFA). We currently have three housing associates who are customers and all three are state HFAs.
We are required by regulation to obtain sufficient collateral to fully secure advances. A member's lending limit is based on the collateral lending value of its residential mortgages and other eligible collateral, which is calculated by applying discounts, or haircuts, to the unpaid principal or market value, as applicable, of the collateral. As additional security for a member’s indebtedness, we have a statutory lien on that member’s FHLBank stock. We may require additional collateral to secure a member’s or housing associate’s outstanding credit obligations at any time (whether or not such collateral would be eligible to originate an advance), at our discretion. A description of our credit risk management and collateral practices as they relate to advance activity is contained in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk Management - Lending and AMA Activities.
Tables 21 and 22 under Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition” present information on our five largest borrowers as of December 31, 2024 and 2023 and the accrued interest income associated with the five borrowers providing the highest amount of interest income for the years ended December 31, 2024 and 2023.
Standby Letters of Credit: We issue standby letters of credit on behalf of members to support certain obligations of the members to third-party beneficiaries, often as collateral for deposits from public sector entities or for residential housing financing and community lending. Generally, the term of a letter of credit is one year renewable annually with a final expiration date of up to ten years after issuance. Members are required to fully collateralize the face amount of any letter of credit issued. Members are charged a fee based on the face amount of the letter of credit. If we are required to make a payment for a beneficiary’s draw, the amount must be reimbursed by the member immediately or, subject to our discretion, may be converted into an advance to the member. The underwriting and collateral requirements for letters of credit are the same as they are for advances. Letters of credit are subject to an activity stock purchase requirement. For additional details on our letters of credit, see Note 15 of the Notes to Financial Statements under Item 8 -” Financial Statements and Supplementary Data”.
Mortgage Loans: We purchase residential mortgage loan products from members and housing associates, referred to as participating financial institutions (PFI), through the MPF Program, a secondary mortgage market structure developed by FHLBank Chicago. Under the MPF Program, we invest in qualifying conventional conforming and government-guaranteed or government-insured fixed rate mortgage loans. The MPF Program helps fulfill our housing mission and provides an additional source of liquidity to our members that choose to sell mortgage loans into the secondary market rather than holding them in their own portfolios. MPF Program portfolio mortgage loans are considered Acquired Member Assets (AMA), a core mission activity of the FHLBanks, as defined by FHFA regulations. Our AMA risk tolerance limit for our investment in mortgage loans held for portfolio is 20 percent of total assets.
MPF Original, MPF 125, and MPF Government are closed loan products in which we purchase loans acquired or originated by the PFI. Under these MPF portfolio products, the PFI performs all traditional retail loan origination functions. In addition to the MPF portfolio products, we also offer MPF Xtra and MPF Government MBS. MPF Xtra is an off-balance sheet product structured to facilitate a loan sale from the PFI to FHLBank Chicago and simultaneously to the Federal National Mortgage Association (Fannie Mae). MPF Government MBS is an off-balance sheet product structured to facilitate a loan sale of government-guaranteed or government-insured loans from the PFI to FHLBank Chicago for securitization into Government National Mortgage Association (Ginnie Mae) MBS. We receive a counterparty fee from our PFIs for our role in MPF Xtra and MPF Government MBS.
Table 24 under Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition” presents the outstanding balances of mortgage loans sold to us from our top five PFIs and the percentage of those loans to total mortgage loans outstanding.
PFI Eligibility - Members and housing associates may apply to become PFIs. We review the general eligibility of the member or housing associate, its servicing qualifications, and its ability to supply documents, data, and reports required to be delivered by PFIs under the MPF Program.
MPF Provider - FHLBank Chicago serves as the MPF Provider and master servicer for the MPF Program. It maintains the structure of MPF residential mortgage loan products and the eligibility rules for MPF loans, including MPF Xtra loans and MPF Government MBS loans, which primarily fall under the rules and guidelines provided by Fannie Mae and Ginnie Mae, respectively. In addition, the MPF Provider manages the pricing and delivery mechanism for MPF loans and the back-office processing of MPF loans in its role as master servicer and program custodian. The MPF Provider publishes and maintains documentation (referred to as Guides) that details the requirements PFIs must follow in originating, underwriting or selling and servicing MPF loans. The MPF Provider also monitors compliance with MPF Program rules and requirements. The MPF Provider maintains the infrastructure through which we can fund or purchase MPF loans through our PFIs. We pay the MPF Provider a fee for providing these services.
MPF Servicing - PFIs selling residential mortgage loans under the MPF Program may either retain the servicing function or release the servicing and the servicing rights to an MPF Program-approved servicer. If a PFI chooses to retain the servicing, it receives a servicing fee. If a PFI chooses to release the servicing rights, it will receive a servicing-released premium. PFIs that retain the servicing may utilize approved subservicers to perform the servicing duties, while maintaining the servicing rights.
Mortgage Standards - PFIs are required to deliver residential mortgage loans that meet the eligibility requirements in the MPF Guides. The eligibility guidelines in the MPF Guides applicable to the conventional mortgage loans in our portfolio are broadly summarized as follows:
▪Mortgage characteristics: MPF loans must be qualifying 5- to 30-year conforming conventional, fixed rate, fully amortizing mortgage loans, secured by first liens on owner-occupied 1- to 4-unit single-family residential properties and single-unit second homes.
▪Loan-to-value (LTV) ratio and private mortgage insurance (PMI): Conventional MPF mortgage loans with LTVs greater than 80 percent are insured by PMI from a mortgage insurance company that has successfully passed an internal credit review and is approved under the MPF Program. Generally, the maximum LTV for conventional MPF loans is 95 percent. AHP MPF mortgage loans may have LTVs up to 100 percent.
▪Conventional loans must have a minimum Fair Isaac Corporation (FICO®) score of 620.
▪Documentation and compliance: Mortgage documents and transactions are required to comply with all applicable laws. MPF mortgage loans are documented using standard Fannie Mae or Federal Home Loan Mortgage Corporation (Freddie Mac) uniform instruments.
▪Government loans: Government mortgage loans sold under the MPF Program have substantially the same parameters as conventional MPF mortgage loans except that their LTVs may not exceed the LTV limits set by the applicable government agency and they must meet all requirements to be insured or guaranteed by the applicable government agency (Federal Housing Administration, the Department of Veterans Affairs, the U.S. Department of Agriculture, or the Department of Housing and Urban Development).
Loans not eligible for sale under the MPF Program include residential mortgage loans unable to be rated by Standard & Poor's (S&P), loans not meeting eligibility requirements, loans classified as high cost, high rate, high risk, Home Ownership and Equity Protection Act loans or loans in similar categories defined under predatory or abusive lending laws, or subprime, non-traditional, or higher-priced mortgage loans.
Allocation of Risk - The MPF Program is designed to allocate risks associated with residential mortgage loans between the PFIs and FHLBank in accordance with the FHFA AMA regulation requirements. PFIs have direct knowledge of their mortgage markets and have developed expertise in underwriting and servicing residential mortgage loans. By allowing PFIs to originate residential mortgage loans, whether through retail or wholesale operations, and to retain or sell servicing rights of residential mortgage loans, the PFI retains control of the functions that impact credit quality the most. We are responsible for managing the interest rate, prepayment. and liquidity risks associated with holding residential mortgage loans in portfolio. To share the credit risk with our PFIs, a third-party model is used to determine the amount of credit enhancement obligation (CE obligation) needed to achieve credit quality that is permissible under the AMA regulation and consistent with our risk appetite. PFIs’ CE obligations must be fully collateralized with assets considered eligible under our collateral policy. PFIs are paid a monthly fee for sharing credit risk. See Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk Management - Lending and AMA Activities” for a discussion of eligible collateral.
Investments
We maintain a portfolio of investments for liquidity and asset/liability management purposes and to enhance income. The type of investments we may purchase are limited by regulation. We may hold short-term investments in highly-rated institutions, including overnight Federal funds, term Federal funds, interest-bearing certificates of deposit and demand deposits, commercial paper, and securities purchased under agreements to resell (i.e., reverse repurchase agreements). Our long-term investment portfolio primarily includes securities issued or guaranteed by the U.S. government, U.S. government agencies and GSEs, as well as MBS issued by U.S. government agencies and housing GSEs (GSE securities are not explicitly guaranteed by the U.S. government). Regulation prohibits the purchase of MBS if the aggregate value of MBS owned exceeds 300 percent of our month-end total regulatory capital, as most recently reported to the FHFA, on the day we purchase the securities. Further, quarterly increases in holdings of MBS are restricted to no more than 50 percent of regulatory capital as of the beginning of such quarter. As of December 31, 2024, the aggregate value of our MBS portfolio represented 253 percent of our regulatory capital. For details on our investment portfolio, see Note 3 of the Notes to Financial Statements under Item 8 - “Financial Statements and Supplementary Data” and Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Investments.” For additional discussion of our investments and their related credit risk, see Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk Management.”
Debt Financing - Consolidated Obligations
Consolidated obligations, consisting of bonds and discount notes, are our primary liabilities and represent our principal source of funding. Consolidated obligations are the joint and several obligations of the FHLBanks, backed only by the financial resources of the FHLBanks. Consolidated obligations are not obligations of the U.S. government, and the U.S. government does not guarantee them; however, the capital markets have traditionally viewed the FHLBanks’ obligations as “Federal agency” debt. As such, the FHLBanks historically have had reasonably stable access to funding at relatively favorable spreads to U.S. Treasury obligations. Our ability to access the capital markets through the sale of consolidated obligations, across the maturity spectrum and through a variety of debt structures, assists us in managing our balance sheet effectively and efficiently. S&P currently rates the long-term senior unsecured debt issues of the FHLBank System and all FHLBanks (including FHLBank Topeka) at AA+. S&P rates all FHLBanks and the FHLBank System’s short-term debt issues at A-1+. S&P’s rating outlook for the FHLBank System’s senior unsecured debt and all FHLBanks is stable. Moody’s Investor Service (Moody's) has affirmed the long-term Aaa rating on the senior unsecured debt issues of the FHLBank System and the FHLBanks and a short-term issuer rating of P-1, with a rating outlook of negative for senior unsecured debt. These ratings measure the likelihood of timely payment of principal and interest on consolidated obligations and also reflect the FHLBanks’ status as GSEs, which generally implies the expectation of a high degree of support by the U.S. government even though their obligations are not guaranteed by the U.S. government.
FHFA regulations govern the issuance of debt on behalf of the FHLBanks and related activities, and authorize the FHLBanks to issue consolidated obligations, through the Office of Finance as their agent, under the authority of Section 11(a) of the Bank Act. No FHLBank is permitted to issue individual debt under Section 11(a) without FHFA approval. We are primarily and directly liable for the portion of consolidated obligations issued on our behalf. In addition, we are jointly and severally liable with the other FHLBanks for the payment of principal and interest on the consolidated obligations of all FHLBanks under Section 11(a). The FHFA, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations for which that FHLBank is not the primary obligor. Although it has never occurred, to the extent that an FHLBank would be required to make a payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank would be entitled to reimbursement from the non-complying FHLBank. However, if the FHFA determines that the non-complying FHLBank is unable to satisfy its obligations, then the FHFA may allocate the non-complying FHLBank’s outstanding consolidated obligation debt among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis the FHFA may determine. If the principal or interest on any consolidated obligation issued on behalf of a specific FHLBank is not paid in full when due, that FHLBank may not pay dividends to, or redeem or repurchase shares of stock from, any member of that specific FHLBank.
Table 1 presents the par value of our consolidated obligations and the combined consolidated obligations of all the FHLBanks as of December 31, 2024 and 2023 (in millions):
Table 1
12/31/2024 12/31/2023
Par value of consolidated obligations of FHLBank Topeka $ 70,579 $ 70,313
Par value of consolidated obligations of all FHLBanks $ 1,192,968 $ 1,204,316
FHFA regulations provide that we must maintain aggregate assets of the following types, free from any lien or pledge, in an amount at least equal to the amount of our consolidated obligations outstanding:
▪Cash;
▪Obligations of, or fully guaranteed by, the U.S. government;
▪Secured advances;
▪Mortgages that have any guaranty, insurance or commitment from the U.S. government or any agency of the U.S. government; and
▪Investments described in Section 16(a) of the Bank Act, which, among other items, includes securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located.
Table 2 illustrates our compliance with the FHFA’s regulations for maintaining aggregate assets at least equal to the amount of consolidated obligations outstanding as of December 31, 2024 and 2023 (dollar amounts in thousands):
Table 2
12/31/2024 12/31/2023
Total non-pledged assets $ 75,460,330 $ 74,514,009
Total carrying value of consolidated obligations $ 70,281,553 $ 69,790,738
Ratio of non-pledged assets to consolidated obligations 1.07 1.07
The Office of Finance has responsibility for facilitating and executing the issuance of the consolidated obligations on behalf of the FHLBanks. It also prepares the FHLBanks’ Combined Quarterly and Annual Financial Reports, services all outstanding debt, serves as a source of information for the FHLBanks on capital market developments and manages the FHLBanks’ relationship with the nationally recognized statistical ratings organizations (NRSRO) with respect to ratings on consolidated obligations.
Consolidated Obligation Bonds: Consolidated obligation bonds are primarily used to satisfy our funding needs. Typically, the maturities of these bonds range from less than one year to 30 years, but the maturities are not subject to any statutory or regulatory limit. Consolidated obligation bonds can be issued and distributed through negotiated or competitively bid transactions with approved underwriters or selling group members.
Consolidated obligation bonds generally are issued with either fixed or variable rate payment terms that use a variety of standardized indices for interest rate resets including, but not limited to, SOFR. In addition, to meet the specific needs of certain investors in consolidated obligations, both fixed and variable rate bonds may also contain certain embedded features, which result in complex coupon payment terms and call features.
Consolidated Obligation Discount Notes: The Office of Finance also sells consolidated obligation discount notes on behalf of the FHLBanks that generally are used to meet short-term funding needs. These securities have maturities up to one year and are offered daily through certain securities dealers in a discount note selling group. In addition to the daily offerings of discount notes, the FHLBanks auction discount notes with fixed maturity dates ranging from 4 to 26 weeks through competitive auctions held twice a week utilizing the discount note selling group. The amount of discount notes sold through the auctions varies based upon market conditions, investor demand, and/or on the funding needs of the FHLBanks. Discount notes are sold at a discount and mature at par.
Derivatives
FHLBank’s Risk Management Policy (RMP) establishes guidelines for our use of derivatives. Interest rate swaps, interest rate cap and floor agreements, and other derivatives can be used as part of our interest rate risk management and funding strategies. The RMP, along with FHFA regulations, prohibits trading in, or the speculative use of, derivatives and limits credit risk to counterparties that arises from derivatives. In general, we have the ability to use derivatives to reduce funding costs for consolidated obligations and to manage other risk elements such as interest rate risk and mortgage prepayment risk.
See Item 7A - “Quantitative and Qualitative Disclosures About Market Risk” for further information on derivatives.
Deposits
The Bank Act allows us to accept deposits from our members, housing associates, any institution for which we are providing correspondent services, other FHLBanks, and other government instrumentalities. We offer several types of deposit programs, including demand, overnight, and term deposits.
Liquidity Requirements: To support deposits, FHFA regulations require us to have at least an amount equal to current deposits received from our members invested in obligations of the U.S. government, deposits in eligible banks or trust companies, or advances with remaining maturities not exceeding five years. In addition, we must meet the additional liquidity policies and guidelines outlined in our RMP. See Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Liquidity Risk Management” for further discussion of our liquidity requirements.
Capital, Capital Rules and Dividends
FHLBank Capital Adequacy and Form Rules: We must comply with regulatory requirements for total regulatory capital, leverage capital, and risk-based capital. Our RMP requires that we also maintain a ratio of total regulatory capital to total assets of not less than 4.6 percent of total assets, total capital stock to total assets of 2 percent, and permanent capital must exceed our risk-based capital requirement. To satisfy these capital requirements, we maintain a capital plan. The Gramm-Leach-Bliley Act (GLB Act) allows us to have two classes of stock, and each class may have sub-classes. Under our capital plan, we have two classes of authorized stock - Class A Common Stock and Class B Common Stock. Both classes have $100 par value per share. Class A Common Stock is required for membership. Class B Common Stock supports member activities with us, to the extent Class A Common Stock is insufficient to support the calculated activity requirement. The GLB Act and the FHFA rules and regulations define total capital for regulatory capital adequacy purposes as the sum of an FHLBank’s permanent capital, plus the amounts paid in by its stockholders for Class A Common Stock; any general loss allowance, if consistent with U.S. generally accepted accounting principles (GAAP) and not established for specific assets; and other amounts from sources determined by the FHFA as available to absorb losses. The GLB Act and FHFA regulations define permanent capital for the FHLBanks as the amount paid in for Class B Common Stock plus the amount of an FHLBank’s retained earnings, as determined in accordance with GAAP.
Under the GLB Act and the FHFA rules and regulations, we are subject to risk-based capital rules. We may not redeem or repurchase any of our capital stock without FHFA approval if the FHFA or our board of directors determines that we have incurred, or are likely to incur, losses that result in, or are likely to result in, charges against our capital, even if we are in compliance with our minimum regulatory capital requirements. Therefore, a member’s right to have its excess shares of capital stock redeemed is conditional on, among other factors, FHLBank maintaining compliance with regulatory capital requirements.
See Item 5 - “Market for Registrant’s Common Equity - Related Stockholder Matters and Issuer Purchases of Equity Securities,” Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital” and Note 11 of the Notes to Financial Statements under Item 8 - “Financial Statements and Supplementary Data” for additional information regarding capital.
Dividends: We may pay dividends from unrestricted retained earnings and current income. (For a discussion regarding restricted retained earnings, please see Joint Capital Enhancement Agreement under this Item 1.) Our board of directors may declare and pay dividends in either cash or capital stock. Under our capital plan, all dividends that are payable in capital stock must be paid in the form of Class B Common Stock, regardless of the class of stock upon which the dividend is being paid.
Consistent with FHFA guidance in Advisory Bulletin (AB) 2003-AB-08, Capital Management and Retained Earnings, and other respective guidance, we adopted guidelines to establish a minimum or threshold level for our retained earnings in light of alternative possible future financial and economic scenarios, which are currently included under our RMP. The calculation of our minimum (threshold) level of retained earnings incorporates regulatory-based estimates of market risk and credit risk, and includes estimates for risk exposure from operational risk, settlement risk related to unsettled consolidated obligations, and net income volatility. The retained earnings threshold level fluctuates from period to period because it is a function of the size and composition of our balance sheet and the risks contained therein at that point in time. As of December 31, 2024, our retained earnings threshold was $0.7 billion. Retained earnings of $1.6 billion exceeded our retained earnings threshold by $0.9 billion at December 31, 2024.
The retained earnings threshold is calculated quarterly and considered by the board of directors as part of each quarterly dividend declaration. The RMP also provides that meeting the established retained earnings threshold has priority over the payment of dividends, but that the board of directors must balance dividends on capital stock against the period over which the retained earnings threshold is met. During the year ended December 31, 2024, the threshold did not significantly affect the amount of dividends declared and paid.
Joint Capital Enhancement Agreement (JCE Agreement) - We, along with the other FHLBanks, entered into a JCE Agreement intended to enhance the capital position of each FHLBank. More specifically, the intent of the JCE Agreement is to allocate a portion of each FHLBank’s earnings to a Separate Restricted Retained Earnings Account (RRE Account) at that FHLBank. Thus, in accordance with the JCE Agreement, each FHLBank allocates 20 percent of its net income to an RRE Account and will do so until the balance of the account equals at least one percent of that FHLBank’s average balance of outstanding consolidated obligations calculated as of the last day of each calendar quarter. Additionally, the JCE Agreement provides that amounts in restricted retained earnings in excess of 150 percent of an FHLBank's restricted retained earnings minimum (i.e., one percent of that FHLBank's average balance of outstanding consolidated obligations calculated as of the last day of each calendar quarter) may be released from restricted retained earnings. Restricted retained earnings are not available to pay dividends and are presented separately on the Statements of Condition.
Tax Status
Section 1433 of the Bank Act provides that we and the other FHLBanks are exempt from all federal, state and local taxation except for real property taxes.
Assessments
We are subject to a statutory AHP assessment based on a percentage of our earnings. The FHLBanks are required to set aside annually the greater of an aggregate of $100 million or 10 percent of their current year’s income subject to assessment to be contributed to the following year's AHP. In accordance with FHFA guidance for the calculation of AHP expense, interest expense on mandatorily redeemable capital stock is added back to income before charges for AHP. Voluntary contribution amounts expensed as Other Expense reduce pre-assessment net income, which is the basis of the statutory AHP calculation, so the FHLBanks have agreed to contribute the amount of this impact to AHP as a voluntary “make-whole” contribution.
Other Mission-Related Activities
One of our core missions is to provide funding to support and sustain affordable housing and community lending in our district. We administer and fund a number of programs specifically designed to fulfill that mission. These programs provide housing opportunities for thousands of very low-, low- and moderate-income households and strengthen communities primarily in Colorado, Kansas, Nebraska, and Oklahoma.
As we continue to look for opportunities to support our members, we have increased our commitment to voluntary programs designed to support and sustain affordable housing and community lending in our district. For 2024, we committed to provide 2.5 percent of our 2023 earnings (calculated as net income before our AHP assessment, voluntary contribution program expense, and interest expense on mandatorily redeemable capital stock). We exceeded this commitment with voluntary housing program expenses totaling 3.5 percent of 2023 net earnings. For 2025, the commitment was increased to 5 percent of 2024 net earnings. The 2024 funds primarily supported the Native American Housing Initiative (NAHI) program, Homeownership Possibilities Expanded (HOPE), and AHP Extra. In 2025, we introduced the Community Assistance Recovery Effort (CARE) disaster relief program and the Mortgage Rate Reduction Product (MRRP). Each of our programs are detailed below.
Affordable Housing Program: Amounts specified by the statutory AHP requirements described in Item 1 - “Business - Assessments” are reserved for this program. AHP provides cash grants to members in partnership with sponsors (i.e., housing authorities, for-profit and not-for-profit organizations, developers, etc.) to finance the purchase, construction, or rehabilitation of very low-, low-, and moderate-income owner occupied or rental housing. As a competitive program, applications are scored based on commitments made to support housing needs in our district. Our assessments also finance the Homeownership Set-aside Program (HSP), which provides down payment, closing cost, and purchase-related repair assistance to very low-, low-, and moderate-income first-time households in Colorado, Kansas, Nebraska, and Oklahoma.
Voluntary Housing and Community Investment Programs
•Homeownership Possibilities Expanded: Providing access to homeownership to the “missing middle,” HOPE supports households in our district that traditionally do not receive assistance but need subsidy to make homeownership accessible and affordable. HOPE is not limited to first-time homebuyers, and income limitations are expected to serve a wider range of households.
•Native American Housing Initiatives Grants Program: The NAHI program was established in 2023 as a voluntary grant program that provides Native American tribes and tribally designated housing entities with access to grant funds intended to build their communities in support of housing for tribal members in FHLBank’s district. NAHI supports tribal organizations working at the grassroots level, which are in the best position to identify tribal needs.
•Community Assistance Recovery Effort: CARE provides assistance to members in the form of a matching grant to amplify the support our members provide to their communities when natural disasters occur. FHLBank members are in the best position to determine local needs following a disaster and to direct assistance where it will have the greatest impact.
•Mortgage Rate Reduction Product: MRRP allows members to provide eligible households a reduced mortgage interest rate compared to the current market rate.
Community Investment Cash Advance (CICA) Program: CICA loans to members specifically target underserved markets in both rural and urban areas. CICA loans represented 1.1 percent, 1.2 percent, and 1.4 percent of total advances outstanding as of December 31, 2024, 2023, and 2022, respectively. Programs offered during 2024 under the CICA Program, which is not funded through the AHP, include:
•Community Housing Program (CHP) - CHP makes loans available to members for financing the construction, acquisition, rehabilitation, and refinancing of owner-occupied housing for households whose incomes do not exceed 115 percent of the median income for the area and rental housing occupied by or affordable for households whose incomes do not exceed 115 percent of the median income for the area. For rental projects, at least 51 percent of the units must have tenants that meet the income guidelines, or at least 51 percent of the units must have rents affordable to tenants that meet the income guidelines. We provide advances for CHP-based loans to members at our estimated cost of funds for a comparable maturity plus a mark-up for administrative costs; and
•Community Development Program (CDP) - CDP provides advances to members to finance CDP-qualified member financing including loans to small businesses, small farms, small agribusiness or for community development purposes that meet one of the following criteria: (1) loans to firms that meet the Small Business Administration’s (SBA) definition of a small business concern; (2) financing for businesses or projects located in an urban neighborhood, Census tract or other area with a median income at or below 100 percent of the area median; (3) financing for businesses, farms, ranches, agribusinesses, or projects located in a rural community, neighborhood, Census tract, or unincorporated area with a median income at or below 115 percent of the area median; (4) firms or projects located in a Native American Area or any Federally Declared Disaster Area; (5) projects in urban areas in which at least 51 percent of the employees of the project, or at least 51 percent of the families benefiting from or receiving services from the project, earn at or below 100 percent of the area median; or (6) projects in rural areas in which at least 51 percent of the employees of the project, or at least 51 percent of the families benefiting from or receiving services from the project, earn at or below 115 percent of the area median. We provide advances for CDP-based loans to members at our estimated cost of funds for a comparable maturity plus a mark-up for administrative costs.
Competition
Advances: Demand for advances is affected by, among other things, the cost of alternative sources of liquidity available to our members, including deposits from members’ customers and other sources of liquidity that are available to members, including the Federal Reserve Bank’s discount window. Members mostly access alternative funding other than advances through Federal funds purchased, the brokered deposit market, and repurchase agreements with financial counterparties. Large members may have broader access to funding through repurchase agreements with investment banks and commercial banks as well as access to the national and global credit markets. The availability of alternative funding sources to members can influence member demand for advances, with the cost of the alternative funding relative to advances being the primary consideration when accessing alternative funding. Other considerations include product availability through FHLBank, dividend rates on FHLBank stock, the member’s creditworthiness, ease of execution, level of diversification, and availability of member collateral for other types of borrowings. We believe our advance product offerings are evolving to meet member demand as market conditions in the competitive environment change. All product development initiatives involve an evaluation of the market opportunity relative to the operational requirements of offering the product while maintaining high levels of risk management and regulatory compliance. Certain product initiatives may also require the filing of a New Business Activity Notice with and non-objection by our regulator.
Mortgage Loans: We are subject to competition in purchasing conventional, conforming fixed rate residential mortgage loans and government-guaranteed residential mortgage loans. We face competition in the prices paid for these assets, customer service, and in ancillary services such as automated underwriting. The most direct competition for purchasing residential mortgage loans comes from the other housing GSEs, which also purchase conventional, conforming fixed rate mortgage loans, specifically Fannie Mae and Freddie Mac. To a lesser extent, we also compete with regional and national financial institutions that buy and/or invest in mortgage loans. Depending on market conditions, these investors may seek to hold, securitize, or sell conventional, conforming fixed rate mortgage loans. We continuously reassess our potential for success in attracting and retaining members for our mortgage loan products and services, just as we do with our advance products. We compete for the purchase of mortgage loans primarily on the basis of price, products and product features, and services offered.
Debt Issuance: We compete with the U.S. government (including debt programs explicitly guaranteed by the U.S. government), U.S. government agencies, 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 capital markets. Collectively, Fannie Mae, Freddie Mac, and the FHLBanks are generally referred to as the housing GSEs, and the cost of the debt of each can be positively or negatively affected by political, financial, or other news that reflects upon government and government agency debt. If the supply of competing debt products increases without a corresponding increase in demand, our debt costs may increase. We compete for the issuance of debt primarily on the basis of rate, term, structure of the debt, liquidity of the instrument, and perceived risk of the issuer.
Derivatives: The issuance of callable debt and the simultaneous execution of callable interest rate swaps with options that mirror the options in the debt have been an important source of competitive funding for us. As such, the depth of the markets for callable debt and mirror-image derivatives is an important factor of our relative cost of funds. There is considerable competition among high-credit-quality issuers, especially among the three housing GSEs, for callable debt and for derivatives. There can be no assurance that the current breadth and depth of these markets will be sustained.
Regulatory Oversight, Audits and Examinations
General: Our business is subject to extensive regulation and supervision. As discussed throughout this Form 10-K, the laws, regulations, and regulatory guidance to which we are subject cover all key aspects of our business, and directly and indirectly affect our product and service offerings, collateral practices, pricing, competitive position, relationship with members and third parties, capital structure, and liquidity practices. As a result, such laws and regulations have a significant effect on our results of operations and financial condition. For a discussion of risks relating to the complex body of laws and regulations to which we are subject, see Item 1A - “Risk Factors - Business Risk - Legislative and Regulatory”. For a discussion of recent regulatory and legislative developments impacting us, see “Legislative and Regulatory Developments” under this Item 1.
We are supervised and regulated by the FHFA, an independent agency in the executive branch of the U.S. government. The FHFA is responsible for providing supervision, regulation and housing mission oversight of the FHLBanks to ensure they fulfill their mission by operating in a safe and sound manner to serve as a reliable source of liquidity and funding for housing finance and community investment. The FHFA is funded in part through assessments from the FHLBanks, with the remainder of its funding provided by Fannie Mae and Freddie Mac; no tax dollars or other appropriations support the operations of the FHFA or the FHLBanks. To assess our safety and soundness, the FHFA conducts comprehensive annual examinations, as well as periodic reviews. Additionally, we are required to submit monthly information about our financial condition and results of operations to the FHFA. This information is available to all FHLBanks.
Before a government corporation issues and offers obligations to the public, the Government Corporation Control Act provides that the Secretary of the Treasury will prescribe the form, denomination, maturity, interest rate, and conditions of the obligations; the manner and time issued; and the selling price. The Bank Act also authorizes the Secretary of the Treasury, at their discretion, to purchase consolidated obligations up to an aggregate principal amount of $4 billion. No borrowings under this authority have been outstanding since 1977.
The U.S. Treasury receives the FHFA’s annual report to Congress, monthly reports reflecting securities transactions of the FHLBanks, and other reports reflecting the operations of the FHLBanks. We must submit annual management reports to Congress, the President of the United States, the Office of Management and Budget, and the Comptroller General. These reports include a statement of financial condition, a statement of operations, a statement of cash flows, a statement of internal accounting and administrative control systems, and the report of the independent public accounting firm on the financial statements.
Audits and Examinations: We have an internal audit department and our board of directors has an audit committee. The Chief Audit Executive reports directly to the audit committee. In addition, an independent registered public accounting firm audits our annual financial statements and effectiveness of internal controls over financial reporting. The independent registered public accounting firm conducts these audits following standards of the Public Company Accounting Oversight Board (United States) and Government Auditing Standards issued by the Comptroller General of the United States. The FHLBanks, the FHFA, and Congress all receive the audit reports.
The Comptroller General has authority under the Bank Act to audit or examine the FHFA and the individual FHLBanks and to decide the extent to which they fairly and effectively fulfill the purposes of the Bank Act. Furthermore, the Government Corporation Control Act provides that the Comptroller General may review any audit of the financial statements conducted by an independent registered public accounting firm. If the Comptroller General conducts such a review, the results of the review and any recommendations must be reported to Congress, the Office of Management and Budget, and the applicable FHLBank. The Comptroller General may also conduct an audit of any financial statements of any individual FHLBank.
Human Capital Resources
Our workforce is a vital contributor to the success of our strategic business objectives. In supporting our people, we focus on our workforce profile and the various programs and philosophies described below.
Workforce Profile: Our workforce is primarily comprised of corporate employees, with our principal operations in one location. As of December 31, 2024, we had 259 full-time and 3 part-time employees. We strive to both develop talent from within the organization and supplement with external hires. We believe that developing talent internally results in institutional strength and continuity and promotes loyalty and commitment in our employee base, which strengthens our success. Adding new employees contributes to new ideas, continuous improvement, and our goals of having a diverse and inclusive workforce with a sense of belonging and an equitable workplace. As of December 31, 2024, the average tenure of our employees was 9.6 years. There are no collective bargaining agreements with our employees.
Total Rewards: We seek to attract, develop and retain talented employees to achieve our strategic business initiatives, enhance business performance, increase shareholder value and provide members a reasonable return on their investment in FHLBank. To achieve this objective, we focus on a combination of development programs, benefits and employee wellness programs and strive to recognize and reward performance. Specifically, our programs include:
•Cash compensation - competitive base salary, performance-based incentives and other cash subsidies;
•Benefits - health insurance, life and accidental death and dismemberment insurance, supplemental life insurance, and a 401(k) retirement savings plan with a competitive employer match;
•Wellness program - employee assistance program, interactive education sessions focused on employee total health, and sporting events sponsorships;
•Time away from work - including paid time off for vacation, illness, personal, holiday, and volunteer opportunities;
•Development - leadership, professional and personal development opportunities; fee reimbursement for external development programs; employee engagement opportunities to drive our Employer of Choice vision; and educational assistance programs;
•Work/Life balance - flexible work arrangements, including a hybrid work schedule allowing a balance between in-office and remote work, two-thirds paid salary continuation for short-term disability, 100 percent paid parental, military, bereavement, jury duty and court appearances leave;
•Management succession planning - our board of directors and leadership actively engage in management succession planning, with a defined plan for our Executive Team, which is reviewed and adjusted annually, to support smooth transitions in the event of an unplanned or planned absence of an executive and to help assure successor executives are fully qualified to assume responsibility for ongoing operations; and
•Our Performance Management framework includes planned quarterly, documented discussions coordinated between manager and employee. At the start of every quarter, managers and employees work together to set new goals or update existing goals and review the previous quarter’s goals. In addition to encouraging goal alignment with ever-changing business needs, this quarterly framework also is intended to provide a natural opportunity for feedback and development conversations to occur between employee and manager throughout the year.
Culture: FHLBank’s culture is an extension of our corporate vision to be the Employer of Choice. We focus on ensuring our business partners’ talents are optimized and we celebrate our successes together. We believe a necessary component of ensuring culture is the way we operationalize our core values. For example, we have a statutory requirement to advance diversity. We further this by working to ensure our core values are a part of our DNA. It is a strategic business priority for FHLBank to ensure all of our business activities are meritorious and inclusive. We strive to ensure that individual talent, merit, and qualifications are identified, recognized and leveraged in all business processes, including but not limited to procurement and other financial activities. We see this commitment through the development and execution of a three-year strategic plan. Progress toward the strategic objectives are regularly reported to management and the board of directors. We offer a range of development opportunities for our employees to connect and grow both personally and professionally. We consider learning and innovation an important component of our organizational strategy. The commitment to our culture and core values is incorporated as a key component of our incentive plan framework, which reflects our organizational focus and individual and collective accountability. We evaluate our recruiting, promotion and succession planning processes regularly to ensure an unbiased and merit-based process.
Legislative and Regulatory Developments
Significant regulatory actions and developments for the period covered by this report not previously disclosed are summarized below.
Regulatory Environment. FHLBank is subject to various legal and regulatory requirements and expectations. Changes in the regulatory environment under the current administration, including regulatory priorities and areas of focus, could affect FHLBank’s business operations, results of operations, and reputation. Certain actions by the current federal executive administration suggest FHLBank’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 FHLBank and the FHLBank System. Relatedly, certain executive orders may impact the regulatory priorities of the federal regulators, including FHFA.
FHFA’s Review and Analysis of the FHLBank System. On November 7, 2023, FHFA 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 it plans to pursue in service of its vision for the future of the FHLBank System. The report focused on four broad themes: (1) update and clarify its regulatory statement of the FHLBanks’ mission; (2) clarify the FHLBanks’ liquidity role; (3) expand the FHLBanks’ housing and community development focus; and (4) promote the FHLBanks’ operational efficiency. The FHFA 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, FHLBank is not able to predict what actions, if any, will ultimately result from the FHFA’s recommendations in the report, the timing of any such actions, the extent of any changes to FHLBank or the FHLBank System, or the ultimate effect on FHLBank or the FHLBank System of any such actions. For discussion of the related risks, see Item 1A - “Risk Factors.
Advisory Bulletin on Federal Home Loan Bank System Climate-Related Risk Management. On September 30, 2024, the FHFA issued an advisory bulletin setting forth the FHFA’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 FHLBank 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.
Relatedly, FHLBank continues to monitor developments relevant to 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. FHLBank also continues to monitor the status of certain climate-related state laws to assess their possible impacts on FHLBank.
Advisory Bulletin on FHLBank Member Credit Risk Management. On September 27, 2024, FHFA issued an advisory bulletin setting forth FHFA’s expectations that an FHLBank’s underwriting and credit decisions should reflect a member’s financial condition and not rely solely on the collateral securing the member’s credit obligations. The advisory bulletin provides guidance for the FHLBanks to implement policies for credit risk governance, member credit assessment and monitoring of credit conditions, among other considerations. It also provides guidance on the oversight of members in financial distress by recommending implementation of escalation policies, processes for coordination with members’ prudential regulators, and management policies addressing default, failure, and insolvency situations. FHLBank is in the process of implementing appropriate adjustments to its relevant policies and procedures.
FHFA Final Rule on Fair Lending, Fair Housing, and Equitable Housing Finance Plans. On May 16, 2024, the FHFA 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 (FTC Act). The final rule: (1) addresses the enforcement authority of the FHFA; (2) 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 (3) 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 FHFA has since issued advisory bulletins setting forth its expectations regarding the FHLBanks’ compliance with the final rule. FHLBank has reviewed this rule and related advisory bulletins and has taken steps to comply with the requirements and proceed in accordance with the guidance.
Agreements Regarding 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 FHFA 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, FHLBank is permitted to invest in Enterprise unsecured debt in an amount of up to 100 percent of its regulatory capital, which consists of Class B stock, Class A stock, if any, retained earnings, and mandatorily redeemable capital stock. However, the amount of such debt in which FHLBank is permitted to invest could be reduced or eliminated entirely depending on the nature of the resolution of the Enterprises’ conservatorships. 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, FHLBank’s opportunities to purchase mortgage loans or the profitability from its investments in mortgage loans could be reduced. The ultimate 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 FHLBank.
Proposed Rule on FHLBank System Boards of Directors and Executive Management. On November 4, 2024, the FHFA 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 FHLBank to complete and submit background checks to the FHFA 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 FHLBank independent directors to include AI, information technology and security, climate-related risk, CDFI business models, and modeling; and (5) establish a review process for director performance and participation, together with a process for removing FHLBank directors for cause. Other proposed revisions address, among other things, FHLBank conflicts of interest policies, covering all FHLBank employees, including specific limitations on executive officers and senior management, and record retention.
Several of the proposed revisions would result in significant changes to the nomination, election, and retention of directors on FHLBank’s board if adopted as proposed. Additional director eligibility requirements and limitations on, and potential reductions or limitations to, director compensation resulting from the proposed rule could hinder FHLBank’s ability to recruit and retain the talent and expertise that are critical to FHLBank’s ability to satisfy its mission, particularly given the growing complexities of the finance industry. FHLBank continues to consider the effect that the proposed rule could have.

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ITEM 1A. RISK FACTORS
Item 1A: Risk Factors
In addition to the other information set forth in this report, you should carefully consider the following factors, which could materially affect our business, financial condition, results of operations, cash flows or ability to pay dividends in future periods. While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties not currently known to us or that we currently deem to be immaterial that may adversely affect our business, financial condition, results of operations, cash flows or ability to pay dividends in the future.
Business Risk - General
Changes in general economic and political conditions could have a material adverse effect on our business, results of operations or ability to pay dividends. Our business and results of operations, which are geographically constrained to Colorado, Kansas, Nebraska and Oklahoma, are sensitive to changes in general economic conditions, particularly in the housing market and regional economic conditions within our district. For example, if home prices decline or the unemployment rate increases, the value of collateral securing member credit may decline and the risk of nonpayment of borrowers of our members may increase, which could in turn increase the possibility of under-collateralization and the risk of loss if a member defaults. Deterioration in the residential mortgage markets could also affect the value of collateral securing our mortgage loan portfolio, increasing the risk of loss due to credit impairment, as well as possible realized losses if we were forced to liquidate the collateral. Unfavorable economic and market conditions can be caused by many factors, which are largely influenced by macroeconomic conditions and other factors beyond our control, including global inflationary pressures, geopolitical conflict, levels of consumer and business confidence economic sanctions, commodity (including energy) prices and supply, a recession or economic slowdown, trade policies, foreign currency exchange rates, changing policy positions or priorities, natural disasters, pandemics or other widespread health emergencies, terrorist attacks, cyberattacks and civil unrest, economic or other sanctions, or other unanticipated or catastrophic events could create economic and financial disruptions and uncertainties. Changes in any of these factors could adversely affect our business, results of operations, and ability to pay dividends.
