10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-K

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

For the fiscal year ended December 31, 2012

OR

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

For the transition period from ________ to ________

Commission File Number 000-52004

FEDERAL HOME LOAN BANK OF TOPEKA

(Exact name of registrant as specified in its charter)

Federally chartered corporation	48-0561319
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
One Security Benefit Pl. Suite 100 Topeka, KS	66606
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 785.233.0507

Securities registered pursuant to Section 12(b) of the Act: None

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

Class A Common Stock, $100 per share par value

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

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

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

Indicate by check mark whether the registrant has submitted electronically 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  x  Yes  o  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  ¨ Large accelerated filer          ¨ Accelerated filer          x Non-accelerated filer          ¨ Smaller reporting company

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

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

	Shares  outstanding as of March 13, 2013
Class A Stock, par value $100	5,188,471
Class B Stock, par value $100	8,394,691

Registrant’s common stock is not publicly traded and is only issued to members of the registrant. Such stock is issued, redeemed and repurchased at par value, $100 per share, with all issuances, redemptions and repurchases subject to the registrant’s capital plan as well as certain statutory and regulatory requirements.

Documents incorporated by reference:  None

FEDERAL HOME LOAN BANK OF TOPEKA

TABLE OF CONTENTS

PART I		4
Item 1.	Business	4
Item 1A.	Risk Factors	21
Item 1B.	Unresolved Staff Comments	26
Item 2.	Properties	26
Item 3.	Legal Proceedings	27
Item 4.	Mine Safety Disclosures	27
PART II		27
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	Selected Financial Data	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	80
Item 8.	Financial Statements and Supplementary Data	86
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	86
Item 9A.	Controls and Procedures	87
Item 9B.	Other Information	87
PART III		87
Item 10.	Directors, Executive Officers and Corporate Governance	87
Item 11.	Executive Compensation	91
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	105
Item 13.	Certain Relationships and Related Transactions, and Director Independence	105
Item 14.	Principal Accounting Fees and Services	107
PART IV		108
Item 15.	Exhibits, Financial Statement Schedules	108

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Important Notice about Information in this Annual Report

In this annual report, unless the context suggests otherwise, references to the “FHLBank,” “FHLBank Topeka,” “we,” “us” and “our” mean the Federal Home Loan Bank of Topeka, and “FHLBanks” mean the 12 Federal Home Loan Banks, including the FHLBank Topeka.

The information contained in this annual report is accurate only as of the date of this annual report and as of the dates specified herein.

The product and service names used in this annual report are the property of the FHLBank, and in some cases, the other FHLBanks. Where the context suggests otherwise, the products, services and company names mentioned in this annual report are the property of their respective owners.

Special Cautionary Notice Regarding Forward-looking Statements

The information contained in this Form 10-K contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include statements describing the objectives, projections, estimates or future predictions of the FHLBank’s operations. These statements may be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “may,” “is likely,” “could,” “estimate,” “expect,” “will,” “intend,” “probable,” “project,” “should,” or their negatives or other variations of these terms. The FHLBank cautions that by their nature forward-looking statements involve risk or uncertainty and that actual results may differ materially from those expressed in any forward-looking statements as a result of such risks and uncertainties, including but not limited to:

§   Governmental actions, including legislative, regulatory, judicial or other developments that affect the FHLBank; its members, counterparties or investors; housing government sponsored enterprises (GSE); or the FHLBank System in general;

§   Regulatory actions and determinations, including those resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act);

§   Changes in the FHLBank’s capital structure;

§   Changes in economic and market conditions, including conditions in the mortgage, housing and capital markets;

§   Changes in demand for advances or consolidated obligations of the FHLBank and/or of the FHLBank System;

§   Effects of derivative accounting treatment, other-than-temporary impairment (OTTI) accounting treatment and other accounting rule requirements;

§   The effects of amortization/accretion;

§   Gains/losses on derivatives or on trading investments and the ability to enter into effective derivative instruments on acceptable terms;

§   Volatility of market prices, interest rates and indices and the timing and volume of market activity;

§   Membership changes, including changes resulting from member failures or mergers, changes in the principal place of business of members or changes in the Federal Housing Finance Agency (Finance Agency) regulations on membership standards;

§   Our ability to declare dividends or to pay dividends at rates consistent with past practices;

§   Soundness of other financial institutions, including FHLBank members, nonmember borrowers, and the other FHLBanks;

§   Changes in the value or liquidity of collateral underlying advances to FHLBank members or nonmember borrowers or collateral pledged by reverse repurchase and derivative counterparties;

§   Competitive forces, including competition for loan demand, purchases of mortgage loans and access to funding;

§   The ability of the FHLBank to introduce new products and services to meet market demand and to manage successfully the risks associated with new products and services;

§   Our ability to keep pace with technological changes and the ability of the FHLBank to develop and support technology and information systems, including the ability to access the internet and internet-based systems and services, sufficient to effectively manage the risks of the FHLBank’s business;

§   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 FHLBank has joint and several liability;

§   Changes in the U.S. government’s long-term debt rating and the long-term credit rating of the senior unsecured debt issues of the FHLBank System;

§   Changes in the fair value and economic value of, impairments of, and risks associated with, the FHLBank’s investments in mortgage loans and mortgage-backed securities (MBS) or other assets and related credit enhancement (CE) protections; and

§   The volume and quality of eligible mortgage loans originated and sold by participating members to the FHLBank through its various mortgage finance products (Mortgage Partnership Finance® (MPF®) Program1).

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.”

All forward-looking statements contained in this Form 10-K are expressly qualified in their entirety by this cautionary notice. The reader should not place undue reliance on such forward-looking statements, since the statements speak only as of the date that they are made and the FHLBank has no obligation and does not undertake publicly to update, revise or correct any forward-looking statement for any reason.

 1  "Mortgage Partnership Finance," "MPF", "eMPF" and "MPF Xtra" are registered trademarks of the Federal Home Loan Bank of Chicago

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PART I

Item 1: Business

General

One of 12 FHLBanks, FHLBank Topeka is a federally chartered corporation organized on October 13, 1932 under the authority of the Federal Home Loan Bank Act of 1932, as amended (Bank Act). Our primary business is making collateralized loans and providing other banking services to member institutions and certain qualifying non-members (housing associates). We are a cooperative owned by our members and are generally limited to providing products and services only to those members. Each FHLBank operates as a separate corporate entity with its own management, employees and board of directors. We are exempt from federal, state and local taxation except real property taxes. We do not have any wholly- or partially-owned subsidiaries and do not have an equity position in any partnerships, corporations or off-balance sheet special purpose entities.

We are supervised and regulated by the Finance Agency, an independent agency in the executive branch of the U.S. government. The Finance Agency’s mission with respect to the FHLBanks is to provide effective supervision, regulation and housing mission oversight of the FHLBanks to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market.

Any federally insured depository institution, insurance company, or community development financial institution whose principal place of business is located in Colorado, Kansas, Nebraska or Oklahoma is eligible to become one of our members. Except for community financial institutions (CFIs), applicants for membership must demonstrate they are engaged in residential housing finance. CFIs are defined in the Housing and Economic Recovery Act of 2008 (Recovery Act) as those institutions that have, as of the date of the transaction at issue, less than a specified amount of average total assets over the three years preceding that date (subject to annual adjustment by the Finance Agency director based on the consumer price index). For 2012, this asset cap was $1.08 billion.

Our members are required to purchase and maintain our capital stock as a condition of membership, and only members are permitted to purchase capital stock. All capital stock transactions are governed by our capital plan, which was developed under, is subject to and operates within specific regulatory and statutory requirements.

Member institutions own nearly all of our outstanding capital stock and may receive dividends on that stock. Former members own capital stock as long as they have outstanding business transactions with us. A member must own capital stock in the FHLBank based on the amount of the member’s assets and the level of business activities it engages in with us. As a result of these stock purchase requirements, we conduct business with related parties in the normal course of business. For disclosure purposes, we include in our definition of a related party any member institution (or successor) that is known to be the beneficial owner of more than 5 percent of any class of our voting securities and any person who is, or at any time since the beginning of our last fiscal year was, one of our directors or executive officers, among others. Information on business activities with related parties is provided in Tables 90 and 91 under Item 12 – “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

Our business activities include providing collateralized loans, known as advances, to members and housing associates, and acquiring residential mortgage loans from members. By law, only certain general categories of collateral are eligible to secure FHLBank obligations. We also provide members and housing associates with letters of credit and certain correspondent services, such as safekeeping, wire transfers, derivative intermediation and cash management.

Finance Agency regulations require our strategic business plan to include plans for maximizing activities that enhance the carrying out of our mission. The Finance Agency has provided a letter expressing renewed interest in ensuring the FHLBanks remain focused on activities related to their mission, including advances and acquired member assets (AMA), and has requested that we identify an appropriate benchmark for our ratio of mission-related assets to total assets. If the Finance Agency were to require us to maintain a higher ratio of mission-related assets to total assets, it could adversely impact our results of operations.

Our primary funding source is consolidated obligations issued through the FHLBanks’ Office of Finance. The Office of Finance is a joint office of the FHLBanks that facilitates the issuance and servicing of the consolidated obligations. The Finance Agency and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office of Finance. Consolidated obligations are debt instruments that constitute the joint and several obligations of all FHLBanks. Although consolidated obligations are not obligations of, nor guaranteed by, the U.S. government, the capital markets have traditionally considered the FHLBanks’ consolidated obligations as “Federal agency” debt. As a result, the FHLBanks have traditionally had ready access to funding at relatively favorable spreads to U.S. Treasuries. Additional funds are provided by deposits (received from both member and non-member financial institutions), other borrowings and the issuance of capital stock.

Standard & Poor’s (S&P) and Moody’s Investor Service (Moody’s) base their ratings of the FHLBanks and the debt issues of the FHLBank System in part on the FHLBanks’ relationship with the U.S. government. S&P currently rates the long-term credit ratings on the senior unsecured debt issues of the FHLBank System, and 11 FHLBanks at AA+ and one FHLBank at AA. S&P’s rating outlook for the FHLBank System’s senior unsecured debt and all 12 FHLBanks is negative. However, S&P still rates the short-term ratings of all the FHLBanks and the FHLBank System’s short-term debt issues at A-1+. Moody’s Investors Service (Moody’s) has confirmed the long-term Aaa rating on the senior unsecured debt issues of the FHLBank System and the 12 FHLBanks. Moody’s rating outlook for the FHLBank System and the 12 FHLBanks is negative.

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Business Segments

We currently do not manage or segregate our operations by segments.

Advances

We make advances to members and housing associates based on the security of residential mortgages and other eligible collateral. Following is a brief description of our standard advance product offerings:

§   Line of credit advances are variable rate, non-amortizing, prepayable, revolving line products that provide an alternative to the purchase of Federal funds, brokered deposits or repurchase agreement borrowings;

§   Short-term fixed rate advances are non-amortizing, non-prepayable loans with terms to maturity from 3 to 93 days;

§   Regular fixed rate advances are non-amortizing loans, prepayable with a fee, with terms to maturity from 94 days to 180 months;

§   Adjustable rate advances are non-amortizing loans, which are: (1) prepayable with fee on interest rate reset dates, if the variable interest rate is tied to any one of a number of standard indices including the London Interbank Offered Rate (LIBOR), Treasury bills, Federal funds, or Prime; or (2) prepayable without fee if the variable interest rate is tied to one of our short-term fixed rate advance products;

§   Callable advances can have a fixed or variable rate of interest for the term of the advance and contain an option(s) that allows for the prepayment of the advance without a fee on specified dates;

§   Amortizing advances are fixed rate loans, prepayable with fee, that contain a set of predetermined principal payments to be made during the life of the advance;

§   Convertible advances are non-amortizing, fixed rate loans that contain an option(s) that allows us to convert the fixed rate advance to a prepayable, adjustable rate advance that re-prices monthly based upon our one-month short-term, fixed rate advance product. Once we exercise our option to convert the advance, it can be prepaid without fee on the initial conversion date or on any interest rate reset date thereafter; and

§   Standby credit facility is a variable rate, non-amortizing, prepayable, revolving standby credit line that provides a greater level of assurance that secured funding can be provided during a market disruption.

Customized advances may be created on request, including advances with embedded floors and caps. All embedded derivatives in customized advances are evaluated to determine whether they are clearly and closely related to the advances. See Note 8 in the Notes to Financial Statements under Item 8 for information on accounting for embedded derivatives. The types of derivatives used to hedge risks embedded in our advance products are indicated in Tables 70 and 71 under Item 7A – “Quantitative and Qualitative Disclosures About Market Risk – Risk Management – Interest Rate Risk Management.”

We also offer a variety of specialized advance products to address housing and community development needs. The products include advances priced at our cost of funds plus reasonable administrative expenses. These advance products address needs for low-cost funding to create affordable rental and homeownership opportunities, and for commercial and economic development activities, including those that benefit low- and moderate-income neighborhoods. Refer to Item 1 – “Business – Other Mission-related Activities” for more details.

In addition to members, we make advances to certain non-members (housing associates). To qualify as a housing associate, the applicant must: (1) be approved under Title II of the National Housing Act of 1934; (2) be a chartered institution having succession; (3) be subject to the inspection and supervision of some governmental agency; (4) lend its own funds as its principal activity in the mortgage field; and (5) have a financial condition that demonstrates that advances may be safely made. Housing associates are not subject to certain provisions of the Bank Act that are applicable to members, such as the capital stock purchase requirements, but the same regulatory lending requirements generally apply to them as apply to members. Restrictive collateral provisions apply if the housing associate does not qualify as a state housing finance agency (HFA). We currently have three housing associates as customers and all three are state HFAs.

At the time an advance is originated, we are required to obtain and maintain a security interest in sufficient collateral eligible in one or more of the following categories:

§   Fully disbursed, whole first mortgages on 1-4 family residential property (not more than 90 days delinquent) or securities representing a whole interest in such mortgages;

§   Securities issued, insured or guaranteed by the U.S. government, U.S. government agencies and mortgage GSEs including, without limitation, MBS issued or guaranteed by Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) or Government National Mortgage Association (Ginnie Mae);

§   Cash or deposits in an FHLBank;

§   Other acceptable real estate-related collateral, provided such collateral has a readily ascertainable market value and we can perfect a security interest in such property (e.g., privately issued collateralized mortgage obligations (CMOs), mortgages on multifamily residential real property, second mortgages on 1-4 family residential property, mortgages on commercial real estate); or

§   In the case of any CFI, secured loans to small business, small farm and small agri-business or securities representing a whole interest in such secured loans.

As additional security for a member’s indebtedness, we have a statutory lien upon that member’s FHLBank stock. Plus, at our discretion, additional collateral may be required to secure a member’s or housing associate’s outstanding credit obligations at any time (whether or not such collateral would be eligible to originate an advance).

