UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________

FORM 10-Q

____________________________________

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

OR

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

Commission File Number: 000-51398

FEDERAL HOME LOAN BANK OF SAN FRANCISCO

(Exact name of registrant as specified in its charter)

____________________________________

Federally chartered corporation	94-6000630
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification number)
600 California Street San Francisco, CA	94108
(Address of principal executive offices)	(Zip code)

(415) 616-1000

(Registrant's telephone number, including area code)

____________________________________

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    o  Yes    o  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	o

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

	Shares outstanding as of April 29, 2011
Class B Stock, par value $100	116,501,077

Federal Home Loan Bank of San Francisco

Form 10-Q

Index

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Statements of Condition (Unaudited)	1
	Statements of Income (Unaudited)	2
	Statements of Capital Accounts (Unaudited)	3
	Statements of Cash Flows (Unaudited)	4
	Notes to Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	54
	Quarterly Overview	55
	Financial Highlights	58
	Results of Operations	59
	Financial Condition	68
	Liquidity and Capital Resources	79
	Risk Management	82
	Critical Accounting Policies and Estimates	100
	Recently Issued Accounting Standards and Interpretations	101
	Recent Developments	101
	Off-Balance Sheet Arrangements, Guarantees, and Other Commitments	106
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	107
Item 4.	Controls and Procedures	114
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	115
Item 1A.	Risk Factors	115
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	115
Item 3.	Defaults Upon Senior Securities	115
Item 4.	(Removed and Reserved)	115
Item 5.	Other Information	116
Item 6.	Exhibits	116
Signatures		117

i

PART I. FINANCIAL INFORMATION

ITEM 1.        FINANCIAL STATEMENTS

Federal Home Loan Bank of San Francisco

Statements of Condition

(Unaudited)

(In millions-except par value)	March 31, 2011			December 31, 2010
Assets
Cash and due from banks	$	3,762		$	755
Federal funds sold	14,966			16,312
Trading securities(a)	3,550			2,519
Available-for-sale securities(a)	7,938			1,927
Held-to-maturity securities (fair values were $25,890 and $32,214, respectively)(b)	25,959			31,824
Advances (includes $9,708 and $10,490 at fair value under the fair value option, respectively)	92,005			95,599
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans of $3 and $3, respectively	2,205			2,381
Accrued interest receivable	171			228
Premises and equipment, net	25			25
Derivative assets	739			718
Other assets	124			135
Total Assets	$	151,444		$	152,423
Liabilities and Capital
Liabilities:
Deposits	$	139		$	134
Consolidated obligations, net:
Bonds (includes $24,943 and $20,872 at fair value under the fair value option, respectively)	115,464			121,120
Discount notes	22,951			19,527
Total consolidated obligations, net	138,415			140,647
Mandatorily redeemable capital stock	3,102			3,749
Accrued interest payable	497			467
Affordable Housing Program	169			174
Payable to REFCORP	18			37
Derivative liabilities	142			163
Other liabilities	842			104
Total Liabilities	143,324			145,475
Commitments and Contingencies (Note 16)
Capital:
Capital stock—Class B—Putable ($100 par value) issued and outstanding:
85 shares and 83 shares, respectively	8,496			8,282
Restricted retained earnings	1,663			1,609
Accumulated other comprehensive loss:
Non-credit-related other-than-temporary impairment loss on available-for-sale securities	(1,079		)	—
Non-credit-related other-than-temporary impairment loss on held-to-maturity securities	(952		)	(2,934		)
Other	(8		)	(9		)
Total accumulated other comprehensive loss	(2,039		)	(2,943		)
Total Capital	8,120			6,948
Total Liabilities and Capital	$	151,444		$	152,423

(a) At March 31, 2011, and at December 31, 2010, none of these securities were pledged as collateral that may be repledged.

(b) Includes $58 at March 31, 2011, and $84 at December 31, 2010, pledged as collateral that may be repledged.

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

1

Federal Home Loan Bank of San Francisco

Statements of Income

(Unaudited)

	For the Three Months Ended March 31,
(In millions)	2011			2010
Interest Income:
Advances	$	186		$	321
Prepayment fees on advances, net	6			11
Federal funds sold	8			5
Trading securities	5			—
Available-for-sale securities	1			1
Held-to-maturity securities	227			288
Mortgage loans held for portfolio	28			36
Total Interest Income	461			662
Interest Expense:
Consolidated obligations:
Bonds	191			289
Discount notes	11			13
Mandatorily redeemable capital stock	3			3
Total Interest Expense	205			305
Net Interest Income	256			357
Provision for credit losses on mortgage loans	—			—
Net Interest Income After Mortgage Loan Loss Provision	256			357
Other Income/(Loss):
Net loss on trading securities	(1		)	—
Total other-than-temporary impairment loss	(88		)	(192		)
Net amount of impairment loss reclassified (from)/to other comprehensive income	(21		)	132
Net other-than-temporary impairment loss	(109		)	(60		)
Net loss on advances and consolidated obligation bonds held at fair value	(54		)	(100		)
Net gain/(loss) on derivatives and hedging activities	20			(36		)
Other	2			1
Total Other Income/(Loss)	(142		)	(195		)
Other Expense:
Compensation and benefits	17			17
Other operating expense	10			12
Federal Housing Finance Agency	3			3
Office of Finance	2			2
Other	—			2
Total Other Expense	32			36
Income Before Assessments	82			126
REFCORP	15			22
Affordable Housing Program	7			11
Total Assessments	22			33
Net Income	$	60		$	93

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

2

Federal Home Loan Bank of San Francisco

Statements of Capital Accounts

(Unaudited)

	Capital Stock Class B—Putable					Retained Earnings								Accumulated Other Comprehensive			Total Capital
(In millions)	Shares		Par Value			Restricted		Unrestricted			Total			Income/(Loss)
Balance, December 31, 2009	86		$	8,575		$	1,239	$	—		$	1,239		$	(3,584	)	$	6,230
Issuance of capital stock	—		4														4
Capital stock reclassified to mandatorily redeemable capital stock, net	—		(18		)												(18		)
Comprehensive income:
Net income								93			93						93
Other comprehensive income/(loss):
Non-credit-related other-than-temporary impairment loss														(191		)	(191		)
Reclassification of non-credit-related other-than-temporary impairment loss included in net income														59			59
Accretion of non-credit-related other-than-temporary impairment loss														215			215
Total comprehensive income																	176
Transfers to restricted retained earnings						87		(87		)	—						—
Cash dividends paid on capital stock (0.26%)						—		(6		)	(6		)				(6		)
Balance, March 31, 2010	86		$	8,561		$	1,326	$	—		$	1,326		$	(3,501	)	$	6,386
Balance, December 31, 2010	83		$	8,282		$	1,609	$	—		$	1,609		$	(2,943	)	$	6,948
Issuance of capital stock	—		34														34
Repurchase/redemption of capital stock	(3	)	(317		)												(317		)
Capital stock reclassified from mandatorily redeemable capital stock, net	5		497														497
Comprehensive income:
Net income								60			60						60
Other comprehensive income/(loss):
Net unrealized gain on available-for-sale securities														1			1
Non-credit-related other-than-temporary impairment loss on available-for-sale securities:
Non-credit-related other-than-temporary impairment loss transferred from held-to-maturity securities														(1,768		)	(1,768		)
Net unrealized gain														689			689
Non-credit-related other-than-temporary impairment loss on held-to-maturity securities:
Non-credit-related other-than-temporary impairment loss														(83		)	(83		)
Reclassification of non-credit-related other-than-temporary impairment loss included in net income														104			104
Accretion of non-credit-related other-than-temporary impairment loss														193			193
Non-credit-related other-than-temporary impairment loss transferred to available-for-sale securities														1,768			1,768
Total comprehensive income																	964
Transfers to restricted retained earnings						54		(54		)	—						—
Cash dividends paid on capital stock (0.29%)						—		(6		)	(6		)				(6		)
Balance, March 31, 2011	85		$	8,496		$	1,663	$	—		$	1,663		$	(2,039	)	$	8,120

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

3

Federal Home Loan Bank of San Francisco

Statements of Cash Flows

(Unaudited)

	For the Three Months Ended March 31,
(In millions)	2011			2010
Cash Flows from Operating Activities:
Net income	$	60		$	93
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	(4		)	(4		)
Change in net fair value adjustment on trading securities	1			—
Change in net fair value adjustment on advances and consolidated obligation bonds held at fair value	54			100
Change in net fair value adjustment on derivatives and hedging activities	(148		)	(115		)
Net other-than-temporary impairment loss recognized in income	109			60
Net change in:
Accrued interest receivable	64			152
Other assets	3			3
Accrued interest payable	35			(39		)
Other liabilities	(31		)	3
Total adjustments	83			160
Net cash provided by operating activities	143			253
Cash Flows from Investing Activities:
Net change in:
Federal funds sold	1,346			(9,675		)
Premises and equipment	(2		)	(2		)
Trading securities:
Proceeds from maturities of long-term	1			1
Purchases of long-term	(1,033		)	—
Held-to-maturity securities:
Net decrease/(increase) in short-term	2,524			(51		)
Proceeds from maturities of long-term	1,737			1,786
Purchases of long-term	(2,860		)	—
Advances:
Principal collected	44,738			68,372
Made to members	(41,319		)	(47,113		)
Mortgage loans held for portfolio:
Principal collected	177			127
Net cash provided by investing activities	5,309			13,445

4

Federal Home Loan Bank of San Francisco

Statements of Cash Flows (continued)

(Unaudited)

	For the Three Months Ended March 31,
(In millions)	2011			2010
Cash Flows from Financing Activities:
Net change in:
Deposits	(119		)	(129		)
Net payments on derivative contracts with financing elements	24			30
Net proceeds from consolidated obligations:
Bonds issued	12,914			30,973
Discount notes issued	18,148			38,827
Payments for consolidated obligations:
Bonds matured or retired	(18,245		)	(56,453		)
Discount notes matured or retired	(14,728		)	(32,279		)
Proceeds from issuance of capital stock	34			4
Payments for repurchase/redemption of mandatorily redeemable capital stock	(150		)	(3		)
Payments for repurchase of capital stock	(317		)	—
Cash dividends paid	(6		)	(6		)
Net cash used in financing activities	(2,445		)	(19,036		)
Net increase/(decrease) in cash and due from banks	3,007			(5,338		)
Cash and due from banks at beginning of the period	755			8,280
Cash and due from banks at end of the period	$	3,762		$	2,942
Supplemental Disclosures:
Interest paid	$	181		$	344
Affordable Housing Program payments	12			14
REFCORP payments	34			12
Transfers of mortgage loans to real estate owned	1			1
Transfers of held-to-maturity securities to available-for-sale securities	5,322			—

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

5

Federal Home Loan Bank of San Francisco

Notes to Financial Statements

(Unaudited)

(Dollars in millions except per share amounts)

Note 1 — Summary of Significant Accounting Policies

The information about the Federal Home Loan Bank of San Francisco (Bank) included in these unaudited financial statements reflects all adjustments that, in the opinion of the Bank, are necessary for a fair statement of results for the periods presented. These adjustments are of a normal recurring nature, unless otherwise disclosed. The results of operations in these interim statements are not necessarily indicative of the results to be expected for any subsequent period or for the entire year ending December 31, 2011. These unaudited financial statements should be read in conjunction with the Bank's Annual Report on Form 10-K for the year ended December 31, 2010 (2010 Form 10‑K).

Use of Estimates. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, if applicable, and the reported amounts of income, expenses, gains, and losses during the reporting period. The most significant of these estimates include the determination of other-than-temporary impairment (OTTI) of securities and fair value of derivatives, certain advances, certain investment securities, and certain consolidated obligations that are reported at fair value in the Statements of Condition. Changes in judgments, estimates, and assumptions could potentially affect the Bank's financial position and results of operations significantly. Although the Bank believes these judgments, estimates, and assumptions to be reasonable, actual results may differ.

Variable Interest Entities. The Bank's investments in variable interest entities (VIEs) are limited to private-label residential mortgage-backed securities (PLRMBS). The Bank evaluated its investments in VIEs as of March 31, 2011, to determine whether it is a primary beneficiary of any of these investments. The primary beneficiary is required to consolidate a VIE. The Bank determined that consolidation accounting is not required because the Bank is not the primary beneficiary of its VIEs as of March 31, 2011. The Bank does not have the power to significantly affect the economic performance of any of these investments because it does not act as a key decision maker nor does it have the unilateral ability to replace a key decision maker. In addition, the Bank does not design, sponsor, transfer, service, or provide credit or liquidity support in any of its investments in VIEs. The Bank's maximum loss exposure for these investments is limited to the carrying value.

Descriptions of the Bank's significant accounting policies are included in “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank's 2010 Form 10-K. Other changes to these policies as of March 31, 2011, are discussed in Note 2 – Recently Issued and Adopted Accounting Guidance.

Note 2 — Recently Issued and Adopted Accounting Guidance

Reconsideration of Effective Control for Repurchase Agreements. On April 29, 2011, the Financial Accounting Standards Board (FASB) issued guidance to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The new guidance removes from the assessment of effective control: (i) the criterion requiring the transferor to have the ability to repurchase or redeem financial assets before their maturity on substantially the agreed-upon terms, even in the event of the transferee's default, and (ii) the collateral maintenance implementation guidance related to that criterion. The new guidance is effective for the first interim or annual period beginning on or after December 15, 2011 (January 1, 2012, for the Bank). The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The adoption of this guidance may result in increased financial statement disclosures, but will not have any effect on the Bank's financial condition, results of operations, or cash flows.

6

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring. On January 19, 2011, the FASB issued guidance to temporarily defer the effective date of disclosures about troubled debt restructuring required by the amended guidance on disclosures about the credit quality of financing receivables and the allowance for credit losses. The effective date for these new disclosures was to be coordinated with the effective date of the guidance for determining what constitutes a troubled debt restructuring.

On April 5, 2011, the FASB issued guidance that clarifies which loan modifications constitute troubled debt restructurings. It is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for presenting previously deferred disclosures related to troubled debt restructurings. The new guidance is effective for interim and annual periods beginning on or after June 15, 2011 (July 1, 2011, for the Bank), and applies retrospectively to troubled debt restructurings occurring on or after the beginning of the fiscal year of adoption. The adoption of this guidance may result in increased financial statement disclosures, but will not have any effect on the Bank's financial condition, results of operations, or cash flows.

Disclosures About the Credit Quality of Financing Receivables and the Allowance for Credit Losses. On July 21, 2010, the FASB issued amended guidance to enhance disclosures about an entity's allowance for credit losses and the credit quality of its financing receivables. The amended guidance requires all public and nonpublic entities with financing receivables, including loans, lease receivables, and other long-term receivables, to provide disclosure of the following: (i) the nature of the credit risk inherent in the financing receivables, (ii) how that risk is analyzed and assessed in arriving at the allowance for credit losses, and (iii) the changes in the allowance for credit losses and reasons for those changes. Both new and existing disclosures must be disaggregated by portfolio segment or class of financing receivable. A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. Short-term accounts receivable, receivables measured at fair value or at the lower of cost or fair value, and debt securities are exempt from this amended guidance. The required disclosures as of the end of a reporting period are effective for interim and annual reporting periods ending on or after December 15, 2010 (December 31, 2010, for the Bank). The required disclosures about activity that occurs during a reporting period are effective for interim and annual reporting periods beginning on or after December 15, 2010 (January 1, 2011, for the Bank). The adoption of this amended guidance resulted in increased financial statement disclosures, but did not affect the Bank's financial condition, results of operations, or cash flows.

Fair Value Measurements and Disclosures – Improving Disclosures About Fair Value Measurements.On January 21, 2010, the FASB issued amended guidance for fair value measurements and disclosures. The update requires a reporting entity to disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and to describe the reasons for the transfers. Furthermore, this update requires a reporting entity to present separately information about purchases, sales, issuances, and settlements in the reconciliation of fair value measurements using significant unobservable inputs; clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value; and amends guidance on employers' disclosures about postretirement benefit plan assets to require that those disclosures be provided by classes of assets instead of by major categories of assets. The amended guidance became effective for interim and annual reporting periods beginning after December 15, 2009 (January 1, 2010, for the Bank), except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity for Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 (January 1, 2011, for the Bank), and for interim periods within those fiscal years. In the period of initial adoption, entities are not required to provide the amended disclosures for any previous periods presented for comparative purposes. Early adoption is permitted. The Bank adopted this amended guidance as of January 1, 2010, with the exception of the required changes noted above related to the roll forward of activity for Level 3 fair value measurements, which were adopted as of January 1, 2011. The adoption did not result in increased financial statement disclosures and did not have any effect on the Bank's financial condition, results of operations, or cash flows.

7

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Note 3 — Trading Securities

The estimated fair value of trading securities as of March 31, 2011, and December 31, 2010, was as follows:

	March 31, 2011		December 31, 2010
Government-sponsored enterprises (GSEs) – Federal Farm Credit Bank (FFCB) bonds	$	2,367	$	2,366
Temporary Liquidity Guarantee Program (TLGP)(1)	1,160		128
Mortgage-backed securities (MBS):
Other U.S. obligations – Ginnie Mae	19		20
GSEs – Fannie Mae	4		5
Total	$	3,550	$	2,519

(1)    TLGP securities represent corporate debentures of the issuing party that are guaranteed by the Federal Deposit Insurance Corporation (FDIC) and backed by the full faith and credit of the U.S. government.

Redemption Terms. The estimated fair value of non-MBS securities by contractual maturity (based on contractual final principal payment) and of MBS as of March 31, 2011, and December 31, 2010, is shown below. Expected maturities of MBS will differ from contractual maturities because borrowers generally have the right to prepay the underlying obligations without prepayment fees.

Year of Contractual Maturity	March 31, 2011		December 31, 2010
Trading securities other than MBS:
Due in 1 year or less	$	1,443	$	—
Due after 1 year through 5 years	2,084		2,494
Subtotal	3,527		2,494
MBS:
Other U.S. obligations – Ginnie Mae	19		20
GSEs – Fannie Mae	4		5
Total MBS	23		25
Total	$	3,550	$	2,519

Interest Rate Payment Terms. Interest rate payment terms for trading securities at March 31, 2011, and December 31, 2010, are detailed in the following table:

	March 31, 2011		December 31, 2010
Estimated fair value of trading securities other than MBS:
Fixed rate	$	800	$	128
Adjustable rate	2,727		2,366
Subtotal	3,527		2,494
Estimated fair value of trading MBS:
Passthrough securities:
Adjustable rate	19		20
Collateralized mortgage obligations:
Fixed rate	4		5
Subtotal	23		25
Total	$	3,550	$	2,519

At March 31, 2011, 99.6% of the fixed rate trading securities were swapped to an adjustable rate. At December 31,

8

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

2010, all of the fixed rate trading securities were swapped to an adjustable rate. At March 31, 2011, 77.7% of the adjustable rate trading securities were swapped to a different adjustable rate index. At December 31, 2010, 89.4% of the adjustable rate trading securities were swapped to a different adjustable rate index.

The net unrealized gain/(loss) on trading securities was immaterial for the three months ended March 31, 2011 and 2010, respectively. These amounts represent the changes in the fair value of the securities during the reported periods.

Note 4 — Available-for-Sale Securities

Available-for-sale securities as of March 31, 2011, and December 31, 2010, were as follows:

March 31, 2011
	Amortized Cost(1)		OTTI Recognized in Accumulated Other Comprehensive Income/(Loss) (AOCI)			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
TLGP	$	1,927	$	—		$	1	$	(1	)	$	1,927
PLRMBS:
Prime	668		(192		)	99		—			575
Alt-A, option ARM	352		(105		)	16		—			263
Alt-A, other	6,070		(1,471		)	574		—			5,173
Total PLRMBS	7,090		(1,768		)	689		—			6,011
Total	$	9,017	$	(1,768	)	$	690	$	(1	)	$	7,938
December 31, 2010
TLGP	$	1,928	$	—		$	—	$	(1	)	$	1,927

(1)    Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous other-than-temporary impairments recognized in earnings (less any cumulative-effect adjustments recognized).

Securities Transferred. As of March 31, 2011, the Bank transferred PLRMBS with credit-related OTTI during the first quarter of 2011 from its held-to-maturity portfolio to its available-for-sale portfolio. These transfers allow the Bank the option to divest these securities prior to maturity in response to changes in interest rates, changes in prepayment risk, or other factors, while acknowledging its intent to hold these securities for an indefinite period of time. For additional information on the transferred securities, see Note 6 – Other-Than-Temporary Impairment Analysis.

The following table summarizes the available-for-sale securities with unrealized losses as of March 31, 2011, and December 31, 2010. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position. The total unrealized losses in the following table will not agree to the total gross unrealized losses in the table above. The total unrealized losses below include non-credit-related OTTI recognized in AOCI net of subsequent unrealized changes in fair value related to the other-than-temporarily impaired securities. For OTTI analysis of available-for-sale securities, see Note 6 – Other-Than-Temporary Impairment Analysis.

9

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

March 31, 2011
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
TLGP	$	502	$	1	$	—	$	—	$	502	$	1
PLRMBS:
Prime	—		—		569		93		569		93
Alt-A, option ARM	—		—		246		92		246		92
Alt-A, other	—		—		5,076		897		5,076		897
Total PLRMBS	—		—		5,891		1,082		5,891		1,082
Total	$	502	$	1	$	5,891	$	1,082	$	6,393	$	1,083
December 31, 2010
TLGP	$	1,348	$	1	$	—	$	—	$	1,348	$	1

Redemption Terms. The amortized cost and estimated fair value of non-MBS securities by contractual maturity (based on contractual final principal payment) and of PLRMBS as of March 31, 2011, and December 31, 2010, are shown below. Expected maturities of PLRMBS will differ from contractual maturities because borrowers generally have the right to prepay the underlying obligations without prepayment fees.

	March 31, 2011				December 31, 2010
Year of Contractual Maturity	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Available-for-sale securities other than PLRMBS:
Due in 1 year or less	$	593	$	593	$	—	$	—
Due after 1 year through 5 years	1,334		1,334		1,928		1,927
Subtotal	1,927		1,927		1,928		1,927
PLRMBS:
Prime	668		575		—		—
Alt-A, option ARM	352		263		—		—
Alt-A, other	6,070		5,173		—		—
Total PLRMBS	7,090		6,011		—		—
Total	$	9,017	$	7,938	$	1,928	$	1,927

The amortized cost of the TLGP securities, which are classified as available-for-sale, included net premiums of $4 at March 31, 2011, and net premiums of $5 at December 31, 2010. At March 31, 2011, the carrying value of the Bank's PLRMBS classified as available-for-sale included net discounts of $1, credit-related OTTI of $816 (including interest accretion adjustments of $29), non-credit-related OTTI of $1,768, and net unrealized gains of $689.

Interest Rate Payment Terms. Interest rate payment terms for available-for-sale securities at March 31, 2011, and December 31, 2010, are shown in the following table:

10

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	March 31, 2011		December 31, 2010
Amortized cost of available-for-sale securities other than PLRMBS:
Adjustable rate	$	1,927	$	1,928
Subtotal	1,927		1,928
Amortized cost of available-for-sale PLRMBS:
Collateralized mortgage obligations:
Fixed rate	4,124		—
Adjustable rate	2,966		—
Subtotal	7,090		—
Total	$	9,017	$	1,928

Certain MBS classified as fixed rate collateralized mortgage obligations have an initial fixed interest rate that subsequently converts to an adjustable interest rate on a specified date as follows:

	March 31, 2011		December 31, 2010
Collateralized mortgage obligations:
Converts in 1 year or less	$	53	$	—
Converts after 1 year through 5 years	1,158		—
Converts after 5 years through 10 years	388		—
Total	$	1,599	$	—

The Bank does not own PLRMBS that are backed by mortgage loans purchased by another Federal Home Loan Bank (FHLBank) from either (i) members of the Bank or (ii) members of other FHLBanks.

Note 5 — Held-to-Maturity Securities

The Bank classifies the following securities as held-to-maturity because the Bank has the positive intent and ability to hold these securities to maturity:

11

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

March 31, 2011
	Amortized Cost(1)		OTTI Recognized in AOCI(1)			Carrying Value(1)		Gross Unrecognized Holding Gains(2)		Gross Unrecognized Holding Losses(2)			Estimated Fair Value
Interest-bearing deposits	$	5,311	$	—		$	5,311	$	—	$	—		$	5,311
Commercial paper	1,800		—			1,800		—		—			1,800
Housing finance agency bonds	712		—			712		—		(123		)	589
Subtotal	7,823		—			7,823		—		(123		)	7,700
MBS:
Other U.S. obligations – Ginnie Mae	234		—			234		—		—			234
GSEs:
Freddie Mac	2,954		—			2,954		81		(12		)	3,023
Fannie Mae	7,744		—			7,744		215		(13		)	7,946
Subtotal GSEs	10,698		—			10,698		296		(25		)	10,969
PLRMBS:
Prime	3,241		(116		)	3,125		53		(200		)	2,978
Alt-A, option ARM	1,328		(481		)	847		89		(9		)	927
Alt-A, other	3,587		(355		)	3,232		155		(305		)	3,082
Subtotal PLRMBS	8,156		(952		)	7,204		297		(514		)	6,987
Total MBS	19,088		(952		)	18,136		593		(539		)	18,190
Total	$	26,911	$	(952	)	$	25,959	$	593	$	(662	)	$	25,890

December 31, 2010
	Amortized Cost(1)		OTTI Recognized in AOCI(1)			Carrying Value(1)		Gross Unrecognized Holding Gains(2)		Gross Unrecognized Holding Losses(2)			Estimated Fair Value
Interest-bearing deposits	$	6,834	$	—		$	6,834	$	—	$	—		$	6,834
Commercial paper	2,500		—			2,500		—		—			2,500
Housing finance agency bonds	743		—			743		—		(119		)	624
TLGP	301		—			301		—		—			301
Subtotal	10,378		—			10,378		—		(119		)	10,259
MBS:
Other U.S. obligations – Ginnie Mae	33		—			33		—		—			33
GSEs:
Freddie Mac	2,326		—			2,326		92		(15		)	2,403
Fannie Mae	5,922		—			5,922		220		(12		)	6,130
Subtotal GSEs	8,248		—			8,248		312		(27		)	8,533
PLRMBS:
Prime	4,285		(330		)	3,955		153		(238		)	3,870
Alt-A, option ARM	1,751		(653		)	1,098		83		(10		)	1,171
Alt-A, other	10,063		(1,951		)	8,112		694		(458		)	8,348
Subtotal PLRMBS	16,099		(2,934		)	13,165		930		(706		)	13,389
Total MBS	24,380		(2,934		)	21,446		1,242		(733		)	21,955
Total	$	34,758	$	(2,934	)	$	31,824	$	1,242	$	(852	)	$	32,214

(1)    Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous other-than-temporary impairments recognized in earnings (less any cumulative-effect adjustments recognized). The carrying value of held-to-maturity securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

(2)    Gross unrecognized holding gains/(losses) represent the difference between estimated fair value and carrying value, while gross unrealized gains/(losses) represent the difference between estimated fair value and amortized cost.

12

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Securities Transferred. As of March 31, 2011, the Bank transferred PLRMBS with credit-related OTTI during the first quarter of 2011 from its held-to-maturity portfolio to its available-for-sale portfolio. These transfers allow the Bank the option to divest these securities prior to maturity in response to changes in interest rates, changes in prepayment risk, or other factors, while acknowledging its intent to hold these securities for an indefinite period of time. For additional information on the transferred securities, see Note 4 – Available-for-Sale Securities and Note 6 – Other-Than-Temporary Impairment Analysis.

The following tables summarize the held-to-maturity securities with unrealized losses as of March 31, 2011, and December 31, 2010. The unrealized losses are aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position. For OTTI analysis of held-to-maturity securities, see Note 6 – Other-Than-Temporary Impairment Analysis.

March 31, 2011
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Interest-bearing deposits	$	3,311	$	—	$	—	$	—	$	3,311	$	—
Commercial paper	650		—		—		—		650		—
Housing finance agency bonds	—		—		589		123		589		123
Subtotal	3,961		—		589		123		4,550		123
MBS:
Other U.S. obligations – Ginnie Mae	26		—		4		—		30		—
GSEs:
Freddie Mac	786		12		26		—		812		12
Fannie Mae	979		8		87		4		1,066		12
Subtotal GSEs	1,765		20		113		4		1,878		24
PLRMBS(1):
Prime	101		1		2,591		315		2,692		316
Alt-A, option ARM	—		—		927		490		927		490
Alt-A, other	—		—		3,045		661		3,045		661
Subtotal PLRMBS	101		1		6,563		1,466		6,664		1,467
Total MBS	1,892		21		6,680		1,470		8,572		1,491
Total	$	5,853	$	21	$	7,269	$	1,593	$	13,122	$	1,614

13

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

December 31, 2010
	Less Than 12 Months				12 Months or More				Total
	Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
Interest-bearing deposits	$	4,438	$	—	$	—	$	—	$	4,438	$	—
Commercial paper	1,500		—		—		—		1,500		—
Housing finance agency bonds	—		—		624		119		624		119
Subtotal	5,938		—		624		119		6,562		119
MBS:
Other U.S. obligations – Ginnie Mae	20		—		5		—		25		—
GSEs:
Freddie Mac	497		15		27		—		524		15
Fannie Mae	623		8		91		4		714		12
Subtotal GSEs	1,120		23		118		4		1,238		27
PLRMBS(1):
Prime	4		—		3,339		568		3,343		568
Alt-A, option ARM	—		—		1,150		663		1,150		663
Alt-A, other	—		—		8,307		2,409		8,307		2,409
Subtotal PLRMBS	4		—		12,796		3,640		12,800		3,640
Total MBS	1,144		23		12,919		3,644		14,063		3,667
Total	$	7,082	$	23	$	13,543	$	3,763	$	20,625	$	3,786

(1)    Includes securities with gross unrecognized holding losses of $514 and $706 at March 31, 2011, and December 31, 2010, respectively, and securities with non-credit-related OTTI charges of $952 and $2,934 that have been recognized in AOCI at March 31, 2011, and December 31, 2010, respectively.

As indicated in the tables above, as of March 31, 2011, the Bank's investments classified as held-to-maturity had gross unrealized losses totaling $1,614, primarily relating to PLRMBS. The gross unrealized losses associated with the PLRMBS were primarily due to illiquidity in the MBS market, uncertainty about the future condition of the housing and mortgage markets and the economy, and continued deterioration in the credit performance of loan collateral underlying these securities, which caused these assets to be valued at significant discounts to their acquisition cost.

Redemption Terms. The amortized cost, carrying value, and estimated fair value of non-MBS securities by contractual maturity (based on contractual final principal payment) and of MBS as of March 31, 2011, and December 31, 2010, are shown below. Expected maturities of MBS will differ from contractual maturities because borrowers generally have the right to prepay the underlying obligations without prepayment fees.

14

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

March 31, 2011
Year of Contractual Maturity	Amortized Cost(1)		Carrying Value(1)		Estimated Fair Value
Held-to-maturity securities other than MBS:
Due in 1 year or less	$	7,111	$	7,111	$	7,111
Due after 1 year through 5 years	5		5		5
Due after 5 years through 10 years	24		24		22
Due after 10 years	683		683		562
Subtotal	7,823		7,823		7,700
MBS:
Other U.S. obligations – Ginnie Mae	234		234		234
GSEs:
Freddie Mac	2,954		2,954		3,023
Fannie Mae	7,744		7,744		7,946
Subtotal GSEs	10,698		10,698		10,969
PLRMBS:
Prime	3,241		3,125		2,978
Alt-A, option ARM	1,328		847		927
Alt-A, other	3,587		3,232		3,082
Subtotal PLRMBS	8,156		7,204		6,987
Total MBS	19,088		18,136		18,190
Total	$	26,911	$	25,959	$	25,890

December 31, 2010
Year of Contractual Maturity	Amortized Cost(1)		Carrying Value(1)		Estimated Fair Value
Held-to-maturity securities other than MBS:
Due in 1 year or less	$	9,635	$	9,635	$	9,635
Due after 1 year through 5 years	7		7		7
Due after 5 years through 10 years	26		26		23
Due after 10 years	710		710		594
Subtotal	10,378		10,378		10,259
MBS:
Other U.S. obligations – Ginnie Mae	33		33		33
GSEs:
Freddie Mac	2,326		2,326		2,403
Fannie Mae	5,922		5,922		6,130
Subtotal GSEs	8,248		8,248		8,533
PLRMBS:
Prime	4,285		3,955		3,870
Alt-A, option ARM	1,751		1,098		1,171
Alt-A, other	10,063		8,112		8,348
Subtotal PLRMBS	16,099		13,165		13,389
Total MBS	24,380		21,446		21,955
Total	$	34,758	$	31,824	$	32,214

(1)    Amortized cost includes unpaid principal balance, unamortized premiums and discounts, and previous OTTI recognized in earnings (less any cumulative-effect adjustments recognized). The carrying value of held-to-maturity securities represents amortized cost after adjustment for non-credit-related OTTI recognized in AOCI.

15

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

At March 31, 2011, the carrying value of the Bank's MBS classified as held-to-maturity included net premiums of $29, credit-related OTTI of $291 (including interest accretion adjustments of $10), and non-credit-related OTTI of $952. At December 31, 2010, the carrying value of the Bank's MBS classified as held-to-maturity included net premiums of $14, credit-related OTTI of $995 (including interest accretion adjustments of $36), and non-credit-related OTTI of $2,934.

Interest Rate Payment Terms. Interest rate payment terms for held-to-maturity securities at March 31, 2011, and December 31, 2010, are detailed in the following table:

	March 31, 2011		December 31, 2010
Amortized cost of held-to-maturity securities other than MBS:
Fixed rate	$	7,111	$	9,635
Adjustable rate	712		743
Subtotal	7,823		10,378
Amortized cost of held-to-maturity MBS:
Passthrough securities:
Fixed rate	2,283		2,461
Adjustable rate	160		169
Collateralized mortgage obligations:
Fixed rate	9,312		11,097
Adjustable rate	7,333		10,653
Subtotal	19,088		24,380
Total	$	26,911	$	34,758

Certain MBS classified as fixed rate passthrough securities and fixed rate collateralized mortgage obligations have an initial fixed interest rate that subsequently converts to an adjustable interest rate on a specified date as follows:

	March 31, 2011		December 31, 2010
Passthrough securities:
Converts in 1 year or less	$	42	$	36
Converts after 1 year through 5 years	1,356		1,484
Converts after 5 years through 10 years	862		917
Total	$	2,260	$	2,437
Collateralized mortgage obligations:
Converts in 1 year or less	$	722	$	864
Converts after 1 year through 5 years	2,153		3,615
Converts after 5 years through 10 years	137		561
Total	$	3,012	$	5,040

The Bank does not own MBS that are backed by mortgage loans purchased by another FHLBank from either (i) members of the Bank or (ii) members of other FHLBanks.

Note 6 — Other-Than-Temporary Impairment Analysis

On a quarterly basis, the Bank evaluates its individual available-for-sale and held-to-maturity investment securities in an unrealized loss position for OTTI. As part of this evaluation, the Bank considers whether it intends to sell each debt security and whether it is more likely than not that it will be required to sell the security before its anticipated recovery of the amortized cost basis. If either of these conditions is met, the Bank recognizes an OTTI charge to earnings equal to the entire difference between the security's amortized cost basis and its fair value at the balance

16

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

sheet date. For securities in an unrealized loss position that meet neither of these conditions, the Bank considers whether it expects to recover the entire amortized cost basis of the security by comparing its best estimate of the present value of the cash flows expected to be collected from the security with the amortized cost basis of the security. If the Bank's best estimate of the present value of the cash flows expected to be collected is less than the amortized cost basis, the difference is considered the credit loss.

PLRMBS. To assess whether it expects to recover the entire amortized cost basis of its PLRMBS, the Bank performed a cash flow analysis for all of its PLRMBS as of March 31, 2011. In performing the cash flow analysis for each security, the Bank used two third-party models. The first model considers borrower characteristics and the particular attributes of the loans underlying the Bank's securities, in conjunction with assumptions about future changes in home prices and interest rates, to project prepayments, defaults, and loss severities. A significant input to the first model is the forecast of future housing price changes for the relevant states and core-based statistical areas (CBSAs), which are based on an assessment of the individual housing markets. CBSA refers collectively to metropolitan and micropolitan statistical areas as defined by the United States Office of Management and Budget. As currently defined, a CBSA must contain at least one urban area with a population of 10,000 or more people. The Bank's housing price forecast as of March 31, 2011, assumed current-to-trough housing price declines ranging from 0% (for those housing markets that are believed to have reached their trough) to 10% over the 3- to 9-month periods beginning January 1, 2011. Thereafter, home prices were projected to recover using one of five different recovery paths that vary by housing market. Under those recovery paths, home prices were projected to increase 0% to 2.8% in the first year, 0% to 3% in the second year, 1.5% to 4% in the third year, 2% to 5% in the fourth year, 2% to 6% in each of the fifth and sixth years, and 2.3% to 5.6% in each subsequent year. The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, default rates, and loss severities, are then input into a second model that allocates the projected loan level cash flows and losses to the various security classes in each securitization structure in accordance with the structure's prescribed cash flow and loss allocation rules. When the credit enhancement for the senior securities in a securitization is derived from the presence of subordinated securities, losses are generally allocated first to the subordinated securities until their principal balance is reduced to zero. The projected cash flows are based on a number of assumptions and expectations, and the results of these models can vary significantly with changes in assumptions and expectations. The scenario of cash flows determined based on the model approach described above reflects a best-estimate scenario and includes a base case current-to-trough housing price forecast and a base case housing price recovery path.

At each quarter end, the Bank compares the present value of the cash flows expected to be collected on its PLRMBS to the amortized cost basis of the securities to determine whether a credit loss exists. For the Bank's variable rate and hybrid PLRMBS, the Bank uses a forward interest rate curve to project the future estimated cash flows. The Bank then uses the effective interest rate for the security prior to impairment for determining the present value of the future estimated cash flows. For securities previously identified as other-than-temporarily impaired, the Bank updates its estimate of future estimated cash flows on a quarterly basis.

For all the PLRMBS in its available-for-sale and held-to-maturity portfolio, the Bank does not intend to sell any security and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.

For securities determined to be other-than-temporarily impaired as of March 31, 2011 (that is, securities for which the Bank determined that it does not expect to recover the entire amortized cost basis), the following table presents a summary of the significant inputs used in measuring the amount of credit loss recognized in earnings in the first quarter of 2011.

17

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

March 31, 2011
	Significant Inputs for Other-Than-Temporarily Impaired PLRMBS						Current
	Prepayment Rates		Default Rates		Loss Severities		Credit Enhancement
Year of Securitization	Weighted Average %	Range %	Weighted Average %	Range %	Weighted Average %	Range %	Weighted Average %	Range %
Prime
2008	9.7	7.4-10.4	52.2	46.4-57.8	43.8	41.0-47.6	30.4	29.8-31.1
2006	6.8	6.8	34.8	34.8	48.7	48.7	6.8	6.8
2005	7.6	7.6	50.2	50.2	32.4	32.4	15.8	15.8
2004 and earlier	12.7	11.3-13.5	20.8	8.1-25.3	30.3	26.4-31.3	9.1	8.3-11.0
Total Prime	10.2	6.8-13.5	46.4	8.1-57.8	41.2	26.4-48.7	26.0	6.8-31.1
Alt-A, option ARM
2006	6.0	4.8-7.5	81.4	74.5-87.3	57.9	48.7-65.6	36.4	32.8-39.5
2005	8.5	6.5-10.6	65.7	53.1-76.2	45.6	40.0-51.8	23.4	14.8-29.4
Total Alt-A, option ARM	7.3	4.8-10.6	73.1	53.1-87.3	51.4	40.0-65.6	29.6	14.8-39.5
Alt-A, other
2007	8.9	6.5-11.9	55.6	25.8-80.2	50.5	43.4-58.6	17.3	7.9-45.1
2006	9.6	3.2-11.5	48.4	32.8-82.6	50.9	40.4-57.3	21.0	6.6-34.7
2005	10.2	6.6-14.9	35.2	13.9-71.8	46.6	31.8-61.2	13.5	6.1-22.9
2004 and earlier	14.2	10.5-15.1	31.0	27.4-45.9	46.0	44.8-50.7	16.0	14.6-21.6
Total Alt-A, other	9.7	3.2-15.1	44.0	13.9-82.6	48.8	31.8-61.2	16.4	6.1-45.1
Total	9.6	3.2-15.1	46.2	8.1-87.3	48.3	26.4-65.6	18.1	6.1-45.1

Credit enhancement is defined as the subordinated tranches and over-collateralization, if any, in a security structure that will generally absorb losses before the Bank will experience a loss on the security, expressed as a percentage of the underlying collateral balance. The calculated averages represent the dollar-weighted averages of all the PLRMBS investments in each category shown. The classification (prime or Alt-A) is based on the model used to run the estimated cash flows for the CUSIP, which may not necessarily be the same as the classification at the time of origination.