Our business and results of operations and that of our members may be affected by the fiscal and monetary policies of the federal government and its agencies, including the Federal Reserve, which regulates the supply of money and credit in the U.S., and the U.S. Treasury. Fiscal policies, including policies of the Federal Reserve, directly and indirectly influence the yield on interest-earning assets and the cost of interest-bearing liabilities for us and our members, which could adversely affect our financial condition, results of operations and ability to pay dividends. Sudden or large increases in the supply of U.S. Treasury securities could lead to a general increase in short-term market interest rates, including those for short-term GSE debt securities.
Additionally, an unpredictable or volatile political environment in the United States or geopolitical instability could negatively impact business and market conditions, economic growth, financial stability and business, consumer, investor and regulatory sentiments, any one or more of which could have a material adverse impact on our financial condition and results of operations. It is difficult to predict the legislative and regulatory changes that may result in connection with the new administration and changes in the make-up of Congress, and the broader economic implications due to changes in governing ideology and style. Changes in trade policies by the United States or other countries, such as tariffs or retaliatory tariffs, may cause inflation, which could impact the prices of products sold by our borrowers and have the potential to reduce demand for their products impacting their profitability and making it difficult for our borrowers to repay their loans. Uncertainty surrounding the federal fiscal policymaking process, the medium and long-term fiscal outlook of the federal government and future tax rates are concerns for businesses, consumers and investors. Adverse economic conditions and governmental policy responses to such conditions could have a material adverse effect on our business, financial position, and results of operations.
If economic and market conditions deteriorate, it could have an adverse effect on our business, including the demand for our products and services, and the value of the collateral securing advances, investments, and mortgage loans held for portfolio.
Natural disasters, including those related to climate change, severe weather, public health crises, acts of war or terrorism or other external events could have a material adverse impact on our members and our business. Regions within our district are subject to risks from severe weather, including tornadoes, floods, drought, or other natural disasters, or pandemics or other health crises, acts of war or terrorism and other adverse external events. Climate change is increasing the frequency and intensity of these severe weather events. Natural disasters, including those resulting from significant climate changes, could damage or destroy our properties (headquarters or business resiliency center), damage or dislocate the facilities of our members, damage or destroy collateral that members have pledged to secure advances or mortgages, damage or destroy collateral securing certain securities, disrupt business for us or our members, negatively impact the livelihood of borrowers of members, or otherwise could cause significant economic dislocation in the affected areas of our region. Any of these situations may adversely impact our financial condition and results of operations.
Climate change and responses to climate change could have a material adversely affect our business, financial condition or results of operations. Concerns over the long-term impacts of climate change have led and will likely continue to lead to governmental efforts to mitigate such impacts. Consumers and businesses are also changing their behavior and business preferences as a result of climate change concerns. New governmental regulations or guidance relating to climate change, as well as changes in behavior and preferences of consumers and businesses could adversely impact our members and our business, including the potential for an increase in climate risk assessment, disclosure, and supervision by our regulators such as those reflected in the advisory bulletin issued by the FHFA in September 2024 on FHLBank System climate-related risk management. New or modified laws and regulations, along with increased stakeholder expectations, related to these matters may increase the costs of compliance for us and our members and alter the environment in which they conduct their businesses. The shift toward a lower-carbon economy, driven by policy regulations, low-carbon technology advancement, consumer sentiment, and/or liability risks, may negatively impact our business model and/or the business models of our members, asset valuations, and operating costs. To the extent that climate change and responses to climate change negatively impact the businesses and financial condition of our members, including members with exposure to the energy industry, our credit risk associated our members may increase.
Business Risk - Legislative and Regulatory
Our business has been, and may continue to be, adversely impacted by legislation and other ongoing actions by the U. S. government in response to periodic disruptions in the financial markets. To the extent that any actions by the U.S. government in response to an economic downturn, recession, inflation or other macro-level events or conditions cause a significant decrease in the aggregate amount of advances, investments, or mortgage loans or increase our operating costs, our financial condition and results of operations may be adversely affected.The FHFA also continues to issue proposed and final regulatory and other requirements. 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. We cannot predict the effect of any new regulations or other regulatory guidance on our operations. Changes in regulatory requirements could result in adverse effects in, among other things, cost of funds, capital requirements, accounting policies, liquidity management, debt issuance, derivative hedging activities, permissible business activities, additional contributions to FHLBank’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 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.
See Item 1 - “Business - Legislative and Regulatory Developments” for more information on potential future legislation and other regulatory activity affecting us.
We are subject to a complex body of laws and regulatory and other requirements that could change in a manner detrimental to our operations. The FHLBanks are GSEs organized under the authority of the Bank Act, and, as such, are governed by federal laws, regulations and other guidance adopted and applied by the FHFA. From time to time, Congress has amended the Bank 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 FHFA 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. There is a risk that actions by the FHFA toward Fannie Mae and Freddie Mac may have an unfavorable impact on the FHLBanks’ operations and/or financial condition because of the significant difference in their business models compared to ours. Congress is considering broad legislation for reform of GSEs as a result of the disruptions in the financial and housing markets and the conservatorships of Fannie Mae and Freddie Mac. We do not know how, when, or to what extent GSE reform legislation will be adopted, and if adopted, how it would impact the business or operations of FHLBank or the FHLBank System. We are, or may also become, subject to further regulations promulgated by the SEC, Commodity Futures Trade Commission (CFTC), Federal Reserve Bank, Financial Crimes Enforcement Network, or other regulatory agencies. In addition, there is a risk that our funding costs and access to funds could be adversely affected by changes in investors’ perception of the systemic risks generally associated with Fannie Mae and Freddie Mac or risks arising from the ultimate resolution to their conservatorship, could adversely affect funding costs, access to funding, competitive position, and our financial condition and results of operations.
Following a comprehensive review, the FHFA issued the System at 100 Report on November 7, 2023, presenting its review and analysis of the FHLBank System and the actions and recommendations that it plans to pursue over a multi-year effort, in service of its vision for the FHLBank System. The report focuses 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 changes, if any, will ultimately result from FHFA's recommendations in the report nor are we able to predict the extent or timing of such changes, particularly in light of the changes in FHFA’s leadership and potential changes in FHLBank’s regulatory environment, including without limitation, as discussed in Part I. Item 1: Business - Recent Regulatory and Legislative Developments. Any such changes as well as any resulting increased scrutiny of FHLBank and the FHLBank System and its mission and activities, however, could materially affect FHLBank’s business operations, results of operations and reputation, and the value of FHLBank membership.
A majority of the states, and some municipalities, have enacted laws prohibiting mortgage loans considered predatory or abusive. Some of these laws impose liability for violations not only on the originator, but also upon purchasers and assignees of mortgage loans. We take measures that we consider reasonable and appropriate to reduce our exposure to potential liability under these laws and are not aware of any potential or pending claim, action, or proceeding asserting that we are liable under these laws. However, there can be no assurance that we will never have any liability under predatory or abusive lending laws. This may negatively impact our financial condition and results of operations and potentially negatively impact our reputation.
We face a risk of noncompliance and enforcement action with respect to the Bank Secrecy Act and other anti-money laundering statutes and regulations. We are generally not subject to the state and federal banking laws affecting U.S. retail depository financial institutions. However, the Bank Act requires the FHLBanks to submit reports to the FHFA concerning transactions involving loans and other financial instruments that involve fraud or possible fraud. In addition, we are required to maintain an anti-money laundering program, under which we are required to report suspicious transactions to the Financial Crimes Enforcement Network (FinCEN) pursuant to the Bank Secrecy Act (BSA) and the Patriot Act. The BSA and the Patriot Act require financial institutions, among other duties, to institute and maintain an effective anti-money laundering program and to file reports such as suspicious activity reports and currency transaction reports. Violation of such requirements may result in significant civil money penalties imposed by federal banking agencies and FinCEN, which agencies have recently engaged in coordinated enforcement efforts against banks and other financial services providers with the U.S. Department of Justice (DOJ), the Drug Enforcement Administration and the Internal Revenue Service (IRS). We are also subject to increased scrutiny of compliance with the rules enforced by the Office of Foreign Asset Control, which may require sanctions for dealing with certain persons or countries. If our policies, procedures and systems are deemed deficient, we could be subject to fines and regulatory actions. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could have a material adverse effect on our business, results of operations and ability to pay dividends.
Business Risk - Strategic
We face competition for advances and access to funding, which could adversely affect our business, financial condition or results of operations. 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, and, in certain circumstances, other FHLBanks. Our members have access to alternative funding sources that may offer more favorable terms than we offer on our advances, including more flexible credit or collateral standards. Many of our competitors offer products and terms that we cannot offer.
The availability of alternative funding sources to our members may significantly decrease the demand for our advances. Any change we might make in pricing our advances, to compete more effectively with competitive funding sources, may decrease our profitability on advances. A decrease in the demand for our advances or a decrease in our profitability on advances, would negatively affect our business, financial condition and results of operations.
Likewise, our acquisition of mortgage loans is subject to competition. The most direct competition for purchases of mortgage loans comes from other buyers of conventional, conforming, fixed rate mortgage loans, such as Fannie Mae and Freddie Mac. Increased competition can result in the acquisition of a smaller market share of the mortgage loans available for purchase and, therefore, lower income from this business activity.
We also compete in the capital markets with Fannie Mae, Freddie Mac, and other GSEs, as well as corporate, sovereign, and supranational entities for funds raised through the issuance of consolidated obligations and other debt instruments. 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.
Member mergers or consolidations, failures, changes in member eligibility, or other losses or changes in member business with us could have a material adverse effect on our business and results of operations. As the financial services industry has consolidated, acquisitions involving some of our members have resulted in membership withdrawals or business level decreases. Additional acquisitions that lead to similar results are possible, including acquisitions in which the acquired institutions are merged into institutions located outside our district with which we cannot do business. Our risk of loss resulting from a single event (such as the loss of a member’s business due to the member’s acquisition by a non-member or a member being deemed ineligible for continued membership) would become proportionately greater if our advances and capital becomes more concentrated.
We could also be adversely impacted by the reduction in business volume that would arise from the failure of one or more of our members. If a member institution fails, although we are entitled to liquidate pledged collateral upon default, historically, failures have been resolved either through repayment directly from the FDIC or through the purchase and assumption of the advances by another surviving financial institution.Additionally, if members become financially distressed, we may, at the request of their regulators, decrease lending limits or, in certain circumstances, cease lending activities to certain members if they do not have adequate eligible collateral to support additional borrowings. If members are unable to obtain sufficient liquidity from us, that member's financial position may continue to deteriorate. This may negatively impact our reputation and, therefore, negatively impact our financial condition or results of operations.
We have a high concentration of advances and capital with a few members, and a loss of, or change in business activities with, such institutions could have a material adverse effect on our business and results of operations. We have a concentration of advances and capital with a few institutions (see Table 21). A reduction in advances by such institutions, or the loss of membership by such institutions, whether through merger, consolidation, withdrawal, or other action, may result in a reduction in our total assets and a possible reduction of capital as a result of the repurchase or redemption of capital stock. The reduction in assets and capital may also reduce our net income. 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 business, results of operations or ability to pay dividends.
Changes in our credit ratings may adversely affect our business operations. As of February 28, 2025, we are rated Aaa with a negative outlook by Moody’s and AA+ with a stable outlook by S&P. Adverse revisions to or the withdrawal of our credit ratings could adversely affect us in a number of ways. It might influence counterparties to limit the types of transactions they would be willing to enter into with us or cause counterparties to cease doing business with us. We have issued letters of credit to support deposits of public unit funds with our members. In some circumstances, loss of or reduction in any of our current ratings could result in our letters of credit no longer being acceptable to collateralize public unit deposits or other transactions. We have also executed various standby bond purchase agreements (SBPA) in which we provide a liquidity facility for bonds issued by the HFAs by agreeing to purchase the bonds in the event they are tendered and cannot be remarketed in accordance with specified terms and conditions. If our current short-term ratings are reduced, suspended, or withdrawn, the issuers will have the right to terminate these SBPAs, resulting in the loss of future fees that would be payable to us under these agreements.
Changes in the credit standing of the U.S. Government or other FHLBanks, including the credit ratings assigned to the U.S. Government or those FHLBanks, could adversely affect us. Pursuant to criteria used by S&P and Moody’s, the FHLBank System’s debt is linked closely to the U.S. sovereign rating because of the FHLBanks’ status as GSEs and the public perception that the FHLBank System would be likely to receive U.S. government support in the event of a crisis. The U.S. government’s fiscal challenges could impact the credit standing or credit rating of the U.S. government, which could in turn result in a revision of the rating assigned to us or the consolidated obligations of the FHLBank System.
The FHLBanks issue consolidated obligations that are the joint and several liability of all FHLBanks. Significant developments affecting the credit standing of one or more of the other FHLBanks, including revisions in the credit ratings of one or more of the other FHLBanks, could adversely affect the cost of consolidated obligations. An increase in the cost of consolidated obligations would adversely affect our cost of funds and negatively affect our financial condition. As of February 28, 2025, the consolidated obligations of the FHLBanks are rated Aaa/P-1 by Moody’s and AA+/A-1+ by S&P. All of the FHLBanks are rated Aaa with a negative outlook by Moody’s and AA+ with a stable outlook by S&P. Moody’s negative outlook for the FHLBanks aligns with Moody’s negative outlook on the ratings of the U.S. government. Changes in the credit standing or credit ratings of one or more of the other FHLBanks could result in a revision or withdrawal of the ratings of the consolidated obligations by the rating agencies at any time, which may negatively affect our cost of funds and our ability to issue consolidated obligations for our benefit. A negative rating action on the U.S. government would likely result in the same rating action for the FHLBanks.
Regulations relating to privacy, information security and data protection could increase our costs, affect or limit how we collect and use personal information and adversely affect our business opportunities. We are subject to various privacy, information security and data protection laws, including requirements concerning security breach notification and we could be negatively impacted by these laws. For example, we are subject to the GLB Act which, among other things: (1) imposes certain limitations on our ability to share non-public personal information about our members with non-affiliated third parties; (2) requires that we provide certain disclosures to members about our information collection, sharing and security practices and afford members the right to “opt out” of any information sharing by us with non-affiliated third parties (with certain exceptions); and (3) requires that we develop, implement and maintain a written comprehensive information security program containing safeguards that are appropriate based on our size and complexity, the nature and scope of our activities and the sensitivity of member information we process, as well as plans for responding to data security breaches. Many state and federal banking regulators, states and foreign countries have also enacted data security breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in certain circumstances in the event of a security breach. Moreover, legislators and regulators in the United States and other countries are increasingly adopting or revising privacy, information security and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of member or employee information and some of our current or planned business activities. This could also increase our costs of compliance and business operations and could reduce income from certain business initiatives. This includes increased privacy-related enforcement activity at the federal level by the Federal Trade Commission, as well as at the state level.
Compliance with current or future privacy, data protection and information security laws (including those regarding security breach notification) affecting member or employee data to which we are subject could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could have a material adverse effect on our business, financial condition or results of operations. Our failure to comply with data privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition or results of operations.
We may become liable for all or a portion of the consolidated obligations for which one or more of the other FHLBanks are the primary obligors, which could have a material adverse effect on our business and results of operations. Under the Bank Act and FHFA regulations, we are jointly and severally liable with the other FHLBanks for all consolidated obligations issued on behalf of all FHLBanks through the Office of Finance regardless of whether we receive all or any portion of the proceeds from any particular issuance of consolidated obligations. If another FHLBank were to default on its obligation to pay principal or interest on any consolidated obligation, the FHFA may allocate the outstanding liability among one or more of the remaining FHLBanks on a pro rata basis or on any other basis the FHFA may determine. In addition, we cannot pay any dividends to members or redeem or repurchase any shares of our capital stock unless the principal and interest due on all our consolidated obligations have been paid in full. As a result, our ability to pay dividends to our members or to redeem or repurchase shares of our 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.
Credit Risk
Declines in U.S. home prices or weaknesses in activity in the U.S. housing and mortgage markets may undermine the need for wholesale funding, which could have a material adverse impact on our business and results of operations. A deterioration of the U.S. housing market and national decline in home prices could adversely impact the financial condition of a number of our members, particularly those whose businesses are concentrated in the mortgage industry. One or more of our members may default on their obligations to us for a number of reasons, such as changes in financial condition, a reduction in liquidity, operational failures, or insolvency of their borrowers. A reduction in mortgage lending or mortgage assets held by member institutions may reduce their demand for wholesale funding.
Defaults by one or more of our institutional counterparties, including a derivatives clearinghouse, on its obligations to us could adversely affect our results of operations or financial condition. We have a high concentration of credit risk exposure to financial institutions as counterparties, some of which are outside of the United States. Our primary exposures to institutional counterparty risk are with: (1) obligations of mortgage servicers that service the loans we have as collateral on our credit obligations; (2) third-party providers of credit enhancements on the MBS that we hold in our investment portfolio, including mortgage insurers, bond insurers, and financial guarantors; (3) third-party providers of PMI and supplemental mortgage insurance (SMI) for mortgage loans purchased under the MPF Program; (4) uncleared derivative counterparties; (5) third-party custodians and futures commission merchants associated with cleared derivatives; and (6) unsecured money market and Federal funds investment transactions. A default by a counterparty could result in losses 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 have a material adverse effect on our business, results of operations or ability to pay dividends or redeem or repurchase capital stock.
We are required to centralize our risk with the derivatives clearinghouses. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and implementing Commodity Futures Trading Commission (CFTC) regulations require all clearable derivatives transactions to be cleared through a derivatives clearinghouse, as opposed to the pre-Dodd-Frank Act methods of entering into derivatives transactions that allowed us to distribute our risk among various counterparties. A default by a derivatives clearinghouse could: adversely affect our financial condition in the event the derivatives clearinghouse is unable to make payments owed to us or return our posted initial margin; jeopardize the effectiveness of derivatives hedging transactions; and adversely affect our operations as we may be unable to enter into certain derivatives transactions or do so at cost-effective rates.
Securities or loans pledged as collateral by our members or collateral securing mortgage loans or MBS investments could be adversely affected by the devaluation of, or inability to liquidate, the collateral in the event of a default. Although we require advances and other extensions of credit to be fully secured with collateral and require borrowers to pledge additional collateral when deemed necessary to protect ourselves from credit losses, changes in market conditions, uninsured or underinsured natural disasters, or other factors may cause the collateral to deteriorate in value, which could lead to a credit loss in the event of a default by a member or a borrower of a member and could have a materially adverse effect on our business and results of operations. If borrowers are unable to pledge additional collateral to fully secure their obligations, whether due to significant financial stress, market volatility, or otherwise, advance levels could decrease and/or credit risk could increase. During economic downturns or periods of significant economic and financial disruptions and uncertainties, the number of members exhibiting significant financial stress may increase, which may expose us to additional member credit risk. Changes in market perception of the financial strength of a financial institution can occur very rapidly and can be difficult to predict, as reflected in the failures of several members of other FHLBanks in March and May 2023. A reduction in liquidity in the financial markets or otherwise could have the same effect.
Our funding depends on our ability to access the capital markets, an interruption of which could have a material adverse effect on our business and results of operations. We conduct our business and fulfill our public purpose primarily by acting as an intermediary between our members and the capital markets. Our ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets (including investor demand). Our counterparties in the capital markets are also subject to regulations that could alter the balance sheet composition, market activities, and behavior of our counterparties in a way that could be detrimental to our access to the capital markets and overall financial market liquidity, which could have a negative impact on our funding costs and results of operations. Further, we rely on the Office of Finance for the issuance of consolidated obligations, and a failure or interruption of services provided by the Office of Finance could hinder our ability to access the capital markets. Certain events, such as severe cybersecurity, financial, economic, geopolitical, or other disruptions, could limit or prevent us from accessing the capital markets for an undeterminable period of time. An event that precludes us from accessing the capital markets through the sale of consolidated obligations may also limit our ability to enter into transactions to obtain funds from other sources. External forces are unpredictable and difficult to prevent, but can have a significant impact on our ability to manage our financial needs and to meet the credit and liquidity needs of our members. Accordingly, we cannot make any assurance that we will be able to obtain funding on terms acceptable to us in the future, if at all. If we cannot access funding when needed, our ability to support and continue our operations would be adversely affected, which could have a material adverse effect on our business, results of operations and ability to pay dividends or redeem or repurchase capital stock.
Market Risk
Changes in interest rates or an inability to successfully manage interest rate risk could have a material adverse effect on our business and results of operations. Changes in interest rates pose significant risks because most of our assets and liabilities are financial instruments. Our profitability depends significantly on our net interest income and is impacted by changes in the fair value of interest rate derivatives and any associated hedged items. We realize net interest income primarily from the spread between interest earned on our outstanding advances and investments less the interest paid on our consolidated obligations and other liabilities.
As noted above, our business and results of operations are affected significantly by the fiscal and monetary policies of the U.S. government and its agencies, including the Federal Reserve, which are difficult to predict. Since March 2022, to combat rising inflation, the Federal Open Market Committee (FOMC) of the Federal Reserve has significantly raised the target range for the Federal funds rate to a range of 4.25 percent to 4.50 percent as of December 31, 2024. The FOMC decreased the target range for the Federal funds rate beginning September 2024 and foreshadowed further decreases to the target rates in 2025. However, the FOMC also noted that further decreases to target rates are likely to occur at a slower pace than the 2024 rate cuts and it will continue to assess additional information and implications for monetary policy in determining future actions with respect to target rates. Future decreases in the policy rate will be dependent on trends in employment levels and inflation and financial and international developments.
Changes in overall market interest rates, changes in the relationships between short-term and long-term market interest rates, changes in the relationship between different interest rate indices, or differences in the timing of rate resets for assets and liabilities or related interest rate derivatives with interest rates tied to those indices, can affect the interest rates received from our interest-earning assets differently than those paid on our interest-bearing liabilities. This difference could result in an increase in interest expense relative to interest income, which would result in a decrease in our net interest spread, or a net decrease in earnings related to the relationship between changes in the valuation of our derivatives and any associated hedged items. Therefore, our ability to manage or hedge interest rate exposure due to direction and speed of interest rate changes significantly affects the success of our asset and liability management activities and our level of net interest income. We manage and monitor interest rate risk through a variety of measures. Given the unpredictability of the financial markets, capturing all variables and potential outcomes in these analyses is not possible. Key assumptions include, but are not limited to, mortgage loan volumes and pricing, market conditions for our consolidated obligations, interest rate spreads and prepayment speeds, implied volatility of interest rates and options contracts, cash flows on mortgage-related assets, and other model and model related assumptions. These assumptions are inherently uncertain. Actual results will differ from simulated results due to the timing, magnitude and frequency of interest rate changes and changes in market conditions, management strategies, and regulatory changes, among other factors. Volatility and disruption in the markets may result in a higher level of volatility in our interest-rate risk profile and could negatively affect our ability to manage interest-rate risk effectively.
We rely on derivatives to lower our cost of funds and reduce our interest rate, option and prepayment risk, and we may not be able to enter into effective derivative instruments on acceptable terms, which could have a material adverse effect on our business and results of operations. Our financial strategies are highly dependent on our ability to enter into derivative transactions on acceptable terms with acceptable counterparties in the necessary quantities and under satisfactory terms to hedge our corresponding assets and liabilities. We use derivatives to reduce our market risk and funding costs. We currently enjoy ready access in the over-the-counter (OTC) derivatives market for uncleared interest rate derivatives through a diverse group of investment grade rated counterparties. Several factors could have an adverse impact on our access to the OTC derivatives market, including changes in our credit rating, changes in the current counterparties’ credit ratings, reductions in our counterparties’ allocation of resources to the interest rate derivatives business and changes in the liquidity of that market created by a variety of regulatory or market factors. If we are unable to manage our hedging positions properly, or are unable to enter into derivative hedging instruments on desirable terms or at all, we may incur higher funding costs, be required to limit certain advance product offerings and be unable to effectively manage our interest rate risk and other risks, which could have a material adverse effect on our business, results of operations and ability to pay dividends or redeem or repurchase capital stock.
The use of derivatives also subjects us to earnings volatility caused primarily by the changes in the fair values of derivatives that do not qualify for hedge accounting and, to a lesser extent, by hedge ineffectiveness, which is the difference in the amounts recognized in our earnings for the changes in fair value of a derivative and the related hedged item. If we are unable to apply hedge accounting due to changes in accounting guidance or other changes in circumstances that impact our ability to utilize hedge accounting, the result could be an increase in the volatility of our earnings from period to period. Such increases in earnings volatility could affect our ability to pay dividends, our ability to meet our retained earnings threshold, and our members’ willingness to hold the capital stock necessary for membership and/or lending activities with us.
Liquidity and Capital Risk
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 to pay our obligations without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs. In addition, we are subject to various regulatory liquidity requirements, including a contingency funding plan designed to protect against temporary access disruptions to the FHLBank debt markets in response to a rise in capital market volatility. Our efforts to manage our liquidity position, including carrying out our contingency funding plan and the related costs, may not enable us to meet our obligations and the credit and liquidity needs of our members, which could have an adverse effect on our net interest income, and thereby, our financial condition and results of operations.
An increase in required Affordable Housing Program contributions could have a material adverse effect on our business, results of operations, our ability to pay dividends, or our ability to redeem or repurchase capital stock. The Bank Act requires each FHLBank to contribute to its AHP the greater of: (1) 10 percent of that FHLBank’s net earnings for the previous year; or (2) that FHLBank’s pro rata share of an aggregate of $100 million, the proration of which is based on the net earnings of the FHLBanks for the previous year. A failure of the FHLBanks to make the minimum $100 million annual AHP contribution in a given year or new or modified legislation could result in an increase in our required AHP contribution, which could adversely affect our results of operations, our ability to pay dividends, or our ability to redeem or repurchase capital stock.
We may not be able to pay dividends at rates consistent with past practices, which could result in lower investment returns for members. Under FHFA regulations and our capital plan, we may declare dividends on our capital stock only out of our unrestricted retained earnings and current net income. Our ability to pay dividends also is subject to statutory and regulatory requirements, including meeting all regulatory capital requirements. The potential promulgation of regulations or other requirements by the FHFA that would require higher levels of required or restricted retained earnings could lead to higher levels of retained earnings, and thus, lower amounts of unrestricted retained earnings available to be paid out to our members as dividends. Failure to meet any of our regulatory capital requirements would prevent us from paying any dividend.
Additionally, FHFA regulations on capital classifications could restrict our ability to pay dividends. Further, our ability to pay dividends at historical rates is impacted directly by our net income, so a decline in net income could result in a decline in dividend rates. A decline in dividend rates may diminish members’ interest in holding FHLBank capital stock and could decrease demand for advances, AMA, or letters of credit.
Lack of a public market and restrictions on transferring our stock could result in an illiquid investment for the holder. Under the GLB Act, FHFA regulations and our capital plan, our Class A Common Stock may be redeemed upon the expiration of a six-month redemption period and our Class B Common Stock after a five-year redemption period following our receipt of a redemption request. Only capital stock in excess of a member’s minimum investment requirement, capital stock held by a member that has submitted a notice to withdraw from membership, or capital stock held by a member whose membership has been terminated may be redeemed at the end of the redemption period. Further, we may elect to repurchase excess capital stock of a member at any time at our sole discretion.
We cannot guarantee, however, that we will be able to redeem capital stock even at the end of the redemption periods. The redemption or repurchase of our capital stock is prohibited by FHFA regulations and our capital plan if the redemption or repurchase of the capital stock would cause us to fail to meet our minimum regulatory capital requirements. Likewise, under such regulations and the terms of our capital plan, we could not honor a member’s capital stock redemption request if the redemption would cause the member to fail to maintain its minimum capital stock investment requirement. Moreover, since our capital stock may only be owned by our members (or, under certain circumstances, former members and certain successor institutions), and our capital plan requires our approval before a member may transfer any of its capital stock to another member, we can provide no assurance that a member would be allowed to sell or transfer any excess capital stock to another member at any point in time.
We may also suspend the redemption of capital stock if we reasonably believe that the redemption would prevent us from maintaining adequate capital against a potential risk, or would otherwise prevent us from operating in a safe and sound manner. In addition, approval from the FHFA for redemptions or repurchases is required if the FHFA or our board of directors were to determine that we have incurred, or are likely to incur, losses that result in, or are likely to result in, charges against our capital. Under such circumstances, we cannot guarantee that the FHFA would grant such approval or, if it did, upon what terms it might do so. We may also be prohibited from repurchasing or redeeming our capital stock if the principal and interest due on any consolidated obligations that we issued through the Office of Finance has not been paid in full or if we become unable to comply with regulatory liquidity requirements to satisfy our current obligations.
Accordingly, there are a variety of circumstances that would preclude us from redeeming or repurchasing our capital stock that is held by a member. Since there is no public market for our capital stock and transfers require our approval, we cannot guarantee that a member’s purchase of our capital stock would not effectively become an illiquid investment.
Operational Risk
Volatile market conditions increase the risk that our financial models will produce unreliable results. We make significant use of financial models to manage our market and credit risk, to make business decisions, and for financial accounting and reporting purposes. For example, we use models to measure and monitor exposures to interest rate and other market risks, including prepayment risk and credit risk 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. Such inaccuracies could have a material adverse effect on our business, results of operations and ability to pay dividends or redeem or repurchase capital stock.
Failure to keep pace with technological change, including the development and use of artificial intelligence, could adversely affect our business. The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services, including those incorporating data analytics, AI, generative AI and machine learning. The development and use of AI presents a number of risks and challenges to our business. The legal and regulatory environment relating to AI is uncertain and rapidly evolving and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment and other laws applicable to the use of AI. These evolving laws and regulations could require changes in our implementation of AI technology and increase our compliance costs and the risk of non-compliance. AI models, particularly generative AI models, may produce output or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful. In addition, the complexity of many AI models makes it difficult to understand why they are generating particular outputs.
Failure to successfully keep pace with technological change affecting our industry could harm our ability to compete effectively. Many of our competitors have substantially greater resources to invest in technological improvements. We face many challenges, including the increased demand to provide members electronic access to their accounts and the cost and implementation of systems to perform electronic banking transactions. Our ability to compete depends on our ability to continue to adapt technology on a timely and cost-effective basis to meet these demands. We may not be able to effectively or timely implement new technology-driven products and services or be successful in marketing these products and services to our members. In addition, the implementation of technological changes and upgrades to maintain current systems and integrate new systems may cause service interruptions, transaction processing errors, system conversion delays and other adverse effects. As these technologies are improved in the future, we may be required to make significant capital expenditures, which may increase our overall expenses and could have a material adverse effect on our business, results of operations and ability to pay dividends.
We are exposed to cybersecurity threats and potential security breaches and our efforts to minimize or respond to such threats may not be effective to prevent significant harm. Cybersecurity threats and potential security breaches could compromise our information and expose us to liability, which would cause our business and reputation to suffer. We rely heavily upon data processing, software, communications and information systems from a number of third parties to conduct our business. Our business involves the storage and transmission of proprietary information and security breaches could expose us to the risk of loss or misuse of such information, litigation and potential liability. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. We, our members and other financial institutions with which we interact, are subject to increasingly frequent, continuous attempts, including ransomware and malware attacks, to penetrate key systems by individual hackers, organized criminals, and in some cases, state-sponsored organizations. Our operations are also vulnerable to disruptions from human error, natural disasters, power loss, computer viruses, unauthorized access and other unforeseen events. Undiscovered data corruption could render our member information inaccurate. Third-party or internal systems and networks may fail to operate properly or become disabled due to deliberate attacks or unintentional events. These risks are further heightened by factors such as developments in generative AI, increased remote working and geopolitical turmoil. Cyberattacks and security breaches may also cause significant increases in operating costs, including the costs of compensating members for any resulting losses they may incur, and the costs and capital expenditures required to correct any deficiencies and strengthen the security of data processing and storage systems, and these costs may exceed coverage limits under our cyber insurance policies.
While we believe we are in compliance with all applicable privacy and data security laws, a cyber-incident could put our members’ confidential information at risk and expose us to significant liability. To date, we have no knowledge of a material cyber-incident or other material information security incident affecting the systems we operate and control. However, financial institutions are one of the top targets for cyber-attacks, and we can never be certain that all of our systems are entirely free from vulnerability to breaches of security or other technological difficulties or failures. The perpetual evolution of known cyber-threats requires us to devote significant resources to maintain, regularly update and backup our data security systems and processes, as we may not be able to anticipate, or effectively implement preventative measures against, all cyberattacks. We also incur significant costs in maintaining cybersecurity protections, including costs associated with maintaining cyber insurance coverage. A security breach or other cyber incident could have an adverse impact on, among other things, our revenue, ability to attract and maintain members and our reputation. In addition, a security breach could also subject us to additional regulatory scrutiny and expose us to civil litigation and possible financial liability, all of which could have a material adverse effect on our business, results of operations, ability to pay dividends, system availability and operational support.
For additional information on information system and security threats, see “Risk Management - Operations Risk Management” under Item 7. For additional information on cybersecurity, see “Item 1C - “Cybersecurity.”
We are required to make significant judgments, assumptions and estimates in the preparation of our financial statements and our judgments, assumptions and estimates may not be accurate. The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in our consolidated financial statements and accompanying notes. Our critical accounting policies and estimates, which are included in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” describe those significant accounting policies and estimates used in the preparation of our consolidated financial statements that we consider “critical” because they require judgments, assumptions and estimates that materially affect our consolidated financial statements and related disclosures. As a result, if future events or regulatory views concerning such analysis differ significantly from the judgments, assumptions and estimates in our critical accounting policies and estimates, those events or regulatory views could have a material impact on our consolidated financial statements and related disclosures, in each case resulting in our need to revise or restate prior period financial statements, cause damage to our reputation and the price of our common stock and adversely affect our business, financial condition and results of operations.
Our risk management framework may not be effective in mitigating risks or losses to us, and we may incur losses due to ineffective risk management processes and strategies. Our risk management framework is comprised of various processes, systems and strategies designed to manage our risk exposure, including credit, liquidity, interest rate, price, operational, reputation, strategic and compliance risks. Our framework also includes financial or other modeling methodologies that involve highly subjective management assumptions and judgment. Our risk management framework may not be effective under all circumstances and may not adequately mitigate risks or losses, which could result in adverse regulatory consequences and unexpected losses and could have a material adverse effect on our business, financial condition and results of operations.
For additional information on internal controls, see “Risk Management - Operations Risk Management” under Item 7.
We may be unable to attract and retain a highly qualified and diverse workforce, including key management. Our success depends on the talents and efforts of our employees, and particularly our management. While turnover has remained low over the last eighteen months, it is critical that we continue to evaluate the market to ensure we are offering employment terms and total rewards that are competitive. If we are not competitive across these key components, we may be unable to retain key management or to attract other highly qualified and diverse employees. Also, failure to develop and implement an adequate succession plan for key members of management could adversely affect our financial condition and results of operations.
Reliance on FHLBank Chicago as MPF Provider could have a material adverse effect on our business if FHLBank Chicago were to default on its contractual obligations owed to us. As part of our business, we participate in the MPF Program with FHLBank Chicago. In its role as MPF Provider, FHLBank Chicago provides the infrastructure, operational support, and maintenance of investor relations for the MPF Program and is also responsible for publishing and maintaining the MPF Guides, which include the requirements PFIs must follow in originating or selling and servicing MPF mortgage loans. If FHLBank Chicago changes its MPF Provider role, ceases to operate the MPF Program, or experiences a failure or interruption in its information systems and other technology, our mortgage loan assets could be adversely affected, and we could experience a related decrease in our net interest margin and profitability. In the same way, we could be adversely affected if any of FHLBank Chicago's third-party vendors engaged in the operation of the MPF Program, or investors that purchase mortgages under the MPF Program, were to experience operational or other difficulties that prevent the fulfillment of their contractual obligations.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B: Unresolved Staff Comments
Not applicable.

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ITEM 2. PROPERTIES
Item 2: Properties
We own our primary facility located at 500 SW Wanamaker Road, Topeka, Kansas. Our facility has Leadership in Energy and Environment Design Certified Gold status, in alignment with our commitment to sustainability, energy efficiency, and natural resource conservation.

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ITEM 3. LEGAL PROCEEDINGS
Item 3: Legal Proceedings
We are subject to various pending legal proceedings arising in the normal course of business, the outcome of which cannot be determined at this time. In the opinion of management, any liability we might incur upon the resolution of these claims and lawsuits will not, in the aggregate, have a material adverse effect on our consolidated financial position or results of operations.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4: Mine Safety Disclosures
Not applicable.
PART II

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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
As a cooperative, members own almost all of our Class A Common Stock and Class B Common Stock with the remainder of the capital stock held by former members that are required to retain capital stock ownership to support outstanding advance and mortgage loan activity executed while they were still members. However, the portion of our capital stock subject to mandatory redemption is treated as a liability and not as capital, including the capital stock of former members. There is no public trading market for our capital stock.
All of our member directors are elected by and from the membership, and we conduct our business in advances and mortgage loan acquisitions almost exclusively with our members. Depending on the class of capital stock, it may be redeemed at par value either six months (Class A Common Stock) or five years (Class B Common Stock) after we receive a written request by a member, subject to regulatory limits and to the satisfaction of any ongoing stock investment requirements applying to the member under our capital plan. We may repurchase shares held by members in excess of the members’ required stock holdings at our discretion at any time at par value. Par value of all common stock is $100 per share. As of February 28, 2025, we had 670 stockholders of record and 3,126,774 shares of Class A Common Stock and 21,331,378 shares of Class B Common Stock outstanding, including 2,677 shares of Class A Common Stock and no shares of Class B Common Stock subject to mandatory redemption by members or former members. “Classes” of stock are not registered under the Securities Act of 1933, as amended. The Recovery Act amended the Exchange Act to require the registration of a class of common stock of each FHLBank under Section 12(g) of the Exchange Act and for each FHLBank to maintain such registration and to be treated as an “issuer” under the Exchange Act, regardless of the number of members holding such a class of stock at any given time. Pursuant to an FHFA regulation, we voluntarily registered one of our classes of stock pursuant to Section 12(g)(1) of the Exchange Act.
Dividends may be paid in cash or shares of Class B Common Stock as authorized under our capital plan and approved by our board of directors. FHFA regulation prohibits any FHLBank from paying a stock dividend if excess stock outstanding will exceed one percent of its total assets after payment of the stock dividend. We manage our excess capital stock position to be able to regularly pay stock dividends.
Base stock dividends on Class A Common Stock and Class B Common Stock are anticipated to remain at or near current levels in 2025 relative to what was paid in 2024. Dividend rates are influenced by capital levels balanced with the rates we offer members on advances and the dividend rates we pay on activity-based stock. Historically, dividend rates have moved directionally with short-term interest rates; however, market conditions and movements in short-term interest rates can be unpredictable. Adverse changes in FHLBank’s financial results may result in lower dividend rates in future periods. See Item 1 - “Business - Capital, Capital Rules and Dividends” for more information regarding our retained earnings policy, and also see Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital” for a discussion of restrictions on dividend payments in the form of capital stock.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6: [Reserved]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) highlights selected information intended to assist readers in understanding our business and assessing our operations both historically and prospectively. This overview of MD&A may not contain all of the information that is important to readers. For a more complete understanding of events, trends and uncertainties, as well as the liquidity, capital, credit and market risks, and critical accounting estimates, affecting FHLBank, this discussion should be read in conjunction with our audited financial statements and related notes presented under Item 8 of this report. Our MD&A includes the following sections:
▪Executive Level Overview - tabular presentation of selected financial data and a general description of our business and financial highlights;
▪Financial Market Trends - a discussion of current trends in the financial markets and overall economic environment, including the related impact on our operations;
▪Critical Accounting Policies and Estimates - a discussion of accounting policies that require critical estimates and assumptions;
▪Results of Operations - an analysis of our operating results, including disclosures about the sustainability of our earnings;
▪Financial Condition - an analysis of our financial position;
▪Liquidity and Capital Resources - an analysis of our cash flows and capital position;
▪Risk Management - a discussion of our risk management strategies; and
▪Recently Issued Accounting Standards.