The Bank Act affords any security interest granted to us by any of our members, or any affiliate of any such member, priority over the claims and rights of any party, including any receiver, conservator, trustee, or similar party having rights of a lien creditor. The only exceptions are claims and rights held by actual bona fide purchasers for value or by parties that are secured by actual perfected security interests, and provided that such claims and rights would otherwise be entitled to priority under applicable law. In addition, our claims are given certain preferences pursuant to the receivership provisions in the Federal Deposit Insurance Act. Most members provide us a blanket lien covering substantially all of the member’s assets and consent for us to file a financing statement evidencing the blanket lien. Based on the blanket lien, the financing statement and the statutory preferences, we normally do not take control of collateral, other than securities collateral, pledged by blanket lien borrowers. We take control of all securities collateral through delivery of the securities to us or to an approved third-party custodian. With respect to non-blanket lien borrowers (typically insurance companies and housing associates), we take control of all collateral. In the event that the financial condition of a blanket lien member warrants such action because of the deterioration of the member’s financial condition, regulatory concerns about the member or other factors, we will take control of sufficient collateral to fully collateralize the member’s indebtedness to us.

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Tables 23 and 24 under Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition” present information on our five largest borrowers as of December 31, 2012 and 2011 and the interest income associated with the five borrowers with the highest interest income for the years ended December 31, 2012 and 2011.

Mortgage Loans

We purchase various mortgage loan products from participating financial institutions (PFIs) under the MPF Program, a secondary mortgage market structure created and maintained by the Federal Home Loan Bank of Chicago (FHLBank Chicago). Under the MPF Program, we invest in qualifying 5- to 30-year conventional conforming and government-insured or guaranteed (by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the Rural Housing Service of the Department of Agriculture (RHS) and the Department of Housing and Urban Development (HUD)) fixed rate mortgage loans on 1-4 family residential properties. These traditional mortgage products, along with loans sold under the MPF Xtra product, where the PFI sells a loan through the MPF Program structure to Fannie Mae, collectively provide our members an opportunity to further their cooperative partnership with us.

The MPF Program helps fulfill our housing mission and provides an additional source of liquidity to FHLBank members that choose to sell mortgage loans into the secondary market rather than holding them in their own portfolios. Traditional MPF Program mortgage loans are considered AMA, a core mission activity of the FHLBanks, as defined by Finance Agency regulations.

Allocation of Risk: The MPF Program is designed to allocate risks associated with mortgage loans between us and the PFIs. PFIs have direct knowledge of their mortgage markets and have developed expertise in underwriting and servicing residential mortgage loans. By allowing PFIs to originate MPF loans, whether through retail or wholesale operations, and to retain or acquire servicing of MPF loans, the MPF Program gives control of those functions that mostly impact credit quality to PFIs. We are responsible for managing the interest rate, prepayment and liquidity risks associated with owning traditional MPF loans.

Under the Finance Agency’s AMA regulation, the PFI must “bear the economic consequences” of certain losses with respect to a master commitment based upon the MPF product and other criteria. To comply with these regulations, MPF purchases and fundings are structured so the credit risk associated with MPF loans is shared with PFIs (excluding the MPF Xtra product). The master commitment defines the pool of MPF loans for which the CE obligation is set so the risk associated with investing in such a pool of MPF loans is equivalent to investing in a AA-rated asset. As a part of our methodology to determine the amount of CE obligation necessary, we analyze the risk characteristics of each mortgage loan using a model licensed from a Nationally Recognized Statistical Rating Organization (NRSRO). We use the model to evaluate loan data provided by the PFI as well as other relevant information.

For traditional MPF products involving conventional loans, PFIs assume or retain a portion of the credit risk. Subsequent to any private mortgage insurance (PMI), we share in the credit risk of the loans with the PFI. We assume the first layer of loss coverage as defined by the First Loss Account (FLA). If losses beyond the FLA layer are incurred for a pool, the PFI assumes the loan losses up to the amount of the CE obligation, or supplemental mortgage insurance (SMI) policy purchased to replace a CE obligation or to in-part reduce the amount of one, as specified in a master commitment agreement for each pool of mortgage loans purchased from the PFI. The CE obligation provided by the PFI ensures they retain a credit stake in the loans they sell and PFIs are paid a CE fee for managing this credit risk. In some instances, depending on the MPF product type (see Table 1), all or a portion of the CE fee may be performance based. Any losses in excess of our responsibility under the FLA and the member’s CE obligation or SMI policy for a pool of MPF loans are our responsibility. All loss allocations among us and our PFIs are based upon formulas specific to pools of loans covered by a specific MPF product and master commitment (see Table 2). PFIs’ CE obligations must be fully collateralized with assets considered eligible under our collateral policy. See Item 1 – “Business – Advances” for a discussion of eligible collateral.

There are five traditional MPF loan products from which PFIs may choose (see Table 1). Four of these products (Original MPF, MPF 125, MPF Plus and MPF Government) are closed loan products in which we purchase loans acquired or closed by the PFI. MPF 100 is a product in which we “table fund” MPF loans; that is, we provide the funds through the PFI (via their settlement agent) as our agent to make the MPF loan to the borrower. Under all of the above MPF loan products, the PFI performs all traditional retail loan origination functions. With respect to the MPF 100 product, we are considered the originator of the MPF loan for accounting purposes since the PFI is acting as our agent when originating the MPF loan; however, we do not collect any origination fees. As mentioned above, the MPF Xtra product is essentially a loan sale from the PFI to FHLBank Chicago (Fannie Mae seller-servicer), and simultaneously to Fannie Mae. We collect a counterparty fee for our PFI participating in the MPF Xtra product.

The traditional MPF products involving conventional loans are termed credit-enhanced products, in that we share in the credit risk of the loans (as described above) with the PFIs. The MPF Government and Xtra products do not have a first loss and/or credit enhancement structure.

PFI Eligibility: Members and eligible housing associates may apply to become PFIs. We review the general eligibility of the member, its servicing qualifications and its ability to supply documents, data and reports required to be delivered by PFIs under the MPF Program. A Participating Financial Institution Agreement provides the terms and conditions for the sale or funding of MPF loans, including required CE obligations, and establishes the terms and conditions for servicing MPF loans. All of the PFI’s CE obligations under this agreement are secured in the same manner as the other obligations of the PFI under its regular advances agreement with us. We have the right under the advances agreement to request additional collateral to secure the PFI’s MPF CE obligations.

MPF Provider: FHLBank Chicago serves as the MPF Provider for the MPF Program. They maintain the structure of MPF loan products and the eligibility rules for MPF loans, including MPF Xtra loans, which primarily fall under the rules and guidelines provided by Fannie Mae. In addition, the MPF Provider manages the pricing and delivery mechanism for MPF loans and the back-office processing of MPF loans in its role as master servicer and program custodian. We have the capability under the individual bank pricing option to change the pricing offered to our PFIs for all MPF products, but the change affects all delivery commitment terms and loan note rates in the same amount for all PFIs. The MPF Provider has engaged Wells Fargo Bank N.A. as the vendor for master servicing and as the primary custodian for the MPF Program.

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The MPF Provider publishes and maintains the MPF Origination, Underwriting and Servicing Guides and the MPF Xtra Guide, all of which detail the requirements PFIs must follow in originating, underwriting or selling and servicing MPF loans. As indicated, under the MPF Xtra product, we are a conduit that PFIs use to sell loans to FHLBank Chicago, then simultaneously to Fannie Mae. We began offering the MPF Xtra product in 2012, primarily to expand our use of balance sheet management tools available to us. MPF Xtra also enhances our list of MPF products so our PFIs can take advantage of the differences between the traditional products and MPF Xtra, primarily the differences between the risk-based capital costs associated with the credit enhancement feature on traditional products compared to loan level price adjustments that exist with MPF Xtra. The MPF Provider maintains the infrastructure through which we can fund or purchase MPF loans through our PFIs. In exchange for providing these services, we pay the MPF Provider a transaction services fee, which is based upon the unpaid principal balances of MPF loans funded since January 1, 2004.

MPF Servicing: PFIs selling MPF loans under the MPF Program may either retain the servicing function or transfer it and the servicing rights to an approved PFI servicer. If a PFI chooses to retain the servicing function, they receive a servicing fee. PFIs may utilize approved subservicers to perform the servicing duties. If the PFI chooses to transfer servicing rights to an approved third-party provider, the servicing is transferred concurrently with the sale of the MPF loan with the PFI receiving a service-released premium. The servicing fee is paid to the third-party servicer. All servicing-retained and servicing-released PFIs are subject to the rules and requirements set forth in the MPF Servicing Guide. Throughout the servicing process, the master servicer monitors PFI compliance with MPF Program requirements and makes periodic reports to the MPF Provider.

Mortgage Standards: PFIs are required to deliver mortgage loans that meet the eligibility requirements in the MPF Guides. The eligibility guidelines in the MPF Guides applicable to the conventional MPF loans in our portfolio are broadly summarized as follows:

§   Mortgage characteristics: MPF loans must be qualifying 5- to 30-year conforming conventional, fixed rate, fully amortizing mortgage loans, secured by first liens on owner-occupied 1- to 4-unit single-family residential properties and single-unit second homes.

§   Loan-to-value (LTV) ratio and PMI: The maximum LTV for conventional MPF loans is 95 percent, though Affordable Housing Program (AHP) mortgage loans may have LTVs up to 100 percent. Conventional MPF loans with LTVs greater than 80 percent are insured by PMI from a mortgage guaranty insurance company that has successfully passed an internal credit review and is approved under the MPF Program.

§   Documentation and compliance: Mortgage documents and transactions are required to comply with all applicable laws. Mortgage loans are documented using standard Fannie Mae/Freddie Mac uniform instruments.

§   Government loans: Government loans sold under the MPF Program have substantially the same parameters as conventional MPF loans except that their LTVs may not exceed the LTV limits set by the applicable government agency and they must meet all requirements to be insured or guaranteed by the applicable government agency.

§   Ineligible mortgage loans: Loans not eligible for sale under the MPF Program include mortgage loans unable to be rated by S&P, loans not meeting eligibility requirements, loans classified as high cost, high rate, high risk, Home Ownership and Equity Protection Act loans or loans in similar categories defined under predatory or abusive lending laws, or subprime, non-traditional, or higher-priced mortgage loans.

Loss Calculations: Losses under the FLA for conventional mortgage loans are defined differently than losses for financial reporting purposes. The differences reside in the timing of the recognition of the loss and how the components of the loss are recognized. Under the FLA, a loss is the difference between the recorded loan value and the total proceeds received from the sale of an MPF property after paying any associated expenses, not to exceed the amount of the FLA. The loss is recognized upon sale of the mortgaged property. For financial reporting purposes, when an MPF loan is deemed a loss, the difference between the recorded loan value and the appraised value of the property securing the loan (fair market value) less the estimated costs to sell is recognized as a charge to the Allowance for Credit Losses on Mortgage Loans in the period the loss status is assigned to the loan. After foreclosure, any expenses associated with carrying the loan until sale are recognized as Real Estate Owned (REO) expenses in the current period.

A majority of the states, and some municipalities, have enacted laws against mortgage loans considered predatory or abusive. Some of these laws impose liability for violations not only on the originator, but also upon purchasers and assignees of mortgage loans. We take measures that we consider reasonable and appropriate to reduce our exposure to potential liability under these laws and are not aware of any claim, action or proceeding asserting that we are liable under these laws. However, there can be no assurance that we will never have any liability under predatory or abusive lending laws.

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Table 1 presents a comparison of the different characteristics for each of the MPF products held on balance sheet as of December 31, 2012:

Table 1

Product Name	Size of the FHLBank’s FLA	PFI CE Obligation Description	CE Fee Paid to PFI	CE Fee Offset1	Servicing Fee to PFI
Original MPF	4 basis points (bps) per year against unpaid balance, accrued monthly	After FLA, to bring to the equivalent of “AA”	10 bps per year, paid monthly; guaranteed	No	25 bps per year, paid monthly
MPF 1002	100 bps fixed based on gross fundings at closing	After FLA, to bring to the equivalent of “AA”	7 to 10 bps per year, paid monthly; performance based after 3 years	Yes; after first 3 years, to the extent recoverable in future years	25 bps per year, paid monthly
MPF 125	100 bps fixed based on gross fundings at closing	After FLA, to bring to the equivalent of “AA”	7 to 10 bps per year, paid monthly; performance based	Yes; to the extent recoverable in future years	25 bps per year, paid monthly
MPF Plus3	Sized to equal expected losses	0 to 20 bps after FLA and SMI, to bring to the equivalent of “AA”	7 bps per year plus 6 to 7 bps per year, performance based (delayed for 1 year); all fees paid monthly	Yes; to the extent recoverable in future years	25 bps per year, paid monthly
MPF Xtra	N/A	N/A	N/A	N/A	25 bps per year, paid     monthly
MPF Government	N/A	N/A (unreimbursed servicing expenses only)	N/A4	N/A	44 bps per year, paid monthly

1	Future payouts of performance-based CE fees are reduced when losses are allocated to the FLA. The offset is limited to fees payable in a given year but could be reduced in subsequent years. The overall reduction is limited to the FLA amount for the life of the pool of loans covered by a master commitment agreement.
2	The MPF 100 product is currently inactive due to regulatory requirements relating to loan originator compensation under the Dodd-Frank Act.
3	Due to higher costs associated with the acquisition of supplemental insurance policies, the MPF Plus product is currently not active.
4	Two government master commitments have been grandfathered and paid 2 bps/year. All other government master commitments are not paid a CE fee.

Table 2 presents an illustration of the FLA and CE obligation calculation for each conventional MPF product type listed as of December 31, 2012:

Table 2

Product Name	FLA	CE Obligation Calculation
Original MPF	4 bps x unpaid principal, annually1	(LLCE2 x PSF3) x Gross Fundings
MPF 100	100 bps x loan funded amount	((LLCE x PSF) – FLA) x Gross Fundings
MPF 125	100 bps x loan funded amount	((LLCE x PSF) – FLA) x Gross Fundings
MPF Plus	5 x variable CE Fee	AA equivalent – FLA-SMI4 = PCE5

1	Starts at zero and increases monthly over the life of the master commitment.
2	LLCE represents the weighted average loan level credit enhancement score of the loans sold into the pool of loans covered by the master commitment agreement.
3	The S&P Level’s Pool Size Factor (PSF) is applied at the MPF FHLBank level against the total of loans in portfolio. A PSF is greater than one if the number of loans in portfolio is less than 300 in total.
4	SMI represents the coverage obtained from the supplemental mortgage insurer. The initial premium for the insurance is determined based on a sample $100 million loan pool. The final premium determination is made during the 13th month of the master commitment agreement, at which time any premium adjustment is determined based on actual characteristics of loans submitted. The SMI generally covers a portion of the PFI’s CE obligation, which typically ranges from 200 to 250 bps of the dollar amount of loans delivered into a mortgage pool, but the PFI may purchase an additional level of coverage to completely cover the PFI’s CE obligation. The CE fees paid to PFIs for this program are capped at a maximum of 14 bps, which is broken into two components, fixed and variable. The fixed portion of the CE fee is paid to the SMI insurer for the coverage discussed above and is a negotiated rate depending on the level of SMI coverage, ranging from 6 to 8 bps. The variable portion is paid to the PFI, and ranges from 6 to 8 bps, with payments commencing the 13th month following initial loan purchase under the master commitment agreement.
5	PCE represents the CE obligation that the PFI elects to retain rather than covering with SMI. Under this MPF product, the retained amount can range from 0 to 20 bps.