The Bank recognized credit-related OTTI charges of $109 and $60 in “Other Income/(Loss)” for the first quarter of 2011 and 2010, respectively, and recognized non-credit-related OTTI charges of $21 and $132 in “Other comprehensive income/(loss)” for the first quarter of 2011 and 2010, respectively.

For each security classified as held-to-maturity, the estimated non-credit-related OTTI is accreted prospectively, based on the amount and timing of future estimated cash flows, over the remaining life of the security as an increase in the carrying value of the security (with no effect on earnings unless the security is subsequently sold or there are additional decreases in the cash flows expected to be collected). The Bank accreted $193 and $215 from AOCI, increasing the carrying value of the respective PLRMBS classified as held-to-maturity for the first quarter of 2011 and 2010, respectively. The Bank does not intend to sell these securities and it is not more likely than not that the Bank will be required to sell these securities before its anticipated recovery of the remaining amortized cost basis.

For certain other-than-temporarily impaired securities that had previously been impaired and subsequently incurred additional OTTI related to credit loss, the additional credit-related OTTI, up to the amount in AOCI, was reclassified out of non-credit-related OTTI in AOCI and charged to earnings. This amount was $109 and $59 for the first quarter of 2011 and 2010, respectively.

The following table presents the credit-related OTTI, which is recognized in earnings, for the three months ended March 31, 2011 and 2010.

18

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	Three Months Ended
	March 31, 2011		March 31, 2010
Balance, beginning of the period	$	952	$	628
Charges on securities for which OTTI was not previously recognized	—		1
Additional charges on securities for which OTTI was previously recognized(1)	109		59
Balance, end of the period	$	1,061	$	688

(1)    For the three months ended March 31, 2011, “securities for which OTTI was previously recognized” represents all securities that were also other-than-temporarily impaired prior to January 1, 2011. For the three months ended March 31, 2010, “securities for which OTTI was previously recognized” represents all securities that were also previously other-than-temporarily impaired prior to January 1, 2010.

Changes in circumstances may cause the Bank to change its intent to hold a certain security to maturity without calling into question its intent to hold other debt securities to maturity in the future. The sale or transfer of a held-to-maturity security because of certain changes in circumstances, such as evidence of significant deterioration in the issuers' creditworthiness, is not considered to be inconsistent with its original classification. In addition, other events that are isolated, non-recurring, and unusual for the Bank that could not have been reasonably anticipated may cause the Bank to sell or transfer a held-to-maturity security without necessarily calling into question its intent to hold other debt securities to maturity.

As of March 31, 2011, the Bank elected to transfer all its PLRMBS that incurred a credit-related OTTI charge during the first quarter of 2011 from the Bank's held-to-maturity portfolio to its available-for-sale portfolio. The Bank recognized an OTTI credit loss on these held-to-maturity PLRMBS, which the Bank believes is evidence of a significant decline in the issuers' creditworthiness. The decline in the issuers' creditworthiness is the basis for the transfers to its available-for-sale portfolio. These transfers allow the Bank the option to decide to sell these securities prior to maturity in response to changes in interest rates, changes in prepayment risk, or other factors, while recognizing the Bank's intent to hold these securities for an indefinite period of time. The Bank has no current plans to sell its other-than-temporarily impaired securities nor is it under any requirement to sell these securities.

The following table summarizes the PLRMBS transferred from the Bank's held-to-maturity portfolio to its available-for-sale portfolio during the first quarter of 2011. The amounts below represent the values as of March 31, 2011.

March 31, 2011
	Amortized Cost(1)		OTTI Recognized in AOCI(1)			Gross Unrecognized Holding Gains(1)		Gross Unrecognized Holding Losses(1)		Estimated Fair Value
PLRMBS:
Prime	$	668	$	(192	)	$	99	$	—	$	575
Alt-A, option ARM	352		(105		)	16		—		263
Alt-A, other	6,070		(1,471		)	574		—		5,173
Total	$	7,090	$	(1,768	)	$	689	$	—	$	6,011

(1)    Gross unrecognized holding gains/(losses) represent the difference between estimated fair value and carrying value, while gross unrealized gains/(losses) represent the difference between estimated fair value and amortized cost.

The following tables present the Bank's other-than-temporarily impaired PLRMBS that incurred an OTTI charge during the three months ended March 31, 2011 and 2010, by loan collateral type:

19

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

March 31, 2011
	Available-for-Sale Securities						Held-to-Maturity Securities
	Unpaid Principal Balance		Amortized Cost		Estimated Fair Value		Unpaid Principal Balance		Amortized Cost		Carrying Value		Estimated Fair Value
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	$	740	$	668	$	575	$	—	$	—	$	—	$	—
Alt-A, option ARM	533		352		263		—		—		—		—
Alt-A, other	6,633		6,070		5,173		—		—		—		—
Total	$	7,906	$	7,090	$	6,011	$	—	$	—	$	—	$	—
March 31, 2010
	Available-for-Sale Securities						Held-to-Maturity Securities
	Unpaid Principal Balance		Amortized Cost		Estimated Fair Value		Unpaid Principal Balance		Amortized Cost		Carrying Value		Estimated Fair Value
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	$	—	$	—	$	—	$	719	$	696	$	453	$	487
Alt-A, option ARM	—		—		—		1,536		1,402		756		791
Alt-A, other	—		—		—		5,212		4,899		3,357		3,652
Total	$	—	$	—	$	—	$	7,467	$	6,997	$	4,566	$	4,930

The following tables present the Bank's other-than-temporarily impaired PLRMBS that incurred an OTTI charge anytime during the life of the securities at March 31, 2011, and December 31, 2010, by loan collateral type:

March 31, 2011
	Available-for-Sale Securities						Held-to-Maturity Securities
	Unpaid Principal Balance		Amortized Cost		Estimated Fair Value		Unpaid Principal Balance		Amortized Cost		Carrying Value		Estimated Fair Value
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	$	740	$	668	$	575	$	509	$	467	$	351	$	402
Alt-A, option ARM	533		352		263		1,466		1,302		820		908
Alt-A, other	6,633		6,070		5,173		1,497		1,420		1,065		1,219
Total	$	7,906	$	7,090	$	6,011	$	3,472	$	3,189	$	2,236	$	2,529
December 31, 2010
	Available-for-Sale Securities						Held-to-Maturity Securities
	Unpaid Principal Balance		Amortized Cost		Estimated Fair Value		Unpaid Principal Balance		Amortized Cost		Carrying Value		Estimated Fair Value
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	$	—	$	—	$	—	$	1,263	$	1,159	$	829	$	978
Alt-A, option ARM	—		—		—		2,047		1,723		1,070		1,154
Alt-A, other	—		—		—		7,900		7,338		5,388		6,079
Total	$	—	$	—	$	—	$	11,210	$	10,220	$	7,287	$	8,211

20

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The following table presents the Bank's credit- and non-credit-related OTTI on its other-than-temporarily impaired PLRMBS during the three months ended March 31, 2011 and 2010:

	Three Months Ended
	March 31, 2011							March 31, 2010
	Credit- Related OTTI		Non-Credit- Related OTTI			Total  OTTI		Credit- Related OTTI		Non-Credit- Related OTTI			Total OTTI
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	$	11	$	(2	)	$	9	$	6	$	53		$	59
Alt-A, option ARM	24		(18		)	6		15		(14		)	1
Alt-A, other	74		(1		)	73		39		93			132
Total	$	109	$	(21	)	$	88	$	60	$	132		$	192

For the Bank's PLRMBS that were not other-than-temporarily impaired as of March 31, 2011, the Bank has experienced net unrealized losses and a decrease in fair value primarily because of illiquidity in the MBS market, uncertainty about the future condition of the housing and mortgage markets and the economy, and continued deterioration in the credit performance of loan collateral underlying these securities, which caused these assets to be valued at significant discounts to their acquisition cost. The Bank does not intend to sell these securities, it is not more likely than not that the Bank will be required to sell these securities before its anticipated recovery of the remaining amortized cost basis, and the Bank expects to recover the entire amortized cost basis of these securities. As a result, the Bank determined that, as of March 31, 2011, the gross unrealized losses on these remaining PLRMBS are temporary. Thirty seven percent of the PLRMBS, based on amortized cost, that were not other-than-temporarily impaired were rated investment grade (23% were rated AAA), and the remaining 63% were rated below investment grade. These securities were included in the securities that the Bank reviewed and analyzed for OTTI as discussed above, and the analyses performed indicated that these securities were not other-than-temporarily impaired. The credit ratings used by the Bank are based on the lowest of Moody's Investors Service (Moody's), Standard & Poor's Ratings Services (Standard & Poor's), or comparable Fitch ratings.

All Other Available-for-Sale and Held-to-Maturity Investments. The Bank determined that, as of March 31, 2011, the immaterial gross unrealized losses on its interest-bearing deposits and commercial paper were temporary because the gross unrealized losses were caused by movements in interest rates and not by the deterioration of the issuers' creditworthiness. The interest-bearing deposits and commercial paper were all with issuers that had credit ratings of at least A at March 31, 2011, and all of the securities matured prior to the date of this report. As a result, the Bank has recovered the entire amortized cost basis of these securities.

As of March 31, 2011, the Bank's investments in housing finance agency bonds, which were issued by the California Housing Finance Agency (CalHFA), had gross unrealized losses totaling $123. These gross unrealized losses were mainly due to an illiquid market and credit concerns regarding the underlying mortgage pool, causing these investments to be valued at a discount to their acquisition cost. In addition, the Bank independently modeled cash flows for the underlying collateral, using assumptions for default rates and loss severity that the Bank deemed reasonable, and concluded that the available credit support within the CalHFA structure more than offset the projected losses on the underlying collateral. The Bank determined that, as of March 31, 2011, all of the gross unrealized losses on these bonds are temporary because the underlying collateral and credit enhancements were sufficient to protect the Bank from losses based on current expectations and because CalHFA had a credit rating of A at March 31, 2011 (based on the lower of Moody's or Standard & Poor's ratings). As a result, the Bank expects to recover the entire amortized cost basis of these securities.

The Bank also invests in corporate debentures issued under the TLGP, which are guaranteed by the FDIC and backed by the full faith and credit of the U.S. government. The Bank expects to recover the entire amortized cost

21

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

basis of these securities because it determined that the strength of the guarantees and the direct support from the U.S. government are sufficient to protect the Bank from losses based on current expectations. As a result, the Bank determined that as of March 31, 2011, all the gross unrealized losses on its TLGP investments are temporary.

For its agency MBS, the Bank expects to recover the entire amortized cost basis of these securities because it determined that the strength of the issuers' guarantees through direct obligations or support from the U.S. government is sufficient to protect the Bank from losses based on current expectations. As a result, the Bank determined that, as of March 31, 2011, all of the gross unrealized losses on its agency MBS are temporary.

Note 7 — Advances

The Bank offers a wide range of fixed and adjustable rate advance products with different maturities, interest rates, payment characteristics, and optionality. Fixed rate advances generally have maturities ranging from one day to 30 years. Adjustable rate advances generally have maturities ranging from less than 30 days to 10 years, where the interest rates reset periodically at a fixed spread to the London Interbank Offered Rate (LIBOR) or other specified index.

Redemption Terms. The Bank had advances outstanding, excluding overdrawn demand deposit accounts, at interest rates ranging from 0.06% to 8.57% at March 31, 2011, and 0.03% to 8.57% at December 31, 2010, as summarized below.

	March 31, 2011				December 31, 2010
Contractual Maturity	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate
Within 1 year	$	53,886	0.77	%	$	52,051	0.97	%
After 1 year through 2 years	8,697		1.88		11,687		1.92
After 2 years through 3 years	14,316		1.29		17,038		1.17
After 3 years through 4 years	2,969		2.70		2,310		2.81
After 4 years through 5 years	4,973		2.04		5,115		2.14
After 5 years	6,649		1.87		6,708		1.92
Total par amount	91,490		1.17	%	94,909		1.30	%
Valuation adjustments for hedging activities	272				363
Valuation adjustments under fair value option	243				327
Total	$	92,005			$	95,599

Many of the Bank's advances are prepayable at the member's option. However, when advances are prepaid, the member is generally charged a prepayment fee intended to make the Bank financially indifferent to the prepayment. In addition, for certain advances with partial prepayment symmetry, the Bank may charge the member a prepayment fee or pay the member a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. The Bank had advances with partial prepayment symmetry outstanding totaling $7,111 at March 31, 2011, and $7,335 at December 31, 2010. Some advances may be repaid on pertinent call dates without prepayment fees (callable advances). The Bank had callable advances outstanding totaling $415 at March 31, 2011, and $283 at December 31, 2010.

The Bank's advances at March 31, 2011, and December 31, 2010, included $2,175 and $2,437, respectively, of putable advances. At the Bank's discretion, the Bank may terminate these advances on predetermined exercise dates, and offer, subject to certain conditions, replacement funding at prevailing market rates. The Bank would typically exercise such termination rights when interest rates increase.

22

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The following table summarizes advances at March 31, 2011, and December 31, 2010, by the earlier of the year of contractual maturity or next call date for callable advances and by the earlier of the year of contractual maturity or next put date for putable advances.

	Earlier of Contractual Maturity or Next Call Date				Earlier of Contractual Maturity or Next Put Date
	March 31, 2011		December 31, 2010		March 31, 2011		December 31, 2010
Within 1 year	$	54,297	$	52,328	$	55,591	$	54,145
After 1 year through 2 years	8,692		11,692		8,391		11,053
After 2 years through 3 years	14,297		17,035		14,048		16,828
After 3 years through 4 years	2,951		2,300		2,782		2,160
After 4 years through 5 years	4,915		5,084		4,770		4,812
After 5 years	6,338		6,470		5,908		5,911
Total par amount	$	91,490	$	94,909	$	91,490	$	94,909

Credit and Concentration Risk. The following tables present the concentration in advances to the top five borrowers and their affiliates at March 31, 2011 and 2010. The tables also present the interest income from these advances before the impact of interest rate exchange agreements associated with these advances for the first quarter of 2011 and 2010.

	March 31, 2011				Three Months Ended March 31, 2011
Name of Borrower	Advances Outstanding(1)		Percentage of Total Advances Outstanding		Interest Income from Advances(4)		Percentage of Total Interest Income from Advances
Citibank, N.A.(2)	$	26,692	29	%	$	18	6	%
JPMorgan Chase & Co.:
JPMorgan Bank & Trust Company, National Association	24,200		26		31		11
JPMorgan Chase Bank, National Association(3)	1,571		2		9		3
Subtotal JPMorgan Chase & Co.	25,771		28		40		14
Bank of America California, N.A.	8,850		10		25		9
OneWest Bank, FSB	5,499		6		36		13
Union Bank, N.A.	4,750		5		15		6
Subtotal	71,562		78		134		48
Others	19,928		22		145		52
Total	$	91,490	100	%	$	279	100	%

23

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	March 31, 2010				Three Months Ended March 31, 2010
Name of Borrower	Advances Outstanding(1)		Percentage of Total Advances Outstanding		Interest Income from Advances(4)		Percentage of Total Interest Income from Advances
Citibank, N.A.	$	34,159	31	%	$	22	4	%
JPMorgan Chase & Co.:
JPMorgan Chase Bank, National Association(3)	13,615		12		137		27
JPMorgan Bank & Trust Company, National Association	5,500		5		2		—
Subtotal JPMorgan Chase & Co.	19,115		17		139		27
Bank of America Corporation:
Bank of America California, N.A.	13,404		12		29		6
Bank of America, NA	130		—		—		—
Subtotal Bank of America Corporation	13,534		12		29		6
Wells Fargo Bank, N.A.(3)	11,173		10		31		6
OneWest Bank, FSB	6,427		6		57		12
Subtotal	84,408		76		278		55
Others	26,646		24		228		45
Total	$	111,054	100	%	$	506	100	%

(1)    Borrower advance amounts and total advance amounts are at par value, and total advance amounts will not agree to carrying value amounts shown in the Statements of Condition. The differences between the par and carrying value amounts primarily relate to unrealized gains or losses associated with hedged advances resulting from valuation adjustments related to hedging activities and the fair value option.

(2)    On April 4, 2011, Citibank (South Dakota), National Association (Citibank South Dakota) filed a Form 8-K with the Securities and Exchange Commission and reported that on March 29, 2011, Citibank South Dakota entered into a Plan of Merger (Merger Agreement) with its affiliate Citibank, N.A., a national banking association (Citibank, N.A.). Citibank, N.A., is a member of the Bank and one of its largest borrowers. According to the Form 8‑K, subject to the terms of the Merger Agreement and stockholder and regulatory approvals, Citibank South Dakota will be merged into Citibank, N.A. In accordance with the Merger Agreement, the main office of Citibank, N.A., will be in Sioux Falls, South Dakota. In that case, Citibank, N.A., would no longer be eligible for membership in the Bank and would no longer be able to take out new advances from the Bank.

(3)    Nonmember institutions.

(4)    Interest income amounts exclude the interest effect of interest rate exchange agreements with derivatives counterparties; as a result, the total interest income amounts will not agree to the Statements of Income. The amount of interest income from advances can vary depending on the amount outstanding, terms to maturity, interest rates, and repricing characteristics.

The Bank held a security interest in collateral from each of the top five advances borrowers and their affiliates sufficient to support their respective advances outstanding, and the Bank does not expect to incur any credit losses on these advances. As of March 31, 2011, two of the advances borrowers and their affiliates (Citibank, N.A., and JPMorgan Chase & Co.) each owned more than 10% of the Bank's outstanding capital stock, including mandatorily redeemable capital stock.

For information related to the Bank's credit risk on advances and allowance methodology for credit losses, see

Note 9 – Allowance for Credit Losses.

Interest Rate Payment Terms. Interest rate payment terms for advances at March 31, 2011, and December 31, 2010, are detailed below:

24

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	March 31, 2011		December 31, 2010
Par amount of advances:
Fixed rate:
Due within 1 year	$	19,449	$	19,800
Due after 1 year	19,537		24,191
Total fixed rate	38,986		43,991
Adjustable rate
Due within 1 year	34,437		32,251
Due after 1 year	18,067		18,667
Total adjustable rate	52,504		50,918
Total par amount	$	91,490	$	94,909

At March 31, 2011, and December 31, 2010, 70.7% and 71.0% of the fixed rate advances were swapped to an adjustable rate, and 2.5% and 2.6% of the adjustable rate advances were swapped to a different adjustable rate index.

Prepayment Fees, Net. The Bank charges borrowers prepayment fees or pays borrowers prepayment credits when the principal on certain advances is paid prior to original maturity. The Bank records prepayment fees net of any associated fair value adjustments related to prepaid advances that were hedged. The net amount of prepayment fees is reflected as interest income in the Statements of Income, as follows:

	Three Months Ended
	March 31, 2011			March 31, 2010
Prepayment fees received	$	33		$	19
Fair value adjustments	(27		)	(8		)
Net	$	6		$	11
Advance principal prepaid	$	675		$	6,404

Note 8 — Mortgage Loans Held for Portfolio

Under the Mortgage Partnership Finance^® (MPF^®) Program, the Bank purchased conventional conforming fixed rate residential mortgage loans directly from its participating members from May 2002 through October 2006. (“Mortgage Partnership Finance” and “MPF” are registered trademarks of the Federal Home Loan Bank of Chicago.) The mortgage loans are held-for-portfolio loans. Participating members originated or purchased the mortgage loans, credit-enhanced them and sold them to the Bank, and generally retained the servicing of the loans.

The following table presents information as of March 31, 2011, and December 31, 2010, on mortgage loans, all of which are secured by one- to four-unit residential properties and single-unit second homes.

	March 31, 2011			December 31, 2010
Fixed rate medium-term mortgage loans	$	651		$	706
Fixed rate long-term mortgage loans	1,573			1,694
Subtotal	2,224			2,400
Net unamortized discounts	(16		)	(16		)
Mortgage loans held for portfolio	2,208			2,384
Less: Allowance for credit losses	(3		)	(3		)
Total mortgage loans held for portfolio, net	$	2,205		$	2,381

Medium-term loans have original contractual terms of 15 years or less, and long-term loans have contractual terms

25

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

of more than 15 years.

The participating member and the Bank share the risk of credit losses on conventional MPF loan products by structuring potential losses on conventional MPF loans into layers with respect to each master commitment. After any primary mortgage insurance, the Bank is obligated to incur the first layer or portion of credit losses not absorbed by the borrower's equity. Under the MPF Program, the participating member's credit enhancement protection consists of the credit enhancement amount, which may be a direct obligation of the participating member or may be a supplemental mortgage insurance policy paid for by the participating member, and may include a contingent performance-based credit enhancement fee payable to the participating member. The participating member is required to pledge collateral to secure any portion of its credit enhancement amount that is a direct obligation.

For taking on the credit enhancement obligation, the Bank pays the participating member or any successor a credit enhancement fee, which is calculated on the remaining unpaid principal balance of the mortgage loans. The Bank records credit enhancement fees as a reduction to interest income. In the first quarter of 2011, the credit enhancement fees were insignificant. In the first quarter of 2010, the Bank reduced net interest income for credit enhancement fees totaling $1.

Concentration Risk. The Bank had the following concentration in MPF loans with institutions whose outstanding total of mortgage loans sold to the Bank represented 10% or more of the Bank's total outstanding mortgage loans at March 31, 2011, and December 31, 2010.

March 31, 2011
Name of Institution	Mortgage Loan Balances Outstanding		Percentage of  Total Mortgage Loan Balances Outstanding		Number of Mortgage Loans Outstanding	Percentage of Total Number of Mortgage  Loans Outstanding
JPMorgan Chase Bank, National Association	$	1,750	79	%	14,666	72	%
OneWest Bank, FSB	292		13		4,037	20
Subtotal	2,042		92		18,703	92
Others	182		8		1,636	8
Total	$	2,224	100	%	20,339	100	%
December 31, 2010
Name of Institution	Mortgage Loan Balances Outstanding		Percentage of  Total Mortgage Loan Balances Outstanding		Number of Mortgage Loans Outstanding	Percentage of Total Number of Mortgage  Loans Outstanding
JPMorgan Chase Bank, National Association	$	1,887	79	%	15,560	72	%
OneWest Bank, FSB	317		13		4,229	20
Subtotal	2,204		92		19,789	92
Others	196		8		1,739	8
Total	$	2,400	100	%	21,528	100	%

For information related to the Bank's credit risk on mortgage loans and allowance methodology for credit losses, see Note 9 – Allowance for Credit Losses.

Note 9 — Allowance for Credit Losses

The Bank has established an allowance methodology for each of its portfolio segments: credit products, mortgage loans held for portfolio, securities purchased under agreements to resell, and Federal funds sold.

26

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Credit Products. Following the requirements of the Federal Home Loan Bank Act of 1932, as amended (FHLBank Act), the Bank obtains sufficient collateral for credit products to protect the Bank from credit losses. Under the FHLBank Act, collateral eligible to secure credit products includes certain investment securities, residential mortgage loans, cash or deposits with the Bank, and other eligible real estate-related assets. The Bank may also accept secured small business, small farm, and small agribusiness loans, and securities representing a whole interest in such secured loans, as collateral from members that are community financial institutions. The Bank evaluates the creditworthiness of its members and nonmember borrowers on an ongoing basis. For more information on security terms, see “Item 8. Financial Statements and Supplementary Data – Note 10 – Allowance for Credit Losses” in the Bank's 2010 Form 10-K.

The Bank classifies as impaired any advance with respect to which the Bank believes it is probable that all principal and interest due will not be collected according to its contractual terms. Impaired advances are valued using the present value of expected future cash flows discounted at the advance's effective interest rate, the advance's observable market price or, if collateral-dependent, the fair value of the advance's underlying collateral. When an advance is classified as impaired, the accrual of interest is discontinued and unpaid accrued interest is reversed. Advances do not return to accrual status until they are brought current with respect to both principal and interest and until the Bank believes future principal payments are no longer in doubt. No advances were classified as impaired during the periods presented.

The Bank manages its credit exposure to credit products through an integrated approach that generally provides for a credit limit to be established for each borrower, includes an ongoing review of each borrower's financial condition, and is coupled with conservative collateral and lending policies to limit risk of loss while taking into account borrowers' needs for a reliable source of funding. At March 31, 2011, and December 31, 2010, none of the Bank's credit products were past due, on nonaccrual status, or considered impaired. There were no troubled debt restructurings related to credit products during the first quarter of 2011 and during 2010.

The Bank has policies and procedures in place to manage the credit risk of advances. Based on the collateral pledged as security for advances, the Bank's credit analyses of members' financial condition, and the Bank's credit extension and collateral policies, the Bank expects to collect all amounts due according to the contractual terms of the advances. Therefore, no allowance for losses on advances was deemed necessary by the Bank. The Bank has never experienced any credit losses on advances.

Four member institutions were placed into receivership during the first quarter of 2011. One institution had no advances outstanding at the time it was placed into receivership. The advances outstanding to the remaining three institutions were assumed by other institutions, and no losses were incurred by the Bank. Bank capital stock held by one of the institutions totaling $2 was classified as mandatorily redeemable capital stock (a liability). The capital stock of the other three institutions was transferred to other member institutions.

From April 1, 2011, to April 29, 2011, one member institution was placed into receivership.The advances outstanding to this institution was assumed by another member institution, and no losses were incurred by the Bank.The Bank capital stock held by this institution was transferred to another member institution.

Mortgage Loans Held for Portfolio. A mortgage loan is considered to be impaired when it is reported 90 days or more past due (nonaccrual) or when it is probable, based on current information and events, that the Bank will be unable to collect all principal and interest amounts due according to the contractual terms of the mortgage loan agreement.

Loans that are on nonaccrual status and that are considered collateral-dependent are measured for impairment based on the fair value of the underlying property less estimated selling costs. Loans are considered collateral-dependent if repayment is expected to be provided solely by the sale of the underlying property, that is, there is no other available and reliable source of repayment. Collateral-dependent loans are impaired if the fair value of the underlying collateral is insufficient to recover the unpaid principal balance on the loan. Interest income on impaired

27

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

loans is recognized in the same manner as nonaccrual loans noted below.

The Bank places a mortgage loan on nonaccrual status when the collection of the contractual principal or interest from the participating institution is reported 90 days or more past due. When a mortgage loan is placed on nonaccrual status, accrued but uncollected interest is reversed against interest income. The Bank records cash payments received on nonaccrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful.

The following table presents information on delinquent mortgage loans as of March 31, 2011, and December 31, 2010.

	March 31, 2011			December 31, 2010
	Recorded Investment (1)			Recorded Investment (1)
30 – 59 days delinquent	$	24		$	27
60 – 89 days delinquent	9			8
90 days or more delinquent	32			29
Total past due	65			64
Total current loans	2,153			2,330
Total mortgage loans	$	2,218		$	2,394
In process of foreclosure, included above(2)	$	19		$	18
Nonaccrual loans	$	32		$	30
Loans past due 90 days or more and still accruing interest	$	—		$	—
Serious delinquencies(3) as a percentage of total mortgage loans outstanding	1.45		%	1.23		%

(1)    The recorded investment in a loan is the unpaid principal balance of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, and direct write-downs. The recorded investment is not net of any valuation allowance.

(2)    Includes loans for which the servicer has reported a decision to foreclose or to pursue a similar alternative, such as deed-in-lieu. Loans in process of foreclosure are included in past due or current loans depending on their delinquency status.

(3)    Represents loans that are 90 days or more past due or in the process of foreclosure.

The Bank's average recorded investment in impaired loans totaled $30 and $24 for the first quarter of 2011 and 2010, respectively. The Bank did not recognize any interest income for impaired loans in the first quarter of 2011 and 2010. In addition, an insignificant amount of the Bank's MPF loans were classified as troubled debt restructurings at March 31, 2011.

The allowance for credit losses on the mortgage loan portfolio was as follows:

	Three Months Ended
	March 31, 2011			March 31, 2010
Balance, beginning of the period	$	3.3		$	2.0
Chargeoffs – transferred to real estate owned (REO)	(0.4		)	(0.4		)
Provision for/(recovery of) credit losses	0.3			0.4
Balance, end of the period	$	3.2		$	2.0
Ratio of net charge-offs during the period to average loans outstanding during the period	0.02		%	0.01		%
Ending balance, individually evaluated for impairment(1)	$	—
Ending balance, collectively evaluated for impairment	$	3.2
Recorded investment, end of the period(2)	$	2,218.0
Individually evaluated for impairment	$	0.1
Collectively evaluated for impairment	$	2,217.9

28

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

(1)    A margin for imprecision (a factor added to the allowance for loan losses that recognizes the imprecise nature of the measurement process) is not used when determining the estimated credit losses on specifically identified mortgage loans.

(2)     Excludes government-guaranteed or government-insured loans.

The Bank calculates its estimated allowance for credit losses on mortgage loans acquired under its two MPF products, Original MPF and MPF Plus, as described below.

Allowance for Credit Losses on Original MPF Loans – The Bank evaluates the allowance for credit losses on Original MPF mortgage loans based on two components. The first component applies to each individual loan that is specifically identified as impaired. The Bank evaluates the exposure on these loans in excess of the first three layers of loss protection (the liquidation value of the real property securing the loan, any primary mortgage insurance, and available credit enhancements) and records a provision for credit losses on the Original MPF loans. The Bank established an allowance for credit losses for this component of the allowance for credit losses on Original MPF loans totaling $0.3 as of March 31, 2011, and $0.3 as of December 31, 2010.

The second component applies to loans that are not specifically identified as impaired and is based on the Bank's estimate of probable credit losses on those loans as of the financial statement date. The Bank evaluates the credit loss exposure on a loan pool basis considering various observable data, such as delinquency statistics, past performance, current performance, loan portfolio characteristics, collateral valuations, industry data, and prevailing economic conditions. The availability and collectability of credit enhancements from institutions or from mortgage insurers under the terms of each Master Commitment are also considered. The Bank established an allowance for credit losses for this component of the allowance for credit losses on Original MPF loans totaling $0.2 as of March 31, 2011, and $0.1 as of December 31, 2010.

Allowance for Credit Losses on MPF Plus Loans – The Bank evaluates the allowance for credit losses on MPF Plus loans based on two components. The first component applies to each individual loan that is specifically identified as impaired. The Bank evaluates the exposure on these loans in excess of the first and second layers of loss protection (the liquidation value of the real property securing the loan and any primary mortgage insurance) to determine whether the Bank's potential credit loss exposure is in excess of the accrued performance-based credit enhancement fee and any supplemental mortgage insurance. If it is, the Bank records an allowance for credit losses on MPF Plus loans. The Bank established an allowance for credit losses for this component of the allowance for credit losses on MPF Plus loans totaling $2.3 as of March 31, 2011, and $2.2 as of December 31, 2010.

The second component applies to loans that are not specifically identified as impaired and is based on the Bank's estimate of probable credit losses on those loans as of the financial statement date. The Bank evaluates the credit loss exposure on a loan pool basis and considers various observable data, such as delinquency statistics, past performance, current performance, loan portfolio characteristics, collateral valuations, industry data, and prevailing economic conditions. The availability and collectability of credit enhancements from institutions or from mortgage insurers under the terms of each Master Commitment are also considered. The Bank established an allowance for credit losses for this component of the allowance for credit losses on MPF Plus loans totaling $0.4 as of March 31, 2011, and $0.7 as of December 31, 2010.

Term Securities Purchased Under Agreements to Resell. The Bank did not have any securities purchased under agreements to resell at March 31, 2011, and December 31, 2010.

Term Federal Funds Sold. The Bank invests in Federal funds sold with highly rated counterparties, and these investments are only evaluated for purposes of an allowance for credit losses if the investment is not paid when due. All investments in Federal funds sold as of March 31, 2011, and December 31, 2010, were repaid according to the contractual terms.

Note 10 — Deposits

The Bank maintains demand deposit accounts that are directly related to the extension of credit to members and

29

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

offers short-term deposit programs to members and qualifying nonmembers. In addition, a member that services mortgage loans may deposit in the Bank funds collected in connection with the mortgage loans, pending disbursement of these funds to the owners of the mortgage loans. The Bank classifies these types of deposits as non-interest-bearing deposits.

Deposits as of March 31, 2011, and December 31, 2010, were as follows:

	March 31, 2011		December 31, 2010
Interest-bearing deposits:
Demand and overnight	$	126	$	110
Term	10		16
Other	1		2
Total interest-bearing deposits	137		128
Non-interest-bearing deposits	2		6
Total	$	139	$	134

Interest Rate Payment Terms. Deposits classified as demand, overnight, and other, pay interest based on a daily interest rate. Term deposits pay interest based on a fixed rate determined at the issuance of the deposit. Interest rate payment terms for deposits at March 31, 2011, and December 31, 2010, are detailed in the following table:

	March 31, 2011				December 31, 2010
	Amount Outstanding		Weighted Average Interest Rate		Amount Outstanding		Weighted Average Interest Rate
Interest-bearing deposits:
Fixed rate	$	10	0.05	%	$	16	0.06	%
Adjustable rate	127		0.01		112		0.01
Total interest-bearing deposits	137		0.01		128		0.02
Non-interest-bearing deposits	2		—		6		—
Total	$	139	0.01	%	$	134	0.02	%

The aggregate amount of time deposits with a denomination of $0.1 or more was $10 at March 31, 2011, and $16 at December 31, 2010. These time deposits were scheduled to mature within three months.

Note 11 — Consolidated Obligations

Consolidated obligations, consisting of consolidated obligation bonds and discount notes, are jointly issued by the FHLBanks through the Office of Finance, which serves as the FHLBanks' agent. As provided by the FHLBank Act or by regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. For a discussion of the joint and several liability regulation, see “Item 8. Financial Statements and Supplementary Data – Note 20 – Commitments and Contingencies” in the Bank's 2010 Form 10-K. In connection with each debt issuance, each FHLBank specifies the type, term, and amount of debt it requests to have issued on its behalf. The Office of Finance tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks and records as a liability its specific portion of the consolidated obligations issued and is the primary obligor for that portion of the consolidated obligations issued. The Federal Housing Finance Agency (Finance Agency), the successor agency to the Federal Housing Finance Board, and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office of Finance.

Redemption Terms. The following is a summary of the Bank's participation in consolidated obligation bonds at March 31, 2011, and December 31, 2010.

30

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	March 31, 2011					December 31, 2010
Contractual Maturity	Amount Outstanding			Weighted Average Interest Rate		Amount Outstanding			Weighted Average Interest Rate
Within 1 year	$	67,119		1.27	%	$	68,636		1.53	%
After 1 year through 2 years	13,324			1.55		18,154			0.99
After 2 years through 3 years	13,007			3.23		15,557			3.06
After 3 years through 4 years	2,169			2.66		2,228			2.69
After 4 years through 5 years	7,648			2.02		5,913			1.92
After 5 years	10,954			3.82		9,100			3.96
Index amortizing notes	5			4.61		5			4.61
Total par amount	114,226			1.85	%	119,593			1.87	%
Net unamortized premiums/(discounts)	51					10
Valuation adjustments for hedging activities	1,290					1,627
Fair value option valuation adjustments	(103		)			(110		)
Total	$	115,464				$	121,120

The Bank's participation in consolidated obligation bonds outstanding includes callable bonds of $16,363 at March 31, 2011, and $17,617 at December 31, 2010. Contemporaneous with the issuance of a callable bond for which the Bank is the primary obligor, the Bank routinely enters into an interest rate swap (in which the Bank pays a variable rate and receives a fixed rate) with a call feature that mirrors the call option embedded in the bond (a sold callable swap). The Bank had notional amounts of interest rate exchange agreements hedging callable bonds of $13,233 at March 31, 2011, and $13,853 at December 31, 2010. The combined sold callable swap and callable bond enable the Bank to meet its funding needs at costs not otherwise directly attainable solely through the issuance of non-callable debt, while effectively converting the Bank's net payment to an adjustable rate.

The Bank's participation in consolidated obligation bonds was as follows:

	March 31, 2011		December 31, 2010
Par amount of consolidated obligation bonds:
Non-callable	$	97,863	$	101,976
Callable	16,363		17,617
Total par amount	$	114,226	$	119,593

The following is a summary of the Bank's participation in consolidated obligation bonds outstanding at March 31, 2011, and December 31, 2010, by the earlier of the year of contractual maturity or next call date.

Earlier of Contractual Maturity or Next Call Date	March 31, 2011		December 31, 2010
Within 1 year	$	81,656	$	81,318
After 1 year through 2 years	13,674		18,299
After 2 years through 3 years	11,127		12,897
After 3 years through 4 years	1,333		1,208
After 4 years through 5 years	2,200		1,610
After 5 years	4,231		4,256
Index amortizing notes	5		5
Total par amount	$	114,226	$	119,593

Consolidated obligation discount notes are consolidated obligations issued to raise short-term funds. These notes

31

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

are issued at less than their face amount and redeemed at par value when they mature. The Bank's participation in consolidated obligation discount notes, all of which are due within one year, was as follows:

	March 31, 2011					December 31, 2010
	Amount Outstanding			Weighted Average Interest Rate		Amount Outstanding			Weighted Average Interest Rate
Par amount	$	22,964		0.19	%	$	19,540		0.21	%
Unamortized discounts	(13		)			(13		)
Total	$	22,951				$	19,527

Interest Rate Payment Terms. Interest rate payment terms for consolidated obligations at March 31, 2011, and December 31, 2010, are detailed in the following table. For information on the general terms and types of consolidated obligations outstanding, see “Item 8. Financial Statements and Supplementary Data – Note 12 – Consolidated Obligations” in the Bank's 2010 Form 10-K.

	March 31, 2011		December 31, 2010
Par amount of consolidated obligations:
Bonds:
Fixed rate	$	72,085	$	80,766
Adjustable rate	35,945		33,300
Step-up	5,303		4,843
Step-down	230		215
Fixed rate that converts to adjustable rate	513		419
Adjustable rate that converts to fixed rate	35		35
Range bonds	110		10
Index amortizing notes	5		5
Total bonds, par	114,226		119,593
Discount notes, par	22,964		19,540
Total consolidated obligations, par	$	137,190	$	139,133

At March 31, 2011, and December 31, 2010, 85.7% and 86.2% of the fixed rate bonds were swapped to an adjustable rate, and 96.3% and 96.0% of the adjustable rate bonds were swapped to a different adjustable rate index. At March 31, 2011, and December 31, 2010, 73.4% and 63.3% of the fixed rate discount notes were swapped to an adjustable rate.

Note 12 — Capital

Capital Requirements. Under the Housing and Economic Recovery Act of 2008 (Housing Act), the Director of the Finance Agency is responsible for setting the risk-based capital standards for the FHLBanks. The FHLBank Act and regulations governing the operations of the FHLBanks require that the minimum stock requirement for members must be sufficient to enable the Bank to meet its regulatory requirements for total capital, leverage capital, and risk-based capital. The Bank must maintain: (i) total regulatory capital in an amount equal to at least 4% of its total assets, (ii) leverage capital in an amount equal to at least 5% of its total assets, and (iii) permanent capital in an amount at least equal to its regulatory risk-based capital requirement. Regulatory capital and permanent capital are defined as retained earnings and Class B stock, which includes mandatorily redeemable capital stock that is classified as a liability for financial reporting purposes. Regulatory capital and permanent capital do not include AOCI. Leverage capital is defined as the sum of permanent capital, weighted by a 1.5 multiplier, plus non-permanent capital. Non-permanent capital consists of Class A capital stock, which is redeemable upon six months' notice. The Bank's capital plan does not provide for the issuance of Class A capital stock.

32

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The risk-based capital requirements must be met with permanent capital, which must be at least equal to the sum of the Bank's credit risk, market risk, and operations risk capital requirements, all of which are calculated in accordance with the rules and regulations of the Finance Agency. The Finance Agency may require an FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirements as defined.