Additionally, refer to Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023 for our MD&A comparing fiscal year 2023 to fiscal year 2022.
Executive Level Overview
Table 3 presents selected financial data for the periods indicated (dollar amounts in thousands):
Table 3
12/31/2024 12/31/2023 12/31/2022 12/31/2021 12/31/2020
Statement of Condition (as of period end):
Total assets $ 75,900,980 $ 74,946,985 $ 71,992,842 $ 48,021,238 $ 52,591,712
Investments1
24,584,831 20,486,846 19,261,151 16,058,574 17,251,975
Advances 41,652,081 45,444,769 44,262,750 23,484,288 21,226,823
Mortgage loans, net 8,949,433 8,352,713 7,905,135 8,135,046 9,205,207
Total liabilities 71,801,251 71,056,333 68,316,298 45,306,972 49,923,945
Deposits 989,021 752,200 711,061 946,207 1,229,361
Consolidated obligations, net2
70,281,553 69,790,738 67,281,244 44,199,598 48,530,494
Total capital 4,099,729 3,890,652 3,676,544 2,714,266 2,667,767
Capital stock 2,631,605 2,607,683 2,507,709 1,499,301 1,574,004
Retained earnings 1,608,086 1,401,940 1,253,105 1,142,650 1,051,455
Statement of Income (for the year ended):
Net interest income 560,219 460,051 362,991 296,648 251,012
Other income (loss) 37,140 47,947 (13,942) (41,434) (40,148)
Voluntary housing and community investment program contributions3
16,498 3,000 - - -
Other expenses 101,674 94,008 80,854 77,529 80,407
Income before assessments 480,823 411,631 267,485 178,435 131,173
Affordable Housing Program (AHP) assessments 48,101 41,164 26,749 17,845 13,123
Net income 432,722 370,467 240,736 160,590 118,050
Selected Financial Ratios and Other Financial Data (for the year ended):
Dividends paid 226,576 221,632 130,281 69,395 70,824
Weighted average dividend rate4
8.82 % 8.47 % 6.47 % 4.49 % 4.38 %
Dividend payout ratio5
52.36 % 59.83 % 54.12 % 43.21 % 59.99 %
Return on average equity 10.84 % 9.56 % 7.47 % 5.88 % 4.50 %
Return on average assets 0.56 % 0.49 % 0.39 % 0.33 % 0.21 %
Average equity to average assets 5.15 % 5.10 % 5.28 % 5.54 % 4.59 %
Net interest margin6
0.73 % 0.61 % 0.60 % 0.61 % 0.44 %
Total capital ratio7
5.40 % 5.19 % 5.11 % 5.65 % 5.07 %
Regulatory capital ratio8
5.59 % 5.35 % 5.22 % 5.50 % 5.00 %
1 Includes trading securities, available-for-sale securities, held-to-maturity securities, interest-bearing deposits, securities purchased under agreements to resell, and Federal funds sold.
2 Consolidated obligations are bonds and discount notes that we are primarily liable to repay. See Note 15 to the financial statements for a description of the par amount of consolidated obligations of all FHLBanks for which we are jointly and severally liable.
3 Voluntary housing and community investment program contributions are expensed in the period they are approved by the board of directors and/or awarded.
4 Dividends paid in cash and stock on both classes of stock as a percentage of average capital stock eligible for dividends.
5 Ratio disclosed represents dividends declared and paid during the year as a percentage of net income for the period presented. FHFA regulation requires dividends be paid out of known income prior to declaration date.
6 Net interest income as a percentage of average earning assets.
7 GAAP capital stock, which excludes mandatorily redeemable capital stock, plus retained earnings and accumulated other comprehensive income (AOCI) as a percentage of total assets.
8 Regulatory capital (i.e., permanent capital and Class A Common Stock) as a percentage of total assets.
We are an independent regional wholesale bank structured as a member-owned cooperative serving eligible financial institutions in Colorado, Kansas, Nebraska and Oklahoma. Our primary business activities including making advances (loans) to and purchasing mortgage loans from our member financial institutions. Financial institutions eligible for membership in FHLBank include commercial banks, savings institutions, insurance companies and credit unions. CDFIs certified under the Community Development Banking and Financial Institutions Act of 1994 are also eligible for membership. While not eligible for membership, housing associates, including state and local housing authorities, that meet certain statutory criteria may also borrow from FHLBank. Our mission is to be a reliable source of liquidity and low-cost funding provider in support of our members’ residential mortgage lending and related housing and economic development needs of the communities they serve. We seek to maintain a balance between our public purpose and our ability to provide adequate returns on the capital supplied by our members. Our structure as a financial cooperative allows our business to be scalable and self-capitalizing without taking undue risks, diminishing capital adequacy or jeopardizing profitability. Therefore, FHLBank is generally designed to expand and contract in asset size as the needs of our members and their communities change.
2024 Financial Highlights:
•Total assets: Total assets increased from $74.9 billion as of December 31, 2023 to $75.9 billion as of December 31, 2024, driven by the $4.1 billion increase in short- and long-term investments between periods and the $0.6 billion increase in mortgage loans, offset by a $3.8 billion decrease in advances. The average balance of interest-earning assets increased $1.5 billion from the year ended December 31, 2023 to December 31, 2024, driven by a $2.6 billion increase in the average balance of short- and long-term investments and a $0.6 billion increase in the average balance of mortgage loans, partially offset by a $1.7 billion decrease in the average balance of advances.
•Primary Mission Assets: Advances to members and housing associates and mortgage loans purchased from members are Primary Mission Assets because they are fundamental to the business and mission of FHLBank. The Primary Mission Asset ratio, as defined by the FHFA under its core mission achievement guidance, is calculated as year-to-date averages of advances and mortgage loans to consolidated obligations (less certain U.S. Treasury securities). As of December 31, 2024 and December 31, 2023, our Primary Mission Asset ratio was 78 percent and 81 percent, respectively.
•Advances: Advances decreased to $41.7 billion at December 31, 2024 compared to $45.4 billion at December 31, 2023, representing 54.9 percent of total assets as of December 31, 2024, compared to 60.6 percent as of December 31, 2023. The average balance of advances decreased $1.7 billion, or 3.7 percent to $44.5 billion for the year ended December 31, 2024 when compared to the prior year period. Outside of period-end volatility with larger members, advance demand continues to be relatively stable among FHLBank membership, especially among community banks. We continue to execute our liquidity mission by serving as a reliable source of liquidity and funding for our members.
•Mortgage loans: Mortgage loans increased to $8.9 billion at December 31, 2024 compared to $8.3 billion at December 31, 2023, representing 11.8 percent of total assets at December 31, 2024, compared to 11.1 percent at December 31, 2023. The average balance of mortgage loans increased $0.6 billion, or 7.6 percent, for the year ended December 31, 2024 when compared to the prior year period. Interest income continues to be positively impacted by originations at interest rates higher than the weighted average rate of the existing portfolio despite increased mortgage loan prepayments and the related premium amortization.
•Net income: For the year ended December 31, 2024, net income increased $62.2 million, to $432.7 million compared to $370.5 million for the same period in the prior year. The increase in net income was due primarily to an increase in net interest income, partially offset by fair value fluctuations of derivatives and trading securities, increases in operating expenses, and statutory and voluntary contributions to housing and community investment programs.
•Net interest income/margin: Net interest income increased $100.1 million to $560.2 million for the year ended December 31, 2024 compared to $460.1 million for the year ended December 31, 2023. The increase in net interest income was driven primarily by improvements in funding and asset spreads, including the impact of fair value hedges, and a $1.5 billion increase in average earning assets. Net interest margin increased twelve basis points, from 0.61 percent for the year ended December 31, 2023 to 0.73 percent for the year ended December 31, 2024. Net interest spread increased twelve basis points, from 0.32 percent for the year ended December 31, 2023 to 0.44 percent for the year ended December 31, 2024.
•Performance ratios: Return on average equity (ROE) increased to 10.8 percent for the year ended December 31, 2024 compared to 9.6 percent for the year ended December 31, 2023. The increase was attributed to the increase in net income.
•Dividends: The Class A Common Stock dividend rate of 4.75 percent per annum and the Class B Common Stock dividend rate of 9.50 percent per annum combined for a weighted average dividend rate for the year ended December 31, 2024 of 8.8 percent.
Financial Market Trends
The primary external factors that affect net interest income are market interest rates and the general state of the economy, as discussed in greater detail below.
General discussion of the level of market interest rates:
Table 4 presents selected market interest rates as of the dates or for the periods shown.
Table 4
Market Instrument 2024 2023 2024 2023
Average Rate Average Rate Ending Rate Ending Rate
Secured Overnight Financing Rate (SOFR)1
5.15 % 5.01 % 4.49 % 5.38 %
Federal funds effective rate1
5.15 5.03 4.33 5.33
Federal Reserve interest rate on reserve balances1
5.21 5.10 4.40 5.40
3-month U.S. Treasury bill1
5.10 5.18 4.32 5.34
2-year U.S. Treasury note1
4.38 4.60 4.24 4.25
5-year U.S. Treasury note1
4.13 4.06 4.38 3.85
10-year U.S. Treasury note1
4.21 3.96 4.57 3.88
30-year residential mortgage note rate1,2
6.80 6.91 6.97 6.76
1 Source is Bloomberg.
2 Mortgage Bankers Association weekly 30-year fixed rate mortgage contract rate.
Since March 2022, the FOMC of the Federal Reserve has significantly raised the target range for the Federal funds rate, from 0.25 percent to 0.50 percent to a range of 4.25 percent to 4.50 percent as of December 31, 2024. The FOMC held the target range between 5.25 percent and 5.50 percent for much of 2023 and 2024 but began reducing the target rates in September 2024 and foreshadowed further decreases to the target rates in 2025. The FOMC maintained the target range for the Federal funds rate at the January 2025 meeting, indicating that additional adjustments to the target range for the Federal funds rate will depend on incoming data, the evolving outlook, and the balance of risks. The FOMC also indicated it would continue reducing its holdings of Treasury securities and agency debt and agency MBS.
We issue debt at a spread to U.S. Treasury security yields. As a result, the costs of issuing consolidated obligations and making advances are sensitive to interest rates. The cost of issuing short-term debt has declined with the decrease in market rates, and the continued high demand for short-term Agency debt has kept this spread to the comparable U.S. Treasury security relatively narrow.
Volatility in the capital markets can also impact the demand for and cost of debt issued by the FHLBanks. Efforts of the Federal Reserve Board to ease inflation have contributed to volatility in the financial markets, financial difficulties experienced by some depository institutions, and uncertainties about the economic outlook. For further discussion of FHLBank debt, see this Item 7 - “Financial Condition - Consolidated Obligations.”
Critical Accounting Policies and Estimates
The preparation of our financial statements in accordance with GAAP requires management to make a number of judgments, estimates, and assumptions that affect our reported results and disclosures. Several of our accounting policies are inherently subject to valuation assumptions and other subjective assessments and are more critical than others in terms of their importance to results. Given the assumptions and judgment used, we have identified the accounting for derivatives and hedging activities as a critical accounting estimate. Our financial condition and results of operations could be materially affected under different conditions or different assumptions related to this accounting estimate.
Accounting for Derivatives and Hedging Activities, including Valuation of Derivatives and Hedged Items: Derivative instruments are carried at fair value on the Statements of Condition. Any change in the fair value of a derivative is recorded each period in current period earnings or other comprehensive income (OCI), depending upon whether the derivative is designated as part of a hedging relationship and, if it is, the type of hedging relationship. Therefore, the assumptions and judgment most critical to the application of this accounting policy are those affecting the estimation of fair values of derivative instruments and the related hedged items, which may have a significant impact on the results reported. A majority of our derivatives are structured to offset some or all of the risk exposure inherent in our lending, mortgage purchase, investment, and funding activities. We seek to utilize hedging techniques that are effective under the hedge accounting requirements; however, in some cases, we have elected to enter into derivatives that are economically effective at reducing risk but do not meet hedge accounting requirements. The accounting framework introduces the potential for considerable income variability from period to period. Specifically, a mismatch can exist between the timing of income and expense recognition from assets or liabilities and the income effects of derivative instruments positioned to mitigate market risk and cash flow variability. Therefore, during periods of significant changes in interest rates and other market factors, reported earnings may exhibit considerable variability. At December 31, 2024, our derivatives portfolio included notional amounts of $37.9 billion accounted for as fair value hedges and $14.1 billion accounted for as economic hedges, the gross fair value of derivative assets and liabilities was $95.7 million and $226.4 million, respectively, and the net fair value of derivative assets and liabilities as of December 31, 2024 was $357.3 million and $6.1 million, respectively.
FHLBank bases the fair values of derivatives on instruments with similar terms or market prices, when available. However, active markets do not exist for many of FHLBank’s derivatives. Consequently, fair values for these instruments are generally estimated using standard valuation techniques such as comparisons to similar instruments or discounted cash flow analysis, which uses observable market inputs, such as discount rate, forward interest rates, and volatility assumptions. Observable market inputs are actively quoted and can be validated to external sources. See Note 14 of the Notes to Financial Statements under Item 8 - “Financial Statements and Supplementary Data” for discussion of the valuation methodologies and primary inputs used to develop the fair value measurement for these instruments.
A hedging relationship is created from the designation of a derivative financial instrument as hedging our exposure to changes in the fair value of a financial instrument. Fair value hedge accounting allows for the offsetting fair value of the hedged risk in the hedged item to also be recorded in current period earnings. Perfectly effective hedges that use interest rate swaps as the hedging instrument and that meet certain stringent criteria can qualify for “shortcut” fair value hedge accounting. Shortcut hedge accounting allows for the assumption of no ineffectiveness, which means that the change in fair value of the hedged item can be assumed to be equal to the change in fair value of the derivative.
For derivative transactions that potentially qualify for long haul fair value hedge accounting treatment, management must assess how effective the derivatives have been, and are expected to be, in hedging offsetting changes in the estimated fair values attributable to the risks being hedged in the hedged items. Quantitative hedge effectiveness testing is performed at the inception of the hedging relationship and on an ongoing basis for long haul fair value hedges. We perform testing at hedge inception based on regression analysis of the hypothetical performance of the hedging relationship using historical market data. We then perform regression testing on an ongoing basis using accumulated actual values in conjunction with hypothetical values. For the hedging relationship to be considered effective, results must fall within established tolerances. If the hedge fails effectiveness testing, the hedge no longer qualifies for hedge accounting and the derivative is marked to estimated fair value through current period earnings without any offsetting change in estimated fair value related to the hedged item.
For derivative instruments and hedged items that meet the requirements as described above and are designated as fair value hedges, we do not anticipate any significant impact on our financial condition or operating performance. For derivative instruments not qualifying for hedge accounting or with no identified hedged item (economic derivatives or economic hedges), changes in the market value of the derivative are reflected in income without any offset. This portfolio of economic derivatives consisted primarily of: (1) interest rate swaps hedging fixed rate MBS and non-MBS trading investments; (2) interest rate caps hedging duration risk; (3) interest rate swaps hedging consolidated obligation discount notes with tenors less than six months; and (4) interest rate basis swaps hedging cost of funds. While the fair value of derivative instruments with no offsetting qualifying hedged item will fluctuate with changes in interest rates and the impact on our earnings can be material, the change in fair value of trading securities associated with economic hedges is expected to partially offset that impact. The estimated fair values of the derivatives and hedged items do not have any cumulative economic effect if the derivative and the hedged item are held to maturity, or contain mutual optional termination provisions at par. Since these fair values fluctuate throughout the hedge period and eventually return to zero (derivative) or par value (hedged item) on the maturity or option exercise date, the earnings impact of fair value changes is only a timing issue for hedging relationships that remain outstanding to maturity or the call termination date. See Tables 43 and 44 under Item 7A - “Quantitative and Qualitative Disclosures About Market Risk,” which present the notional amount and fair value amount for derivative instruments by hedged item, hedging instrument, hedging objective, and accounting designation. See Tables 10 through 12 under this Item 7, which show the relationship of gains/losses on economic hedges and gains/losses on the trading securities being hedged by economic derivatives. Our projections of changes in fair value of the derivatives have been consistent with actual results.
See Note 1 and Note 6 of the Notes to Financial Statements under Item 8 - “Financial Statements and Supplementary Data” for additional discussion of accounting for derivatives and types of hedging transactions.
Results of Operations
Earnings Analysis: Table 5 presents changes in the major components of our net income (dollar amounts in thousands):
Table 5
Increase (Decrease) in Earnings Components
12/31/2024 vs. 12/31/2023
Dollar Change Percentage Change
Total interest income $ 315,446 8.3 %
Total interest expense 215,278 6.4
Net interest income 100,168 21.8
Provision (reversal) for credit losses on mortgage loans (995) (155.2)
Net interest income after mortgage loan loss provision 101,163 22.0
Net gains (losses) on trading securities (2,592) (13.3)
Net gains (losses) on derivatives (9,317) (62.4)
Other non-interest income 1,102 8.2
Total other income (loss) (10,807) (22.5)
Operating expenses 4,595 18.1
Other non-interest expenses 16,569 23.1
Total other expenses 21,164 21.8
AHP assessments 6,937 16.9
NET INCOME $ 62,255 16.8 %
Net income increased $62.2 million, or 16.8 percent, to $432.7 million for the year ended December 31, 2024 compared to $370.5 million for the year ended December 31, 2023 primarily attributed to a $100.1 million increase in net interest income, partially offset by an $11.9 million decrease related to fluctuations in the fair value of derivatives and trading securities and a $21.2 million increase in other expenses, as discussed in greater detail below.
Net Interest Income: Net interest income increased $100.1 million, or 21.8 percent, to $560.2 million for the year ended December 31, 2024 compared to $460.1 million for the year ended December 31, 2023. Balance sheet composition, market interest rates and trends, and net interest spread affect net interest income and net interest margin on earning assets, including advances, mortgage loans, and investments. The increase from 2023 to 2024 was attributed primarily to improvements in funding spreads and shifts in balance sheet composition. Asset spreads also improved, particularly on long-term investments and advances, combined with the impact of higher average interest rates on fair value hedges as compared to the prior period.
Net interest margin increased twelve basis points during 2024 compared to 2023, from 0.61 percent for the year ended December 31, 2023 to 0.73 percent for the year ended December 31, 2024 due to increased average balances on short- and long-term investments and mortgage loans at higher interest rates, combined with the impact of higher interest rates and spreads on fair value hedges (see Table 8). Net interest spread, which is the difference between the yield on interest-earning assets and the average cost of funding, increased twelve basis points from 2023 to 2024 due to shifts in balance sheet composition between advances and investments, combined with spread improvements across most asset categories as discussed above. Net interest margin increased as a result of the improvement in net interest spread attributed to the aforementioned factors. For further discussion of investments, advances and mortgage loans, see this “Financial Condition” under this Item 7.
Net interest income and net interest margin are also impacted by derivative and hedging activities, as net interest settlements on derivatives and the changes in fair values of hedged items and the corresponding derivative instruments designated in fair value hedging relationships are recorded in net interest income. For 2024, net interest income increased $158.5 million due to the impact of fair value hedges compared to the prior year due to increases in intermediate and long-term interest rates between periods. Tables 6 and 7 present the impact of derivatives and hedging activities recorded in net interest income (in thousands):
Table 6
Advances Investments Mortgage Loans Consolidated Obligation Discount Notes Consolidated Obligation Bonds Total
Unrealized gains (losses) due to fair value changes
$ 4,607 $ 47,706 $ - $ (1,203) $ (1,581) $ 49,529
Net amortization/accretion of hedging activities
3,413 - 785 - 392 4,590
Net interest received (paid) 296,828 199,032 - (6,464) (269,467) 219,929
Price alignment amount1
(13,485) (15,425) - 248 23 (28,639)
TOTAL $ 291,363 $ 231,313 $ 785 $ (7,419) $ (270,633) $ 245,409
1 Represents the interest amount on derivative collateral for which variation margin is characterized as a daily settled contract.
Table 7
Advances Investments Mortgage Loans Consolidated Obligation Discount Notes Consolidated Obligation Bonds Total
Unrealized gains (losses) due to fair value changes
$ (6,037) $ 27,739 $ - $ (883) $ (4,256) $ 16,563
Net amortization/accretion of hedging activities
2,177 - 937 - 290 3,404
Net interest received (paid) 271,973 184,570 - (34,679) (319,386) 102,478
Price alignment amount1
(18,618) (18,091) - 698 444 (35,567)
TOTAL $ 249,495 $ 194,218 $ 937 $ (34,864) $ (322,908) $ 86,878
1 Represents the interest amount on derivative collateral for which variation margin is characterized as a daily settled contract.
Table 8 presents average balances and yields of major earning asset categories and the sources funding those earning assets (dollar amounts in thousands):
Table 8
2024 2023 2022
Average
Balance Interest
Income/Expense Yield Average
Balance Interest
Income/Expense Yield Average
Balance Interest
Income/Expense Yield
Interest-earning assets:
Interest-bearing deposits $ 2,774,672 $ 144,639 5.21 % $ 2,817,399 $ 143,330 5.09 % $ 1,560,269 $ 33,548 2.15 %
Securities purchased under agreements to resell
2,909,262 153,604 5.28 2,391,466 121,367 5.08 2,311,370 42,895 1.86
Federal funds sold 4,637,672 241,903 5.22 4,321,685 221,114 5.12 3,426,096 68,392 2.00
Investment securities1,2
13,695,304 820,796 5.99 11,838,703 644,726 5.45 11,129,636 264,278 2.37
Advances1,2
44,460,023 2,434,890 5.48 46,166,703 2,409,840 5.22 34,290,538 742,694 2.17
Mortgage loans3,4
8,694,716 322,061 3.70 8,080,282 261,352 3.23 8,023,766 228,583 2.85
Other interest-earning assets
35,232 712 2.02 50,302 1,430 2.84 47,418 885 1.87
Total earning assets 77,206,881 4,118,605 5.34 75,666,540 3,803,159 5.03 60,789,093 1,381,275 2.27
Other non-interest-earning assets
280,207 240,099 223,334
Total assets $ 77,487,088 $ 75,906,639 $ 61,012,427
Interest-bearing liabilities:
Deposits $ 819,721 40,415 4.93 $ 685,032 32,921 4.81 $ 785,204 10,342 1.32
Consolidated obligations1:
Discount Notes 17,122,493 888,622 5.19 22,070,185 1,102,702 5.00 18,092,988 368,075 2.03
Bonds 54,600,307 2,627,916 4.81 48,159,776 2,206,160 4.58 38,125,726 638,751 1.68
Other borrowings 44,729 1,433 3.20 46,359 1,325 2.86 46,803 1,116 2.39
Total interest-bearing liabilities
72,587,250 3,558,386 4.90 70,961,352 3,343,108 4.71 57,050,721 1,018,284 1.78
Capital and other non-interest-bearing funds
4,899,838 4,945,287 3,961,706
Total funding $ 77,487,088 $ 75,906,639 $ 61,012,427
Net interest income and net interest spread5
$ 560,219 0.44 % $ 460,051 0.32 % $ 362,991 0.49 %
Net interest margin6
0.73 % 0.61 % 0.60 %
1 Interest income/expense and average rates include the effect of associated derivatives that qualify for fair value hedge accounting treatment.
2 Interest income includes prepayment/yield maintenance fees.
3 Credit enhancement income payments made to PFIs are netted against interest earnings on the mortgage loans. The expense related to these payments was $7.2 million, $6.5 million and $6.4 million for the years ended December 31, 2024, 2023, and 2022, respectively.
4 Mortgage loans average balance includes outstanding principal for non-performing conventional loans. However, these loans no longer accrue interest.
5 Net interest spread is the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
6 Net interest margin is defined as net interest income as a percentage of average interest-earning assets.
Changes in the volume of interest-earning assets and the level of interest rates influence changes in net interest income, net interest spread and net interest margin. Table 9 summarizes changes in interest income and interest expense (in thousands):
Table 9
2024 vs. 2023 2023 vs. 2022
Increase (Decrease) Due to Increase (Decrease) Due to
Volume1,2
Rate1,2
Total Volume1,2
Rate1,2
Total
Interest Income3:
Interest-bearing deposits $ (2,194) $ 3,503 $ 1,309 $ 40,729 $ 69,053 $ 109,782
Securities purchased under agreements to resell
27,173 5,064 32,237 1,538 76,934 78,472
Federal funds sold 16,415 4,374 20,789 21,882 130,840 152,722
Investment securities 107,408 68,662 176,070 17,860 362,588 380,448
Advances (90,967) 116,017 25,050 328,744 1,338,402 1,667,146
Mortgage loans 20,865 39,844 60,709 1,621 31,148 32,769
Other assets (366) (352) (718) 57 488 545
Total earning assets 78,334 237,112 315,446 412,431 2,009,453 2,421,884
Interest Expense3:
Deposits 6,621 873 7,494 (1,480) 24,059 22,579
Consolidated obligations:
Discount notes (255,367) 41,287 (214,080) 96,362 638,265 734,627
Bonds 305,870 115,886 421,756 206,522 1,360,887 1,567,409
Other borrowings (48) 156 108 (10) 219 209
Total interest-bearing liabilities 57,076 158,202 215,278 301,394 2,023,430 2,324,824
Change in net interest income $ 21,258 $ 78,910 $ 100,168 $ 111,037 $ (13,977) $ 97,060
1 Changes in interest income and interest expense not identifiable as either volume-related or rate-related have been allocated to volume and rate based upon the proportion of the absolute value of the volume and rate changes.
2 Amounts used to calculate volume and rate changes are based on numbers in dollars. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same results.
3 Interest income/expense and average rates include the effect of associated derivatives that qualify for fair value hedge accounting treatment.
Net Gains (Losses) on Derivatives: Tables 10 and 11 present the earnings impact of derivatives by financial instrument as recorded in other non-interest income (in thousands):
Table 10
Advances Investments Mortgage Loans Consolidated Obligation Discount Notes Consolidated Obligation Bonds Balance Sheet
Total
Derivatives not designated as hedging instruments:
Economic hedges - unrealized gains (losses) due to fair value changes
$ 591 $ (16,667) $ - $ 811 $ (571) $ (4,030) $ (19,866)
Mortgage delivery commitments - - (468) - - - (468)
Economic hedges - net interest received (paid)
4,283 23,903 - (1,027) (2,501) 1,620 26,278
Price alignment amount1
(207) (123) - (1) (7) - (338)
Net gains (losses) on derivatives 4,667 7,113 (468) (217) (3,079) (2,410) 5,606
Net gains (losses) on trading securities hedged on an economic basis with derivatives
- 16,871 - - - - 16,871
TOTAL $ 4,667 $ 23,984 $ (468) $ (217) $ (3,079) $ (2,410) $ 22,477
1 Represents the interest amount on derivative collateral for which variation margin is characterized as a daily settled contract.
Table 11
Advances Investments Mortgage Loans Consolidated
Obligation Discount Notes Consolidated
Obligation Bonds Total
Derivatives not designated as hedging instruments:
Economic hedges - unrealized gains (losses) due to fair value changes
$ 911 $ (23,874) $ - $ 3,624 $ 837 $ (18,502)
Mortgage delivery commitments - - (809) - - (809)
Economic hedges - net interest received (paid) 3,616 33,327 - (954) (956) 35,033
Price alignment amount1
(224) (594) - (10) 29 (799)
Net gains (losses) on derivatives 4,303 8,859 (809) 2,660 (90) 14,923
Net gains (losses) on trading securities hedged on an economic basis with derivatives
- 19,579 - - - 19,579
TOTAL $ 4,303 $ 28,438 $ (809) $ 2,660 $ (90) $ 34,502
1 Represents the interest amount on derivative collateral for which variation margin is characterized as a daily settled contract.
The volatility in other income (loss) is driven predominantly by net gains (losses) on economic derivatives, which generally include interest rate swaps, caps and floors. Net gains (losses) from derivatives are sensitive to several factors, including: (1) the general level of interest rates and change between indices; (2) the shape of the term structure of interest rates; and (3) implied volatilities of interest rates. The fair value of options, particularly interest rate caps and floors, are also impacted by the time value decay that occurs as the options approach maturity, but this factor represents the normal amortization of the cost of these options and flows through income irrespective of any changes in the other factors impacting the fair value of the options (level of rates, shape of curve, and implied volatility).
As reflected in Tables 10 and 11, the majority of the net unrealized gains and losses on derivatives are related to changes in the fair values of economic swaps related to investments. Net interest payments or receipts on economic derivatives flow through net gains (losses) on derivatives instead of net interest income, which does not reflect the full economic impact of the swaps on yields, especially for trading investments that are economically swapped to variable rates. We generally record net unrealized gains on derivatives when the overall level of interest rates rises over the period and record net unrealized losses when the overall level of interest rates falls over the period. Net unrealized gains or losses on derivatives will continue to be a function of the general level of swap rates but are also impacted by swap spreads in relationship to the relevant index rate.
For the years ended December 31, 2024 and 2023, net gains (losses) on derivatives resulted in other income of $5.6 million and $14.9 million, respectively. The decrease between periods was attributed to fair value fluctuations resulting from changes in swap index rates, partially offset in both periods by net interest settlements of $26.3 million and $35.0 million for the years ended December 31, 2024 and 2023, respectively.
The fair value gains and losses (excluding related net interest settlements) on the economic interest rate swaps hedging the multifamily GSE MBS, U.S. Treasury obligations, and GSE debentures were largely offset by the fair value gains and losses attributable to the associated securities for the years ended December 31, 2024 and 2023, which are recorded in net gains (losses) on trading securities as reflected in Table 12. Unrealized gains and losses on trading securities are generally driven by movements in intermediate interest rates between periods and are discussed in greater detail below.
Table 12
2024 2023
Gains (Losses) on Derivatives Gains (Losses) on Trading Securities Net Gains (Losses) on Derivatives Gains (Losses) on Trading Securities Net
U.S. Treasury obligations $ - $ - $ - $ (4,384) $ 3,767 $ (617)
GSE debentures (5,313) 4,446 (867) (6,971) 4,983 (1,988)
GSE MBS (11,354) 12,425 1,071 (11,431) 10,829 (602)
TOTAL $ (16,667) $ 16,871 $ 204 $ (22,786) $ 19,579 $ (3,207)
For additional detail regarding gains and losses on trading securities, see Table 13 and related discussion below.
See Tables 43 and 44 under Item 7A - “Quantitative and Qualitative Disclosures About Market Risk” for additional detail regarding notional and fair value amounts of derivative instruments.
Net Gains (Losses) on Trading Securities: Our trading portfolio is comprised primarily of fixed rate multifamily GSE MBS, with a small percentage of fixed rate GSE debentures and variable rate single-family GSE MBS. Periodically, we also invest in short-term securities and U.S. Treasury obligations classified as trading. In general, the fixed rate securities are related to economic hedges in the form of interest rate swaps that convert fixed rates to variable rates on the fixed rate securities and the related economic hedges. The fair values of the fixed rate multifamily GSE MBS are affected by changes in mortgage rates and credit spreads and are swapped on an economic basis to SOFR. The fair values of the fixed rate GSE debentures are affected by changes in intermediate term interest rates and credit spreads and are swapped on an economic basis to SOFR.
All unrealized gains and losses related to trading securities are recorded in other income (loss) as net gains (losses) on trading securities; however, only gains and losses relating to trading securities that are related to economic hedges are included in Table 12. Unrealized gains (losses) fluctuate as the fair value of our trading portfolio fluctuates. There are a number of factors that can impact the fair value of a trading security including the movement in interest rates, changes in credit spreads, the passage of time, and changes in price volatility. Table 13 presents the major components of the net gains (losses) on trading securities (in thousands):
Table 13
2024 2023
Trading securities not hedged:
U.S. obligation MBS and GSE MBS $ 91 $ (25)
Total trading securities not hedged 91 (25)
Trading securities hedged on an economic basis with derivatives:
U.S. Treasury obligations - 3,767
GSE debentures 4,446 4,983
GSE MBS 12,425 10,829
Total trading securities hedged on an economic basis with derivatives
16,871 19,579
TOTAL $ 16,962 $ 19,554
The unrealized gains on the securities in the trading portfolio for the current periods reflect the changes in term Treasury and mortgage rates relative to the prevailing yields at the end of the prior year periods. In addition to interest rates and credit spreads, the value of these securities is affected by price convergence to par which results in a decrease in their current premium price (i.e., time decay).
Other Expenses: Other expenses, which includes compensation and benefits, other operating expenses and voluntary housing and community investment program contributions, increased $21.2 million for the year ended December 31, 2024. The increase is primarily a result of a $2.6 million increase in compensation and benefits and $13.5 million in voluntary grant programs awarded in partnership with FHLBank members to support affordable housing and community development initiatives throughout Colorado, Kansas, Nebraska, and Oklahoma. These voluntary contributions are in addition to the statutory AHP assessments under the Bank Act required to fund affordable housing initiatives. Compensation and benefits increased due to hiring for new and open positions and higher incentive accruals based on incentive plan goal attainment.
Affordable Housing and Community Investment Programs:
In addition to the 10 percent AHP statutory assessment, the FHLBanks jointly stated in their public comment letter to the FHFA that they are already making or will make voluntary contributions of 5.0 percent of earnings in support of community investment activities. For 2024, we committed to provide 2.5 percent of our 2023 earnings (calculated as net income before our AHP assessment, voluntary contribution program expense, and interest expense on mandatorily redeemable capital stock). We exceeded this commitment with voluntary housing program expenses totaling 3.5 percent of 2023 earnings. For 2025, the commitment increased to 5.0 percent of 2024 earnings calculated under the same method. Voluntary contribution amounts expensed reduce pre-assessment net income, which is the basis of the statutory AHP calculation, so a “make-whole” contribution equal to the reduction in the AHP statutory assessment attributable to the voluntary contributions is added to our AHP program. The “make-whole” calculation ensures that the 10 percent AHP statutory assessment is not impacted by voluntary contributions. The AHP assessment and the “make-whole” contribution are available to be awarded in the year subsequent to when they are expensed. Voluntary housing and community investment program contributions are expensed in the period they are approved by the board of directors and/or awarded, which does not occur ratably throughout the year.
Table 14 provides the basis for the calculations of the statutory assessment and voluntary program contributions (dollar amounts in thousands):
Table 14
For Year Ended December 31,
2023 2022 2021
Net earnings base for calculation of voluntary program contribution commitment:
Net income
$ 370,467 $ 240,736 $ 160,590
10 percent statutory assessment
41,164 26,749 17,845
Mandatorily redeemable capital stock interest expense
14 7 19
Voluntary contribution expense
3,000 - -
Net earnings
$ 414,645 $ 267,492 $ 178,454
2024 2023 2022
Statutory and voluntary calculated amounts:
Statutory AHP assessment (prior year expense)
$ 41,164 $ 26,749 $ 17,845
Voluntary contribution expense (current year expense)
14,848 3,000 -
Total statutory assessments and voluntary contributions
$ 56,012 $ 29,749 $ 17,845
Statutory assessments and voluntary contributions as a percentage of net earnings
13.5 % 11.1 % 10.0 %
The AHP competitive program provides direct grants or below-market interest rates on advances to members that provide the funds to assist in the purchase, construction, or rehabilitation of housing for very low-, low-, and moderate-income households. In addition to the competitive AHP program funds, our assessments also finance the HSP, which is part of our TurnKey suite of products. The programs offered under TurnKey are HSP, HSP+, and HOPE. These programs provide down payment, closing cost, and purchase-related repair assistance to very low-, low-, and moderate-income first-time households, including first-time households in High-Cost Areas and non-metropolitan Difficult Development Areas in our district and households in our district that traditionally do not receive assistance but require a subsidy to make homeownership accessible and affordable. The NAHI grant program provides Native American tribes and tribally designated housing entities in our district with access to grant funds intended to support housing for tribal members in our district. For additional information on FHLBank’s affordable housing and community development initiatives, refer to Item 1 - “Other Mission-Related Activities.”
Table 15 provides fulfillment details of the voluntary contribution commitment by program (in thousands):
Table 15
For Year Ended December 31,
2024 2023 2022
Commitment fulfillment by program:
AHP statutory assessment:
AHP competitive funds
$ 26,756 $ 17,387 $ 11,599
HSP/HSP+
14,408 9,362 6,246
Total AHP
41,164 26,749 17,845
Voluntary contribution programs:
NAHI
5,314 3,000 -
HOPE
4,266 - -
AHP Extra 4,232 - -
Other
1,036 - -
Total voluntary contribution programs
$ 14,848 $ 3,000 $ -
Total $ 56,012 $ 29,749 $ 17,845
Table 16 reconciles the voluntary contribution program amounts to the Statements of Income (dollar amounts in thousands):
Table 16
For Year Ended December 31,
2024 2023 2022
Voluntary housing and community investment program contribution expense:
Voluntary contribution expense
$ 14,848 $ 3,000 $ -
Voluntary AHP “make-whole” contribution1
1,650 - -
Total voluntary contribution expense on Statements of Income
$ 16,498 $ 3,000 $ -
1 Amount calculated as 11.1 percent of current year voluntary contribution expense beginning in 2024.
Financial Condition
Overall: Table 17 presents the percentage concentration of the major components of our Statements of Condition:
Table 17
Component Concentration
12/31/2024 12/31/2023
Assets:
Cash and due from banks - % 0.1 %
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold 14.3 10.1
Investment securities 18.1 17.2
Advances 54.9 60.6
Mortgage loans, net 11.8 11.1
Other assets 0.9 0.9
Total assets 100.0 % 100.0 %
Liabilities:
Deposits 1.4 % 1.0 %
Consolidated obligation discount notes, net 19.0 27.7
Consolidated obligation bonds, net 73.6 65.4
Other liabilities 0.6 0.7
Total liabilities 94.6 94.8
Capital:
Capital stock outstanding 3.5 3.5
Retained earnings 2.1 1.9
Accumulated other comprehensive income (loss) (0.2) (0.2)
Total capital 5.4 5.2
Total liabilities and capital 100.0 % 100.0 %
Table 18 presents changes in the major components of our Statements of Condition (dollar amounts in thousands):
Table 18
Increase (Decrease)
in Components
12/31/2024 vs. 12/31/2023
Dollar
Change Percent
Change
Assets:
Cash and due from banks $ (487) (1.9) %
Interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold 3,307,434 43.7
Investment securities 790,551 6.1
Advances (3,792,688) (8.3)
Mortgage loans, net 596,720 7.1
Other assets 52,465 8.2
Total assets $ 953,995 1.3 %
Liabilities:
Deposits $ 236,821 31.5 %
Consolidated obligation discount notes, net (6,326,202) (30.5)
Consolidated obligation bonds, net 6,817,017 13.9
Other liabilities 17,282 3.4
Total liabilities 744,918 1.0
Capital:
Capital stock outstanding 23,922 0.9
Retained earnings 206,146 14.7
Accumulated other comprehensive income (loss) (20,991) 17.6
Total capital 209,077 5.4
Total liabilities and capital $ 953,995 1.3 %
Total assets increased $1.0 billion between periods, from $74.9 billion at December 31, 2023 to $75.9 billion at December 31, 2024, driven by the $4.1 billion increase in short- and long-term investments and a $0.6 billion increase in mortgage loans between periods, partially offset by a $3.8 billion decrease in advances. Asset composition remained relatively consistent during 2024, with advances comprising the largest asset on the balance sheet, despite a decrease in advance balances from 60.6 percent of total assets at December 31, 2023 to 54.9 percent at December 31, 2024. Short-term investments increased to 14.3 percent of total assets as of December 31, 2024 compared to 10.1 percent as of December 31, 2023 as a result of FHLBank holding higher balances of liquid assets to provide adequate liquidity availability for members compared to the end of 2023. Total liabilities increased $0.7 billion from December 31, 2023 to December 31, 2024, which corresponded to the increase in assets, but the composition of debt shifted between periods. Consolidated obligation bonds and discount notes represented 70.3 percent and 29.7 percent of total consolidated obligations, respectively, at December 31, 2023 compared to 79.5 percent and 20.5 percent at December 31, 2024. This composition shift is mostly due to an increase in short-term floating rate bonds, partially offset by a decrease in fixed rate callable bonds (swapped) and a decrease in discount notes. The increase in floating rate bonds was due to advantageous pricing and better matching of repricing characteristics of the assets they are funding. Total capital increased $0.2 billion, or 5.4 percent, from December 31, 2023 to December 31, 2024 primarily due to an increase in retained earnings in excess of dividends paid and an increase in excess capital stock.