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Investments

A portfolio of investments is maintained for liquidity, asset-liability management and income purposes and to invest capital within the established statutory and regulatory limits. We maintain a portfolio of short-term investments in highly rated institutions, including overnight Federal funds, term Federal funds, interest-bearing certificates of deposit, bank notes, bankers’ acceptances, commercial paper and securities purchased under agreement to resell (i.e., reverse repurchase transactions). A longer-term investment portfolio is also maintained, which includes securities issued or guaranteed by the U.S. government, U.S. government agencies and GSEs as well as MBS that are issued by U.S. government agencies and housing GSEs (GSE securities are not explicitly guaranteed by the U.S. government) or privately issued MBS or asset-backed securities (ABS) that carried the highest ratings from Moody’s, Fitch Ratings (Fitch) or S&P at the date of acquisition. We have not purchased a private-label MBS/ABS investment since June 2006. On March 24, 2011, our Board of Directors approved removal of our authority to purchase these types of investments from our Risk Management Policy (RMP).

Under Finance Agency regulations, we are prohibited from investing in certain types of securities including:

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

§   Instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks;

§   Non-investment-grade debt instruments other than certain investments targeted to low-income persons or communities, and instruments that were downgraded after purchase;

§   Whole mortgages or other whole loans other than: (1) those acquired under our MPF Program; (2) certain investments targeted to low-income persons or communities; (3) certain marketable direct obligations of state, local, or tribal government units or agencies, having at least the second highest credit rating from a NRSRO; (4) MBS or ABS backed by manufactured housing loans or home equity loans; and (5) certain foreign housing loans authorized under section 12(b) of the Bank Act;

§   Non-U.S. dollar denominated securities;

§   Interest-only or principal-only stripped MBS, CMOs, real estate mortgage investment conduits (REMICs) and eligible ABS;

§   Residual-interest or interest-accrual classes of CMOs, REMICs and eligible ABS; and

§   Fixed rate MBS, CMOs, REMICs and eligible ABS, or floating rate MBS, CMOs, REMICs and eligible ABS that on the trade date are at rates equal to their contractual cap or that have average lives which vary by more than six years under an assumed instantaneous interest rate change of 300 bps.

In addition to the above limitations on allowable types of MBS investments, the Finance Agency limits our total investment in MBS by requiring that the total amortized cost of MBS owned not exceed 300 percent of our previous month-end total regulatory capital on the day we purchase the securities. Under Finance Board Resolution 2008-08, the FHLBanks were granted temporary authority to increase MBS up to 600 percent of previous month-end total regulatory capital under specific conditions. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Balance Sheet Analysis – Investments” for further discussion of Finance Board Resolution 2008-08 and actions taken by the FHLBank.

Debt Financing – Consolidated Obligations

Consolidated obligations, consisting of bonds and discount notes, are our primary sources of liabilities and represent the principal source we use to fund our advances and traditional mortgage products and to purchase investments. Consolidated obligations are the joint and several obligations of the FHLBanks, backed only by the financial resources of the 12 FHLBanks. Consolidated obligations are not obligations of the U.S. government, and the U.S. government does not guarantee them. The capital markets have traditionally considered the FHLBanks’ obligations as “Federal agency” debt. Consequently, although the U.S. government does not guarantee the FHLBanks’ debt, the FHLBanks have historically had reasonably stable access to funding at relatively favorable spreads to U.S. Treasuries. Our ability to access the capital markets through the sale of consolidated obligations, across the entire maturity spectrum and through a variety of debt structures, assists in managing our balance sheet effectively and efficiently. Moody’s currently rates the FHLBanks’ consolidated obligations Aaa/P-1, and S&P currently rates them AA+/A-1+. These ratings measure the likelihood of timely payment of principal and interest on consolidated obligations and also reflect the FHLBanks’ status as GSEs, which generally implies the expectation of a high degree of support by the U.S. government even though their obligations are not guaranteed by the U.S. government.

Finance Agency regulations govern the issuance of debt on behalf of the FHLBanks and related activities, and authorize the FHLBanks to issue consolidated obligations, through the Office of Finance as their agent, under the authority of Section 11(a) of the Bank Act. No FHLBank is permitted to issue individual debt under Section 11(a) without Finance Agency approval. We are primarily and directly liable for the portion of consolidated obligations issued on our behalf. In addition, we are jointly and severally liable with the other 11 FHLBanks for the payment of principal and interest on the consolidated obligations of all 12 FHLBanks under Section 11(a). The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations for which the FHLBank is not the primary obligor. Although it has never occurred, to the extent that an FHLBank would be required to make a payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank would be entitled to reimbursement from the non-complying FHLBank. However, if the Finance Agency determines that the non-complying FHLBank is unable to satisfy its obligations, then the Finance Agency may allocate the non-complying FHLBank’s outstanding consolidated obligation debt among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis the Finance Agency may determine. If the principal or interest on any consolidated obligation issued on behalf of an individual FHLBank is not paid in full when due, the FHLBank may not pay dividends to, or redeem or repurchase shares of stock from, any member of that individual FHLBank.

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Table 3 presents the par value of our consolidated obligations and the combined consolidated obligations of the 12 FHLBanks as of December 31, 2012 and 2011 (in millions):

Table 3

	12/31/2012		12/31/2011
Par value of consolidated obligations of the FHLBank	$	30,458	$	29,897
Par value of consolidated obligations of all FHLBanks	$	687,902	$	691,868

Finance Agency regulations provide that we must maintain aggregate assets of the following types, free from any lien or pledge, in an amount at least equal to the amount of consolidated obligations outstanding:

§   Cash;

§   Obligations of, or fully guaranteed by, the U.S government;

§   Secured advances;

§   Mortgages, which have any guaranty, insurance or commitment from the U.S. government or any agency of the U.S. government;

§   Investments described in Section 16(a) of the Bank Act, which, among other items, includes securities that a fiduciary or trust fund may purchase under the laws of the state in which the FHLBank is located; and

§   Other securities that are assigned a rating or assessment by an NRSRO that is equivalent to or higher than the rating on consolidated obligations, except securities specifically prohibited in the Investments section of Item 1 – “Business – Investments.”

Table 4 illustrates our compliance with the Finance Agency’s regulations for maintaining aggregate assets at least equal to the amount of consolidated obligations outstanding as of December 31, 2012 and 2011 (in thousands):

Table 4

	12/31/2012		12/31/2011
Total non-pledged assets	$	33,735,216	$	33,105,379
Total carrying value of consolidated obligations	$	30,642,961	$	30,145,591
Ratio of non-pledged assets to consolidated obligations		1.10		1.10

The Office of Finance has responsibility for facilitating and executing the issuance of the consolidated obligations on behalf of the FHLBanks. It also prepares the FHLBanks’ Combined Quarterly and Annual Financial Reports, services all outstanding debt, serves as a source of information for the FHLBanks on capital market developments, administers the Resolution Funding Corporation (REFCORP) and the Financing Corporation, and manages the FHLBanks’ relationship with the NRSROs with respect to ratings on consolidated obligations.

Consolidated Obligation Bonds: Consolidated obligation bonds are primarily used to satisfy our term funding needs. Typically, the maturities of these bonds range from less than one year to 30 years, but the maturities are not subject to any statutory or regulatory limit. Consolidated obligation bonds can be issued and distributed through negotiated or competitively bid transactions with approved underwriters or selling group members.

Consolidated obligation bonds are generally issued with either fixed or variable rate payment terms that use a variety of standardized indices for interest rate resets including, but not limited to, LIBOR, Federal Funds Effective Rate, Constant Maturity Swap (CMS), Prime, Three Month Treasury Bill Auction Yield, and 11th District Cost of Funds Index (COFI). In addition, to meet the specific needs of certain investors in consolidated obligations, both fixed and variable rate bonds may also contain certain embedded features, which result in complex coupon payment terms and call features. Normally, when such a complex consolidated obligation bond is issued, we simultaneously enter into a derivative containing mirror or offsetting features to synthetically convert the terms of the complex bond to a simple variable rate callable bond tied to one of the standardized indices. We also simultaneously enter into derivatives containing offsetting features to synthetically convert the terms of some of our fixed rate callable and bullet bonds and floating rate bonds to a simple variable rate callable bond tied to one of the standardized indices.

When consolidated obligations are issued with variable-rate coupon payment terms that use the Federal funds rate, we typically simultaneously enter into derivatives that effectively convert the Federal funds rate to LIBOR. The effective Federal funds rate is based upon transactional data relating to the Federal funds sold market. An increase in commercial bank reserves combined with the rate of interest paid on those reserves has contributed to a decline in the volume of transactions in the overnight Federal funds market. Thus, in the aggregate, the FHLBanks may comprise a significant percentage of the Federal funds sold market at any given point in time; however each FHLBank manages its investment portfolio separately.

Consolidated Obligation Discount Notes: The Office of Finance also sells consolidated obligation discount notes on behalf of the FHLBanks that are primarily used to meet short-term funding needs. These securities have maturities up to one year and are offered daily through certain securities dealers in a discount note selling group. In addition to the daily offerings of discount notes, the FHLBanks auction specific amounts of discount notes with fixed maturity dates ranging from 4 to 26 weeks through competitive auctions held twice a week utilizing the discount note selling group. The amount of discount notes sold through the auctions varies based upon market conditions and/or on the funding needs of the FHLBanks. Discount notes are sold at a discount and mature at par.

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Use of Derivatives

The FHLBank’s RMP establishes guidelines for our use of derivatives. Interest rate swaps, swaptions, interest rate cap and floor agreements, calls, puts, futures, forward contracts and other derivatives can be used as part of our interest-rate risk management and funding strategies. This policy, along with Finance Agency regulations, prohibits trading in or the speculative use of derivatives and limits credit risk to counterparties that arises from derivatives. In general, we have the ability to use derivatives to reduce funding costs for consolidated obligations and to manage other risk elements such as interest rate risk, mortgage prepayment risk, unsecured credit risk and foreign currency risk.

We use derivatives in three general ways: (1) by designating them as either a fair value or cash flow hedge of an underlying financial instrument, a firm commitment or a forecasted transaction; (2) by acting as an intermediary between members and the capital markets; or (3) in asset/liability management (i.e., economic hedge). Economic hedges are defined as derivatives hedging specific or non-specific underlying assets, liabilities or firm commitments that do not qualify for hedge accounting, but are acceptable hedging strategies under our RMP. For example, we use derivatives in our overall interest rate risk management to adjust the interest rate sensitivity of consolidated obligations to approximate more closely to the interest rate sensitivity of assets, including advances, investments and mortgage loans, and/or to adjust the interest rate sensitivity of advances, investments and mortgage loans to approximate more closely to the interest rate sensitivity of liabilities. In addition to using derivatives to manage mismatches of interest rate terms between assets and liabilities, we also use derivatives to manage embedded options in assets and liabilities, to hedge the market value of existing assets, liabilities and anticipated transactions, to hedge the duration risk of prepayable instruments and to reduce funding costs as discussed below.

To reduce funding costs or to alter the characteristics of our liabilities to better match the characteristics of our assets, we frequently execute derivatives concurrently with the issuance of consolidated obligation bonds (collectively referred to as swapped consolidated obligation bond transactions). At times, we also execute derivatives concurrently with the issuance of consolidated obligation discount notes. This allows us to create synthetic variable rate debt at a cost that is often a cost improvement over other funding alternatives and lower than the cost of a comparable variable rate cash instrument issued directly by us. This strategy of issuing consolidated obligations while simultaneously entering into derivatives enables us to more effectively fund our variable rate and, to a lesser extent, short-term fixed rate assets. It also allows us, in some instances, to offer a wider range of attractively priced advances to our members and housing associates than would otherwise be possible. The continued attractiveness of these swapped consolidated obligation transactions depends on price relationships in both the FHLBank consolidated obligation market and the derivatives market, primarily the interest rate swap market. If conditions in these markets change, we may alter the types or terms of the consolidated obligations issued and derivatives transacted to better match assets, to meet customer needs and/or to improve our funding costs. We frequently purchase interest rate caps with various terms and strike rates to manage embedded interest rate cap risk associated with our variable rate MBS and CMO portfolios. Although these derivatives are valid economic hedges against the prepayment and option risk of our portfolio of MBS and CMOs, they are not specifically linked to individual investment securities and, therefore, do not receive either fair value or cash flow hedge accounting. The derivatives are marked-to-market through earnings. We can also use interest rate caps and floors, swaptions and callable swaps to manage and hedge prepayment and option risk on MBS, CMOs and mortgage loans. 

Other common ways in which we use derivatives to manage our assets and liabilities are:

§   To mitigate the adverse earnings effects of the contraction or extension of certain assets (e.g., advances or mortgage assets) and liabilities;

§   To protect the value of existing asset or liability positions or of anticipated transactions; and

§   To synthetically convert the terms of some of our fixed rate advances to simple variable rate advances tied to one of the standardized indices referred to above by simultaneously entering into derivatives containing offsetting features of the advance.

See Item 7A – “Quantitative and Qualitative Disclosures About Market Risk – Risk Management – Interest Rate Risk Management” for further information on derivatives.

Deposits

The Bank Act allows us to accept deposits from our members, housing associates, any institution for which we are providing correspondent services, other FHLBanks and other government instrumentalities. We offer several types of deposit programs to our members and housing associates, including demand, overnight and term deposits.

Liquidity Requirements: To support deposits, Finance Agency regulations require us to have at least an amount equal to current deposits invested in obligations of the U.S. government, deposits in eligible banks or trust companies, or advances with maturities not exceeding five years. In addition, we must meet the additional liquidity policies and guidelines outlined in our RMP. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk Management” for further discussion of our liquidity requirements.

Capital, Capital Rules and Dividends

FHLBank Capital Adequacy and Form Rules: The Gramm-Leach-Bliley Act (GLB Act) allows us to have two classes of stock, and each class may have sub-classes. Class A stock is conditionally redeemable on six months’ written notice from the member, and Class B stock is conditionally redeemable on five years’ written notice from the member, subject in each case to certain conditions and limitations that may restrict the ability of the FHLBanks to effectuate such redemptions. Membership is voluntary. However, other than non-member housing associates (see Item 1 – “Business – Advances”), membership is required in order to utilize our credit and mortgage finance products. Members that withdraw from membership may not reapply for membership for five years.

The GLB Act and the Finance Agency rules and regulations define total capital for regulatory capital adequacy purposes as the sum of an FHLBank’s permanent capital, plus the amounts paid in by its stockholders for Class A stock; any general loss allowance, if consistent with U.S. generally accepted accounting principles (GAAP) and not established for specific assets; and other amounts from sources determined by the Finance Agency as available to absorb losses. The GLB Act and Finance Agency regulations define permanent capital for the FHLBanks as the amount paid in for Class B stock plus the amount of an FHLBank’s retained earnings, as determined in accordance with GAAP.

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Under the GLB Act and the Finance Agency rules and regulations, we are subject to risk-based capital rules. Only permanent capital can satisfy our risk-based capital requirement. In addition, the GLB Act specifies a 5 percent minimum leverage capital requirement based on total FHLBank capital, which includes a 1.5 weighting factor applicable to permanent capital, and a 4 percent minimum total capital requirement that does not include the 1.5 weighting factor applicable to permanent capital. We may not redeem or repurchase any of our capital stock without Finance Agency approval if the Finance Agency or our Board of Directors determines that we have incurred, or are likely to incur, losses that result in, or are likely to result in, charges against our capital, even if we are in compliance with our minimum regulatory capital requirements. Therefore, a member’s right to have its excess shares of capital stock redeemed is conditional on, among other factors, the FHLBank maintaining compliance with the three regulatory capital requirements: risk-based, leverage and total capital.