As of March 31, 2011, and December 31, 2010, the Bank was in compliance with these capital rules and requirements.

The following table shows the Bank's compliance with the Finance Agency's capital requirements at March 31, 2011, and December 31, 2010.

	March 31, 2011						December 31, 2010
	Required			Actual			Required			Actual
Risk-based capital	$	4,182		$	13,261		$	4,209		$	13,640
Total regulatory capital	$	6,058		$	13,261		$	6,097		$	13,640
Total regulatory capital ratio	4.00		%	8.76		%	4.00		%	8.95		%
Leverage capital	$	7,572		$	19,891		$	7,621		$	20,460
Leverage ratio	5.00		%	13.13		%	5.00		%	13.42		%

Mandatorily Redeemable Capital Stock. The Bank had mandatorily redeemable capital stock totaling $3,102 outstanding to 52 institutions at March 31, 2011, and $3,749 outstanding to 50 institutions at December 31, 2010. The change in mandatorily redeemable capital stock for the three months ended March 31, 2011 and 2010, was as follows:

	Three Months Ended
	March 31, 2011			March 31, 2010
Balance at the beginning of the period	$	3,749		$	4,843
Reclassified from/(to) capital during the period:
Merger with or acquisition by nonmember institution	1			—
Termination of membership	2			18
Acquired by/transferred to members(1)	(500		)	—
Redemption of mandatorily redeemable capital stock	(23		)	(3		)
Repurchase of excess mandatorily redeemable capital stock	(127		)	—
Balance at the end of the period	$	3,102		$	4,858

(1)    During 2008, JPMorgan Chase Bank, National Association, a nonmember, assumed Washington Mutual Bank's outstanding Bank advances and acquired the associated Bank capital stock. The Bank reclassified the capital stock transferred to JPMorgan Chase Bank, National Association, totaling $3,208, to mandatorily redeemable capital stock (a liability). JPMorgan Bank and Trust Company, National Association, an affiliate of JPMorgan Chase Bank, National Association, became a member of the Bank. During the first quarter of 2011, the Bank allowed the transfer of excess stock totaling $500 from JPMorgan Chase Bank, National Association, to JPMorgan Bank and Trust Company, National Association, to enable JPMorgan Bank and Trust Company, National Association, to satisfy its activity-based stock requirement. The capital stock transferred is no longer classified as mandatorily redeemable capital stock (a liability). However, the capital stock remaining with JPMorgan Chase Bank, National Association, remains classified as mandatorily redeemable capital stock (a liability).

Cash dividends on mandatorily redeemable capital stock in the amount of $3 and $3 were recorded as interest expense for the three months ended March 31, 2011 and 2010, respectively.

The Bank's mandatorily redeemable capital stock is discussed more fully in “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital” in the Bank's 2010 Form 10-K.

The following table presents mandatorily redeemable capital stock amounts by contractual redemption period at March 31, 2011, and December 31, 2010.

33

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Contractual Redemption Period	March 31, 2011		December 31, 2010
Within 1 year	$	41	$	58
After 1 year through 2 years	52		58
After 2 years through 3 years	1,258		1,797
After 3 years through 4 years	1,478		1,538
After 4 years through 5 years	273		298
Total	$	3,102	$	3,749

Retained Earnings and Dividend Policy. The Bank's Retained Earnings and Dividend Policy establishes amounts to be retained in restricted retained earnings, which are not made available for dividends in the current dividend period.

Retained Earnings Related to Valuation Adjustments – In accordance with the Retained Earnings and Dividend Policy, the Bank retains in restricted retained earnings any cumulative net gains in earnings (net of applicable assessments) resulting from gains or losses on derivatives and associated hedged items and financial instruments carried at fair value (valuation adjustments). As the cumulative net gains are reversed by periodic net losses and settlements of contractual interest cash flows, the amount of cumulative net gains decreases. The amount of retained earnings required by this provision of the policy is therefore decreased, and that portion of the previously restricted retained earnings becomes unrestricted and may be made available for dividends. Retained earnings restricted in accordance with these provisions totaled $149 at March 31, 2011, and $148 at December 31, 2010. In accordance with this provision, the amount increased by $1 in the first quarter of 2011 as a result of net unrealized gains resulting from valuation adjustments during this period.

Other Retained Earnings – Targeted Buildup– In addition to any cumulative net gains resulting from valuation adjustments, the Bank holds an additional amount in restricted retained earnings intended to protect members' paid-in capital from the effects of an extremely adverse credit event, an extremely adverse operations risk event, an extremely high level of quarterly losses related to the Bank's derivatives and associated hedged items and financial instruments carried at fair value, and the risk of higher-than-anticipated credit-related OTTI on PLRMBS, especially in periods of extremely low net income resulting from an adverse interest rate environment.

The Board of Directors has set the targeted amount of restricted retained earnings at $1,800. The Bank's retained earnings target may be changed at any time. The Board of Directors will periodically review the methodology and analysis to determine whether any adjustments are appropriate. The retained earnings restricted in accordance with this provision of the Retained Earnings and Dividend Policy totaled $1,514 at March 31, 2011, and $1,461 at December 31, 2010.

For more information on these two categories of restricted retained earnings and the Bank's Retained Earnings and Dividend Policy, see “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital” in the Bank's 2010 Form 10-K.

Joint Capital Enhancement Agreement – Effective February 28, 2011, the 12 FHLBanks, including the Bank, entered into a Joint Capital Enhancement Agreement (Agreement) intended to enhance the capital position of each FHLBank. Depending on the earnings of the FHLBanks, the FHLBanks' Resolution Funding Corporation (REFCORP) obligations could be satisfied as of the end of the second quarter of 2011. The intent of the Agreement is to allocate that portion of each FHLBank's earnings historically paid to satisfy its REFCORP obligation to a separate retained earnings account at that FHLBank.

Each FHLBank is currently required to contribute 20% of its earnings toward payment of the interest on REFCORP bonds. The Agreement provides that, upon full satisfaction of the REFCORP obligation, each FHLBank will contribute 20% of its net income each quarter to a restricted retained earnings account until the balance of that account equals at least 1% of that FHLBank's average balance of outstanding consolidated obligations for the

34

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

previous quarter. These restricted retained earnings will not be available to pay dividends. For more information on the Agreement, see “Item 8. Financial Statements and Supplementary Data – Note 23 – Subsequent Events” in the Bank's 2010 Form 10-K.

Dividend Payments – Finance Agency rules state that FHLBanks may declare and pay dividends only from previously retained earnings or current net earnings, and may not declare or pay dividends based on projected or anticipated earnings. There is no requirement that the Board of Directors declare and pay any dividend. A decision by the Board of Directors to declare a dividend is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks.

The Bank paid dividends (including dividends on mandatorily redeemable capital stock) totaling $9 at an annualized rate of 0.29% in the first quarter of 2011, and $9 at an annualized rate of 0.27% in the first quarter of 2010.

On April 28, 2011, the Bank's Board of Directors declared a cash dividend for the first quarter of 2011 at an annualized dividend rate of 0.31%. The Bank recorded the first quarter dividend on April 28, 2011, the day it was declared by the Board of Directors. The Bank expects to pay the first quarter dividend (including dividends on mandatorily redeemable capital stock), which will total $9, on or about May 12, 2011.

The Bank will pay the first quarter 2011 dividend in cash rather than stock form to comply with Finance Agency rules, which do not permit the Bank to pay dividends in the form of capital stock if the Bank's excess stock (defined as any stock held by a member in excess of its minimum capital stock requirement, as established by the Bank's capital plan) exceeds 1% of its total assets. As of March 31, 2011, the Bank's excess capital stock totaled $6,388, or 4.22% of total assets.

The Bank will continue to monitor the condition of its PLRMBS portfolio, its overall financial performance and retained earnings, developments in the mortgage and credit markets, and other relevant information as the basis for determining the status of dividends in future quarters.

Excess and Surplus Capital Stock. The Bank may repurchase some or all of a member's excess capital stock and any excess mandatorily redeemable capital stock, at the Bank's discretion and subject to certain statutory and regulatory requirements. The Bank must give the member 15 days' written notice; however, the member may waive this notice period. The Bank may also repurchase some or all of a member's excess capital stock at the member's request, at the Bank's discretion and subject to certain statutory and regulatory requirements.

The Bank's surplus capital stock repurchase policy provides for the Bank to repurchase excess stock that constitutes surplus stock, at the Bank's discretion and subject to certain statutory and regulatory requirements, if a member has surplus capital stock as of the last business day of the quarter. A member's surplus capital stock is defined as any stock held by a member in excess of 115% of its minimum capital stock requirement, generally excluding stock dividends earned and credited for the current year.

On a quarterly basis, the Bank determines whether it will repurchase excess capital stock, including surplus capital stock. Because of a decision to preserve capital in view of the possibility of future OTTI charges on the Bank's PLRMBS portfolio, the Bank did not fully repurchase excess stock created by declining advances balances in 2010 and the first quarter of 2011. The Bank opted to maintain its strong regulatory capital position, while repurchasing $445 in excess capital stock in the first quarter of 2011. The Bank did not repurchase excess stock in the first quarter of 2010.

During the first quarter of 2011, the five-year redemption period for $22 in mandatorily redeemable capital stock expired, and the Bank redeemed the stock at its $100 par value on the relevant expiration dates.

35

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

On April 28, 2011, the Bank announced that it plans to repurchase up to $500 in excess capital stock on May 16, 2011. The amount of excess capital stock to be repurchased from any shareholder will be based on the shareholder's pro rata ownership share of total capital stock outstanding as of the repurchase date, up to the amount of the shareholder's excess capital stock.

The Bank will continue to monitor the condition of its PLRMBS portfolio, its overall financial performance and retained earnings, developments in the mortgage and credit markets, and other relevant information as the basis for determining the status of capital stock repurchases in future quarters.

Excess capital stock totaled $6,388 as of March 31, 2011, which included surplus capital stock of $5,796.

For more information on excess and surplus capital stock, see “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital” in the Bank's 2010 Form 10-K.

Concentration. The following table presents the concentration in capital stock held by institutions whose capital stock ownership represented 10% or more of the Bank's outstanding capital stock, including mandatorily redeemable capital stock, as of March 31, 2011, and December 31, 2010.

	March 31, 2011				December 31, 2010
Name of Institution	Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding		Capital Stock Outstanding		Percentage of Total Capital Stock Outstanding
Citibank, N.A.(1)	$	3,309	29	%	$	3,445	29	%
JPMorgan Chase & Co.:
JPMorgan Bank & Trust Company, National Association	1,536		13		1,099		9
JPMorgan Chase Bank, National Association(2)	1,023		9		1,566		13
Subtotal JPMorgan Chase & Co.	2,559		22		2,665		22
Wells Fargo & Company:
Wells Fargo Bank, N.A.(2)	1,357		11		1,435		12
Wells Fargo Financial National Bank	5		—		5		—
Subtotal Wells Fargo & Company	1,362		11		1,440		12
Total capital stock ownership over 10%	7,230		62		7,550		63
Others	4,369		38		4,481		37
Total	$	11,599	100	%	$	12,031	100	%

(1)    On April 4, 2011, Citibank (South Dakota), National Association (Citibank South Dakota) filed a Form 8-K with the Securities and Exchange Commission and reported that on March 29, 2011, Citibank South Dakota entered into a Plan of Merger (Merger Agreement) with its affiliate Citibank, N.A., a national banking association (Citibank, N.A.). Citibank, N.A., is a member of the Bank and one of its largest borrowers. According to the Form 8‑K, subject to the terms of the Merger Agreement and stockholder and regulatory approvals, Citibank South Dakota will be merged into Citibank, N.A. In accordance with the Merger Agreement, the main office of Citibank, N.A., will be in Sioux Falls, South Dakota. In that case, Citibank, N.A., would no longer be eligible for membership in the Bank. On the date of the merger, the capital stock held by Citibank, N.A., will be reclassified as mandatorily redeemable capital stock.

(2)    The capital stock held by these institutions is classified as mandatorily redeemable capital stock.

Note 13 — Segment Information

The Bank uses an analysis of financial performance based on the balances and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and to determine the allocation of resources to these two major business segments. For purposes of segment reporting, adjusted net interest income includes interest income and expense associated with economic hedges that are recorded in “Net gain/(loss) on derivatives and hedging activities” in other income and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” Other key financial information, such as any OTTI loss on the Bank's available-for-sale and held-to-maturity PLRMBS, other expenses, and assessments, are not included in the segment reporting analysis, but are

36

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

incorporated into the Bank's overall assessment of financial performance.

For more information on these operating segments, see “Item 8. Financial Statements and Supplementary Data – Note 17 – Segment Information” in the Bank's 2010 Form 10-K.

The following table presents the Bank's adjusted net interest income by operating segment and reconciles total adjusted net interest income to income before assessments for the three months ended March 31, 2011 and 2010.

	Advances- Related Business		Mortgage- Related Business(1)		Adjusted Net Interest Income		Amortization of Basis Adjustments(2)			Net Interest Expense on Economic Hedges(3)			Interest Expense on Mandatorily Redeemable Capital Stock(4)		Net Interest Income		Other Loss			Other Expense		Income Before Assessments
Three months ended:
March 31, 2011	$	93	$	133	$	226	$	(23	)	$	(10	)	$	3	$	256	$	(142	)	$	32	$	82
March 31, 2010	138		138		276		(20		)	(64		)	3		357		(195		)	36		126

(1)    Does not include credit-related OTTI charges of $109 and $60 for the three months ended March 31, 2011 and 2010, respectively.

(2)    Represents amortization of amounts deferred for adjusted net interest income purposes only in accordance with the Bank's Retained Earnings and Dividend Policy.

(3)    The Bank includes interest income and interest expense associated with economic hedges in adjusted net interest income in its analysis of financial performance for its two operating segments. For financial reporting purposes, the Bank does not include these amounts in net interest income in the Statements of Income, but instead records them in other income in “Net gain/(loss) on derivatives and hedging activities.”

(4)    The Bank excludes interest expense on mandatorily redeemable capital stock from adjusted net interest income in its analysis of financial performance for its two operating segments.

The following table presents total assets by operating segment at March 31, 2011, and December 31, 2010.

	Advances- Related Business		Mortgage- Related Business		Total Assets
March 31, 2011	$	124,925	$	26,519	$	151,444
December 31, 2010	128,424		23,999		152,423

Note 14 — Derivatives and Hedging Activities

General. The Bank may enter into interest rate swaps (including callable, putable, and basis swaps); swaptions; and cap, floor, corridor, and collar agreements (collectively, interest rate exchange agreements or derivatives). Most of the Bank's interest rate exchange agreements are executed in conjunction with the origination of advances and the issuance of consolidated obligation bonds to create variable rate structures. The interest rate exchange agreements are generally executed at the same time the advances and bonds are transacted and generally have the same maturity dates as the related advances and bonds.

Additional active uses of interest rate exchange agreements include: (i) offsetting interest rate caps, floors, corridors, or collars embedded in adjustable rate advances made to members, (ii) hedging the anticipated issuance of debt, (iii) matching against consolidated obligation discount notes or bonds to create the equivalent of callable fixed rate debt, (iv) reducing the interest rate sensitivity and modifying the repricing gaps of assets and liabilities, and (v) exactly offsetting other derivatives executed with members (with the Bank serving as an intermediary). The Bank's use of interest rate exchange agreements results in one of the following classifications: (i) a fair value hedge of an underlying financial instrument, (ii) a forecasted transaction, (iii) a cash flow hedge of an underlying financial instrument, (iv) an economic hedge for specific asset and liability management purposes, or (v) an intermediary transaction for members.

Interest Rate Swaps – An interest rate swap is an agreement between two entities to exchange cash flows in the future. The agreement sets the dates on which the cash flows will be paid and the manner in which the cash flows will be calculated. One of the simplest forms of an interest rate swap involves the promise by one party to pay cash flows equivalent to the interest on a notional principal amount at a predetermined fixed rate for a given period of

37

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

time. In return for this promise, the party receives cash flows equivalent to the interest on the same notional principal amount at a variable rate for the same period of time. The variable rate received or paid by the Bank in most interest rate exchange agreements is indexed to the London Inter-Bank Offered Rate (LIBOR).

Swaptions – A swaption is an option on a swap that gives the buyer the right to enter into a specified interest rate swap at a certain time in the future. When used as a hedge, a swaption can protect the Bank against future interest rate changes when it is planning to lend or borrow funds in the future. The Bank purchases receiver swaptions. A receiver swaption is the option to receive fixed interest rate payments at a later date.

Interest Rate Caps and Floors – In a cap agreement, a cash flow is generated if the price or interest rate of an underlying variable rises above a certain threshold (or cap) price. In a floor agreement, a cash flow is generated if the price or interest rate of an underlying variable falls below a certain threshold (or floor) price. Caps may be used in conjunction with liabilities and floors may be used in conjunction with assets. Caps and floors are designed as protection against the interest rate on a variable rate asset or liability rising above or falling below a certain level.

Hedging Activities. The Bank documents all relationships between derivative hedging instruments and hedged items, its risk management objectives and strategies for undertaking various hedge transactions, and its method of assessing effectiveness. This process includes linking all derivatives that are designated as fair value or cash flow hedges to: (i) assets and liabilities on the balance sheet, (ii) firm commitments, or (iii) forecasted transactions. The Bank also formally assesses (both at the hedge's inception and at least quarterly on an ongoing basis) whether the derivatives that are used in hedging transactions have been effective in offsetting changes in the fair value or cash flows of hedged items and whether those derivatives may be expected to remain effective in future periods. The Bank typically uses regression analyses or other statistical analyses to assess the effectiveness of its hedges. When it is determined that a derivative has not been or is not expected to be effective as a hedge, the Bank discontinues hedge accounting prospectively.

The Bank discontinues hedge accounting prospectively when: (i) it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item (including hedged items such as firm commitments or forecasted transactions); (ii) the derivative and/or the hedged item expires or is sold, terminated, or exercised; (iii) it is no longer probable that the forecasted transaction will occur in the originally expected period; (iv) a hedged firm commitment no longer meets the definition of a firm commitment; (v) it determines that designating the derivative as a hedging instrument is no longer appropriate; or (vi) it decides to use the derivative to offset changes in the fair value of other derivatives or instruments carried at fair value.

Intermediation– As an additional service to its members, the Bank enters into offsetting interest rate exchange agreements, acting as an intermediary between exactly offsetting derivatives transactions with members and other counterparties. This intermediation allows members indirect access to the derivatives market. Derivatives in which the Bank is an intermediary may also arise when the Bank enters into derivatives to offset the economic effect of other derivatives that are no longer designated to advances, investments, or consolidated obligations. The offsetting derivatives used in intermediary activities do not receive hedge accounting treatment and are separately marked to market through earnings. The net result of the accounting for these derivatives does not significantly affect the operating results of the Bank.These amounts are recorded in other income and presented as “Net gain/(loss) on derivatives and hedging activities.”

The notional principal of the interest rate exchange agreements associated with derivatives with members and offsetting derivatives with other counterparties was $950 at March 31, 2011, and $960 at December 31, 2010. The Bank did not have any interest rate exchange agreements outstanding at March 31, 2011, and December 31, 2010, that were used to offset the economic effect of other derivatives that were no longer designated to advances, investments, or consolidated obligations.

Investments–The Bank may invest in U.S. Treasury and agency obligations, MBS rated AAA at the time of acquisition, and the taxable portion of highly rated state or local housing finance agency obligations. The interest

38

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

rate and prepayment risk associated with these investment securities is managed through a combination of debt issuance and derivatives. The Bank may manage prepayment risk and interest rate risk by funding investment securities with consolidated obligations that have call features or by hedging the prepayment risk with a combination of consolidated obligations and callable swaps or swaptions. The Bank executes callable swaps and purchases swaptions in conjunction with the issuance of certain liabilities to create funding equivalent to fixed rate callable debt. Although these derivatives are economic hedges against prepayment risk and are designated to individual liabilities, they do not receive either fair value or cash flow hedge accounting treatment. The derivatives are marked to market through earnings and provide modest income volatility. Investment securities may be classified as trading, available-for-sale, or held-to-maturity.

The Bank may also manage the risk arising from changing market prices or cash flows of investment securities classified as trading by entering into interest rate exchange agreements (economic hedges) that offset the changes in fair value or cash flows of the securities. The market value changes of both the trading securities and the associated interest rate exchange agreements are included in other income in the Statements of Income.

Advances– The Bank offers a wide array of advance structures to meet members' funding needs. These advances may have maturities up to 30 years with fixed or adjustable rates and may include early termination features or options. The Bank may use derivatives to adjust the repricing and/or options characteristics of advances to more closely match the characteristics of the Bank's funding liabilities. In general, whenever a member executes a fixed rate advance or a variable rate advance with embedded options, the Bank will simultaneously execute an interest rate exchange agreement with terms that offset the terms and embedded options, if any, in the advance. The combination of the advance and the interest rate exchange agreement effectively creates a variable rate asset. This type of hedge is treated as a fair value hedge.

Mortgage Loans–The Bank's investment portfolio includes fixed rate mortgage loans. The prepayment options embedded in mortgage loans can result in extensions or contractions in the expected repayment of these investments, depending on changes in estimated prepayment speeds. The Bank manages the interest rate risk and prepayment risk associated with fixed rate mortgage loans through a combination of debt issuance and derivatives. The Bank uses both callable and non-callable debt to achieve cash flow patterns and market value sensitivities for liabilities similar to those expected on the mortgage loans. Net income could be reduced if the Bank replaces prepaid mortgages with lower-yielding assets and the Bank's higher funding costs are not reduced accordingly.

The Bank executes callable swaps and purchases swaptions in conjunction with the issuance of certain consolidated obligations to create funding equivalent to fixed rate callable bonds. Although these derivatives are economic hedges against the prepayment risk of specific loan pools and are referenced to individual liabilities, they do not receive either fair value or cash flow hedge accounting treatment. The derivatives are marked to market through earnings and are presented as “Net gain/(loss) on derivatives and hedging activities.”

Consolidated Obligations – Although the joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor, FHLBanks individually are counterparties to interest rate exchange agreements associated with specific debt issues. The Office of Finance acts as agent of the FHLBanks in the debt issuance process. In connection with each debt issuance, each FHLBank specifies the terms and the amount of debt it requests to have issued on its behalf. The Office of Finance tracks the amount of debt issued on behalf of each FHLBank. In addition, the Bank separately tracks and records as a liability its specific portion of consolidated obligations and is the primary obligor for its specific portion of consolidated obligations issued. Because the Bank knows the amount of consolidated obligations issued on its behalf, it has the ability to structure hedging instruments to match its specific debt. The hedge transactions may be executed upon or after the issuance of consolidated obligations and are accounted for based on the accounting for derivative instruments and hedging activities.

Consolidated obligation bonds are structured to meet the Bank's and/or investors' needs. Common structures include fixed rate bonds with or without call options and adjustable rate bonds with or without embedded options. In

39

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

general, when bonds with these structures are issued, the Bank will simultaneously execute an interest rate exchange agreement with terms that offset the terms and embedded options, if any, of the consolidated obligation bond. This combination of the consolidated obligation bond and the interest rate exchange agreement effectively creates an adjustable rate bond. The cost of this funding combination is generally lower than the cost that would be available through the issuance of just an adjustable rate bond. These transactions generally receive fair value hedge accounting treatment.

The Bank did not have any consolidated obligations denominated in currencies other than U.S. dollars outstanding during the three months ended March 31, 2011, or the twelve months ended December 31, 2010.

Firm Commitments– A firm commitment for a forward starting advance hedged through the use of an offsetting forward starting interest rate swap is considered a derivative. In this case, the interest rate swap functions as the hedging instrument for both the firm commitment and the subsequent advance. When the commitment is terminated and the advance is made, the current market value associated with the firm commitment is included with the basis of the advance. The basis adjustment is then amortized into interest income over the life of the advance.

Anticipated Debt Issuance–The Bank may enter into interest rate swaps for the anticipated issuances of fixed rate bonds to hedge the cost of funding. These hedges are designated and accounted for as cash flow hedges. The interest rate swap is terminated upon issuance of the fixed rate bond, with the effective portion of the realized gain or loss on the interest rate swap recorded in other comprehensive income. Realized gains and losses reported in AOCI are recognized as earnings in the periods in which earnings are affected by the cash flows of the fixed rate bonds.

Credit Risk – The Bank is subject to credit risk as a result of the risk of nonperformance by counterparties to the derivative agreements. All of the Bank's derivative agreements contain master netting provisions to help mitigate the credit risk exposure to each counterparty. The Bank manages counterparty credit risk through credit analyses and collateral requirements and by following the requirements of the Bank's risk management policies and credit guidelines. Based on the master netting provisions in each agreement, credit analyses, and the collateral requirements in place with each counterparty, the Bank does not expect to incur any credit losses on derivatives agreements.

The notional amount of an interest rate exchange agreement serves as a basis for calculating periodic interest payments or cash flows and is not a measure of the amount of credit risk from that transaction. The Bank had notional amounts outstanding of $182,301 and $190,410 at March 31, 2011, and December 31, 2010, respectively. The notional amount does not represent the exposure to credit loss. The amount potentially subject to credit loss is the estimated cost of replacing an interest rate exchange agreement that has a net favorable position if the counterparty defaults; this amount is substantially less than the notional amount.

The following table presents credit risk exposure on derivative instruments, excluding a counterparty's pledged collateral that exceeds the Bank's net position with the counterparty.

	March 31, 2011		December 31, 2010
Total net exposure at fair value(1)	$	1,420	$	1,525
Cash collateral held	29		807
Net exposure after cash collateral	1,391		718
Other collateral held	710		697
Net exposure after collateral	$	681	$	21

(1)    Includes net accrued interest receivable of $322 and $253 as of March 31, 2011, and December 31, 2010, respectively.

Certain of the Bank's derivatives agreements contain provisions that link the Bank's credit rating from each of the major credit rating agencies to various rights and obligations. In several of the Bank's derivatives agreements, if the

40

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Bank's debt rating falls below A, the Bank's counterparty would have the right, but not the obligation, to terminate all of its outstanding derivatives transactions with the Bank. In addition, the amount of collateral that the Bank is required to deliver to a counterparty depends on the Bank's credit rating. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a net derivative liability position at March 31, 2011, was $125, for which the Bank had posted collateral of $59 in the normal course of business. If the credit rating of the Bank's debt had been lowered to AAA/Aa, then the Bank would have been required to deliver up to an additional $50 of collateral (at fair value) to its derivatives counterparties at March 31, 2011. At March 31, 2011, the Bank's credit ratings continued to be AAA/Aaa.

The following table summarizes the fair value of derivative instruments without the effect of netting arrangements or collateral as of March 31, 2011, and December 31, 2010. For purposes of this disclosure, the derivatives values include the fair value of derivatives and related accrued interest.

	March 31, 2011								December 31, 2010
	Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities			Notional Amount of Derivatives		Derivative Assets			Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	74,604	$	1,561		$	341		$	84,131	$	1,816		$	429
Total	74,604		1,561			341			84,131		1,816			429
Derivatives not designated as hedging instruments:
Interest rate swaps	105,621		503			437			104,193		518			535
Interest rate caps, floors, corridors, and/or collars	2,076		16			22			2,086		17			24
Total	107,697		519			459			106,279		535			559
Total derivatives before netting and collateral adjustments	$	182,301	2,080			800			$	190,410	2,351			988
Netting adjustments by counterparty			(661		)	(661		)			(826		)	(826		)
Cash collateral and related accrued interest			(680		)	3					(807		)	1
Total collateral and netting adjustments(1)			(1,341		)	(658		)			(1,633		)	(825		)
Derivative assets and derivative liabilities as reported on the Statements of Condition			$	739		$	142				$	718		$	163

(1)    Amounts represent the effect of legally enforceable master netting agreements that allow the Bank to settle positive and negative positions and also cash collateral held or placed with the same counterparty.

The following table presents the components of net gain/(loss) on derivatives and hedging activities as presented in the Statements of Income for the three months ended March 31, 2011 and 2010.

41

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	Three Months Ended
	March 31, 2011			March 31, 2010
	Gain/(Loss)			Gain/(Loss)
Derivatives and hedged items in fair value hedging relationships - hedge ineffectiveness by derivative type:
Interest rate swaps	$	1		$	4
Total net gain related to fair value hedge ineffectiveness	1			4
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps	28			26
Interest rate caps, floors, corridors, and/or collars	1			(2		)
Net interest settlements	(10		)	(64		)
Total net gain/(loss) related to derivatives not designated as hedging instruments	19			(40		)
Net gain/(loss) on derivatives and hedging activities	$	20		$	(36	)

The following table presents, by type of hedged item, the gains and losses on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on the Bank's net interest income for the three months ended March 31, 2011 and 2010.

	Three Months Ended
	March 31, 2011											March 31, 2010
Hedged Item Type	Gain/ (Loss) on Derivatives			Gain/ (Loss) on Hedged Item			Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on Net Interest Income(1)			Gain/ (Loss) on Derivatives		Gain/ (Loss) on Hedged Item			Net Fair Value Hedge Ineffectiveness			Effect of Derivatives on Net Interest Income(1)
Advances	$	82		$	(81	)	$	1	$	(84	)	$	38	$	(39	)	$	(1	)	$	(168	)
Consolidated obligation bonds	(314		)	314			—		330			8		(3		)	5			511
Total	$	(232	)	$	233		$	1	$	246		$	46	$	(42	)	$	4		$	343

(1)    The net interest on derivatives in fair value hedge relationships is presented in the interest income/expense line item of the respective hedged item.

For the three months ended March 31, 2011 and 2010, there were no reclassifications from other comprehensive income/(loss) into earnings as a result of the discontinuance of cash flow hedges because the original forecasted transactions occurred by the end of the originally specified time period or within a two-month period thereafter.

As of March 31, 2011, the amount of unrecognized net losses on derivative instruments accumulated in other comprehensive income/(loss) expected to be reclassified to earnings during the next 12 months was immaterial. The maximum length of time over which the Bank is hedging its exposure to the variability in future cash flows for forecasted transactions, excluding those forecasted transactions related to the payment of variable interest on existing financial instruments, is less than three months.

Note 15 — Fair Values

The following fair value amounts have been determined by the Bank using available market information and the Bank's best judgment of appropriate valuation methods. These estimates are based on pertinent information available to the Bank at March 31, 2011, and December 31, 2010. Although the Bank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any estimation technique or valuation methodology. For example, because an active secondary market does not exist for a portion of the Bank's financial instruments, in certain cases fair values are not subject to precise quantification or verification and may change as economic and market factors and evaluation of those factors change. Therefore, these fair values are not necessarily indicative of the amounts that would be realized in current market transactions, although they do reflect

42

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

the Bank's judgment of how a market participant would estimate the fair values. The fair value summary table does not represent an estimate of the overall market value of the Bank as a going concern, which would take into account future business opportunities and the net profitability of total assets and liabilities on a combined basis.

The following table presents the carrying value and the fair value of the Bank's financial instruments at March 31, 2011, and December 31, 2010.

	March 31, 2011				December 31, 2010
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Assets
Cash and due from banks	$	3,762	$	3,761	$	755	$	755
Federal funds sold	14,966		14,966		16,312		16,312
Trading securities	3,550		3,550		2,519		2,519
Available-for-sale securities	7,938		7,938		1,927		1,927
Held-to-maturity securities	25,959		25,890		31,824		32,214
Advances (includes $9,708 and $10,490 at fair value under the fair value option, respectively)	92,005		92,251		95,599		95,830
Mortgage loans held for portfolio, net of allowance for credit losses on mortgage loans	2,205		2,325		2,381		2,511
Accrued interest receivable	171		171		228		228
Derivative assets(1)	739		739		718		718
Liabilities
Deposits	139		139		134		134
Consolidated obligations:
Bonds (includes $24,943 and $20,872 at fair value under the fair value option, respectively)	115,464		115,635		121,120		121,338
Discount notes	22,951		22,955		19,527		19,528
Mandatorily redeemable capital stock	3,102		3,102		3,749		3,749
Accrued interest payable	497		497		467		467
Derivative liabilities(1)	142		142		163		163
Other
Standby letters of credit	24		24		26		26

(1)     Amounts include the netting of derivative assets and liabilities by counterparty, including cash collateral, where the Bank has the legal right to do so under its master netting agreement with each counterparty.

Fair Value Methodologies and Techniques and Significant Inputs. The valuation methodologies and techniques and significant inputs used in estimating the fair values of the Bank's financial instruments are discussed below.

Cash and Due from Banks–The estimated fair value approximates the recorded carrying value.

Federal Funds Sold –The estimated fair value of overnight Federal funds sold approximates the recorded carrying value. The estimated fair value of term Federal funds sold has been determined by calculating the present value of expected cash flows for the instruments excluding accrued interest. The discount rates used in these calculations are the replacement rates for comparable instruments with similar terms.

Investment Securities – Commercial Paper and Interest-Bearing Deposits –The estimated fair values of these investments are determined by calculating the present value of expected cash flows, excluding accrued interest, using market-observable inputs as of the last business day of the period or using industry standard analytical models and certain actual and estimated market information. The discount rates used in these calculations are the replacement rates for comparable instruments with similar terms.

43

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Investment Securities – FFCB, TLGP, and Housing Finance Agency Bonds and MBS – Under the methodology approved by the MBS Pricing Governance Committee and adopted by the Bank, the Bank requests prices for these securities from four specific third-party vendors, when available. These pricing vendors use methods that generally employ, but are not limited to, benchmark yields, recent trades, dealer estimates, valuation models, benchmarking of like securities, sector groupings, and/or matrix pricing. The Bank establishes a price for each security using a formula that is based on the number of prices received. If four prices are received, the average of the two middle prices is used; if three prices are received, the middle price is used; if two prices are received, the average of the two prices is used; and if one price is received, it is used subject to validation as described below. The computed prices are tested for reasonableness based on differences among pricing vendorsusing specified tolerance thresholds. Prices within the established thresholds are generally accepted unless strong evidence suggests that using the formula-driven price would not be appropriate. Preliminary estimated fair values that are outside the tolerance thresholds, or that the Bank believes may not be appropriate based on all available information (including those limited instances in which only one price is received), are subject to further analysis, including but not limited to a price challenge of pricing vendors, a comparison to the prices for similar securities and/or to non-binding dealer estimates, or use of an internal model that is deemed most appropriate after consideration of all relevant facts and circumstances that a market participant would consider. The relative proximity of the vendor prices for each security, as defined by the tolerance thresholds, supports the Bank's conclusion that the final assigned prices are reasonable estimates of fair value. Securities classified as trading are recorded at fair value on a recurring basis.

Advances –Because quoted prices are not available for advances, the fair values are measured using model-based valuation techniques (such as the present value of future cash flowsexcluding the amount of the accrued interest receivable), creditworthiness of members, advance collateral types, prepayment assumptions, and other factors, such as credit loss assumptions, as necessary.

Because no principal market exists for the sale of advances, the Bank has defined the most advantageous market as a hypothetical market in which an advance sale could occur with a hypothetical financial institution. The Bank's primary inputs for measuring the fair value of advances are market-based consolidated obligation yield curve (CO Curve) inputs obtained from the Office of Finance and provided to the Bank. The Bank prices advances using the CO Curve because it represents the Bank's cost of funds. The CO Curve is then adjusted to reflect the rates on replacement advances with similar terms and collateral. These spread adjustments are not market-observable and are evaluated for significance in the overall fair value measurement and the fair value hierarchy level of the advance. As of March 31, 2011, the spread adjustment to the CO Curve ranged from 4 to 19 basis points for advances carried at fair value. The Bank obtains market-observable inputs from derivatives dealers for complex advances. These inputs may include volatility assumptions, which are market-based expectations of future interest rate volatility implied from current market prices for similar options (swaptions volatilities). The discount rates used in these calculations are the replacement advance rates for advances with similar terms. Pursuant to the Finance Agency's advances regulation, advances with an original term to maturity or repricing period greater than six months generally require a prepayment fee sufficient to make the Bank financially indifferent to the borrower's decision to prepay the advances, and the Bank determined that no adjustment is required to the fair value measurement of advances for prepayment fees.

Mortgage Loans Held for Portfolio – The estimated fair value for mortgage loans represents modeled prices based on observable market prices for agency commitment rates adjusted for differences in coupon and seasoning. Market prices are highly dependent on the underlying prepayment assumptions. Changes in the prepayment speeds often have a material effect on the fair value estimates. These underlying prepayment assumptions are susceptible to material changes in the near term because they are made at a specific point in time.

Loans to Other FHLBanks–Because these are overnight transactions, the estimated fair value approximates the recorded carrying value.

Accrued Interest Receivable and Payable – The estimated fair value approximates the recorded carrying value of accrued interest receivable and accrued interest payable.

44

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Derivative Assets and Liabilities –In general, derivative instruments held by the Bank for risk management activities are traded in over-the-counter markets where quoted market prices are not readily available. These derivatives are interest-rate related. For these derivatives, the Bank measures fair value using internally developed discounted cash flow models that use primarily market-observable inputs, such as the LIBOR swap yield curve, option volatilities adjusted for counterparty credit risk, as necessary, and prepayment assumptions.

The Bank is subject to credit risk in derivatives transactions due to potential nonperformance by the derivatives counterparties. To mitigate this risk, the Bank only executes transactions with highly rated derivatives dealers and major banks (derivatives dealer counterparties) that meet the Bank's eligibility criteria. In addition, the Bank has entered into master netting agreements and bilateral security agreements with all active derivatives dealer counterparties that provide for delivery of collateral at specified levels tied to counterparty credit ratings to limit the Bank's net unsecured credit exposure to these counterparties. Under these policies and agreements, the amount of unsecured credit exposure to an individual derivatives dealer counterparty is limited to the lesser of (i) a percentage of the counterparty's capital or (ii) an absolute dollar credit exposure limit, both according to the counterparty's credit rating, as determined by rating agency long-term credit ratings of the counterparty's debt securities or deposits. All credit exposure from derivatives transactions entered into by the Bank with member counterparties that are not derivatives dealers must be fully secured by eligible collateral. The Bank evaluated the potential for the fair value of the instruments to be affected by counterparty credit risk and determined that no adjustments to the overall fair value measurements were required.

Deposits and Other Borrowings –For deposits and other borrowings, the estimated fair value has been determined by calculating the present value of expected future cash flows from the deposits and other borrowings excluding accrued interest. The discount rates used in these calculations are the cost of deposits and borrowings with similar terms.

Consolidated Obligations –Because quoted prices in active markets are not generally available for identical liabilities, the Bank measures fair values using internally developed models that use primarily market-observable inputs. The Bank's primary inputs for measuring the fair value of consolidated obligation bonds are market-based CO Curve inputs obtained from the Office of Finance and provided to the Bank. The Office of Finance constructs a market observable curve, referred to as the CO Curve, using the Treasury yield curve as a base curve, which may be adjusted by indicative spreads obtained from market observable sources. These market indications are generally derived from pricing indications from dealers, historical pricing relationships, market activity for similar liabilities such as recent GSE trades or secondary market activity. For consolidated obligation bonds with embedded options, the Bank also obtains market-observable quotes and inputs from derivatives dealers. The Bank uses these swaption volatilities as significant inputs for measuring the fair value of consolidated obligations.

Adjustments may be necessary to reflect the Bank's credit quality or the credit quality of the FHLBank System when valuing consolidated obligation bonds measured at fair value. The Bank monitors its own creditworthiness, the creditworthiness of the other 11 FHLBanks, and the FHLBank System to determine whether any adjustments are necessary for creditworthiness in its fair value measurement of consolidated obligation bonds. The credit ratings of the FHLBank System and any changes to the credit ratings are the basis for the Bank to determine whether the fair values of consolidated obligations have been significantly affected during the reporting period by changes in the instrument-specific credit risk.

Mandatorily Redeemable Capital Stock –The estimated fair value of capital stock subject to mandatory redemption is generally at par valueas indicated by member contemporaneous purchases and sales at par value. Fair value includes estimated dividends earned at the time of reclassification from capital to liabilities, until such amount is paid, and any subsequently declared stock dividend. The Bank's stock can only be acquired by members at par value and redeemed or repurchased at par value, subject to statutory and regulatory requirements. The Bank's stock is not traded, and no market mechanism exists for the exchange of Bank stock outside the cooperative ownership structure.