Advances: Advances are one of the primary ways we fulfill our mission of providing liquidity to our members and constituted the largest asset on our balance sheet at December 31, 2024 and 2023. Advance par value decreased by $3.8 billion, or 8.3 percent, from $45.7 billion at December 31, 2023 to $41.9 billion at December 31, 2024 (see Table 19). Outside of period-end volatility with larger members, advance demand continues to be relatively stable among FHLBank membership, especially among community banks and insurance companies. The composition of the advance portfolio remains concentrated in advances that either reprice or mature on a relatively short-term basis; line of credit, adjustable rate advances, and short-term fixed rate advances were 58.4 percent of the portfolio at December 31, 2024 compared to 66.0 percent as of December 31, 2023. Within the population of advances that reprice or mature on a relatively short-term basis, composition has shifted from short-term fixed rate advances to adjustable rate advances. Despite the overall decline in fixed rate advances, putable fixed rate advances increased $1.0 billion between periods and regular fixed rate advances increased $0.5 billion between periods. When issuing a putable advance, we effectively purchase a put option from the member that allows us to put or extinguish the advance at a predetermined future date, which we normally would exercise when interest rates increase. A putable advance is generally issued at a lower rate than the advance without the put option. It follows that the increase in putable fixed rate advance activity reflects members’ outlook on interest rates and the actual decline in short-term interest rates since December 31, 2023.
We elect to swap a significant portion of fixed rate advances with longer maturities to short-term indices to synthetically create adjustable rate advances to manage interest rate risk. When coupled with the volume of our short-term fixed rate and adjustable rate advances, advances that effectively re-price at least every three months represented 97.1 percent and 95.9 percent of our total advance portfolio as of December 31, 2024 and 2023, respectively. We anticipate continuing the practice of swapping fixed rate advances to short-term indices.
As of December 31, 2024 and 2023, 62.8 percent and 65.1 percent, respectively, of our members carried outstanding advance balances. Advance balances may be impacted by monetary policy changes intended to curb inflationary pressures and the related inflationary effects on member balance sheets, including decreased loan demand and the inability to grow or retain deposit balances. Members also have access to other wholesale funding sources, which may impact the demand for advances on the basis of relative cost.
Table 19 summarizes advances outstanding by product (dollar amounts in thousands). An individual advance may be reclassified to a different product type between periods due to the occurrence of a triggering event such as the passing of a call date (i.e., from fixed rate callable advance to regular fixed rate advance).
Table 19
12/31/2024 12/31/2023
Dollar Percent Dollar Percent
Line of Credit:
Overnight line of credit1
$ 8,829,398 21.1 % $ 11,747,448 25.7 %
Adjustable rate:
Standard advance products:
Regular adjustable rate advances 11,931,497 28.5 4,418,750 9.7
Adjustable rate callable advances 983,500 2.3 1,616,400 3.5
Standard housing and community development advances:
Adjustable rate callable advances 20,535 0.1 22,262 0.1
Total adjustable rate term advances 12,935,532 30.9 6,057,412 13.3
Fixed rate:
Standard advance products:
Short-term fixed rate advances2
2,658,109 6.4 12,313,627 27.0
Regular fixed rate advances 12,944,095 30.9 12,359,319 27.1
Fixed rate callable advances 48,302 0.1 68,402 0.2
Fixed rate putable advances 3,095,200 7.4 2,071,800 4.5
Fixed rate convertible advances 20,500 0.1 113,400 0.3
Standard housing and community development advances:
Regular fixed rate advances 234,266 0.6 291,064 0.6
Fixed rate callable advances 458 - 458 -
Total fixed rate term advances 19,000,930 45.5 27,218,070 59.7
Amortizing:
Standard advance products:
Fixed rate amortizing advances 900,980 2.2 415,568 0.9
Fixed rate callable amortizing advances 16,585 - 18,367 -
Standard housing and community development advances:
Fixed rate amortizing advances 179,156 0.3 202,036 0.4
Fixed rate callable amortizing advances 13,111 - 11,401 -
Total amortizing advances 1,109,832 2.5 647,372 1.3
TOTAL PAR VALUE $ 41,875,692 100.0 % $ 45,670,302 100.0 %
1 Represents fixed rate line of credit advances with daily maturities.
2 Represents non-amortizing, non-prepayable loans with terms to maturity from 3 to 93 days.
Our potential credit risk from advances is concentrated in commercial banks, savings institutions, and insurance companies in our four-state district, but also includes potential credit risk exposure to credit unions, housing associates and a small number of non-members. Table 20 presents advances outstanding by borrower type (in thousands):
Table 20
12/31/2024 12/31/2023
Member advances:
Commercial banks $ 15,941,387 $ 21,969,321
Savings institutions 13,119,023 12,842,164
Insurance companies 9,428,930 7,469,328
Credit unions 3,261,314 3,268,583
CDFIs 18,404 26,404
Total member advances 41,769,058 45,575,800
Non-member advances:
Housing associates 104,634 94,502
Non-member borrowers1
2,000 -
Total non-member advances 106,634 94,502
TOTAL PAR VALUE $ 41,875,692 $ 45,670,302
1 Includes former members that have merged into or were acquired by non-members.
Table 21 presents information on our five largest borrowers (dollar amounts in thousands). We do not expect to incur any credit losses on these advances based on our rights to collateral with an estimated fair value in excess of the book value of these advances. We have not experienced a credit loss on an advance since the inception of FHLBank.
Table 21
Borrower Name 12/31/2024 12/31/2023
Advance
Par Value Percent of Total
Advance Par
Advance
Par Value Percent of Total
Advance Par
MidFirst Bank $ 10,125,000 24.2 % $ 9,585,000 21.0 %
BOKF, N.A. 3,000,000 7.2 7,675,000 16.8
United of Omaha Life Insurance Co. 2,747,585 6.6 2,278,283 5.0
First United Bank & Trust 2,230,000 5.3 1,881,516 4.1
Capitol Federal Savings Bank 2,164,488 5.2 2,375,410 5.2
TOTAL $ 20,267,073 48.5 % $ 23,795,209 52.1 %
Table 22 presents accrued interest income associated with the five borrowers with the highest interest income for the periods presented (dollar amounts in thousands). If the borrower was not one of our top five borrowers for whom we accrued the highest amount of interest income for one of the periods presented, the applicable columns are left blank.
Table 22
Year Ended
12/31/2024 12/31/2023
Borrower Name Advance Income Percent of Total
Advance Income1
Advance Income Percent of Total
Advance Income1
MidFirst Bank $ 562,255 26.2 % $ 585,147 27.1 %
BOKF, N.A. 337,654 15.7 314,616 14.5
United of Omaha Life Insurance Co. 123,299 5.7 81,285 3.8
Security Life of Denver Insurance Co. 111,635 5.2 79,684 3.6
First United Bank & Trust Co. 103,988 4.8
Capitol Federal Savings Bank 107,137 5.0
TOTAL $ 1,238,831 57.6 % $ 1,167,869 54.0 %
1 Total advance income by borrower excludes: (1) changes in unrealized gains (losses) from qualifying fair value hedging relationships; (2) net interest settlements on derivatives hedging the advances; and (3) prepayment fees received.
Prepayment Fees - Advances are priced based on our marginal cost of issuing matched-maturity funding while considering our related administrative and operating costs, pricing on other funding alternatives available to members, and desired profitability targets. Advances with a maturity or repricing period greater than three months that do not include call features that can be exercised at the option of the member generally incorporate a fee sufficient to make us economically indifferent should the borrower decide to prepay the advance.
Letters of Credit - We also issue letters of credit for members. Members must collateralize letters of credit in accordance with the same requirements as for advances. Letters of credit are generally issued or confirmed on behalf of a member to: (1) collateralize public unit deposits: (2) facilitate residential housing finance; (3) facilitate community lending; (4) manage assets/liabilities; or (5) provide liquidity or other funding. Outstanding letters of credit balances totaled $7.5 billion and $7.2 billion as of December 31, 2024 and 2023, respectively.
Housing Associates - We are permitted under the Bank Act to make advances to housing associates, which are non-members that are approved mortgagees under Title II of the National Housing Act. All outstanding advances to housing associates are to state housing finance authorities. Totals as of December 31, 2024 and 2023, which are noted in Table 20, represent less than one percent of total advance par values for each period presented.
MPF Program: The MPF Program is a secondary mortgage market alternative for our members, predominately utilized by the smaller institutions in our district. We participate in the MPF Program through the MPF Provider, a division of FHLBank Chicago. Under the MPF Program, participating members can sell us fixed rate conventional and government residential mortgage loans.
The mortgage loan portfolio increased $0.6 billion between periods, from $8.3 billion at December 31, 2023 to $8.9 billion at December 31, 2024. Mortgage rates have remained elevated, which has reduced origination volume and refinancing incentive for borrowers and slowed prepayments in recent periods, although purchase volume has continued to exceed principal repayments. As mortgage interest rates decline, we expect an increase in prepayments and new originations of mortgage loans. Net mortgage loans as a percentage of total assets increased, from 11.1 percent as of December 31, 2023 to 11.8 percent as of December 31, 2024. The principal amount of new mortgage loans acquired and held on our balance sheet from our PFIs during the year ended December 31, 2024 was $1.5 billion.
Future growth in the MPF portfolio is a function of asset size and composition, most notably the balance of advances, and capital level, as growth in advances impacts our total assets and capital level, which allows the balance of mortgage loans to increase while maintaining our targeted AMA risk tolerance. The other factors that may influence future growth in our mortgage loans held for portfolio include: (1) the level of interest rates and the shape of the yield curve; (2) the mortgage loan origination volume of current PFIs; (3) refinancing activity; (4) the relative competitiveness of MPF pricing to the prices offered by other buyers of residential mortgage loans; (5) a PFI's level of excess risk-based capital relative to the required risk-based capital charge associated with the PFI's CE obligations on MPF mortgage loans; and (6) the number of new and delivering PFIs.
Table 23 presents the unpaid principal balance of mortgage loans according to the amortization schedule based on the contractual terms of the loan (in thousands). Scheduled repayments are reported in the maturity category in which the payment is due. Prepayments may shorten the amortization period and late payments may extend the principal amortization of the late payments to the maturity date.
Table 23
Redemption Term 12/31/2024 12/31/2023
Due in one year or less $ 318,200 $ 310,706
Due after one year through five years 1,309,284 1,279,640
Due after five years through fifteen years 3,375,042 3,232,396
Thereafter 3,875,401 3,460,409
TOTAL UNPAID PRINCIPAL BALANCE $ 8,877,927 $ 8,283,151
Table 24 presents the outstanding balances of mortgage loans sold to us, net of participations, from our top five PFIs and the percentage of those loans to total mortgage loans outstanding (dollar amounts in thousands). Columns are left blank for periods presented in which the PFI was not one of our top five outstanding mortgage loan balances.
Table 24
12/31/2024 12/31/2023
Mortgage
Loan Balance Percent of Total
Mortgage Loans
Mortgage
Loan Balance Percent of Total
Mortgage Loans
Farmers Bank & Trust $ 504,595 5.7 % $ 338,745 4.1 %
Fidelity Bank 406,622 4.6 366,733 4.4
Tulsa Teachers Credit Union 300,132 3.4 304,925 3.7
West Gate Bank 291,134 3.3 267,101 3.2
First National Bank of Omaha
232,791 2.6
Community National Bank & Trust 226,466 2.7
TOTAL $ 1,735,274 19.6 % $ 1,503,970 18.1 %
Table 25 presents mortgage loan portfolio credit ratios and the components of the ratio calculation for the periods presented (dollar amounts in thousands):
Table 25
12/31/2024 12/31/2023
Average loans outstanding during the period, unpaid principal balance $ 8,618,877 $ 8,002,681
Mortgage loans held for portfolio, unpaid principal balance 8,877,927 8,283,151
Nonaccrual loans, unpaid principal balance 24,093 19,002
Allowance for credit losses 4,033 5,531
Net (charge-offs) recoveries
138 (206)
Ratio of net charge-offs (recoveries) to average loans outstanding during the period - % - %
Ratio of allowance for credit losses to mortgage loans held for portfolio 0.06 0.07
Ratio of nonaccrual loans to mortgage loans held for portfolio 0.27 0.23
Ratio of allowance for credit losses to nonaccrual loans 21.59 29.11
Two indications of credit quality are FICO scores and LTV ratios. FICO is a widely used credit industry indicator to assess borrower credit quality with scores typically ranging from 300 to 850 with the low end of the scale indicating greater credit risk. In February 2010, the MPF Program instituted a minimum FICO score of 620 for all conventional loans. Table 26 provides the percentage distribution of FICO scores at origination for conventional mortgage loans outstanding in our traditional MPF products:
Table 26
FICO Score1
12/31/2024 12/31/2023
< 620 0.5 % 0.5 %
620 to < 660 3.9 4.2
660 to < 700 11.4 11.8
700 to < 740 19.9 19.4
>= 740 64.3 64.1
100.0 % 100.0 %
Weighted average 750 750
1 Represents the original FICO score of the lowest-scoring borrower for the related loan.
LTV is a primary variable in credit performance. Generally, a higher LTV ratio means greater risk of loss in the event of a default and higher loss severity. As noted previously, the maximum LTV for conventional MPF loans is 95 percent, though AHP MPF mortgage loans may have LTVs up to 100 percent. Table 27 provides LTV ratios at origination for conventional mortgage loans outstanding in our traditional MPF products:
Table 27
LTV 12/31/2024 12/31/2023
<= 60% 14.8 % 15.7 %
> 60% to 70% 13.3 14.0
> 70% to 80% 49.5 49.6
> 80% to 90% 12.4 11.4
> 90% to < 100% 10.0 9.3
100.0 % 100.0 %
Weighted average 75.1 % 74.5 %
Our mortgage loans held in portfolio were dispersed across all 50 states and the District of Columbia as of December 31, 2024 and 2023. Table 28 is a summary of the geographic concentration percentage of our conventional mortgage loan portfolio by state, highlighting the top five states with the highest concentration.
Table 28
12/31/2024 12/31/2023
Kansas 35.0 % 36.3 %
Nebraska 23.9 24.1
Oklahoma 10.8 11.5
Colorado 11.0 10.9
Missouri 2.3 2.2
All other 17.0 15.0
TOTAL 100.0 % 100.0 %
The credit risk of conventional mortgage loans sold under the traditional MPF products is managed by structuring potential credit losses into certain layers. As is customary for conventional mortgage loans, PMI is required for MPF loans with LTVs greater than 80 percent. Losses beyond the PMI layer are absorbed by a first loss account (FLA) established for each pool of mortgage loans sold by a PFI up to the maximum amount of the remaining FLA net of credit losses.
Allowance for Credit Losses on Mortgage Loans Held for Portfolio - The allowance for credit losses on mortgage loans decreased $1.5 million from December 31, 2023 to December 31, 2024. Delinquencies of conventional loans remained at low levels relative to the portfolio, at 1.1 percent and 1.0 percent of the amortized cost of total conventional loans at December 31, 2024 and December 31, 2023, respectively. We believe that policies and procedures are in place to effectively manage the credit risk on mortgage loans held for portfolio. See Note 5 of the Notes to Financial Statements under Item 8 for a summary of the allowance for credit losses on mortgage loans as well as payment status and other delinquency statistics for our mortgage loan portfolio.
Investments: Investments are used to manage interest rate and duration risk, enhance income, and provide liquidity and primary and secondary market support for the U.S. housing securities market. Total investments increased $4.1 billion from December 31, 2023 to December 31, 2024 driven by increases in Federal funds sold, interest bearing deposits and MBS securities.
Short-term Investments - Short-term investments, which are used to provide funds for our members, maintain liquidity, meet other financial obligations such as debt servicing, and enhance income, consist primarily of reverse repurchase agreements, interest-bearing deposits, Federal funds sold, and certificates of deposit. Fluctuations in short-term investments reflect the impact of regulatory requirements, anticipated member liquidity needs, and the timing of paydowns, maturities, and investment opportunities on liquidity management practices. At December 31, 2024, the $3.3 billion increase in short-term investments was due primarily to advance paydowns and the timing of investment opportunities at year-end.
Within our portfolio of short-term investments, counterparty credit risk arises from unsecured exposures. Our short-term unsecured credit investments have maturities generally ranging between overnight and three months and may include the following types:
•Interest-bearing deposits. Unsecured deposits that earn interest.
•Federal funds sold. Unsecured loans of reserve balances at the Federal Reserve Banks between financial institutions that are made on either an overnight or term basis, but typically made on an overnight basis.
•Certificates of deposit. Unsecured negotiable promissory notes issued by banks and payable to the bearer at maturity.
Table 29 presents the carrying value of our unsecured credit exposure with private counterparties by investment type (in thousands). The unsecured investment credit exposure presented may not reflect the average or maximum exposure during the period as the balances presented reflect the balances at period end.
Table 29
12/31/2024 12/31/2023
Interest-bearing deposits $ 2,142,391 $ 1,604,423
Federal funds sold 3,575,000 2,080,000
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1
$ 5,717,391 $ 3,684,423
1 Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities and does not include related accrued interest.
We actively monitor our credit exposures and the credit quality of our counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, sovereign support and the current market perceptions of the counterparties. General macro-economic, political and market conditions may also be considered when deciding on unsecured exposure. As a result, we may further limit existing exposures.
FHFA regulations include limits on the amount of unsecured credit an individual FHLBank may extend to a counterparty or to a group of affiliated counterparties. This limit is based on a percentage of eligible regulatory capital and the counterparty’s overall credit rating. Under these regulations, the level of eligible regulatory capital is determined as the lesser of an individual FHLBank’s total regulatory capital or the eligible amount of regulatory capital of the counterparty. The eligible amount of regulatory capital is then multiplied by a stated percentage. The percentage that an FHLBank may offer for term extensions of unsecured credit ranges from 1 percent to 15 percent based on the counterparty’s internal credit rating. The calculation of term extensions of unsecured credit includes on-balance sheet transactions, off-balance sheet commitments and derivative transactions (derivative transactions cleared through a clearinghouse are excluded from the calculation and unsecured credit is limited with bilateral derivative counterparties due to the receipt of collateral based on zero collateral thresholds although there can be a lag between receipt and the calculation of exposure). See “Risk Management - Credit Risk Management” under this Item 7 for additional information related to derivative exposure.
FHFA regulation also permits us to extend additional unsecured credit for overnight extensions of credit. Our total overnight unsecured exposure to a counterparty may not exceed twice the regulatory limit for term exposures, or a total of 2 percent to 30 percent of the eligible amount of regulatory capital, based on the counterparty’s credit rating. We generally limit our unsecured exposure to any private counterparty to no more than the balance of our retained earnings, even if the counterparty limit under the previously discussed calculation would be higher. As of December 31, 2024, we were in compliance with the regulatory limits established for unsecured credit, and our unsecured credit exposure to any individual non-member private counterparty (excluding GSEs) did not exceed the balance of our retained earnings on that date.
We are prohibited by FHFA 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. Our unsecured credit exposures to U.S. branches and agency offices of foreign commercial banks include the risk that, as a result of political or economic conditions in a country, the counterparty may be unable to meet its contractual repayment obligations. Our unsecured credit exposures to domestic counterparties and U.S. subsidiaries of foreign commercial banks include the risk that these counterparties have extended credit to foreign counterparties. Throughout 2024, we were in compliance with the regulation and did not own any financial instruments issued by foreign sovereign governments.
We manage our credit risk by conducting pre-purchase credit due diligence and ongoing surveillance described previously and generally investing in unsecured investments of highly-rated counterparties. We may extend unsecured credit to qualified members by investing in overnight Federal funds issued by them. As of December 31, 2024, all unsecured investments were rated as investment grade based on NRSROs (see Table 32).
Table 30 presents the amount of our unsecured investment credit exposure by remaining contractual maturity and by the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks as of December 31, 2024 (in thousands). We also mitigate the credit risk on investments by purchasing instruments that have short-term maturities.
Table 30
Domicile of Counterparty Overnight
Domestic $ 2,142,391
U.S. Branches and agency offices of foreign commercial banks:
Canada 1,300,000
Germany
300,000
Australia
1,100,000
Netherlands
300,000
Finland
575,000
Total U.S. Branches and agency offices of foreign commercial banks
3,575,000
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1
$ 5,717,391
1 Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, instrumentalities, GSEs and supranational entities, and does not include related accrued interest.
Unsecured credit exposure continues to be conservatively placed. In addition, we anticipate continued future investment in reverse repurchase agreements, which are secured investments. To enhance our liquidity position, we classify our unsecured short-term investment securities in our trading portfolio, which allows us to sell these securities if necessary.
Long-term investments - Our long-term investment portfolio consists primarily of GSE MBS and U.S. Treasury obligations. Our RMP restricts the acquisition of investments to highly rated long-term securities. Generally, fixed rate U.S. Treasury obligations are either classified as trading securities and economically swapped to variable rates or classified as available-for-sale securities and swapped to variable rates in qualifying fair value hedging relationships. In addition to serving as excellent collateral, U.S. Treasury obligations also help satisfy regulatory liquidity requirements. We also purchase fixed rate securities for duration and interest rate risk management.
According to FHFA regulation, no additional MBS purchases may be made if the aggregate value of our MBS exceeds 300 percent of our regulatory capital. Further, quarterly increases in holdings of MBS are restricted to no more than 50 percent of regulatory capital. As of December 31, 2024, the aggregate value of our MBS portfolio represented 253 percent of our regulatory capital. We are below our regulatory threshold primarily due to an increase in regulatory capital despite increased MBS purchases in recent periods. We expect to be below our regulatory limit in the near-term but continue to remain opportunistic about future MBS purchases.
We provide SBPAs to two state HFAs within our district. For a predetermined fee, we accept an obligation to purchase the authorities’ bonds if the remarketing agent is unable to resell the bonds to suitable investors, and to hold the bonds until: (1) the designated remarketing agent can find a suitable investor; (2) we successfully exercise our right to sell the bonds; or (3) the HFA repurchases the bonds according to a schedule established by the SBPA. The standby bond purchase commitments executed and outstanding as of December 31, 2024 expire no later than 2029 though they are renewable upon request of the HFA and at our option. Total principal commitments for bond purchases under the SBPAs were $1.0 billion as of both December 31, 2024 and 2023. We were not required to purchase any bonds under these agreements during 2023 or 2024. We plan to continue supporting the state HFAs in our district by executing SBPAs where appropriate and when allowed by our RMP. In the future, we may acquire participation interests in SBPAs with other FHLBanks and/or directly enter into SBPAs with out-of-district HFAs with the permission of the in-district FHLBank.
Major Security Types - Securities for which we have the ability and intent to hold to maturity are classified as held-to-maturity securities and recorded at carrying value, which is the net total of par, premiums, and discounts. We classify certain investments as trading or available-for-sale securities and carry them at fair value, generally for liquidity purposes, to provide a fair value offset to the gains (losses) on the interest rate swaps associated with swapped securities, and for asset/liability management purposes. Liquidity or other asset/liability management strategies may require periodic sale of these securities but they are not actively traded; most often, they are held until maturity or call date. Securities acquired as asset/liability management tools to manage duration risk, which may be sold when the duration exposure is within risk tolerances, are classified as trading or available-for-sale securities. Changes in the fair values of investments classified as trading are recorded through other income and the original premiums/discounts on these investments are not amortized.
See Note 3 of the Notes to Financial Statements under Item 8 of this annual report for additional information on our different investment classifications including the types of securities held under each classification. The carrying values by contractual maturities of our investments as of December 31, 2024 are summarized by security type in Table 31 (dollar amounts in thousands) with certain weighted average yield metrics along with carrying values as of December 31, 2023. Expected maturities of MBS will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or yield maintenance fees.
Table 31
12/31/2024 12/31/2023
Due in
one year
or less Due after
one year
through five years
Due after
five years
through 10 years
Due after
10 years Carrying
Value Carrying
Value
Trading securities:
GSE debentures $ 17,884 $ - $ - $ - $ 17,884 $ 288,438
GSE MBS 325,087 87,890 5,289 3,813 422,079 620,170
Total trading securities 342,971 87,890 5,289 3,813 439,963 908,608
Available-for-sale securities:
U.S. Treasury obligations 440,483 2,796,740 - - 3,237,223 2,937,868
U.S. obligation MBS - - - 77,263 77,263 107,535
GSE MBS 237,923 2,642,365 3,764,102 3,074,564 9,718,954 8,708,050
State or local housing agency obligations - - - 24,179 24,179 -
Total available-for-sale securities 678,406 5,439,105 3,764,102 3,176,006 13,057,619 11,753,453
Held-to-maturity securities:
State or local housing agency obligations - - 30,895 - 30,895 35,855
GSE MBS - 28,423 1,557 158,951 188,931 228,941
Total held-to-maturity securities - 28,423 32,452 158,951 219,826 264,796
Total securities 1,021,377 5,555,418 3,801,843 3,338,770 13,717,408 12,926,857
Interest-bearing deposits 2,142,423 - - - 2,142,423 1,604,989
Federal funds sold 3,575,000 - - - 3,575,000 2,080,000
Securities purchased under agreements to resell
5,150,000 - - - 5,150,000 3,875,000
TOTAL INVESTMENTS $ 11,888,800 $ 5,555,418 $ 3,801,843 $ 3,338,770 $ 24,584,831 $ 20,486,846
Weighted average yields1:
Available-for-sale securities 2.77 % 2.93 % 4.28 % 4.69 %
Held-to-maturity securities - % 2.97 % 2.65 % 1.71 %
1 The weighted average yields 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 portfolio. The result is then multiplied by 100 to express it as a percentage.
Securities Ratings - Tables 32 and 33 present the carrying value of our investments by rating as of December 31, 2024 and 2023 (in thousands). The ratings presented are the lowest ratings available for the security, issuer, or counterparty based on NRSROs, where available. Some counterparties for collateralized overnight borrowing are not rated by an NRSRO because they are not issuers of debt or are otherwise not required to be rated by an NRSRO. We also utilize other credit quality factors when analyzing potential investments including, but not limited to, collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, and/or the financial health of the underlying issuer.
Table 32
12/31/2024
Carrying Value1
Investment Grade Unrated Total
Triple-A Double-A Single-A
Interest-bearing deposits2
$ - $ 437,032 $ 1,705,391 $ - $ 2,142,423
Federal funds sold2
- 1,675,000 1,900,000 - 3,575,000
Securities purchased under agreements to resell3
- 2,500,000 250,000 2,400,000 5,150,000
Investment securities:
Non-mortgage-backed securities:
U.S. Treasury obligations - 3,237,223 - - 3,237,223
GSE debentures - 17,884 - - 17,884
State or local housing agency obligations
55,074 - - - 55,074
Total non-mortgage-backed securities
55,074 3,255,107 - - 3,310,181
Mortgage-backed securities:
U.S. obligation MBS - 77,263 - - 77,263
GSE MBS - 10,329,964 - - 10,329,964
Total mortgage-backed securities - 10,407,227 - - 10,407,227
TOTAL INVESTMENTS $ 55,074 $ 18,274,366 $ 3,855,391 $ 2,400,000 $ 24,584,831
1 Investment amounts represent the carrying value and do not include related accrued interest receivable of $43.3 million at December 31, 2024.
2 Amounts include unsecured credit exposure with overnight maturities.
3 Amounts represent collateralized overnight borrowings.
Table 33
12/31/2023
Carrying Value1
Investment Grade Unrated Total
Triple-A Double-A Single-A
Interest-bearing deposits2
$ 87 $ 566 $ 1,604,336 $ - $ 1,604,989
Federal funds sold2
- - 2,080,000 - 2,080,000
Securities purchased under agreements to resell3
- - 1,500,000 2,375,000 3,875,000
Investment securities:
Non-mortgage-backed securities:
U.S. Treasury obligations - 2,937,868 - - 2,937,868
GSE debentures - 288,438 - - 288,438
State or local housing agency obligations
35,855 - - - 35,855
Total non-mortgage-backed securities
35,855 3,226,306 - - 3,262,161
Mortgage-backed securities:
U.S. obligation MBS - 107,535 - - 107,535
GSE MBS - 9,557,161 - - 9,557,161
Total mortgage-backed securities - 9,664,696 - - 9,664,696
TOTAL INVESTMENTS $ 35,942 $ 12,891,568 $ 5,184,336 $ 2,375,000 $ 20,486,846
1 Investment amounts represent the carrying value and do not include related accrued interest receivable of $39.9 million at December 31, 2023.
2 Amounts include unsecured credit exposure with overnight maturities.
3 Amounts represent collateralized overnight borrowings.
Table 34 details interest rate payment terms for the carrying value of our investment securities as of December 31, 2024 and 2023 (in thousands). We generally manage the interest rate risk associated with our fixed rate trading and available-for-sale securities by entering into interest rate swaps that convert the investment's fixed rate to a variable rate index (see Tables 43 and 44 under Part I, Item 7A - “Quantitative and Qualitative Disclosures About Market Risk).”
Table 34
12/31/2024 12/31/2023
Trading securities:
Non-mortgage-backed securities:
Fixed rate $ 17,884 $ 288,438
Non-mortgage-backed securities 17,884 288,438
Mortgage-backed securities:
Fixed rate 412,977 609,139
Variable rate 9,102 11,031
Mortgage-backed securities 422,079 620,170
Total trading securities 439,963 908,608
Available-for-sale securities:
Non-mortgage-backed securities:
Fixed rate 3,261,402 2,937,868
Non-mortgage-backed securities 3,261,402 2,937,868
Mortgage-backed securities:
Fixed rate 4,996,621 3,727,446
Variable rate 4,799,596 5,088,139
Mortgage-backed securities 9,796,217 8,815,585
Total available-for-sale securities 13,057,619 11,753,453
Held-to-maturity securities:
Non-mortgage-backed securities:
Variable rate 30,895 35,855
Non-mortgage-backed securities 30,895 35,855
Mortgage-backed securities:
Fixed rate 15,915 23,650
Variable rate 173,016 205,291
Mortgage-backed securities 188,931 228,941
Total held-to-maturity securities 219,826 264,796
TOTAL $ 13,717,408 $ 12,926,857
Deposits: Total deposits increased 31.5 percent, from $0.8 billion at December 31, 2023 to $1.0 billion at December 31, 2024. Deposit programs are offered primarily to facilitate customer transactions with us, and all deposits are uninsured. Deposit products offered include demand and overnight deposits and short-term certificates of deposit. Deposits are typically in overnight or demand accounts that generally re-price daily based upon a market index such as the overnight Federal funds rate. The level of deposits is driven by member demand for deposit products, which in turn is a function of the liquidity position of members. Factors that influence deposit levels include turnover in member investment and loan portfolios, changes in members’ customer deposit balances, changes in members’ demand for liquidity, and our deposit pricing as compared to other short-term market rates. Declines in the level of deposits could occur during future periods if the level of member liquidity should decrease due to loan demand outpacing deposit funding growth at members, or if depositor investment options improve as interest rates change. Fluctuations in deposits have little impact on our ability to obtain liquidity. We historically have had stable and ready access to the capital markets through consolidated obligations and have been able to replace any reduction in deposits with similarly or even lower priced borrowings.
Table 35 presents the average amount of and the annual rate paid on deposit types that exceed 10 percent of average deposits (dollar amounts in thousands).
Table 35
2024 2023 2022
Amount Rate Amount Rate Amount Rate
Overnight deposits $ 431,285 5.06 % $ 332,442 4.94 % $ 429,345 1.29 %
Demand deposits 337,443 4.71 306,434 4.62 318,282 1.23
Consolidated Obligations: Consolidated obligations are the joint and several debt obligations of the FHLBanks and consist of bonds and discount notes. Consolidated obligations represent the primary source of liabilities we use to fund advances, mortgage loans and investments. We use debt with a variety of maturities and option characteristics to manage our interest rate risk profile. For further discussion, see Item 7A - “Quantitative and Qualitative Disclosures About Market Risk.” We make extensive use of derivative transactions, executed in conjunction with specific consolidated obligation debt issues, to synthetically structure funding terms and costs.
Fixed rate bonds are generally used to fund fixed rate advances, mortgage loans and investments. To the extent that bonds are funding variable rate assets, we typically either issue bonds that have variable rates matching the variable rate asset index or utilize an interest rate swap to alter the fixed rate bonds' characteristics to match the assets' index. Additionally, we often use variable rate, fixed rate, or complex consolidated obligation bonds that are swapped or indexed to SOFR or OIS to fund short-term advances and money market investments and/or as a liquidity risk and interest-rate risk management tool.
Discount notes are primarily used to fund: (1) shorter-term advances or adjustable rate advances with indices and resets based on our short-term cost of funds; and (2) investments with maturities of three months or less. However, we sometimes use discount notes to fund longer-term assets, including fixed rate assets, variable rate assets, assets swapped to synthetically create variable rate assets and short-term anticipated cash flows generated by longer-term fixed rate assets.
Table 36 presents the carrying value of consolidated obligation bonds and discounts notes as of December 31, 2024 and 2023 (in thousands).
Table 36
12/31/2024 12/31/2023
Bonds:
Par value $ 56,060,550 $ 49,409,390
Premiums 12,044 12,874
Discounts (3,054) (3,108)
Concession fees (12,085) (11,424)
Hedging adjustments (192,949) (360,243)
Total bonds 55,864,506 49,047,489
Discount Notes:
Par value 14,518,446 20,903,145
Discounts (101,891) (157,163)
Concession fees (345) (420)
Hedging adjustments 837 (2,313)
Total discount notes 14,417,047 20,743,249
TOTAL $ 70,281,553 $ 69,790,738
Total consolidated obligations increased $0.5 billion, or 0.7 percent, from December 31, 2023 to December 31, 2024. The distribution between consolidated obligation bonds and discount notes shifted between periods, from 70.3 percent and 29.7 percent, respectively, at December 31, 2023 to 79.5 percent and 20.5 percent at December 31, 2024, respectively. Management increased issuance of floating rate debt due to favorable funding spreads and increased demand from investors. Callable bonds outstanding declined from $22.9 billion at December 31, 2023 to $17.0 billion at December 31, 2024 primarily due to calls or maturities of swapped callable bonds. Callable bonds are typically fixed or structured rate debt that pay higher coupons to investors because of the optionality held by the issuer. When a swap is called by the counterparty in a swapped callable bond transaction, we typically call the hedged bond. Unswapped callable bonds provide us with options to replace the bonds at lower costs if interest rates decline. Our funding mix generally is driven by asset composition, but we may also shift our debt composition as a result of market conditions that impact the cost of unswapped consolidated obligations and the cost of consolidated obligations swapped or indexed to SOFR or OIS. For a discussion on yields and spreads, see Table 8 under this Item 7. For further discussion of how our portfolio of unswapped callable bonds impacted interest rate risk, see Item 7A - “Quantitative and Qualitative Disclosures About Market Risk.”
We often execute derivatives concurrently with the issuance of consolidated obligations to create synthetic variable rate debt at a cost that is lower than funding alternatives and comparable variable rate cash instruments issued directly by us. This alters the characteristics of our liabilities to more closely match the term and/or repricing characteristics of our assets. This strategy of issuing consolidated obligations while simultaneously entering into derivatives enables us to more effectively fund our variable rate and short-term fixed rate assets. It also allows us, in some instances, to offer a wider range of advances at more attractive terms than would otherwise be possible. Swapped consolidated obligation transactions depend on price relationships in both the FHLBank consolidated obligation market and the derivatives market, primarily the interest rate swap market. If conditions in these markets change, we may adjust the types or terms of the consolidated obligations issued and derivatives utilized to better match assets, meet customer needs, and/or improve our funding costs.
Several recent developments have the potential to impact the demand for FHLBank consolidated obligations in 2025 and perhaps beyond. For a discussion of the impact of these recent developments, U.S. government programs, governmental regulation of commercial banks, and the financial markets on the cost of FHLBank consolidated obligations, see “Financial Market Trends” under this Item 7.
Derivatives: We use derivatives to reduce the interest-rate sensitivity of our assets. We also use derivatives in our overall interest rate risk management to adjust the interest rate sensitivity of consolidated obligations to approximate more closely the interest rate sensitivity of assets, including advances, investments and mortgage loans. We also use derivatives to manage embedded options in assets and liabilities, to hedge the market value of existing assets, liabilities, and anticipated transactions, to hedge the duration risk of prepayable instruments, to mitigate adverse impacts to earnings from the contraction or extension of certain assets (e.g., advances or mortgage assets) and liabilities, and to reduce funding costs as discussed below. Generally, we designate derivatives as a fair value hedge of an underlying financial instrument or firm commitment. Economic hedges are defined as derivatives hedging specific or non-specific underlying assets, liabilities, or firm commitments that do not qualify for hedge accounting, but are acceptable hedging strategies under our RMP for asset/liability management.
All derivatives are marked to fair value with any associated accrued interest, and netted by clearing agent by clearinghouse or by counterparty and offset by the fair value of any swap cash collateral received or delivered where the legal right of offset has been determined, and included on the Statements of Condition as an asset when there is a net fair value gain or as a liability when there is a net fair value loss. Fair values of our derivatives primarily fluctuate as the swap interest rate curves fluctuate. Other factors such as implied price/interest rate volatility, the shape of the above interest rate curves and time decay can also drive the market price for derivatives.
The notional amount of total derivatives outstanding was relatively unchanged between periods, at $51.5 billion at December 31, 2023 and $52.0 billion at December 31, 2024. Notable shifts include decreases in interest rate swaps hedging callable fixed rate bonds, offset by increases in interest rate swaps hedging putable advances, interest rate caps, and basis swaps. The decline in interest rate swaps hedging callable bonds reflects the bond issuance shift discussed previously, and the increase in interest rate swaps hedging putable advances reflects the increase in putable advances discussed previously. Interest rate caps are used to manage duration risk and convexity. The basis swaps are used to manage exposure to the relationships between the indices impacting our cost of funds. For additional information regarding the types of derivative instruments and risks hedged, see Tables 43 and 44 under Item 7A - “Quantitative and Qualitative Disclosures About Market Risk.”
Liquidity and Capital Resources
We maintain high levels of liquidity to achieve our mission of serving as a dependable and economical funding source for our members and housing associates. As part of fulfilling our mission, we also maintain minimum liquidity requirements in accordance with certain FHFA regulations and guidelines and in accordance with policies established by management and the board of directors. Our structure as a member-owned cooperative and business model enable us to manage the levels of our assets, liabilities, and capital in response to changes in member credit demand, membership composition, and market conditions. As such, assets and liabilities utilized for liquidity purposes can vary significantly in the normal course of business due to the amount and timing of cash flows as a result of these factors.
Sources and Uses of Liquidity - A primary source of our liquidity is the issuance of consolidated obligations. The capital markets traditionally have treated FHLBank obligations as U.S. government agency debt. As a result, even though the U.S. government does not guarantee FHLBank debt, we generally have comparatively stable access to funding at relatively favorable spreads to U.S. Treasury rates. We are primarily and directly liable for our portion of consolidated obligations (i.e., those obligations issued on our behalf). In addition, we are jointly and severally liable with the other FHLBanks for the payment of principal and interest on the consolidated obligations of all FHLBanks. Our uses of liquidity primarily include repaying called and maturing consolidated obligations for which we are the primary obligor, issuing advances, and purchasing investments and mortgage loans. We also use liquidity to repay member deposits, pledge collateral to derivative counterparties, and redeem or repurchase capital stock. Our other sources of liquidity include our short-term liquidity portfolio, deposit inflows, repayments of advances and mortgage loans, maturing investments, trading and available-for-sale investments, other secured and unsecured borrowings, interest income, or the sale of unencumbered assets.
During the year ended December 31, 2024, proceeds from the issuance of bonds and discount notes (net of premiums and discounts) were $70.2 billion and $610.5 billion, respectively, compared to $52.2 billion and $481.2 billion for the year ended December 31, 2023. The difference between the proceeds from bonds and discount notes reflects the cumulative effect of using short-term discount notes to fund short-term advances and our short-term liquidity portfolio, and the increase between periods reflects the increase in assets and the composition shift as previously discussed. High demand for Agency debt has kept the spread to U.S. Treasury obligations relatively narrow. Our ability to issue debt remains robust, but volatility in the capital markets can impact the demand for and cost of debt issued by the FHLBanks.