See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Capital” for additional information regarding our capital plan.

Dividends: We may pay dividends from unrestricted retained earnings and current income. (For a discussion regarding restricted retained earnings, please see Joint Capital Enhancement Agreement under this Item 1.) Our Board of Directors may declare and pay dividends in either cash or capital stock. Under our capital plan, all dividends that are payable in capital stock must be paid in the form of Class B Common Stock, regardless of the class upon which the dividend is being paid.

Consistent with Finance Agency guidance in Advisory Bulletin (AB) 2003-AB-08, Capital Management and Retained Earnings, we adopted a retained earnings policy, which provides guidelines to establish a minimum or threshold level for our retained earnings in light of alternative possible future financial and economic scenarios. Our minimum (threshold) level of retained earnings is calculated quarterly and re-evaluated by the Board of Directors as part of each quarterly dividend declaration. The retained earnings policy includes detailed calculations of four components: (1) market risk, which is based upon our projected dividend paying capacity under a two-year earnings analysis that includes multiple stress or extreme scenarios (amount necessary to pay dividends at three-month LIBOR over the period); (2) credit risk, which requires that retained earnings be sufficient to credit enhance all of our assets from their actual rating levels to the equivalent of triple-A ratings (where advances are considered to be triple-A rated); (3) operations risk, which is equal to 30 percent of the total of the market and credit risk amounts, subject to a $10 million floor; and (4) derivative hedging volatility, which is the projected income impact of derivative hedging activities under 100-basis-point shocks in interest rates (maximum derivative hedging loss under up or down shocks). The retained earnings policy was considered by the Board of Directors when dividends were declared during the last two years, but the retained earnings threshold calculated in accordance with the policy did not significantly affect the level of dividends declared and paid. Tables 5 and 6 reflect the quarterly retained earnings threshold calculations utilized during 2012 and 2011 (in thousands), respectively, compared to the actual amount of retained earnings at the end of each quarter:

Table 5

Retained Earnings Component (based upon prior quarter end)	12/31/2012		09/30/2012		06/30/2012		03/31/2012
Market Risk (dividend paying capacity)1	$	-	$	-	$	-	$	-
Credit Risk		68,619		69,377		72,905		77,221
Operations Risk		20,586		20,813		21,872		23,166
Derivative Hedging Volatility		21,325		25,018		27,401		28,300
Total Retained Earnings Threshold		110,530		115,208		122,178		128,687
Actual Retained Earnings as of End of Quarter		481,282		460,715		440,682		425,872
Overage	$	370,752	$	345,507	$	318,504	$	297,185

1 Market risk is zero when we have sufficient income to pay a three-month LIBOR dividend in all scenarios modeled.

Table 6

Retained Earnings Component (based upon prior quarter end)	12/31/2011		09/30/2011		06/30/2011		03/31/2011
Market Risk (dividend paying capacity) 1	$	-	$	-	$	-	$	-
Credit Risk		78,082		85,655		81,273		75,340
Operations Risk		23,424		25,696		24,382		22,602
Derivative Hedging Volatility		39,699		48,412		35,849		40,222
Total Retained Earnings Threshold		141,205		159,763		141,504		138,164
Actual Retained Earnings as of End of Quarter		401,461		376,863		386,529		369,212
Overage	$	260,256	$	217,100	$	245,025	$	231,048

1 Market risk is zero when we have sufficient income to pay a three-month LIBOR dividend in all scenarios modeled.

Under our retained earnings policy, any shortage of actual retained earnings with respect to the retained earnings threshold is to be met over a period generally not to exceed two years from the quarter-end calculation. The policy also provides that meeting the established retained earnings threshold shall have priority over the payment of dividends, but that the Board of Directors must balance dividends on capital stock against the period over which the retained earnings threshold is met. The retained earnings threshold level fluctuates from period to period because it is a function of the size and composition of our balance sheet and the risks contained therein at that point in time.

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Joint Capital Enhancement Agreement (JCE Agreement) – Effective February 28, 2011, we, along with the other 11 FHLBanks, entered into a JCE Agreement intended to enhance the capital position of each FHLBank. On August 5, 2011, the FHLBanks also amended the JCE Agreement to reflect differences between the original agreement and capital plan amendments.

The intent of the JCE Agreement is to allocate that portion of each FHLBank’s earnings historically paid to satisfy its REFCORP obligation to a Separate Restricted Retained Earnings Account (RRE Account) at that FHLBank. Each FHLBank was required to contribute 20 percent of its earnings toward payment of the interest on REFCORP bonds until the REFCORP obligation was satisfied. The Finance Agency certified on August 5, 2011 that the FHLBanks’ payments to the U.S. Department of the Treasury for the second quarter of 2011 resulted in full satisfaction of the FHLBanks’ REFCORP obligation.

Thus, in accordance with the JCE Agreement, starting in the third quarter of 2011, each FHLBank began allocating 20 percent of its net income to a RRE Account and will do so until the balance of the account equals at least 1 percent of that FHLBank’s average balance of outstanding consolidated obligations for the previous quarter.

Key provisions under the JCE Agreement are as follows:

§   Under the JCE Agreement, each FHLBank will build its RRE Account to a minimum of 1 percent of its total outstanding consolidated obligations through the 20 percent allocation. For this purpose, total outstanding consolidated obligations is based on the most recent quarter's average carrying value of all consolidated obligations for which an FHLBank is the primary obligor, excluding hedging adjustments (Total Consolidated Obligations). Under the JCE Agreement, an FHLBank may make voluntary allocations above 20 percent of its net income and/or above the targeted balance of 1 percent of its Total Consolidated Obligations.

§   The JCE Agreement provides that any quarterly net losses of an FHLBank may be netted against its net income, if any, for other quarters during the same calendar year to determine the minimum required year-to-date or annual allocation to its RRE Account. Any year-to-date or annual losses must first be allocated to the unrestricted retained earnings of an FHLBank until such retained earnings are reduced to a zero balance. Thereafter, any remaining losses may be applied to reduce the balance of an FHLBank’s RRE Account, but not below a zero balance. In the event an FHLBank incurs a net loss for a cumulative year-to-date or annual period that results in a decrease to the balance of its RRE Account below the balance of the RRE Account as of the beginning of that calendar year, such FHLBank’s quarterly allocation requirement will thereafter increase to 50 percent of quarterly net income until the cumulative difference between the allocations made at the 50 percent rate and the allocations that would have been made at the regular 20 percent rate is equal to the amount of the decrease to the balance of its RRE Account at the beginning of that calendar year.

§   If the size of an FHLBank’s balance sheet would decrease and consequently, Total Consolidated Obligations would decline, the percent allocated could exceed the targeted one percent of Total Consolidated Obligations. The JCE Agreement provides that if an FHLBank's RRE Account exceeds 1.5 percent of its Total Consolidated Obligations, such FHLBank may transfer amounts from its RRE Account to the unrestricted retained earnings account, but only to the extent that the balance of its RRE Account remains at least equal to 1.5 percent of the FHLBank’s Total Consolidated Obligations immediately following such transfer. Finally, the JCE Agreement provides that during periods in which an FHLBank’s RRE Account is less than one percent of its Total Consolidated Obligations, such FHLBank may pay dividends only from unrestricted retained earnings or from the portion of quarterly net income not required to be allocated to its RRE Account.

§   The JCE Agreement can be voluntarily terminated by an affirmative vote of two-thirds of the boards of directors of the FHLBanks, or automatically after the occurrence of a certain event after following certain proscribed procedures (Automatic Termination Event). An Automatic Termination Event means: (1) a change in the FHLBank Act, or another applicable statute, that will have the effect of creating a new, or higher, assessment or taxation on net income or capital of the FHLBanks; or (2) a change in the FHLBank Act, or another applicable statute, or relevant regulations that will result in a higher mandatory allocation of an FHLBank’s quarterly net income to any retained earnings account other than the annual amount, or total amount, specified in an FHLBank’s capital plan. An FHLBank’s obligation to make allocations to the RRE Account terminates after it has been determined that an Automatic Termination Event has occurred and one year thereafter the restrictions on paying dividends out of the RRE Account, or otherwise reallocating funds from the RRE Account, are also terminated. Upon the voluntary termination of the JCE Agreement, an FHLBank’s obligation to make allocations to the RRE Account is terminated on the date written notice of termination is delivered to the Finance Agency, and restrictions on paying dividends out of the RRE Account, or otherwise reallocating funds from the RRE Account, terminate one year thereafter.

Tax Status

Although we are exempt from all federal, state and local taxation except for real property taxes, we were obligated to make payments to REFCORP in the amount of 20 percent of net earnings after operating expenses and AHP expenses through June 30, 2011. The Finance Agency certified on August 5, 2011 that the FHLBanks’ payments to the U.S. Department of the Treasury for the second quarter of 2011 resulted in full satisfaction of the FHLBanks’ REFCORP obligation. Starting in the third quarter of 2011, we began allocating 20 percent of our net income to a separate RRE account as described in “Capital, Capital Rules and Dividends” under this Item 1. In addition to the RECORP obligation, the 12 FHLBanks were required to set aside annually the greater of an aggregate of $100 million or 10 percent of their current year’s income before charges for AHP (but after assessments for REFCORP). In accordance with Finance Agency guidance for the calculation of AHP expense, interest expense on mandatorily redeemable capital stock is added back to income before charges for AHP (but after assessments for REFCORP). Assessments for REFCORP and AHP through June 30, 2011 were the equivalent to an effective minimum income tax rate of 26.5 percent, but this effective rate will be slightly higher depending upon the amount of interest expense for mandatorily redeemable capital stock recorded by the FHLBank during the year. After June 30, 2011, required assessments for AHP were equivalent to an effective minimum income tax rate of 10 percent.

Other Mission-related Activities

In addition to supporting residential mortgage lending, one of our core missions is to support related housing and community development. We administer and fund a number of targeted programs specifically designed to fulfill that mission. These programs provide housing opportunities for thousands of very low-, low- and moderate-income households and strengthened communities primarily in Colorado, Kansas, Nebraska and Oklahoma.

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Affordable Housing Program: Amounts specified by the AHP requirements described in Item 1 – “Business – Tax Status” are reserved for this program. AHP provides cash grants to members, creating a pool of no-cost or low-cost funds to finance the purchase, construction or rehabilitation of very low-, low- and moderate-income owner occupied or rental housing. In addition to the competition for AHP funds, customized homeownership set-aside programs offered during 2012 under the AHP included:

§   Rural First-time Homebuyer Program (RFHP) – RFHP provides down payment, closing cost or rehabilitation cost assistance to first-time homebuyers in rural areas;

§   Rural Disaster-Related Assistance (RDRA) – RDRA provides rehabilitation or rebuilding cost assistance to homeowners in rural federally declared disaster areas; and

§ Targeted Ownership Program (TOP) –TOP provides down payment, closing cost or rehabilitation cost assistance in rural and urban areas to disabled first-time homebuyers or first-time homebuyer households with a disabled member of the household.

Effective January 1, 2013, we no longer offer the RDRA or TOP.

Community Investment Cash Advance (CICA) Program. CICA loans to members specifically target underserved markets in both rural and urban areas. CICA loans represented 5.1 percent, 4.5 percent and 3.8 percent of total advances outstanding as of December 31, 2012, 2011 and 2010, respectively. Programs offered during 2012 under the CICA Program, which is not funded through the AHP, include:

§   Community Housing Program (CHP) –CHP makes loans available to members for financing the construction, acquisition, rehabilitation and refinancing of owner-occupied housing for households whose incomes do not exceed 115 percent of the area’s median income and rental housing occupied by or affordable for households whose incomes do not exceed 115 percent of the area’s median income. For rental projects, at least 51 percent of the units must have tenants that meet the income guidelines, or at least 51 percent of the units must have rents affordable to tenants that meet the income guidelines. We provide advances for CHP-based loans to members at our estimated cost of funds for a comparable maturity plus a mark-up for administrative costs;

§   Community Housing Program Plus (CHP Plus) –CHP Plus makes up to $25 million in loans available to members annually to help finance the construction, acquisition or rehabilitation of rental housing occupied by or affordable for households whose incomes do not exceed 80 percent of the area’s median income level. At least 51 percent of the units must have tenants that meet the income guidelines, or at least 51 percent of the units must have rents affordable to tenants that meet the income guidelines. We provide advances for CHP Plus-based loans to members at our estimated cost of funds for a comparable maturity;

§   Community Development Program (CDP) –CDP provides advances to members to finance CDP-qualified member financing including loans to small businesses, farms, agri-businesses, public or private utilities, schools, medical and health facilities, churches, day care centers or for other community development purposes that meet one of the following criteria: (1) loans to firms that meet the Small Business Administration’s (SBA) definition of a qualified small business concern; (2) financing for businesses or projects located in an urban neighborhood, census tract or other area with a median income at or below 100 percent of the area median; (3) financing for businesses, farms, ranches, agri-businesses or projects located in a rural community, neighborhood, census tract or unincorporated area with a median income at or below 115 percent of the area median; (4) firms or projects located in a Federal Empowerment Zone, Enterprise Community or Champion Community, Native American Area, Brownfield Area, Federally Declared Disaster Area, Military Base Closing Area or Community Adjustment and Investment Program Area; (5) businesses in urban areas in which at least 51 percent of the employees of the business earn at or below 100 percent of the area median; or (6) businesses in rural areas in which at least 51 percent of the employees of the business earn at or below 115 percent of the area median. We provide advances for CDP-based loans to members at our estimated cost of funds for a comparable maturity plus a mark-up for administrative costs; and

§   Housing and Community Development Emergency Loan Program (HELP) –HELP provides up to $25 million in advances annually for members to finance recovery efforts in federally-declared disaster areas. We provide advances for HELP-based loans to members at our estimated cost of funds for a comparable maturity.

Effective January 1, 2013, we no longer offer the CHP Plus or HELP.