45

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Commitments – The estimated fair value of the Bank's commitments to extend credit was immaterial at March 31, 2011, and December 31, 2010. The estimated fair value of standby letters of credit is based on the present value of fees currently charged for similar agreements. The value of the Bank's standby letters of credit is recorded in other liabilities.

Subjectivity of Estimates Related to Fair Values of Financial Instruments. Estimates of the fair value of advances with embedded options, mortgage instruments, derivatives with embedded options, and consolidated obligation bonds with embedded options using the methods described below and other methods are highly subjective and require judgments regarding significant matters such as the amount and timing of future cash flows, prepayment speed assumptions, expected interest rate volatility, methods to determine possible distributions of future interest rates used to value options, and the selection of discount rates that appropriately reflect market and credit risks. Changes in these judgments often have a material effect on the fair value estimates. Since these estimates are made as of a specific date, they are susceptible to material near term changes.

Fair Value Hierarchy. The fair value hierarchy is used to prioritize the fair value methodologies and valuation techniques as well as the inputs to the valuation techniques used to measure fair value for assets and liabilities carried at fair value on the Statements of Condition. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of market observability of the fair value measurement for the asset or liability. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

• Level 1 – Inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. An active market for the asset or liability is a market in which the transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

• Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are supported by little or no market activity or by the Bank's own assumptions.

A financial instrument's categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The following assets and liabilities, including those for which the Bank has elected the fair value option, are carried at fair value on the Statements of Condition as of March 31, 2011:

• Trading securities

• Available-for-sale securities

• Certain advances

• Derivative assets and liabilities

• Certain consolidated obligation bonds

For instruments carried at fair value, the Bank reviews the fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in or out at fair value as of the beginning of the quarter in which the changes occur. For the periods presented, the Bank did not have any reclassifications for transfers in or out of the fair value hierarchy levels.

Fair Value on a Recurring Basis. These assets and liabilities are measured at fair value on a recurring basis and are summarized in the following table by fair value hierarchy (as described above).

46

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

March 31, 2011
	Fair Value Measurement Using:						Netting
	Level 1		Level 2		Level 3		Adjustments(1)			Total
Assets:
Trading securities:
GSEs – FFCB bonds	$	—	$	2,367	$	—	$	—		$	2,367
TLGP	—		1,160		—		—			1,160
MBS:
Other U.S. obligations – Ginnie Mae	—		19		—		—			19
GSEs – Fannie Mae	—		4		—					4
Total trading securities	—		3,550		—		—			3,550
Available-for-sale securities:
TLGP	—		1,927		—		—			1,927
PLRMBS	—		—		6,011		—			6,011
Total available-for-sale securities	—		1,927		6,011		—			7,938
Advances(2)	—		10,506		—		—			10,506
Derivative assets (interest-rate related)	—		2,080		—		(1,341		)	739
Total assets	$	—	$	18,063	$	6,011	$	(1,341	)	$	22,733
Liabilities:
Consolidated obligation bonds(3)	$	—	$	24,943	$	—	$	—		$	24,943
Derivative liabilities (interest-rate related)	—		800		—		(658		)	142
Total liabilities	$	—	$	25,743	$	—	$	(658	)	$	25,085

December 31, 2010
	Fair Value Measurement Using:						Netting
	Level 1		Level 2		Level 3		Adjustments(1)			Total
Assets:
Trading securities:
GSEs – FFCB bonds	$	—	$	2,366	$	—	$	—		$	2,366
TLGP	—		128		—		—			128
MBS:
Other U.S. obligations – Ginnie Mae	—		20		—		—			20
GSEs – Fannie Mae	—		5		—					5
Total trading securities	—		2,519		—		—			2,519
Available-for-sale securities (TLGP)	—		1,927		—		—			1,927
Advances(2)	—		11,297		—		—			11,297
Derivative assets (interest-rate related)	—		2,351		—		(1,633		)	718
Total assets	$	—	$	18,094	$	—	$	(1,633	)	$	16,461
Liabilities:
Consolidated obligation bonds(3)	$	—	$	21,384	$	—	$	—		$	21,384
Derivative liabilities (interest-rate related)	—		988		—		(825		)	163
Total liabilities	$	—	$	22,372	$	—	$	(825	)	$	21,547

(1) Amounts represent the netting of derivative assets and liabilities by counterparty, including cash collateral, where the Bank has the legal right to do so under its master netting agreement with each counterparty.

(2) Includes $9,708 and $10,490 of advances recorded under the fair value option at March 31, 2011, and December 31, 2010, respectively, and $798 and $807 of advances recorded at fair value at March 31, 2011, and December 31, 2010, respectively, where the exposure to overall changes in fair value was hedged in accordance with the accounting for derivative instruments and hedging activities.

(3) Includes $24,943 and $20,872 of consolidated obligation bonds recorded under the fair value option at March 31, 2011, and December 31, 2010, respectively, and $0 and $512 of consolidated obligation bonds recorded at fair value at March 31, 2011, and December 31, 2010, respectively, where the exposure to overall changes in fair value was hedged in accordance with the accounting for derivatives instruments and hedging activities.

47

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

The following table presents a reconciliation of the Bank's available-for-sale PLRMBS that are measured at fair value on the Statements of Condition using significant unobservable inputs (Level 3) for the three months ended March 31, 2011.

	Three Months Ended March 31, 2011
Balance, beginning of period	$	—
Transfers of held-to-maturity to available-for-sale securities	5,322
Unrealized gains in AOCI	689
Balance, end of period	$	6,011

Fair Value on a Nonrecurring Basis. Certain assets are measured at fair value on a nonrecurring basis—that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustment in certain circumstances (for example, when there is evidence of impairment). At March 31, 2011, and December 31, 2010, the Bank measured certain of its held-to-maturity investment securities and REO at fair value on a nonrecurring basis. The following tables present these assets as of March 31, 2011, and December 31, 2010, for which a nonrecurring change in fair value was recorded at March 31, 2011, and December 31, 2010, by level within the fair value hierarchy.

March 31, 2011
	Fair Value Measurement Using:
Assets:	Level 1		Level 2		Level 3
REO	$	—	$	—	$	2

December 31, 2010
	Fair Value Measurement Using:
Assets:	Level 1		Level 2		Level 3
Held-to-maturity securities – PLRMBS	$	—	$	—	$	547
REO	—		—		2

Based on the current lack of significant market activity for PLRMBS and REO, the non-recurring fair value measurements for these assets as of March 31, 2011, and December 31, 2010, fell within Level 3 of the fair value hierarchy.

Fair Value Option. The fair value option provides an entity with an irrevocable option to elect fair value as an alternative measurement for selected financial assets, financial liabilities, unrecognized firm commitments, and written loan commitments not previously carried at fair value. It requires an entity to display the fair value of those assets and liabilities for which the entity has chosen to use fair value on the face of the statement of condition. Fair value is used for both the initial and subsequent measurement of the designated assets, liabilities, and commitments, with the changes in fair value recognized in net income. Interest income and interest expense carried on advances and consolidated bonds at fair value are recognized solely on the contractual amount of interest due or unpaid. Any transaction fees or costs are immediately recognized in other non-interest income or other non-interest expense.

The Bank elected the fair value option for certain financial instruments on January 1, 2008, as follows:

• Adjustable rate credit advances with embedded options

• Callable fixed rate credit advances

• Putable fixed rate credit advances

• Putable fixed rate credit advances with embedded options

• Fixed rate credit advances with partial prepayment symmetry

• Callable or non-callable capped floater consolidated obligation bonds

48

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

• Convertible consolidated obligation bonds

• Adjustable or fixed rate range accrual consolidated obligation bonds

• Ratchet consolidated obligation bonds

In addition to the items transitioned to the fair value option on January 1, 2008, the Bank has elected that any new transactions in these categories will be accounted for under the fair value option. In general, transactions for which the Bank has elected the fair value option are in economic hedge relationships. The Bank has also elected the fair value option for the following additional categories for all new transactions entered into starting on January 1, 2008:

• Adjustable rate credit advances indexed to the following: Prime Rate, U.S. Treasury Bill, Federal funds, Constant Maturity Treasury (CMT), Constant Maturity Swap (CMS), and 12-month Moving Treasury Average of one-year CMT (12MTA)

• Adjustable rate consolidated obligation bonds indexed to the following: Prime Rate, U.S. Treasury Bill, Federal funds, CMT, CMS, and 12MTA

The Bank elected the fair value option for the following financial instruments on October 1, 2009:

• Step-up callable bonds, which pay interest at increasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-up dates

• Step-down callable bonds, which pay interest at decreasing fixed rates for specified intervals over the life of the bond and can generally be called at the Bank's option on the step-down dates

The Bank has elected these items for the fair value option to assist in mitigating potential income statement volatility that can arise from economic hedging relationships. The risk associated with using fair value only for the derivative is the Bank's primary reason for electing the fair value option for financial assets and liabilities that do not qualify for hedge accounting or that have not previously met or may be at risk for not meeting the hedge effectiveness requirements.

The following table summarizes the activity related to financial assets and liabilities for which the Bank elected the fair value option during the three months ended March 31, 2011 and 2010:

	Three Months Ended
	March 31, 2011						March 31, 2010
	Advances			Consolidated Obligation Bonds			Advances			Consolidated Obligation Bonds
Balance, beginning of the period	$	10,490		$	20,872		$	21,616		$	37,022
New transactions elected for fair value option	516			5,160			73			7,751
Maturities and terminations	(1,240		)	(1,096		)	(4,134		)	(20,562		)
Net gain/(loss) on advances and net (gain)/loss on consolidated obligation bonds held at fair value	(51		)	3			(80		)	20
Change in accrued interest	(7		)	4			(16		)	10
Balance, end of the period	$	9,708		$	24,943		$	17,459		$	24,241

For advances and consolidated obligations recorded under the fair value option, the estimated impact of changes in credit risk for the three months ended March 31, 2011 and 2010, was immaterial.

The following table presents the changes in fair value included in the Statements of Income for each item for which the fair value option has been elected for the three months ended March 31, 2011 and 2010:

49

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	Three Months Ended
	March 31, 2011											March 31, 2010
	Interest Income on Advances		Interest Expense on Consolidated Obligation Bonds			Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held at Fair Value			Total Changes in Fair Value Included in Current Period Earnings			Interest Income on Advances		Interest Expense on Consolidated Obligation Bonds			Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held at Fair Value			Total Changes in Fair Value Included in Current Period Earnings
Advances	$	70	$	—		$	(51	)	$	19		$	166	$	—		$	(80	)	$	86
Consolidated obligation bonds	—		(34		)	(3		)	(37		)	—		(61		)	(20		)	(81		)
Total	$	70	$	(34	)	$	(54	)	$	(18	)	$	166	$	(61	)	$	(100	)	$	5

The following table presents the difference between the aggregate fair value and aggregate remaining contractual principal balance outstanding of advances and consolidated obligation bonds for which the fair value option has been elected at March 31, 2011, and December 31, 2010:

	At March 31, 2011							At December 31, 2010
	Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance			Principal Balance		Fair Value		Fair Value Over/(Under) Principal Balance
Advances(1)	$	9,465	$	9,708	$	243		$	10,163	$	10,490	$	327
Consolidated obligation bonds	25,046		24,943		(103		)	20,982		20,872		(110		)

(1)    At March 31, 2011, and December 31, 2010, none of these advances were 90 days or more past due or had been placed on nonaccrual status.

Note 16 — Commitments and Contingencies

As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of March 31, 2011, and through the filing date of this report, does not believe that is probable that it will be asked to do so. The par amount of the outstanding consolidated obligations of all 12 FHLBanks was $765,980 at March 31, 2011, and $796,374 at December 31, 2010. The par value of the Bank's participation in consolidated obligations was $137,190 at March 31, 2011, and $139,133 at December 31, 2010. For more information on the joint and several liability regulation, see “Item 8. Financial Statements and Supplementary Data – Note 20 – Commitments and Contingencies” in the Bank's 2010 Form 10-K.

Off-balance sheet commitments as of March 31, 2011, and December 31, 2010, were as follows:

	March 31, 2011						December 31, 2010
	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	$	1,696	$	4,247	$	5,943	$	1,554	$	4,481	$	6,035
Commitments to fund additional advances	3		—		3		304		—		304
Unsettled consolidated obligation bonds, par(1)	1,485		—		1,485		205		—		205
Unsettled consolidated obligation discount notes, par	5		—		5		—		—		—
Interest rate exchange agreements, traded but not yet settled	1,045		—		1,045		95		—		95

(1)    AtMarch 31, 2011, and December 31, 2010, $1,045 and $95 were hedged with associated interest rate swaps, respectively.

50

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

Advance commitments are generally for periods up to 12 months. Advances funded under advance commitments are fully collateralized at the time of funding (see Note 9 – Allowance for Credit Losses). Based on the Bank's credit analyses of members' financial condition and collateral requirements, no allowance for losses was deemed necessary by the Bank on the advance commitments outstanding as of March 31, 2011, and December 31, 2010. The estimated fair value of advance commitments was immaterial to the balance sheet as of March 31, 2011, and December 31, 2010.

Standby letters of credit are generally issued for a fee on behalf of members to support their obligations to third parties. If the Bank is required to make payment for a beneficiary's drawing under a letter of credit, the amount is charged to the member's demand deposit account with the Bank. The original terms of these standby letters of credit range from 42 days to 10 years, including a final expiration in 2021.

The value of the Bank's obligations related to standby letters of credit is recorded in other liabilities and amounted to $24 at March 31, 2011, and $26 at December 31, 2010. Letters of credit are fully collateralized at the time of issuance. Based on the Bank's credit analyses of members' financial condition and collateral requirements, no allowance for losses was deemed necessary by the Bank on the letters of credit outstanding as of March 31, 2011, and December 31, 2010.

The Bank executes interest rate exchange agreements with major banks and derivatives entities affiliated with broker-dealers that have, or are supported by guarantees from related entities that have, long-term unsecured, unsubordinated debt or deposit ratings from Standard & Poor's, Moody's, and/or Fitch, where the lowest rating is A-/A3 or better. The Bank also executes interest rate exchange agreements with its members. The Bank enters into master agreements with netting provisions with all counterparties and into bilateral security agreements with all active derivatives dealer counterparties. All member counterparty master agreements, excluding those with derivatives dealers, are subject to the terms of the Bank's Advances and Security Agreement with members, and all member counterparties (except for those that are derivatives dealers) must fully collateralize the Bank's net credit exposure. As of March 31, 2011, the Bank had pledged as collateral securities with a carrying value of $58, all of which could be sold or repledged, to counterparties that had market risk exposure to the Bank related to derivatives. As of December 31, 2010, the Bank had pledged as collateral securities with a carrying value of $84, all of which could be sold or repledged, to counterparties that had market risk exposure to the Bank related to derivatives.

The Bank may be subject to various pending legal proceedings that may arise in the normal course of business. After consultation with legal counsel, the Bank does not anticipate that the ultimate liability, if any, arising out of these matters will have a material effect on its financial condition or results of operations.

Other commitments and contingencies are discussed in Note 7 – Advances, Note 8 – Mortgage Loans Held for Portfolio, Note 11 – Consolidated Obligations, Note 12 – Capital, and Note 14 – Derivatives and Hedging Activities.

Note 17 — Transactions with Certain Members, Certain Nonmembers, and Other FHLBanks

Transactions with Certain Members and Certain Nonmembers. The following tables set forth information at the dates and for the periods indicated with respect to transactions with: (i) members and nonmembers holding more than 10% of the outstanding shares of the Bank's capital stock, including mandatorily redeemable capital stock, at each respective period end, (ii) members that had an officer or director serving on the Bank's Board of Directors at any time during the periods indicated, and (iii) affiliates of the foregoing members and nonmembers. All transactions with members, the nonmembers described in the preceding sentence, and their respective affiliates are entered into in the normal course of business.

51

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

	March 31, 2011		December 31, 2010
Assets:
Cash and due from banks	$	1	$	—
Investments(1)	3,136		2,568
Advances	55,495		57,567
Mortgage loans held for portfolio	1,751		1,888
Accrued interest receivable	31		80
Derivative assets	677		762
Total	$	61,091	$	62,865
Liabilities:
Deposits	$	678	$	760
Mandatorily redeemable capital stock	3,102		3,001
Derivative liabilities	3		4
Total	$	3,783	$	3,765
Notional amount of derivatives	$	44,817	$	49,695
Standby letters of credit	3,535		3,764

(1)    Investments consist of Federal funds sold, available-for-sale securities, and held-to-maturity securities issued by and/or purchased from the members or nonmembers described in this section or their affiliates.

	Three Months Ended
	March 31, 2011			March 31, 2010
Interest Income:
Investments(1)	$	16		$	26
Advances(2)	49			170
Mortgage loans held for portfolio	22			29
Total	$	87		$	225
Interest Expense:
Mandatorily redeemable capital stock	$	3		$	3
Consolidated obligations(3)	(124		)	(185		)
Total	$	(121	)	$	(182	)
Other Income/(Loss):
Net gain/(loss) on derivatives and hedging activities	$	(101	)	$	3
Other income	1			1
Total	$	(100	)	$	4

(1)    Investments consist of Federal funds sold, available-for-sale securities, and held-to-maturity securities issued by and/or purchased from the members or nonmembers described in this section or their affiliates.

(2)    Includes the effect of associated derivatives with the members or nonmembers described in this section or their affiliates.

(3)    Reflects the effect of associated derivatives with the members or nonmembers described in this section or their affiliates.

Transactions with Other FHLBanks. Transactions with other FHLBanks are identified on the face of the Bank's financial statements.

Note 18 — Subsequent Events

The Bank evaluated events subsequent to March 31, 2011, until the time of the Form 10-Q filing with the Securities and Exchange Commission, and no material subsequent events were identified, other than those discussed below.

On April 28, 2011, the Bank announced that it plans to repurchase up to $500 in excess capital stock on May 16, 2011. The amount of excess capital stock to be repurchased from any shareholder will be based on the shareholder's pro rata ownership share of total capital stock outstanding as of the repurchase date, up to the amount of the

52

Federal Home Loan Bank of San Francisco

Notes to Financial Statements (continued)

shareholder's excess capital stock.

On April 28, 2011, the Bank's Board of Directors declared a cash dividend for the first quarter of 2011 at an annualized dividend rate of 0.31%. The Bank recorded the first quarter dividend on April 28, 2011, the day it was declared by the Board of Directors. The Bank expects to pay the first quarter dividend (including dividends on mandatorily redeemable capital stock), which will total $9, on or about May 12, 2011. The Bank will pay the dividend in cash rather than stock form to comply with Finance Agency rules.

53

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements contained in this quarterly report on Form 10-Q, including statements describing the objectives, projections, estimates, or predictions of the future of the Federal Home Loan Bank of San Francisco (Bank) or the Federal Home Loan Bank System, are “forward-looking statements.” These statements may use forward-looking terms, such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “probable,” “project,” “should,” “will,” or their negatives or other variations on these terms, and include statements related to, among others, gains and losses on derivatives, plans to pay dividends and repurchase excess capital stock, future other-than-temporary impairment charges, future classification of securities, satisfaction of the Federal Home Loan Banks' Resolution Funding Corporation (REFCORP) obligation, amendments to the Bank's Capital Plan and Joint Capital Enhancement Agreement, and reform legislation. The Bank cautions that by their nature, forward-looking statements involve risk or uncertainty that could cause actual results to differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. These risks and uncertainties include, among others, the following:

• changes in economic and market conditions, including conditions in the mortgage, housing, and capital markets;

• the volatility of market prices, rates, and indices;

• the timing and volume of market activity;

• political events, including legislative, regulatory, judicial, or other developments that affect the Bank, its members, counterparties, or investors in the consolidated obligations of the Federal Home Loan Banks (FHLBanks), such as the impact of any government-sponsored enterprises (GSE) legislative reforms,

• changes in the Federal Home Loan Bank Act of 1932 as amended (FHLBank Act), changes in applicable sections of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, or changes in regulations applicable to the FHLBanks;

• changes in the Bank's capital structure;

• the ability of the Bank to pay dividends or redeem or repurchase capital stock;

• membership changes, including changes resulting from mergers or changes in the principal place of business of Bank members;

• the soundness of other financial institutions, including Bank members, nonmember borrowers or other counterparties, and the other FHLBanks;

• changes in the demand by Bank members for Bank advances;

• changes in the value or liquidity of collateral underlying advances to Bank members or nonmember borrowers or collateral pledged by the Bank's derivatives counterparties;

• changes in the fair value and economic value of, impairments of, and risks associated with the Bank's investments in mortgage loans and mortgage-backed securities (MBS) or other assets and the related credit enhancement protections;

• changes in the Bank's ability or intent to hold MBS and mortgage loans to maturity;

• competitive forces, including the availability of other sources of funding for Bank members;

• the willingness of the Bank's members to do business with the Bank whether or not the Bank is paying dividends or repurchasing excess capital stock;

• changes in investor demand for consolidated obligations and/or the terms of interest rate exchange or similar agreements;

• the ability of the Bank to introduce new products and services to meet market demand and to manage successfully the risks associated with new products and services;

• the ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which the Bank has joint and several liability; and

• technological changes and enhancements, and the Bank's ability to develop and support technology and information systems sufficient to manage the risks of the Bank's business effectively.

Readers of this report should not rely solely on the forward-looking statements and should consider all risks and uncertainties addressed throughout this report, as well as those discussed under “Item 1A. Risk Factors” in the Bank's Annual Report on Form 10-K for the year ended December 31, 2010 (2010 Form 10-K).

54

This Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Bank's interim financial statements and notes and the Bank's 2010 Form 10-K.

On July 30, 2008, the Housing and Economic Recovery Act of 2008 (Housing Act) was enacted. The Housing Act created a new federal agency, the Federal Housing Finance Agency (Finance Agency), which became the new federal regulator of the FHLBanks effective on the date of enactment of the Housing Act. On October 27, 2008, the Federal Housing Finance Board (Finance Board), the federal regulator of the FHLBanks prior to the creation of the Finance Agency, merged into the Finance Agency. Pursuant to the Housing Act, all regulations, orders, determinations, and resolutions that were issued, made, prescribed, or allowed to become effective by the Finance Board will remain in effect until modified, terminated, set aside, or superseded by the Director of the Finance Agency, any court of competent jurisdiction, or operation of law. References throughout this report to regulations of the Finance Agency also include the regulations of the Finance Board where they remain applicable.

Quarterly Overview

The Bank's business and results of operations, as well as those of its members, continued to be influenced by U.S. economic conditions during the first quarter of 2011. U.S. economic output expanded modestly during the period and employment growth gained some momentum, although the unemployment rate remained high. The housing sector continued to experience difficulties during the quarter. While the level of delinquencies and foreclosures declined, delays in processing problem loans contributed to the backlog of distressed properties that has been building up, putting ongoing downward pressure on home prices. As in earlier quarters, Bank members have been able to fund limited lending activity primarily with deposits and on-balance sheet liquidity.

Net income for the first quarter of 2011 was $60 million, compared with net income of $93 million for the first quarter of 2010. The decrease in net income for the first quarter of 2011 primarily reflected a decline in net interest income. In addition, the Bank incurred a higher credit-related other-than-temporary impairment (OTTI) charge on private-label residential mortgage-backed securities (PLRMBS) in the first quarter of 2011 relative to the same period in 2010. These negative effects on net income were partially offset by lower net losses associated with derivatives, hedged items, and financial instruments carried at fair value in the first quarter of 2011 compared to the first quarter of 2010.

Net interest income for the first quarter of 2011 was $256 million, down from $357 million for the first quarter of 2010. The decrease in net interest income for the first quarter of 2011 was due, in part, to lower advances and MBS balances and to lower earnings on invested capital (resulting from the lower interest rate environment). In addition, net interest income on economically hedged assets and liabilities was lower in the first quarter of 2011 relative to the year-earlier period. (This income is generally offset by net interest expense on derivative instruments used in economic hedges reflected in other income). These factors were partially offset by increased spreads on the Bank's portfolio of MBS and mortgage loans.

Other income/(loss) for the first quarter of 2011 was a loss of $142 million, compared to a loss of $195 million for the first quarter of 2010. The loss for the first quarter of 2011 reflected a credit-related OTTI charge of $109 million on certain PLRMBS, compared to a credit-related OTTI charge of $60 million for the first quarter of 2010. The net loss associated with derivatives, hedged items, and financial instruments carried at fair value was $25 million for the first quarter of 2011, compared to a net loss of $72 million for the first quarter of 2010. In addition, net interest expense on derivative instruments used in economic hedges, which was generally offset by net interest income on the economically hedged assets and liabilities, totaled $10 million in the first quarter of 2011, compared to $64 million in the first quarter of 2010.

The $25 million net loss associated with derivatives, hedged items, and financial instruments carried at fair value for the first quarter of 2011 reflected losses primarily associated with the effects of changes in interest rates. Net gains and losses on these financial instruments are primarily a matter of timing and will generally reverse through changes in future valuations and settlements of contractual interest cash flows over the remaining contractual terms to maturity, or by the exercised call or put dates. As of March 31, 2011, the Bank's retained earnings included a

55

cumulative net gain of $148 million associated with derivatives, hedged items, and financial instruments carried at fair value.

The credit-related OTTI charge of $109 million for the first quarter of 2011 reflected the impact of additional projected credit losses on loan collateral underlying certain of the Bank's PLRMBS. Each quarter, the Bank updates its OTTI analysis to reflect current and anticipated housing market conditions, observed and anticipated borrower behavior, and updated information on the loans supporting the Bank's PLRMBS. This process includes updating key aspects of the Bank's loss projection models. Projected collateral performance as of the end of the first quarter of 2011 primarily reflected higher projected loss severities on collateral supporting the Bank's PLRMBS compared to the prior quarter, reflecting the estimated cost of anticipated increases in foreclosure and liquidation timelines.

The PLRMBS that experienced OTTI related to credit during the first quarter of 2011 were reclassified from held-to-maturity to available-for-sale at their fair values as of March 31, 2011. The Bank does not intend to sell any of the securities in its available-for-sale portfolio or in its held-to-maturity portfolio. Accumulated other comprehensive loss declined $904 million during the first quarter of 2011, from $2.9 billion at December 31, 2010, to $2.0 billion at March 31, 2011, primarily because of two factors. As a result of improvement in the fair value of PLRMBS classified as available-for-sale, accumulated other comprehensive loss was reduced by $689 million. In addition, the Bank accreted $193 million from accumulated other comprehensive loss for PLRMBS classified as held-to-maturity that had experienced OTTI in prior quarters. For PLRMBS classified as held-to-maturity, the amount of the non-credit-related impairment is accreted prospectively, based on the amount and timing of future estimated cash flows, over the remaining life of the security as an increase in the carrying value of the security, with no effect on earnings unless the security is subsequently sold or there are additional decreases in the cash flows expected to be collected.

Additional information about investments and OTTI charges associated with the Bank's PLRMBS is provided in “Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Investments” and in “Item 1. Financial Statements – Note 6 – Other-Than-Temporary Impairment Analysis.” Additional information about the Bank's PLRMBS is also provided in “Part II. Item 1. Legal Proceedings.”

On April 28, 2011, the Bank's Board of Directors declared a cash dividend for the first quarter of 2011 at an annualized rate of 0.31%. The Bank recorded the first quarter dividend on April 28, 2011, the day it was declared by the Board of Directors. The Bank expects to pay the dividend (including dividends on mandatorily redeemable capital stock), which will total $9 million, on or about May 12, 2011. The Bank will pay the dividend in cash rather than stock form to comply with Finance Agency rules, which do not permit the Bank to pay dividends in the form of capital stock if the Bank's excess capital stock exceeds 1% of its total assets. As of March 31, 2011, the Bank's excess capital stock totaled $6.4 billion, or 4.22% of total assets.

As of March 31, 2011, the Bank was in compliance with all of its regulatory capital requirements. The Bank's total regulatory capital ratio was 8.76%, exceeding the 4.00% requirement. The Bank had $13.3 billion in regulatory capital, exceeding its risk-based capital requirement of $4.2 billion.

In light of the Bank's strong regulatory capital position, the Bank plans to repurchase up to $500 million in excess capital stock on May 16, 2011. The amount of excess capital stock to be repurchased from any shareholder will be based on the shareholder's pro rata ownership of total capital stock outstanding as of the repurchase date, up to the amount of the shareholder's excess capital stock.

The Bank will continue to monitor the condition of the Bank's PLRMBS portfolio, its overall financial performance and retained earnings, developments in the mortgage and credit markets, and other relevant information as the basis for determining the status of dividends and excess capital stock repurchases in future quarters.

During the first quarter of 2011, total assets decreased $1.0 billion, or 1%, to $151.4 billion at March 31, 2011, from $152.4 billion at December 31, 2010. Total advances declined $3.6 billion, or 4%, to $92.0 billion at March 31, 2011, from $95.6 billion at December 31, 2010. The continued decrease in member advance demand reflected general economic conditions and conditions in the mortgage and credit markets. Member liquidity remained high

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and lending activity remained subdued.

All advances made by the Bank are required to be fully collateralized in accordance with the Bank's credit and collateral requirements. The Bank monitors the creditworthiness of its members on an ongoing basis. In addition, the Bank has a comprehensive process for assigning values to collateral and determining how much it will lend against the collateral pledged. During the first quarter of 2011, the Bank continued to review and adjust its lending parameters based on market conditions. Based on the Bank's risk assessments of housing and mortgage market conditions and of individual members and their collateral, the Bank also continued to adjust collateral terms for individual members during the first quarter of 2011.

Four member institutions were placed into receivership during the first quarter of 2011. One institution had no advances outstanding at the time it was placed into receivership. The advances outstanding to the remaining three institutions were assumed by other institutions, and no losses were incurred by the Bank. Bank capital stock held by one of the institutions totaling $2 million was classified as mandatorily redeemable capital stock (a liability). The capital stock of the other three institutions was transferred to other member institutions.

From April 1, 2011, to April 29, 2011, one member institution was placed into receivership.The advances outstanding to this institution was assumed by another member institution, and no losses were incurred by the Bank.The Bank capital stock held by this institution was transferred to another member institution.

On April 4, 2011, Citibank (South Dakota), National Association (Citibank South Dakota) filed a Form 8-K with the Securities and Exchange Commission and reported that on March 29, 2011, Citibank South Dakota entered into a Plan of Merger (Merger Agreement) with its affiliate Citibank, N.A., a national banking association (Citibank, N.A.). Citibank, N.A., is a member of the Bank and one of its largest borrowers. According to the Form 8-K, subject to the terms of the Merger Agreement and stockholder and regulatory approvals, Citibank South Dakota will be merged into Citibank, N.A. In accordance with the Merger Agreement, the main office of Citibank, N.A., will be in Sioux Falls, South Dakota. In that case, Citibank, N.A., would no longer be eligible for membership in the Bank and would no longer be able to take out new advances from the Bank. A decrease in advances to any departing member, if not replaced with advances to other members, results in a reduction of the Bank's total assets and net income. The timing and magnitude of the impact of a decrease in the amount of advances would depend on a number of factors, including: the amount and the period over which the advances were prepaid or repaid; the amount and timing of any corresponding decreases in activity-based capital stock; the profitability of the advances; the extent to which consolidated obligations mature as the advances are prepaid or repaid; and the Bank's ability to extinguish consolidated obligations or transfer them to other FHLBanks and the associated costs.

Several recent issues are contributing to ongoing uncertainty in the housing and mortgage markets, including allegations of widespread failures in the processing of home mortgage foreclosures and increasing investor demands for sellers to repurchase mortgage loans that do not conform to the original representations and warranties. The Bank is monitoring developments in these areas to assess the potential impact on the Bank's PLRMBS and on the creditworthiness or pledged mortgage collateral of any large Bank member or affiliate affected by these issues.

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Financial Highlights

The following table presents a summary of certain financial information for the Bank for the periods indicated.

Financial Highlights

(Unaudited)

(Dollars in millions)	March 31, 2011			December 31, 2010			September 30, 2010			June 30, 2010			March 31, 2010
Selected Balance Sheet Items at Quarter End
Total Assets	$	151,444		$	152,423		$	142,695		$	158,198		$	173,851
Advances	92,005			95,599			89,327			95,747			112,139
Mortgage Loans Held for Portfolio, Net	2,205			2,381			2,623			2,788			2,909
Investments(1)	52,413			52,582			49,889			51,139			54,383
Consolidated Obligations:(2)
Bonds	115,464			121,120			118,764			129,524			136,588
Discount Notes	22,951			19,527			11,138			15,788			24,764
Mandatorily Redeemable Capital Stock	3,102			3,749			3,627			4,690			4,858
Capital Stock—Class B—Putable	8,496			8,282			8,875			8,280			8,561
Restricted Retained Earnings	1,663			1,609			1,478			1,350			1,326
Accumulated Other Comprehensive Loss	(2,039		)	(2,943		)	(3,152		)	(3,332		)	(3,501		)
Total Capital	8,120			6,948			7,201			6,298			6,386
Selected Operating Results for the Quarter
Net Interest Income	$	256		$	270		$	306		$	363		$	357
Provision for Credit Losses on Mortgage Loans	—			—			—			2			—
Other Income/(Loss)	(142		)	(38		)	(86		)	(285		)	(195		)
Other Expense	32			41			33			35			36
Assessments	22			51			50			12			33
Net Income	$	60		$	140		$	137		$	29		$	93
Selected Other Data for the Quarter
Net Interest Margin(3)	0.69		%	0.72		%	0.81		%	0.87		%	0.78		%
Operating Expenses as a Percent of Average Assets	0.07			0.07			0.07			0.07			0.06
Return on Average Assets	0.16			0.37			0.36			0.07			0.20
Return on Average Equity	3.26			8.04			8.38			1.87			5.96
Annualized Dividend Rate(4)	0.29			0.39			0.44			0.26			0.27
Dividend Payout Ratio(5)	10.36			5.90			6.74			18.60			6.70
Average Equity to Average Assets Ratio	4.92			4.61			4.30			3.76			3.41
Selected Other Data at Quarter End
Regulatory Capital Ratio(6)	8.76			8.95			9.80			9.05			8.48
Duration Gap (in months)	1			1			7			6			4

(1) Investments consist of Federal funds sold, trading securities, available-for-sale securities, held-to-maturity securities, securities purchased under agreements to resell, and loans to other Federal Home Loan Banks (FHLBanks).

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(2) As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all of the FHLBanks have joint and several liability for FHLBank consolidated obligations, which are backed only by the financial resources of the FHLBanks. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of March 31, 2011, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par amount of the outstanding consolidated obligations of all 12 FHLBanks at the dates indicated was as follows:

	Par Amount (In millions)
March 31, 2011	$	765,980
December 31, 2010	796,374
September 30, 2010	806,007
June 30, 2010	846,481
March 31, 2010	870,928

(3) Net interest margin is net interest income (annualized) divided by average interest-earning assets.

(4) On April 28, 2011, the Bank's Board of Directors declared a cash dividend for the first quarter of 2011 at an annualized dividend rate of 0.31%. The Bank will record and pay the first quarter dividend during the second quarter of 2011.

(5) This ratio is calculated as dividends per share divided by net income per share.

(6) This ratio is calculated as regulatory capital divided by total assets. Regulatory capital includes mandatorily redeemable capital stock (which is classified as a liability) and excludes accumulated other comprehensive income.

Results of Operations

First Quarter of 2011 Compared to First Quarter of 2010

Net Interest Income. The primary source of Bank earnings is net interest income, which is the interest earned on advances, mortgage loans, and investments, less interest paid on consolidated obligations, deposits, and other borrowings. The Average Balance Sheets table that follows presents the average balances of earning asset categories and the sources that fund those earning assets (liabilities and capital) for the first quarter of 2011 and 2010, together with the related interest income and expense. It also presents the average rates on total earning assets and the average costs of total funding sources.

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Average Balance Sheets
	Three Months Ended
	March 31, 2011							March 31, 2010
(Dollars in millions)	Average Balance			Interest Income/ Expense		Average Rate		Average Balance			Interest Income/ Expense		Average Rate
Assets
Interest-earning assets:
Federal funds sold	$	16,575		$	8	0.20	%	$	14,641		$	5	0.14	%
Trading securities:
MBS	24			—		3.16		29			—		4.16
Other investments	3,061			5		0.66		—			—		—
Available-for-sale securities:(1)
MBS	79			—		—		—			—		—
Other investments	1,928			1		0.27		1,934			1		0.23
Held-to-maturity securities:(1)
MBS	24,521			222		3.67		30,447			283		3.77
Other investments	8,769			5		0.25		10,103			5		0.20
Mortgage loans held for portfolio, net	2,284			28		4.99		2,969			36		4.92
Advances(2)	93,400			192		0.83		125,062			332		1.08
Deposits with other FHLBanks	—			—		0.09		2			—		0.01
Loans to other FHLBanks	1			—		0.17		13			—		0.09
Total interest-earning assets	150,642			461		1.24		185,200			662		1.45
Other assets(3)(4)(5)	384			—		—		102			—		—
Total Assets	$	151,026		$	461	1.24	%	$	185,302		$	662	1.45	%
Liabilities and Capital
Interest-bearing liabilities:
Consolidated obligations:
Bonds(2)	$	117,762		$	191	0.66	%	$	147,769		$	289	0.79	%
Discount notes	19,536			11		0.23		23,152			13		0.23
Deposits(3)	943			—		0.03		1,719			—		—
Borrowings from other FHLBanks	7			—		0.18		1			—		0.13
Mandatorily redeemable capital stock	3,334			3		0.34		4,850			3		0.27
Other borrowings	—			—		—		2			—		0.10
Total interest-bearing liabilities	141,582			205		0.59		177,493			305		0.70
Other liabilities(3)(4)	2,017			—		—		1,498			—		—
Total Liabilities	143,599			205		0.58		178,991			305		0.69
Total Capital	7,427			—		—		6,311			—		—
Total Liabilities and Capital	$	151,026		$	205	0.55	%	$	185,302		$	305	0.67	%
Net Interest Income				$	256						$	357
Net Interest Spread(6)						0.65	%						0.75	%
Net Interest Margin(7)						0.69	%						0.78	%
Interest-earning Assets/Interest-bearing Liabilities	106.40		%					104.34		%

(1) The average balances of available-for-sale securities and held-to-maturity securities are reflected at amortized cost. As a result, the average rates do not reflect changes in fair value or non-credit-related OTTI charges.

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(2) Interest income/expense and average rates include the effect of associated interest rate exchange agreements, as follows:

	Three Months Ended
	March 31, 2011									March 31, 2010
(In millions)	(Amortization)/ Accretion of Hedging Activities			Net Interest Settlements			Total Net Interest Income/(Expense)			(Amortization)/ Accretion of Hedging Activities			Net Interest Settlements			Total Net Interest Income/(Expense)
Advances	$	(9	)	$	(84	)	$	(93	)	$	(17	)	$	(168	)	$	(185	)
Consolidated obligation bonds	22			330			352			24			511			535

(3) Average balances do not reflect the effect of reclassifications of cash collateral.

(4) Includes forward settling transactions and valuation adjustments for certain cash items.

(5) Includes non-credit-related OTTI charges on available-for-sale and held-to-maturity securities.

(6) Net interest spread is the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities.

(7) Net interest margin is net interest income (annualized) divided by average interest-earning assets.

The following table details the changes in interest income and interest expense for the first quarter of 2011 compared to the first quarter of 2010. Changes in both volume and interest rates influence changes in net interest income and the net interest margin.

Change in Net Interest Income: Rate/Volume Analysis Three Months Ended March 31, 2011, Compared to Three Months Ended March 31, 2010
	Increase/ (Decrease)			Attributable to Changes in(1)
(In millions)				Average Volume			Average Rate
Interest-earning assets:
Federal funds sold	$	3		$	1		$	2
Trading securities:
Other investments	5			5			—
Available-for-sale securities:
Other investments	—			—			—
Held-to-maturity securities:
MBS	(61		)	(54		)	(7		)
Other investments	—			(1		)	1
Mortgage loans held for portfolio	(8		)	(9		)	1
Advances(2)	(140		)	(73		)	(67		)
Total interest-earning assets	(201		)	(131		)	(70		)
Interest-bearing liabilities:
Consolidated obligations:
Bonds(2)	(98		)	(54		)	(44		)
Discount notes	(2		)	(2		)	—
Mandatorily redeemable capital stock	—			(1		)	1
Total interest-bearing liabilities	(100		)	(57		)	(43		)
Net interest income	$	(101	)	$	(74	)	$	(27	)

(1) Combined rate/volume variances, a third element of the calculation, are allocated to the rate and volume variances based on their relative sizes.