Our short-term liquidity portfolio consists of cash, short-term investments, and long-term investments with remaining maturities of one year or less. Short-term investments may include Federal funds sold, interest-bearing demand deposits, reverse repurchase agreements, and certificates of deposit. The short-term liquidity portfolio increased between periods, from $8.0 billion as of December 31, 2023 to $11.9 billion as of December 31, 2024. The maturities of our short-term investments are structured to provide periodic cash flows to support our ongoing liquidity needs. To enhance our liquidity position, short-term investment securities (i.e., marketable certificates of deposit) are also classified as trading when held so that they can be readily sold should liquidity be needed immediately.
Investment securities on our balance sheet are also a source of potential liquidity. U.S. Treasury obligations, GSE debentures, and GSE MBS can be sold or pledged as collateral for financing in the securities repurchase agreement market. In addition to balance sheet sources of liquidity, we have established lines of credit with numerous counterparties in the Federal funds market as well as with the other FHLBanks. We expect to maintain a sufficient level of liquidity for the foreseeable future.
During the year ended December 31, 2024, advance disbursements totaled $252.8 billion compared to $907.0 billion for the prior year period which reflects the decline in on-balance liquidity needs of members, as previously discussed, and the decrease in short-term advance utilization compared to the prior year period. Periods with high short-term advance utilization typically have more frequent maturity and renewal activity, which results in higher cumulative disbursement and maturity amounts. Investment purchases (excluding overnight investments) totaled $2.5 billion in the year ended December 31, 2024 compared to $4.0 billion for the same period in 2023. Payments on maturing and retired consolidated obligation bonds and discount notes were $63.6 billion and $616.8 billion, respectively, for the year ended December 31, 2024 compared to $44.9 billion and $485.4 billion for the prior year period.
Capital: Total capital increased $209.1 million, or 5.4 percent, from December 31, 2023 to December 31, 2024 due to an increase in retained earnings in excess of dividends paid and, to a lesser extent, an increase in excess capital stock (see Table 38). We strive to manage our average capital ratio above our minimum regulatory and RMP requirements in an effort to ensure that we have the ability to issue additional consolidated obligations should the need arise. Excess capital capacity ensures we are able to meet the liquidity needs of our members and/or repurchase excess stock either upon the submission of a redemption request by a member or at our discretion for balance sheet or capital management purposes.
Each member is required to hold capital stock to become and remain a member of FHLBank and enter into specified activities with FHLBank including, but not limited to, access to FHLBank’s credit products and selling AMA to FHLBank. The amount of Class A Common Stock a member must acquire and maintain is the Asset-based Stock Purchase Requirement, which is currently equal to 0.1 percent of a member’s total assets as of December 31 of the preceding calendar year, with a minimum requirement of $1,000, and a maximum requirement of $500,000. The amount of Class B Common Stock a member must acquire and maintain is the Activity-based Stock Purchase Requirement, which is currently equal to 4.5 percent of the principal amount of advances outstanding to the member plus 3 percent of the principal amount of AMA outstanding for members, limited to a maximum of 3.0 percent of the member's total assets at the end of the prior calendar year, plus 0.25 percent of letters of credit balances outstanding, less the member’s Asset-based Stock Purchase Requirement.
Excess stock represents the amount of stock held by a member in excess of that institution’s stock requirement. Upon reducing the Activity-based Stock Purchase Requirement, through a change to the capital plan, or through a reduction of advance, AMA or letters of credit balances, excess stock is created since the member is no longer required under our capital plan to hold the same amount of activity-based capital stock. If our excess stock exceeds one percent of our total assets before or after the payment of a dividend in the form of stock, we would be prohibited by FHFA regulation from paying dividends in the form of stock. To manage the amount of excess stock, we may repurchase excess Class A Common Stock over FHLBank-established limits held by any individual member. Our current practices include periodic mandatory repurchases of excess Class A Common Stock and exchanging all excess Class B Common Stock over $50,000 per member for Class A Common Stock on a daily basis.
Under our cooperatively structured capital plan, our capital stock balances should fluctuate along with any growth (increased capital stock balances) or reduction (decreased capital stock balances) in advance, AMA and letters of credit balances in future periods. Any repurchase of excess capital stock is at our discretion and subject to statutory and regulatory limitations, including remaining in compliance with all of our regulatory and internal capital requirements after any such discretionary repurchase.
The increase in retained earnings from December 31, 2023 to December 31, 2024 is attributed to the net income for the year of $432.7 million, exceeding the $226.6 million payment of dividends in 2024. Dividends increased $5.0 million for the year ended December 31, 2024 compared to the year ended December 31, 2023 as a result of higher dividend rates paid on both Class A Common Stock and Class B Common Stock. The JCE Agreement provides that we allocate at least 20 percent of our net income to a separate RRE Account until the balance of that account equals at least one percent of our average balance of outstanding consolidated obligations calculated as of the last day of each calendar quarter. As of December 31, 2024, our level of restricted retained earnings represented approximately 0.69 percent of average outstanding consolidated obligations. These restricted retained earnings are not available to pay dividends (see the discussion of our JCE Agreement and the amendment to our capital plan see Item 1 - “Capital, Capital Rules and Dividends.”)
Our capital stock is not publicly traded. Members may request that we redeem any capital stock in excess of the stock purchase requirements, but any repurchase of excess capital stock prior to the end of the redemption period is entirely at our discretion. See Item 1 - “Capital, Capital Rules and Dividends”. All redemptions (at member request at the end of the redemption period) or repurchases (at our discretion, prior to the end of any applicable redemption period if made at a member’s request) are made at the par value of $100 per share. Stock redemption periods are six months for Class A Common Stock and five years for Class B Common Stock, although we can, at our discretion, repurchase amounts over a member’s minimum stock purchase requirements at any time prior to the end of the redemption periods as long as we will remain in compliance with our regulatory capital requirements after such repurchase. Ownership of our capital stock is concentrated within the financial services industry, and is stratified across various institutional entities as reflected in Table 37 as of December 31, 2024 and 2023 (dollar amounts in thousands):
Table 37
2024 2023
Count Amount Count Amount
Commercial banks 521 $ 1,273,118 534 $ 1,340,879
Savings institutions 20 646,513 21 645,656
Credit unions 92 267,123 90 272,855
Insurance companies 29 443,491 28 346,843
CDFIs 4 1,360 4 1,450
Total GAAP capital stock 666 2,631,605 677 2,607,683
Mandatorily redeemable capital stock 5 3,225 3 247
TOTAL REGULATORY CAPITAL STOCK 671 $ 2,634,830 680 $ 2,607,930
Our activity-based stock purchase requirements are consistent with our cooperative structure; members’ stock ownership requirements and the dollar amount of dividends paid to members generally increase as their activities with us increase. To the extent that a member’s asset-based stock purchase requirement is insufficient to cover the member’s activity-based stock purchase requirement, the member is required to purchase Class B Common Stock. We believe the value of our products and services is enhanced by dividend yields. Factors that affect members’ willingness to enter into activity with us and purchase additional required activity-based stock include, but are not limited to, our dividend rates, the risk-based capital weighting of our capital stock, and alternative investment or borrowing opportunities available to our members.
Table 38 provides a summary of member capital requirements under our current capital plan as of December 31, 2024 and 2023 (in thousands):
Table 38
Requirement 12/31/2024 12/31/2023
Asset-based (Class A Common Stock only) $ 187,495 $ 184,901
Activity-based (additional Class B Common Stock)1
2,030,000 2,182,176
Total Required Stock2
2,217,495 2,367,077
Excess Stock (Class A and B Common Stock) 417,335 240,853
Total Regulatory Capital Stock2
$ 2,634,830 $ 2,607,930
Activity-based Requirements:
Advances3
$ 1,879,698 $ 2,050,911
Letters of credit 18,857 18,122
AMA assets (mortgage loans)4
265,301 247,490
Total Activity-based Requirement 2,163,856 2,316,523
Asset-based Requirement (Class A Common Stock) not supporting member activity1
53,639 50,554
Total Required Stock2
$ 2,217,495 $ 2,367,077
1 Class A Common Stock, up to a member’s asset-based stock requirement, will be used to satisfy a member’s activity-based stock requirement before any Class B Common Stock is purchased by the member.
2 Includes mandatorily redeemable capital stock.
3 Advances to housing associates have no activity-based requirements because housing associates cannot own FHLBank stock.
4 Non-members previously required to purchase AMA activity-based stock are subject to the stock requirement in place at the time their membership ended as long as there are unpaid principal balances outstanding.
We are subject to various capital requirements under provisions of the GLB Act, the FHFA’s capital structure regulation and our RMP. See Item 1 - “Capital, Capital Rules and Dividends” for details on the various capital requirements. We have been in compliance with each of the capital rules and requirements at all times, as applicable, since the implementation of our capital plan. See Note 11 of the Notes to Financial Statements under Item 8 for additional information and compliance as of December 31, 2024 and 2023.
Capital Distributions: Dividends may be paid in cash or capital stock as authorized by our board of directors. Quarterly dividends can be paid out of current and previous unrestricted retained earnings, subject to FHFA regulation and our capital plan.
Dividends paid to members totaled $226.6 million for the year ended December 31, 2024 compared to $221.6 million for the same period in the prior year. The weighted average dividend rate for the year ended December 31, 2024 was 8.82 percent which represented a dividend payout ratio of 52.4 percent compared to a weighted average dividend rate of 8.47 percent and a payout ratio of 59.8 percent for the year ended December 31, 2023. The dividend payout ratio represents dividends declared and paid during a period as a percentage of net income for the period, although FHFA regulation requires dividends be paid out of known income prior to the declaration date. For example, dividends declared and paid in December 2024 were based on income during the three months ended November 30, 2024. (See Part I, Item 1 - “Capital, Capital Rules and Dividends” for other factors that contribute to the level of dividends paid.)
In accordance with our capital plan, we must pay holders of Class A Common Stock the dividend parity threshold (DPT) rate before paying a higher rate to holders of Class B Common Stock. The DPT is a dividend rate expressed as a percentage per annum up to which the dividends paid per share on Class A Common Stock and Class B Common Stock must be equal. When the overnight Federal funds effective rate is below 2.00 percent, the DPT is zero for that dividend period (DPT is floored at zero). Table 39 presents the dividend rates per annum paid on capital stock under our capital plan for the quarterly periods listed below:
Table 39
Applicable Rate per Annum 12/31/2024 09/30/2024 06/30/2024 03/31/2024
Class A Common Stock 4.75 % 4.75 % 4.75 % 4.75 %
Class B Common Stock 9.50 9.50 9.50 9.50
Weighted Average1
8.84 8.90 8.79 8.76
Dividend Parity Threshold:
Average effective overnight Federal funds rate 4.66 % 5.27 % 5.33 % 5.33 %
Spread to index (2.00) (2.00) (2.00) (2.00)
TOTAL (floored at zero percent) 2.66 % 3.27 % 3.33 % 3.33 %
1 Weighted average dividend rates are dividends paid in cash and stock on both classes of stock divided by the average of capital stock eligible for dividends.
Table 40 presents the dividend rates per annum paid on capital stock under our capital plan for the quarterly periods of 2023:
Table 40
Applicable Rate per Annum 12/31/2023 09/30/2023 06/30/2023 03/31/2023
Class A Common Stock 4.75 % 4.50 % 4.00 % 3.75 %
Class B Common Stock
9.50 9.25 9.00 8.75
Weighted Average1
8.84 8.62 8.31 8.12
Dividend Parity Threshold:
Average effective overnight Federal funds rate 5.33 % 5.26 % 4.99 % 4.52 %
Spread to index (2.00) (2.00) (2.00) (1.00)
TOTAL (floored at zero percent) 3.33 % 3.26 % 2.99 % 3.52 %
1 Weighted average dividend rates are dividends paid in cash and stock on both classes of stock divided by the average of capital stock eligible for dividends.
Historically, dividend rates have moved directionally with short-term interest rates. Market conditions and movements in short-term interest rates can be unpredictable, and adverse market conditions may result in lower dividend rates in future quarters. If there is a change to the DPT in the future, the capital plan requires that we provide members notice of that change 90 days prior to a dividend payment.
Under the capital plan, all dividends paid in the form of capital stock must be paid in the form of Class B Common Stock. We expect to continue paying dividends primarily in the form of capital stock, but future dividends may be paid in cash. The payment of cash dividends instead of stock dividends should not have a significant impact from a liquidity perspective, as the subsequent redemption of excess stock created by stock dividends would utilize liquidity resources in the same manner as a cash dividend. FHFA regulation prohibits any FHLBank from paying a stock dividend if excess stock outstanding will exceed one percent of its total assets after payment of the stock dividend.
Off-Balance Sheet Arrangements: In the ordinary course of business, we engage in financial transactions that, in accordance with GAAP, are not recorded on the Statements of Condition or may be recorded on the Statements of Condition in amounts that are different from the full contract or notional amount of the transactions. For more information on our off-balance sheet arrangements, see Note 15 of the Notes to Financial Statements under Item 8 - “Financial Statements and Supplementary Data.”
Risk Management
Active risk management continues to be an essential part of our operations and a key determinant of our ability to: (1) provide liquidity to our members at reasonable costs to them; (2) maintain the par value of members’ capital stock; (3) repurchase or redeem members’ capital stock; and (4) maintain earnings to return an acceptable dividend to our members and meet retained earnings thresholds. Proper identification, assessment and management of risks, complemented by adequate internal controls, enable our stakeholders to have confidence in our ability to meet our housing finance mission, serve our stockholders, earn a profit, compete in the industry, and sustain and prosper over the long term. We maintain comprehensive risk management processes to facilitate, control and monitor risk taking. Periodic reviews by internal and external auditors, FHFA examiners and independent consultants subject our practices to additional scrutiny, further strengthening the process.
We maintain an ERM program in an effort to enable the identification of all inherent significant risks to the organization and institute the prompt and effective management of any major risk exposures. Under this program, we perform annual risk assessments designed to identify and evaluate all material risks that could adversely affect the achievement of our performance objectives and compliance requirements. ERM is a process, effected by our board of directors, management and other personnel, applied in strategy setting and across FHLBank. It is designed to: (1) identify and evaluate potential risks or events that may affect FHLBank; (2) manage these risks to desired residual risk levels consistent with our Risk Appetite Statement; and (3) provide reasonable assurance regarding the achievement of FHLBank's strategic, operations, reporting and compliance objectives. Our ERM program is a structured and disciplined approach that aligns strategy, processes, people, technology and knowledge with the purpose of identifying, evaluating and managing the uncertainties we face as we create value. It is a continuous process of identifying, prioritizing, assessing and managing inherent enterprise risks (i.e., business, compliance, credit, liquidity, market and operations) before they become realized risk events.
Our Risk Philosophy Statement, approved by our board of directors, establishes the broad parameters we consider in executing our business strategy and represents a set of shared attitudes and beliefs that characterize how we consider risk in everything we do. Our Risk Appetite Statement, also approved by our board of directors, defines the level of risk exposure we are willing to accept or retain in pursuit of stakeholder value. We accept a measured and managed amount of market risk while seeking to manage our risk exposure to business, compliance, credit, liquidity and operations risk to a low residual risk level. While we consider our risk appetite first in evaluating strategic alternatives, defining and managing to a specific risk appetite does not ensure we will not incur greater than expected losses or be faced with an unexpected, catastrophic loss. By defining and managing to a specific risk appetite, our board of directors and senior management strive to ensure that there is a common understanding of our desired risk profile, which enhances the ability of both to make improved strategic and tactical decisions. Our monthly Risk Dashboard provides a holistic view of our risk profile and the means for reporting our key risk metrics as defined within our Risk Appetite Metrics document, which is also approved by our board of directors. The Risk Dashboard is intended to demonstrate, at an entity level, whether our enterprise risks are well controlled and normal operations are expected with standard board of directors’ involvement.
As part of our ERM program, entity-level risk assessment workshops are conducted with our management committees to identify and reach a general consensus on the primary risks that must be managed to help ensure achievement of our strategic objectives and allow for future success for the organization. By using this type of top-down assessment, we seek to: (1) gain an understanding of our current risk universe; (2) obtain management’s input on new and/or increasing areas of exposure; (3) determine the impact our primary risks might have on achieving our strategic business plan objectives; (4) discuss and validate our current risk management approach; (5) identify other risk management strategies that might be implemented to better ensure alignment with our desired residual risk profile; and (6) prioritize the allocation of resources to address those areas where current risk management strategies may be falling short relative to the overall level of perceived residual risk. The results of these activities, including any risk strategies and action plans for enhancing risk management practices, are summarized in an annual risk assessment report, which is reviewed by the SRMC and approved by the board of directors.
Business units also play key roles in our risk management program. We utilize a customized business unit risk assessment approach to ensure that: (1) risk assessments are completed annually for all of our business units; (2) effective internal controls and strategies are in place for managing the identified risks within the key processes throughout FHLBank; and (3) risk management or internal control weaknesses are properly identified with necessary corrective actions taken. The results of all risk assessments are reviewed by senior management and presented to the Risk Oversight Committee of the board of directors on a scheduled basis to keep our board of directors apprised of any weaknesses in the current risk management process of each business unit and the steps undertaken by management to address any identified weaknesses.
Effective risk management programs include not only conformance to risk management best practices by management but also incorporate board of director oversight. As previously noted, our board of directors plays an active role in the ERM process by regularly reviewing risk management policies and approving aggregate levels of risk. Involvement by the board of directors in establishing risk tolerance levels, including oversight of the development and maintenance of programs to manage it, is substantial and reflects a high level of director fiduciary responsibility and accountability. In addition to establishing the formal Risk Philosophy Statement, Risk Appetite Statement, Risk Appetite Metrics and reviewing the annual and business unit risk assessment results, our board of directors reviews both the RMP and Member Products Policy at least annually. Various management committees, including the Executive Team, the SRMC, the Asset/Liability Committee, the Credit Underwriting Committee, the Market Risk Analysis Committee, the ORC, the Disclosure Committee, the Technology Committee, and the Model Risk Management Committee, oversee our risk management process. The following discussion highlights our different strategies to diversify and manage risk. For a separate discussion of market risk, see Item 7A - “Quantitative and Qualitative Disclosures About Market Risk”.
Interest Rate Risk Management: Interest rate risk is the risk that relative and absolute changes in interest rates may adversely affect an institution's financial condition and performance. The goal of an interest rate risk management strategy is not necessarily to eliminate interest rate risk, but to manage it by setting, and operating within, an appropriate framework and limits. We generally manage interest rate risk by acquiring and maintaining a portfolio of assets and liabilities and entering into related derivative transactions to limit the expected mismatches in duration and market value of equity (MVE) sensitivity. For additional information on interest rate risk measurement, see Part I, Item 7A - “Quantitative and Qualitative Disclosures About Market Risk.”
Credit Risk Management: Credit risk is defined as the potential that a borrower or counterparty will fail to meet its financial obligations in accordance with agreed terms. We manage credit risk by following established policies, evaluating the creditworthiness of our counterparties, and utilizing collateral agreements and settlement netting for derivative transactions where enforceability of the legal right of offset has been determined. The most important step in the management of credit risk is the initial decision to extend credit. Continuous monitoring of counterparties is completed for all areas where we are exposed to credit risk, whether that is through lending, investing or derivative activities.
Lending and AMA Activities - Credit risk with members arises largely as a result of our lending and AMA activities, which includes members’ CE obligations on conventional mortgage loans that we acquire through the MPF Program. We manage our exposure to credit risk on advances, letters of credit, and members’ CE obligations on conventional mortgage loans through a combined approach that provides ongoing review of the financial condition of our members coupled with credit enhancement sufficiency analysis, investment grade determination, and prudent collateralization.
At the time an advance is originated, we are required to obtain and then to maintain a security interest in sufficient collateral of the borrower, which is eligible in one or more of the following categories:
▪Fully disbursed, whole first mortgages on 1-4 family residential property or securities representing a whole interest in such mortgages;
▪Securities issued and guaranteed or insured by the U.S. government, U.S. government agencies and mortgage GSEs including, without limitation, MBS issued or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae;
▪Cash or deposits;
▪Other acceptable real estate-related collateral, which includes privately issued collateralized mortgage obligations (CMOs), mortgages on multifamily residential real property, second mortgages on 1-4 family residential property, and mortgages on commercial real estate; or
▪In the case of any CFI, secured loans to small business, small farm and small agri-business or securities representing a whole interest in such secured loans.
For collateral to be eligible for acceptance, we must be able to determine that the collateral has a readily ascertainable market value, can be reliably discounted to account for liquidation and other risks, and is able to be liquidated in due course.
The Bank Act affords any security interest granted to us by any of our members, or any affiliate of any such member, priority over the claims and rights of any party, including any receiver, conservator, trustee, or similar party that has rights of a lien creditor. The only exceptions are claims and rights held by actual bona fide purchasers for value or by parties that are secured by actual perfected security interests, and provided that such claims and rights would otherwise be entitled to priority under applicable law. In addition, our claims are given certain preferences pursuant to the receivership provisions in the Federal Deposit Insurance Act. Most members provide us a blanket lien covering substantially all of the member’s assets and their consent for us to file a financing statement evidencing the blanket lien. Based on the blanket lien, the financing statement and the statutory preferences, we normally do not take control of collateral, other than securities collateral, pledged by blanket lien borrowers. We take control of all securities collateral through delivery of the securities to us or to an approved third-party custodian. With respect to non-blanket lien borrowers (typically insurance companies, CDFIs, and housing associates), and given the interaction with certain state insurance laws with the Bank Act, we take control of all pledged collateral. If the financial condition of a blanket lien member warrants such action because of the deterioration of the member’s financial condition, regulatory concerns about the member or other factors, we will take control of sufficient collateral intended to fully collateralize the member’s indebtedness to us.
Since the FHLBank System was established in 1932, the U.S. has experienced a wide range of economic conditions, including periods of depression, recession, and expansion, but no degree of economic downturn has ever resulted in a credit loss on an advance. Even during the most recent financial crisis, which resulted in the failure of a number of member financial institutions, there were no credit losses on advances. In addition, the FHLBanks have never accepted collateral in satisfaction of an advance, but rather have been paid in full by an institution that assumes the advance, the FDIC, or some other receiver.
As also provided in the Bank Act, a member’s investment in our capital stock is held as additional collateral for the member’s advances and other credit obligations (letters of credit, CE obligations, etc.). In addition, we can call for additional collateral or substitute collateral during the life of an advance or other credit obligation to protect our security interest.
Credit risk arising from AMA activities under our MPF Program falls into three categories: (1) the risk of credit losses on the mortgage loans represented in our FLA and last loss positions; (2) the risk that a PFI will not perform as promised with respect to its loss position provided through its CE obligations on conventional mortgage loan pools, which are covered by the same collateral arrangements as those described for advances; and (3) the risk that a third-party insurer (obligated under PMI or SMI arrangements) will fail to perform as expected. Should a PMI third-party insurer fail to perform, it would increase our credit risk exposure because our FLA is the next layer to absorb credit losses on conventional mortgage loan pools. Likewise, if an SMI third-party insurer fails to perform, it would increase our credit risk exposure because it would reduce the participating member’s CE obligation loss layer since SMI is purchased by PFIs to cover all or a portion of their CE obligation exposure for mortgage pools under certain MPF Program products. Credit risk exposure to third-party insurers to which we have PMI and/or SMI exposure is monitored on an ongoing basis and regularly reported to the board of directors. In addition, we perform a credit analysis of third-party PMI and SMI insurers. On an ongoing basis, we review trends that could identify changing risks within our mortgage loan portfolio for macro- and micro-economic environment-related issues, including adverse changes in credit characteristics (loan purpose, low FICO scores, high debt-to-income ratios, high LTV ratios, etc.) and/or various types of concentrations (geographic, high-balance loans, third-party originated, etc.). Based on the credit underwriting standards under the MPF Program and this ongoing review, we have concluded that the mortgage loans we hold would not be considered subprime.
Investments - Our RMP restricts the acquisition of investments to high-quality, short-term money market instruments and highly rated long-term securities. The short-term investment portfolio represents unsecured credit and reverse repurchase agreements. Counterparty ratings are monitored daily while performance and capital adequacy are monitored on a monthly basis in an effort to mitigate unsecured credit risk on our short-term investments. Collateral eligibility and transaction margin requirements on our reverse repurchase agreements are monitored daily. U.S. Treasury obligations and MBS securitized by Fannie Mae or Freddie Mac represent the majority of our long-term investments. Other long-term investments include MBS issued by Ginnie Mae, unsecured GSE debentures and collateralized state and local HFA securities.
Derivatives - We transact most of our derivatives with large banks and major broker-dealers. OTC derivative transactions may be either executed with a counterparty (uncleared derivatives) or with an executing broker and cleared through a Futures Commission Merchant (i.e., clearing agent) that acts on our behalf to clear and settle derivative transactions through a clearinghouse (cleared derivatives).
We are subject to credit risk due to the risk of nonperformance by counterparties to our derivative transactions. The amount of credit risk on derivatives depends on the extent to which netting procedures and collateral requirements are used and are effective in mitigating the risk. We manage this risk through credit analysis and collateral management. We are also required to follow the requirements set forth by applicable regulation.
Uncleared Derivatives. We are subject to non-performance by the counterparties to our uncleared derivative transactions. All bilateral security agreements with our non-member counterparties include bilateral collateral exchange provisions that require all credit exposures be collateralized, subject to a minimum transfer amount. As a result of these risk mitigation practices, we do not anticipate any credit losses on our uncleared derivative transactions as of December 31, 2024.
Cleared Derivatives. We are subject to nonperformance by the clearinghouse(s) and clearing agent(s). The requirement that we post initial and variation margin, through the clearing agent, to the clearinghouse, exposes us to institutional credit risk if the clearing agent or the clearinghouse fails to meet its obligations. The use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral or payments are posted daily for changes in the value of cleared derivatives through a clearing agent. We do not anticipate any credit losses on our cleared derivatives as of December 31, 2024.
We regularly monitor the exposures on our derivative transactions by determining the market value of positions using internal pricing models. The market values generated by the pricing model used to value derivatives are compared to dealer model results on a monthly basis to ensure that our derivative pricing model is reasonably calibrated to actual market pricing methodologies utilized by the dealers. In addition, we have our internal pricing model validated regularly by an independent consultant. As a result of these risk mitigation initiatives, management does not anticipate any credit losses on our derivative transactions. For additional information on managing credit risk on derivatives, see Note 6 of the Notes to Financial Statements under Item 8.
The contractual or notional amount of derivative transactions reflects our involvement in the various classes of financial instruments. The maximum credit risk with respect to derivative transactions is the estimated cost of replacing the derivative transactions if there are defaults, minus the value of any related collateral posted to satisfy the initial margin (if required). Our derivative transactions are subject to variation margin which is derived from the change in market value of the transaction and must be posted by the net debtor on demand. Cleared transactions are subject to initial margin as well as variation margin. The initial margin is intended to protect the clearinghouse against default of a customer. Initial margin is calculated to cover the potential price volatility of the derivative transaction between the time of the default and the assignment of the transaction to another clearing agent or termination of the transaction. Although the initial margin requirement should decrease over time as the duration and market volatility decrease, it remains outstanding for the life of the transaction; thus, it is possible that we could either have: (1) net credit exposure with a clearinghouse even if our net creditor position has been fully satisfied by the receipt of variation margin; or (2) net credit exposure with a clearinghouse despite being the net debtor (i.e., being in a liability position). In determining maximum credit risk, we consider accrued interest receivables and payables as well as the netting requirements to net assets and liabilities.
Liquidity Risk Management: Maintaining the ability to meet our obligations as they come due and to meet the credit needs of our members and housing associates in a timely and cost-efficient manner is the primary objective of managing liquidity risk. We seek to be in a position to meet the credit needs of our members, as well as our debt service and liquidity needs, without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs.
We maintain daily liquidity levels above certain thresholds and consider hypothetical adverse scenarios. These thresholds are outlined in our internal policies and comply with federal statutes, FHFA regulations and other FHFA guidance not issued in the form of regulations. We remained in compliance with liquidity regulatory requirements throughout 2024.
FHFA regulations require us to always have at least an amount equal to our current deposits received from our members invested in obligations of the United States, deposits in eligible banks or trust companies, or advances with remaining maturities not exceeding five years. We were in compliance with these regulations at all times during the year ended December 31, 2024.
We generally maintained stable access to the capital markets throughout 2024. A Contingency Funding Plan allows us to maintain sufficient liquidity in the event of operational disruptions at FHLBank, the Office of Finance, or in the capital markets. For additional discussion of the market for our consolidated obligations and the overall market affecting liquidity see “Financial Market Trends” under this Item 7.
An entity’s liquidity position is vulnerable to any rating, event, performance or ratio trigger (collectively called triggers) that would lead to the termination of the entity’s credit availability or the acceleration of repayment of credit obligations owed by the entity. We have reviewed documents concerning our vulnerability to transactions that contain triggers to gain an understanding of the manner in which risks can arise from such triggers. Triggers adverse to us currently exist in agreements for uncleared derivative transactions and SBPAs. Our staff monitors triggers to properly manage any type of potential risks from triggers. For additional information regarding our credit exposure relating to derivative contracts, see Note 6 of the Notes to Financial Statements under Item 8 - “Financial Statements and Supplementary Data.”
With respect to advances, letters of credit, and SBPAs, credit practices are impacted by certain triggers based on the member’s or housing associate’s financial performance (or the ratings of bonds underlying SBPAs) as defined in detail in our policies and/or the appropriate agreements. For collateral requirements designed for our credit products, see Notes 1, 4 and 15 in Item 8 - “Financial Statements and Supplementary Data - Notes to Financial Statements.”
We have executed SBPAs with multiple state housing finance authorities. All of the SBPAs contain rating triggers beneficial to us providing that if the housing finance authority bonds covered by the SBPA are rated below investment grade (triple-B), we would not be obligated to purchase the bonds even though we were otherwise required to do so under the terms of the SBPA contract. In addition, some transactions also contain a provision that allows us to terminate our obligation to purchase these bonds under the SBPA upon 30 days prior written notice if the long-term rating on the underlying bonds were to be withdrawn, suspended or reduced below single-A. As of December 31, 2024 and 2023, we were a party to, or participated in, 36 SBPAs with principal commitments of $1.0 billion for both periods. We were not required to purchase any bonds under any agreements during the year ended December 31, 2024 or 2023.
Business Risk Management: Business risk is the risk of an adverse impact on our profitability resulting from external factors that may occur in both the short and long run. We manage business risk, in part, through a commitment to strategic planning and by having a strategic business plan in effect at all times that describes how the business activities will achieve our mission and also details the operating goals and strategic objectives for each major business activity. The Strategic Business Plan is intended to make transparent our strategic plans as well as the strategic planning process that helps formulate that plan. The Strategic Business Plan is augmented from time-to-time, at least annually, with appropriate research and analysis. The Strategic Business Plan provides a mechanism for management and the board of directors to be fully engaged in fulfilling their responsibilities for establishing our long-term strategic direction. Directors’ knowledge of the external environment through their positions with member institutions in the financial services industry as well as a variety of other professions provides a strong experience base to complement the capabilities and competencies of management. Full development of the Strategic Business Plan, including tactical strategies and implementation, is delegated to management. We use planning scenarios to develop the Strategic Business Plan and we continue to refine and enhance the scenario planning process each year. We believe this process results in the development of robust and effective future scenarios, thereby enhancing the overall effectiveness of our strategic planning process and the development of risk strategies for each scenario. The board of directors plays a key role in the development of the Strategic Business Plan and regularly monitors progress in the achievement of business objectives. Two board of directors’ meetings are set aside each year for strategic planning purposes.
To manage business and strategic risk, earnings simulations are conducted annually with estimated base-, best- and worst-case scenarios. These earnings simulations are based upon a set of assumptions developed for each of the three scenarios that consider factors such as: (1) the effects of changes in interest rates and spreads; (2) the balances of advances, mortgage loans, and investments; (3) operating expenses; and (4) dividends. The worst-case scenario assumptions typically include a pessimistic interest rate assumption, an overall decline in advance balances of approximately 20 percent due to either a declining economy, the loss of a large borrowing member due to merger or acquisition, or changes in mortgage flow as a result of a declining economy. We monitor key indicators tied to the various scenario assumptions and provide a monthly report to the Executive Committee and the board of directors. This key indicator report includes advance balance monitoring for our largest eight members and our overall membership. See Table 21 under this Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Advances” for advance concentration to the top five borrowers.
Business risk also includes political, reputation, and regulatory risk. Congress occasionally considers legislation that could have an impact on the housing GSEs, including the FHLBanks. Legislation has the power to impact our cost of funds and our cost of doing business. It could also limit or expand existing authorities or change the competitive balance among the FHLBanks and other housing GSEs. Consequently, we seek to: (1) positively influence legislative outcomes; (2) support, oppose, or comment on regulatory proposals; and (3) continually educate all stakeholders about our positive impact on the communities we serve. To manage these types of business risks, we maintain a Director of Government and Industry Relations position and work with lobbying firms in Washington, D.C. Additionally, we, along with the other 10 FHLBanks, partner with our Washington, D.C.-based trade association, the Council of FHLBanks, to ensure that the FHLBank System's common legislative and regulatory interests are served. More specifically, we promote the enactment of laws and regulations that are beneficial to FHLBank Topeka and our members, and we oppose detrimental laws and regulations. We also work to enhance awareness and understanding of the FHLBanks among Washington leaders, including members of Congress and their staff, Executive departments, regulators, trade associations, and the financial media.
For additional discussions of general business risk, legislative and regulatory business risk and strategic business risk, see Item 1A - “Risk Factors.”
Joint and Several Liability - Although we are primarily liable for our portion of consolidated obligations (i.e., those issued on our behalf), we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on consolidated obligations of all the FHLBanks. For additional information regarding FHLBank’s joint and several liability, see Item 1 - “Business - Debt Financing - Consolidated Obligations” and Note 8 of the Notes to Financial Statements under Item 8.
Operations Risk Management: Operations risk is defined as the risk of loss resulting from inadequate or failed internal processes, people, or systems, or from external events. This category of risk is inherent in our daily business activities and involves people, information technology (IT) systems, processes, and external events (including fraud, security incidents, and business disruptions). A number of strategies are used to manage and mitigate operations risk, including systems and procedures to monitor transactions and financial positions, segregation of duties, documentation of transactions, secondary reviews, comprehensive risk assessments conducted at the entity and business unit level, and periodic reviews by our Internal Audit department. The ORC serves as the primary venue for overseeing all of our operations risk management initiatives and activities.
Human Error and Circumvention or Failure of Internal Controls and Procedures - Employees play a vital role in implementing our risk management practices and strategies. We look to recruit, develop, promote, and retain high-quality employees by offering a fair and competitive compensation package and by providing a comfortable, secure and professional work environment in a cost-effective manner. To ensure our employees understand the importance of establishing and maintaining an effective internal control system, we maintain an Internal Control Policy which, in addition to defining internal control and describing the five interrelated components and underlying principles of FHLBank’s internal control framework, outlines the objectives for our internal controls, establishes and delineates management’s responsibilities for implementing and maintaining internal controls, and establishes the Internal Audit department as the business unit responsible for reviewing the adequacy of our internal controls. We have established and maintain an effective internal control system, guided by the Internal Control Policy, that addresses: (1) the establishment of strategies aligned with our mission and vision; (2) the efficiency and effectiveness of our activities; (3) the safeguarding of our assets: (4) the reliability, completeness and timely reporting of financial and management information (and the transparency of that information) to the board of directors and outside parties, including the Office of Finance, the SEC and the FHFA; and (5) compliance with applicable laws, regulations, policies, supervisory determinations and directives. The annual business unit risk assessment program serves to reinforce our focus on maintaining strong internal controls by identifying significant inherent risks and the internal controls and strategies used to mitigate those risks to acceptable residual risk levels. The business unit risk assessment program provides management and the board of directors with a thorough understanding of our risk management and internal control structure.
Systems Malfunctions and Security Threats - We rely heavily on IT systems and other technology to conduct our business. To manage operations risk as it relates to IT systems, we devote significant management attention and resources to technology. Our Technology Committee assists executive management in overseeing the development and implementation of significant technology strategies. The Technology Committee is also charged with providing strategic oversight of all technology-related activities, monitoring the strategic alignment and synchronization of IT services with our Strategic Business Plan (and our immediate and long-term goals and objectives), reviewing the operational health of IT systems, and reviewing new or anticipated projects related to our strategic initiatives. Protection of our information assets is also necessary to establish and maintain trust between us and our customers, maintain compliance with applicable laws and regulations, and protect our reputation. Consequently, we maintain an enterprise-wide security program. The goal of our enterprise security program is to maintain a security framework such that: (1) physical and information assets are protected from unauthorized access, modification, disclosure and destruction; (2) integrity and confidentiality of information is maintained; (3) physical and information assets and information systems are available when needed; and (4) cybersecurity threats or other information security risks are identified, monitored, and addressed through our enterprise information security program. For additional information on cybersecurity and cybersecurity threats, see Item 1C - “Cybersecurity.”
Man-made or Natural Disasters - We manage the risk of business disruption and systems failure due to man-made or natural disasters by having in place at all times a business resiliency plan, the purpose of which is to provide contingency plans for situations where operations cannot be carried out in their normal manner. We maintain an alternate data center that is geographically located far enough from our primary data center to reduce the possibility of both data centers being impacted by the same event. We also maintain an off-site business resumption center which includes computer equipment, office space, supplies, and other resources to allow our employees to resume operations if our headquarters is inaccessible. Our on-site power generators support both the alternate data center and business resumption center in case of total power failure. Business partners may also resume operations by working remotely in situations where our headquarters is inaccessible. Comprehensive business resiliency exercises utilizing the alternate data center and business resumption center are conducted routinely and vary in scope and duration to simulate various types of disruptions. The disaster recovery plans are reviewed and updated annually. We also have a reciprocal back-up agreement in place with FHLBank Boston to provide short-term advances to our members on our behalf in the event that our facilities are inoperable. In the event that FHLBank Boston’s facilities are inoperable, we have agreed to provide short-term liquidity advances to FHLBank Boston’s members. We complete an annual test of this agreement with FHLBank Boston to ensure the process and related systems are functioning properly. We also maintain a funds transfer contingency agreement with FHLBank Boston that is tested annually, which authorizes either FHLBank Topeka or FHLBank Boston to process wire transfers for the other during a contingency situation.
Internal or External Fraud - Our Anti-Fraud Policy, which includes our Whistleblower Procedures, along with our Anti-Money Laundering Policy, forms the foundation of our Fraud Awareness Program. Our Fraud Awareness Program establishes our methodology or framework for preventing, detecting, deterring, reporting, remediating, and punishing suspicious activities, money laundering activities, dishonest activities, violations of the Code of Ethics and other fraudulent activities that could create risks for us or undermine the public’s confidence in the integrity of our activities. Employees may submit good faith complaints or concerns regarding accounting or auditing matters, fraud concerns, potential wrongdoing or violations of applicable securities laws and regulations, or violations of the Commodity Exchange Act and relevant implementing regulations to management or our anonymous reporting service without fear of dismissal or retaliation of any kind. We are committed to achieving compliance with all applicable securities laws and regulations, the Commodity Exchange Act and relevant implementing regulations, accounting standards, accounting controls and audit practices. Decisions to prosecute or refer fraud investigation results to the appropriate law enforcement or regulatory agencies for independent investigation shall be made in conjunction with legal counsel and appropriate senior management, as will final decisions on disposition of the case.
Recently Issued Accounting Standards
For a discussion of recently issued accounting standards, see Note 2 of the Notes to Financial Statements under Item 8 - "Financial Statements and Supplementary Data".

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A: Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk that changes in market value may adversely affect our financial condition and performance. Interest rate risk is a component of market risk and represents our most significant market risk exposure. Interest rate risk is the risk that the market value of our asset, liability, and derivative portfolios will be negatively impacted by interest rate volatility or that earnings will be affected significantly by interest rate changes. We manage interest rate risk through the characteristics of our portfolio of assets and liabilities and by using derivative transactions to limit duration mismatches and reduce MVE sensitivity. Matching the duration of assets with the duration of liabilities funding those assets is accomplished through the use of different debt maturities and embedded option characteristics, as well as the use of derivatives, primarily interest rate swaps, interest rate caps, and interest rate floors. Interest rate swaps increase the flexibility of our funding alternatives by providing cash flows or characteristics that might not be as readily available or cost-effective if obtained in the standard GSE debt market.