Other Housing and Community Development Programs. A number of other voluntary housing and community development programs specifically developed for our members have also been established. These programs are not funded through the AHP and include the following:

§   Joint Opportunities for Building Success (JOBS) –In 2012, $998,000, in JOBS funds were distributed to assist members in promoting employment growth in their communities. We distributed $1,225,000 and $1,247,000 in 2011 and 2010, respectively. A charitable grant program, JOBS funds are allocated annually to support economic development projects. For 2013, the Board of Directors has approved up to $1,000,000 in funds that may be made available under this program. The following are elements of the JOBS program: (1) funds made available to projects only through our members; (2) $25,000 maximum funding per member ($25,000 per project) annually; (3) loan pools and similar funding mechanisms are eligible to receive more than one JOBS award annually provided there is an eligible project in the pool for each JOBS application funded; (4) members and project participants agree to participate in publicity highlighting their roles as well as the FHLBank’s contribution to the project and community/region; (5) projects that appear to be “bail outs” are not eligible; (6) members cannot use JOBS funds for their own direct benefit (e.g., infrastructure improvements to facilitate a new branch location) or any affiliate of the member; (7)projects can only be located in FHLBank Topeka’s District (Colorado, Kansas, Nebraska and Oklahoma); (8) applications of a political nature will not be accepted (JOBS funds cannot be used for any lobbying activity at the local, state or national level); and (9) FHLBank employees and members of their households may not receive JOBS funds except in their capacity as a volunteer of a nonprofit entity;

§   Community Initiative –The Community Initiative is a flexible direct grant program created to address housing and community development needs within the district that are not fully addressed by our other programs. In order to provide the maximum flexibility in identifying and addressing housing and community development needs, the program does not have prescribed criteria. Available funding used for the Community Initiative was $17,000 in 2012, $16,000 in 2011 and $9,000 in 2010. Up to $18,000 in funding has been allocated for this program for 2013; and

§   Rural First-time Homebuyer Education Program –We provide up to $100,000 annually to support rural homeownership education and counseling while actively encouraging participating organizations to seek supplemental funding from other sources. Goals of the program are to support rural education and counseling in all four states in the district, especially in those areas with RFHP-participating stockholders. We used $100,000, $75,000 and $78,000 of the available funds for this program during 2012, 2011 and 2010, respectively. For 2013, $75,000 has been allocated to this program.

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Competition

Advances: Demand for advances is affected by, among other things, the cost of alternative sources of liquidity available to our members, including deposits from members’ customers and other sources of liquidity that are available to members. Such other suppliers of wholesale funds may include investment banks, commercial banks, and U.S. government lending programs. Smaller members generally have access to alternative funding sources through brokered deposits and the sale of securities under agreements to repurchase, while larger members typically have access to a broader range of funding alternatives. Large members may also have independent access to the national and global credit markets. The availability of alternative funding sources to members can significantly influence member demand for advances and can change as a result of a variety of factors including, among others, market conditions, product availability through the FHLBank, the member’s creditworthiness and availability of member collateral for other types of borrowings.

Mortgage Loans: We are subject to competition in purchasing conventional, conforming fixed rate mortgage loans and government-guaranteed mortgage loans. We face competition in customer service, the prices paid for these assets, and in ancillary services such as automated underwriting. The most direct competition for purchasing mortgages comes from the other housing GSEs, which also purchase conventional, conforming fixed rate mortgage loans, specifically Fannie Mae and Freddie Mac. To a lesser extent, we also compete with regional and national financial institutions that buy and/or invest in mortgage loans. Depending on market conditions, these investors may seek to hold, securitize or sell conventional, conforming fixed rate mortgage loans. We continuously reassess our potential for success in attracting and retaining members for our mortgage loan products and services, just as we do with our advance products. We compete for the purchase of mortgage loans primarily on the basis of price, products, structures and services offered.

Debt Issuance: We compete with the U.S. government (including debt programs explicitly guaranteed by the U.S. government), U.S. government agencies, Fannie Mae, Freddie Mac and other GSEs as well as corporate, sovereign and supranational entities for funds raised through the issuance of unsecured debt in the national and global capital markets. Collectively, Fannie Mae, Freddie Mac and the FHLBanks are generally referred to as the housing GSEs, and the cost of the debt of each can be positively or negatively affected by political, financial or other news that reflects upon any of the three housing GSEs. If the supply of competing debt products increases without a corresponding increase in demand, our debt costs may rise or less debt may be issued at the same cost than would otherwise be the case. In addition, the availability and cost of funds raised through the issuance of certain types of unsecured debt may be adversely affected by regulatory initiatives that tend to reduce investment by certain depository institutions in unsecured debt with greater price volatility or interest rate sensitivity than similar maturity fixed rate, non-callable instruments of the same issuer.

Derivatives: The sale of callable debt and the simultaneous execution of callable interest rate swaps with options that mirror the options in the debt have been an important source of competitive funding for us. As such, the depth of the markets for callable debt and mirror-image derivatives is an important determinant of our relative cost of funds. There is considerable competition among high-credit-quality issuers, especially among the three housing GSEs, for callable debt and for derivatives. There can be no assurance that the current breadth and depth of these markets will be sustained.

Regulatory Oversight, Audits and Examinations

General: We are supervised and regulated by the Finance Agency, which is an independent agency in the executive branch of the U.S. government. The Finance Agency is responsible for providing effective supervision, regulation and housing mission oversight of the FHLBank to promote its safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market. The Finance Agency is headed by a director appointed by the President of the United States for a five-year term, with the advice and consent of the Senate. The Director (currently an acting Director) has designated and prescribed functions, powers and duties to a Deputy Director responsible for explicit oversight of the FHLBanks. The Federal Housing Finance Oversight Board advises the Director with respect to overall strategies and policies in carrying out the duties of the Director. The Federal Housing Finance Oversight Board is comprised of the Secretary of the Treasury, Secretary of HUD, Chairman of the Securities and Exchange Commission (SEC) and the Director, who serves as the Chairperson of the Board. The Finance Agency is funded in part through assessments from the 12 FHLBanks, with the remainder of its funding provided by Fannie Mae and Freddie Mac; no tax dollars or other appropriations support the operations of the Finance Agency or the FHLBanks. To assess our safety and soundness, the Finance Agency conducts annual, on-site examinations, as well as periodic on-site and off-site reviews. Additionally, we are required to submit monthly information on our financial condition and results of operations to the Finance Agency. This information is available to all FHLBanks.

The Government Corporation Control Act provides that, before a government corporation issues and offers obligations to the public, the Secretary of the Treasury shall prescribe the form, denomination, maturity, interest rate and conditions of the obligations; the manner and time issued; and the selling price. The Bank Act also authorizes the Secretary of the Treasury, at his or her discretion, to purchase consolidated obligations up to an aggregate principal amount of $4 billion. No borrowings under this authority have been outstanding since 1977. The U.S. Treasury receives the Finance Agency’s annual report to Congress, monthly reports reflecting securities transactions of the FHLBanks, and other reports reflecting the operations of the FHLBanks.

Audits and Examinations: We have an internal audit department and our Board of Directors has an audit committee. The Chief Internal Audit Officer reports directly to the Board of Director’s Audit Committee. In addition, an independent registered public accounting firm audits our annual financial statements and effectiveness of internal controls over financial reporting. The independent registered public accounting firm conducts these audits following standards of the Public Company Accounting Oversight Board (United States) and Government Auditing Standards issued by the Comptroller General. The FHLBanks, the Finance Agency and Congress all receive the audit reports. We must submit annual management reports to Congress, the President of the United States, the Office of Management and Budget, and the Comptroller General. These reports include a statement of financial condition, a statement of operations, a statement of cash flows, a statement of internal accounting and administrative control systems, and the report of the independent public accounting firm on the financial statements.

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

Personnel

As of March 13, 2013, we had 200 employees. The employees are not represented by a collective bargaining unit and we consider our relationship with our employees good.

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Legislation and Regulatory Developments

The legislative and regulatory environment for the FHLBank has been one of profound change over the past several years, beginning with the enactment of the Recovery Act and continuing as financial regulators issue proposed and/or final rules to implement the Dodd-Frank Act enacted in July 2010, and Congress considers housing finance and GSE reform. The FHLBanks’ business operations, funding costs, rights, obligations, and/or the environment in which the FHLBanks carry out their housing finance mission are likely to be materially affected by the Dodd-Frank Act; however, the full effect of the Dodd-Frank Act will become known only after the required regulations, studies and reports are issued and finalized. Significant regulatory actions and developments for the period covered by this report are summarized below.

Future Legislation: Various legislation, including proposals to substantially change the regulatory system for the FHLBanks and other housing GSEs, is from time to time introduced in Congress. Such proposed legislation may change applicable statutes and our operating environment in substantial and unpredictable ways. If enacted, legislation could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among the FHLBanks and other housing GSEs. We cannot predict whether any of this potential legislation will be enacted and, if enacted, the effect that it, or any implementing regulations, could have on our business, results of operations or financial condition.

Dodd-Frank Act: The Dodd-Frank Act provides for new statutory and regulatory requirements for derivatives transactions, including those utilized by us to hedge our interest rate and other risks. As a result of these requirements, beginning on June 10, 2013, certain derivative transactions will be required to be cleared through a third-party central clearinghouse and traded on regulated exchanges or new swap execution facilities. Derivative transactions that are not required to be cleared will be subject to mandatory reporting, documentation, minimum margin and capital and other requirements.

Mandatory Clearing. The Commodity Futures Trading Commission (CFTC) issued its first set of mandatory clearing determinations on November 28, 2012 (first mandatory clearing determination), which will subject four classes of interest rate swaps and two classes of credit default swaps to mandatory clearing beginning in the first quarter of 2013.

Certain of the interest rate swaps in which we engage fall within the scope of the first mandatory clearing determination and, as such, we will be required to clear any such swaps. Implementation of the first clearing determination will be phased in; we are classified as a “category 2 entity” and therefore have to comply with the mandatory clearing requirement for the specified interest rate swaps that we execute on or after June 10, 2013. The CFTC is expected to issue additional mandatory clearing determinations in the future with respect to other types of derivatives transactions, which could include certain interest rate swaps entered into by us that are not within the scope of the first mandatory clearing determination.

The CFTC has approved an end-user exception to mandatory clearing that would exempt derivative transactions that we may enter into with our members that have $10 billion or less in assets; the exception applies only if the member uses the swaps to hedge or mitigate its commercial risk and the reporting counterparty for such swaps complies with certain additional reporting requirements. As a result, any such member swaps would not be subject to mandatory clearing, although such swaps may be subject to applicable new requirements for derivatives transactions that are not subject to mandatory clearing requirements (uncleared trades). Although our moratorium on intermediating swaps for members currently continues, we have included this discussion relating to member swaps because we might decide to offer intermediated member swaps in the future.

Collateral Requirements for Cleared Swaps. Cleared swaps will be subject to initial and variation margin requirements established by the clearinghouse and its clearing members. While clearing swaps may reduce counterparty credit risk, the margin requirements for cleared swaps have the potential of making derivatives transactions more costly. In addition, mandatory clearing has required us to enter into new relationships and accompanying documentation with clearing members, which we continue to negotiate, and additional documentation with our interest rate swap counterparties.

The CFTC has issued a final rule requiring that collateral posted by swap customers to a clearinghouse in connection with cleared swaps be legally segregated on a customer-by-customer basis (the LSOC Model). Pursuant to the LSOC Model, although customer collateral must be segregated on an individual customer basis on the books of a futures commission merchant (FCM) and derivatives clearing organization, it may be commingled with the collateral of other customers of the same FCM in one physical account. The LSOC model affords greater protection to collateral posted for cleared swaps than is currently afforded to collateral posted for futures contracts. However, because of operational and investment risks inherent in the LSOC Model, and because of certain provisions applicable to FCM insolvencies under the U.S. Bankruptcy Code, the LSOC Model does not afford complete protection to cleared swaps customer collateral in the event of an FCM insolvency. Accordingly, a major consideration in our decision to establish and maintain a clearing relationship with an FCM is our assessment of the financial soundness of the FCM.

Definitions of Certain Terms under New Derivatives Requirements. The Dodd-Frank Act requires swap dealers and certain other large users of derivatives to register as “swap dealers” or “major swap participants,” as the case may be, with the CFTC and/or the SEC. Although we have a substantial portfolio of derivative transactions that are entered into for hedging purposes, and may engage in intermediated swaps with its members in the future, based on the definitions in the final rules jointly issued by the CFTC and the SEC in April 2012, we do not expect to be required to register as either a major swap participant or as a swap dealer.

Based on the final rules and accompanying interpretive guidance jointly issued by the CFTC and the SEC in July 2012 to further define the term “swap,” call and put optionality in certain advances to our members will not be treated as “swaps” so long as the optionality relates solely to the interest rate on the advance and does not result in enhanced or inverse performance or other risks unrelated to the interest rate. Accordingly, our ability to offer these advances to member customers should not be adversely affected by the new derivatives regulations.

Margin for Uncleared Derivatives Transactions. The Dodd-Frank Act will also change the regulatory landscape for derivatives transactions that are not subject to mandatory clearing requirements (uncleared trades). While we expect to continue to enter into uncleared trades on a bilateral basis, such trades will be subject to new regulatory requirements, including mandatory reporting, documentation, minimum margin and capital, and other requirements. The CFTC, the Finance Agency and other federal bank regulators proposed margin requirements for uncleared trades in 2011. Under the proposed margin rules, we would have to post both initial margin and variation margin to our swap dealer and major swap participant counterparties, but may be eligible in both instances for modest unsecured thresholds as a “low-risk financial end user.” Pursuant to additional Finance Agency provisions, we would be required to collect both initial margin and variation margin from our swap dealer counterparties, without any unsecured thresholds. These margin requirements and any related capital requirements could adversely impact the liquidity and pricing of certain uncleared derivative transactions entered into by us, making such trades more costly. Final margin rules are not expected until the second quarter of 2013 at the earliest and, accordingly, it is not likely that we will have to comply with such requirements until the end of 2013.

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Documentation for Uncleared Transactions. In February 2012, the CFTC adopted final rules that impose external business conduct standards on swap dealers and major swap participants when dealing with counterparties. The external business conduct standards rules prohibit certain abusive practices and require disclosure of certain material information to counterparties. In addition, swap dealers and major swap participants must conduct due diligence relating to their dealings with counterparties. In order to facilitate compliance with the external business conduct standards, swap dealers and major swap participants have sought to amend their existing swap documentation with counterparties. To facilitate amendment of the agreements, the International Swaps and Derivatives Association (ISDA) has initiated a protocol process, which allows multiple counterparty adherents to the same protocol to amend existing bilateral documentation with other adhering counterparties without having to negotiate changes to individual agreements. The original compliance date for swap dealers and major swap participants to comply with the external business standards was October 14, 2012, but that deadline has been extended twice and is now May 1, 2013. We adhered to an ISDA protocol in September 2012 to address the new documentation requirements under the external business conduct rules. Following adherence to the protocol, we have amended our agreements with 19 swap dealers by completing the required exchange of questionnaires with these parties.

In September 2012, the CFTC finalized rules regarding certain new documentation requirements for uncleared trades, including requirements for new dispute resolution and portfolio valuation and reconciliation provisions, new representations regarding applicable insolvency regimes and possible changes to our existing credit support arrangements with our swap dealer counterparties. ISDA has published a second protocol draft to address these new documentation requirements, and we are currently evaluating the protocol’s provisions. Our swap documentation with swap dealers must comply with certain of the requirements contained in the September 2012 CFTC rules by July 1, 2013. The final rules also impose requirements with respect to when swap dealers and major swap participants must deliver acknowledgments of, and execute confirmations for, uncleared trades with us. These timing requirements will be phased in between December 31, 2012 and March 1, 2014.

Additional changes to our swap documentation are expected to be required by additional Dodd-Frank Act rules, including the margin requirements for uncleared swaps that have not yet been finalized. We will consider adhering to future ISDA protocols to address the foregoing requirements.