(2) Interest income/expense and average rates include the interest effect of associated interest rate exchange agreements.

Net interest income in the first quarter of 2011 was $256 million, a 28% decrease from $357 million in the first quarter of 2010. This decrease was driven primarily by the following:

• Interest income on non-MBS investments increased $8 million in the first quarter of 2011 compared to the first quarter of 2010. The increase consisted of a $5 million increase attributable to a 14% increase in average non-MBS investment balances and a $3 million increase attributable to higher average yields on

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non-MBS investments.

• Interest income from the mortgage portfolio decreased $69 million in the first quarter of 2011 compared to the first quarter of 2010. The decrease consisted of a $54 million decrease attributable to a 19% decrease in average MBS outstanding, a $7 million decrease attributable to lower average yields on MBS investments, and a $9 million decrease attributable to a 23% decrease in average mortgage loans outstanding, partially offset by a $1 million increase attributable to higher average yields on mortgage loans outstanding. Interest income from the mortgage portfolio includes the impact of cumulative retrospective adjustments for the amortization of net purchase discounts from the acquisition dates of the MBS and mortgage loans, which decreased interest income by an immaterial amount in the first quarter of 2011 and decreased interest income by $11 million in the first quarter of 2010. The unfavorable impact in the first quarter of 2010 was primarily due to faster projected prepayment speeds in the quarter resulting in acceleration in the recognition (as a reduction in income) of purchase premiums.

• Interest income from advances decreased $140 million in the first quarter of 2011 compared to the first quarter of 2010. The decrease consisted of a $67 million decrease attributable to lower average yields and a $73 million decrease attributable to a 25% decrease in average advances outstanding, reflecting lower member demand during the first quarter of 2011 relative to the first quarter of 2010. In addition, members and nonmember borrowers prepaid $0.7 billion of advances in the first quarter of 2011 and $6.4 billion in the first quarter of 2010. As a result, interest income was increased by net prepayment fees of $6 million in the first quarter of 2011 and $11 million in the first quarter of 2010.

• Interest expense on consolidated obligations (bonds and discount notes) decreased $100 million in the first quarter of 2011 compared to the first quarter of 2010. The decrease consisted of a $44 million decrease attributable to lower interest rates on consolidated obligations and a $56 million decrease attributable to lower average consolidated obligation balances, which paralleled the decline in advances and MBS investments. Lower interest rates enabled the Bank to refinance matured or called debt at lower rates.

The net interest margin for the first quarter of 2011 was 69 basis points, 9 basis points lower than the net interest margin for the first quarter of 2010, which was 78 basis points. The net interest spread for the first quarter of 2011 was 65 basis points, 10 basis points lower than the net interest spread from the first quarter of 2010.

Net interest income on economically hedged assets and liabilities was lower in the first quarter of 2011 relative to the year-earlier period. This income is generally offset by net interest expense on derivative instruments used in economic hedges, recognized in “Other Income/(Loss),” which was also lower in the first quarter of 2011, primarily because of the impact of lower interest rates throughout the first quarter of 2010 on the adjustable leg of the interest rate swaps.

Member demand for wholesale funding from the Bank can vary greatly depending on a number of factors, including economic and market conditions, competition from other wholesale funding sources, member deposit inflows and outflows, the activity level of the primary and secondary mortgage markets, and strategic decisions made by individual member institutions. As a result, Bank asset levels and operating results may vary significantly from period to period.

Other Income/(Loss)

The following table presents the components of “Other Income/(Loss)” for the three months ended March 31, 2011 and 2010.

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Other Income/(Loss)
	Three Months Ended
(In millions)	March 31, 2011			March 31, 2010
Other Income/(Loss):
Net loss on trading securities(1)	$	(1	)	$	—
Total other-than-temporary impairment loss	(88		)	(192		)
Net amount of impairment loss reclassified (from)/to other comprehensive income	(21		)	132
Net other-than-temporary impairment loss	(109		)	(60		)
Net loss on advances and consolidation obligation bonds held at fair value	(54		)	(100		)
Net gain/(loss) on derivatives and hedging activities	20			(36		)
Other	2			1
Total Other Income/(Loss)	$	(142	)	$	(195	)

(1)    The net gain/(loss) on trading securities that were economically hedged was insignificant during the three months ended March 31, 2011 and 2010, respectively.

Net Other-Than-Temporary Impairment Loss – The Bank recognized a $109 million credit-related OTTI charge on PLRMBS during the first quarter of 2011, compared to a $60 million credit-related OTTI charge on PLRMBS during the first quarter of 2010. The credit-related OTTI charge of $109 million for the first quarter of 2011 reflected the impact of additional projected credit losses on loan collateral underlying certain of the Bank's PLRMBS. Each quarter, the Bank updates its OTTI analysis to reflect current and anticipated housing market conditions, observed and anticipated borrower behavior, and updated information on the loans supporting the Bank's PLRMBS. This process includes updating key aspects of the Bank's loss projection models. Projected collateral performance as of the end of the first quarter of 2011 primarily reflected higher projected loss severities on collateral supporting the Bank's PLRMBS compared to the prior quarter, reflecting the estimated cost of anticipated increases in foreclosure and liquidation timelines.

Additional information about the OTTI charge is provided in “Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Investments” and in “Item 1. Financial Statements – Note 6 – Other-Than-Temporary Impairment Analysis.”

Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held at Fair Value –The following table presents the net gain/(loss) on advances and consolidated obligation bonds held at fair value, for which the Bank elected the fair value option for the three months ended March 31, 2011 and 2010.

Net Gain/(Loss) on Advances and Consolidated Obligation Bonds Held at Fair Value
	Three Months Ended
(In millions)	March 31, 2011			March 31, 2010
Advances	$	(51	)	$	(80	)
Consolidated obligation bonds	(3		)	(20		)
Total	$	(54	)	$	(100	)

In general, transactions elected for the fair value option are in economic hedge relationships. Gains or losses on these transactions are generally offset by losses or gains on derivatives that economically hedge these instruments.

For the first quarter of 2011, the unrealized net fair value losses on advances were primarily driven by the increased interest rate environment relative to the actual coupon rates on the Bank's advances and by lower swaption volatilities used in pricing fair value option putable advances during the first quarter of 2011. The unrealized net fair value losses on consolidated obligation bonds were primarily driven by decreased interest rate spreads on consolidated obligation bonds relative to the actual spreads on the Bank's outstanding consolidated obligation bonds

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and by lower swaption volatilities used in pricing fair value option callable bonds during the first quarter of 2011.

For the first quarter of 2010, the unrealized net fair value losses on advances were primarily driven by advances with a maturity of less than six months where interest rates increased relative to the actual coupon rates on the Bank's advances, partially offset by gains resulting from the decreased swaption volatilities used in pricing fair value option putable advances during the first quarter of 2010. The unrealized net fair value losses on consolidated obligation bonds were primarily driven by the decreased long-term interest rate environment relative to the actual coupon rates on the consolidated obligation bonds and lower swaption volatilities used in pricing fair value option callable bonds during the first quarter of 2010.

Net Gain/(Loss) on Derivatives and Hedging Activities – The following table shows the accounting classification of hedges and the categories of hedged items that contributed to the gains and losses on derivatives and hedged items in the first quarter of 2011 and 2010.

Sources of Gains/(Losses) Recorded in Net (Loss)/Gain on Derivatives and Hedging Activities Three Months Ended March 31, 2011, Compared to Three Months Ended March 31, 2010
(In millions)	March 31, 2011											March 31, 2010
	Gain/(Loss)					Net Interest Income/ (Expense) on			Total			Gain/(Loss)						Net Interest Income/ (Expense) on			Total
Hedged Item	Fair Value Hedges, Net		Economic Hedges			Economic Hedges						Fair Value Hedges, Net			Economic Hedges			Economic Hedges
Advances:
Elected for fair value option	$	—	$	64		$	(57	)	$	7		$	—		$	61		$	(146	)	$	(85	)
Not elected for fair value option	1		8			(8		)	1			(1		)	1			(14		)	(14		)
Consolidated obligation bonds:
Elected for fair value option	—		(7		)	25			18			—			24			54			78
Not elected for fair value option	—		(41		)	42			1			5			(44		)	64			25
Consolidated obligation discount notes:
Not elected for fair value option	—		5			(10		)	(5		)	—			(18		)	(22		)	(40		)
Non-MBS Investments:
Not elected for fair value option	—		—			(2		)	(2		)	—			—			—			—
Total	$	1	$	29		$	(10	)	$	20		$	4		$	24		$	(64	)	$	(36	)

During the first quarter of 2011, net gains on derivatives and hedging activities totaled $20 million compared to net losses of $36 million in the first quarter of 2010. These amounts included net interest expense on derivative instruments used in economic hedges of $10 million in the first quarter of 2011, compared to net interest expense on derivative instruments used in economic hedges of $64 million in the first quarter of 2010. The decrease in net interest expense was primarily due to the impact of lower interest rates throughout the first quarter of 2011 on the adjustable rate leg of the interest rate swaps.

Excluding the $10 million impact from net interest expense on derivative instruments used in economic hedges, net gains for the first quarter of 2011 totaled $30 million as detailed above. The $30 million in net gains were primarily attributable to changes in interest rates and decreased swaption volatilities during the first quarter of 2011.

Excluding the $64 million impact from net interest expense on derivative instruments used in economic hedges, net gains for the first quarter of 2010 totaled $28 million as detailed above. The $28 million in net gains were primarily attributable to changes in interest rates and decreased swaption volatilities during the first quarter of 2010.

Under the accounting for derivatives instruments and hedging activities, the Bank is required to carry all of its derivative instruments on the balance sheet at fair value. If derivatives meet the hedging criteria, including effectiveness measures, the underlying hedged instruments may also be carried at fair value so that some or all of the unrealized gain or loss recognized on the derivative is offset by a corresponding unrealized loss or gain on the

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underlying hedged instrument. The unrealized gain or loss on the “ineffective” portion of all hedges, which represents the amount by which the change in the fair value of the derivative differs from the change in the fair value of the hedged item or the variability in the cash flows of the forecasted transaction, is recognized in current period earnings. In addition, certain derivatives are associated with assets or liabilities but do not qualify as fair value or cash flow hedges under the accounting for derivatives instruments and hedging activities. These economic hedges are recorded on the balance sheet at fair value with the unrealized gain or loss recorded in earnings without any offsetting unrealized loss or gain from the associated asset or liability.

Under the fair value option, the Bank elected to carry certain assets and liabilities (advances and consolidated obligation bonds) at fair value. In general, transactions elected for the fair value option are in economic hedge relationships.

In general, nearly all of the Bank's derivatives and hedged instruments, as well as certain assets and liabilities that are carried at fair value, are held to the maturity, call, or put date. For these financial instruments, net gains or losses are primarily a matter of timing and will generally reverse through changes in future valuations and settlements of contractual interest cash flows over the remaining contractual terms to maturity, or by the exercised call or put dates. However, the Bank may have instances in which hedging relationships are terminated prior to maturity or prior to the call or put dates. Terminating the hedging relationship may result in a realized gain or loss. In addition, the Bank may have instances in which it may sell trading securities prior to maturity, which may also result in a realized gain or loss.

The ongoing impact of these valuation adjustments on the Bank cannot be predicted, and the Bank's retained earnings in the future may not be sufficient to fully offset the impact of these valuation adjustments. The effects of these valuation adjustments may lead to significant volatility in future earnings, including earnings available for dividends.

Additional information about derivatives and hedging activities is provided in “Item 1. Financial Statements – Note 14 – Derivatives and Hedging Activities.”

Return on Average Equity

Return on average equity was 3.26% (annualized) in the first quarter of 2011, compared to 5.96% (annualized) in the first quarter of 2010. This decrease reflected the decrease in net income in the first quarter of 2011 coupled with the increase in average equity in the first quarter of 2011.

Dividends and Retained Earnings

By regulations governing the operations of the FHLBanks, dividends may be paid only out of current net earnings or previously retained earnings. As required by the regulations, the Bank has a formal Retained Earnings and Dividend Policy that is reviewed at least annually by the Bank's Board of Directors. The Board of Directors may amend the Retained Earnings and Dividend Policy from time to time. The Bank's Retained Earnings and Dividend Policy establishes amounts to be retained in restricted retained earnings, which are not made available for dividends in the current dividend period. The Bank may be restricted from paying dividends if it is not in compliance with any of its minimum capital requirements or if payment would cause the Bank to fail to meet any of its minimum capital requirements. In addition, the Bank may not pay dividends if any principal or interest due on any consolidated obligation has not been paid in full or is not expected to be paid in full, or, under certain circumstances, if the Bank fails to satisfy certain liquidity requirements under applicable regulations.

The regulatory liquidity requirements state that each FHLBank must: (i) maintain eligible high quality assets (advances with a maturity not exceeding five years, U.S. Treasury securities investments, and deposits in banks or trust companies) in an amount equal to or greater than the deposits received from members, and (ii) hold contingent liquidity in an amount sufficient to meet its liquidity needs for at least five business days without access to the consolidated obligations markets. At March 31, 2011, advances maturing within five years totaled $84.8 billion, significantly in excess of the $0.1 billion of member deposits on that date. At December 31, 2010, advances

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maturing within five years totaled $88.2 billion, also significantly in excess of the $0.1 billion of member deposits on that date. In addition, as of March 31, 2011, and December 31, 2010, the Bank's estimated total sources of funds obtainable from liquidity investments, repurchase agreement borrowings collateralized by the Bank's marketable securities, and advance repayments would have allowed the Bank to meet its liquidity needs for more than 90 days without access to the consolidated obligations markets.

Retained Earnings Related to Valuation Adjustments –In accordance with the Bank's Retained Earnings and Dividend Policy, the Bank retains in restricted retained earnings any cumulative net gains in earnings (net of applicable assessments) resulting from valuation adjustments.

In general, the Bank's derivatives and hedged instruments, as well as certain assets and liabilities that are carried at fair value, are held to the maturity, call, or put date. For these financial instruments, net gains or losses are primarily a matter of timing and will generally reverse through changes in future valuations and settlements of contractual interest cash flows over the remaining contractual terms to maturity, or by the exercised call or put dates. However, the Bank may have instances in which hedging relationships are terminated prior to maturity or prior to the call or put dates. Terminating the hedging relationship may result in a realized gain or loss. In addition, the Bank may have instances in which it may sell trading securities prior to maturity, which may also result in a realized gain or loss.

As the cumulative net gains are reversed by periodic net losses and settlements of contractual interest cash flows, the amount of the cumulative net gains decreases. The amount of retained earnings required by this provision of the policy is therefore decreased, and that portion of the previously restricted retained earnings becomes unrestricted and may be made available for dividends. In this case, the potential dividend payout in a given period will be substantially the same as it would have been without the effects of valuation adjustments, provided that at the end of the period the cumulative net effect since inception remains a net gain. The purpose of the valuation adjustments category of restricted retained earnings is to provide sufficient retained earnings to offset future net losses that result from the reversal of cumulative net gains, so that potential dividend payouts in future periods are not necessarily affected by the reversals of these gains. Although restricting retained earnings in accordance with this provision of the policy may help preserve the Bank's ability to pay dividends, the reversal of cumulative net gains in any given period may result in a net loss if the reversal exceeds net earnings before the impact of valuation adjustments for that period. Also, if the net effect of valuation adjustments since inception results in a cumulative net loss, the Bank's other retained earnings at that time (if any) may not be sufficient to offset the net loss. As a result, the future effects of valuation adjustments may cause the Bank to reduce or temporarily suspend dividend payments.

The retained earnings restricted in accordance with this provision of the Bank's Retained Earnings and Dividend Policy totaled $149 million at March 31, 2011, and $148 million at December 31, 2010.

Other Retained Earnings – Targeted Buildup –In addition to any cumulative net gains resulting from valuation adjustments, the Bank holds an additional amount in restricted retained earnings intended to protect members' paid-in capital from the effects of an extremely adverse credit event, an extremely adverse operations risk event, an extremely high level of quarterly valuation losses related to the Bank's derivatives and associated hedged items and financial instruments carried at fair value, and the risk of higher-than-anticipated credit-related OTTI of PLRMBS, especially in periods of extremely low net income resulting from an adverse interest rate environment.

The Board of Directors has set the targeted amount of restricted retained earnings at $1.8 billion. The Bank's retained earnings target may be changed at any time. The Board of Directors will periodically review the methodology and analysis to determine whether any adjustments are appropriate. The retained earnings restricted in accordance with this provision of the Retained Earnings and Dividend Policy totaled $1.5 billion at March 31, 2011, and $1.5 billion at December 31, 2010.

For more information on these two categories of restricted retained earnings, see “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital” in the Bank's 2010 Form 10-K.

Effective February 28, 2011, the 12 FHLBanks, including the Bank, entered into a Joint Capital Enhancement Agreement (Agreement) intended to enhance the capital position of each FHLBank. The intent of the Agreement is

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to allocate that portion of each FHLBank's earnings historically paid to satisfy its REFCORP obligation to a separate retained earnings account at that FHLBank.

Each FHLBank is currently required to contribute 20% of its earnings toward payment of the interest on REFCORP bonds. The Agreement provides that, upon full satisfaction of the REFCORP obligation, each FHLBank will contribute 20% of its net income each quarter to a restricted retained earnings account until the balance of that account equals at least 1% of that FHLBank's average balance of outstanding consolidated obligations for the previous quarter. These restricted retained earnings will not be available to pay dividends.

The Agreement further requires each FHLBank to submit an application to the Finance Agency for approval to amend its capital plan or capital plan submission, as applicable, consistent with the terms of the Agreement. Under the Agreement, if the FHLBanks' REFCORP obligation terminates before the Finance Agency has approved all proposed capital plan amendments submitted pursuant to the Agreement, each FHLBank will nevertheless be required to commence the required allocation to its separate restricted retained earnings account beginning as of the end of the calendar quarter in which the final payments are made by the FHLBanks with respect to their REFCORP obligations. Depending on the earnings of the FHLBanks, the REFCORP obligations could be satisfied as of the end of the second quarter of 2011. As of the date of this report, the Bank is considering amendments to its capital plan to incorporate the terms of the Agreement. If approved by the Finance Agency, amendments to the capital plan could result in conforming amendments to the Agreement, including, among other things, possible revisions to the termination provisions and related provisions affecting restrictions on the separate restricted retained earnings account.

For more information on the Agreement, see “Item 8. Financial Statements and Supplementary Data – Note 23 – Subsequent Events” in the Bank's 2010 Form 10-K.

Dividend Payments – Finance Agency rules state that FHLBanks may declare and pay dividends only from previously retained earnings or current net earnings, and may not declare or pay dividends based on projected or anticipated earnings. There is no requirement that the Board of Directors declare and pay any dividend. A decision by the Board of Directors to declare or not declare a dividend is a discretionary matter and is subject to the requirements and restrictions of the FHLBank Act and applicable requirements under the regulations governing the operations of the FHLBanks.

The Bank paid dividends (including dividends on mandatorily redeemable capital stock) totaling $9 million at an annualized rate of 0.29% in the first quarter of 2011, and $9 million at an annualized rate of 0.27% in the first quarter of 2010.

On April 28, 2011, the Bank's Board of Directors declared a cash dividend for the first quarter of 2011 at an annualized rate of 0.31%. The Bank recorded the first quarter dividend on April 28, 2011, the day it was declared by the Board of Directors. The Bank expects to pay the first quarter dividend (including dividends on mandatorily redeemable capital stock), which will total $9 million, on or about May 12, 2011.

The Bank will pay the first quarter 2011 dividend in cash rather than stock form to comply with Finance Agency rules, which do not permit the Bank to pay dividends in the form of capital stock if the Bank's excess stock exceeds 1% of its total assets. As of March 31, 2011, the Bank's excess capital stock totaled $6.4 billion, or 4.22% of total assets.

The Bank will continue to monitor the condition of its PLRMBS portfolio, its overall financial performance and retained earnings, developments in the mortgage and credit markets, and other relevant information as the basis for determining the status of dividends in future quarters.

For more information on the Bank's Retained Earnings and Dividend Policy, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Comparison of 2010 to 2009 – Dividends and Retained Earnings” in the Bank's 2010 Form 10-K.

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Financial Condition

Total assets were $151.4 billion at March 31, 2011, a 1% decrease from $152.4 billion at December 31, 2010. Advances decreased by $3.6 billion, or 4%, to $92.0 billion at March 31, 2011, from $95.6 billion at December 31, 2010. Average total assets were $151.0 billion for the first quarter of 2011, an 18% decrease compared to $185.3 billion for the first quarter of 2010. Average advances were $93.4 billion for the first quarter of 2011, a 25% decrease from $125.1 billion for the first quarter of 2010.

The continued decrease in member advance demand reflected general economic conditions and conditions in the mortgage and credit markets. Member liquidity remained high and lending activity remained subdued.

Advances outstanding at March 31, 2011, included unrealized gains of $515 million, of which $272 million represented unrealized gains on advances hedged in accordance with the accounting for derivative instruments and hedging activities and $243 million represented unrealized gains on economically hedged advances that are carried at fair value in accordance with the fair value option. Advances outstanding at December 31, 2010, included unrealized gains of $690 million, of which $363 million represented unrealized gains on advances hedged in accordance with the accounting for derivative instruments and hedging activities and $327 million represented unrealized gains on economically hedged advances that are carried at fair value in accordance with the fair value option. The overall decrease in the unrealized gains of the hedged advances and advances carried at fair value from December 31, 2010, to March 31, 2011, was primarily attributable to the effects of a decrease in the short-term interest rate environment relative to the actual coupon rates on the Bank's advances.

Total liabilities were $143.3 billion at March 31, 2011, a 1% decrease from $145.5 billion at December 31, 2010, reflecting decreases in consolidated obligations outstanding from $140.6 billion at December 31, 2010, to $138.4 billion at March 31, 2011. The decrease in consolidated obligations outstanding paralleled the decrease in assets during the first quarter of 2011. Average total liabilities were $143.6 billion for the first quarter of 2011, a 20% decrease compared to $179.0 billion for the first quarter of 2010. The decrease in average liabilities reflected decreases in average consolidated obligations, paralleling the decline in average assets.Average consolidated obligations were $137.3 billion in the first quarter of 2011 and $170.9 billion in the first quarter of 2010.

Consolidated obligations outstanding at March 31, 2011, included unrealized losses of $1.3 billion on consolidated obligation bonds hedged in accordance with the accounting for derivative instruments and hedging activities and unrealized gains of $103 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. Consolidated obligations outstanding at December 31, 2010, included unrealized losses of $1.6 billion on consolidated obligation bonds hedged in accordance with the accounting for derivative instruments and hedging activities and unrealized gains of $110 million on economically hedged consolidated obligation bonds that are carried at fair value in accordance with the fair value option. The overall decrease in the unrealized losses on the hedged consolidated obligation bonds and the consolidated obligation bonds carried at fair value from December 31, 2010, to March 31, 2011, was primarily attributable to a decrease in the long-term interest rate environment.

As provided by the FHLBank Act or regulations governing the operations of the FHLBanks, all FHLBanks have joint and several liability for all FHLBank consolidated obligations. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. The Bank has never been asked or required to repay the principal or interest on any consolidated obligation on behalf of another FHLBank, and as of March 31, 2011, and through the filing date of this report, does not believe that it is probable that it will be asked to do so. The par amount of the outstanding consolidated obligations of all 12 FHLBanks was $766.0 billion at March 31, 2011, and $796.4 billion at December 31, 2010.

As of March 31, 2011, Standard & Poor's Rating Services (Standard & Poor's) rated the FHLBanks' consolidated obligations AAA/A-1+, and Moody's Investors Service (Moody's) rated them Aaa/P-1, both with a stable outlook. As of March 31, 2011, Standard & Poor's assigned long-term credit ratings of AAA with a stable outlook to ten

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FHLBanks, including the Bank; AA+ with a stable outlook to the FHLBank of Chicago; and AA+ with a negative outlook to the FHLBank of Seattle. On April 20, 2011, Standard & Poor's affirmed its AAA rating on the consolidated obligations of the FHLBank System but revised its outlook from stable to negative. Standard & Poor's also revised its outlooks from stable to negative for 10 of the 12 individual FHLBanks while affirming their AAA long-term counterparty credit ratings. The outlooks on the FHLBank of Chicago and the FHLBank of Seattle were not revised. Standard & Poor's changes reflected its revision of the outlook on the long-term sovereign credit rating on the United States of America to negative from stable (AAA/Negative/A-1+) as of April 18, 2011. In the application of Standard & Poor's Government Related Entities criteria, the ratings of the FHLBank System and the FHLBanks are constrained by the long-term sovereign rating of the U.S. As of March 31, 2011, Moody's continued to assign all the FHLBanks a long-term credit rating of Aaa with a stable outlook. Changes in the long-term credit ratings of individual FHLBanks do not necessarily affect the credit rating of the consolidated obligations issued on behalf of the FHLBanks. Rating agencies may change a rating from time to time because of various factors, including operating results or actions taken, business developments, or changes in their opinion regarding, among other factors, the general outlook for a particular industry or the economy.

The Bank evaluated the publicly disclosed FHLBank regulatory actions and long-term credit ratings of other FHLBanks as of March 31, 2011, and as of each period end presented, and determined that it is unlikely the Bank will be required to repay any principal or interest associated with consolidated obligations for which the Bank is not the primary obligor.

The U.S. Treasury has projected that the statutory limit on the total amount of U.S. debt will be reached in May 2011. Although the U.S. Treasury could take measures to temporarily postpone the date it would default on its legal obligations, the U.S. Treasury currently projects that such measures would be exhausted in August 2011. If Congress does not increase the debt limit prior to that time, it is likely that such an occurrence would cause disruptions in the capital markets that could result in higher interest rates and borrowing costs for the FHLBanks. To the extent that the Bank cannot access funding when needed on acceptable terms to effectively manage its cost of funds, the Bank's financial condition and results of operations could be negatively affected.

Financial condition is further discussed under “Segment Information.”

Segment Information

The Bank uses an analysis of financial performance based on the balances and adjusted net interest income of two operating segments, the advances-related business and the mortgage-related business, as well as other financial information, to review and assess financial performance and to determine the allocation of resources to these two major business segments. For purposes of segment reporting, adjusted net interest income includes interest income and expense associated with economic hedges that are recorded in “Net gain/(loss) on derivatives and hedging activities” in other income and excludes interest expense that is recorded in “Mandatorily redeemable capital stock.” Other key financial information, such as any OTTI loss on the Bank's available-for-sale and held-to-maturity PLRMBS, other expenses, and assessments, are not included in the segment reporting analysis, but are incorporated into the Bank's overall assessment of financial performance. For a reconciliation of the Bank's operating segment adjusted net interest income to the Bank's total net interest income, see “Item 1. Financial Statements – Note 13 – Segment Information.”

Advances-Related Business. The advances-related business consists of advances and other credit products, related financing and hedging instruments, liquidity and other non-MBS investments associated with the Bank's role as a liquidity provider, and capital stock.

Assets associated with this segment decreased to $124.9 billion (82% of total assets) at March 31, 2011, from $128.4 billion (84% of total assets) at December 31, 2010, representing a decrease of $3.5 billion, or 3%. The continued decrease in member advance demand reflected general economic conditions and conditions in the mortgage and credit markets. Member liquidity remained high and lending activity remained subdued.

Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield

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on advances and non-MBS investments and the cost of the consolidated obligations funding these assets, including the cash flows from associated interest rate exchange agreements.

Adjusted net interest income for this segment was $93 million in the first quarter of 2011, a decrease of $45 million, or 33%, compared to $138 million in the first quarter of 2010. The decline was primarily attributable to lower advances balances coupled with a lower yield on capital resulting from the lower interest rate environment.

Members and nonmember borrowers prepaid $0.7 billion of advances in the first quarter of 2011 compared to $6.4 billion in the first quarter of 2010. As a result, interest income was increased by net prepayment fees of $6 million in the first quarter of 2011 and $11 million in the first quarter of 2010.

Adjusted net interest income for this segment represented 41% and 50% of total adjusted net interest income for the first quarter of 2011 and 2010, respectively.

Advances – The par amount of advances outstanding decreased by $3.4 billion, or 4%, to $91.5 billion at March 31, 2011, from $94.9 billion at December 31, 2010. The decrease was primarily attributable to the $2.4 billion decline in advances outstanding to the Bank's top five borrowers and their affiliates. Advances to the top five borrowers decreased to $71.6 billion at March 31, 2011, from $74.0 billion at December 31, 2010. (See “Item 1. Financial Statements and Supplementary Data – Note 7 – Advances.” for further information.) The remaining $1.0 billion decrease in total advances outstanding was attributable to a net decrease in advances to other borrowers of varying asset sizes and charter types. In total, 99 borrowers increased their advances during the first quarter of 2011, while 29 borrowers decreased their advances.

The $3.4 billion decrease in advances outstanding reflects a $5.0 billion decrease in fixed rate advances, a $0.1 billion decrease in daily variable rate advances, partially offset by a $1.7 billion increase in adjustable rate advances.

The components of the advances portfolio at March 31, 2011, and December 31, 2010, are presented in the following table.

Advances Portfolio by Product Type
	March 31, 2011				December 31, 2010
(Dollar in millions)	Par Amount		Percent of Total Par Amount		Par Amount		Percent of Total Par Amount
Adjustable – London Inter-Bank Offered Rate (LIBOR)	$	50,610	56	%	$	48,944	52	%
Adjustable – other indices	151		—		153		—
Adjustable – LIBOR, with caps and/or floors and PPS(1)	1,160		1		1,160		1
Subtotal adjustable rate advances	51,921		57		50,257		53
Fixed	30,865		35		35,373		38
Fixed – amortizing	384		—		395		—
Fixed – with PPS(1)	4,947		5		5,303		6
Fixed – with caps and PPS(1)	200		—		200		—
Fixed – callable at member's option	9		—		9		—
Fixed – callable at member's option with PPS(1)	406		—		274		—
Fixed – putable at Bank's option	1,777		2		2,039		2
Fixed – putable at Bank's option with PPS(1)	398		—		398		—
Subtotal fixed rate advances	38,986		42		43,991		46
Daily variable rate	583		1		661		1
Total par amount	$	91,490	100		$	94,909	100	%

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(1) Partial prepayment symmetry (PPS) is a product feature under which the Bank may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. Any prepayment credit on an advance with PPS would be limited to the lesser of 10% of the par value of the advance or the gain recognized on the termination of the associated interest rate swap, which may also include a similar contractual gain limitation.

Average advances were $93.4 billion in the first quarter of 2011, a 25% decrease from $125.1 billion in the first quarter of 2010. The decline in member advance demand reflected general economic conditions and conditions in the mortgage and credit markets. Member liquidity remained high and lending activity remained subdued.

For a discussion of advances credit risk, see “Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Advances.”

Non-MBS Investments –The Bank's non-MBS investment portfolio consists of financial instruments that are used primarily to facilitate the Bank's role as a cost-effective provider of credit and liquidity to members. These investments are also used as a source of liquidity to meet the Bank's financial obligations on a timely basis, which may supplement or reduce earnings. The Bank's total non-MBS investment portfolio was $28.2 billion as of March 31, 2011, a decrease of $2.9 billion, or 9%, from $31.1 billion as of December 31, 2010. In response to decreased demand by the Bank's counterparties, the Bank reduced its non-MBS investment portfolio, which resulted in an increase in cash held at the Federal Reserve Bank of San Francisco.

Cash and Due from Banks – Cash and due from banks increased to $3.8 billion at March 31, 2011, from $0.8 billion at December 31, 2010. The increase in cash and due from banks at March 31, 2011, was caused by lower demand by the Bank's counterparties in the overnight Federal funds market, which resulted in an increase in cash held at the Federal Reserve Bank of San Francisco.

Borrowings – Consistent with the decrease in advances, total liabilities (primarily consolidated obligations) funding the advances-related business decreased $4.7 billion, or 4%, from $121.5 billion at December 31, 2010, to $116.8 billion at March 31, 2011. For further information and discussion of the Bank's joint and several liability for FHLBank consolidated obligations, see “Management's Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition and “Item 1. Financial Statements and Supplementary Data – Note 16 – Commitments and Contingencies.”

To meet the specific needs of certain investors, fixed and adjustable rate consolidated obligation bonds may contain embedded call options or other features that result in complex coupon payment terms. When these consolidated obligation bonds are issued on behalf of the Bank, typically the Bank simultaneously enters into interest rate exchange agreements with features that offset the complex features of the bonds and, in effect, convert the bonds to adjustable rate instruments tied to an index, primarily LIBOR. For example, the Bank uses fixed rate callable bonds that are typically offset with interest rate exchange agreements with call features that offset the call options embedded in the callable bonds. This combined financing structure enables the Bank to meet its funding needs at costs not generally attainable solely through the issuance of comparable term non-callable debt.

At March 31, 2011, the notional amount of interest rate exchange agreements associated with the advances-related business totaled $165.6 billion, of which $28.9 billion were hedging advances, $132.8 billion were hedging consolidated obligations, $2.9 billion were economically hedging trading securities, and $1.0 billion were interest rate exchange agreements that the Bank entered into as an intermediary between exactly offsetting derivatives transactions with members and other counterparties. At December 31, 2010, the notional amount of interest rate exchange agreements associated with the advances-related business totaled $173.7 billion, of which $32.7 billion were hedging advances, $137.7 billion were hedging consolidated obligations, $2.3 billion were economically hedging trading securities, and $1.0 billion were interest rate exchange agreements that the Bank entered into as an intermediary between exactly offsetting derivatives transactions with members and other counterparties. The hedges associated with advances and consolidated obligations were primarily used to convert the fixed rate cash flows and non-LIBOR-indexed cash flows of the advances and consolidated obligations to adjustable rate LIBOR-indexed cash flows or to manage the interest rate sensitivity and net repricing gaps of assets, liabilities, and interest rate exchange agreements.

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FHLBank System consolidated obligation bonds and discount notes, along with similar debt securities issued by other GSEs such as Fannie Mae and Freddie Mac, are generally referred to as agency debt. The agency debt market is a large sector of the debt capital markets. The costs of debt issued by the FHLBanks and the other GSEs generally rise and fall with increases and decreases in general market interest rates. For more information, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in the Bank's 2010 Form 10-K.

Since December 16, 2008, the Federal Open Market Committee has not changed the target Federal funds rate. During the first quarter of 2011, yields on intermediate-term U.S. Treasury securities increased modestly as investors adjusted to improved U.S. economic indicators and potential future changes in Federal Reserve monetary policy. The following table provides selected market interest rates as of the dates shown.

Selected Market Interest Rates
Market Instrument	March 31, 2011		December 31, 2010		March 31, 2010		December 31, 2009
Federal Reserve target rate for overnight Federal funds	0-0.25	%	0-0.25	%	0-0.25	%	0-0.25	%
3-month Treasury bill	0.10		0.13		0.16		0.06
3-month LIBOR	0.30		0.30		0.29		0.25
2-year Treasury note	0.83		0.60		1.02		1.14
5-year Treasury note	2.28		2.01		2.54		2.68

The following table presents a comparison of the average cost of FHLBank System consolidated obligation bonds relative to 3-month LIBOR and discount notes relative to comparable term LIBOR in the first quarter of 2011 and 2010. With respect to discount notes, the Bank experienced lower cost relative to LIBOR in the first three months of 2011, compared to a year ago because average LIBOR rates were higher in the first three months of 2011 than in the prior year.

	Spread to LIBOR of Average Cost of Consolidated Obligations for the Three Months Ended
(In basis points)	March 31, 2011	March 31, 2010
Consolidated obligation bonds	–15.2	–14.9
Consolidated obligation discount notes (one month and greater)	–15.4	–13.7

Mortgage-Related Business. The mortgage-related business consists of MBS investments, mortgage loans acquired through the Mortgage Partnership Finance® (MPF®) Program, and the related financing and hedging instruments. (“Mortgage Partnership Finance” and “MPF” are registered trademarks of the FHLBank of Chicago.) Adjusted net interest income for this segment is derived primarily from the difference, or spread, between the yield on the MBS and mortgage loans and the cost of the consolidated obligations funding those assets, including the cash flows from associated interest rate exchange agreements.

At March 31, 2011, assets associated with this segment were $26.5 billion (18% of total assets), an increase of $2.5 billion, or 11%, from $24.0 billion at December 31, 2010 (16% of total assets). The MBS portfolio increased $2.7 billion to $24.2 billion at March 31, 2011, from $21.5 billion at December 31, 2010, primarily due to purchases of agency residential MBS, and mortgage loan balances decreased $0.2 billion to $2.2 billion at March 31, 2011, from $2.4 billion at December 31, 2010. In the first quarter of 2011, average MBS investments were $24.6 billion, a decrease of $5.9 billion compared to $30.5 billion in the first quarter of 2010. Average mortgage loans were $2.3 billion in the first quarter of 2011, a decrease of $0.7 billion from $3.0 billion in the first quarter of 2010.

Adjusted net interest income for this segment was $133 million in the first quarter of 2011, a decrease of $5 million, or 4%, from $138 million in the first quarter of 2010. The decrease for the first quarter of 2011 was primarily due to the effect of lower MBS and mortgage loan balances, partially offset by lower unfavorable cumulative retrospective

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adjustments for the amortization of net purchase premiums from the acquisition dates of the MBS and mortgage loans and the favorable impact of lower interest rates, which enabled the Bank to refinance matured or called debt at lower rates.

Adjusted net interest income for this segment represented 59% and 50% of total adjusted net interest income for the first quarter of 2011 and 2010, respectively.

MPF Program – Under the MPF Program, the Bank purchased conventional conforming fixed rate residential mortgage loans directly from eligible members. Participating members originated or purchased the mortgage loans, credit-enhanced them and sold them to the Bank, and generally retained the servicing of the loans. The Bank manages the interest rate risk, prepayment risk, and liquidity risk of each loan in its portfolio. The Bank and the member that sold the loan share in the credit risk of the loan. The Bank has not purchased any new loans since October 2006. For more information regarding credit risk, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – MPF Program” in the Bank's 2010 Form 10-K.

At March 31, 2011, and December 31, 2010, the Bank held conventional conforming fixed rate mortgage loans purchased under one of two MPF products, MPF Plus or Original MPF, which are described in greater detail in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – MPF Program” in the Bank's 2010 Form 10-K.Mortgage loan balances at March 31, 2011, and December 31, 2010, were as follows:

Mortgage Loan Balances by MPF Product Type
(In millions)	March 31, 2011			December 31, 2010
MPF Plus	$	2,043		$	2,203
Original MPF	181			197
Subtotal	2,224			2,400
Net unamortized discounts	(16		)	(16		)
Mortgage loans held for portfolio	2,208			2,384
Less: Allowance for credit losses	(3		)	(3		)
Mortgage loans held for portfolio, net	$	2,205		$	2,381

The Bank performs periodic reviews of its mortgage loan portfolio to identify probable credit losses in the portfolio and to determine the likelihood of collection of the loans in the portfolio. For more information on how the Bank determines its estimated allowance for credit losses on mortgage loans, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – MPF Program” and “Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates – Allowance for Credit Losses – Mortgage Loans Acquired Under the MPF Program in the Bank's 2010 Form 10-K.”

MBS Investments – The Bank's MBS portfolio was $24.2 billion, or 182% of Bank capital (as determined in accordance with regulations governing the operations of the FHLBanks), at March 31, 2011, compared to $21.5 billion, or 157% of Bank capital, at December 31, 2010. During the first quarter of 2011, the Bank's MBS portfolio increased primarily because of purchases of agency residential MBS. For a discussion of the composition of the Bank's MBS portfolio and the Bank's OTTI analysis of that portfolio, see “Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Investments” and “Item 1. Financial Statements and Supplementary Data – Note 6 – Other-Than-Temporary Impairment Analysis.”

Intermediate-term and long-term fixed rate MBS investments are subject to prepayment risk, and long-term adjustable rate MBS investments are subject to interest rate cap risk. The Bank has managed these risks by predominately purchasing intermediate-term fixed rate MBS (rather than long-term fixed rate MBS), funding the

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fixed rate MBS with a mix of non-callable and callable debt, and using interest rate exchange agreements with interest rate risk characteristics similar to callable debt.