Duration of Equity: Durations of equity (DOE) aggregates the estimated sensitivity of market value for each of our financial assets and liabilities to changes in interest rates. A positive DOE results when the duration of assets and designated derivatives is greater than the duration of liabilities and designated derivatives, indicating a degree of interest rate risk exposure in a rising interest rate environment. A negative DOE results in the opposite scenario, indicating a degree of interest rate risk exposure in a declining interest rate environment. Higher DOE numbers, whether positive or negative, indicate greater volatility of market value in response to changing interest rates. A decline in market value does not necessarily translate directly into a decline in income, especially for entities that do not trade financial instruments. Changes in market value may indicate trends in income over longer periods, and knowing the sensitivity of our market value to changes in interest rates provides a measure of the interest rate risk we take.
Under the RMP, our base case DOE is generally limited to a range of ±5.0 assuming current interest rates. In addition, our DOE is generally limited to a range of ±7.0 assuming an instantaneous parallel increase or decrease in interest rates of 200 basis points. During periods of extremely low interest rates, the FHFA requires that the FHLBanks employ a constrained down shock analysis to limit the evolution of forward interest rates to positive non-zero values. Since our market risk model imposes a positive non-zero boundary on post-shock interest rates, no additional calculations are necessary to meet this FHFA requirement when applicable. When DOE exceeds the limits established by the RMP, corrective actions taken may include: (1) the purchase of interest rate caps, interest rate floors, or other derivatives; (2) the sale of assets; or (3) the addition to the balance sheet of assets or liabilities having characteristics that are such that they counterbalance the excessive duration observed.
Table 41 presents our DOE in the base and the up and down 200 basis point interest rate shock scenarios:
Table 41
Duration of Equity
Date Up 200 Basis Points Base Down 200 Basis Points
12/31/2024 2.0 1.9 0.7
09/30/2024 2.7 2.5 1.5
06/30/2024 2.7 2.4 1.5
03/31/2024 3.3 2.3 1.3
12/31/2023 3.3 2.1 1.2
09/30/2023 3.2 2.2 1.9
06/30/2023 2.3 1.6 2.0
03/31/2023 1.8 1.8 2.4
The primary factors contributing to the net changes in duration from December 31, 2023 to December 31, 2024 were: (1) the relative change in interest rates and the relative level of mortgage rates during the period along with variable rate CMOs and their effective cap levels; (2) the relative percent of total assets represented by the fixed rate mortgage loan portfolio during the period; and (3) asset/liability actions taken by management throughout the period, including the addition of interest rate cap positions. The increase in longer-term interest rates and the relative level of shorter-term interest rates during the period impacted the implied forward rates and the valuation of the variable rate CMO investments with lower effective interest rate caps. To reduce the impact of the general duration lengthening from the variable rate CMO investments with lower effective interest rate caps, stand-alone interest caps were purchased during the period, leading to the less asset sensitive DOE level in the +200 interest rate shock scenario.
In addition, the relative changes in interest rates and mortgage rates during the period caused the mortgage loan portfolio contribution to duration to change less than the associated liabilities, contributing to the decrease in the asset sensitive DOE profile in the base case scenario and the -200 interest rate shock scenario. The mortgage loan portfolio generally has a longer duration profile in the interest rate shock scenarios contributing to the asset-sensitive DOE in the up and down 200 basis point shock scenarios. However, the prepayment sensitivity and market value changes in our mortgage portfolio currently align well with our non-swapped callable debt portfolio in these scenarios generating a relatively stable sensitivity profile in the interest rate shock scenarios.
The change in interest rates during the period generally lengthens the duration profile for both the fixed rate mortgage loan portfolio and the associated unswapped callable consolidated obligation bonds funding these assets. The decline in advances during the period generated a marginally larger contribution and an overall modest net duration profile change from the mortgage loan and unswapped callable bond portfolios. This behavior is expected since DOE is a market value weighted measure and as portfolio weightings change in relation to total market value of assets, the respective contributions increase or decrease to overall DOE. With the increase in our mortgage loan portfolio balance, the net impact was a slight increase as a percentage of total assets during this period, so the duration profile changed as expected as prepayments shifted slightly for both new production mortgage loans, as well as the outstanding fixed rate mortgage loan portfolio.
To effectively manage these changes in the mortgage loan portfolio (including new production and prepaid loans) and related sensitivity to changes in market conditions, unswapped callable consolidated obligation bonds that either matured or were called were generally replaced with reissuance of unswapped callable consolidated obligation bonds with relatively long maturities and lock-out periods (generally six months and greater). Generally, changes in the profile of the liability portfolio corresponds with the expected duration profile of the fixed rate mortgage loans, all else being equal, and positions the balance sheet for future changes in rates, including changes in interest rate increases where the mortgage loan portfolio will likely lengthen in duration as expected prepayments slow. For further discussion of the call and reissuance of consolidated obligation bonds, see Item 7 - “Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Consolidated Obligations.” The combination of these factors contributed to the net DOE changes in all scenarios during the period.
Duration gap is the difference between the duration of our assets and the duration of our liabilities. Our base duration gap was 1.2 months and 1.3 months for December 31, 2024 and 2023, respectively.
Market Value of Equity
MVE is the net value of our assets and liabilities. Estimating sensitivity of MVE to changes in interest rates is another measure of interest rate risk. The RMP measures our market value risk in terms of the MVE in relation to total regulatory capital stock outstanding (TRCS). TRCS includes all capital stock outstanding, including stock subject to mandatory redemption. As a cooperative, we believe using the TRCS results is an appropriate measure because it reflects our market value relative to the book value of our capital stock. Our RMP stipulates MVE shall not be less than: (1) 100 percent of TRCS under the base case scenario; or (2) 90 percent of TRCS under a ±200 basis point instantaneous parallel shock in interest rates. Table 42 presents MVE as a percent of TRCS. As of December 31, 2024, all scenarios are well above the specified limits and much of the relative level in the ratios during the periods covered by the table can be attributed to the relative level of the fixed rate mortgage loan and associated funding portfolio market values along with the relative level of outstanding capital.
The MVE to TRCS ratios can be impacted by the market value of equity sensitivity and level of capital outstanding based on our capital management approach. The relative level of advance, mortgage loan, and letters of credit balances, which trigger required stock, and excess stock as of December 31, 2024 (see Table 38 under this Item 7) contributed to the MVE levels as of December 31, 2024. These relationships and associated risk sensitivity primarily generate the changes in the MVE/TRCS levels and produce the changes in the ratios in all interest rate scenarios in the table below.
Generally, a positive duration position accompanied by rising interest rates would negatively impact the base market value of equity (numerator). Likewise, as capital increases, the MVE/TRCS ratio declines since the capital level is the denominator in the ratio. While the change in interest rates contributed to the overall impact on base MVE during the period, the changes were limited with the ratio maintaining consistent levels in the base case and interest rate shock scenarios during the period.
Table 42
Market Value of Equity as a Percent of Total Regulatory Capital Stock
Date Up 200 Basis Points Base Down 200 Basis Points
12/31/2024 148 153 158
09/30/2024 148 156 161
06/30/2024 142 149 155
03/31/2024 147 155 161
12/31/2023 145 153 157
09/30/2023 136 144 150
06/30/2023 143 148 154
03/31/2023 143 148 154
Detail of Derivative Instruments by Type of Instrument by Type of Risk
Various types of derivative instruments are utilized to mitigate the interest rate risks described in the preceding sections as well as to better match the terms of assets and liabilities. Tables 43 and 44 present the notional amount and fair value amount (fair value includes net accrued interest receivable or payable on the derivative) for derivative instruments by hedged item, hedging instrument, hedging objective and accounting designation (in thousands):
Table 43
12/31/2024
Hedged Item Hedging Instrument Hedging Objective Accounting Designation Notional Amount Fair Value Amount
Advances
Fixed rate non-callable advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index Fair Value Hedge $ 12,541,236 $ 2,387
Fixed rate convertible advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance Fair Value Hedge 20,500 181
Fixed rate putable advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance Fair Value Hedge 3,095,200 (1,397)
Fixed rate non-callable advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index Economic Hedge 581,304 1,107
Firm commitment to issue a fixed rate advance Forward settling interest rate swap Protect against fair value risk Fair Value Hedge 8,730 11
Investments
Fixed rate non-MBS available-for-sale investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Fair Value Hedge 3,300,000 641
Fixed rate MBS available-for-sale investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Fair Value Hedge 5,128,426 37,078
Fixed rate non-MBS trading investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Economic Hedge 18,000 2
Fixed rate MBS trading investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Economic Hedge 419,438 7,198
Mortgage Loans Held for Portfolio
Fixed rate mortgage purchase commitments Mortgage purchase commitment Protect against fair value risk Economic Hedge 34,524 (43)
Consolidated Obligation Discount Notes
Fixed rate non-callable consolidated obligation discount notes with tenors less than 6 months Receive fixed, pay variable interest rate swap Convert the discount note's fixed rate to a variable rate Economic Hedge 7,247,448 (7)
Fixed rate non-callable consolidated obligation discount notes with tenors of 6 to 12 months Receive fixed, pay variable interest rate swap Convert the discount note's fixed rate to a variable rate Fair Value Hedge 2,969,182 9
Firm commitment to issue consolidated obligation discount note
Receive fixed, pay variable interest rate swap Protect against fair value risk Economic Hedge 198,705 (5)
Consolidated Obligation Bonds
Fixed rate non-callable consolidated obligation bonds Receive fixed, pay variable interest rate swap Convert the bond’s fixed rate to a variable rate index Fair Value Hedge 2,642,000 (34,414)
Fixed rate callable consolidated obligation bonds Receive fixed, pay variable interest rate swap Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond Fair Value Hedge 7,355,000 (125,425)
Variable rate consolidated obligation bonds Receive variable interest rate, pay variable interest rate swap Reduce basis risk by converting an undesirable variable rate index in the bond to a more desirable variable rate index Economic Hedge 500,000 (70)
Callable step-up/step-down consolidated obligation bonds Receive variable interest rate with embedded features, pay variable interest rate swap Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond Fair Value Hedge 823,000 (39,065)
Fixed rate callable consolidated obligation bonds Receive fixed, pay variable interest rate swap Convert the bond’s fixed rate to a variable rate index Economic Hedge
1,750,000 16,941
Balance Sheet
Duration of equity
Interest rate cap Limit duration and convexity risk caused by an increase in interest rates
Economic Hedge
2,604,000 4,181
Cost of funds or asset
Receive variable interest rate, pay variable interest rate swap Reduce interest rate sensitivity and repricing gaps Economic Hedge
750,000 6
TOTAL $ 51,986,693 $ (130,684)
Table 44
12/31/2023
Hedged Item Hedging Instrument Hedging Objective Accounting Designation Notional Amount Fair Value Amount
Advances
Fixed rate non-callable advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index Fair Value Hedge $ 11,315,760 $ (2,205)
Fixed rate convertible advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance Fair Value Hedge 113,400 4,215
Fixed rate putable advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance Fair Value Hedge 2,071,800 (9,227)
Fixed rate non-callable advances Pay fixed, receive variable interest rate swap Convert the advance’s fixed rate to a variable rate index Economic Hedge 201,138 834
Firm commitment to issue a fixed rate advance Forward settling interest rate swap Protect against fair value risk Fair Value Hedge 52,141 7
Investments
Fixed rate non-MBS available-for-sale investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Fair Value Hedge 3,050,000 (4,065)
Fixed rate MBS available-for-sale investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Fair Value Hedge 3,766,473 48,363
Fixed rate non-MBS trading investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Economic Hedge 293,000 (26)
Fixed rate MBS trading investments Pay fixed, receive variable interest rate swap Convert the investment’s fixed rate to a variable rate index Economic Hedge 628,027 20,659
Adjustable rate MBS with embedded caps Interest rate cap Offset the interest rate cap embedded in a variable rate investment Economic Hedge 304,000 698
Mortgage Loans Held for Portfolio
Fixed rate mortgage purchase commitments Mortgage purchase commitment Protect against fair value risk Economic Hedge 41,641 128
Consolidated Obligation Discount Notes
Fixed rate non-callable consolidated obligation discount notes with tenors less than 6 months Receive fixed, pay variable interest rate swap Convert the discount note's fixed rate to a variable rate Economic Hedge 5,261,131 453
Fixed rate non-callable consolidated obligation discount notes with tenors of 6 to 12 months Receive fixed, pay variable interest rate swap Convert the discount note's fixed rate to a variable rate Fair Value Hedge 3,727,296 911
Consolidated Obligation Bonds
Fixed rate non-callable consolidated obligation bonds Receive fixed, pay variable interest rate swap Convert the bond’s fixed rate to a variable rate index Fair Value Hedge 4,599,000 (18,313)
Fixed rate callable consolidated obligation bonds Receive fixed, pay variable interest rate swap Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond Fair Value Hedge 14,797,000 (241,011)
Callable step-up/step-down consolidated obligation bonds Receive variable interest rate with embedded features, pay variable interest rate swap Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond Fair Value Hedge 1,312,000 (72,918)
TOTAL $ 51,533,807 $ (271,497)

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8: Financial Statements and Supplementary Data
The following financial statements and accompanying notes, including the Report of Independent Registered Public Accounting Firm, are set forth on pages to of this Form 10-K.
Audited Financial Statements
Description Page Number
Management's Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm - PricewaterhouseCoopers LLP (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 for the Years Ended December 31, 2024, 2023, and 2022
Statements of Capital 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
Background
Note 1 - Summary of Significant Accounting Policies
Note 2 - Recently Issued Accounting Standards and Adopted Accounting Guidance
Note 3 - Investments
Note 4 - Advances
Note 5 - Mortgage Loans
Note 6 - Derivatives and Hedging Activities
Note 7 - Deposits
Note 8 - Consolidated Obligations
Note 9 - Affordable Housing Program
Note 10 - Assets and Liabilities Subject to Offsetting
Note 11 - Capital
Note 12 - Accumulated Other Comprehensive Income
Note 13 - Pension and Other Postretirement Benefit Plans
Note 14 - Fair Value
Note 15 - Commitments and Contingencies
Note 16 - Transactions with Stockholders
Note 17 - Transactions with Other FHLBanks

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no changes in or disagreements with our accountants on accounting and financial disclosure during the two most recent fiscal years.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A: Controls and Procedures
Disclosure Controls and Procedures
Senior management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures are designed to provide a reasonable level of assurance in achieving their desired objectives; however, in designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Management, with the participation of the President and CEO, our principal executive officer, and the Chief Financial Officer (CFO), our principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2024. Based upon that evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December 31, 2024.
Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm with respect to FHLBank’s internal control over financial reporting are included under Item 8 - “Financial Statements and Supplementary Data.”
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the fourth quarter of the year for which this annual report on Form 10-K is filed that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B: Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10: Directors, Executive Officers and Corporate Governance
Information About Our Executive Officers
The following sets forth the executive officers who served during the period from January 1, 2024 through the date of this annual report on Form 10-K.
All executive officers are “at will” employees. All executive officers, other than the Chief Audit Executive (CAE) and the CRO, may be removed from office or discharged by the board of directors or the President and CEO with or without cause. The CAE may be removed from office, with or without cause, only with the approval of the Audit Committee. The CRO may be removed from office, with or without cause, only with the approval of the Risk Oversight Committee.
Table 45
Executive Officer Age Position Held
Jeffrey B. Kuzbel 58 President and Chief Executive Officer
Carl M. Koupal, III 41 Executive Vice President, Chief Mission Officer / Chief Legal Officer and Corporate Secretary
Philip D. Bacchus 44 Senior Vice President, Chief Financial Officer (Principal Financial Officer)
Brian J. Dreher 53 Senior Vice President, Chief Information Officer
Lance W. Liby 54 Senior Vice President, Chief Business Officer
Thomas E. Millburn1
54 Senior Vice President, Chief Audit Executive
Martin L. Schlossman, Jr. 56 Senior Vice President, Chief Risk Officer
Amy J. Crouch2
49 First Vice President, Chief Accounting Officer
__________
1 Although Mr. Millburn is a non-voting member of FHLBank's executive team, he is not considered an "executive officer" as defined in Rule 3b-7 of the Exchange Act because he is not in charge of a principal business unit, division or function, nor does he perform a policy making function.
2 Ms. Crouch served as FHLBank's Principal Financial Officer until December 1, 2024.
Except as otherwise indicated below, each officer has been engaged in the principal occupation listed above for at least five years:
Jeffrey B. Kuzbel became President and CEO in January 2024, after serving as Executive Vice President (EVP) and CFO starting in January 2022, and Senior Vice President (SVP) and CFO starting in April 2021. Prior to joining FHLBank in 2021, Mr. Kuzbel served as LIBOR Transition Executive at Capital One Financial from 2019 to March 2021; Treasury & Balance Sheet Management CFO at Capital One Financial from 2016 through 2018; Managing Vice President, Balance Sheet Management, at Capital One Financial from 2013 through 2015; Vice President, Balance Sheet Strategy from 2010 through 2012; and Senior Director, Treasury Finance & Analytics during 2009. Prior to his tenure at Capital One Financial, Mr. Kuzbel served as Lead Director - Market Risk Management for Freddie Mac, as Vice President - Fixed Income Portfolio Management and Trading at Advanced Investment Management, Inc., and as Head of Investments at the Federal Home Loan Bank of Pittsburgh.
Carl M. Koupal, III, became EVP and Chief Mission Officer/Chief Legal Officer (CMO/CLO), Corporate Secretary in July 2024, after serving as EVP and Chief Legal and Ethics Officer, Corporate Secretary starting in January 2024, and as SVP and Chief Legal and Ethics Officer since October 2022. Mr. Koupal is responsible for overseeing FHLBank’s Legal Services, Housing and Community Development, Government and Industry Relations, Corporate Communications, Corporate Governance, and, on an interim basis, Corporate Services activities. Mr. Koupal previously served as Chief Compliance and Ethics Officer & General Counsel, Corporate Secretary starting in October 2021; First Vice President, Associate General Counsel, Director of Legal Services and Compliance, Corporate Secretary from April 2018 to October 2021; and as Vice President, Assistant General Counsel, Director of Compliance and Corporate Secretary from March 2016 through March 2018. Mr. Koupal joined FHLBank in 2008 as a Law Clerk and was promoted to Staff Attorney in 2009; Legal and Compliance Officer in 2011; Assistant Vice President, Assistant General Counsel, Director of Compliance and Assistant Corporate Secretary in 2014; and Vice President, Assistant General Counsel, Director of Compliance and Corporate Secretary in 2016.
Philip D. Bacchus became SVP and CFO in August 2024. Mr. Bacchus is responsible for overseeing FHLBank’s Finance, Strategy, and Innovation Division, which includes Accounting, Capital Markets, and Strategy, Innovation, and Planning activities. Prior to joining FHLBank in 2024, Mr. Bacchus served as Senior Vice President and Treasurer at American Savings Bank, Honolulu, Hawaii, from 2019 to August 2024; and served in various treasury and balance sheet management roles at Capital One Financial from 2006 to 2017.
Brian J. Dreher became SVP and CIO in January 2022, after serving as Vice President and Director of IT Infrastructure & Operations starting in 2014. Mr. Dreher is responsible for FHLBank’s Information Technology activities, including IT governance, application solutions delivery, information security, infrastructure, and operations. He served as Vice President, Assistant Director of Information Technology from 2010 to 2014, and Vice President and Software Development Manager from 2004 to 2010. He joined FHLBank in 1998.
Lance W. Liby became SVP and Chief Business Officer in April 2024. Mr. Liby is responsible for overseeing FHLBank’s Product Administration and Lending, Product Development and Research, Sales, Member Solutions, and Wire Services activities. Mr. Liby previously served as First Vice President, Chief Credit Officer from January 2017 to March 2024. He joined FHLBank in 2013. Prior to joining FHLBank, Mr. Liby served as vice president at Mortgage Liquidity Solutions from 2011 to 2013 and was the Senior Manager of Credit Risk at U.S. Central Federal Credit Union from 2003 to 2011.
Thomas E. Millburn became SVP, CAE in March 2016. Mr. Millburn is responsible for overseeing FHLBank’s Internal Audit activities. Mr. Millburn previously served as SVP, Chief Internal Audit Officer from March 2011 to March 2016 and Senior Vice President, Director of Internal Audit from December 2010 to March 2011. Mr. Millburn joined FHLBank in 1994 as a staff internal auditor and was promoted to Assistant Vice President, Director of Internal Audit in 1999, Vice President in 2000 and First Vice President in March 2004.
Martin L. Schlossman, Jr. became SVP, CRO in March 2017, after serving as Interim CRO starting in January 2017. Mr. Schlossman is responsible for overseeing FHLBank’s Credit, Market Risk Analysis, and Operations Risk and Compliance activities. Mr. Schlossman previously served as Senior Vice President, Associate CRO from March 2012 through December 2016. He joined FHLBank in November 2000 as an Enterprise Risk Analyst and was promoted to Planning Officer in December 2001, Assistant Vice President in March 2004, Vice President in June 2005, and First Vice President in March 2009. He was named Associate CRO in June 2010 and was promoted to Senior Vice President in March 2012.
Amy J. Crouch became First Vice President and Chief Accounting Officer and FHLBank’s Principal Accounting Officer in January 2023. She was named Interim Principal Financial Officer from January 2024 through November 2024. Ms. Crouch is responsible for FHLBank’s Accounting activities, including financial reporting. Ms. Crouch previously served as Vice President, Director of Financial Reporting since September 2011, and as SEC Reporting and Compliance Manager from April 2008 to September 2011. She joined FHLBank in 2005 as SEC Reporting and Compliance Accountant.
Directors
The Bank Act, as amended by the Recovery Act, mandates that an FHLBank’s board of directors consists of 13 directors or such other number as the Director of the FHFA deems appropriate. Further, the Bank Act categorizes directorships into two categories: “member” directors and “independent” directors. A majority of directors are required to be member directors and at least two-fifths are required to be independent directors. Each director must be: (1) a citizen of the United States; and (2) either a bona fide resident in our district or serve as an officer or director of a member located in our district. Under the FHFA regulations, new and re-elected directors serve four-year terms; subject to adjustment by the FHFA to establish staggering of the board. Directors cannot be elected to serve more than three consecutive full terms. A director who was term-limited may be re-elected to a directorship for a term that commences no earlier than two years after the expiration of the third full term. The FHFA Director designated for 2024 and our board of directors currently consists of 17 directors, 10 of whom are member directors and seven of whom are independent directors
Additionally, at least two of the independent directors must qualify as public interest directors. To qualify as a public interest director, an individual must have more than four years of experience in representing consumer or community interests in banking services, credit needs, housing, or consumer financial protections.
Member directorships are designated to each of the four states in our district and each of our members is entitled to nominate and vote for candidates representing the state in which the member’s principal place of business is located as of December 31 of the calendar year immediately preceding the election year (Record Date). To qualify as a nominee for a member directorship, a nominee must be an officer or director of a member located in the state to which the director of the FHFA has allocated the directorship, and such member must meet all minimum capital requirements established by its appropriate Federal banking agency or appropriate state regulator. Member directors are nominated by members located in the state to which the member directorship is assigned, based on a determination by the nominating institution that the nominee possesses the applicable experience, qualifications, attributes and skills to qualify the nominee to serve as an FHLBank director, without any participation from our board of directors. Following the nomination process, a member is entitled to cast, for each applicable member directorship, one vote for each share of capital stock that the member is required to hold, subject to a statutory limitation. Under this limitation, the total number of votes that each member may cast is limited to the average number of shares of capital stock that were required to be held by all members in that state as of the Record Date for voting.
Each of our member directors meets the required qualifications and, as such, each is an officer or director of a member in the respective state from which they were nominated and elected.
Independent directors are nominated by the board of directors after consultation with the Affordable Housing Advisory Council and after the nominee has been submitted to the FHFA for review. In nominating independent directors, our board of directors may consider an individual’s current and prior experience on the board of directors, the qualifications of the nominee, and the skills and experience most likely to add strength to the board of directors, among other skills, qualifications and attributes. FHFA regulations require us to encourage the consideration of diversity in nominating or soliciting nominees for positions on our board of directors. Pursuant to our Procedures for Identifying and Evaluating Candidates for Independent Directorships and Filling Vacant Directorships, our board of directors will consider diversity in nominating independent directors and in electing member directors when the board of directors is permitted to elect or appoint member directors in the event of a vacancy, and in evaluating potential director candidates, the board of directors may also identify appropriate criteria that will promote appropriate diversity on the board of directors and help meet our strategic needs, including desired skill sets, experience, residence, ability to devote sufficient time to service on the board of directors, and background. If our board of directors nominates only one individual for each independent directorship, then each nominee must receive at least 20 percent of the number of votes eligible to be cast in the election to be elected. If our board of directors nominates more persons for the type of independent directorship to be filled than there are directorships of that type to be filled in the election, then the nominee receiving the highest number of votes will be elected. Each member voting in the independent director election is entitled to cast one vote for each share of capital stock that the member is required to hold, subject to the statutory limitation discussed above. Our board of directors has adopted procedures for the nomination and election of independent directors, consistent with the requirements of the Bank Act and FHFA regulations.
On November 5, 2024, Kyle J. Heckman from the state of Colorado and Christopher D. Wente from the state of Kansas were each declared elected as member directors, and Milroy A. Alexander from the state of Colorado and Lynn Jenkins from the state of Kansas were declared elected as independent directors of FHLBank’s board of directors. Each of the directors elected in 2024 will serve four-year terms expiring December 31, 2028.
Table 46 sets forth certain information regarding each of our directors as of the filing date of this annual report on Form 10-K.
Table 46
Director Age Type of
Directorship Director Since Current Term
Expiration Board Committee
Membership1
Milroy A. Alexander 75 Independent January 2015 December 2028
(a), (b), (c) Vice Chair, (e)
Steven G. Bradshaw 65 Member
January 2024 December 2027
(b), (f)
Kyle J. Heckman
46 Member January 2025
December 2028
(a), (d)
Thomas E. Henning 71 Independent January 2023 December 2026 (a), (b) Chair, (c), (d)
Michael B. Jacobson 71 Member January 2022 December 2025 (d), (f)
Lynn Jenkins
61 Independent July 2019 December 2028
(a), (e), (f)
Holly Johnson 61 Independent January 2016
December 2027
(a) Chair, (c), (d)
Barry J. Lockard
59 Member January 2019 December 2026 (b), (c) Chair
Craig A. Meader 67 Member January 2020
December 2027
(a), (e), (f) Chair Designate
Jeffrey R. Noordhoek 59 Independent July 2020 December 2025 (b), (f)
Mark J. O’Connor 60 Member May 2011 December 2025 (c), (e), (f) Chair
Carla D. Pratt 56 Independent January 2023 December 2026 (b), (e)
Douglas E. Tippens 70 Member January 2015 December 2026 (a), (b), (c), (d) Chair
Gregg Vandaveer 72 Member
January 2024
December 2027
(e), (f)
Paul E. Washington 55 Independent July 2021 December 2025 (c), (d), (e) Chair
Christopher D. Wente
49 Member
January 2025
December 2028
(e), (f)
Lance L. White 50 Member January 2023 December 2026 (b),(d)
1 Board of Director committees are as follows: (a) Audit; (b) Compensation, People and Inclusion; (c) Executive; (d) Risk Oversight; (e) Mission and Governance; and (f) Operations.
Milroy A. Alexander has been a housing, financial and business consultant since 2010, serving non-profit housing organizations and a residential and commercial redevelopment authority for a former air force base. He has been board Chair of Northeast Denver Housing Center for the last 25 years. He is the former board chair of the Lowry Redevelopment Authority and a former board member of the National Council of State Housing Agencies, the Municipal Securities Rulemaking Board, Rose Community Foundation, and numerous other organizations. Mr. Alexander previously served as Executive Director and CEO of the Colorado Housing and Finance Authority in Denver, Colorado. The board of directors considered Mr. Alexander’s qualifications, skills and attributes, including his more than 21 years of service at a state HFA, including nine years as Executive Director and CEO and 12 years as CFO; his certification as a certified public accountant (CPA); his more than 11 years as an auditor with Touche Ross & Co. (now Deloitte); his past service on the audit committees of many organizations, his experience in and knowledge of auditing and accounting, financial management, organizational management, project development, and risk management practices when making his nomination.
Steven G. Bradshaw has served as President Emeritus of BOKF, N.A., and BOK Financial, Tulsa, Oklahoma, since July 2022. He has also served as President and CEO of both BOKF, N.A., and BOK Financial, both of Tulsa, Oklahoma, from January 2014 to December 2021. Before joining BOKF, N.A., and BOKF Financial in 1991, he operated his wholly owned retail brokerage service. Although the board of directors did not participate in Mr. Bradshaw’s nomination since he is a member director, Mr. Bradshaw possesses a B.S. in Business Finance from the University of Central Oklahoma, graduated with distinction from the Southwestern Graduate School of Banking, and has over 30 years of banking experience that assists in his service as a director.
Kyle J. Heckman has served as chairman of Flatirons Bank since September 2024 where he previously served as chairman and CEO for nearly 15 years. Although the board of directors did not participate in Mr. Heckman’s nomination since he is a member director, he earned a Bachelor of Arts in Economics, a Bachelor of Science in Business Administration with an emphasis in finance and an MBA from the University of Colorado at Boulder. Heckman previously served on the board of directors and audit committee of the Federal Reserve Bank of Kansas City for two three-year terms. He was an appointed council member of the Federal Reserve Bank’s regional Community Depository Institutions Advisory Council (CDIAC) for five years.
Thomas E. Henning has been Manager of Henning LLC Companies since January 2023. Prior to his current role, Mr. Henning was Chairman, President and CEO of the Assurity Group, Inc. (AGI), a mutual holding company of life insurance companies in Lincoln, Nebraska, from 2005 through 2022 and was employed by Security Financial Life Insurance Co., a predecessor to AGI, from 1990 to 2005. Mr. Henning has served on the board of Nelnet, Inc., a public company and provider of education finance and services, headquartered in Lincoln, Nebraska, since 2003. He has also served on the board of First Interstate Bank, a public company and provider of financial services headquartered in Billings, Montana, since 2022, and previously served on the board of Great Western Bank prior to its acquisition by First Interstate Bank from 2015 to 2022. The board of directors considered Mr. Henning’s qualifications, skills, and attributes, including his past experience as Chairman, President, and CEO of a life and health insurance company; his past experience as President and CEO of a community bank and President and Chief Operating Officer of a regional banking group; his prior and current service on the board of publicly traded companies; his more than 40 years of financial services experience; his prior service as an FHLBank director; and his experience in and knowledge of auditing and accounting, financial management, organizational management, project development, risk management practices, and the law, when making his nomination. Prior to his current term, Mr. Henning served as an independent director of FHLBank from April 2007 through December 2015.
Michael B. Jacobson has served as Chairman, President and CEO of NebraskaLand Bank, North Platte, Nebraska, since 1998. He has also served as Chairman, President and CEO of NebraskaLand Financial Services, Inc. since 2000. Mr. Jacobson also serves on the Government Relations committee of the Nebraska Bankers Association, Chairman of North Platte Redevelopment Authority, Chair of the North Platte Airport Authority, on the Great Plans Health board of directors, as a University of Nebraska Foundation Trustee, and on Governor Pete Ricketts' Agricultural committee. Although the board of directors did not participate in Mr. Jacobson's nomination since he is a member director, Mr. Jacobson possesses a B.S. in agricultural economics, is a graduate of the Colorado Graduate School of Banking and possesses over 40 years of banking experience, including over 25 years as the CEO of a bank, that assists in his service as a director. Prior to his current term, Mr. Jacobson served as a member director of FHLBank from January 2012 through December 2019.
Lynn Jenkins has been a partner at LJ Strategies since January 2019. Ms. Jenkins worked as a CPA for 16 years before launching a career in public service. Ms. Jenkins served as Treasurer of the State of Kansas and was subsequently elected to serve five terms in the U.S. House of Representatives. She currently serves on the boards of directors for American Century Investments Mutual Funds and previously served on the board of directors of MGP Ingredients, Inc. The board of directors considered Ms. Jenkins' qualifications, skills and attributes, including her role as a member of the U.S. House of Representatives, including service in leadership roles and on the House Financial Services Committee and the House Ways and Means Committee; her role as the Treasurer of the State of Kansas; her experience as a CPA and at public accounting firms; her experience in and knowledge of auditing and accounting, financial management, organizational management, project development, and the law, when making her nomination.
Holly Johnson, a Chickasaw citizen and CPA, owns a tribal consulting company providing services to the Chickasaw Nation in the area of administrative support and policy development. She served as Secretary of the Department of Treasury for the Chickasaw Nation from October 2012 to December 2019, where she was responsible for all finance and accounting functions. From October 2010 to September 2012, she served as the Administrator of Planning and Organizational Development for the Chickasaw Nation. From August 2003 to October 2010, she served as an Elected Tribal Legislator for the Pontotoc District. Ms. Johnson serves as a trustee of the Chickasaw Foundation and is a past trustee of the Ada City Schools Foundation and the Chickasaw Nation's 401(k) plans, a past board member of the Ada Chamber of Commerce, a member of the Oklahoma State University School of Accounting Executive Advisory Board, and a former appointed commissioner of the Oklahoma Ethics Commission. She represented Indian Tribal Governments on the Advisory Committee of the Internal Revenue Service. The board of directors considered Ms. Johnson's qualifications, skills and attributes, including her role as Secretary for the Department of Treasury for the Chickasaw Nation; her experience as a CPA and at public accounting firms; her experience in and knowledge of auditing and accounting, financial management, organizational management, project development and risk management practices, when making her nomination.
Barry J. Lockard is Chair of our board of directors. Mr. Lockard has served as President and CEO of Cornhusker Bank, Lincoln, Nebraska, since 2007. Mr. Lockard previously held senior leadership roles at Black and Decker, Cincinnati Bell, and First National Bank of Omaha. He also served eight years in the Nebraska Army National Guard. He has served on the boards of directors of the Nebraska Bankers Association, the American Bankers Association (ABA) Community Bankers Council, and is a trustee for the Graduate School of Banking at Colorado, where he has also served as a member of the faculty. Although the board of directors did not participate in Mr. Lockard’s nomination since he is a member director, Mr. Lockard possesses a bachelor’s degree in business administration, is a graduate of the Colorado Graduate School of Banking, and has more than 15 years as a bank CEO, that assists in his service as a director.
Craig A. Meader has served as Chairman and CEO of First National Bank of Kansas since 1988. Mr. Meader has served as Chairman of the Kansas Bankers Association and the Bankers Bank of Kansas. Mr. Meader is a former member of the ABA Community Bankers Council, Government Relations Council and the ABA board of directors. Although the board of directors did not participate in Mr. Meader’s nomination since he is a member director, Mr. Meader possesses a bachelor’s degree in business administration and finance, is a graduate of the Madison Wisconsin Graduate School of Banking, served on the board of directors of Bankers’ Bank of Kansas, N.A. for seven years, including one year as Chairman, and has more than 40 years as a bank CEO, that assists in his service as a director.
Jeffrey R. Noordhoek has served as CEO of Nelnet, Inc., a publicly traded company, since January 2014, and previously served as President of Nelnet, Inc., from January 2006 through December 2013. The board of directors considered Mr. Noordhoek's qualifications, skills and attributes, including his position as CEO of Nelnet, Inc., which is a publicly traded company listed on the New York Stock Exchange and is the largest education payment plan provider in the United States; his lending, financial services, capital markets and derivatives experience; his experience overseeing a large team of information technology and IT security professionals; and his experience in and knowledge of auditing and accounting, financial management, organizational management, project development, and risk management practices, when making his nomination.
Mark J. O’Connor serves as the president of the Board of The Impact Development Fund, a nonprofit CDFI headquartered in Loveland, Colorado. Mr. O’Connor recently retired as President of Investments of FirstBank Holding Company, Lakewood, Colorado, where he held many leadership positions since 1989. Although the board of directors did not participate in Mr. O’Connor’s most recent nomination since he is a member director, Mr. O’Connor has more than 30 years of banking experience. He is a graduate of the Pacific Coast Banking School and has over 18 years of investment portfolio management experience, which includes serving as the President of Investments and Chair of the ALCO Committee of a large bank holding company. His experience on the board of a state housing finance authority, including service as Chairman, and his prior experience as an FHLBank director assist in his service as a director.
Carla D. Pratt has served as the Ada Lois Sipuel Fisher Chair in Civil Rights, Race, and Justice in Law at the University of Oklahoma College of Law since May 2022. Prior to her current position she served as Dean and Professor of Law at Washburn University School of Law in Topeka, Kansas, from July 2018 to May 2022. Prior to joining Washburn University School of Law, she served various faculty and administrative roles at Penn State’s Dickinson School of Law beginning in July 2000. Prior to joining academia, she practiced insurance law and commercial litigation. The board of directors considered Ms. Pratt’s qualifications, skills and attributes, including her position as former Dean and Professor of Law at Washburn University School of Law; her service as an Associate Justice of the Standing Rock Sioux Supreme Court; her service on the accrediting body that is authorized by the U.S. Department of Education to accredit American law schools; her experience and deep understanding of diversity and inclusion issues and initiatives; her experience in and knowledge of auditing and accounting, financial management, organizational management, project development, risk management practices, and the law, when making her nomination.
Douglas E. Tippens has served as Executive Vice President of BancFirst, Oklahoma City, Oklahoma, since December 2017. He served as Market President of BancFirst from November 2015 to December 2017. Before his service at BancFirst, Mr. Tippens served as President and CEO of Bank of Commerce, Yukon, Oklahoma, since 2006, and served on the board of directors of Bank of Commerce, Chelsea, Oklahoma, since 2013. Although the board of directors did not participate in Mr. Tippens’ nomination since he is a member director, Mr. Tippens possesses a B.S. in agriculture economics and an MBA, is a graduate of the Graduate School of Banking at the University of Wisconsin, has more than 40 years of banking experience, including 10 years as president and CEO, and served on the board of directors of the Federal Reserve Bank of Kansas City, Oklahoma City Branch, that assists in his service as a director.
Gregg Vandaveer has served as Sooner State Bank's Chairman of the Board since 2022 where he previously served as President and CEO from 2001 to 2021. Prior to joining Sooner State Bank, he served as President and CEO of Oklahoma State Bank from 1998 to 2001; Executive Vice President and Chief Lending Officer of First Enterprise Bank from 1995 to 1998; Executive Vice President and Member of the Board of Directors at American Bancorp of Oklahoma from 1987 to 1994; Vice President: Correspondent Banking for United Oklahoma Bank from 1983 to 1987; and Vice President of Johnco, Inc. Although the board of directors did not participate in Mr. Vandaveer’s nomination since he is a member director, Mr. Vandaveer possesses a B.S. in journalism, is a graduate of the Southwestern Graduate School of Banking, the ABA Commercial Lending School, and the Oklahoma Bankers Association Intermediate School of Banking, and has more than 30 years of banking experience, including more than 20 years as president and CEO, that assists in his service as a director.
Paul E. Washington has served as Executive Vice President for IMA Financial Group, Denver, Colorado, since May 2021, where he is responsible for mergers & acquisitions, commercial real estate strategy, communications, governance, administration, and investments. Mr. Washington served as market director (a regional president-equivalent position) for JLL, a Fortune 500, SEC registered commercial real estate services company from April 2017 to May 2021. He currently serves on the boards of directors for Independent Bank Group, Inc.; Colorado Concern; Downtown Denver Partnership; and Denver Museum of Nature & Science. Mr. Washington holds bar licenses in Colorado and California and previously served on the Colorado Housing and Finance Authority board of directors from 2013 to 2021 where he served as both board Chair and Chair of the Finance committee. The board of directors considered Mr. Washington's qualifications, skills, and attributes, including his degree in business and his J.D. and L.L.M. in taxation; his prior experience in leading a large real estate services company; his prior service on the board of directors of the Colorado Housing and Finance Authority; his experience in and knowledge of auditing and accounting, financial management, organizational management, project development, risk management practices, and the law, when making his nomination.