Recordkeeping and Reporting. Compliance dates for the new recordkeeping and reporting requirements for all of our cleared and uncleared swaps have now been established. We currently comply with recordkeeping requirements for our swaps that were in effect on or after July 21, 2010 and, beginning on April 10, 2013, we will have to comply with new record-keeping requirements for swaps entered into on or after April 10, 2013. For interest rate swaps that we enter into with swap dealers, the swap dealers are currently required to comply with reporting requirements applicable to such swaps, including real-time reporting requirements. We will be required to comply with reporting requirements, including real-time reporting requirements, for any swaps that we may intermediate for our members beginning on April 10, 2013.

We, together with the other FHLBanks, will continue to monitor the Dodd-Frank Act rulemakings and the overall regulatory process to implement the derivatives reforms prescribed by that legislation. We will also continue to work with the other FHLBanks to implement the processes and documentation necessary to comply with the Dodd-Frank Act's new requirements for derivatives.

Significant Finance Agency Regulatory Actions:

Finance Agency Issues Final Rule on Private Transfer Fee Covenants. On March 16, 2012, the Finance Agency issued a final rule prohibiting Fannie Mae, Freddie Mac and the FHLBanks (the Regulated Entities) from purchasing, investing or otherwise dealing in any mortgages on properties encumbered by private transfer fee covenants, securities backed by such mortgages, or securities backed by the income stream from such covenants, except for certain limited types of private transfer fee covenants. The final rule also prohibits the FHLBanks from accepting such mortgages or securities as collateral. Pursuant to the final rule, the foregoing restrictions would apply only to mortgages on properties encumbered by private transfer fee covenants, if those covenants are created on or after February 8, 2011, to securities backed by such mortgages, and to securities issued after that date and backed by revenue from private transfer fees regardless of when the covenants were created. The Regulated Entities were required to comply with the final rule by July 16, 2012.

Finance Agency Issues Advisory Bulletin on Classification of Assets. On April 9, 2012, the Finance Agency issued Advisory Bulletin 2012-02, Framework for Adversely Classifying Loans, Other Real Estate Owned, and Other Assets and Listing Assets for Special Mention (AB 2012-02). The guidance establishes a standard and uniform methodology for classifying assets and prescribes the timing of asset charge-offs, excluding investments. The guidance in AB 2012-02 is generally consistent with the Uniform Retail Credit Classification and Account Management Policy issued by the federal banking regulators in June 2000. AB 2012-02 states that it was effective upon issuance. However, the Finance Agency issued additional guidance that extends the effective date to January 1, 2014. We are currently assessing the provisions of AB 2012-02 in coordination with the Finance Agency and have not yet determined its effect on our operating activities, results of operation or financial condition.

Finance Agency Issues Final Rule on Prudential Management and Operations Standards. On June 8, 2012, the Finance Agency issued a final rule on Prudential Management and Operations Standards to implement section 1108 of the Recovery Act, which requires the Finance Agency to establish prudential standards relating to the management and operations of the Regulated Entities. Section 1108 of the Recovery Act requires the Director of the Finance Agency to establish standards that address 10 separate areas relating to the management and operation of the Regulated Entities, including adequacy of internal controls and information systems, adequacy and independence of internal audit systems, management of interest rate risk, management of market risk, adequacy of liquidity and reserves, management of growth in assets and in the investment portfolio, management of investments and acquisition of assets to ensure they are consistent with the purposes of the Safety and Soundness Act and the Regulated Entities’ authorizing statutes, adequacy of overall risk management processes, adequacy of credit and counterparty risk management practices, and maintenance of records that allow an accurate assessment of the institution’s financial condition. The final rule establishes the standards as guidelines. In the event the Finance Agency determines that a Regulated Entity has failed to meet one or more of the standards, the Finance Agency may require the Regulated Entity to submit a corrective plan, which shall describe the actions the Regulated Entity will take to correct its failure to meet any one or more of the standards, and the time within which each action will be taken. If a Regulated Entity fails to submit an acceptable corrective plan, or fails in any material respect to implement or otherwise comply with an approved corrective plan, the Finance Agency may limit certain activities of the Regulated Entity. The final rule became effective on August 7, 2012.

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Finance Agency Establishes Suspended Counterparty Program. On June 18, 2012, the Finance Agency issued a notice regarding the establishment of a Suspended Counterparty Program to help address the risk to the Regulated Entities presented by individuals and entities with a history of fraud or other financial misconduct. As part of the Suspended Counterparty Program, each Regulated Entity is required to establish a process to notify the Finance Agency on a timely basis of individuals or institutions which have been convicted of an action relating to fraud or other fraudulent conduct or have been suspended or debarred by any Federal agency for such conduct. The Finance Agency will then inform all Regulated Entities when a decision has been made to suspend a counterparty, including the basis for the scope of the suspension, and the Finance Agency will direct the Regulated Entities to take appropriate action. Regulated Entities were required to implement a process for reporting to the Finance Agency the identity of any individual or entity meeting certain reporting criteria by no later than August 15, 2012.

Finance Agency Issues Notice on the Examination Rating System. On November 13, 2012, the Finance Agency issued a notice on its new Examination Rating System. The final examination rating system, which will be used for examining the Enterprises and the FHLBanks, will require an assessment of seven individual components dealing with capital, asset quality, management, earnings, liquidity, sensitivity to market risk and operational risk. Under the new rating system, each Regulated Entity will be assigned a composite numerical rating from “1” to “5,” with a “1” rating indicating the lowest degree of supervisory concern and a “5” rating indicating the highest level of supervisory concern. The composite rating will reflect the ratings of the underlying components, which will also be rated on a scale of “1” to “5.” The new rating system will replace the examination rating system developed by the Finance Agency’s predecessor agencies. The Finance Agency intends to use the new ratings system for examinations that commence after January 1, 2013.

Finance Agency Issues Proposed Rulemaking on FHLBank Community Support Amendments. On November 10, 2011, the Finance Agency issued a proposed rule to amend the Finance Agency’s Community Support Requirements regulation. The proposed amendments would require the FHLBanks to monitor and assess the eligibility of each FHLBank member for access to long-term advances through compliance with the regulations’ Community Reinvestment Act of 1977 (CRA) and first-time homebuyer standards. The proposed rule would also replace the current practice in which members submit to the Finance Agency biennial community support statements containing their most recent CRA evaluations. Instead, the FHLBanks would be responsible for verifying a member’s CRA rating and overseeing members’ compliance with first-time homebuyer requirements. Comments on the proposed rule were due by February 8, 2012.

Finance Agency Issues Proposed Order on Qualified Financial Contracts (QFCs). On August 9, 2012, the Finance Agency circulated a proposed order on QFCs that would be applicable to the Regulated Entities. The Finance Agency has indicated that the proposed order is intended to permit the Finance Agency to comply with certain statutory requirements for the transfer of QFCs in the event of the receivership of a Regulated Entity. The proposed order sets forth certain recordkeeping and reporting requirements for a Regulated Entity's QFCs. If the order is issued as proposed, each FHLBank will have to, among other things, establish and maintain infrastructure sufficient to meet the recordkeeping and reporting requirements and engage external personnel to audit its compliance with the order on an annual basis. Comments were due by October 10, 2012.

Finance Agency Issues White Paper on Building a New Infrastructure for the Secondary Mortgage Market. On October 4, 2012, the Finance Agency issued, and requested public input on, its white paper on Building a New Infrastructure for the Secondary Mortgage Market. The purpose of the white paper is to describe a proposed framework for both a new securitization infrastructure and a contractual framework supporting the new infrastructure. The proposed infrastructure would replace the proprietary infrastructures of the Enterprises with a common model, and establish a framework that is consistent with multiple versions of housing finance reform, including greater participation of private capital in assuming credit risk. Public input on the white paper was due by December 3, 2012.

Finance Agency Issues Notice on a Proposed Advisory Bulletin on Collateralization of Advances and Other Credit Products Provided by FHLBanks to Insurance Company Members. On October 5, 2012, the Finance Agency issued a notice with request for comment on a proposed advisory bulletin which would set forth standards to guide Finance Agency staff in its supervision of secured lending to insurance company members by the FHLBanks. The advisory bulletin would set forth a series of considerations that the Finance Agency proposes to use in monitoring transactions between FHLBanks and their insurance company members, with a focus on principles that would be used by the Finance Agency supervisory staff to assess each FHLBank’s ability to evaluate the financial health of its insurance company members and the quality of their eligible collateral, as well as the extent to which the FHLBank has a first-priority security interest in that collateral. Comments on the proposed advisory bulletin were due by December 4, 2012.

Finance Agency Issues Notice of Proposed Rulemaking on Stress Testing of Regulated Entities. On October 5, 2012, the Finance Agency issued a notice of proposed rulemaking on Stress Testing of Regulated Entities. The purpose of the proposed rule is to ensure stronger regulation of the Regulated Entities by providing the Finance Agency with additional, forward-looking information that will allow it to assess capital adequacy under various scenarios at the Regulated Entities. Section 165(i)(2)(c) of the Dodd-Frank Act requires the Finance Agency, as a primary federal financial regulatory agency, in coordination with other Federal financial regulators, to issue consistent and comparable regulations for annual stress testing of financial companies with assets over $10 billion. The proposed rule would require each Regulated Entity to complete an annual stress test of itself based on scenarios provided by the Finance Agency that reflect a minimum of three sets of economic and financial conditions, including a baseline, adverse and severely adverse scenario using a planning horizon of at least nine quarters over which the impact of the specified scenarios must be assessed. The proposed rule would require the Regulated Entities to report the results of the stress tests to the Finance Agency by January 5 of each year and then to provide certain public disclosure of the results of the stress tests within 90 days of the submission of the report to the Finance Agency. Comments on the proposed rulemaking were due by December 4, 2012.

Finance Agency Issues Notice of Proposed Rulemaking on Information Sharing Among FHLBanks. On January 29, 2013, the Finance Agency issued a notice of proposed rulemaking on Information Sharing Among FHLBanks. The proposed rule would implement Section 1207 of the Recovery Act, which requires the Finance Agency to make available to each FHLBank information relating to the financial condition of all other FHLBanks and to promulgate regulations to facilitate the sharing of such information among the FHLBanks. The Finance Agency published a proposed rule to implement the foregoing Recovery Act provisions in late 2012, but has re-issued the proposed rule after reviewing the comments and reconsidering the proposed means of information sharing. Pursuant to the proposed rule, the Director of the Finance Agency would distribute to the FHLBanks and the Office of Finance a proposed order identifying the categories of financial and supervisory information regarding each FHLBank and the FHLBank System that the Finance Agency would share with each FHLBank and the Office of Finance. Upon finalizing the order, the Finance Agency would routinely distribute certain categories of information to the FHLBanks and the Office of Finance. Comments on the proposed rule are due by April 1, 2013.

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Finance Agency Issues Advance Notice of Proposed Rulemaking on Mortgage Assets Affected by PACE Programs. On January 26, 2012, the Finance Agency issued an advance notice of proposed rulemaking on mortgage assets affected by Property Assessed Clean Energy (PACE) programs. PACE programs provide a means of financing certain kinds of home-improvement projects. Specifically, PACE programs permit local governments to provide financing to property owners for the purchase of energy-related home-improvement projects. The Finance Agency identified that it is concerned that PACE programs which involve subordination of any mortgage holder’s security interest in the underlying property to that of the provider of PACE financing may increase the financial risk borne by Fannie Mae and Freddie Mac as holders of mortgages on properties subject to PACE obligations, as well as MBS based on such mortgages. The proposed action would direct the Enterprises not to purchase any mortgage that is subject to a first-lien PACE obligation or that could become subject to first-lien PACE obligations without the consent of the mortgage holder. Comments on the advance notice of proposed rulemaking were due by March 26, 2012.

Other Significant Regulatory Actions:

Financial Stability Oversight Council (FSOC) Issues Final Rule and Interpretive Guidance on Authority to Require Supervision and Regulation of Certain Nonbank Financial Companies. On April 11, 2012, the FSOC issued a final rule to implement section 113 of the Dodd-Frank Act, which gives the FSOC the authority to require that a nonbank financial company be supervised by the Board of Governors and be subject to enhanced prudential standards. Under the final rule, the FSOC has established a three-stage process to assist in the determination of whether an entity should be supervised by the Board of Governors. Under the first stage, the FSOC will identify those U.S. nonbank financial companies that have $50 billion or more of total consolidated assets and exceed any one of five threshold indicators of interconnectedness or susceptibility to material financial distress, including whether the company has $20 billion or more of borrowings outstanding. A company that meets the standards identified in the first stage would proceed to the second stage, where the FSOC would conduct a comprehensive analysis of the potential for the identified nonbank financial companies to pose a threat to U.S. financial stability. Stage three builds on the quantitative and qualitative information provided through the first two stages of the review and the FSOC will determine whether to subject a nonbank financial company to Board of Governors supervision and prudential standards based on the results of the analyses conducted during each stage of the review. The final rule became effective on May 11, 2012.

Financial Crimes Enforcement Network (FinCEN) Issues Notice of Proposed Rulemaking on Anti-Money Laundering and Suspicious Activity Reporting Requirements for Housing GSEs. On November 8, 2011, FinCEN, a bureau of the Department of the Treasury, issued a proposed rule defining certain Housing GSEs, including the FHLBanks, as financial institutions for the purpose of requiring Housing GSEs to establish anti-money laundering programs and report suspicious activities pursuant to the Bank Secrecy Act (BSA). As amended by the USA PATRIOT Act, the BSA requires financial institutions to establish anti-money laundering programs that include, at a minimum: (1) the development of internal policies, procedures, and controls; (2) the designation of a compliance officer; (3) an ongoing employee training program; and (4) an independent audit function to test programs. The proposed rule would require that each Housing GSE develop and implement an anti-money laundering program reasonably designed to prevent the Housing GSE from being used to facilitate money laundering or the financing of terrorist activities, and other financial crimes, including mortgage fraud. The proposed rule would also require the Housing GSEs to file suspicious activity reports directly with FinCEN in the event certain suspicious transactions are conducted or attempted by, at, or through a Housing GSE. The Housing GSEs are currently subject to Finance Agency regulations and guidance on the Reporting of Fraudulent Financial Instruments. Should FinCEN issue a final rule imposing anti-money laundering and suspicious activity report requirements on the Housing GSEs, the Finance Agency may amend the regulations and/or guidance to avoid any conflicts or duplicative requirements with FinCEN’s regulations. Comments on the proposed rulemaking were due by January 9, 2012.

Board of Governors Issues Proposed Prudential Standards. On January 5, 2012, the Board of Governors issued a proposed rule that would implement the enhanced prudential standards and early remediation standards required by the Dodd-Frank Act for nonbank financial companies identified by the FSOC as posing a threat to the U.S. financial stability. Such proposed prudential standards include: risk-based capital and leverage requirements, liquidity standards, requirements for overall risk management, single-counterparty credit limits, stress test requirements and a debt-to-equity limit. The capital and liquidity requirements would be implemented in phases and would be based on or exceed the Basel international capital and liquidity framework (as discussed in further detail below under Additional Developments). Comments on the proposed rule were due by April 30, 2012.