Borrowings – Total consolidated obligations funding the mortgage-related business decreased $2.5 billion, or 11%, to $26.5 billion at March 31, 2011, from $24.0 billion at December 31, 2010, paralleling the decrease in mortgage portfolio assets. For further information and discussion of the Bank's joint and several liability for FHLBank consolidated obligations, see “Management's Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” and “Item 1. Financial Statements and Supplementary Data – Note 16 – Commitments and Contingencies.”

At March 31, 2011, the notional amount of interest rate exchange agreements associated with the mortgage-related business totaled $16.7 billion, almost all of which hedged or was associated with consolidated obligations funding the mortgage portfolio.

At December 31, 2010, the notional amount of interest rate exchange agreements associated with the mortgage-related business totaled $16.8 billion, almost all of which hedged or was associated with consolidated obligations funding the mortgage portfolio.

Interest Rate Exchange Agreements

A derivatives transaction or interest rate exchange agreement is a financial contract whose fair value is generally derived from changes in the value of an underlying asset or liability. The Bank uses interest rate swaps; options to enter into interest rate swaps (swaptions); interest rate cap, floor, corridor, and collar agreements; and callable and putable interest rate swaps (collectively, interest rate exchange agreements) to manage its exposure to interest rate risks inherent in its normal course of business—lending, investment, and funding activities. For more information on the primary strategies that the Bank employs for using interest rate exchange agreements and the associated market risks, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Market Risk – Interest Rate Exchange Agreements” in the Bank's 2010 Form 10-K. The following table summarizes the Bank's interest rate exchange agreements by type of hedged item, hedging instrument, associated hedging strategy, accounting designation as specified under the accounting for derivative instruments and hedging activities, and notional amount as of March 31, 2011, and December 31, 2010.

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Interest Rate Exchange Agreements
(In millions)			Notional Amount
Hedging Instrument	Hedging Strategy	Accounting Designation	March 31, 2011		December 31, 2010
Hedged Item: Advances
Pay fixed, receive adjustable interest rate swap	Fixed rate advance converted to a LIBOR adjustable rate	Fair Value Hedge	$	18,393	$	21,493
Receive fixed, pay adjustable interest rate swap	LIBOR adjustable rate advance converted to a fixed rate	Economic Hedge(1)	—		150
Basis swap	Adjustable rate advance converted to another adjustable rate index to reduce interest rate sensitivity and repricing gaps	Economic Hedge(1)	151		153
Pay fixed, receive adjustable interest rate swap	Fixed rate advance converted to a LIBOR adjustable rate	Economic Hedge(1)	1,008		913
Pay fixed, receive adjustable interest rate swap; swap may be callable at the Bank's option or putable at the counterparty's option	Fixed rate advance (with or without an embedded cap) converted to a LIBOR adjustable rate; advance and swap may be callable or putable; matched to advance accounted for under the fair value option	Economic Hedge(1)	8,147		8,844
Interest rate cap, floor, corridor, and/or collar	Interest rate cap, floor, corridor, and/or collar embedded in an adjustable rate advance; matched to advance accounted for under the fair value option	Economic Hedge(1)	1,166		1,166
Subtotal Economic Hedges(1)			10,472		11,226
Total			28,865		32,719
Hedged Item: Non-Callable Bonds
Receive fixed or structured, pay adjustable interest rate swap	Fixed rate or structured rate non-callable bond converted to a LIBOR adjustable rate	Fair Value Hedge	49,814		54,512
Receive fixed or structured, pay adjustable interest rate swap	Fixed rate or structured rate non-callable bond converted to a LIBOR adjustable rate	Economic Hedge(1)	5,269		6,294
Receive fixed or structured, pay adjustable interest rate swap	Fixed rate or structured rate non-callable bond converted to a LIBOR adjustable rate; matched to non-callable bond accounted for under the fair value option	Economic Hedge(1)	60		45
Basis swap	Non-LIBOR adjustable rate non-callable bond converted to a LIBOR adjustable rate to reduce interest rate sensitivity and repricing gaps	Economic Hedge(1)	25		25
Basis swap	Non-LIBOR adjustable rate non-callable bond converted to a LIBOR adjustable rate; matched to non-callable bond accounted for under the fair value option	Economic Hedge(1)	18,725		15,340
Basis swap	Adjustable rate non-callable bond converted to another adjustable rate index to reduce interest rate sensitivity and repricing gaps	Economic Hedge(1)	15,650		16,400
Basis swap	Fixed rate or adjustable rate non-callable bond previously converted to an adjustable rate index, converted to another adjustable rate to reduce interest rate sensitivity and repricing gaps	Economic Hedge(1)	23,280		27,505
Pay fixed, receive adjustable interest rate swap	Fixed rate or adjustable rate non-callable bond, which may have been previously converted to LIBOR, converted to fixed rate non-callable debt that offsets the interest rate risk of mortgage assets	Economic Hedge(1)	2,105		3,315
Subtotal Economic Hedges(1)			65,114		68,924
Total			114,928		123,436

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Interest Rate Exchange Agreements (continued)
(In millions)			Notional Amount
Hedging Instrument	Hedging Strategy	Accounting Designation	March 31, 2011		December 31, 2010
Hedged Item: Callable Bonds
Receive fixed or structured, pay adjustable interest rate swap with an option to call at the counterparty's option	Fixed or structured rate callable bond converted to a LIBOR adjustable rate; swap is callable	Fair Value Hedge	6,397		8,126
Receive fixed or structured, pay adjustable interest rate swap with an option to call at the counterparty's option	Fixed or structured rate callable bond converted to a LIBOR adjustable rate; swap is callable	Economic Hedge(1)	370		65
Receive fixed or structured, pay adjustable interest rate swap with an option to call at the counterparty's option	Fixed or structured rate callable bond converted to a LIBOR adjustable rate; swap is callable; matched to callable bond accounted for under the fair value option	Economic Hedge(1)	6,466		5,662
Subtotal Economic Hedges(1)			6,836		5,727
Total			13,233		13,853
Hedged Item: Discount Notes
Pay fixed, receive adjustable callable interest rate swap	Discount note, which may have been previously converted to LIBOR, converted to fixed rate callable debt that offsets the prepayment risk of mortgage assets	Economic Hedge(1)	1,910		1,627
Basis swap or receive fixed, pay adjustable interest rate swap	Discount note converted to one-month LIBOR or other short-term adjustable rate to hedge repricing gaps	Economic Hedge(1)	19,148		15,488
Pay fixed, receive adjustable non-callable interest rate swap	Discount note, which may have been previously converted to LIBOR, converted to fixed rate non-callable debt that offsets the interest rate risk of mortgage assets	Economic Hedge(1)	345		65
Total			21,403		17,180
Hedged Item: Trading Securities
Pay MBS rate, receive adjustable interest rate swap	MBS rate converted to a LIBOR adjustable rate	Economic Hedge(1)	4		4
Basis swap	Basis swap hedging adjustable rate Federal Farm Credit Bank (FFCB) bonds	Economic Hedge(1)	2,133		2,133
Pay fixed, receive adjustable interest rate swap	Fixed rate Temporary Liquidity Guarantee Program (TLGP) bond converted to a LIBOR adjustable rate	Economic Hedge(1)	785		125
Total			2,922		2,262
Hedged Item: Intermediary Positions
Pay fixed, receive adjustable interest rate swap, and receive fixed, pay adjustable interest rate swap	Interest rate swaps executed with members offset by executing interest rate swaps with derivatives dealer counterparties	Economic Hedge(1)	40		40
Interest rate cap/floor	Stand-alone interest rate cap and/or floor executed with a member offset by executing an interest rate cap and/or floor with derivatives dealer counterparties	Economic Hedge(1)	910		920
Total			950		960
Total Notional Amount			$	182,301	$	190,410

(1) Economic hedges are derivatives that are matched to balance sheet instruments or other derivatives that do not meet the requirements for hedge accounting under the accounting for derivative instruments and hedging activities.

At March 31, 2011, the total notional amount of interest rate exchange agreements outstanding was $182.3 billion, compared with $190.4 billion at December 31, 2010. The $8.1 billion decrease in the notional amount of derivatives during the first quarter of 2011 was primarily due to a net $9.1 billion decrease in interest rate exchange agreements hedging consolidated obligation bonds, and a net $3.9 billion decrease in interest rate exchange agreements hedging

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advances, partially offset by a net $4.2 billion increase in interest rate exchange agreements hedging discount notes and a net $0.7 billion increase in interest rate exchange agreements hedging trading securities. The decrease in interest rate exchange agreements hedging consolidated obligation bonds reflects decreased use of interest rate exchange agreements that effectively converted the repricing frequency from three months to one month, and is consistent with the decline in the amount of bonds outstanding at March 31, 2011, relative to December 31, 2010. The notional amount serves as a basis for calculating periodic interest payments or cash flows received and paid and is not a measure of the amount of credit risk in that transaction.

The following tables categorize the notional amounts and estimated fair values of the Bank’s interest rate exchange agreements, unrealized gains and losses from the related hedged items, and estimated fair value gains and losses from financial instruments carried at fair value by type of accounting treatment and product as of March 31, 2011, and December 31, 2010.

Interest Rate Exchange Agreements Notional Amounts and Estimated Fair Values
March 31, 2011
(In millions)	Notional Amount		Fair Value of Derivatives			Unrealized Gain/(Loss) on Hedged Items			Financial Instruments Carried at Fair Value			Difference
Fair value hedges:
Advances	$	18,393	$	(231	)	$	231		$	—		$	—
Non-callable bonds	49,814		1,131			(1,138		)	—			(7		)
Callable bonds	6,397		16			17			—			33
Subtotal	74,604		916			(890		)	—			26
Not qualifying for hedge accounting (economic hedges):
Advances	10,472		(250		)	—			214			(36		)
Non-callable bonds	65,089		341			—			(6		)	335
Non-callable bonds with embedded derivatives	25		—			—			—			—
Callable bonds	6,836		(73		)	—			134			61
Discount notes	21,403		14			—			—			14
MBS – trading	4		—			—			—			—
FFCB and TLGP bonds	2,918		(15		)	—			—			(15		)
Intermediated	950		—			—			—			—
Subtotal	107,697		17			—			342			359
Total excluding accrued interest	182,301		933			(890		)	342			385
Accrued interest	—		347			(371		)	4			(20		)
Total	$	182,301	$	1,280		$	(1,261	)	$	346		$	365

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December 31, 2010
(In millions)	Notional Amount		Fair Value of Derivatives			Unrealized Gain/(Loss) on Hedged Items			Financial Instruments Carried at Fair Value		Difference
Fair value hedges:
Advances	$	21,493	$	(314	)	$	313		$	—	$	(1	)
Non-callable bonds	54,512		1,422			(1,432		)	—		(10		)
Callable bonds	8,126		22			(4		)	—		18
Subtotal	84,131		1,130			(1,123		)	—		7
Not qualifying for hedge accounting (economic hedges):
Advances	11,226		(352		)	—			291		(61		)
Non-callable bonds	68,899		381			—			1		382
Non-callable bonds with embedded derivatives	25		—			—			—		—
Callable bonds	5,727		(64		)	—			129		65
Discount notes	17,180		9			—			—		9
FFCB and TLGP bonds	2,258		(3		)	—			—		(3		)
MBS – trading	4		—			—			—		—
Intermediated	960		—			—			—		—
Subtotal	106,279		(29		)	—			421		392
Total excluding accrued interest	190,410		1,101			(1,123		)	421		399
Accrued interest	—		262			(290		)	15		(13		)
Total	$	190,410	$	1,363		$	(1,413	)	$	436	$	386

Because the periodic and cumulative net gains or losses on the Bank’s derivatives, hedged instruments, and certain assets and liabilities that are carried at fair value are primarily a matter of timing, the net gains or losses will generally reverse through changes in future valuations and settlements of contractual interest cash flows over the remaining contractual term to maturity, call date, or put date of the hedged financial instruments, associated interest rate exchange agreements, and financial instruments carried at fair value. However, the Bank may have instances in which the financial instruments or hedging relationships are terminated prior to maturity or prior to the call or put date. Terminating the financial instruments or hedging relationships may result in a realized gain or loss. In addition, the Bank may have instances in which it may sell trading securities prior to maturity, which may also result in a realized gain or loss.

The hedging and fair value option valuation adjustments during the first quarter of 2011 were primarily driven by changes in overall interest rate spreads and swaption volatilities.

The ongoing impact of these valuation adjustments on the Bank cannot be predicted, and the Bank’s retained earnings in the future may not be sufficient to offset the impact of these valuation adjustments. The effects of these valuation adjustments may lead to significant volatility in future earnings, including earnings available for dividends.

Credit Risk. For a discussion of derivatives credit exposure, see “Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Derivatives Counterparties.”

Concentration Risk. The following table presents the concentration in derivatives with derivatives counterparties whose outstanding notional balances represented 10% or more of the Bank's total notional amount of derivatives outstanding as of March 31, 2011, and December 31, 2010.

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Concentration of Derivatives Counterparties
(Dollars in millions)		March 31, 2011				December 31, 2010
Derivatives Counterparty	Credit   Rating(1)	Notional Amount		Percentage of Total Notional Amount		Notional Amount		Percentage of Total Notional Amount
BNP Paribas	AA	$	27,345	15	%	$	26,321	14	%
Deutsche Bank AG	A	25,545		14		28,818		15
JPMorgan Chase Bank, National Association	AA	24,955		14		24,055		13
UBS AG	A	23,571		13		24,200		13
Barclays Bank PLC	AA	17,328		10		15,531		8
Citigroup Inc.:
Citibank, N.A.	A	14,166		8		19,172		10
Citigroup Financial Products	A	50		—		55		—
Subtotal Citigroup Inc.		14,216		8		19,227		10
Subtotal		132,960		74		138,152		73
Others	At least A	49,341		26		52,258		27
Total		$	182,301	100	%	$	190,410	100	%

(1) The credit ratings used by the Bank are based on the lowest of Moody's, Standard & Poor's, or comparable Fitch ratings.

Liquidity and Capital Resources

The Bank's financial strategies are designed to enable the Bank to expand and contract its assets, liabilities, and capital in response to changes in membership composition and member credit needs. The Bank's liquidity and capital resources are designed to support these financial strategies. The Bank's primary source of liquidity is its access to the capital markets through consolidated obligation issuance. The Bank's equity capital resources are governed by its capital plan.

Since the beginning of 2011, the combination of declining FHLBank funding needs and continued investor demand for FHLBank debt has enabled the FHLBanks to issue debt at reasonable costs. During the first quarter of 2011, the FHLBanks issued $10 billion in global bonds, $46 billion in callable bonds, and $186 billion in auctioned discount notes.

Liquidity

The Bank strives to maintain the liquidity necessary to meet member credit demands, repay maturing consolidated obligations for which it is the primary obligor, meet other obligations and commitments, and respond to significant changes in membership composition. The Bank monitors its financial position in an effort to ensure that it has ready access to sufficient liquid funds to meet normal transaction requirements, take advantage of appropriate investment opportunities, and cover unforeseen liquidity demands.

The Bank generally manages operational, contingent, and structural liquidity risks using a portfolio of cash and short-term investments—which include commercial paper, interest-bearing deposits, and Federal funds sold to highly rated counterparties—and access to the debt capital markets. In addition, the Bank maintains alternate sources of funds, detailed in its contingent liquidity plan, which also includes an explanation of how sources of funds are allocated under stressed market conditions. The Bank maintains short-term, high-quality money market investments in amounts that may average up to three times the Bank's capital as a primary source of funds to satisfy these requirements and objectives.

The Bank maintains a contingent liquidity plan to meet its obligations and the liquidity needs of members in the event of short-term operational disruptions at the Bank or the Office of Finance or short-term disruptions of the capital markets. In 2009, the Finance Agency established liquidity guidelinesthatrequire each FHLBank to

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maintain sufficient on-balance sheet liquidity in an amount at least equal to its anticipated cash outflows for two different scenarios, both of which assume no capital markets access and no reliance on repurchase agreements or the sale of existing held-to-maturity and available-for-sale investments. The two scenarios differ only in the treatment of maturing advances. One scenario assumes that the Bank does not renew any maturing advances and retains sufficient liquidity to meet its obligations for 15 calendar days. The second scenario requires the Bank to renew maturing advances for certain members based on specific criteria established by the Finance Agency. In the renew advances scenario, the Bank must retain sufficient liquidity to meet its obligations for 5 calendar days.

In addition to the Finance Agency's guidelines on contingent liquidity, the Bank's asset-liability management committee has established an operational guideline to maintain at least 90 days of liquidity to enable the Bank to meet its obligations in the event of a longer-term consolidated obligations market disruption. The Bank's operational guideline assumes that mortgage assets can be used as a source of funds with the expectation that those assets can be used as collateral in the repurchase agreement markets. Under this guideline, the Bank maintained at least 90 days of liquidity at all times during the first three months of 2011. On a daily basis, the Bank models its cash commitments and expected cash flows for the next 90 days to determine its projected liquidity position. If a market or operational disruption occurred that prevented the issuance of new consolidated obligation bonds or discount notes through the capital markets, the Bank could meet its obligations by: (i) allowing short-term liquid investments to mature, (ii) using eligible securities as collateral for repurchase agreement borrowings, and (iii) if necessary, allowing advances to mature without renewal. In addition, the Bank may be able to borrow on a short-term unsecured basis from financial institutions (Federal funds purchased) or other FHLBanks (inter-FHLBank borrowings).

The Bank actively monitors and manages structural liquidity risks, which the Bank defines as maturity mismatches greater than 90 days for all sources and uses of funds. Structural liquidity maturity mismatches are identified using maturity gap analysis and valuation sensitivity metrics that quantify the risk associated with the Bank's structural liquidity position.

The following table shows the Bank's principal financial obligations due, estimated sources of funds available to meet those obligations, and the net difference between funds available and funds needed for the 5-business-day and 90-day periods following March 31, 2011, and December 31, 2010. Also shown are additional contingent sources of funds from on-balance sheet collateral available for repurchase agreement borrowings.

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Principal Financial Obligations Due and Funds Available for Selected Periods
	As of March 31, 2011				As of December 31, 2010
(In millions)	5 Business Days		90 Days		5 Business Days		90 Days
Obligations due:
Commitments for new advances	$	—	$	—	$	304	$	304
Commitments to purchase investments	300		743		—		—
Demand deposits	812		812		925		925
Maturing member term deposits	—		11		3		16
Discount note and bond maturities and expected exercises of bond call options	2,165		30,511		2,309		21,949
Subtotal obligations	3,277		32,077		3,541		23,194
Sources of available funds:
Maturing investments	7,382		21,777		11,198		25,946
Cash at Federal Reserve Bank of San Francisco	3,761		3,761		754		754
Proceeds from scheduled settlements of discount notes and bonds	625		1,490		30		205
Maturing advances and scheduled prepayments	1,939		16,525		2,061		13,857
Subtotal sources	13,707		43,553		14,043		40,762
Net funds available	10,430		11,476		10,502		17,568
Additional contingent sources of funds:(1)
Estimated borrowing capacity of securities available for repurchase agreement borrowings:
MBS	—		20,084		—		17,964
Marketable money market investments	4,841		—		5,881		—
TLGP investments	3,049		3,049		2,311		2,017
FFCB bonds	2,366		2,366		2,366		2,366
Subtotal contingent sources	10,256		25,499		10,558		22,347
Total contingent funds available	$	20,686	$	36,975	$	21,060	$	39,915

(1)    The estimated amount of repurchase agreement borrowings obtainable from authorized securities dealers is subject to market conditions and the ability of securities dealers to obtain financing for the securities and transactions entered into with the Bank. The estimated maximum amount of repurchase agreement borrowings obtainable is based on the current par amount and estimated market value of MBS and other investments (not included in above figures) that are not pledged at the beginning of the period and is subject to estimated collateral discounts taken by securities dealers.

For more information, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Liquidity” and “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk” in the Bank's 2010 Form 10‑K.

Regulatory Capital

The FHLBank Act and Finance Agency regulations specify that each FHLBank must meet certain minimum regulatory capital standards. The Bank must maintain: (i) total regulatory capital in an amount equal to at least 4% of its total assets, (ii) leverage capital in an amount equal to at least 5% of its total assets, and (iii) permanent capital in an amount at least equal to its regulatory risk-based capital requirement. Regulatory capital and permanent capital are both defined as total capital stock outstanding, including mandatorily redeemable capital stock, and retained earnings. Regulatory capital and permanent capital do not include accumulated other comprehensive income/(loss). Leverage capital is defined as the sum of permanent capital weighted by a 1.5 multiplier plus non-permanent capital. (Non-permanent capital consists of Class A capital stock, which is redeemable upon six months' notice. The Bank's capital plan does not provide for the issuance of Class A capital stock.) The risk-based capital requirements must be met with permanent capital, which must be at least equal to the sum of the Bank's credit risk, market risk, and operations risk capital requirements, all of which are calculated in accordance with the rules of the Finance Agency.

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The following table shows the Bank's compliance with the Finance Agency's capital requirements at March 31, 2011, and December 31, 2010.

Regulatory Capital Requirements
	March 31, 2011						December 31, 2010
(Dollars in millions)	Required			Actual			Required			Actual
Risk-based capital	$	4,182		$	13,261		$	4,209		$	13,640
Total regulatory capital	$	6,058		$	13,261		$	6,097		$	13,640
Total regulatory capital ratio	4.00		%	8.76		%	4.00		%	8.95		%
Leverage capital	$	7,572		$	19,891		$	7,621		$	20,460
Leverage ratio	5.00		%	13.13		%	5.00		%	13.42		%

In light of the Bank's strong regulatory capital position, the Bank plans to repurchase up to $500 million in excess capital stock on May 16, 2011. The amount of excess capital stock to be repurchased from any shareholder will be based on the shareholder's pro rata ownership share of total capital stock outstanding as of the repurchase date, up to the amount of the shareholder's excess capital stock.

The Bank's capital requirements are more fully discussed in “Item 8. Financial Statements and Supplementary Data – Note 15 – Capital” in the Bank's 2010 Form 10-K.

Risk Management

The Bank has an integrated corporate governance and internal control framework designed to support effective management of the Bank's business activities and the risks inherent in these activities. As part of this framework, the Bank's Board of Directors has adopted a Risk Management Policy and a Member Products Policy, which are reviewed regularly and reapproved at least annually. The Risk Management Policy establishes risk guidelines, limits (if applicable), and standards for credit risk, market risk, liquidity risk, operations risk, concentration risk, and business risk in accordance with Finance Agency regulations, the risk profile established by the Board of Directors, and other applicable guidelines in connection with the Bank's capital plan and overall risk management. For more detailed information, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management” in the Bank's 2010 Form 10‑K.

Advances. The Bank manages the credit risk associated with lending to members by monitoring the creditworthiness of the members and the quality and value of the assets they pledge as collateral. To identify the credit strength of each borrower, the Bank assigns each member and nonmember borrower an internal credit quality rating from one to ten, with one as the highest rating. These ratings are based on results from the Bank's credit model, which considers financial, regulatory, and other qualitative information, including regulatory examination reports. The internal ratings are reviewed on an ongoing basis using current available information, and are revised, if necessary, to reflect the borrower's current financial position. Advance and collateral terms may be adjusted based on the results of this credit analysis.

Pursuant to the Bank's lending agreements with its members, the Bank limits the amount it will lend to a percentage of the market value or unpaid principal balance of pledged collateral, known as the borrowing capacity. The borrowing capacity percentage varies according to several factors, including the collateral type, the value assigned to the collateral, the results of the Bank's collateral field review of the member's collateral, the pledging method used for loan collateral (specific identification or blanket lien), data reporting frequency (monthly or quarterly), the member's financial strength and condition, and the concentration of collateral type. Under the terms of the Bank's lending agreements, the aggregate borrowing capacity of a member's pledged eligible collateral must meet or exceed the total amount of the member's outstanding advances, other extensions of credit, and certain other member obligations and liabilities. The Bank monitors each member's aggregate borrowing capacity and collateral requirements on a daily basis by comparing the member's borrowing capacity to its obligations to the Bank.

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When a nonmember financial institution acquires some or all of the assets and liabilities of a member, including outstanding advances and Bank capital stock, the Bank may allow the advances to remain outstanding, at its discretion. The nonmember borrower is required to meet all the Bank's credit and collateral requirements, including requirements regarding creditworthiness and collateral borrowing capacity.

The following tables present a summary of the status of the credit outstanding and overall collateral borrowing capacity of the Bank's member and nonmember borrowers as of March 31, 2011, and December 31, 2010.

Member and Nonmember Credit Outstanding and Collateral Borrowing Capacity by Credit Quality Rating
(Dollars in millions)
March 31, 2011
	All Members and Nonmembers	Members and Nonmembers with Credit Outstanding
					Collateral Borrowing Capacity(2)
Member or Nonmember Credit Quality Rating	Number	Number	Credit Outstanding(1)		Total		Used
1-3	95	65	$	43,273	$	93,345	46	%
4-6	214	135	52,298		103,806		50
7-10	79	45	1,867		4,411		42
Total	388	245	$	97,438	$	201,562	48	%
December 31, 2010
	All Members and Nonmembers	Members and Nonmembers with Credit Outstanding
					Collateral Borrowing Capacity(2)
Member or Nonmember Credit Quality Rating	Number	Number	Credit Outstanding(1)		Total		Used
1-3	87	58	$	40,552	$	85,967	47	%
4-6	216	141	58,163		107,634		54
7-10	90	53	2,235		5,839		38
Total	393	252	$	100,950	$	199,440	51	%

(1) Includes advances, letters of credit, the market value of swaps, estimated prepayment fees for certain borrowers, and the credit enhancement obligation on MPF loans.

(2) Collateral borrowing capacity does not represent any commitment to lend on the part of the Bank.

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Member and Nonmember Credit Outstanding and Collateral Borrowing Capacity by Unused Borrowing Capacity
(Dollars in millions)
March 31, 2011
Unused Borrowing Capacity	Number of Members and Nonmembers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)
0% – 10%	7	$	124	$	126
11% – 25%	20	10,368		12,155
26% – 50%	49	66,698		109,849
More than 50%	169	20,248		79,432
Total	245	$	97,438	$	201,562
December 31, 2010
Unused Borrowing Capacity	Number of Members and Nonmembers with Credit Outstanding	Credit Outstanding(1)		Collateral Borrowing Capacity(2)
0% – 10%	12	$	344	$	358
11% – 25%	28	15,624		18,190
26% – 50%	53	69,639		114,676
More than 50%	159	15,343		66,216
Total	252	$	100,950	$	199,440

(1) Includes advances, letters of credit, the market value of swaps, estimated prepayment fees for certain borrowers, and the credit enhancement obligation on MPF loans.

(2) Collateral borrowing capacity does not represent any commitment to lend on the part of the Bank.

Securities pledged as collateral are assigned borrowing capacities that reflect the securities' pricing volatility and market liquidity risks. Securities are delivered to the Bank's custodian when they are pledged. The Bank prices securities collateral on a daily basis or twice a month, depending on the availability and reliability of external pricing sources. Securities that are normally priced twice a month may be priced more frequently in volatile market conditions. The Bank benchmarks the borrowing capacities for securities collateral to the market on a periodic basis and may review and change the borrowing capacity for any security type at any time. As of March 31, 2011, the borrowing capacities assigned to U.S. Treasury securities and most agency securities ranged from 95% to 99.5% of their market value. The borrowing capacities assigned to private-label MBS, which must be rated AAA or AA when initially pledged, generally ranged from 50% to 85% of their market value, depending on the underlying collateral (residential mortgages, home equity loans, or commercial real estate), the rating, and the subordination structure of the respective security.

The following table presents the securities collateral pledged by all members and by nonmembers with credit outstanding at March 31, 2011, and December 31, 2010.

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Composition of Securities Collateral Pledged by Members and by Nonmembers with Credit Outstanding
(In millions)	March 31, 2011				December 31, 2010
Securities Type with Current Credit Ratings	Current Par		Borrowing Capacity		Current Par		Borrowing Capacity
U.S. Treasury (bills, notes, bonds)	$	505	$	499	$	503	$	497
Agency (notes, subordinate debt, structured notes, indexed amortization notes, and Small Business Administration pools)	4,214		4,173		3,799		3,769
Agency pools and collateralized mortgage obligations	14,760		14,478		14,395		14,111
PLRMBS – publicly registered AAA-rated senior tranches	167		127		274		203
PLRMBS – publicly registered AA-rated senior tranches	20		10		24		12
PLRMBS – publicly registered A-rated senior tranches	75		13		87		16
PLRMBS – publicly registered BBB-rated senior tranches	89		11		47		7
Private-label commercial MBS – publicly registered AAA-rated subordinate tranches	16		13		22		18
Term deposits with the Bank	11		11		16		16
Total	$	19,857	$	19,335	$	19,167	$	18,649

With respect to loan collateral, most members may choose to pledge loan collateral using a specific identification method or a blanket lien method. Members pledging under the specific identification method must provide a detailed listing of all the loans pledged to the Bank on a monthly or quarterly basis. Under the blanket lien method, a member generally pledges the following loan types, whether or not the individual loans are eligible to receive borrowing capacity: all loans secured by real estate; all loans made for commercial, corporate, or business purposes; and all participations in these loans. Members pledging under the blanket lien method may provide a detailed listing of loans or may use a summary reporting method, which entails a quarterly review by the Bank of certain data regarding the member and its pledged collateral.

The Bank may require certain members to deliver pledged loan collateral to the Bank for one or more reasons, including the following: the member is a de novo institution (chartered within the last three years), the Bank is concerned about the member's creditworthiness, or the Bank is concerned about the maintenance of its collateral or the priority of its security interest. Members required to deliver loan collateral must pledge those loans under the blanket lien method with detailed reporting. The Bank's largest borrowers are required to report detailed data on a monthly basis and may pledge loan collateral using either the specific identification method or the blanket lien method with detailed reporting.

As of March 31, 2011, 64% of the loan collateral pledged to the Bank was pledged by 29 institutions under specific identification, 29% was pledged by 129 institutions under blanket lien with detailed reporting, and 7% was pledged by 64 institutions under blanket lien with summary reporting.

As of March 31, 2011, the Bank's maximum borrowing capacities for loan collateral ranged from 20% to 95% of the unpaid principal balance. For example, the maximum borrowing capacities for collateral pledged under blanket lien with detailed reporting were as follows: 95% for first lien residential mortgage loans, 65% for multifamily mortgage loans, 60% for commercial mortgage loans, 50% for small business, small farm, and small agribusiness loans, and 20% for second lien residential mortgage loans. The highest borrowing capacities are available to members that pledge under blanket lien with detailed reporting because the detailed loan information allows the Bank to assess the value of the collateral more precisely and because additional collateral is pledged under the blanket lien that may not receive borrowing capacity but may be liquidated to repay advances in the event of default. The Bank may review and change the maximum borrowing capacity for any type of loan collateral at any time.

The table below presents the mortgage loan collateral pledged by all members and by nonmembers with credit outstanding at March 31, 2011, and December 31, 2010.

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Composition of Loan Collateral Pledged by Members and by Nonmembers with Credit Outstanding
(In millions)	March 31, 2011				December 31, 2010
Loan Type	Unpaid Principal Balance		Borrowing Capacity		Unpaid Principal Balance		Borrowing Capacity
First lien residential mortgage loans	$	156,154	$	104,380	$	158,001	$	105,506
Second lien residential mortgage loans and home equity lines of credit	74,091		14,984		77,098		15,068
Multifamily mortgage loans	34,772		21,856		33,810		20,733
Commercial mortgage loans	50,755		29,698		51,502		27,258
Loan participations	15,297		10,656		16,717		11,600
Small business, small farm, and small agribusiness loans	2,814		510		3,031		478
Other	951		143		1,015		148
Total	$	334,834	$	182,227	$	341,174	$	180,791

The Bank holds a security interest in subprime residential mortgage loans (defined as loans with a borrower FICO score of 660 or less) pledged as collateral. At March 31, 2011, and December 31, 2010, the amount of these loans totaled $38 billion and $38 billion, respectively. The Bank reviews and assigns borrowing capacities to subprime mortgage loans as it does for all other types of loan collateral, taking into account the known credit attributes in the pricing of the loans. In addition, members with concentrations in nontraditional and subprime mortgage loans are subject to more frequent analysis to assess the credit quality and value of the loans. All advances, including those made to members pledging subprime mortgage loans, are required to be fully collateralized. The Bank limits the amount of borrowing capacity that may be supported by subprime collateral.

Investments. The Bank has adopted credit policies and exposure limits for investments that promote risk diversification and liquidity. These policies restrict the amounts and terms of the Bank's investments with any given counterparty according to the Bank's own capital position as well as the capital and creditworthiness of the counterparty.

The Bank monitors its investments for substantive changes in relevant market conditions and any declines in fair value. For securities in an unrealized loss position because of factors other than movements in interest rates, such as widening of mortgage asset spreads, the Bank considers whether it expects to recover the entire amortized cost basis of the security by comparing the best estimate of the present value of the cash flows expected to be collected from the security with the amortized cost basis of the security. If the Bank's best estimate of the present value of the cash flows expected to be collected is less than the amortized cost basis, the difference is considered the credit loss.

When the fair value of an individual investment security falls below its amortized cost, the Bank evaluates whether the decline is other than temporary. The Bank recognizes an other-than-temporary impairment when it determines that it will be unable to recover the entire amortized cost basis of the security and the fair value of the investment security is less than its amortized cost. The Bank considers its intent to hold the security and whether it is more likely than not that the Bank will be required to sell the security before its anticipated recovery of the remaining cost basis, and other factors. The Bank generally views changes in the fair value of the securities caused by movements in interest rates to be temporary.

The following tables present the Bank's investment credit exposure at the dates indicated, based on the lowest of the long-term credit ratings provided by Moody's, Standard & Poor's, or comparable Fitch ratings.

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Investment Credit Exposure
(In millions)
March 31, 2011
	Carrying Value
	Credit Rating(1)
Investment Type	AAA		AA		A		BBB		BB		B		CCC		CC		C		Total
Trading securities:
GSEs:
FFCB bonds	$	2,367	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	2,367
TLGP	1,160		—		—		—		—		—		—		—		—		1,160
MBS:
Other U.S. obligations:
Ginnie Mae	19		—		—		—		—		—		—		—		—		19
GSEs:
Fannie Mae	4		—		—		—		—		—		—		—		—		4
Total trading securities	3,550		—		—		—		—		—		—		—		—		3,550
Available-for-sale securities:
TLGP(2)	1,927		—		—		—		—		—		—		—		—		1,927
PLRMBS:
Prime	—		—		64		—		—		54		309		59		89		575
Alt-A, option ARM	—		—		—		—		—		9		182		72		—		263
Alt-A, other	—		—		47		145		—		685		3,208		260		828		5,173
Total PLRMBS	—		—		111		145		—		748		3,699		391		917		6,011
Total available-for-sale securities	1,927		—		111		145		—		748		3,699		391		917		7,938
Held-to-maturity securities:
Interest-bearing deposits	—		1,991		3,320		—		—		—		—		—		—		5,311
Commercial paper(3)	—		1,150		650		—		—		—		—		—		—		1,800
Housing finance agency bonds	—		207		505		—		—		—		—		—		—		712
MBS:
Other U.S. obligations:
Ginnie Mae	234		—		—		—		—		—		—		—		—		234
GSEs:							—
Freddie Mac	2,954		—		—		—		—		—		—		—		—		2,954
Fannie Mae	7,744		—		—		—		—		—		—		—		—		7,744
PLRMBS:
Prime	1,278		554		395		275		153		136		138		196		—		3,125
Alt-A, option ARM	—		—		—		—		156		87		604		—		—		847
Alt-A, other	105		197		277		592		476		655		761		39		130		3,232
Total PLRMBS	1,383		751		672		867		785		878		1,503		235		130		7,204
Total held-to-maturity securities	12,315		4,099		5,147		867		785		878		1,503		235		130		25,959
Federal funds sold	—		10,655		4,311		—		—		—		—		—		—		14,966
Total investments	$	17,792	$	14,754	$	9,569	$	1,012	$	785	$	1,626	$	5,202	$	626	$	1,047	$	52,413

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Investment Credit Exposure
(In millions)
December 31, 2010
	Carrying Value
	Credit Rating(1)
Investment Type	AAA		AA		A		BBB		BB		B		CCC		CC		C		Total
Trading securities:
GSEs:
FFCB bonds	$	2,366	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	2,366
TLGP	128		—		—		—		—		—		—		—		—		128
MBS:
Other U.S. obligations:
Ginnie Mae	20		—		—		—		—		—		—		—		—		20
GSEs:
Fannie Mae	5		—		—		—		—		—		—		—		—		5
Total trading securities	2,519		—		—		—		—		—		—		—		—		2,519
Available-for-sale securities:
TLGP(2)	1,927		—		—		—		—		—		—		—		—		1,927
Total available-for-sale securities	1,927		—		—		—		—		—		—		—		—		1,927
Held-to-maturity securities:
Interest-bearing deposits	—		3,334		3,500		—		—		—		—		—		—		6,834
Commercial paper(3)	—		1,500		1,000		—		—		—		—		—		—		2,500
Housing finance agency bonds	—		222		521		—		—		—		—		—		—		743
TLGP(2)	301		—		—		—		—		—		—		—		—		301
MBS:
Other U.S. obligations:
Ginnie Mae	33		—		—		—		—		—		—		—		—		33
GSEs:
Freddie Mac	2,326		—		—		—		—		—		—		—		—		2,326
Fannie Mae	5,922		—		—		—		—		—		—		—		—		5,922
PLRMBS:
Prime	1,521		709		515		211		92		194		374		267		73		3,956
Alt-A, option ARM	—		—		—		—		155		96		775		71		—		1,097
Alt-A, other	230		735		583		408		301		1,140		3,553		282		880		8,112
Total PLRMBS	1,751		1,444		1,098		619		548		1,430		4,702		620		953		13,165
Total held-to-maturity securities	10,333		6,500		6,119		619		548		1,430		4,702		620		953		31,824
Federal funds sold	—		10,374		5,938		—		—		—		—		—		—		16,312
Total investments	$	14,779	$	16,874	$	12,057	$	619	$	548	$	1,430	$	4,702	$	620	$	953	$	52,582

(1) Credit ratings of BB and lower are below investment grade.

(2) TLGP securities represent corporate debentures of the issuing party that are guaranteed by the FDIC and backed by the full faith and credit of the U.S. government.

(3) The Bank's investment in commercial paper also had a short-term credit rating of A-1/P-1.

For all the securities in its available-for-sale and held-to-maturity portfolios and for Federal funds sold, the Bank does not intend to sell any security and it is not more likely than not that the Bank will be required to sell any security before its anticipated recovery of the remaining amortized cost basis.

The Bank invests in short-term unsecured Federal funds sold, negotiable certificates of deposit (interest-bearing deposits), and commercial paper with member and nonmember counterparties. The Bank determined that, as of March 31, 2011, all of the gross unrealized losses on its short-term unsecured Federal funds sold, interest-bearing deposits, and commercial paper were temporary because the gross unrealized losses were caused by movements in interest rates and not by the deterioration of the issuers' creditworthiness; the short-term unsecured Federal funds sold, interest-bearing deposits, and commercial paper were all with issuers that had credit ratings of at least A at

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March 31, 2011; and all of the securities matured prior to the date of this report. As a result, the Bank has recovered the entire amortized cost basis of these securities.

The Bank's investments may also include housing finance agency bonds issued by housing finance agencies located in Arizona, California, and Nevada, the three states that make up the Bank's district, which is the Eleventh District of the FHLBank System. These bonds are mortgage revenue bonds (federally taxable) and are collateralized by pools of first lien residential mortgage loans and credit-enhanced by bond insurance. The bonds held by the Bank are issued by the California Housing Finance Agency (CalHFA) and insured by either Ambac Assurance Corporation, MBIA Insurance Corporation, or Assured Guaranty Municipal Corporation (formerly Financial Security Assurance Incorporated). At March 31, 2011, all of the bonds were rated at least A by Moody's or Standard & Poor's.