Christopher D. Wente has served as president and CEO of Golden Belt Bank since 2017. Although the board of directors did not participate in Mr. Wente’s nomination since he is a member director, he earned a Bachelor of Science degree in industrial engineering from Kansas State University and is a 2014 graduate of the Graduate School of Banking at Colorado. Mr. Wente has served as a director for Banker’s Bank of Kansas since 2022, on the Hays Medical Center board of directors since 2024, as a member of the KBA Bank Management committee, and as a board member of the Ellis County Coalition for Economic Development.
Lance L. White has served as President and CEO of Bank of the Flint Hills, Wamego, Kansas, since 2007. Although the board of directors did not participate in Mr. White’s nomination since he is a member director, Mr. White has a B.S. in Accounting, is a graduate of the Colorado Graduate School of Banking, has served on the Community Depository Institutions Advisory Council of the Federal Reserve Bank of Kansas City, and has over 25 years of banking experience, including more than 15 as CEO, that assists in his service as a director.
Relationships, Arrangements and Involvement in Certain Legal Proceedings
There are no family relationships among any of our directors or executive officers. Except as described above, none of our directors holds directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940. There are no arrangements or understandings between any director or executive officer and any other person pursuant to which that director or executive officer was selected. No director or executive officer of FHLBank has been involved in any legal proceeding during the past ten years that would affect the integrity or ability of such director or nominee to serve in such capacity, including any proceedings identified in Item 401(f) of Regulation S-K.
Code of Ethics
We have adopted a Code of Ethics that applies to our directors, executive officers (including our principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions), employees, and Affordable Housing Advisory Council members. Our Code of Ethics is filed as an exhibit to reports we file with the SEC and has been posted on our website at www.fhlbtopeka.com/board-governance. We will also post on our website any amendments to, or waivers from, a provision of our Code of Ethics that applies to the principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions as required by applicable rules and regulations. The Code of Ethics is available, in print, free of charge, upon request. Written requests may be made to the CMO/CLO of FHLBank at 500 SW Wanamaker, Topeka, Kansas, 66606.
Audit Committee Financial Expert
Our board of directors has a separately-designated, standing audit committee, which consists of Holly Johnson (Chair), Milroy A. Alexander, Kyle J. Heckman, Thomas E. Henning, Lynn Jenkins, Craig A. Meader, and Douglas E. Tippens.
The board of directors has determined that Holly Johnson is an “audit committee financial expert” as that term is defined under SEC regulations. Ms. Johnson is “independent” in accordance with the Nasdaq Independence Standards (defined under Item 13 below) for audit committee members, as those standards were applied by our board of directors.
The Compensation, People and Inclusion Committee Report is included following the Compensation Discussion and Analysis in Item 11 - “Executive Compensation.”
Insider Trading Policy
FHLBank is cooperatively owned. Our member institutions (and, in limited circumstances, our former member institutions) own our capital stock. No individuals (including our directors, officers and employees) may own our capital stock.
Our capital stock can only be acquired, redeemed, or repurchased at par value of $100 per share. Our capital stock is not publicly traded, and no market mechanism exists for the disposition of our capital stock outside our cooperative structure. Members must purchase and maintain capital stock in FHLBank as a condition of membership and may be required to purchase additional stock to transact advances, MPF and/or letters of credit activity with us. Transactions in our capital stock are governed by applicable regulatory requirements and FHLBank’s Capital Plan (included as Exhibit 4.1 to this Form 10-K).
In addition to FHLBank’s cooperative structure, FHLBank’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. FHLBank therefore has adopted an Insider Trading Policy aimed at promoting compliance with insider trading laws, rules, and regulations applicable to FHLBank. FHLBank believes that this policy and the related procedures are reasonably designed to promote compliance with insider trading laws, rules, regulations, and applicable listing standards. This policy is filed as Exhibit 19.1 to this Form 10-K.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Compensation Discussion and Analysis
Overview of Previous Year Performance and Compensation: Our overall executive compensation philosophy is to attract, retain, and motivate highly-qualified executive officers who will advance: (1) our business objectives to promote our long-term growth and profitability in accordance with achievement of our long-term strategic objectives; and (2) our mission of supporting our members’ efforts to build strong communities.
The named executive officers in 2024 were: (1) Jeffrey B. Kuzbel, President and CEO; (2) Sonia R. Betsworth, EVP and Chief Administrative Officer (CAO); (3) Carl M. Koupal, III, EVP and CMO/CLO; (4) Martin L. Schlossman, Jr., SVP and CRO; (5) Philip D. Bacchus, SVP and CFO; and (6) Amy Crouch, First Vice President (FVP) and Chief Accounting Officer (each a “Named Executive Officer” or “NEO” and, collectively, the “Named Executive Officers” or “NEOs”). Ms. Betsworth retired from FHLBank in Feburary 2025 after 42 years of service.
In determining the appropriate total compensation package for our NEOs for 2024, we considered the principal objectives of our compensation program as: (1) attracting and retaining highly-qualified and talented individuals; and (2) motivating these individuals to achieve short- and long-term FHLBank-wide performance goals through incentive compensation.
In 2024, we provided competitive compensation opportunities for our NEOs based in part on adjustments to base salary in line with our Executive Pay Philosophy and on incentive compensation achievable through our Executive Incentive Compensation Plan (EICP). The EICP provides cash-based annual incentives and deferred incentive awards, which promote the achievement of short- and long-term objectives. With the exception of the Chief Accounting Officer, all NEOs participated in the EICP. The Chief Accounting Officer participated in our Short-Term Incentive Compensation Plan (STIP), which does not include a deferral component. The achievement of both short- and long-term goals translated to above target incentive awards earned by our NEOs in recognition of their contribution to our overall performance and success.
Framework for Compensation Decisions: The Compensation, People and Inclusion Committee of the board of directors (Compensation Committee) oversees the compensation of the NEOs. The Compensation Committee’s responsibilities in 2024 included:
▪Advising the board of directors on the establishment of appropriate compensation, incentive and benefits programs, including the recommendation of performance goals for the EICP;
▪Approving the base salaries for NEOs, other than the CEO, as recommended by the CEO;
▪Approving the annual and deferred cash incentive awards of the NEOs; and
▪Recommending to the board of directors the base salary, including any salary adjustments, of the CEO.
Shareholder Advisory Vote on Executive Compensation: Directors are elected as described under Item 10 - “Directors, Executive Officers and Corporate Governance.” As such, we do not engage in a proxy process and have not otherwise engaged in any activity that would require a consent solicitation of our members. Accordingly, there is no shareholder advisory vote on executive compensation in determining our compensation policies and decisions.
Elements of Executive Compensation: To implement our compensation objectives, the elements of our 2024 compensation program for the NEOs included: (1) annual base salary; (2) annual and deferred cash incentive award opportunities under our EICP or STIP; (3) retirement and other benefits; (4) limited perquisites; and (5) potential payments upon termination or change in control.
Due to our cooperative structure, we cannot offer equity-based compensation programs, so we may offer cash-incentive opportunities and certain retirement benefits to keep our compensation packages competitive relative to the market and to offset the value of compensation that labor-market competitors might offer through equity-based compensation programs.
As required by Item 402(x) of Regulation S-K, we provide the following discussion of the timing of equity awards in relation to the disclosure of material nonpublic information (MNPI). During the year ended December 31, 2024, none of the NEOs were awarded stock options or similar awards and we did not time the disclosure of MNPI for the purpose of affecting the value of executive compensation.
Use of Benchmarks: We believe a key to attracting and retaining highly qualified executive officers is the identification of the appropriate peer groups within which we compete for executive talent. We have historically recruited nationally, both within and outside of the FHLBank System, in our efforts to attract highly qualified candidates for the NEO positions. To ensure that we are offering competitive compensation to retain our NEOs, the board of directors (through the Compensation Committee) periodically retains compensation consultants to assist with comparative analyses of the NEOs’ total compensation through a review of survey data reflecting potential comparator benchmarks for total compensation. Our Compensation Committee has used the survey data as guideposts, in conjunction with our pay philosophy, in considering and determining competitive levels of base salary and total compensation for our NEOs among other factors as described above.
For 2024 compensation, the Compensation Committee considered the competitiveness of the total compensation paid to our NEOs by reviewing comparative survey data obtained from the compensation consultant, McLagan Partners, Inc. (“McLagan”).
The Compensation Committee generally considers a market composite benchmark when making pay decisions regarding the NEOs. The market composite benchmark created by McLagan is calculated by considering publicly available proxy data for regional and community banks with assets between $20 billion and $65 billion and other FHLBanks. Additionally, in calculating the market composite benchmark, for the commercial banks' peer group, Divisional Heads are used as the relevant comparison at the median. For the other FHLBanks' peer group, overall Functional Heads are used at the median.
The following is a list of regional and community banks with $20 billion to $65 billion in assets, which is a component of the market peer group used for the 2024 compensation benchmarks:
Ameris Bank Frost - Banking, Investments, Insurance
Associated Bank Fulton Financial
Atlantic Union Bankshares Corporation Glacier Bancorp, Inc.
Banc of California, Inc. Hancock Whitney Corporation
Bank of Hawaii MidFirst Bank
Bank OZK Old National Bank
BOK Financial Corporation Pinnacle Financial Partners, Inc.
Cadence Bancorp Simmons First National Corporation
Cathay General Bancorp South State Corporation
City National Bank of Florida Synovus
Commerce Bank Texas Capital Bank
Customers Bancorp, Inc. UMB Financial Corporation
Eastern Bank Umpqua Holding Corporation
First Hawaiian Bank United Bank - VA
First Interstate BancSystem Inc. United Community Banks, Inc.
FirstBank Holding Company Valley National Bank
FNB Omaha Wintrust Financial Corp.
The intent to remain competitive with other FHLBanks and consider a broader select group of financial services institutions reflects our belief that the knowledge and skills necessary for effective performance of our NEOs’ duties may be developed through experience at a variety of other financial services institutions. While we recognize that Topeka’s geographic location may be a disadvantage in attracting executives, we generally view it as a positive factor in retaining executives.
The FHLBank-based survey data is considered a primary peer group. For each of the FHLBank-based and market-based peer groups (i.e., the survey data), the Compensation Committee considered the 25th percentile, 50th percentile (i.e., median) and 75th percentile compensation ranges for analyzing executive positions similar to those of our NEOs in assessing the competitiveness of our total compensation for the NEOs. The Compensation Committee generally strives to establish annual base salary and incentive compensation opportunities for our NEOs in the median range of the survey data reviewed assuming target level performance would be achieved. The ultimate compensation determined appropriate in any given year, however, will depend on the scope of a NEO’s responsibilities as compared to similar positions within our identified peer group(s), the experience and performance of the individual NEO, and our overall performance. While survey information is one factor in setting compensation for our NEOs, surveys are not the sole governing factor and independent decisions by the Compensation Committee are necessary to make compensation consistent with our financial condition, pay philosophy and future prospects.
Annual Base Salary: A significant element of each NEO’s total compensation is annual base salary, which is designed to reward our NEOs for past performance and their commitment to future performance and to serve as the foundation for competitive total compensation. Adjustments to annual base salaries for the NEOs are considered annually and made effective January 1st, following an analysis of our total compensation practices, the survey data, and FHLBank’s performance.
For 2024, the Compensation Committee determined that appropriate annual base salaries for each NEO should be competitive with the salaries of comparable positions within the peer groups for purposes of providing guideposts for a competitive compensation analysis. Adjustments to annual base salaries of the NEOs for 2024 were based on: (1) each NEO’s scope of responsibility and accountability; (2) analysis of our comparator peer groups; (3) performance of FHLBank based on achievement levels of FHLBank-wide goals in the prior year; (4) the perceived performance of each NEO, as a subjective matter; and (5) other factors such as experience, time in position, general economic conditions, and labor supply and demand conditions.
A final factor that the Compensation Committee generally considers in determining base salary increases in its effort to retain our NEOs is the relative difference in compensation between the executive officers as well as the pay relationship between executive officers and other employees at FHLBank. The Compensation Committee believes that internal pay equity provides an additional perspective to that of the survey data and helps ensure our executive compensation practices are internally consistent and equitable.
The Compensation Committee also considered guidance and communications from our regulator, the FHFA, in determining total compensation for the NEOs as more specifically addressed below under “FHFA Oversight.”
In 2024, the Compensation Committee and the CEO determined that, with respect to competitive pay positioning for purposes of retaining our NEOs, it was appropriate to increase the base salaries of the NEOs to maintain competitive base and total compensation. Consideration was also given to each NEO’s scope of responsibility, market comparators, individual and FHLBank performance, and other factors as described above. The CEO salary increase was recommended by the Compensation Committee and approved by the board of directors.
Annual and Deferred Cash Incentive Awards: Our EICP is a cash-based annual incentive plan with a long-term deferral component that establishes individual incentive compensation award opportunities related to achievement of performance objectives during the performance periods. The EICP establishes two performance periods: (1) a Base Performance Period aligned with the calendar year; and (2) a Deferral Performance Period (or the long-term performance period), which is a three-year period commencing the calendar year following the Base Performance Period. Participating NEOs may earn an annual cash incentive during a Base Performance Period and a deferred cash incentive during a Deferral Performance Period. For each Base Performance Period, the board of directors will establish a Total Base Opportunity for NEOs. The Total Base Opportunity is equal to a percentage of each NEO’s annual base salary at the beginning of the Base Performance Period and is composed of the Cash Incentive and the Deferred Incentive.
We believe that well-designed incentive compensation plans provide important opportunities to motivate our NEOs to accomplish financial, risk, and operational goals that promote our mission. Thus, motivating our NEOs to accomplish business and financial short- and long-term goals that promote a high level of performance for our members is a key objective of our total compensation program. Consequently, our compensation and benefits programs are designed to motivate our NEOs to engage in the behaviors and performance necessary to deliver our desired results.
To effectively motivate the NEOs to accomplish both short- and long-term goals that promote our performance, we believe that incentive awards must represent at-risk pay. In other words, the administration of our incentive compensation plans must be such that awards are distributed only in exchange for accomplishing pre-established goals, recommended by the Compensation Committee and approved by the board of directors, and are distributed only in accordance with such achievement. In 2024, we achieved at or above target attainment for each of the pre-established goals.
In the fourth quarter of 2023, goal metrics, metric performance ranges and metric weights for cash incentive award opportunities under the 2024 EICP were developed. The proposed performance objectives reflected the drivers of our business and mission and were based upon the Compensation Committee’s and management’s discussions with respect to our primary mission and stockholder perceptions of success. The Compensation Committee and management took steps intended to align the performance objectives to the Strategic Business Plan. The Compensation Committee reviewed and analyzed the proposed 2024 performance objectives, as appropriate, before submitting the objectives to the board of directors for approval.
For the Base Performance Period of January 1, 2024 to December 31, 2024, the board of directors approved a Total Base Opportunity equal to a percentage of each NEO’s Earned Base Salary during the Base Performance Period. Certain NEOs have a greater and more direct impact than others on the success of FHLBank; therefore, these differences are recognized by varying the Total Base Opportunity for each NEO. The Total Base Opportunity is the amount that may be earned for achieving performance levels under established Performance Measures and is comprised of the Cash Incentive and the Deferred Incentive. In the event FHLBank’s performance during the Base Performance Period results in the achievement of a Total Base Opportunity that exceeds 100 percent of a Participant’s base salary at the start of the Base Performance Period, the Target Document provides that the Total Base Opportunity shall be capped at 100 percent of the Participant’s base salary in accordance with regulatory restrictions. The Deferred Incentive is 50 percent of the Total Base Opportunity, which shall be deferred for the Deferral Performance Period, which is the three-year period from January 1, 2025 to December 31, 2027, over which FHLBank applies an interest rate credit compounding annually, as further described below, and becomes payable after the end of the Deferral Performance Period, subject to review by the Director of the FHFA. The Cash Incentive is the portion of the Total Base Opportunity that is not the Deferred Incentive and becomes payable after the end of the Base Performance Period upon achievement of established Performance Measures, subject to review by the Director of the FHFA.
Awards under the EICP may be granted for achievement of Performance Measures corresponding to achievement levels, from threshold, to target, to optimum performance for each goal metric. Threshold represents the minimum achievement level; target represents the expected achievement level; and optimum represents the achievement level that substantially exceeds the target level. Awards may be earned for performance attainment within these achievement levels as a percentage of base salary that corresponds to actual performance. For performance that falls between any two levels of achievement, linear interpolation is used to ensure that the award is consistent with the level of performance achieved. NEOs may earn annual awards expressed as a percent of their base salary at the beginning of the Performance Period. Table 47 presents the Total Base Opportunity for each NEO for each achievement level for the Base Performance Period:
Table 47
Position Total Base Opportunity
Threshold Target Optimum1
President & CEO 40.0 % 80.0 % 120.0 %
EVP and SVP & CFO
30.0 60.0 90.0
SVP & NEO other than CFO
27.5 55.0 82.5
FVP2
17.5 35.0 52.5
1 Total Base Opportunity is capped at 100 percent of the Participant’s Earned Base Salary.
2 Ms. Crouch served as FHLBank's Principal Financial Officer until December 1, 2024. Ms. Crouch is not a participant of the EICP and is a participant of the STIP with the same incentive compensation plan targets as the EICP. The STIP Cash Incentive and the EICP Base Opportunity are identical by definition.
The Total Base Opportunity Goal Metrics for 2024 are described in Table 48:
Table 48
Total Base Opportunity Goal Metric Definition
Return on Equity Spread to SOFR1
The spread between (a) adjusted net income (as defined in the plan) divided by the daily average total regulatory capital and (b) the daily average of overnight SOFR.
Affordable Housing Program ("AHP") General Fund Ratio The AHP General Fund Ratio refers to the total dollar amount of applications submitted for the AHP General Fund compared to the total dollar amount allocated to the AHP General Fund available to be awarded in the AHP General Fund for the performance year based on the Required Annual AHP Contribution.
Native American Housing Initiatives ("NAHI") Grants Ratio NAHI references FHLBank’s voluntary grant program that provides Native American tribes and Tribally Designated Housing Entities with access to grant funds intended to build their communities in support of housing for tribal members in FHLBank’s district (Colorado, Kansas, Nebraska and Oklahoma). The ratio refers to the total dollar amount in applications submitted compared to the initial total dollars awarded for the performance year.
Member Participation in Housing and Community Development Programs Housing and Community Development Programs include the following four program categories: (1) the AHP General Fund; (2) TurnKey; (3) Community Housing/Development Programs; and (4) NAHI. Participation in the AHP General Fund means a member submits an AHP General Fund application. Participation in TurnKey means a member submits a reservation for a TurnKey product. Participation in a Community Housing/Development Program means a member has an approved Community Housing Program or Community Development Program application. Participation in NAHI means a member submits a NAHI application.
Risk Management - Compliance, Business and Operations Risks Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale. General risk categories are compliance, business and operations risks.
Risk Management - Market, Credit and Liquidity Risks Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale. General risk categories are market, credit and liquidity risks.
Diversity, Equity, Inclusion and Belonging Education and Culture FHLBank’s DEIB education and culture initiative is defined as the advancement of DEIB, to the maximum extent possible, in balance with financially safe and sound business practices through business partner engagement with DEIB experiences.
Diversity, Equity, Inclusion and Belonging Business Practice Outcome Measures Points are awarded by achievement of the following (one point awarded for each): (1) Workforce: Attain a workforce ratio of at least 13.75% business partners of color as of 12/31/2024. (2) Workforce: Participate in four outreach opportunities to support diversifying our workforce or members of the board of directors. (3) Marketplace: Participate in four outreach opportunities with diverse-owned vendors. (4) Marketplace: Participate in four outreach opportunities with diverse broker dealers. (5) Culture: Provide tangible and practical examples of equity and belonging at ten different opportunities. (6) Culture: Celebrate cultural diversity of business partners at four FHLBank-sponsored events.
1 As part of evaluating our financial performance and measuring EICP performance, we begin with the components of “adjusted income”, a non-GAAP financial measure.” We adjust net income reported in accordance with GAAP for the impact of: (1) AHP assessments (equivalent to an effective minimum income tax rate of 10 percent); (2) fair value changes on trading securities and derivatives and hedging activities (excluding net interest settlements); (3) prepayment and yield maintenance fees; (4) voluntary program contributions; (5) non-routine and/or unpredictable items, such as gains/losses on securities; and (6) non-recurring items, such as gains/losses on retirement of debt and gains/losses on mortgage loans held for sale.
The profit- and mission-oriented objectives “Return on Equity Spread to SOFR” and “Mission Housing Goals” were based on the belief that profitability and mission focus are critical to the long-term viability of the organization. The “Diversity, Equity, Inclusion and Belonging Education and Culture” and “Diversity, Equity, Inclusion and Belonging Business Practice Outcome Measures” reflect our commitment to diversity across all levels of our business, from recruiting and retaining our business partners to ensuring we have as broad a selection pool of suppliers as possible. We recognize that by harnessing the power of our collective similarities and differences FHLBank is better able to deliver on our mission. We believe this makes FHLBank a better place to work and a better partner for our cooperative members. Finally, the “Risk Management - Compliance, Business and Operations Risks” and the “Risk Management - Market, Credit and Liquidity Risks” objectives were included in recognition of the impact that the NEOs have on management of business, compliance, credit, liquidity, market and operations risks, to incent strong risk management practices and to reward positive risk management performance as determined by the board of directors. We divide the risk management objectives to balance risk exposure with the pursuit of stakeholder value.
The Total Base Opportunity available to Participants for the Financial Performance Goals shall be adjusted as reflected in Table 49 below if the daily average Total Regulatory Capital is below 4.75 percent for 2024. The Financial Performance Goals include the Return on Equity Spread to SOFR, which represents 30 percent of the Base Opportunity Metric Weights at Table 51.
Table 49
Daily Average Total Regulatory Capital Financial Performance Goals Adjustment
≥4.75% 0%
≥4.70% and <4.75% (25)%
≥4.65% and <4.70% (50)%
≥4.60% and <4.65% (75)%
<4.60% (100)%
Award levels were set at Threshold, Target and Optimum percentages of annual base salary. Table 50 sets forth the specific annual goal performance ranges, the actual achievement levels, and the incentive payout for each of our Total Base Opportunity Goal Metrics in 2024:
Table 50
Total Base Opportunity Goal Metrics Annual Performance Range Actual Achievement Incentive Payout1
Threshold Target Optimum
Financial Performance - Return on Equity Spread to SOFR 3.25% 4.00% 5.00% 5.84% 150.00%
Housing and Community Development Mission Alignment -AHP General Fund Ratio 100% 110% 140% 355.06% 150.00%
Housing and Community Development Mission Alignment - NAHI Grants Ratio 100% 150% 200% 251.76% 150.00%
Housing and Community Development Mission Alignment - Member Participation in Housing and Community Development Programs 175 185 200 236 150.00%
Risk Management - Compliance, Business and Operations Risks 3.00 4.00 5.00 4.49 124.50%
Risk Management - Market, Credit and Liquidity Risks 4.00 4.50 5.00 4.58 108.00%
Diversity, Equity, Inclusion and Belonging (DEIB) - Education & Culture 80% 85% 90% 93% 150.00%
Diversity, Equity, Inclusion and Belonging Business Practice Outcome Measures (6.0 point scoring scale) 3.00 4.00 6.00 6.00 150.00%
TOTAL WEIGHTED AVERAGE INCENTIVE PAYOUT 139.88%
1 If the actual achievement is Optimum or higher, the incentive payout is capped at 150.00 percent.
We believe the goals incorporated into the EICP are indicative of our balanced approach to profitability, mission and member-focus, and risk management. As reflected in Table 50, we achieved in excess of Optimum for the Return on Equity Spread to SOFR and in excess of Optimum for the Housing and Community Development Mission Alignment goals. We achieved Optimum for Education and Culture and Optimum for the Business Practice Outcome Measures of the DEIB goals. We exceeded Target performance for Market, Credit and Liquidity and Compliance, Business and Operations of the Risk Management goals.
Table 51 provides the metric weight for each Total Base Opportunity Goal Metric as a percent of the Total Base Opportunity for each NEO in 2024:
Table 51
Performance Objective Metric Weight
Financial Performance - Return on Equity Spread to Secured Overnight Financing Rate (SOFR) 30 %
Housing and Community Development Mission Alignment - Affordable Housing Program (AHP) General Fund Ratio 10
Housing and Community Development Mission Alignment - Native American Housing Initiatives (NAHI) Grants Ratio 10
Housing and Community Development Mission Alignment - Member Participation in Housing and Community Development Programs 10
Risk Management - Compliance, Business and Operations Risks 15
Risk Management - Market, Credit and Liquidity Risks 15
Diversity, Equity, Inclusion and Belonging (DEIB) - Education & Culture 5
Diversity, Equity, Inclusion and Belonging Business Practice Outcomes 5
TOTAL 100 %
Table 52 presents the eligible salary, aggregate goal achievement, Total Base Opportunity, Cash Incentive and Deferred Incentive for each NEO as calculated under the EICP for the Base Performance Period of January 1, 2024 to December 31, 2024 and the Deferral Performance Period, which is the three-year period from January 1, 2025 to December 31, 2027:
Table 52
Named Executive Officer Eligible Salary
Incentive
Percent of Base Salary Total Base Opportunity Cash
Incentive1
Deferred Incentive
Jeffrey B. Kuzbel, President & CEO
$ 850,000 100.00 % $ 850,000 $ 425,000 $ 425,000
Sonia R. Betsworth, EVP & CAO 385,000 83.93 323,112 161,556 161,556
Carl M. Koupal, III, EVP & CMO/CLO
392,596 83.92 329,486 164,743 164,743
Philip D. Bacchus, SVP & CFO
157,377 83.93 132,079 66,040 66,039
Martin L. Schlossman, Jr., SVP & CRO 383,000 76.93 294,647 147,324 147,323
Amy J. Crouch, FVP & Chief Accounting Officer2
235,000 48.96 115,048 115,048 -
1 Cash Incentive is included as non-equity incentive plan compensation in Table 56 for all NEOs.
2 Ms. Crouch served as FHLBank's Principal Financial Officer until December 1, 2024. Table 52 presents the eligible salary, aggregate goal achievement, Total Base Opportunity, and Cash Incentive for Ms. Crouch as calculated under the STIP for the Base Performance Period of January 1, 2024 to December 31, 2024. There is no Deferred Incentive defined in the STIP. The goal achievement percentage is the same as the EICP.
The final value of the Deferred Incentive portion of the Total Base Opportunity for the calendar year 2025 to calendar year 2027 is measured by applying an interest rate credit equal to FHLBank’s Pre-ASC 815 annual return on equity, compounded annually, to the Deferred Incentive presented in Table 52, as long as FHLBank has an MVE of not less than 100 percent of TRCS outstanding, as of the last day of the Deferral Performance Period.
For any Performance Period, an award will not be payable if we fail to achieve performance at or above the Performance Measure(s) set by the Compensation Committee. The Compensation Committee may, in its discretion, reduce or eliminate an award payable under the EICP under any of the following circumstances: (1) we receive a composite “4” or “5” rating in our FHFA examination in any single year in any single Base Performance Period or Deferral Performance Period; (2) the board of directors finds a serious, material safety or soundness problem or a serious, material risk management deficiency exists, or if: (a) operational errors or omissions result in material revisions to the financial results, information submitted to the FHFA, or to data used to determine incentive payouts; (b) submission of material information to the SEC, Office of Finance, or FHFA is significantly past due; or (c) we fail to make sufficient progress, as determined by the board of directors, in the timely remediation of significant examination, monitoring or other supervisory findings; (3) during the most recent FHFA examination, the FHFA identified an unsafe or unsound practice or condition that is material to the financial operation of FHLBank within a NEO’s area(s) of responsibility and such unsafe or unsound practice or condition is not subsequently resolved in favor of FHLBank by the last day of the Base Performance Period or Deferral Performance Period; or (4) a given participant does not achieve satisfactory individual achievement levels (as determined in the sole discretion of the Compensation Committee) during the Deferral Performance Period. Additionally, Deferred Incentive awards shall be reduced by one-third for each year during the Deferral Performance Period in which we have negative net income, as defined and in accordance with GAAP. The Compensation Committee did not reduce or eliminate an award.
The EICP for the 2022-2024 Deferral Performance Period is subject to the following performance goal: (1) FHLBank must have an MVE of not less than 100 percent of TRCS outstanding as of the last day of the Deferral Performance Period; and (2) the calculation of the Final Deferred Incentive Award shall be calculated by applying an interest rate credit of six percent, compounded annually, to the Deferred Incentive.
Based on the performance results, Table 53 presents the Final Deferred Incentive Award for the 2022-2024 Deferral Performance Period for each NEO:
Table 53
Named Executive Officer Deferred Incentive Final Deferred Incentive Award1
Jeffrey B. Kuzbel, President & CEO
$ 132,942 $ 158,337
Sonia R. Betsworth, EVP & CAO 94,940 113,076
Carl M. Koupal, III, EVP & CMO/CLO
21,557 25,699
Philip D. Bacchus, SVP & CFO
- -
Martin L. Schlossman, Jr., SVP & CRO 84,634 100,801
1 The amount is included as non-equity incentive plan compensation in Table 56 for all NEOs.
An NEO, in the discretion of the Compensation Committee, shall be required to forfeit an award earned under the EICP if the NEO is: (1) terminated from employment with FHLBank for Cause as defined under the EICP; (2) engages in competition with FHLBank or interferes with the business relationships of FHLBank during their employment or for a period of one year following their termination; or (3) discloses confidential information of FHLBank.
Bonuses: On occasion, the Compensation Committee may elect to award a NEO additional compensation in the form of a bonus in recognition of that NEO's performance. Mr. Bacchus received a hiring bonus in the amount of $175,000, as well as a $25,000 stipend to assist with relocation expense. Additionally, Mr. Bacchus may receive an additional $175,000 if within his first twelve months of employment, he purchases a primary residence or signs a year-long lease within the surrounding area of FHLBank. In 2024, Mr. Bacchus has received a net payment of $69,000 of the funds to assist with his relocation. All of Mr. Bacchus’s bonuses are subject to a clawback of the entire bonus amounts if Mr. Bacchus’s employment with FHLBank ends within one year of the payment of the bonuses.
Retirement and Other Benefits - In 2024, certain of the NEOs were participants in the Pentegra Defined Benefit Plan for Financial Institutions, a tax-qualified multiple-employer defined-benefit plan (DB Plan), which was hard frozen December 31, 2019. After the freeze, participants no longer accrued benefits under the DB Plan. In November 2024, we completed a purchase agreement with Midland National Life Insurance Company pursuant to which we transferred the future benefit obligations and annuity administration for all participants of the DB Plan. All of the NEOs participate in the Federal Home Loan Bank of Topeka 401(k) Plan, a defined contribution retirement savings plan qualified under the Internal Revenue Code (IRC) for employees of FHLBank (DC Plan). In response to federal legislation, which imposed restrictions on the retirement benefits payable to our executives, we subsequently established a third retirement plan, the Benefit Equalization Plan (BEP) to support the competitive level of our total compensation for executive officers, including certain NEOs. Generally, the BEP is characterized as a non-qualified “excess benefit” plan, which restores those retirement benefits that exceed the IRC limits applicable to the qualified DB Plan and DC Plan. In this respect, the BEP is an extension of our commitment to our NEOs and other eligible highly compensated employees that preserves and restores the full pension and thrift benefits that, due to IRC limitations, are not payable from the qualified retirement plans.
DB Plan: The board of directors resolved, effective December 31, 2019, to: (1) freeze the DB Plan to discontinue the future accrual of new benefits under the DB Plan; and (2) revise the BEP to cease any further accrual of pension benefit under the BEP (as described further below).
Our DB Plan covered all full-time employees of FHLBank as of January 1, 2009 who met the eligibility requirements of: (1) attainment of age 21; (2) completion of twelve months of employment; and (3) employed by FHLBank as of December 31, 2008, including certain of the NEOs. Employees were not fully vested until they completed five years of employment. The regular form of retirement benefits provides a single life annuity; a lump-sum payment or other additional payment options are also available to a limited degree for those NEOs who were employed prior to a plan change in 2003. The benefits are not subject to offset for social security or any other retirement benefits received. In 2024, four of the NEOs (Ms. Betsworth, Mr. Koupal, Mr. Schlossman, and Ms. Crouch) participated in the DB Plan, which required no contribution from those four NEOs.
The DB Plan made available a normal retirement benefit, at or after age 65 where a NEO participant has met the vesting requirement, equal to 2.0 percent of their highest three-year average salary multiplied by their years of benefit service, up to 30 years. Two NEO participants (Mr. Schlossman and Ms. Betsworth) are eligible to receive benefits in excess of 2.0 percent because of a plan change in 2003. The amount in excess of 2.0 percent is a calculated “frozen add-on” determined at the time of the plan change. The formula for this “frozen add-on” is the prior benefit formula as of August 31, 2003 minus the new benefit formula as of September 1, 2003. Benefits are payable in the event of retirement, death, disability, or termination of employment if vested. Only the portion of the benefit accrued before September 1, 2003 is payable as a lump sum to employees who have attained age 50; otherwise, benefits are paid in installments.
Early retirement benefits are payable at a reduced rate. Upon termination of employment prior to age 65, NEO participants meeting the five-year vesting and age 45 early retirement eligibility criteria are entitled to an early retirement benefit. Each of the NEOs participating in the DB Plan is eligible for early retirement. The early retirement benefit amount is calculated by taking the normal retirement benefit amount and reducing it by 3.0 percent times the difference between the age of the early retiree and age 65. If the NEO was employed prior to September 1, 2003 and their age and benefit service added together totaled 70 (Rule of 70), the normal retirement benefit amount would be reduced by 1.5 percent for each year between the age of the early retiree and age 65 for the portion of the normal retirement benefit accrued prior to September 1, 2003.
DC Plan: The DC Plan is a tax-qualified, defined contribution plan. Substantially all officers and employees of FHLBank are covered by the plan. FHLBank contributes a matching amount equal to a percentage of voluntary employee contributions, subject to certain limitations (see “BEP” below).
All employees who have met the eligibility requirements can choose to participate in the DC Plan. We match employee contributions based on the length of service and the amount of an employee’s contribution. These employer contributions are immediately 100 percent vested. During 2024, matching ratios for all employees, including the NEOs (with the exception of Messrs. Kuzbel and Bacchus), under the DC Plan were as follows:
Year 1 No match
Years 2 through 3 100 percent match up to 4 percent of employee’s eligible compensation
Years 4 through 5 150 percent match up to 4 percent of employee’s eligible compensation
After 5 years 200 percent match up to 4 percent of employee’s eligible compensation
We also make a monthly basic contribution in an amount equal to two percent of all employees’, including the NEOs’, monthly eligible compensation after one year of service.
BEP: The BEP is an unfunded, nonqualified supplemental executive retirement plan that permits Participating NEOs and certain other executives to defer compensation and to receive matching contributions that would otherwise have been made or accrued under FHLBank’s DC Plan, as appropriate, but for the limitations imposed by the IRC. As part of Messrs. Kuzbel's and Bacchus’ offer letters, they are eligible to receive an employer contribution of 10 percent as though they are a five-year, tenured employees of FHLBank.
The BEP allows the NEOs to receive a rate of return based on our return on equity calculated for EICP purposes for the previous year. For 2024, the rate of return earned on the defined contribution portion of the BEP was 9.02 percent, which was our 2023 return on equity.
Participating NEOs are at all times 100 percent vested in their defined contribution account balances of the BEP. In the event of unforeseen emergencies, they may request withdrawals equal to the lesser of the amounts necessary to meet their financial hardships or the amount of their account balances. As of December 31, 2024, each of the Participating NEOs would be entitled to receive their respective balance of compensation deferred through participation under the BEP within ninety days of any such Participating NEO’s termination of employment due to death, disability or retirement and upon a change in control as defined in the BEP and in accordance with IRC Section 409A and applicable regulations. For each Participating NEO, these amounts are listed in Table 60 under the column titled “Aggregate Balance at Last FYE.”
As indicated above, the pension accrual benefit of the BEP ceased further accruals as of December 31, 2019.
Other benefits: We are also committed to providing competitive benefits designed to promote health and welfare for all employees (including their families), including the NEOs. We offer all employees a variety of benefits including insurance (medical, dental, vision, prescription drug, life, long-term disability and travel accident), short-term disability salary continuation, flexible spending accounts, health savings account, an employee assistance program and education benefits. The NEOs participate in these benefit programs on the same basis as all other eligible employees.
Perquisites: The board of directors views limited perquisites afforded to the NEOs as an element of the total compensation program. Any perquisites provided, however, are not intended to materially add to any NEO’s compensation package and, as such, are provided to them primarily as a convenience associated with their respective duties and responsibilities. Examples of ongoing perquisites that were provided to the NEO in 2024 include cell phone reimbursement, limited spousal travel and limited club dues. As part of Mr. Bacchus' offer letter, he was eligible to receive a relocation benefit (plus a tax gross up). Total perquisites to each NEO are presented in Table 57.
Potential payments upon termination or change in control
Severance Benefits: We provide severance benefits to the CEO, CAO, CMO/CLO, CFO and CRO pursuant to our Executive Officer Severance Policy. The policy’s primary objective is to provide a level of protection to officers from loss of income during a period of unemployment. These officers are eligible to receive severance pay under the policy if we terminate the officer’s employment with or without cause, subject to certain limitations. These limitations include: (1) the officer voluntarily terminates employment, including as a result of disability or death; or (2) the officer’s employment is terminated by us for misconduct.
Provided the requirements of the policy are met and the NEO provides us an enforceable release, Table 54 presents the term and amounts that would have been payable to the NEO under the Executive Officer Severance Policy as of December 31, 2024, or other effective policy, absent a qualifying event that would result in payments under the Change in Control Plan (see “Change in Control Plan” below):
Table 54
Officer Months Severance Amount1
COBRA2
Severance Total
Jeffrey B. Kuzbel, President & CEO
12 $ 850,000 $ 34,297 $ 884,297
Sonia R. Betsworth, EVP & CAO3
9 288,750 17,601 306,351
Carl M. Koupal, III, EVP & CMO/CLO
9 307,500 25,723 333,223
Philip D. Bacchus, SVP & CFO
6 225,000 11,734 236,734
Martin L. Schlossman, Jr., SVP & CRO 6 187,000 9,189 196,189
1 Severance Amount equals the number of months of base salary as described under the Executive Officer Severance Policy.
2 COBRA equals the number of months of medical, dental and vision coverage cost as described under the Executive Officer Severance Policy.
3 Ms. Betsworth ceased to serve as CAO effective December 31, 2024; consequently, the Severance Policy was no longer applicable to Ms. Betsworth as of January 1, 2025.
The amounts above do not include accrued incentive plan payments as presented in the Summary Compensation Table; the aggregate balance of the DC Plan as presented in the Nonqualified Deferred Compensation Table; or the present value of accumulated benefits of the BEP as presented in the Pension Benefits Table.
Change in Control Plan: The Change in Control Plan provides that, upon both a change in control and the termination of a participant that qualifies as a Change in Control Termination, a participant will be entitled to a cash lump sum payment. A Change in Control means the occurrence of any of the following events, provided it shall not include any reorganization that is mandated by any Federal statute, rule, regulations or directive: (1) the merger, reorganization, or consolidation of FHLBank Topeka with or into another FHLBank or other entity; (2) the sale or transfer of all or substantially all of the business or assets of FHLBank Topeka to another FHLBank or other entity; (3) the purchase by FHLBank Topeka or transfer to FHLBank Topeka of substantially all of the business or assets of another FHLBank; (4) a change in the composition of the board of directors, as a result of one or a series of related transactions, that causes the combined number of member directors from the states of Colorado, Kansas, Nebraska and Oklahoma to cease to constitute a majority of the directors of FHLBank Topeka; or (5) the liquidation or dissolution of FHLBank Topeka. We provide for payments under a Change in Control to: (1) promote key employee loyalty and to assure continued dedication to FHLBank Topeka, notwithstanding the possibility, threat or occurrence of a Change in Control; and (2) to reduce the personal uncertainties to key employees who are vital to FHLBank Topeka's future success associated with a pending or possible Change in Control, and to encourage those key employees' continued dedication to FHLBank Topeka.