National Credit Union Administration Issues Proposed Rule on Access to Emergency Liquidity. On July 30, 2012, the National Credit Union Administration (NCUA) published a proposed rule requiring, among other things, that federally-insured credit unions of $100 million or larger must maintain access to at least one federal liquidity source for use in times of financial emergency and distressed circumstances. This access must be demonstrated through direct or indirect membership in the Central Liquidity Facility (a U.S. government corporation created to improve the general financial stability of credit unions by serving as a liquidity lender to credit unions) or by establishing access to the Federal Reserve’s discount window. The proposed rule does not include FHLBank membership as an emergency liquidity source. If the rule is issued as proposed, it may adversely impact our results of operations if it causes our federally-insured credit union members to favor these federal liquidity sources over FHLBank membership or advances. Comments were due by September 28, 2012.

FSOC Issues Proposed Recommendations Regarding Money Market Mutual Fund Reform. On November 19, 2012, the FSOC issued proposed recommendations pursuant to Section 120 of the Dodd-Frank Act, which authorizes the FSOC to issue recommendations to a primary financial regulatory agency to apply new or heightened standards and safeguards for a financial activity or practice conducted by bank holding companies or nonbank financial companies. Pursuant to Section 120, the FSOC proposes to determine that money market funds’ activities and practices could create or increase the risk of significant liquidity, credit and other problems spreading among bank holding companies, nonbank financial companies and U.S. financial markets. Based on the proposed determination, the FSOC proposed three alternative approaches for addressing the concerns: (1) require money market funds to have a floating net asset value per share; (2) require money market funds to have a net asset value buffer with a tailored amount of assets of up to one percent to absorb day-to-day fluctuations in the value of the funds’ portfolio securities and allow the funds to maintain a stable net asset value; or (3) require money market funds to have a risk-based net asset value buffer of three percent to provide explicit loss-absorption capacity that could be combined with other measures to enhance the effectiveness of the buffer. Actions by the FSOC or other regulators in response to the FSOC’s proposed recommendations could result in money market funds being less attractive to investors, thereby shrinking demand for FHLBank debt by money market funds and potentially hindering our ability to obtain the liquidity needed to meet certain obligations. Comments on the proposed recommendations were due by February 15, 2013.

Additional Developments:

Basel Committee on Banking Supervision Capital and Liquidity Framework. In September 2010, the Basel Committee on Banking Supervision (Basel Committee) approved a new capital framework for internationally active banks. Banks subject to the new framework will be required to have increased amounts of capital with core capital being more strictly defined to include only common equity and other capital assets that are able to fully absorb losses. In January 2013, the Basel Committee approved a revised liquidity framework, including a revised liquidity coverage ratio which revises the definition of high-quality liquid assets and net cash outflows, which are used to determine the amount and type of high quality, unencumbered liquid assets an organization should have at hand in the event of a liquidity crisis.

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On June 7, 2012, the Board of Governors, the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) (collectively, the Agencies) concurrently published three joint notices of proposed rulemaking (the NPRs) seeking comments on comprehensive revisions to the Agencies’ capital framework to incorporate the Basel Committee’s new capital framework. These revisions would, among other things:

§   Implement the Basel Committee’s capital standards related to minimum requirements, regulatory capital, and additional capital buffers;

§   Revise the methodologies for calculating risk-weighted assets in the general risk-based capital rules; and

§   Revise the approach by which large banks determine their capital adequacy.

The NPRs do not incorporate the reforms related to liquidity risk management published in Basel III, which the Agencies are expected to propose in a separate rulemaking. If the new NPRs are adopted as proposed and depending on the liquidity framework expected to be proposed by the Agencies, some of our members could need to divest assets in order to comply with the more stringent capital and liquidity requirements, thereby tending to decrease their need for advances. The requirements may also adversely impact investor demand for consolidated obligations to the extent that affected institutions divest or limit their investments in consolidated obligations. On the other hand, any new liquidity requirements could motivate our members to borrow term advances from us to create and maintain balance sheet liquidity. Comments were due on the proposed rulemakings by October 22, 2012.

While it is still uncertain how the capital and liquidity standards being developed by the Basel Committee ultimately will be implemented by the U.S. regulatory authorities, the framework and the Board of Governors’ proposed plan could require some of our members to divest assets in order to comply with the more stringent capital and liquidity requirements, thereby tending to decrease their need for advances; on the other hand, the new framework may incent our members to take our term advances to create balance sheet liquidity. The requirements may also adversely affect investor demand for consolidated obligations.

Expiration of Unlimited Insurance on Noninterest-Bearing Transaction Accounts. As a result of the Dodd-Frank Act, the Federal Deposit Insurance Act and the Federal Credit Union Act were amended to require that the FDIC and NCUA fully insure the net amount that any depositor at an insured depository institution maintains in a noninterest-bearing transaction account. The amendments provided an alternative source of funds to many of our members, which competed with our advance business. The provisions of the Dodd-Frank Act which authorized unlimited insurance on noninterest-bearing transaction accounts included a prospective repeal of such authority, with such repeal occurring effective January 1, 2013.

Consumer Financial Protection Bureau (CFPB) Issues Final Qualified Mortgage Rule. In January 2013, the CFPB issued a final rule with an effective date of January 10, 2014 establishing new standards for mortgage lenders to follow during the loan approval process to determine whether a borrower can afford to repay the mortgage. Qualified mortgage loans (QMs) are home loans that are either eligible for Fannie Mae or Freddie Mac to purchase or otherwise satisfy certain underwriting standards. The standards require lenders to consider, among other factors, the borrower's current income, current employment status, credit history, monthly payment for mortgage loans, monthly payment for other loan obligations, and the borrower's total debt-to-income ratio. Further, the underwriting standards prohibit loans with excessive points and fees, interest-only or negative-amortization features (subject to limited exceptions), or terms greater than 30 years.

The final rule provides for a safe harbor from certain liability for QMs, which could incent lenders, including our members, to limit their mortgage lending to QMs or otherwise reduce their origination of mortgage loans that are not QMs. This could reduce the overall level of members’ mortgage loan lending and, in turn, reduce demand for our advances. In January 2013, the CFPB also issued a proposal that would generally allow first lien balloon mortgage loans made by small creditors (generally those with assets under $2 billion) in rural or underserved areas, and retained in portfolio for at least three years, to be treated as QM mortgages. However, we believe that many of the balloon mortgage loans made by our CFI members may not be made in areas that fit the narrow criteria for “rural or underserved areas.” If such balloon mortgages are not treated as QM mortgages under final CFPB regulations, this is likely to reduce mortgage lending by our CFI members and lead to increased concentration in the mortgage market. Additionally, the value and marketability of mortgage loans that are not QMs, including those pledged as collateral to secure member advances, may be adversely affected. Comments were due February 25, 2013.

HARP, HAMP and Other Foreclosure Prevention Efforts. In 2012, the Finance Agency, Fannie Mae, and Freddie Mac announced a series of changes that were intended to assist more eligible borrowers who can benefit from refinancing their home mortgages. The changes include lowering or eliminating certain risk-based fees, removing the current 125 percent LTV ceiling on fixed rate mortgages that are purchased by Fannie Mae and Freddie Mac, waiving certain representations and warranties, eliminating the need for a new property appraisal and extending the end date for the program until December 31, 2013 for loans originally sold to Fannie Mae and Freddie Mac on or before May 31, 2009.

Other federal agencies have also implemented other programs during the past few years intended to prevent foreclosure. These programs focus on lowering a home owner's monthly payments through mortgage modifications or refinancings, providing temporary reductions or suspensions of mortgage payments, and helping homeowners transition to more affordable housing. Other proposals such as expansive principal writedowns or principal forgiveness (including new short-sale/deed in lieu of foreclosure programs recently discussed), or converting delinquent borrowers into renters and conveying the properties to investors, have gained some popularity as well. If the Finance Agency requires us to offer a similar refinancing option for our investments in mortgage loans, our income from those investments could decline.

Further, settlements announced in 2013 and 2012 with the banking regulators, the federal government and the nation’s largest mortgage servicers and states’ attorneys general are also likely to focus on loan modifications and principal writedowns. In late January, 2013 the Treasury department announced that it is expanding refinancing programs for homeowners whose mortgages are greater than their home value to include mortgages underlying private-label MBS. These programs, proposals and settlements could ultimately impact investments in MBS, including the timing and amount of cash flows we realize from those investments. We monitor these developments and assess the potential impact of relevant developments on investments, including private-label MBS as well as on our securities and loan collateral and on the creditworthiness of any members that could be impacted by these issues. We continue to update models, including the models we use to analyze investments in private-label MBS, based on these types of developments. Additional developments could result in further increases to loss projections from these investments.

Additionally, these developments could result in a significant number of prepayments on mortgage loans underlying investments in Agency MBS. If that should occur, these investments would be paid off in advance of original expectations subjecting us to resulting premium acceleration and reinvestment risk.

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Where to Find Additional Information

We file our annual, quarterly and current reports and other information with the SEC. You may read and copy such material at the public reference facilities maintained by the SEC at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-732-0330 for more information on the public reference room. You can also find our SEC filings at the SEC’s website at www.sec.gov. Additionally, on our website at www.fhlbtopeka.com, you can find a link to the SEC’s website which can be used to access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (Exchange Act), as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Item 1A: Risk Factors

Our business has been and may continue to be adversely impacted by recently enacted legislation and other ongoing actions by the U. S. government in response to disruptions in the financial markets. Disruptions in the financial markets since 2008 have significantly impacted the financial services industry, our members and us. In response to the economic downturn and the recession that ended in 2010, the U.S. government established certain governmental programs that have and may continue to adversely impact our access to and cost of funds and our competitive position for providing advances. These and future governmental programs could create increased funding costs for consolidated obligations and decreased borrowing activity from our members that could have a material adverse impact on our financial condition and results of operations. See Item 1 – “Business – Legislation and Regulatory Developments” for further discussion of government programs and initiatives.

These initiatives or proposed initiatives have at various times adversely impacted our competitive position with respect to accessing financing as well as the rate that we pay for borrowed funds. For example, the U.S. government’s financial backing of Fannie Mae and Freddie Mac has resulted in the debt securities of Fannie Mae and Freddie Mac being marginally more attractive to investors at various times than the debt securities of the FHLBanks.

On July 21, 2010, the President signed into law the Dodd-Frank Act. The Dodd-Frank Act, among other things: (1) creates an inter-agency oversight council that will identify and regulate systemically important financial institutions; (2) regulates the over-the-counter derivatives market; and (3) establishes new requirements, including a risk-retention requirement, for MBS. Our business operations, funding costs, rights, obligations, and/or the manner in which we carry out our housing-finance mission may be affected by the Dodd-Frank Act.

The Dodd-Frank Act may also subject the FHLBanks to heightened prudential standards established by the Federal Reserve Board if the FHLBanks are identified as being systemically important financial institutions. These standards may include risk-based capital requirements, liquidity requirements, risk management and a resolution plan. Other standards could encompass such matters as a requirement to issue contingent capital instruments, additional public disclosures, and limits on short-term debt. The Dodd-Frank Act also requires systemically important financial institutions to report to the Federal Reserve on the nature and extent of their credit exposures to other significant companies and undergo semi-annual stress tests and may subject us to higher capital requirements. Oversight by the Federal Reserve Board may result in an increase in our cost of doing business due to compliance with new regulatory requirements and may result in FHLBank being assessed for the costs of additional regulatory oversight.

Finally, the Dodd-Frank Act requires federal regulatory agencies to establish regulations to implement the legislation. For example, regulations on the over-the-counter derivatives market that may be issued under the Dodd-Frank Act could materially affect an FHLBank’s ability to hedge its interest rate risk exposure from advances and mortgage loan purchases, achieve the FHLBank’s risk management objectives, and act as an intermediary between its members and counterparties. Recent regulatory actions taken by the CFTC may subject us to increased regulatory requirements which have the potential of making derivative transactions more costly and less attractive as risk management tools. We may be subject to initial and variation margin requirements. Such regulatory actions also have the potential to impact the costs of certain transactions between us and our members.

Our primary regulator, the Finance Agency, also continues to issue proposed and final regulatory requirements as a result of the Recovery Act, the Dodd-Frank Act and other mandates.

We cannot predict the effect of any new regulations on our operations. Changes in regulatory requirements could result in, among other things, an increase in our cost of funding or overall cost of doing business, or a decrease in the size, scope or nature of our lending or investments, which could negatively affect our financial condition and results of operations.

The U.S. Congress is also considering broad legislation for reform of GSEs as a result of the disruptions in the financial and housing markets and the conservatorships of Fannie Mae and Freddie Mac. A report released by the U.S. Treasury Department and HUD on February 11, 2011 outlines possible GSE reforms, including potential reforms to the business models of Fannie Mae, Freddie Mac and the FHLBanks. We do not know how or to what extent GSE reform legislation will impact the business or operations of FHLBank or the FHLBank System.

To the extent that these initiatives, proposed initiatives and other actions by the U.S. government in response to the financial crisis cause a significant decrease in the aggregate amount of advances or increase our operating costs, our financial condition and results of operations may be adversely affected. See Item 1 – “Business – Competition” for further discussion of the reduction in member borrowings as a result of competition arising from actions of the U.S. government. See Item 1 – “Legislative and Regulatory Developments” for more information on potential future legislation regarding GSE reform and other regulatory activity affecting FHLBank.

We are subject to a complex body of laws and regulations that could change in a manner detrimental to our operations. The FHLBanks are GSEs organized under the authority of the Bank Act, and, as such, are governed by federal laws and regulations adopted and applied by the Finance Agency. In addition, Congress may amend the Bank Act or pass other legislation that significantly affects the rights, obligations and permissible activities of the FHLBanks and the manner in which the FHLBanks carry out their housing-finance and liquidity missions and business operations. FHLBank is, or may also become, subject to regulations promulgated by the SEC, CFTC, Federal Reserve Board, or other regulatory agencies.

We cannot predict whether new regulations will be promulgated by the Finance Agency or other regulatory agencies, or whether Congress will enact new legislation, and we cannot predict the effect of any new regulations or legislation on our operations. Changes in regulatory or statutory requirements could result in, among other things, an increase in our cost of funding and the cost of operating our business, a change in our permissible business activities, or a decrease in the size, scope or nature of our membership or our lending, investment or MPF Program activities, which could negatively affect our financial condition and results of operations.

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We may become liable for all or a portion of the consolidated obligations of one or more of the other FHLBanks. We are jointly and severally liable with the other FHLBanks for all consolidated obligations issued on behalf of all 12 FHLBanks through the Office of Finance. We cannot pay any dividends to members or redeem or repurchase any shares of our capital stock unless the principal and interest due on all our consolidated obligations have been paid in full. If another FHLBank were to default on its obligation to pay principal or interest on any consolidated obligation, the Finance Agency may allocate the outstanding liability among one or more of the remaining FHLBanks on a pro rata basis or on any other basis the Finance Agency may determine. As a result, our ability to pay dividends to our members or to redeem or repurchase shares of our capital stock could be affected not only by our own financial condition, but also by the financial condition of one or more of the other FHLBanks. However, no FHLBank has ever defaulted on its debt obligations since the FHLBank System was established in 1932.

We share a regulator with Fannie Mae and Freddie Mac. The Finance Agency currently serves as the federal regulator of the FHLBanks and the Office of Finance, Fannie Mae and Freddie Mac. Because the business models of Fannie Mae and Freddie Mac are significantly different from that of the FHLBanks, there is a risk that actions by the Finance Agency toward Fannie Mae and Freddie Mac may have an unfavorable impact on the FHLBanks’ operations and/or financial condition.

