Summary

The future level of net interest income of the FHLBanks will depend, in part, upon the level and volatility of interest rates, demand for advances, cost of consolidated obligations, changes in fiscal and monetary policies, as well as the state of the overall U.S. economy and financial markets.

Continued increases in short-term interest rates expected by the Federal Reserve

The FHLBanks’ advance levels increased in both the 1st and 2nd Quarters of 2022

The FHLBanks have remained focused on operational resilience and risk management

Serving members

Returned to office under a hybrid model

For full FHLBank Combined Financial Report (CFR) for Q2 2022 see link below: https://www.fhlb-of.com/ofweb_userWeb/resources/2022Q2CFR.pdf

Market and Business Conditions

Elevated levels of deposits

Total deposits at all FDIC-insured banks rose from $18.5 trillion to $19.9 trillion from Q1 2021 to Q1 2022– an 8.0% increase

Total deposits at all federally-insured credit unions rose $158.0 billion, or 9.3%, since Q1 2021 to $1.85 trillion in the first quarter of 2022

The first quarter 2022 data was the most recent reports available from the FDIC and NCUA.

Modest growth in loan demand

Total loans and leases at all FDIC-insured banks increased by 4.9% year-over-year from Q1 2021 to Q1 2022 – from $10.82 trillion to $11.36 trillion

Quarterly loan balances continued to grow from Q4 2021

Total loans at all federally-insured credit unions rose 11.7% year-over-year from Q1 2021 to Q1 2022 – from $1.16 trillion to $1.30 trillion

fdic-ins
federally-ins

Static Net Interest Margin at FDIC Banks

The average NIM at all FDIC insured banks was 2.54% in the first quarter 2022, remaining relatively stable compared to the fourth quarter 2021

The FDIC reported the first quarter 2022 Net Income of $59.7 billion, down 22% from the first quarter of 2021

From December 31, 2021 to June 30, 2022, the effective rate on Federal Funds increased from 0.08% to 1.21%

Rate increased 1.13% from Q4 2021 to Q2 2022

Over the same period the 10-year Treasury rate increased from 1.52% to 2.98%

The 10-yr rate increased by 1.46% from Q4 2021 to Q2 2022

Market expectation of continued increases in short-term interest rates by the Federal Reserve

QNIM

Financial Highlights – FHLBanks' Combined Statement of Income (Unaudited)

($ in millions) Three Months Ended 6/30blankOver / (Under)blank
20222021Amount%
Net interest income $1,078 $927 $15116.3
Provision (benefit) for credit losses 6-6-
Non-interest income (loss)(33)(120)87(72.5)
Non-interest expense363353102.8
Net income before assessment67645422248.9
AHP assessments69462350.0
Net income60740819948.8
Net interest margin (bps)504912.0

Financial Highlights – FHLBanks' Combined Statement of Income (Unaudited)

($ in millions)Six Months Ended 6/30blankOver / (Under)blank
20222021Amount%
Net interest income$2,050$1,958$924.7
Provision (benefit) for credit losses6(10)16(160.0)
Non-interest income (loss)(95)(245)150(61.2)
Non-interest expense71571140.6
Net income before assessment1,2341,01222221.9
AHP assessments1251032221.4
Net income1,10990920022.
Net interest margin (bps)5151--

Financial Highlights – FHLBanks' Combined Balance Sheet (Unaudited)

($ in millions) As of blankOver / (Under)blank
6/30/202212/31/2021Amount%
Total assets $946,710$723,238$223,47230.9
Total advances518,883351,278167,60547.7
Total investment securities189,611190,437(826)(0.4)
Total consolidated obligations869,747651,921217,82633.4
Total capital stock32,36225,0657,29729.1
Total retained earnings23,37322,7606132.7

FHLBanks' Combined Net Income Trends (Unaudited)

FHLBanks reported combined net income of $607 million for the second quarter of 2022 compared with $408 million for the second quarter of 2021 – an increase of $199 million, resulting primarily from higher net interest income and lower losses in non-interest income