A Participant in the Change in Control Plan will receive in a cash lump sum, an amount that, when combined with any amount payable under an FHLBank severance policy, equals a compensation multiplier times the sum of: (1) the Participant’s then annualized base salary; and (2) an amount equal to the target Total Base Opportunity as reflected in FHLBank’s EICP Targets document for the year in which the change in control occurs. Participants at Tier 1 are subject to a compensation multiplier of 2.99, participants at Tier 2 are subject to a compensation multiplier of 2.0, and participants at Tier 3 are subject to a compensation multiplier of 1.0. A Participant is also eligible to receive the continuation of certain group health care benefits for a period of years equal to their compensation multiplier. The Compensation Committee approved the following Participants in the Change in Control Plan and their effective Tiers: Mr. Kuzbel, CEO at Tier 1; Ms. Betsworth, CAO, Mr. Koupal, CMO/CLO, and Mr. Bacchus, CFO at Tier 2; and Mr. Schlossman, CRO, at Tier 3.
Table 55 represents the elements of potential payments upon a Change in Control and the total amount that would be payable to the participating NEOs as of December 31, 2024 subject to FHLBank’s Change in Control Plan, as currently in effect:
Table 55
Officer Severance Amount1
Incentive2
COBRA3
Change in Control Total
Jeffrey B. Kuzbel, President & CEO
$ 2,541,500 $ 2,033,200 $ 102,891 $ 4,677,591
Sonia R. Betsworth, EVP & CAO4
770,000 462,000 46,937 1,278,937
Carl M. Koupal, III, EVP & CMO/CLO
820,000 492,000 68,594 1,380,594
Philip D. Bacchus, SVP & CFO
900,000 540,000 46,937 1,486,937
Martin L. Schlossman, Jr., SVP & CRO 374,000 205,700 18,378 598,078
1 Compensation multiplier times the annual base salary at year end as described under the Change in Control Plan.
2 Compensation multiplier times target Total Base Opportunity reflected in the 2024 EICP Targets as described in under the Change in Control Plan.
3 COBRA equals the number of months of medical, dental and vision coverage cost as described under the Change in Control Plan.
4 Ms. Betsworth ceased to serve as CAO effective December 31, 2024; consequently, the Change in Control Plan was no longer applicable to Ms. Betsworth as of January 1, 2025.
The amounts above do not include accrued incentive plan payments as presented in the Summary Compensation Table; the aggregate balance of the DC Plan as presented in the Nonqualified Deferred Compensation Table; or the present value of accumulated benefits of the BEP as presented in the Pension Benefits Table.
Why We Choose to Pay These Elements: We believe the Compensation Committee’s analyses described above provided an appropriate process to determine 2024 compensation levels for each NEO that reasonably positions us to competitively manage our operations for success and to accomplish our mission.
The mix of compensation elements that comprised the total compensation of our NEOs in 2024 particularly allowed us to provide total compensation that we believe appropriately balanced reasonable guaranteed pay through carefully considered base salary determinations with additional at-risk cash compensation opportunities for the NEOs. This means that while we strived to match an appropriate level of compensation comparable to that reflected by our perceived peer groups and internal pay analysis through annual base salary and retirement benefits components, we also strived to provide a component of compensation that is at-risk in both the shorter- and longer-term. These at-risk awards represent an opportunity to reward our NEOs based on the achievement of both our annual and long-term performance goals and the discretion vested in our Compensation Committee.
FHFA Oversight: Section 1113 of the Recovery Act requires that the Director of the FHFA prevent an FHLBank from paying compensation to its executive officers that is not reasonable and comparable to that paid for employment in similar businesses involving similar duties and responsibilities. In 2009, the FHFA issued an advisory bulletin establishing certain principles for executive compensation at the FHLBanks and the Office of Finance that include: (1) such compensation must be reasonable and comparable to that offered to executives in similar positions at comparable financial institutions; (2) such compensation should be consistent with sound risk management and preservation of the par value of FHLBank capital stock; (3) a significant percentage of an executive’s incentive based compensation should be tied to longer-term performance and outcome-indicators and be deferred and made contingent upon performance over several years; and (4) the board of directors should promote accountability and transparency in the process of setting compensation. On January 28, 2014, the FHFA issued a final rule on executive compensation, which defines “reasonable” and “comparable” compensation and establishes the review and approval process for certain compensation payments and agreements. FHLBank is subject to additional supervisory guidance and oversight from the FHFA, from time to time.
The FHLBanks have been directed to provide all compensation actions affecting their NEOs to the FHFA for review.
Compensation, People and Inclusion Committee Interlocks and Insider Participation: No member of the Compensation, People and Inclusion Committee has at any time been an officer or employee with us. No executive officer has served or is serving on our board of directors or the compensation committee of any entity whose executive officers served on the Compensation Committee of our board of directors.
Compensation, People and Inclusion Committee Report: The Compensation, People and Inclusion Committee of our board of directors has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Compensation, People and Inclusion Committee has recommended to the board of directors that the Compensation Discussion and Analysis be included in our annual report on Form 10-K.
The Compensation, People and Inclusion Committee
Thomas Henning, Chair
Milroy A. Alexander
Steve G. Bradshaw
Barry J. Lockard
Jeffrey R. Noordhoek
Carla D. Pratt
Douglas E. Tippens
Lance L. White
Table 56 presents the Summary Compensation Table for the NEOs for the years for which they represented NEO of FHLBank.
Table 56
Name and Principal Position
Year Salary Bonus Non-Equity Incentive Plan Compensation1
Change in Pension Value and Nonqualified Deferred Compensation Earnings2
All Other Compensation3
Total
Jeffrey B. Kuzbel4
2024 $ 850,000 $ - $ 583,337 $ 11,711 $ 116,937 $ 1,561,985
President & CEO
2023 470,000 - 191,056 3,993 70,544 735,593
2022 442,000 50,000 175,101 3,533 60,614 731,248
Sonia R. Betsworth5
2024 385,000 - 274,632 34,624 56,231 750,487
EVP & CAO 2023 370,000 - 279,660 236,248 51,895 937,803
2022 345,000 - 250,056 22,762 45,376 663,194
Carl M. Koupal, III6
2024 392,596 - 190,442 2,678 52,771 638,487
EVP & CMO/CLO
2023 360,000 - 121,950 24,868 48,014 554,832
2022 335,000 - 110,594 448 43,672 489,714
Philip D. Bacchus7
2024 157,377 200,000 66,040 3 113,433 536,853
SVP & CFO
Martin L. Schlossman, Jr.8
2024 383,000 - 248,125 21,954 54,460 707,539
SVP & CRO
2023 365,000 - 237,831 107,417 49,431 759,679
2022 337,000 - 211,707 8,606 43,477 600,790
Amy J. Crouch9
2024 235,000 - 115,048 - 35,612 385,660
FVP & Chief Accounting Officer
1 All compensation reported under “non-equity incentive plan compensation” represents performance awards earned pursuant to achievement of performance objectives under FHLBank’s EICP and the STIP, subject to the approval of the Compensation Committee and not disapproved by the FHFA. The deferred compensation earned and the accrued component of the EICP for 2020 was reduced when paid in 2021. In 2023, the amount of these reductions, which was $34,936, and $30,107 for Ms. Betsworth, and Mr. Schlossman, respectively, was paid at the discretion of the board of directors. The amounts in the table reflect the actual amounts paid in the respective years.
2 The change in pension value will fluctuate with changes in discount rates used to calculate the present value of accumulated benefits and can result in decreases. However, per SEC rules, any net actuarial decreases in pension plan values have been excluded from this column. Nonqualified deferred compensation earnings include above market earnings attributable to the BEP, which are calculated by multiplying the nonqualified deferred compensation average balance of the applicable year by the average rate of return in excess of the long-term applicable Federal rate (120 percent compounded quarterly) published by the IRS.
3 The 2024 components of All Other Compensation are provided in Table 57.
4 Above market earnings attributable to the BEP were $11,711, $3,993, and $3,533 for 2024, 2023, and 2022, respectively.
5 Above market earnings attributable to the BEP were $34,624, $17,248, and $22,762 for 2024, 2023 and 2022, respectively. The aggregate change in the value of the accumulated benefit under FHLBank’s DB Plan was $(86,000), $151,000 and $(651,000) for 2024, 2023, and 2022, respectively. The aggregate change in the value of the accumulated benefit under the defined benefit portion of the BEP was $(40,000), $68,000 and $(321,000) for 2024, 2023, and 2022, respectively.
6 Above market earnings attributable to the BEP were $2,678, $868, and $448 for 2024, 2023, and 2022, respectively. The aggregate change in the value of the accumulated benefit under FHLBank’s DB Plan was $(40,000), $24,000 and $(223,000) for 2024, 2023, and 2022, respectively.
7 Above market earnings attributable to the BEP were $3 for 2024.
8 Above market earnings attributable to the BEP were $21,954, $8,417 and $8,606 for 2024, 2023, and 2022, respectively. The aggregate change in the value of the accumulated benefit under FHLBank’s DB Plan was $(70,000) and $69,000 and $(406,000) for 2024 and 2023, and 2022, respectively. The aggregate change in the value of the accumulated benefit under the defined benefit portion of the BEP was $(29,000), $30,000 and $(184,000) for 2024, 2023, and 2022, respectively.
9 Ms. Crouch served as FHLBank's Principal Financial Officer until December 1, 2024. The aggregate change in the value of the accumulated benefit under FHLBank’s DB Plan was $(34,000) for 2024.
Table 57 presents the components of “All Other Compensation” for 2024 as summarized in Table 56.
Table 57
Named Executive Officer
Perquisites and Personal Benefits1
Gross-ups for Taxes Life Insurance Premiums
Long Term and Individual Disability Premiums
FHLBank Contribution to DC Plan
FHLBank Contribution to Defined Contribution Portion of BEP
Other Miscellaneous Total All Other Compensation
Jeffrey B. Kuzbel, President & CEO
$ - $ - $ 1,453 $ 12,109 $ 21,804 $ 81,571 $ - $ 116,937
Sonia R. Betsworth, EVP & CAO - - 659 2,060 22,463 31,049 - 56,231
Carl M. Koupal, III, EVP & CMO/CLO
- - 642 780 33,487 17,862 - 52,771
Philip D. Bacchus, SVP & CFO
69,101 29,555 59 72 - 13,846 800 113,433
Martin L. Schlossman, Jr., SVP & CRO - - 655 2,320 20,299 30,331 855 54,460
Amy J. Crouch, FVP & Chief Accounting Officer2
- - 402 489 34,152 - 569 35,612
1 Perquisites and personal benefits are only included if more than $10,000 in aggregate for an individual. Perquisites and personal benefits for Mr. Bacchus consist of relocation support of $69,101.
2 Ms. Crouch served as FHLBank's Principal Financial Officer until December 1, 2024.
Table 58 presents the Grants of Plan Based Awards Table for the NEOs.
Table 58
Name Plan Estimated Future Payouts Under Non-Equity Incentive Plan Awards1
Threshold Target Optimum
Jeffrey B. Kuzbel
EICP-Cash Incentive $ 170,000 $ 340,000 $ 510,000
President & CEO EICP-Deferred Incentive Opportunity 170,000 340,000 510,000
Sonia R. Betsworth
EICP-Cash Incentive 57,750 115,500 173,250
EVP & CAO EICP-Deferred Incentive Opportunity 57,750 115,500 173,250
Carl M. Koupal, III EICP-Cash Incentive 55,125 110,250 165,375
EVP & CMO/CLO EICP-Deferred Incentive Opportunity 55,125 110,250 165,375
Philip D. Bacchus EICP-Cash Incentive 23,607 47,213 70,820
SVP & CFO EICP-Deferred Incentive Opportunity 23,607 47,213 70,820
Martin L. Schlossman, Jr.
EICP-Cash Incentive 52,663 105,325 157,988
SVP & CRO EICP-Deferred Incentive Opportunity 52,663 105,325 157,988
Amy J. Crouch2
STIP-Cash Incentive
41,125 82,250 123,375
FVP & Chief Accounting Officer
1 Amounts reflected for the EICP represent the applicable range of estimated future payouts and do not represent amounts actually earned or awarded for the fiscal year ended December 31, 2024. Award amounts are calculated using the base salaries in effect on January 1 at the beginning of the performance period and the prorated salary amount for Mr. Bacchus. The EICP-Cash Incentive, if any, are earned and vested at year end. Awards, if any, under the EICP-Deferred Incentive Opportunity are payable in the year following the end of the three-year performance period. See discussion under Annual and Deferred Cash Incentive Awards under this Item 11 for a description of the terms of the EICP and potential future payouts.
2 Ms. Crouch served as FHLBank's Principal Financial Officer until December 1, 2024. Amounts reflected for the STIP represent the applicable range of estimated future payouts and do not represent amounts actually earned or awarded for the fiscal year ended December 31, 2024. Award amounts are calculated using the base salaries in effect on January 1 at the beginning of the performance period. The STIP-Cash Incentive, if any, are earned and vested at year end.
Pension Benefits: We previously participated in the DB Plan, a tax-qualified defined benefit plan. As mentioned above, the DB plan was frozen in 2019 and in 2024, FHLBank entered an agreement to transfer the future benefit obligations and annuity administration to Midland National Life Insurance Company, effective February 1, 2025. As such, FHLBank is no longer a party to the plan. The defined benefit portion of the BEP remains unchanged. In Table 59 presents the 2024 Pension Benefits Table for the participating NEOs.
Table 59
Name Plan Name Number of Years of Credited Services
Present Value of Accumulated Benefit Payments During Last Fiscal Year
Sonia R. Betsworth
Pentegra Defined Benefit Plan for Financial Institutions 30.0 2,051,000 -
EVP & CAO
FHLBank Benefit Equalization Plan 30.0 841,000 -
Carl M. Koupal, III
CMO/CLO
Pentegra Defined Benefit Plan for Financial Institutions 10.5 186,000 -
Martin L. Schlossman, Jr.
Pentegra Defined Benefit Plan for Financial Institutions 18.1 786,000 -
SVP & CRO FHLBank Benefit Equalization Plan 18.1 295,000 -
Amy J. Crouch1
Chief Accounting Officer
Pentegra Defined Benefit Plan for Financial Institutions 13.6 230,000 -
1 Ms. Crouch served as FHLBank's Principal Financial Officer until December 1, 2024.
Deferred Compensation: Table 60 presents the 2024 Nonqualified Deferred Compensation Table for the participating NEOs. Our fiscal year (FY) is 2024, with a fiscal year end (FYE) of December 31, 2024.
Table 60
Name Executive Contributions in Last FY1
Registrant Contributions in Last FY
Aggregate Earnings in Last FY
Aggregate Withdrawals / Distributions
Aggregate Balance at Last FYE2
Jeffrey B. Kuzbel, President & CEO
$ 72,875 $ 81,571 $ 27,778 $ - $ 423,951
Sonia R. Betsworth, EVP & CAO 53,308 31,049 82,124 - 1,045,749
Carl M. Koupal, III, EVP & CMO/CLO
10,694 17,862 6,354 - 100,021
Philip D. Bacchus, SVP & CFO
- 13,846 7 - 13,853
Martin L. Schlossman, Jr., SVP & CRO 144,946 30,331 52,072 - 697,735
1 All amounts are also included in the salary column of Table 56.
2 The total amount reported as preferential (above market) earnings in the aggregate balance at last FYE reported as compensation to each NEO in the Executive Group in our Summary Compensation Tables for previous years (2006-2023) was $8,145 for Mr. Kuzbel, $112,424 for Ms. Betsworth, $1,316 for Mr. Koupal, III, $0 for Mr. Bacchus, and $21,234 for Mr. Schlossman, Jr. The amounts reported as preferential (above market) earnings for the current year are presented in Table 56.
CEO Pay Ratio: For the year ended December 31, 2024, the ratio of the total compensation of our CEO to the annual total compensation of our Median Employee (as identified in the manner described below) is approximately 10:1. For the year ended December 31, 2024, the total compensation of the CEO, as reported in the Summary Compensation Table (Table 56), was $1,561,985, and the total compensation of the Median Employee was $159,111.
Methodology used to determine the Median Employee
We identified the Median Employee by comparing the 2024 compensation (i.e., base salary on December 31, 2024, combined with actual incentive compensation earned in 2024 but paid in 2025) for each of the employees who were employed by FHLBank on December 31, 2024, and ranking all 262 employees by that consistently applied compensation measure from lowest to highest, excluding the CEO. Because there was an even amount of employees in the total count, we identified the two middle employees and selected the one with lower compensation to represent the initial median employee. Next, we identified the five employees with 2024 compensation higher than that initial median employee and the five employees with 2024 compensation lower than that initial median employee, constituting a total pool of 11 employees (the “Identified Pool”). We then calculated the 2024 Total Compensation for each employee in the Identified Pool for 2024 in the same manner as “Total Compensation” in the Summary Compensation Table. We ranked the 2024 Total Compensation for each employee in the Identified Pool from lowest to highest, and the employee from the Identified Pool in the middle is our Median Employee. The employees in the calculation included only full-time employees as all part-time and temporary employees were excluded.
As a result of our methodology for determining the pay ratio, the estimated pay ratio reported above may not be comparable to the pay ratio of other companies in our industry or in other industries because other companies may rely on different methodologies or assumptions to determine an estimate of their pay ratio, or may make adjustments that we do not make. In addition, no two companies have identical employee populations or compensation programs. As such, our pay ratio should not be used as a basis for comparison between companies.
Director Compensation: We provide our directors with compensation for the performance of their duties as members of the Board for time spent on FHLBank’s business. We are a cooperative and our capital stock may only be held by current and former members, so we do not provide compensation to our directors int he form of stock or stock options. Table 61 presents the Director Compensation Table for the persons who served on our board of directors during 2024.
Table 61
Name Fees Earned or Paid in Cash
Nonqualified Deferred Compensation Earnings1
Total
Milroy A. Alexander $ 145,000 $ 6,624 $ 151,624
Steve Bradshaw
123,000 123,000
Thomas E. Henning 123,000 123,000
Michael B. Jacobson 123,000 1,458 124,458
Lynn Jenkins
123,000 123,000
Holly Johnson 130,000 1,545 131,545
Barry J. Lockard 160,000 160,000
Craig A. Meader 123,000 965 123,965
L. Kent Needham 130,000 130,000
Jeffrey R. Noordhoek 123,000 123,000
Mark J. O’Connor 130,000 130,000
Thomas H. Olson, Jr. 130,000 130,000
Carla D. Pratt 123,000 438 123,438
Douglas E. Tippens 123,000 31,403 154,403
Gregg Vandaveer
123,000 8,229 131,229
Paul E. Washington 123,000
123,000
Lance L. White 123,000 3,970 126,970
1 Nonqualified deferred compensation earnings represents above market earnings attributable to the BEP, which are calculated by multiplying the nonqualified deferred compensation average balance of the applicable year by the average rate of return in excess of the long-term applicable Federal rate (120 percent compounded quarterly) published by the IRS.
Director Fees: The board of directors establishes on an annual basis a Board of Directors Compensation Policy governing compensation for board of director meeting attendance. On December 15, 2023, the board of directors adopted our 2024 Board of Directors Compensation Policy (2024 Policy), which became effective January 1, 2024. The applicable statutes and regulations allow each FHLBank to pay its directors reasonable compensation and expenses, subject to the authority of the Director of the FHFA to object to, and to prohibit prospectively, compensation or expenses that the Director of the FHFA determines are not reasonable. To compensate them for their time while serving as directors, our 2024 Policy provided that each director shall be paid one-fourth of their maximum annual compensation provided for in the policy following the end of each calendar quarter. The quarterly payment can be reduced for reasons specified in the policy.
The maximum annual compensation amounts are based on an evaluation of McLagan market research data, including the appropriate peer group and peer positioning, a fee comparison among the FHLBanks and the board’s assessment of appropriate and comparable pay to recruit and retain highly qualified directors. The 2024 Policy established annual compensation limits of $160,000 for the Chair, $140,000 for the Vice Chair, $130,000 for Committee Chairs and $123,000 for all other directors. Additionally, an individual serving as a Vice Chair of the Board was also entitled to an increase of $5,000 in their maximum annual compensation in the event the individual served as both Vice Chair of the Board and a Committee Chair.
The board of directors adopted a 2025 Board of Directors Compensation Policy (2025 Policy) governing compensation for board of director meeting attendance on December 20, 2024. The 2025 Policy is similar to the 2024 Policy, and makes no adjustments to the established annual compensation limits. In addition to the maximum annual compensation reflected in the policy, a director may also realize the benefit of reasonable spousal or guest travel expenses that qualify as perquisites as set forth in the Directors and Executive Officers Travel Policy, for one meeting per calendar year, as designated by the Chair of the board of directors. Directors are also entitled to participate in FHLBank’s BEP, discussed above, which allows directors the opportunity to defer director compensation, up to 100 percent.
Director Expenses: Directors are also reimbursed for all necessary and reasonable travel, subsistence and other related expenses incurred in connection with the performance of their duties. For expense reimbursement purposes, directors’ official duties can include:
▪Meetings of the Board and Board Committees;
▪Meetings requested by the FHFA;
▪Meetings of FHLBank System committees;
▪FHLBank System director meetings;
▪Meetings of the Council of Federal Home Loan Banks and Council committees; and
▪Attendance at other events on behalf of FHLBank.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
We are a cooperative. Our members or former members own all of our outstanding capital stock. Our directors are elected by and a majority are from our membership. Each member is eligible to vote for the open member directorships in the state in which its principal place of business is located and for each open independent directorship. For additional information, see Item 10 - “Directors, Executive Officers and Corporate Governance.” Membership is voluntary, and members must give notice of their intent to withdraw from membership. A member that withdraws from membership may not be readmitted to membership for five years after the date upon which its required membership stock (Class A Common Stock) is redeemed by us.
Management cannot legally and, therefore, does not, own our capital stock. We do not offer any compensation plan to our employees under which equity securities of FHLBank are authorized for issuance.
Members, former members, and successors to former members, including affiliated institutions under common control of a single holding company, holding five percent or more of our outstanding capital stock as of February 28, 2025, are presented in Table 62.
Table 62
Member Institutions Holding 5 Percent or More Capital Stock
Borrower Name Address City State Number of Shares Percent of Total
MidFirst Bank 501 NW Grand Blvd Oklahoma City OK 5,319,361 21.8 %
BOKF, N.A. 1 Williams Center-BOK Tower 16 SW Tulsa OK 1,563,798 6.4
TOTAL 6,883,159 28.2 %
Additionally, because a majority of our board of directors are member directors nominated and elected from our membership, our member directors are officers or directors of members financial institutions that own our capital stock. Table 63 presents total outstanding capital stock, which includes mandatorily redeemable capital stock, held as of February 28, 2025, for members whose affiliated officers or directors currently serve on our board of directors:
Table 63
Total Capital Stock Outstanding to Member Institutions whose Officers or Directors Serve as a Director
Borrower Name Address City State Number of Shares Percent of Total
BOKF, N.A. 1 Williams Center-BOK Tower 16 SW Tulsa OK 1,563,798 6.4 %
NebraskaLand Bank 1400 S Dewey Street North Platte NE 50,674 0.2
Cornhusker Bank 8310 O Street Lincoln NE 48,524 0.2
Bank of the Flint Hills 806 5th Street Wamego KS 46,245 0.2
Golden Belt Bank, FSA 1101 East 27th Street Hays KS 38,743 0.2
Midwest Housing Development Fund 515 N. 162nd Avenue, Suite 202 Omaha NE 7,780 -
BancFirst 100 N Broadway Ave Oklahoma City OK 6,500 -
First National Bank of Kansas 600 N 4th Street Burlington KS 5,211 -
Flatirons Bank 1095 Canyon Blvd. Suite 100 Boulder CO 4,693 -
Sooner State Bank 2 SE 4th Street Tuttle OK 3,654 -
Bankers’ Bank of Kansas, NA 555 N Woodlawn Blvd, Bldg 5 Wichita KS 3,418 -
Impact Development Fund 200 E. 7th Street, Suite 412 Loveland CO 1,333 -
TOTAL 1,779,240 7.2 %

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13: Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Transactions
Due to our structure as a cooperative, capital stock ownership is a prerequisite for our members to transact business with us. In recognition of this organizational structure, the SEC granted us an accommodation pursuant to a “no action letter,” dated May 23, 2006, which relieves us from the requirement to make disclosures under Item 404(a) of Regulation S-K for transactions with related persons, such as our members and directors, which occur in the ordinary course of business. Further, the Recovery Act codified this accommodation.
Members with beneficial ownership of more than five percent of our total outstanding capital stock and all our directors are classified as related persons under SEC regulations. Our members and certain former members or their successors own all our stock, the majority of our directors are elected by and from the membership, and we conduct our advances and mortgage loan business almost exclusively with members. AHP, Voluntary Program, and Community Investment Program funds are also disbursed in partnership or in connection with our members. Therefore, in the normal course of business, we extend credit and offer services and AHP benefits to members whose officers and directors may serve as our directors, as well as to entities that hold five percent or more of our capital stock. It is our policy that extensions of credit, all other FHLBank products and services, and the AHP benefits are offered on terms and conditions that are no more favorable to such members than the terms and conditions of comparable transactions with other members.
Information with respect to the directors who are officers or directors of our members is set forth under Item 10 - “Directors, Executive Officers and Corporate Governance - Directors.” Additional information regarding members that are beneficial owners of more than five percent of our total outstanding capital stock is provided in Item 12 - “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
For a discussion of the compensation of our NEOs and directors, see Item 11 - “Executive Compensation.”
We have a written “Related Person Transactions Policy” (Policy) that provides for the review and approval or ratification by our Audit Committee of any transaction with a related person that is outside the ordinary course of business. Under the Policy, transactions with related persons that are in the ordinary course of business are deemed pre-approved.
A “Related Person” under the Policy is:
▪Any person who is, or at any time since the beginning of our last fiscal year was, a director or an executive officer of FHLBank;
▪Any immediate family member of any of the foregoing persons and any person (other than a tenant or employee) sharing the household of such director or executive officer;
▪Any firm, corporation, or other entity in which any of the foregoing persons is an executive officer, a general partner or principal or in a similar position; or
▪Any member institution (or successor) of FHLBank that is known to be the beneficial owner of more than five percent of our voting securities.
“Ordinary course of business” is defined in the Policy as activities conducted with members, including but not limited to providing our products and services to the extent such product and service transactions are conducted on terms no more favorable than the terms of comparable transactions with similarly situated members or housing associates, as applicable, or transactions between FHLBank and a Related Person where the rates and charges involved in the transactions are subject to competitive bidding. Our products and services include: (1) credit products (e.g., overnight line of credit, advances, forward settling advance commitments, and letters of credit); (2) MPF Program mortgage loan products; (3) housing and CDP products; and (4) other services (e.g., deposit accounts, wire transfer services, safekeeping services and unsecured credit transactions permissible under the RMP).
Transactions outside the ordinary course of business, with Related Persons that have a direct or indirect material interest, and exceed $120,000 are subject to Audit Committee review and approval under the Policy and include situations in which: (1) we obtain products or services from a Related Person of a nature, quantity or quality, or on terms that are not readily available from alternative sources; (2) we provide products or services to a Related Person on terms not comparable to those provided to unrelated parties; or (3) the rates or charges involved in the transactions are not subject to competitive bidding.
Director Independence
Board Operating Guidelines and Nasdaq Standards: The Board Operating Guidelines of FHLBank (Guidelines), available at www.fhlbtopeka.com/board-governance, require that the board of directors make an annual affirmative determination as to the independence of each director, as that term is defined by Rule 5605(a)(2) of the Nasdaq Marketplace Rules (the “Nasdaq Independence Standards”).
The board of directors has affirmatively determined that each one of its directors, both independent and member directors (each of whom is listed in Item 10 of this Form 10-K), is independent in accordance with the Nasdaq Independence Standards.
To assist the board of directors in making an affirmative determination of each director’s independence under the Nasdaq Independence Standards, the board of directors: (1) applied categorical standards for independence contained in the Guidelines and under the Nasdaq Independence Standards; (2) determined subjectively the independence of each director; and (3) considered the recommendation of the Audit Committee following its assessment of the independence of each director. The board of directors’ determination of independence under the Nasdaq Independence Standards rested upon a finding that each director has no relationship which, in the opinion of the board of directors, would interfere with that director’s exercise of independent judgment in carrying out the responsibilities of the director. Since under FHFA regulations, each independent director must be a bona fide resident of our district, and each member director must be an officer or director of one of our members, the board of directors included in its consideration whether any of these relationships would interfere with the exercise of independent judgment of a particular director.
Committee Independence
Audit Committee: In addition to the Nasdaq Independence Standards for committee members, our Audit Committee members are subject to the independence standards of the FHFA. FHFA regulations state that a director will be considered sufficiently independent to serve as an Audit Committee member if that director does not have a disqualifying relationship with FHLBank or its management that would interfere with the exercise of that director’s independent judgment. Disqualifying relationships include but are not limited to:
▪Being employed by FHLBank in the current year or any of the past five years;
▪Accepting compensation from FHLBank other than compensation for service as a director;
▪Serving or having served in any of the past five years as a consultant, advisor, promoter, underwriter, or legal counsel of FHLBank; or
▪Being an immediate family member of an individual who is, or has been in any of the past five years, employed by FHLBank as an executive officer.
In addition to the independence standards for Audit Committee members required under the FHFA regulations, Section 10A(m) of the Exchange Act sets forth the independence requirements of directors serving on the Audit Committee of a listed company under the Exchange Act. Under Section 10A(m), to be considered independent, a member of the Audit Committee may not, other than in their capacity as a member of the board of directors or any other board committee: (1) accept any consulting, advisory, or other compensation from FHLBank; or (2) be an affiliated person of FHLBank.
All members of our Audit Committee were independent under the FHFA’s audit committee independence criteria and under the independence criteria of Section 10A(m) of the Exchange Act throughout the period covered by this annual report.
The FHFA’s criteria for audit committee independence are posted on the corporate governance page of our website at www.fhlbtopeka.com. Except for the documents specifically incorporated by reference into this Annual Report on Form 10-K, information contained on our website or that can be accessed through our website is not incorporated by reference into this Annual Report on Form 10-K. Reference to our website is made as an inactive textual reference.
Compensation, People and Inclusion Committee: FHLBank’s board of directors has established a Compensation Committee. Under Nasdaq rules, to be considered an independent compensation committee member, the board of directors must affirmatively determine the independence of each director on the Compensation Committee and must consider all factors specifically relevant to determine whether a director has a relationship to FHLBank which is material to that director’s ability to be independent from management in connection with the duties of a Compensation Committee member, including the source of the compensation of the director and whether the director is affiliated with FHLBank. The board of directors has affirmatively determined that each member of the Compensation Committee is independent in accordance with the Nasdaq Independence Standards for compensation committee members.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14: Principal Accountant Fees and Services
Prior to approving PricewaterhouseCoopers LLP as our independent accountants for 2024, the Audit Committee considered whether PricewaterhouseCoopers LLP’s provision of services other than audit services is compatible with maintaining the accountants’ independence. The Audit Committee’s policy is to pre-approve all audit, audit-related, and permissible non-audit services provided by our independent accountants. The Audit Committee pre-approved all such services provided by the independent accountants during 2024 and 2023. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent accountants and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent accountants in accordance with its pre-approval and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.
Table 64 sets forth our aggregate fees incurred for the years ended December 31, 2024 and 2023 by our external accounting firm, PricewaterhouseCoopers LLP (in thousands):
Table 64
2024 2023
Audit fees $ 1,254 $ 1,044
Audit-related fees 77 70
Tax fees - -
All other fees 2 81
TOTAL $ 1,333 $ 1,195
Audit fees during the years ended December 31, 2024 and 2023 were for professional services rendered for the audits of our annual financial statements and review of financial statements included in our annual reports on Form 10-K and quarterly reports on Form 10-Q.
Audit-related and all other fees during the years ended December 31, 2024 and 2023 were for discussions regarding miscellaneous accounting-related matters and a license fee for an electronic disclosure checklist application. For the year ended December 31, 2023, all other fees also included $80 thousand for a pre-implementation software review.
We are assessed our proportionate share of the costs of operating the Office of Finance, which includes the expenses associated with the annual audits of the combined financial statements of the 11 FHLBanks. The audit fees for the combined financial statements are billed directly by PricewaterhouseCoopers LLP to the Office of Finance and we are assessed our proportionate share of these expenses. In 2024 and 2023, we were assessed $33,000 and $42,000 each year for the costs associated with PricewaterhouseCoopers LLP’s audits of the combined financial statements for those years. These assessments are not included in the table above.
Section 1433 of the Bank Act provides that we and the other FHLBanks are exempt from all federal, state and local taxation, with the exception of real property tax. Therefore, no tax consultation fees were paid to our external accounting firm during the years ended December 31, 2024 and 2023.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15: Exhibit and Financial Statement Schedules
a) The financial statements included as part of this Form 10-K are identified in the index to Audited Financial Statements appearing in Item 8 of this Form 10-K and which index is incorporated in this Item 15 by reference.
b) Exhibits.
We have incorporated by reference certain exhibits as specified below pursuant to Rule 12b-32 under the Exchange Act.
Exhibit No. Description
3.1
Exhibit 3.1 to FHLBank’s registration statement on Form 10, filed May 15, 2006, and made effective on July 14, 2006 (File No. 000-52004) (the “Form 10 Registration Statement”), Federal Home Loan Bank of Topeka Articles and Organization Certificate, is incorporated herein by reference as Exhibit 3.1.
3.2
Exhibit 3.2 to the Current Report on Form 8-K, filed October 31, 2024, Federal Home Loan Bank of Topeka Amended and Restated Bylaws, is incorporated herein by reference as Exhibit 3.2.
4.1
Exhibit 4.1 to the 2019 Annual Report on Form 10-K, filed March 20, 2020, Federal Home Loan Bank of Topeka Capital Plan, is incorporated herein by reference as Exhibit 4.1.
4.2
Exhibit 4.2 to the 2019 Annual Report on Form 10-K, filed March 20, 2020, Description of Securities - Supplement to the Federal Home Loan Bank of Topeka Capital Plan, is incorporated herein by reference as Exhibit 4.2.
10.1
Exhibit 10.3 to the 2016 Annual Report on Form 10-K, filed March 9, 2017, Federal Home Loan Bank of Topeka Form of Advance, Pledge and Security Agreement (Specific Pledge), is incorporated herein by reference as Exhibit 10.1.
10.2
Exhibit 10.4 to the 2016 Annual Report on Form 10-K, filed March 9, 2017, Federal Home Loan Bank of Topeka Form of Advance, Pledge and Security Agreement (Blanket Pledge), is incorporated herein by reference as Exhibit 10.2.
10.3
Exhibit 10.6 to the 2013 Annual Report on Form 10-K, filed March 14, 2014, Federal Home Loan Bank of Topeka Form of Confirmation of Advance, is incorporated herein by reference as Exhibit 10.3.
10.4
Exhibit 10.1 to the Current Report on Form 8-K, filed June 23, 2017, Bond Trust Indenture dated as of June 1, 2017, between Shawnee County, Kansas and BOKF, N.A., is incorporated herein by reference as Exhibit 10.4.
10.5
Exhibit 10.2 to the Current Report on Form 8-K, filed June 23, 2017, Lease Agreement dated as of June 1, 2017, between Shawnee County, Kansas and Federal Home Loan Bank of Topeka, is incorporated herein by reference as Exhibit 10.5.
10.6
Exhibit 10.3 to the Current Report on Form 8-K, filed June 23, 2017, Base Lease Agreement dated as of June 1, 2017, between Shawnee County, Kansas and Federal Home Loan Bank of Topeka, is incorporated herein by reference as Exhibit 10.6
10.7
Exhibit 10.26 to the 2016 Annual Report on Form 10-K, filed March 9, 2017, Amended and Restated Federal Home Loan Banks P&I Funding and Contingency Plan Agreement, is incorporated herein by reference as Exhibit 10.7.
10.8*
Exhibit 10.1 to the Current Report on Form 8-K, filed December 18, 2020, Federal Home Loan Bank of Topeka Benefit Equalization Plan, is incorporated herein by reference as Exhibit 10.8.
10.9*
Exhibit 10.1 to the Current Report on Form 8-K, filed December 19, 2024, Federal Home Loan Bank of Topeka Executive Defined Contribution Retirement Plan, is incorporated herein by reference as Exhibit 10.9.
10.10*
Exhibit 10.1 to the Current Report on Form 8-K, filed February 16, 2022, Executive Incentive Compensation Plan dated December 17, 2021, is incorporated herein by reference as Exhibit 10.10.
10.11*
Exhibit 10.1 to the Current Report on Form 8-K, filed March 20, 2024, Executive Incentive Compensation Plan dated December 15, 2023, is incorporated herein by reference as Exhibit 10.11.
10.12*
Exhibit 10.1 to the Current Report on Form 8-K, filed July 18, 2024, Executive Incentive Compensation Plan dated June 13,2024, is incorporated herein by reference as Exhibit 10.12.
10.13*
Executive Incentive Compensation Plan dated December 20, 2024
10.14*
Exhibit 10.1 to the Current Report on Form 8-K, filed February 6, 2020, Federal Home Loan Bank of Topeka 2020 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.14.
10.15*
Exhibit 10.1 to the Current Report on Form 8-K, filed February 2, 2021, Federal Home Loan Bank of Topeka 2021 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.15.
10.16*
Exhibit 10.2 to the Current Report on Form 8-K, filed February 16, 2022, Federal Home Loan Bank of Topeka 2022 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.16.
10.17*
Exhibit 10.1 to the Current Report on Form 8-K, filed March 7, 2023, Federal Home Loan Bank of Topeka 2023 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.17.
10.18*
Exhibit 10.1 to the Current Report on Form 8-K, filed May 23, 2024, Federal Home Loan Bank of Topeka 2024 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.18.
Exhibit No. Description
10.19*
Exhibit 10.1 to the Current Report on Form 8-K, filed February 12, 2025, Federal Home Loan Bank of Topeka 2025 Executive Incentive Compensation Plan Targets, is incorporated herein by reference as Exhibit 10.19.
10.20*
Exhibit 10.1 to the Current Report on Form 8-K, filed July 20, 2015, Federal Home Loan Bank of Topeka Change in Control Plan, is incorporated herein by reference as Exhibit 10.20.
10.21*
Exhibit 10.1 to the Current Report on Form 8-K, filed August 1, 2018, Federal Home Loan Bank of Topeka Executive Officer Severance Policy, is incorporated herein by reference as Exhibit 10.21.
10.22*
Exhibit 10.1 to the Current Report on Form 8-K, filed January 5, 2024, Federal Home Loan Bank of Topeka 2024 Board of Directors Compensation Policy, is incorporated herein by reference as Exhibit 1022.
10.23*
Exhibit 10.1 to the Current Report on Form 8-K, filed December 26, 2024, Federal Home Loan Bank of Topeka 2025 Board of Directors Compensation Policy, is incorporated herein by reference as Exhibit 10.23.
10.24*
Exhibit 10.1 to the Current Report on Form 8-K, filed June 30, 2016, Form of Director Indemnification Agreement, is incorporated herein by reference as Exhibit 10.24.
10.25*
Exhibit 10.2 to the Current Report on Form 8-K, filed June 30, 2016, Form of Officer Indemnification Agreement, is incorporated herein by reference as Exhibit 10.25.
10.26*
Exhibit 10.2 to the Current Report on Form 8-K, filed November 26, 2024, Acceptance Agreement with Midland National Life Insurance Company, is incorporated herein by reference as Exhibit 10.26.
10.27*
Federal Home Loan Bank of Topeka Short-Term Incentive Compensation Plan
14.1
Exhibit 14.1 to the 2023 Annual Report on Form 10-K, filed March 11, 2024, Federal Home Loan Bank of Topeka Code of Ethics, is incorporated herein by reference as Exhibit 14.1.
19.1
Federal Home Loan Bank of Topeka Insider Trading Policy
24.1
Power of Attorney.
31.1
Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
Certification of Senior Vice President and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of President and Principal Executive Officer and Senior Vice President and Principal 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
Exhibit 99.1 2023 Annual Report on Form 10-K, filed March 11, 2024, Federal Home Loan Bank of Topeka Audit Committee Charter, is incorporated herein by reference as Exhibit 99.1.
99.2
Federal Home Loan Bank of Topeka 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**
XBRL Taxonomy Extension Schema Document
101.CAL**
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB**
XBRL Taxonomy Extension Label Linkbase Document
101.PRE**
XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF**
XBRL Taxonomy Extension Definition Linkbase Document
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
* Represents a management contract or a compensatory plan or arrangement.
** The financial information contained in these XBRL documents is unaudited.