At March 31, 2011, the Bank's investments in housing finance agency bonds had gross unrealized losses totaling $123 million. These gross unrealized losses were due to an illiquid market and credit concerns regarding the underlying mortgage pool, causing these investments to be valued at a discount to their acquisition cost. The Bank independently modeled cash flows for the underlying collateral, using assumptions for default rates and loss severity that the Bank deemed reasonable, and concluded that the available credit support within the CalHFA structure more than offset the projected underlying collateral losses. The Bank determined that, as of March 31, 2011, all of the gross unrealized losses on its housing finance agency bonds are temporary because the underlying collateral and credit enhancements were sufficient to protect the Bank from losses based on current expectations and because CalHFA had a credit rating of A at March 31, 2011 (based on the lower of Moody's or Standard & Poor's ratings). As a result, the Bank expects to recover the entire amortized cost basis of these securities.

The Bank also invests in corporate debentures issued under the TLGP, which are guaranteed by the FDIC and backed by the full faith and credit of the U.S. government. The Bank expects to recover the entire amortized cost basis of these securities because it determined that the strength of the guarantees and the direct support from the U.S. government are sufficient to protect the Bank from losses based on current expectations. As a result, the Bank determined that as of March 31, 2011, all the gross unrealized losses on its TLGP investments are temporary.

The Bank's investments also include PLRMBS, all of which were AAA-rated at the time of purchase, and

agency residential MBS, which are backed by Fannie Mae, Freddie Mac, or Ginnie Mae. Some of these PLRMBS were issued by and/or purchased from members, former members, or their affiliates. At March 31, 2011, PLRMBS representing 26% of the amortized cost of the Bank's MBS portfolio were labeled Alt-A by the issuer. Alt-A PLRMBS are generally collateralized by mortgage loans that are considered less risky than subprime loans but more risky than prime loans. These loans are generally made to borrowers who have sufficient credit ratings to qualify for a conforming mortgage loan but the loans may not meet all standard guidelines for documentation requirements, property type, or loan-to-value ratios.

As of March 31, 2011, the Bank's investment in MBS classified as held-to-maturity had gross unrealized losses totaling $1.5 billion, most of which were related to PLRMBS. These gross unrealized losses were primarily due to illiquidity in the MBS market, uncertainty about the future condition of the housing and mortgage markets and the economy, and continued deterioration in the credit performance of loan collateral underlying these securities, causing these assets to be valued at significant discounts to their acquisition cost.

For its agency residential MBS, the Bank expects to recover the entire amortized cost basis of these securities because it determined that the strength of the issuers' guarantees through direct obligations or support from the U.S. government is sufficient to protect the Bank from losses based on current expectations. As a result, the Bank determined that, as of March 31, 2011, all of the gross unrealized losses on its agency residential MBS are temporary.

In 2009, the 12 FHLBanks formed the OTTI Governance Committee (OTTI Committee), which consists of one representative from each FHLBank. The OTTI Committee is responsible for reviewing and approving the key modeling assumptions, inputs, and methodologies to be used by the FHLBanks to generate the cash flow projections used in analyzing credit losses and determining OTTI for all PLRMBS and for certain home equity loan

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investments, including home equity asset-backed securities. For certain PLRMBS for which underlying collateral data is not available, alternative procedures as determined by each FHLBank are expected to be used to assess these securities for OTTI. Certain private-label MBS backed by multifamily and commercial real estate loans, home equity lines of credit, and manufactured housing loans are outside the scope of the FHLBanks' OTTI Committee and are analyzed for OTTI by each individual FHLBank owning securities backed by such collateral. The Bank does not have any home equity loan investments or any private-label MBS backed by multifamily or commercial real estate loans, home equity lines of credit, or manufactured housing loans.

The Bank's evaluation includes estimating projected cash flows that the Bank is likely to collect based on an assessment of all available information about each security on an individual basis, the structure of the security, and certain assumptions as proposed by the FHLBanks' OTTI Committee and approved by the Bank, such as the remaining payment terms for the security, prepayment speeds, default rates, loss severity on the collateral supporting the security based on underlying loan-level borrower and loan characteristics, expected housing price changes, and interest rate assumptions, to determine whether the Bank expects to recover the entire amortized cost basis of the security. In performing a detailed cash flow analysis, the Bank identifies the best estimate of the cash flows expected to be collected. If this estimate results in a present value of expected cash flows (discounted at the security's effective yield) that is less than the amortized cost basis of the security, the security is considered to be other-than-temporarily impaired.

To assess whether it expects to recover the entire amortized cost basis of its PLRMBS, the Bank performed a cash flow analysis for all of its PLRMBS as of March 31, 2011. In performing the cash flow analysis for each security, the Bank used two third-party models. The first model considers borrower characteristics and the particular attributes of the loans underlying the Bank's securities, in conjunction with assumptions about future changes in home prices and interest rates, to project prepayments, defaults, and loss severities. A significant input to the first model is the forecast of future housing price changes for the relevant states and core-based statistical areas (CBSAs), which are based on an assessment of the individual housing markets. CBSA refers collectively to metropolitan and micropolitan statistical areas as defined by the United States Office of Management and Budget. As currently defined, a CBSA must contain at least one urban area with a population of 10,000 or more people. The Bank's housing price forecast as of March 31, 2011, assumed current-to-trough home price declines ranging from 0% (for those housing markets that are believed to have reached their trough) to 10% over the 3- to 9-month periods beginning January 1, 2011. Thereafter, home prices were projected to recover using one of five different recovery paths that vary by housing market. Under those recovery paths, home prices were projected to increase within a range of 0% to 2.8% in the first year, 0% to 3% in the second year, 1.5% to 4% in the third year, 2% to 5% in the fourth year, 2% to 6% in the fifth and sixth years, and 2.3% to 5.6% in each subsequent year. The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, default rates, and loss severities, are then input into a second model that allocates the projected loan level cash flows and losses to the various security classes in each securitization structure in accordance with the structure's prescribed cash flow and loss allocation rules. When the credit enhancement for the senior securities in a securitization is derived from the presence of subordinated securities, losses are generally allocated first to the subordinated securities until their principal balance is reduced to zero. The projected cash flows are based on a number of assumptions and expectations, and the results of these models can vary significantly with changes in assumptions and expectations. The scenario of cash flows determined based on the model approach described above reflects a best-estimate scenario and includes a base case current-to-trough housing price forecast and a base case housing price recovery path.

In addition to evaluating its PLRMBS under a base case (or best estimate) scenario, the Bank performed a cash flow analysis for each of these securities under a more adverse housing price scenario. This more adverse scenario was based on a housing price forecast that was 5 percentage points lower at the trough than the base case scenario, followed by a flatter recovery path. Under this scenario, current-to-trough home price declines were projected to range from 5% to 15% over the 3- to 9-month periods beginning January 1, 2011. Thereafter, home prices were projected to increase within a range of 0% to 1.9% in the first year, 0% to 2% in the second year, 1% to 2.7% in the third year, 1.3% to 3.4% in the fourth year, 1.3% to 4.0% in each of the fifth and sixth years, and 1.5% to 3.8% in each subsequent year.

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The following table shows the base case scenario and what the OTTI charges would have been under the more adverse housing price scenario at March 31, 2011:

OTTI Analysis Under Base Case and Adverse Case Scenario
	Housing Price Scenario
	Base Case								Adverse Case
(Dollars in millions)	Number of Securities	Unpaid Principal Balance		Credit- Related OTTI(1)		Non-Credit- Related OTTI(1)			Number of Securities	Unpaid Principal Balance		Credit- Related OTTI(1)		Non-Credit- Related OTTI(1)
Other-than-temporarily impaired PLRMBS backed by loans classified at origination as:
Prime	8	$	740	$	11	$	(2	)	17	$	1,362	$	54	$	(25	)
Alt-A, option ARM	12	533		24		(18		)	23	2,026		122		(102		)
Alt-A, other	93	6,633		74		(1		)	122	8,065		260		(121		)
Total	113	$	7,906	$	109	$	(21	)	162	$	11,453	$	436	$	(248	)

(1)    Amounts are for the three months ended March 31, 2011.

For more information on the Bank's OTTI analysis and reviews, see “Item 1. Financial Statements – Note 6 – Other-Than-Temporary Impairment Analysis.”

The following table presents the ratings of the Bank's PLRMBS as of March 31, 2011, by year of securitization and by collateral type at origination.

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Unpaid Principal Balance of PLRMBS by Year of Securitization and Credit Rating
(In millions)
March 31, 2011
	Unpaid Principal Balance
	Credit Rating(1)
Collateral Type at Origination and Year of Securitization	AAA		AA		A		BBB		BB		B		CCC		CC		C		Total
Prime
2008	$	—	$	—	$	—	$	34	$	—	$	64	$	221	$	—	$	—	$	319
2007	—		—		—		91		—		21		253		315		120		800
2006	85		49		150		—		59		24		—		71		—		438
2005	62		—		14		—		—		65		85		—		—		226
2004 and earlier	1,128		506		306		150		96		37		19		—		—		2,242
Total Prime	1,275		555		470		275		155		211		578		386		120		4,025
Alt-A, option ARM
2007	—		—		—		—		261		165		1,040		—		—		1,466
2006	—		—		—		—		—		—		253		—		—		253
2005	—		—		—		—		—		22		109		176		—		307
Total Alt-A, option ARM	—		—		—		—		261		187		1,402		176		—		2,026
Alt-A, other
2008	—		—		—		—		—		228		—		—		—		228
2007	—		—		—		—		260		391		1,121		169		704		2,645
2006	—		87		—		88		—		30		458		133		486		1,282
2005	13		—		30		137		59		743		3,392		131		185		4,690
2004 and earlier	91		124		303		519		189		175		36		—		—		1,437
Total Alt-A, other	104		211		333		744		508		1,567		5,007		433		1,375		10,282
Total par amount	$	1,379	$	766	$	803	$	1,019	$	924	$	1,965	$	6,987	$	995	$	1,495	$	16,333

(1)    The credit ratings used by the Bank are based on the lowest of Moody's, Standard & Poor's, or comparable Fitch ratings. Credit ratings of BB and lower are below investment grade.

The following table presents the ratings of the Bank's other-than-temporarily impaired PLRMBS at March 31, 2011, by year of securitization and by collateral type at origination.

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Unpaid Principal Balance of Other-Than-Temporarily Impaired PLRMBS by Year of Securitization and Credit Rating
(In millions)
March 31, 2011
	Unpaid Principal Balance
	Credit Rating(1)
Collateral Type at Origination and Year of Securitization	AA		A		BBB		BB		B		CCC		CC		C		Total
Prime
2008	$	—	$	—	$	—	$	—	$	64	$	221	$	—	$	—	$	285
2007	—		—		—		—		—		253		315		120		688
2006	—		—		—		59		13		—		71		—		143
2005	—		—		—		—		42		—		—		—		42
2004 and earlier	—		72		—		—		—		19		—		—		91
Total Prime	—		72		—		59		119		493		386		120		1,249
Alt-A, option ARM
2007	—		—		—		261		165		1,040		—		—		1,466
2006	—		—		—		—		—		253		—		—		253
2005	—		—		—		—		22		82		176		—		280
Total Alt-A, option ARM	—		—		—		261		187		1,375		176		—		1,999
Alt-A, other
2008	—		—		—		—		228		—		—		—		228
2007	—		—		—		76		391		1,121		169		704		2,461
2006	87		—		88		—		—		458		133		486		1,252
2005	—		—		46		—		569		3,025		131		185		3,956
2004 and earlier	—		86		30		21		60		36		—		—		233
Total Alt-A, other	87		86		164		97		1,248		4,640		433		1,375		8,130
Total par amount	$	87	$	158	$	164	$	417	$	1,554	$	6,508	$	995	$	1,495	$	11,378

(1)    The credit ratings used by the Bank are based on the lowest of Moody's, Standard & Poor's, or comparable Fitch ratings. Credit ratings of BB and lower are below investment grade.

For the Bank's PLRMBS, the following table shows the amortized cost, estimated fair value, OTTI charges, performance of the underlying collateral based on the classification at the time of origination, and credit enhancement statistics by type of collateral and year of securitization. Credit enhancement is defined as the percentage of subordinated tranches and over-collateralization, if any, in a security structure that will absorb losses before the Bank will experience a loss on the security, expressed as a percentage of the underlying collateral balance. The credit enhancement figures include the additional credit enhancement required by the Bank (above the amounts required for an AAA rating by the credit rating agencies) for selected securities starting in late 2004, and for all securities starting in late 2005. The calculated weighted averages represent the dollar-weighted averages of all the PLRMBS in each category shown. The classification (prime or Alt-A) is based on the model used to run the estimated cash flows for the CUSIP, which may not necessarily be the same as the classification at the time of origination.

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PLRMBS Credit Characteristics
(Dollars in millions)
March 31, 2011
							For the Three Months Ended March 31, 2011							Underlying Collateral Performance and Credit Enhancement Statistics
Collateral Type at Origination and Year of Securitization	Amortized Cost		Gross Unrealized Losses		Estimated Fair Value		Credit- Related OTTI		Non- Credit- Related OTTI			Total OTTI		Weighted- Average 60+ Days Collateral Delinquency Rate		Original Weighted Average Credit Support		Current Weighted Average Credit Support
Prime
2008	$	297	$	26	$	272	$	3	$	(3	)	$	—	29.69	%	30.00	%	29.82	%
2007	720		184		577		4		(4		)	—		21.45		22.71		17.15
2006	422		8		417		3		(2		)	1		10.75		10.28		9.90
2005	224		36		195		—		—			—		13.90		12.15		16.75
2004 and earlier	2,246		155		2,092		1		7			8		7.78		4.23		9.76
Total Prime	3,909		409		3,553		11		(2		)	9		12.90		11.05		13.22
Alt-A, option ARM
2007	1,302		483		908		—		—			—		41.19		44.14		39.65
2006	203		49		155		4		(4		)	—		45.11		44.81		36.43
2005	175		50		127		20		(14		)	6		41.87		22.95		24.40
Total Alt-A, option ARM	1,680		582		1,190		24		(18		)	6		41.78		41.01		36.94
Alt-A, other
2008	228		44		183		—		44			44		14.30		31.80		31.13
2007	2,417		415		2,034		25		(24		)	1		31.66		26.90		23.87
2006	1,073		139		972		18		(18		)	—		31.62		18.46		13.55
2005	4,492		812		3,760		31		(3		)	28		20.42		13.60		14.70
2004 and earlier	1,447		148		1,306		—		—			—		13.32		7.92		16.43
Total Alt-A, other	9,657		1,558		8,255		74		(1		)	73		23.58		17.23		17.52
Total	$	15,246	$	2,549	$	12,998	$	109	$	(21	)	$	88	23.21	%	18.66	%	18.87	%

The following table presents a summary of the significant inputs used to determine potential OTTI credit losses in the Bank's PLRMBS portfolio at March 31, 2011.

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Significant Inputs to OTTI Credit Analysis for All PLRMBS
March 31, 2011
	Significant Inputs						Current
	Prepayment Rates		Default Rates		Loss Severities		Credit Enhancement
Year of Securitization	Weighted Average %	Range %	Weighted Average %	Range %	Weighted Average %	Range %	Weighted Average %	Range %
Prime
2008	9.5	5.9-10.4	50.8	29.7-57.8	44.1	41.0-48.4	30.4	29.8-31.1
2007	8.2	7.7-10.2	8.3	6.4-8.8	25.6	25.4-26.5	10.3	7.4-22.7
2006	8.7	5.5-10.3	20.0	9.6-34.8	42.2	35.8-49.2	11.8	6.7-21.3
2005	11.8	6.7-14.0	12.7	0.5-50.3	27.0	24.7-32.4	11.0	7.0-15.8
2004 and earlier	13.0	1.3-49.4	10.2	0.0-37.8	27.7	19.0-53.9	9.4	5.0-48.1
Total Prime	11.6	1.3-49.4	18.3	0.0-57.8	32.5	19.0-53.9	13.3	5.0-48.1
Alt-A, option ARM
2007	6.6	4.8-8.6	77.3	69.5-87.3	55.5	47.3-65.0	39.7	34.1-46.8
2006	6.0	4.8-7.5	81.4	74.5-87.4	57.9	48.7-65.6	36.4	32.8-39.5
2005	9.0	6.5-12.8	62.6	36.4-76.2	44.6	37.1-51.8	24.8	14.8-35.0
Total Alt-A, option ARM	6.9	4.8-12.8	75.5	36.4-87.4	54.1	37.1-65.6	36.9	14.8-46.8
Alt-A, other
2007	9.3	6.5-13.8	54.5	25.8-80.2	49.4	30.4-58.6	20.3	7.9-49.2
2006	9.5	3.2-11.5	50.1	32.8-82.6	50.9	40.4-57.3	20.0	6.6-34.7
2005	10.2	6.6-14.9	32.7	12.6-71.8	44.6	27.7-61.2	14.8	4.4-79.8
2004 and earlier	14.3	5.9-24.5	20.3	0.0-51.8	35.9	19.4-110.6	16.2	8.8-74.7
Total Alt-A, other	10.5	3.2-24.5	39.1	0.0-82.6	45.6	19.4-110.6	17.2	4.4-79.8
Total	10.3	1.3-49.4	39.5	0.0-87.3	44.0	19.0-110.6	18.9	4.4-79.8

Credit enhancement is defined as the subordinated tranches and over-collateralization, if any, in a security structure that will generally absorb losses before the Bank will experience a loss on the security, expressed as a percentage of the underlying collateral balance. The calculated averages represent the dollar-weighted averages of all the PLRMBS investments in each category shown. The classification (prime or Alt-A) is based on the model used to run the estimated cash flows for the CUSIP, which may not necessarily be the same as the classification at the time of origination.

The following table presents the unpaid principal balance of PLRMBS by collateral type at the time of origination at March 31, 2011, and December 31, 2010.

Unpaid Principal Balance of PLRMBS by Collateral Type at Origination
	March 31, 2011						December 31, 2010
(In millions)	Fixed Rate		Adjustable Rate		Total		Fixed Rate		Adjustable Rate		Total
PLRMBS:
Prime	$	1,425	$	2,600	$	4,025	$	1,689	$	2,701	$	4,390
Alt-A, option ARM	—		2,026		2,026		—		2,074		2,074
Alt-A, other	5,365		4,917		10,282		5,643		4,966		10,609
Total	$	6,790	$	9,543	$	16,333	$	7,332	$	9,741	$	17,073

The following table presents credit ratings as of April 29, 2011, on PLRMBS in a loss position at March 31, 2011.

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PLRMBS in a Loss Position at March 31, 2011, and Credit Ratings as of April 29, 2011
(Dollars in millions)
	March 31, 2011												April 29, 2011
Collateral Type at Origination:	Unpaid Principal Balance		Amortized Cost		Carrying Value		Gross Unrealized Losses		Weighted- Average 60+ Days Collateral Delinquency Rate		% Rated AAA		% Rated AAA		% Rated AA to BBB		% Rated Below Investment Grade		% on Watchlist
Prime	$	3,732	$	3,619	$	3,410	$	409	13.47	%	27.27	%	7.63	%	36.31	%	56.06	%	2.32	%
Alt-A, option ARM	1,977		1,666		1,093		582		41.48		—		—		—		100.00		—
Alt-A, other	10,115		9,525		8,272		1,558		23.46		0.66		0.66		11.51		87.83		2.95
Total	$	15,824	$	14,810	$	12,775	$	2,549	23.35	%	6.85	%	2.22	%	15.92	%	81.86	%	2.43	%

The following table presents the fair value of the Bank's PLRMBS as a percentage of the unpaid principal balance by collateral type at origination and year of securitization.

Fair Value of PLRMBS as a Percentage of Unpaid Principal Balance by Year of Securitization
Collateral Type at Origination and Year of Securitization	March 31, 2011		December 31, 2010		September 30, 2010		June 30, 2010		March 31, 2010
Prime
2008	85.55	%	86.57	%	87.24	%	84.19	%	80.87	%
2007	72.06		71.04		69.65		67.93		62.44
2006	95.43		93.76		94.77		92.68		90.88
2005	86.55		86.30		87.13		85.25		83.73
2004 and earlier	93.29		93.16		93.26		92.56		90.87
Weighted average of all Prime	88.31		88.15		88.51		87.43		85.17
Alt-A, option ARM
2007	61.93		58.88		55.74		53.35		51.95
2006	61.09		60.39		56.44		54.89		53.44
2005	41.36		41.84		40.65		40.85		40.23
Weighted average of all Alt-A, option ARM	58.71		56.49		53.55		51.66		50.37
Alt-A, other
2008	80.69		79.91		79.47		75.78		75.21
2007	76.88		76.39		74.15		71.65		69.75
2006	75.77		75.45		75.90		74.13		71.68
2005	80.16		77.36		76.94		74.91		72.79
2004 and earlier	90.92		90.01		89.28		87.08		84.79
Weighted average of all Alt-A, other	80.28		78.69		77.86		75.67		73.60
Weighted average of all PLRMBS	79.58	%	78.42	%	77.86	%	76.19	%	74.28	%

The following tables summarize rating agency downgrade actions on investments that occurred from April 1, 2011, to April 29, 2011. The credit ratings used by the Bank are based on the lowest of Moody's, Standard & Poor's, or comparable Fitch ratings.

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Investments Downgraded from April 1, 2011, to April 29, 2011 Dollar Amounts as of March 31, 2011
	To AA				To A				To BBB				To Below Investment Grade				Total
(In millions)	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
PLRMBS:
Downgrade from AAA	$	235	$	223	$	183	$	173	$	348	$	322	$	62	$	56	$	828	$	774
Downgrade from AA	—		—		4		3		224		211		229		214		457		428
Downgrade from A	—		—		—		—		24		19		332		319		356		338
Downgrade from BBB	—		—		—		—		—		—		151		142		151		142
Total	$	235	$	223	$	187	$	176	$	596	$	552	$	774	$	731	$	1,792	$	1,682

Investments Downgraded to Below Investment Grade from April 1, 2011, to April 29, 2011 Dollar Amounts as of March 31, 2011
	To BB				To B				To CCC				Total Below Investment Grade
(In millions)	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
PLRMBS:
Downgrade from AAA	$	62	$	56	$	—	$	—	$	—	$	—	$	62	$	56
Downgrade from AA	229		214		—		—		—		—		229		214
Downgrade from A	332		319		—		—		—		—		332		319
Downgrade from BBB	41		35		27		24		83		83		151		142
Total	$	664	$	624	$	27	$	24	$	83	$	83	$	774	$	731

The PLRMBS that were downgraded from April 1, 2011, to April 29, 2011, were included in the Bank's OTTI analysis performed as of March 31, 2011, and no additional OTTI charges were required as a result of these downgrades.

The Bank believes that, as of March 31, 2011, the gross unrealized losses on the remaining PLRMBS that did not have an OTTI charge are primarily due to illiquidity in the MBS market, uncertainty about the future condition of the housing and mortgage markets and the economy, and continued deterioration in the credit performance of loan collateral underlying these securities, which caused these assets to be valued at significant discounts to their acquisition cost. The Bank does not intend to sell these securities, it is not more likely than not that the Bank will be required to sell these securities before its anticipated recovery of the remaining amortized cost basis, and the Bank expects to recover the entire amortized cost basis of these securities. As a result, the Bank determined that, as of March 31, 2011, all of the gross unrealized losses on these securities are temporary. The Bank will continue to monitor and analyze the performance of these securities to assess the likelihood of the recovery of the entire amortized cost basis of these securities as of each balance sheet date.

The following tables summarize rating agency actions for investments placed on negative watch from April 1, 2011, to April 29, 2011. The credit ratings used by the Bank are based on the lowest of Moody's, Standard & Poor's, or comparable Fitch ratings.

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Investments Placed on Negative Watch from April 1, 2011, to April 29, 2011 Dollar Amounts as of March 31, 2011
	AAA				AA				B				Total
(In millions)	Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value		Carrying Value		Fair Value
Interest-bearing deposits	$	—	$	—	$	500	$	500	$	—	$	—	$	500	$	500
Housing finance agency bonds	—		—		505		418		—		—		505		418
PLRMBS	80		78		13		12		251		250		344		340
Federal funds sold	—		—		1,750		1,750		—		—		1,750		1,750
Total	$	80	$	78	$	2,768	$	2,680	$	251	$	250	$	3,099	$	3,008

If conditions in the housing and mortgage markets and general business and economic conditions remain stressed or deteriorate further, the fair value of MBS may decline further and the Bank may experience OTTI of additional PLRMBS in future periods, as well as further impairment of PLRMBS that were identified as other-than-temporarily impaired as of March 31, 2011. Additional future OTTI credit charges could adversely affect the Bank's earnings and retained earnings and its ability to pay dividends and repurchase capital stock. The Bank cannot predict whether it will be required to record additional OTTI charges on its PLRMBS in the future.

Federal and state government authorities, as well as private entities, such as financial institutions and the servicers of residential mortgage loans, have begun or promoted implementation of programs designed to provide homeowners with assistance in avoiding residential mortgage loan foreclosures. These loan modification programs, as well as future legislative, regulatory, or other actions, including amendments to the bankruptcy laws, that result in the modification of outstanding mortgage loans, may adversely affect the value of, and the returns on, these mortgage loans or MBS related to these mortgage loans.

Derivatives Counterparties. The Bank has also adopted credit policies and exposure limits for derivatives credit exposure. All credit exposure from derivatives transactions entered into by the Bank with member counterparties that are not derivatives dealers (including interest rate swaps, caps, floors, corridors, and collars), for which the Bank serves as an intermediary, must be fully secured by eligible collateral, and all such derivatives transactions are subject to both the Bank's Advances and Security Agreement and a master netting agreement.

For all derivatives dealer counterparties, the Bank selects only highly rated derivatives dealers and major banks that meet the Bank's eligibility criteria. In addition, the Bank has entered into master netting agreements and bilateral security agreements with all active derivatives dealer counterparties that provide for delivery of collateral at specified levels tied to counterparty credit ratings to limit the Bank's net unsecured credit exposure to these counterparties.

Under these policies and agreements, the amount of unsecured credit exposure to an individual derivatives dealer counterparty is limited to the lesser of: (i) a percentage of the counterparty's capital, or (ii) an absolute dollar credit exposure limit, both according to the counterparty's credit rating, as determined by rating agency long-term credit ratings of the counterparty's debt securities or deposits. The following table presents the Bank's credit exposure to its derivatives counterparties at the dates indicated.

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Credit Exposure to Derivatives Counterparties
(In millions)
March 31, 2011
Counterparty Credit Rating(1)	Notional Balance		Credit Exposure Net of Cash Collateral		Other Collateral Held		Net Credit Exposure
AA	$	76,189	$	282	$	266	$	16
A(2)	105,637		456		443		13
Subtotal	181,826		738		709		29
Member institutions(3)	475		1		1		—
Total derivatives	$	182,301	$	739	$	710	$	29
December 31, 2010
Counterparty Credit Rating(1)	Notional Balance		Credit Exposure Net of Cash Collateral		Other Collateral Held		Net Credit Exposure
AA	$	73,372	$	276	$	268	$	8
A(2)	116,558		441		429		12
Subtotal	189,930		717		697		20
Member institutions(3)	480		1		1		—
Total derivatives	$	190,410	$	718	$	698	$	20

(1) The credit ratings used by the Bank are based on the lowest of Moody's, Standard & Poor's, or comparable Fitch ratings.

(2) Includes notional amounts of derivatives contracts outstanding totaling $14.2 billion at March 31, 2011, and $19.2 billion at December 31, 2010, with Citibank, N.A., a member that is a derivatives dealer counterparty.

(3) Collateral held with respect to interest rate exchange agreements with members represents either collateral physically held by or on behalf of the Bank or collateral assigned to the Bank, as evidenced by an Advances and Security Agreement, and held by the members for the benefit of the Bank. These amounts do not include those related to Citibank, N.A., which are included in the A-rated derivatives dealer counterparty amounts above at March 31, 2011, and at December 31, 2010.

At March 31, 2011, the Bank had a total of $182.3 billion in notional amounts of derivatives contracts outstanding. Of this total:

• $181.8 billion represented notional amounts of derivatives contracts outstanding with 17 derivatives dealer counterparties. Nine of these counterparties made up 92% of the total notional amount outstanding with these derivatives dealer counterparties, individually ranging from 6% to 15% of the total. The remaining counterparties each represented less than 5% of the total. Six of these counterparties, with $72.6 billion of derivatives outstanding at March 31, 2011, were affiliates of members, and one counterparty, with $14.2 billion outstanding at March 31, 2011, was a member of the Bank.

• $475 million represented notional amounts of derivatives contracts with three member counterparties that are not derivatives dealers. The Bank entered into these derivatives contracts as an intermediary and entered into the same amount of exactly offsetting transactions with derivatives dealer counterparties. The Bank's intermediation in this manner allows members indirect access to the derivatives market.

Credit exposure net of cash collateral on derivatives contracts at March 31, 2011, was $739 million, which consisted of:

• $738 million of gross credit exposure on open derivatives contracts with 11 derivatives dealer counterparties. After consideration of collateral held by the Bank, the amount of net unsecured exposure from these contracts totaled $29 million.

• $1 million of credit exposure net of cash collateral on open derivatives contracts, in which the Bank served as an intermediary, with one member counterparty that is not a derivatives dealer, all of which was secured with eligible collateral.

At December 31, 2010, the Bank had a total of $190.4 billion in notional amounts of derivatives contracts outstanding. Of this total:

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• $189.9 billion represented notional amounts of derivatives contracts outstanding with 17 derivatives dealer counterparties. Eight of these counterparties made up 86% of the total notional amount outstanding with these derivatives dealer counterparties, individually ranging from 5% to 15% of the total. The remaining counterparties each represented less than 5% of the total. Six of these counterparties, with $74.3 billion of derivatives outstanding at December 31, 2010, were affiliates of members, and one counterparty, with $19.2 billion outstanding at December 31, 2010, was a member of the Bank.

• $480 million represented notional amounts of derivatives contracts with three member counterparties that are not derivatives dealers. The Bank entered into these derivatives contracts as an intermediary and entered into the same amount of exactly offsetting transactions with derivatives dealer counterparties. The Bank's intermediation in this manner allows members indirect access to the derivatives market.

Credit exposure net of cash collateral on derivatives contracts at December 31, 2010, was $718 million, which consisted of:

• $717 million of credit exposure net of cash collateral on open derivatives contracts with ten derivatives dealer counterparties. After consideration of collateral held by the Bank, the amount of net unsecured exposure from these contracts totaled $20 million.

• $1 million of credit exposure net of cash collateral on open derivatives contracts, in which the Bank served as an intermediary, with one member counterparty that is not a derivatives dealer, all of which was secured with eligible collateral.

The Bank's credit exposure net of cash collateral increased $21 million from December 31, 2010, to March 31, 2011, even though the notional amount outstanding decreased from $190.4 billion at December 31, 2010, to $182.3 billion at March 31, 2011. In general, the Bank is a net receiver of fixed interest rates and a net payer of adjustable interest rates under its derivatives contracts with counterparties. From December 31, 2010, to March 31, 2011, interest rates decreased, causing interest rate swaps in which the Bank is a net receiver of fixed interest rates to increase in value.

An increase or decrease in the notional amounts of derivatives contracts may not result in a corresponding increase or decrease in credit exposure net of cash collateral because the fair values of derivatives contracts are generally zero at inception.

Based on the master netting arrangements, its credit analyses, and the collateral requirements in place with each counterparty, the Bank does not expect to incur any credit losses on its derivatives agreements.

For more information, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk – Derivatives Counterparties” in the Bank's 2010 Form 10-K.

Critical Accounting Policies and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, if applicable, and the reported amounts of income, expenses, gains, and losses during the reporting period. Changes in these judgments, estimates, and assumptions could potentially affect the Bank's financial position and results of operations significantly. Although the Bank believes these judgments, estimates, and assumptions to be reasonably accurate, actual results may differ.

In the Bank's 2010 Form 10-K, the following accounting policies and estimates were identified as critical because they require the Bank to make subjective or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. These policies and estimates are: estimating the allowance for credit losses on the advances and mortgage loan portfolios; accounting for derivatives; estimating fair values of investments classified as trading and available-for-sale, derivatives and associated hedged items carried at fair value in accordance with the accounting for derivative instruments and associated hedging activities, and financial instruments carried at fair

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value under the fair value option, and accounting for other-than-temporary impairment for investment securities; and estimating the prepayment speeds on MBS and mortgage loans for the accounting of amortization of premiums and accretion of discounts on MBS and mortgage loans.

There have been no significant changes in the judgments and assumptions made during the first three months of 2011 in applying the Bank's critical accounting policies. These policies and the judgments, estimates, and assumptions are described in greater detail in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” and “Item 8. Financial Statements and Supplementary Data – Note 1 – Summary of Significant Accounting Policies” in the Bank's 2010 Form 10-K and in “Item 1. Financial Statements – Note 15 – Fair Values.”

Recently Issued Accounting Guidance and Interpretations

See “Item 1. Financial Statements – Note 2 – Recently Issued and Adopted Accounting Guidance” for a discussion of recently issued accounting standards and interpretations.

Recent Developments

Dodd-Frank Act. On July 21, 2010, the Dodd-Frank Wall Street and Consumer Protection Act (Dodd-Frank Act) was signed into law. The Dodd-Frank Act, among other effects: (1) creates a consumer financial protection agency; (2) creates an inter-agency Financial Stability Oversight Council (Oversight Council) to identify and regulate systemically important financial institutions; (3) regulates the over-the-counter derivatives market; (4) reforms the credit rating agencies; (5) provides shareholders of entities that are subject to the proxy rules under the Securities Exchange Act of 1934, as amended, with an advisory vote on the entities' compensation practices, including executive compensation and golden parachutes; (6) establishes new requirements, including a risk retention requirement, for mortgage-backed securities; (7) makes a number of changes to the federal deposit insurance system; and (8) creates a federal insurance office to monitor the insurance industry.

The Bank's business operations, funding costs, rights and obligations, and the manner in which the Bank carries out its housing finance mission are all likely to be affected by the passage of the Dodd-Frank Act and implementing regulations.

It is not possible to predict the full impact of the Dodd-Frank Act on the Bank or its members.

Dodd-Frank Act's Impact on the Bank's Derivatives Transactions. The Dodd-Frank Act provides for new statutory and regulatory requirements for derivatives transactions, including those used by the Bank to hedge its interest rate and other risks. As a result of these requirements, certain derivatives transactions will be required to be cleared through a third-party central clearinghouse and traded on regulated exchanges or through new swap execution facilities. Such cleared trades are expected to be subject to initial and variation margin requirements established by the clearinghouse and its clearing members. While clearing swaps should reduce counterparty credit risk, the margin requirements for cleared trades have the potential of making derivatives transactions more costly and less attractive as risk management tools for the Bank.

The Dodd-Frank Act will also change the regulatory requirements for derivatives transactions that are not subject to mandatory clearing requirements (uncleared trades). While the Bank expects to continue to enter into uncleared trades on a bilateral basis, such trades are expected to be subject to new regulatory requirements, including new mandatory reporting requirements, documentation requirements, and new minimum margin and capital requirements imposed by federal regulators. Under the proposed margin rules, the Bank will have to post both initial margin and variation margin to its swap dealer counterparties, but may be eligible in both instances for modest unsecured thresholds as a “low risk financial end user.” Pursuant to additional proposed Finance Agency provisions, the Bank will be required to collect both initial margin and variation margin from its swap dealer counterparties, without any thresholds. These margin requirements and any related capital requirements could adversely affect the liquidity and pricing of certain uncleared derivative transactions entered into by the Bank and thus also make uncleared trades more costly and less attractive as risk management tools for the Bank.

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The U.S. Commodities Futures Trading Commission (CFTC) has issued a proposed rule requiring that collateral posted by swaps customers to a clearinghouse in connection with cleared swaps be legally segregated on an individual customer basis. However, the CFTC has also asked for additional comment on other collateral models under which customer collateral would not be legally segregated, but could instead be commingled with all collateral posted by other customers of the clearing member. Such commingling could put the Bank's collateral at risk in the event that another customer and the Bank's clearing member both default.To the extent that the CFTC's final rule places the Bank's posted collateral at greater risk of loss in the clearing structure than under the current over-the-counter market structure, the Bank may be adversely affected.

The Dodd-Frank Act will require swap dealers and certain other large users of derivatives to register as "swap dealers" or "major swap participants" with the CFTC and/or the Securities and Exchange Commission (SEC). Based on definitions in the proposed rules jointly issued by the CFTC and SEC, it seems unlikely that the Bank will be required to register as a major swap participant, although this remains a possibility. It also seems unlikely that the Bank will be required to register as a swap dealer with respect to derivatives transactions it enters into with dealer counterparties for the purpose of hedging and managing its own interest rate risk, which constitute the great majority of the Bank's derivatives transactions. However, based on the proposed rules, it is possible that the Bank could be required to register with the CFTC as a swap dealer if it enters into intermediated swaps with its members.

It is also unclear how the final rule will treat certain advance products that may contain features that operate in a manner similar to certain derivatives, such as interest rate caps, floors, and options. Accordingly, it is not known at this time whether certain transactions between the Bank and its members will be treated as “swaps,” or, if so, the impact on the Bank or on its decision to enter into certain member transactions.

The Bank, together with the other FHLBanks, is providing comments to the regulators regarding proposed rulemakings that could affect the FHLBanks. It is not expected that final rules implementing the Dodd-Frank Act will become effective until the latter half of 2011, and delays beyond that time are possible.

Proposed CFTC Rule on Eligible Investments for Derivatives Clearing Organizations. On November 3, 2010, the CFTC issued a proposed rule with a comment deadline of December 3, 2010, which, among other changes, would eliminate the ability of futures commissions merchants and derivatives clearing organizations to invest customer funds in GSE securities that are not explicitly guaranteed by the U.S. government. Currently, GSE securities are eligible investments under CFTC regulations. If this change is adopted as proposed, it may reduce the demand for FHLBank debt, and the cost of issuing debt may increase.

Oversight Council and Federal Reserve Board Proposed Rules Regarding Authority to Supervise and Regulate Certain Nonbank Financial Companies. On January 26, 2011, the Oversight Council issued a proposed rule with a comment deadline of February 25, 2011, that would implement the Oversight Council's authority to subject nonbank financial companies to the supervision of the Board of Governors of the Federal Reserve System (Federal Reserve Board) and certain prudential standards. The proposed rule defines “nonbank financial company” broadly enough to likely cover the FHLBanks. The proposed rule provides certain factors that the Oversight Council will consider in determining whether to subject a nonbank financial company to such supervision and prudential standards. These factors include the availability of substitutes for the financial services and products the entity provides as well as the entity's size, interconnectedness with other financial firms, leverage, liquidity risk, and existing regulatory scrutiny.

On February 11, 2011, the Federal Reserve Board issued a proposed rule with a comment deadline of March 30, 2011, that would define certain key terms to determine which nonbank financial companies will be subject to the Federal Reserve Board's oversight. The proposed rule provides that a company is “predominantly engaged in financial activities” if:

• the annual gross financial revenue of the company represents 85 percent or more of the company's gross revenue in either of its two most recently completed fiscal years; or

• the company's total financial assets represent 85 percent or more of the company's total assets as of the end

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of either of its two most recently completed fiscal years.

The FHLBanks are predominantly engaged in financial activities under either of the proposed tests. The proposed rule also defines “significant nonbank financial company” as a nonbank financial company with $50 billion or more in total assets as of the end of its most recently completed fiscal year. The Bank had $152 billion in total assets at December 31, 2010.

If the Bank is determined to be a nonbank financial company subject to the Federal Reserve Board's regulatory requirements, then the Bank's operations and business are likely to be affected.

Oversight Council Recommendations on Implementing the Volcker Rule.On January 18, 2011, the Oversight Council issued certain recommendations for implementing certain prohibitions on proprietary trading, commonly referred to as the Volcker Rule. Institutions subject to the Volcker Rule may be subject to various limits with regard to their proprietary trading and various regulatory requirements to ensure compliance with the Volcker Rule. If the Volcker Rule is implemented in a way that covers the FHLBanks, then the Bank may be subject to additional limitations on the composition of its investment portfolio beyond those to which it is already subject under existing Finance Agency regulations. This could result in less profitable investment alternatives for the Bank. In addition, the Bank may be subject to additional regulatory requirements to ensure compliance with the Volcker rule, with attendant incremental costs. The FHLBank System's consolidated obligations generally are exempt from the operation of this rule, subject to certain limitations, including the absence of conflicts of interest and certain financial risks.