Non-interest income was a loss of $33 million in the second quarter of 2022, resulting primarily from changes in the fair value of investment securities, derivatives, and financial instruments held under fair value option, driven by increases in interest rates

Non-interest expense was $363 million in the second quarter of 2022, an increase of 3% from the second quarter of 2021

NIM-qtrs

FHLBanks' Combined Balance Sheet Trends (Unaudited)

The FHLBanks’ assets expand and contract as the needs of member financial institutions and their communities change over time

FHLBanks’ Combined Balance Sheets have seen an aggregate increase in the 2nd quarter of 2022

Capital levels remained strong

Total-asset-liabilities
liabilities and assetsq2-horz

FHLBanks' Combined Advances (Unaudited)

FHLBanks’ Combined advances were $518.9 billion at June 30, 2022 compared with $351.3 billion at December 31, 2021, an increase of 48%

97% of FHLBank advances were to members; the remaining advances were to non-members and housing associates

At June 30, 2022, advances to depository members and insurance company members grew by 72% and 15% compared to December 31, 2021

FHLBanks’ Combined Advances Trends (Unaudited)

FHLBanks' Combined Capital and Regulatory Requirements (Unaudited)

Total capital at 6/30/2022 was $55.6 billion, or 5.87% of total System assets of $946.7 billion

Combined Regulatory Capital Ratio decreased to 5.93% as of 6/30/2022 from 6.67% as of 12/31/2021

Combined Leverage Capital Ratio decreased to 8.88% as of 6/30/2022 from 9.99% as of 12/31/2021

Credit quality of FHLBank assets remained strong

($ in millions)As ofblankblank
6/30/202212/31/21Over / (Under)
Capital stock$32,362$25,065$7,297
Retained earnings:
Unrestricted17,55117,110441
Restricted5,8225,650172
Total retained earnings23,37322,760613
Combined regulatory capital-to-assets ratios5.93% 6.67% (0.74)%

FHLBanks' Affordable Housing Programs (Unaudited)

The FHLBanks’ Affordable Housing Programs (“AHP”) help members provide subsidized and other low-cost funding, as well as grants, to create affordable rental and homeownership opportunities through a 10% assessment on income subject to AHP assessment

The FHLBanks’ Combined AHP assessments were $69 million for the second quarter of 2022, an increase of 50% from the second quarter of 2021 assessments of $46 million

affordable-housing

FHLBanks' Combined Letters of Credit (Unaudited)

FHLBank Standby Letters of Credit (LOC) allow members to maintain deposits from state and local governments as well as other public entities and support housing development and other initiatives

The notional amount of LOCs outstanding at June 30, 2022 was $149.6 billion, utilized by over 1,200 members and housing associates

This represented a decline of 3.3% compared to the notional amount of LOCs outstanding at June 30, 2021 of $154.8 billion

The majority of LOCs were used for Public Unit Deposits as pictured in the chart below

LOC details

Disclaimer: Data presented in this section may not comport with CFR data and should be viewed independently

FHLBanks’ Historical Letters of Credit Trends (Unaudited)

FHLBanks' Combined Acquired Member Assets (Unaudited)

The FHLBanks, through their four separate Acquired Member Asset (AMA) programs, acquire mortgage assets from their members–providing them valuable liquidity. Through these programs the FHLBanks share credit risk with their members and housing associates, and the FHLBanks manage the interest rate and prepayment risks

In Q2 2022, the FHLBanks purchased nearly $2.8 billion of mortgage assets across more than 11,000 loans. As of Q2 2022, there were 998 Participating Financial Institutions, and of those that participated in the programs during the quarter, over 60% were CFIs (i.e., bank members with assets under $1.239 billion)

During Q2 2022, the FHLBanks supported nearly 2,700 first-time homebuyers through their loan acquisitions; and acquired loans in every US state

AMA loan metrics

Disclaimer: Data presented in this section may not comport with CFR data and should be viewed independently