FDIC Interim Final Rule on the Dodd-Frank Act Orderly Liquidation Resolution Authority.On January 25, 2011, the FDIC issued an interim final rule on how the FDIC would treat certain creditor claims under the new orderly liquidation authority established by the Dodd-Frank Act. The Dodd-Frank Act provides for the appointment of the FDIC as receiver for a financial company, not including FDIC-insured depository institutions, in instances where the failure of the company and its liquidation under other insolvency procedures (such as bankruptcy) would pose a significant risk to the financial stability of the United States. The interim final rule provides, among other things:

• a valuation standard for collateral on secured claims;

• that all unsecured creditors must expect to absorb losses in any liquidation and that secured creditors will only be protected to the extent of the fair value of their collateral;

• a clarification of the treatment for contingent claims; and

• that secured obligations collateralized with U.S. government obligations will be valued at fair market value.

Comments on this interim final rule were due by March 28, 2011. Valuing most collateral at fair value, rather than par, could adversely affect the value of the Bank's investments in the event of the issuer's insolvency.

FDIC Final Rule on Assessment System. On February 25, 2011, the FDIC issued a final rule to revise the assessment system applicable to FDIC-insured financial institutions. The rule, among other things, implements a provision in the Dodd-Frank Act to redefine the assessment base used for calculating deposit insurance assessments. Specifically, the rulechanges the assessment base for most institutions from adjusted domestic deposits to average consolidated total assets minus average tangible equity. This rule became effective on April 1, 2011, so the Bank's advances are now included with other liabilities in the assessment bases of its FDIC-insured members. The rule also eliminates an adjustment to the base assessment rate paid for secured liabilities, including advances, in excess of 25% of an institution's domestic deposits, since these are now part of the assessment base. To the extent that higher assessments increase the cost of advances for some members, the final rule may negatively affect their demand for Bank advances.

Proposed Rule on Incentive-based Compensation Arrangements. On April 14, 2011, seven federal financial regulators, including the Finance Agency, published a proposed rule that would prohibit “covered financial institutions” from entering into incentive-based compensation arrangements that encourage inappropriate risks.

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For the FHLBanks and the Office of Finance, the rule would:

• prohibit excessive compensation;

• prohibit incentive compensation that could lead to material financial loss;

• require an annual report;

• require policies and procedures; and

• require mandatory deferrals of 50% of incentive compensation over three years for executive officers.

Covered persons under the rule would include senior management responsible for the oversight of firm-wide activities or material business lines and non-executive employees or groups of those employees whose activities may expose the institution to a material loss.

Under the proposed rule, covered financial institutions would be required to comply with three key risk management principles related to the design and governance of incentive-based compensation: balanced design, independent risk management controls, and strong governance.

The proposed rule identifies four methods to balance compensation design and make it more sensitive to risk: risk adjustment of awards, deferral of payment, longer performance periods, and reduced sensitivity to short-term performance. Larger covered financial institutions, like the Bank, would also be subject to a mandatory 50% deferral of incentive-based compensation for executive officers and board oversight of incentive-based compensation for certain risk-taking employees who are not executive officers. The proposed rule would affect the design of the Bank's compensation policies and practices, including its incentive compensation policies and practices, if adopted as proposed. Comments on the proposed rule are due by May 31, 2011.

Proposed Rule on Credit Risk Retention for Asset-Backed Securities. On March 31, 2011, the Federal banking agencies, the Finance Agency, the U.S. Department of Housing and Urban Development, and the Securities and Exchange Commission jointly issued a notice of proposed rulemaking, which proposes regulations requiring sponsors of asset-backed securities to retain a minimum five percent economic interest in a portion of the credit risk of the assets collateralizing asset-backed securities, unless all the assets securitized satisfy specified qualifications.

The proposed rule specifies criteria for qualified residential mortgage, commercial real estate, auto and commercial loans that would make them exempt from the risk retention requirement. The criteria for qualified residential mortgages are described in the proposed rulemaking as those underwriting and product features that, based on historical data, are associated with low risk even in periods of housing price declines and high unemployment.

Key issues in the proposed rule include: (1) the appropriate terms for treatment as a qualified residential mortgage; (2) the extent to which Fannie Mae- and Freddie Mac-related securitizations will be exempt from the risk retention rules; and (3) the possibility of creating a category of high quality non-qualified residential mortgage loans that would have a risk retention requirement less than five percent.

If adopted as proposed, the rule could reduce the number of loans originated by the Bank's members, which could reduce member demand for the Bank's products. Comments on this proposed rule are due on June 10, 2011.

Housing GSE Reform. On February 11, 2011, the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development issued a report to Congress on Reforming America's Housing Finance Market. The report primarily focused on Fannie Mae and Freddie Mac by providing options for the long-term structure of housing finance. The report recognized the vital role the FHLBanks play in helping financial institutions access liquidity and capital to compete in an increasingly competitive marketplace. The report indicated that the Administration would work, in consultation with the Finance Agency and Congress, to restrict the areas of mortgage finance in which Fannie Mae, Freddie Mac, and the FHLBanks operate so that overall government support of the mortgage market is substantially reduced. Specifically, with respect to the FHLBanks, the report stated that the Administration supports limiting the level of advances and reducing portfolio investments, consistent with the FHLBanks' mission of providing liquidity and access to capital for insured depository institutions. If housing GSE reform legislation incorporating these requirements is enacted, the FHLBanks could be significantly

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limited in their ability to make advances to their members and could be subject to additional limitations on their investment authority.

The report also supports consideration of additional means of funding for mortgage credit, including the potential development of a covered bond market. A developed covered bond market could compete with FHLBank advances.

In addition, the report sets forth various reforms for Fannie Mae and Freddie Mac, each of which would ultimately wind down those entities. The Bank's investment portfolio has traditionally included a significant amount of investments in Fannie Mae and Freddie Mac debt securities. Accordingly, the Bank's investment strategies may be affected by the winding down of those entities. To the extent that Fannie Mae and Freddie Mac wind down or limit the amount of mortgages they purchase, FHLBank members may increase their mortgage loans held in portfolio, which could potentially increase demand for FHLBank advances. The impact of housing GSE reform on the FHLBanks will depend on the specific content of any legislation that is ultimately enacted to implement housing GSE reform.

Finance Agency Advance Notice of Proposed Rulemaking Regarding FHLBank Members. On December 27, 2010, the Finance Agency issued an advance notice of proposed rulemaking with a comment deadline of March 28, 2011, that provides notice that the Finance Agency is reviewing its regulations on FHLBank membership to ensure the regulations are consistent with maintaining a nexus between FHLBank membership and the housing and community development mission of the FHLBanks. The notice provides certain potential provisions designed to strengthen that nexus, including, among other things:

• requiring compliance with membership standards on a continuous basis rather than only at the time of admission to membership; and

• creating additional quantifiable standards for membership eligibility.

The Bank's results of operations may be adversely affected if the Finance Agency ultimately issues a regulation that prevents prospective institutions from becoming Bank members or prevents existing members from continuing as Bank members, which could reduce future business opportunities.

Finance Agency Proposed Rule on FHLBank Liabilities. On April 2, 2011, the Finance Agency issued a final rule that would, among other things:

• reorganize and re-adopt Finance Board regulations dealing with consolidated obligations, as well as related regulations addressing other authorized FHLBank liabilities and book entry procedures for consolidated obligations;

• implement recent statutory amendments that removed authority from the Finance Agency to issue consolidated obligations;

• specify that the FHLBanks issue consolidated obligations that are the joint and several obligations of the FHLBanks as provided for in the statute rather than as joint and several obligations of the FHLBanks as provided for in the current regulation; and

• provide that consolidated obligations are issued under Section 11(c) of the FHLBank Act rather than under Section 11(a) of the FHLBank Act.

The final rule is not expected to have any adverse impact on the FHLBanks' joint and several liability for the principal and interest payments on consolidated obligations.

Finance Agency Rule on Temporary Increases in Minimum Capital Levels. On March 3, 2011, the Finance Agency issued a final rule, effective April 4, 2011, authorizing the Director of the Finance Agency to increase the minimum capital level of an FHLBank if the Director of the Finance Agency determines that the current level is insufficient to address the FHLBank's risks. The rule identifies the factors that the Director of the Finance Agency may consider in making this determination, which include:

• current or anticipated declines in the value of assets held by the FHLBank;

• its ability to access liquidity and funding;

• credit, market, operational, and other risks;

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• current or projected declines in its capital;

• the FHLBank's material compliance with regulations, written orders, or agreements;

• housing finance market conditions;

• levels of retained earnings;

• initiatives, operations, products, or practices that entail heightened risk;

• the ratio of the market value of equity to the par value of capital stock; and/or

• other conditions as notified by the Director of the Finance Agency.

The rule provides that the Director of the Finance Agency is to consider the need to maintain, modify, or rescind any increase in the minimum capital level no less than every 12 months.

Finance Agency Advance Notice of Proposed Rule on the use of NRSRO Credit Ratings. On January 31, 2011, the Finance Agency issued an advance notice of a proposed rule with a comment deadline of March 17, 2011, that would implement a provision in the Dodd-Frank Act that requires all federal agencies to remove regulations that require the use of NRSRO credit ratings in the assessment of a security. The notice seeks comment regarding certain specific Finance Agency regulations applicable to FHLBanks, including regulations related to risk-based capital requirements, prudential requirements, investments, and consolidated obligations.

Regulatory Policy Guidance on Reporting of Fraudulent Financial Instruments.On January 27, 2010, the Finance Agency issued a regulation requiring the FHLBanks to report to the Finance Agency the discovery of any fraud or possible fraud related to the purchase or sale of financial instruments or loans. On March 29, 2011, the Finance Agency issued immediately effective final guidance that sets forth fraud reporting requirements for the FHLBanks under the regulation. The guidance, among other things, provides examples of fraud that should be reported to the Finance Agency and the Finance Agency's Office of Inspector General. In addition, the guidance requires FHLBanks to establish and maintain effective internal controls, policies, procedures, and operational training to discover and report fraud or possible fraud. Although complying with the guidance will increase the Bank's regulatory requirements, the Bank does not expect any material incremental costs or adverse impact to its business.

Proposed Rule on Private Transfer Fee Covenants. On February 8, 2011, the Finance Agency issued a proposed rule that would restrict the Bank from purchasing, investing in, or taking security interests in, mortgage loans on properties encumbered by private transfer fee covenants, securities backed by such mortgage loans, and securities backed by the income stream from such covenants, except for certain transfer fee covenants. Excepted transfer fee covenants would include covenants to pay private transfer fees to covered associations (including organizations comprising owners of homes, condominiums, or cooperatives or certain other tax-exempt organizations) that use the private transfer fees exclusively for the direct benefit of the property. The foregoing restrictions would apply only to mortgages on properties encumbered by private transfer fee covenants created on or after February 8, 2011, and to securities backed by these mortgages, and to securities issued after that date and backed by revenue from private transfer fees regardless of when the covenants were created. The Bank would be required to comply with the regulation within 120 days of the publication of the final rule. To the extent that a final rule limits the type of collateral the Bank accepts for advances, the Bank's business may be adversely affected. Comments on the proposed rule were due by April 11, 2011.

Off-Balance Sheet Arrangements, Guarantees, and Other Commitments

In accordance with regulations governing the operations of the FHLBanks, each FHLBank, including the Bank, is jointly and severally liable for the FHLBank System's consolidated obligations issued under Section 11(a) of the FHLBank Act, and in accordance with the FHLBank Act, each FHLBank, including the Bank, is jointly and severally liable for consolidated obligations issued under Section 11(c) of the FHLBank Act. The joint and several liability regulation authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor.

The Bank's joint and several contingent liability is a guarantee, but is excluded from initial recognition and measurement provisions because the joint and several obligations are mandated by the FHLBank Act or Finance

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Agency regulation and are not the result of arms-length transactions among the FHLBanks. The Bank has no control over the amount of the guaranty or the determination of how each FHLBank would perform under the joint and several obligations. The valuation of this contingent liability is therefore not recorded on the balance sheet of the Bank. The par amount of the outstanding consolidated obligations of all 12 FHLBanks was $766.0 billion at March 31, 2011, and $796.4 billion at December 31, 2010. The par value of the Bank's participation in consolidated obligations was $137.2 billion at March 31, 2011, and $139.1 billion at December 31, 2010. At March 31, 2011, the Bank had committed to the issuance of $1.5 billion in consolidated obligation bonds, of which $1.0 billion were hedged with associated interest rate swaps, and $5 million in consolidated obligation discount notes, none of which were hedged with associated interest rate swaps. At December 31, 2010, the Bank had committed to the issuance of $205 million in consolidated obligation bonds, of which $95 million were hedged with associated interest rate swaps. For additional information on the Bank's joint and several liability contingent obligation, see “Item 8. Financial Statements and Supplementary Data – Note 20 – Commitments and Contingencies” in the Bank's 2010 Form 10‑K.

In addition, in the ordinary course of business, the Bank engages in financial transactions that, in accordance with U.S. GAAP, are not recorded on the Bank's balance sheet or may be recorded on the Bank's balance sheet in amounts that are different from the full contract or notional amount of the transactions. For example, the Bank routinely enters into commitments to extend advances and issues standby letters of credit. These commitments and standby letters of credit may represent future cash requirements of the Bank, although the standby letters of credit usually expire without being drawn upon. Standby letters of credit are subject to the same underwriting and collateral requirements as advances made by the Bank. At March 31, 2011, the Bank had $3 million of advance commitments and $5.9 billion in standby letters of credit outstanding. At December 31, 2010, the Bank had $304 million of advance commitments and $6.0 billion in standby letters of credit outstanding. The estimated fair value of the advance commitments was immaterial to the balance sheet at March 31, 2011, and December 31, 2010. The estimated fair value of the letters of credit was $24 million and $26 million at March 31, 2011, and at December 31, 2010, respectively.

The Bank's financial statements do not include a liability for future statutorily mandated payments from the Bank to the Resolution Funding Corporation (REFCORP). No liability is recorded because each FHLBank must pay 20% of net earnings (after its Affordable Housing Program obligation) to REFCORP to support the payment of part of the interest on the bonds issued by the REFCORP, and each FHLBank is unable to estimate its future required payments because the payments are based on the future earnings of that FHLBank and the other FHLBanks and are not estimable under the accounting for contingencies. Accordingly, the REFCORP payments are disclosed as a long-term statutory payment requirement.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Federal Home Loan Bank of San Francisco's (Bank) market risk management objective is to maintain a relatively low exposure of the value of capital and future earnings (excluding the impact of any cumulative net gains or losses on derivatives and associated hedged items and on financial instruments carried at fair value) to changes in interest rates. This profile reflects the Bank's objective of maintaining a conservative asset-liability mix and its commitment to providing value to its members through products and dividends without subjecting their investments in Bank capital stock to significant interest rate risk.

In May 2008, the Bank's Board of Directors modified the market risk management objective in the Bank's Risk Management Policy to maintaining a relatively low exposure of the net portfolio value of capital and future earnings (excluding the impact of any cumulative net gains or losses on derivatives and associated hedged items and on financial instruments carried at fair value) to changes in interest rates. See “Total Bank Market Risk” below for a discussion of the modification.

Market risk identification and measurement are primarily accomplished through market value of capital sensitivity analyses, net portfolio value of capital sensitivity analyses, and net interest income sensitivity analyses. The Risk Management Policy approved by the Bank's Board of Directors establishes market risk policy limits and market risk measurement standards at the total Bank level as well as at the business segment level. Additional guidelines

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approved by the Bank's asset-liability management committee (ALCO) apply to the Bank's two business segments, the advances-related business and the mortgage-related business. These guidelines provide limits that are monitored at the segment level and are consistent with the Bank policy limits. Interest rate risk is managed for each business segment on a daily basis, as discussed below in “Segment Market Risk.” At least monthly, compliance with Bank policies and guidelines is presented to the ALCO or the Board of Directors, along with a corrective action plan if applicable.

Total Bank Market Risk

Market Value of Capital Sensitivity and Net Portfolio Value of Capital Sensitivity

The Bank uses market value of capital sensitivity (the interest rate sensitivity of the net fair value of all assets, liabilities, and interest rate exchange agreements) as an important measure of the Bank's exposure to changes in interest rates. As presented below, the Bank continues to measure, monitor, and report on market value of capital sensitivity, but no longer has a policy limit as of May 2008.

In May 2008, the Board of Directors approved a modification to the Bank's Risk Management Policy to use net portfolio value of capital sensitivity as the primary market value metric for measuring the Bank's exposure to changes in interest rate risk and to establish a policy limit on net portfolio value of capital sensitivity. This approach uses valuation methods that estimate the value of mortgage-backed securities (MBS) and mortgage loans in alternative interest rate environments based on valuation spreads that existed at the time the Bank acquired the MBS and mortgage loans (acquisition spreads), rather than valuation spreads implied by the current market prices of MBS and mortgage loans (market spreads). Risk metrics based on spreads existing at the time of acquisition of mortgage assets better reflect the interest rate risk of the Bank because the Bank does not intend to sell its mortgage assets and the use of market spreads calculated from estimates of current market prices (which include large embedded liquidity spreads) would not reflect the actual risks faced by the Bank. Beginning in the third quarter of 2009, in the case of specific PLRMBS for which the Bank expects loss of principal in future periods, the par amount of the other-than-temporarily impaired security is reduced by the amount of the projected principal shortfall and the asset price is calculated based on the acquisition spread. This approach directly takes into consideration the impact of projected principal (credit) losses from PLRMBS on the net portfolio value of capital, but eliminates the impact of large liquidity spreads inherent in the prior treatment of other-than-temporarily impaired securities. The Bank continues to monitor both the market value of capital sensitivity and the net portfolio value of capital sensitivity.

The Bank's net portfolio value of capital sensitivity policy limits the potential adverse impact of an instantaneous parallel shift of a plus or minus 100-basis-point change in interest rates from current rates (base case) to no worse than –3% of the estimated net portfolio value of capital. In addition, the policy limits the potential adverse impact of an instantaneous plus or minus 100-basis-point change in interest rates measured from interest rates that are 200 basis points above or below the base case to no worse than –4% of the estimated net portfolio value of capital. In the case where a market risk sensitivity compliance metric cannot be estimated with a parallel shift in interest rates due to low interest rates, the sensitivity metric is not reported. The Bank's measured net portfolio value of capital sensitivity was within the policy limit as of March 31, 2011.

To determine the Bank's estimated risk sensitivities to interest rates for both the market value of capital sensitivity and the net portfolio value of capital sensitivity, the Bank uses a third-party proprietary asset and liability system to calculate estimated net portfolio values under alternative interest rate scenarios. The system analyzes all of the Bank's financial instruments, including derivatives, on a transaction-level basis using sophisticated valuation models with consistent and appropriate behavioral assumptions and current position data. The system also includes a third-party mortgage prepayment model.

At least annually, the Bank reexamines the major assumptions and methodologies used in the model, including interest rate curves, spreads for discounting, and prepayment assumptions. The Bank also compares the prepayment assumptions in the third-party model to other sources, including actual prepayment history.

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The Market Value of Capital Sensitivity table below presents the sensitivity of the market value of capital (the market value of all of the Bank's assets, liabilities, and associated interest rate exchange agreements, with mortgage assets valued using market spreads implied by current market prices) to changes in interest rates. The table presents the estimated percentage change in the Bank's market value of capital that would be expected to result from changes in interest rates under different interest rate scenarios, using market spread assumptions.

Market Value of Capital Sensitivity Estimated Percentage Change in Market Value of Bank Capital for Various Changes in Interest Rates
Interest Rate Scenario(1)	March 31, 2011		December 31, 2010
+200 basis-point change above current rates	–4.0	%	–3.7	%
+100 basis-point change above current rates	–2.0		–2.0
–100 basis-point change below current rates(2)	+2.2		+2.4
–200 basis-point change below current rates(2)	+4.1		+5.1

(1) Instantaneous change from actual rates at dates indicated.

(2) Interest rates for each maturity are limited to non-negative interest rates.

The Bank's estimates of the sensitivity of the market value of capital to changes in interest rates as of March 31, 2011, show substantially similar sensitivity compared to the estimates as of December 31, 2010. Compared to interest rates as of December 31, 2010, interest rates as of March 31, 2011, were 2 basis points higher for terms of 1 year, 29 basis points higher for terms of 5 years, and 20 basis points higher for terms of 10 years.

As indicated by the table above, the market value of capital sensitivity is adversely affected when rates increase. In general, mortgage assets, including MBS, are expected to remain outstanding for a longer period of time when interest rates increase and prepayment speeds decline as a result of reduced incentives to refinance. Because most of the Bank's MBS were purchased when mortgage asset spreads to pricing benchmarks were significantly lower than what is currently required by investors, the adverse spread difference gives rise to an embedded negative impact on the market value of MBS, which directly reduces the estimated market value of Bank capital. If interest rates increase and MBS consequently remain outstanding for a longer period of time, the adverse spread difference will exist for a longer period of time, giving rise to an even larger embedded negative market value impact than exists at current interest rate levels. This creates additional downward pressure on the measured market value of capital. As a result, the Bank's measured market value of capital sensitivity to changes in rates is higher than it would be if it were measured based on the fundamental underlying repricing and option risks (a greater decline in the market value of capital when rates increase and a greater increase in the market value of capital when rates decrease). Based on the liquidity premium investors require for these assets and the Bank's intent and ability to hold the assets to maturity, the Bank determined that the market value of capital sensitivity is not the best indication of risk, and the Bank has therefore developed an alternative way to measure that risk, based on estimates of the sensitivity of the net portfolio value of capital.

The Net Portfolio Value of Capital Sensitivity table below presents the sensitivity of the net portfolio value of capital (the net value of the Bank's assets, liabilities, and hedges, with mortgage assets valued using acquisition valuation spreads) to changes in interest rates. The table presents the estimated percentage change in the Bank's net portfolio value of capital that would be expected to result from changes in interest rates under different interest rate scenarios based on pricing mortgage assets at spreads that existed at the time of purchase rather than current market spreads. The Bank's estimates of the net portfolio value of capital sensitivity to changes in interest rates as of March 31, 2011, show substantially similar sensitivity compared to the estimates as of December 31, 2010.

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Net Portfolio Value of Capital Sensitivity Estimated Percentage Change in Net Portfolio Value of Bank Capital for Various Changes in Interest Rates Based on Acquisition Spreads
Interest Rate Scenario(1)	March 31, 2011		December 31, 2010
+200 basis-point change above current rates	–3.4	%	–2.8	%
+100 basis-point change above current rates	–1.5		–1.2
–100 basis-point change below current rates(2)	+0.7		+0.4
–200 basis-point change below current rates(2)	+0.7		+0.6

(1) Instantaneous change from actual rates at dates indicated.

(2) Interest rates for each maturity are limited to non-negative interest rates.

Potential Dividend Yield

The potential dividend yield is a measure used by the Bank to assess financial performance. The potential dividend yield is based on current period economic earnings that exclude the effects of unrealized net gains or losses resulting from the Bank's derivatives and associated hedged items and from financial instruments carried at fair value, which will generally reverse through changes in future valuations and settlements of contractual interest cash flows over the remaining contractual terms to maturity or by the call or put date of the assets and liabilities held at fair value, hedged assets and liabilities, and derivatives.Economic earnings also exclude the interest expense on mandatorily redeemable capital stock.

The Bank limits the sensitivity of projected financial performance through a Board of Directors' policy limit on projected adverse changes in the potential dividend yield. The Bank's potential dividend yield sensitivity policy limits the potential adverse impact of an instantaneous parallel shift of a plus or minus 200-basis-point change in interest rates from current rates (base case) to no worse than –120 basis points from the base case projected potential dividend yield. In the downward shift, the change in interest rates was limited so that interest rates did not go below zero. With the indicated interest rate shifts, the potential dividend yield for the projected period January 2011 through March 2011 would be expected to decrease by 22 basis points, well within the policy limit of –120 basis points.

Duration Gap

Duration gap is the difference between the estimated durations (market value sensitivity) of assets and liabilities (including the impact of interest rate exchange agreements) and reflects the extent to which estimated maturity and repricing cash flows for assets and liabilities are matched. The Bank monitors duration gap analysis at the total Bank level but does not have a policy limit. The Bank's duration gap was one month at March 31, 2011, and one month at December 31, 2010.

Total Bank Duration Gap Analysis
	March 31, 2011			December 31, 2010
	Amount (In millions)		Duration Gap(1)(2) (In months)	Amount (In millions)		Duration Gap(1)(2) (In months)
Assets	$	151,444	7	$	152,423	6
Liabilities	143,324		6	145,475		5
Net	$	8,120	1	$	6,948	1

(1) Duration gap values include the impact of interest rate exchange agreements.

(2) Because of the current low interest rate environment, the duration gap is estimated using an instantaneous, one sided parallel change upward of 100 basis points from base case interest rates.

The duration gap as of March 31, 2011, was the same as the duration gap as of December 31, 2010. Since duration

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gap is a measure of market value sensitivity, the impact of the extraordinarily wide mortgage asset spreads on duration gap is the same as described in the analysis in “Market Value of Capital Sensitivity” above. As a result of the liquidity premium investors require for these assets and the Bank's intent and ability to hold its mortgage assets to maturity, the Bank does not believe that market value-based sensitivity risk measures provide a fundamental indication of risk.

Segment Market Risk

The financial performance and interest rate risks of each business segment are managed within prescribed guidelines and policy limits.

Advances-Related Business

Interest rate risk arises from the advances-related business primarily through the use of member-contributed capital to fund fixed rate investments of targeted amounts and maturities. In general, advances result in very little net interest rate risk for the Bank because most fixed rate advances with original maturities greater than three months and advances with embedded options are hedged contemporaneously with an interest rate swap or option with terms offsetting the advance. The interest rate swap or option generally is maintained as a hedge for the life of the advance. These hedged advances effectively create a pool of variable rate assets, which, in combination with the strategy of raising debt swapped to variable rate liabilities, creates an advances portfolio with low net interest rate risk.

Non-MBS investments used for liquidity management generally have maturities of less than three months or are variable rate investments. These investments effectively match the interest rate risk of the Bank's variable rate funding. To leverage the Bank's capital stock, the Bank also invests in agency or TLGP investments, generally with terms of less than two years. These investments may be variable rate or fixed rate, and the interest rate risk resulting from the fixed rate coupon is hedged with an interest rate swap or fixed rate debt.

The interest rate risk in the advances-related business is primarily associated with the Bank's strategy for investing the members' contributed capital. The Bank's strategy is to generally invest 50% of member capital in short-term investments (maturities of three months or less) and 50% in intermediate-term investments (laddered portfolio of investments with maturities of up to four years). However, this strategy may be altered from time to time depending on market conditions. The strategy to invest 50% of member capital in short-term assets is intended to mitigate the market value of capital risks associated with the potential repurchase or redemption of members' excess capital stock. The strategy to invest 50% of member capital in a laddered portfolio of instruments with short to intermediate maturities is intended to take advantage of the higher earnings available from a generally positively sloped yield curve, when intermediate-term investments generally have higher yields than short-term investments. Excess capital stock primarily results from a decline in a member's advances. Under the Bank's capital plan, capital stock, when repurchased or redeemed, is required to be repurchased or redeemed at its par value of $100 per share, subject to certain regulatory and statutory limits.

The Bank updates the repricing and maturity gaps for actual asset, liability, and derivatives transactions that occur in the advances-related segment each day. The Bank regularly compares the targeted repricing and maturity gaps to the actual repricing and maturity gaps to identify rebalancing needs for the targeted gaps. On a weekly basis, the Bank evaluates the projected impact of expected maturities and scheduled repricings of assets, liabilities, and interest rate exchange agreements on the interest rate risk of the advances-related segment. The analyses are prepared under base case and alternate interest rate scenarios to assess the effect of put options and call options embedded in the advances, related financing, and hedges. These analyses are also used to measure and manage potential reinvestment risk (when the remaining term of advances is shorter than the remaining term of the financing) and potential refinancing risk (when the remaining term of advances is longer than the remaining term of the financing).

Because of the short-term and variable rate nature of the assets, liabilities, and derivatives of the advances-related business, the Bank's interest rate risk guidelines address the amounts of net assets that are expected to mature or

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reprice in a given period. Net market value sensitivity analyses and net interest income simulations are also used to identify and measure risk and variances to the target interest rate risk exposure in the advances-related segment.

Mortgage-Related Business

The Bank's mortgage assets include MBS, most of which are classified as held-to-maturity or as available-for-sale, with a small amount classified as trading, and mortgage loans held for portfolio purchased under the MPF Program. The Bank is exposed to interest rate risk from the mortgage-related business because the principal cash flows of the mortgage assets and the liabilities that fund them are not exactly matched through time and across all possible interest rate scenarios, given the uncertainty of mortgage prepayments and the existence of interest rate caps on certain adjustable rate MBS.

The Bank purchases a mix of intermediate-term fixed rate and adjustable rate MBS. Generally, purchases of long-term fixed rate MBS have been relatively small; any MPF loans that have been acquired are medium- or long-term fixed rate mortgage assets. This results in a mortgage portfolio that has a diversified set of interest rate risk attributes.

The estimated market risk of the mortgage-related business is managed both at the time an individual asset is purchased and on a total portfolio level. At the time of purchase (for all significant mortgage asset acquisitions), the Bank analyzes the estimated earnings sensitivity and estimated net market value sensitivity, taking into consideration the estimated prepayment sensitivity of the mortgage assets and anticipated funding and hedging under various interest rate scenarios. The related funding and hedging transactions are executed at or close to the time of purchase of a mortgage asset.

At least monthly, the Bank reviews the estimated market risk of the entire portfolio of mortgage assets and related funding and hedges. Rebalancing strategies to modify the estimated mortgage portfolio market risks are then considered. Periodically, the Bank performs more in-depth analyses, which include the impacts of non-parallel shifts in the yield curve and assessments of unanticipated prepayment behavior. Based on these analyses, the Bank may take actions to rebalance the mortgage portfolio's estimated market risk profile. These rebalancing strategies may include entering into new funding and hedging transactions, forgoing or modifying certain funding or hedging transactions normally executed with new mortgage purchases, or terminating certain funding and hedging transactions for the mortgage asset portfolio.

The Bank manages the estimated interest rate risk associated with mortgage assets, including prepayment risk, through a combination of debt issuance and derivatives. The Bank may obtain funding through callable and non-callable FHLBank System debt and may execute derivatives transactions to achieve principal cash flow patterns and market value sensitivities for the liabilities and derivatives that provide a significant offset to the interest rate and prepayment risks associated with the mortgage assets. Debt issued to finance mortgage assets may be fixed rate debt, callable fixed rate debt, or adjustable rate debt. Derivatives may be used as temporary hedges of anticipated debt issuance or long-term hedges of debt used to finance the mortgage assets. The derivatives used to hedge the interest rate risk of fixed rate mortgage assets generally may be options to enter into interest rate swaps (swaptions) or callable and non-callable pay-fixed interest rate swaps.

In May 2008, the Board of Directors approved a modification to the Bank's Risk Management Policy to use net portfolio value of capital sensitivity as a primary market value metric for measuring the Bank's exposure to interest rate risk and to establish a policy limit on net portfolio value of capital sensitivity. This approach uses valuation methods that estimate the value of MBS and mortgage loans in alternative interest rate environments based on valuation spreads that existed at the time the Bank acquired the MBS and mortgage loans (acquisition spreads), rather than valuation spreads implied by the current market prices of MBS and mortgage loans (market spreads). Risk metrics based on spreads existing at the time of acquisition of mortgage assets better reflect the interest rate risk of the Bank, because the Bank does not intend to sell its mortgage assets, and the use of market spreads calculated from estimates of current market prices (which include large embedded liquidity spreads) would not reflect the actual risks faced by the Bank. Beginning in the third quarter of 2009, in the case of specific PLRMBS for which the Bank expects loss of principal in future periods, the par amount of the other-than-temporarily

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impaired security is reduced by the amount of the projected principal shortfall and the asset price is calculated based on the acquisition spread. This approach directly takes into consideration the impact of projected principal (credit) losses from PLRMBS on the net portfolio value of capital, but eliminates the impact of large liquidity spreads inherent in the prior treatment of other-than-temporarily impaired securities. The Bank continues to monitor both the market value of capital sensitivity and the net portfolio value of capital sensitivity attributable to the mortgage-related business.

The following table presents results of the estimated market value of capital sensitivity analysis attributable to the mortgage-related business as of March 31, 2011, and December 31, 2010.

Market Value of Capital Sensitivity Estimated Percentage Change in Market Value of Bank Capital Attributable to the Mortgage-Related Business for Various Changes in Interest Rates
Interest Rate Scenario(1)	March 31, 2011		December 31, 2010
+200 basis-point change	–2.3	%	–1.9	%
+100 basis-point change	–1.2		–1.2
–100 basis-point change(2)	+1.4		+1.7
–200 basis-point change(2)	+2.8		+4.1

(1) Instantaneous change from actual rates at dates indicated.

(2) Interest rates for each maturity are limited to non-negative interest rates.

The Bank's estimates of the sensitivity of the market value of capital to changes in interest rates as of March 31, 2011, show substantially similar sensitivity compared to the estimates as of December 31, 2010. Compared to interest rates as of December 31, 2010, interest rates as of March 31, 2011, were 2 basis points higher for terms of 1 year, 29 basis points higher for terms of 5 years, and 20 basis points higher for terms of 10 years.

As indicated by the table above, the market value of capital sensitivity is adversely affected when rates increase. In general, mortgage assets, including MBS, are expected to remain outstanding for a longer period of time when interest rates increase and prepayment speeds decline as a result of reduced incentives to refinance. Because most of the Bank's MBS were purchased when mortgage asset spreads to pricing benchmarks were significantly lower than what is currently required by investors, the adverse spread difference gives rise to an embedded negative impact on the market value of MBS, which directly reduces the estimated market value of Bank capital. If interest rates increase and MBS consequently remain outstanding for a longer period of time, the adverse spread difference will exist for a longer period of time, giving rise to an even larger embedded negative market value impact than exists at current interest rate levels. This creates additional downward pressure on the measured market value of capital. As a result, the Bank's measured market value of capital sensitivity to changes in rates is higher than it would be if it were measured based on the fundamental underlying repricing and option risks (a greater decline in the market value of capital when rates increase and a greater increase in the market value of capital when rates decrease). Based on the liquidity premium investors require for these assets and the Bank's intent and ability to hold the mortgage assets to maturity, the Bank determined that the market value of capital sensitivity is not the best indication of risk, and the Bank has therefore developed an alternative way to measure that risk, based on estimates of the sensitivity of the net portfolio value of capital.

The Bank's interest rate risk policies and guidelines for the mortgage-related business address the net portfolio value of capital sensitivity of the assets, liabilities, and derivatives of the mortgage-related business. The following table presents the estimated percentage change in the value of Bank capital attributable to the mortgage-related business that would be expected to result from changes in interest rates under different interest rate scenarios based on pricing mortgage assets at spreads that existed at the time of purchase rather than current market spreads. The Bank's estimates of the net portfolio value of capital sensitivity to changes in interest rates as of March 31, 2011, show substantially similar sensitivity compared to the estimates as of December 31, 2010.

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Net Portfolio Value of Capital Sensitivity Estimated Percentage Change in Net Portfolio Value of Bank Capital Attributable to the Mortgage-Related Business for Various Changes in Interest Rates Based on Acquisition Spreads
Interest Rate Scenario(1)	March 31, 2011		December 31, 2010
+200 basis-point change above current rates	–2.0	%	–1.4	%
+100 basis-point change above current rates	–0.8		–0.6
–100 basis-point change below current rates(2)	0.0		–0.1
–200 basis-point change below current rates(2)	–0.3		–0.1

(1) Instantaneous change from actual rates at dates indicated.

(2) Interest rates for each maturity are limited to non-negative interest rates.

ITEM 4.CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The senior management of the Federal Home Loan Bank of San Francisco (Bank) is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports filed or submitted under the Securities Exchange Act of 1934 (1934 Act) is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The Bank's disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Bank in the reports that it files or submits under the 1934 Act is accumulated and communicated to the Bank's management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the Bank's disclosure controls and procedures, the Bank's management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Bank's management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of controls and procedures.

Management of the Bank has evaluated the effectiveness of the design and operation of its disclosure controls and procedures with the participation of the president and chief executive officer, executive vice president and chief operating officer, senior vice president and chief financial officer, and senior vice president, controller and operations officer, as of the end of the quarterly period covered by this report. Based on that evaluation, the Bank's president and chief executive officer, executive vice president and chief operating officer, senior vice president and chief financial officer, and senior vice president, controller and operations officer, have concluded that the Bank's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the fiscal quarter covered by this report.

Internal Control Over Financial Reporting

During the three months ended March 31, 2011, there were no changes in the Bank's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Bank's internal control over financial reporting.

Consolidated Obligations

The Bank's disclosure controls and procedures include controls and procedures for accumulating and communicating information in compliance with the Bank's disclosure and financial reporting requirements relating to the joint and several liability for the consolidated obligations of other Federal Home Loan Banks (FHLBanks). Because the FHLBanks are independently managed and operated, the Bank's management relies on information that is provided or disseminated by the Federal Housing Finance Agency (Finance Agency), the Office of Finance, and

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the other FHLBanks, as well as on published FHLBank credit ratings, in determining whether the joint and several liability regulation is reasonably likely to result in a direct obligation for the Bank or whether it is reasonably possible that the Bank will accrue a direct liability.

The Bank's management also relies on the operation of the joint and several liability regulation, which is located in Section 1270.10 of Title 12 of the Code of Federal Regulations. The joint and several liability regulation requires that each FHLBank file with the Finance Agency a quarterly certification that it will remain capable of making full and timely payment of all of its current obligations, including direct obligations, coming due during the next quarter. In addition, if an FHLBank cannot make such a certification or if it projects that it may be unable to meet its current obligations during the next quarter on a timely basis, it must file a notice with the Finance Agency. Under the joint and several liability regulation, the Finance Agency may order any FHLBank to make principal and interest payments on any consolidated obligations of any other FHLBank, or allocate the outstanding liability of an FHLBank among all remaining FHLBanks on a pro rata basis in proportion to each FHLBank's participation in all consolidated obligations outstanding or on any other basis.

PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

The Federal Home Loan Bank of San Francisco (Bank) may be subject to various legal proceedings arising in the normal course of business.

On March 15, 2010, the Bank filed two complaints in the Superior Court of the State of California, County of San Francisco (San Francisco Superior Court), relating to the purchase of private-label residential mortgage-backed securities. The Bank's complaints are actions for rescission and damages and assert claims for and violations of state and federal securities laws, negligent misrepresentation, and rescission of contract. On June 10, 2010, the Bank amended the two complaints to, among other things, add additional defendants. On November 5, 2010, the Bank filed a declaratory relief action against Bank of America Corporation in the San Francisco Superior Court, for a determination that Bank of America Corporation is a successor to the liabilities of defendant Countrywide Financial Corporation.

For a discussion of this litigation, see “Part I. Item 3. Legal Proceedings” in the Bank's Annual Report on Form 10‑K for the year ended December 31, 2010.

After consultation with legal counsel, the Bank is not aware of any other legal proceedings that may have a material effect on its financial condition or results of operations or that are otherwise material to the Bank.

ITEM 1A.RISK FACTORS

For a discussion of risk factors, see “Part I. Item 1A. Risk Factors” in the Federal Home Loan Bank of San Francisco's (Bank's) Annual Report on Form 10-K for the year ended December 31, 2010 (2010 Form 10-K). There have been no material changes from the risk factors disclosed in the “Part I. Item 1A. Risk Factors” section of the Bank's 2010 Form 10-K.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.        (REMOVED AND RESERVED)

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ITEM 5.OTHER INFORMATION

None.

ITEM 6.    EXHIBITS

10.1	Joint Capital Enhancement Agreement, effective February 28, 2011, with the other 11 Federal Home Loan Banks, incorporated by reference to Exhibit 99.1 to the Bank's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 1, 2011 (Commission File No. 000-51398)
31.1	Certification of the President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Chief Operating Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.3	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.4	Certification of the Controller and Operations Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the President and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Operating Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.3	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.4	Certification of the Controller and Operations Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1	Computation of Ratio of Earnings to Fixed Charges – Three Months Ended March 31, 2011

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 11, 2011.

Federal Home Loan Bank of San Francisco

/S/ STEVEN T. HONDA

Steven T. Honda

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

/S/ VERA MAYTUM

Vera Maytum

Senior Vice President, Controller and Operations Officer

(Chief Accounting Officer)

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