There is a risk that our funding costs and access to funds could be adversely affected by changes in investors’ perception of the systemic risks associated with Fannie Mae and Freddie Mac. In addition, the special status of Fannie Mae and Freddie Mac debt securities could result in higher relative funding costs on FHLBank debt. As a result of the foregoing, we may have to pay a higher rate of interest on consolidated obligations to make them attractive to investors relative to Fannie Mae and Freddie Mac debt securities. If we maintain our existing pricing on advances, the resulting increase in the cost of issuing consolidated obligations could cause our advances to be less profitable and reduce our net interest spreads (the difference between the interest rate received on advances and the interest rate paid on consolidated obligations). If we change the pricing of our advances in response to this potential decrease in net interest spreads, the advances may no longer be as attractive to our members, and any outstanding advance balances may decrease. In either case, the increased cost of issuing consolidated obligations could negatively affect our financial condition and results of operations.

Our funding depends upon our ability to access the capital markets. Our primary source of funds is the sale of consolidated obligations in the capital markets, including the short-term discount note market. Our ability to obtain funds through the sale of consolidated obligations depends in part on prevailing conditions in the capital markets (including investor demand) at the time. At times during the economic downturn and recession that ended in 2010, our cost of issuing term debt increased significantly relative to U.S. Treasury obligations and LIBOR and resulted in us becoming more reliant on the issuance of consolidated obligation discount notes, with maturities of one year or less. Had there also been any significant disruption in the short-term debt markets during that period, it could have had a serious effect on our business and the business of the other FHLBanks. If such a significant market disruption in the short-term debt markets had occurred for an extended time, we might not have been able to obtain short-term funding on acceptable terms and the high cost of longer-term liabilities would likely have caused us to increase advance rates, which could have adversely affected demand for advances and, in turn, our results of operations. Alternatively in such a scenario, continuing to fund longer-term variable rate assets with very short-term liabilities could have adversely impacted our results of operations if the cost of those short-term liabilities had risen to levels above the yields on the long-term variable rate assets being funded. Accordingly, we cannot make any assurance that we will be able to obtain funding on terms acceptable to us in the future, if we are able to obtain funding at all in the case of another severe financial and economic disruption. If we cannot access funding when needed, our ability to support and continue our operations would be adversely affected, negatively affecting our financial condition and results of operations.

Changes in interest rates could significantly affect our earnings. Changes in interest rates that are detrimental to our investment position could negatively affect our financial condition and results of operations. Like many financial institutions, we realize income primarily from earnings on our invested capital as well as the spread between interest earned on our outstanding advances, mortgage loans and investments and interest paid on our borrowings and other liabilities. Although we use various methods and procedures to monitor and manage our exposures to risk due to changes in interest rates, we may experience instances when our interest-bearing liabilities will be more sensitive to changes in interest rates than our interest-earning assets, or vice versa. These impacts could be exacerbated by prepayment and extension risk, which is the risk that mortgage-related assets will be refinanced in low interest-rate environments or will remain outstanding at below-market yields when interest rates increase.

Changes in our credit ratings may adversely affect our business operations. We are currently rated Aaa with a negative outlook by Moody’s and AA+ with a negative outlook by S&P. Revisions to or the withdrawal of our credit ratings could adversely affect us in a number of ways. It could require the posting of additional collateral for derivatives transactions and might influence counterparties to limit the types of transactions they would be willing to enter into with us or cause counterparties to cease doing business with us. We have issued letters of credit to support deposits of public unit funds with our members. In some circumstances, loss of our current rating could result in our letters of credit no longer being acceptable to collateralize public unit deposits or other transactions. We have also executed various standby bond purchase agreements with two in-district state HFAs and one out-of-district HFA in which we provide a liquidity facility for bonds issued by the HFAs by agreeing to purchase the bonds in the event they are tendered and cannot be remarketed in accordance with specified terms and conditions. If our current short-term ratings are reduced, suspended or withdrawn, the issuers will have the right to terminate these standby bond purchase agreements, resulting in the loss of future fees that would be payable to us under these agreements.

Changes in the credit standing of the U.S. Government or other FHLBanks, including the credit ratings assigned to the U.S. Government or those FHLBanks, could adversely affect us. Pursuant to criteria used by S&P and Moody’s, the FHLBank System’s debt is linked closely to the U.S. sovereign rating because of the FHLBanks’ status as GSEs and the public perception that the FHLBank System would be likely to receive U.S. government support in the event of a crisis. The U.S. government’s fiscal challenges, including the debt ceiling, sequestration and budgeting could impact the credit standing or credit rating of the U.S. government, which could in turn result in a revision of the rating assigned to us or the consolidated obligations of the FHLBank System.

The FHLBanks issue consolidated obligations that are the joint and several liability of all 12 FHLBanks. Significant developments affecting the credit standing of one or more of the other 11 FHLBanks, including revisions in the credit ratings of one or more of the other FHLBanks, could adversely affect the cost of consolidated obligations. An increase in the cost of consolidated obligations would affect our cost of funds and negatively affect our financial condition. The consolidated obligations of the FHLBanks are rated Aaa/P-1 by Moody’s and AA+/A-1+ by S&P. All 12 of the FHLBanks are rated Aaa with a negative outlook by Moody’s while 11 of the FHLBanks are rated AA+ with a negative outlook and one of the FHLBanks is rated AA with a negative outlook by S&P. Changes in the credit standing or credit ratings of one or more of the other FHLBanks could result in a revision or withdrawal of the ratings of the consolidated obligations by the rating agencies at any time, which may negatively affect our cost of funds and our ability to issue consolidated obligations for our benefit.

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We may not be able to meet our obligations as they come due or meet the credit and liquidity needs of our members in a timely and cost-effective manner. We seek to be in a position to meet our members’ credit and liquidity needs and to pay our obligations without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs. In addition, in accordance with the Finance Agency’s requirement to maintain five calendar days of contingent liquidity, we maintain a contingency liquidity plan designed to protect against temporary disruptions in access to the FHLBank debt markets in response to a rise in capital markets volatility. Our efforts to manage our liquidity position, including carrying out our contingency liquidity plan, may not enable us to meet our obligations and the credit and liquidity needs of our members, which could have an adverse effect on our net interest income, and thereby, our financial condition and results of operations.

We face competition for loan demand, purchases of mortgage loans and access to funding which could adversely affect our earnings. Our primary business is making advances to our members. We compete with other suppliers of wholesale funding, both secured and unsecured, including U.S. government programs, investment banks, commercial banks and, in certain circumstances, other FHLBanks. Our members have access to alternative funding sources, which may offer more favorable terms on their loans than we offer on our advances, including more flexible credit or collateral standards. In addition, many of our competitors are not subject to the same regulations that are applicable to us. This enables those competitors to offer products and terms that we are not able to offer.

The availability of alternative funding sources to our members, such as the ability to sell covered bonds, may significantly decrease the demand for our advances. Any change we might make in pricing our advances, in order to compete more effectively with these competitive funding sources, may decrease our profitability on advances. A decrease in the demand for our advances, or a decrease in our profitability on advances, would negatively affect our financial condition and results of operations.

Likewise, our MPF business is subject to competition. The most direct competition for purchases of mortgage loans comes from other buyers of conventional, conforming, fixed rate mortgage loans, such as Fannie Mae and Freddie Mac. Increased competition can result in the acquisition of a smaller market share of the mortgage loans available for purchase and, therefore, lower income from this business activity.

We also compete in the capital markets with Fannie Mae, Freddie Mac, other GSEs and U.S. government programs, as well as corporate, sovereign and supranational entities for funds raised through the issuance of consolidated obligations and other debt instruments. We face increased competition in the Agency/GSE and other related debt markets as a result of government debt programs, including those explicitly guaranteed by the U.S. and foreign governments. Our ability to obtain funds through the issuance of debt depends in part on prevailing market conditions in the capital markets (including investor demand), such as effects on the reduction in liquidity in financial markets, which are beyond our control. Accordingly, we may not be able to obtain funding on terms that are acceptable to us. Increases in the supply of competing debt products in the capital markets may, in the absence of increases in demand, result in higher debt costs to us or lesser amounts of debt issued at the same cost than otherwise would be the case. Although our supply of funds through issuance of consolidated obligations has always kept pace with our funding needs, we cannot assure that this will continue in the future, especially in the case of financial market disruptions when the demand for advances by our members typically increases.

The yield on or value of our MBS/ABS investments may be adversely affected by increased delinquency rates and credit losses related to mortgage loans that back our MBS/ABS investments. Delinquencies and losses with respect to residential mortgage loans have generally remained high, particularly in the nonprime sector, including subprime and alternative documentation loans. Although residential property values started to increase or at least stabilize in mid-2012, residential property values in many states declined over the previous five years after extended periods during which those values appreciated. If delinquency and/or default rates on mortgages continue to increase, and/or there is a rapid decline in residential real estate values, we could experience reduced yields or losses on our MBS/ABS investments. Furthermore, market illiquidity has, from time to time, increased the amount of management judgment required to value private-label MBS/ABS and certain other securities. Subsequent valuations may result in significant changes in the value of private-label MBS/ABS and other investment securities. If we decide to sell securities due to credit deterioration, the price we may ultimately realize will depend on the demand and liquidity in the market at that time and may be materially lower than the fair value reflected in our financial statements.

Loan modification and liquidation programs could have an adverse impact on the value of our MBS investments. As mortgage loans continue to experience increased delinquencies and loss severities, mortgage servicers continue their efforts to modify these loans in order to mitigate losses. Such loan modifications increasingly may include reductions in interest rates and/or principal on these loans. Losses from such loan modifications may be allocated to investors in MBS backed by these loans in the form of lower interest payments and/or reductions in future principal amounts received. In addition, efforts by the U.S. government to address the downturn in the housing market could result in reductions in interest rates and/or principal and may also result in additional foreclosures that could result in an adverse impact on the value of our MBS investments.

Many servicers are contractually required to advance principal and interest payments on delinquent loans backing MBS investments, regardless of whether the servicer has received payment from the borrower, provided that the servicer believes it will be able to recoup the advanced funds from the underlying property securing the mortgage loan. Once the related property is liquidated, the servicer is entitled to reimbursement for these advances and other expenses incurred while the loan was delinquent. Such reimbursements, combined with decreasing property values in many areas, may result in higher losses than we may have expected or experienced to date being allocated to our MBS investments backed by such loans.

Securities or mortgage loans pledged as collateral by our members could be adversely affected by the devaluation or inability to liquidate the collateral in the event of a default by the member. Although we seek to obtain sufficient collateral on our credit obligations to protect ourselves from credit losses, changes in market conditions or other factors may cause the collateral to deteriorate in value, which could lead to a credit loss in the event of a default by a member and adversely affect our financial condition and results of operations. A reduction in liquidity in the financial markets or otherwise could have the same effect.

Counterparty credit risk could adversely affect us. We assume unsecured credit risk when entering into money market transactions and financial derivatives transactions with counterparties. The insolvency or other inability of a significant counterparty to perform on its obligations under such transactions or other agreements could have an adverse effect on our financial condition and results of operations.

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Defaults by one or more of our institutional counterparties on its obligations to us could adversely affect our results of operations or financial condition. We have a high concentration of credit risk exposure to financial institutions as counterparties, which are currently perceived to present a higher degree of risk than they were perceived to present in the past due to the continued reduced liquidity in financial markets for certain financial transactions, difficulties in the current housing market and the deterioration in the financial performance and condition of financial institutions in general, including many European and domestic financial institutions. Our primary exposures to institutional counterparty risk are with: (1) obligations of mortgage servicers that service the loans we have as collateral on our credit obligations; (2) third-party providers of credit enhancements on the MBS/ABS that we hold in our investment portfolio, including mortgage insurers, bond insurers and financial guarantors; (3) third-party providers of private and supplemental mortgage insurance for mortgage loans purchased under the MPF Program; (4) derivative counterparties; and (5) unsecured money market and Federal funds investment transactions. The liquidity and financial condition of some of our counterparties may have been adversely affected by the continued reduced liquidity in the financial markets for certain financial transactions and difficulties in the housing market. A default by a counterparty with significant obligations to us could adversely affect our ability to conduct operations efficiently and at cost-effective rates, which in turn could adversely affect our results of operations or financial condition.

Default by a derivatives clearinghouse on its obligations could adversely affect our results of operations or financial condition. The Dodd-Frank Act and implementing CFTC regulations will require all clearable derivatives transactions to be cleared through a derivatives clearinghouse. As a result of such statutes and regulations, we will be required to centralize our risk with the derivatives clearinghouse as opposed to the pre-Dodd-Frank Act methods of entering into derivatives transactions which allowed us to distribute our risk among various counterparties. The default by a derivatives clearinghouse could adversely affect our financial condition in the event we are owed money by the derivatives clearinghouse and jeopardizing the effectiveness of derivatives hedging transactions, and could adversely affect our operations as we may be unable to enter into certain derivatives transactions or unable to enter into such transactions at cost-effective rates.

We rely upon derivatives to lower our cost of funds and reduce our interest-rate, option and prepayment risk, and we may not be able to enter into effective derivative instruments on acceptable terms. We use derivatives to: (1) obtain funding at more favorable rates; and (2) reduce our interest rate risk, option risk and mortgage prepayment risk. Management determines the nature and quantity of hedging transactions using derivatives based on various factors, including market conditions and the expected volume and terms of advances or other transactions. As a result, our effective use of derivatives depends upon management’s ability to determine the appropriate hedging positions in light of: (1) our assets and liabilities; and (2) prevailing and anticipated market conditions. In addition, the effectiveness of our hedging strategies depends upon our ability to enter into derivatives with acceptable counterparties, on terms desirable to us and in the quantities necessary to hedge our corresponding obligations, interest rate risk or other risks. The cost of entering into derivative instruments has increased as a result of: (1) consolidations, mergers and bankruptcy or insolvency of financial institutions, which have led to fewer counterparties, resulting in less liquidity in the derivatives market; and (2) increased uncertainty related to the potential changes in legislation and regulations regarding over-the-counter derivatives including increased margin and capital requirements, increased regulatory costs and transaction fees associated with clearing and custodial arrangements. If we are unable to manage our hedging positions properly, or are unable to enter into derivative hedging instruments on desirable terms, we may incur higher funding costs, be required to limit certain advance product offerings and be unable to effectively manage our interest rate risk and other risks, which could negatively affect our financial condition and results of operations.

We may not be able to pay dividends at rates consistent with past practices. Our Board of Directors may only declare dividends on our capital stock, payable to members, from our unrestricted retained earnings and current income. Our ability to pay dividends also is subject to statutory and regulatory requirements, including meeting all regulatory capital requirements. For example, the potential promulgation of regulations by the Finance Agency that would require higher levels of retained earnings or mandated revisions to our retained earnings policy could lead to higher levels of retained earnings, and thus, lower amounts of unrestricted retained earnings available to be paid out to our members as dividends. Failure to meet any of our regulatory capital requirements would prevent us from paying any dividend.

Further, events such as changes in our market-risk profile, credit quality of assets held and increased volatility of net income caused by the application of certain GAAP may affect the adequacy of our retained earnings and may require us to increase our threshold level of retained earnings and correspondingly reduce our dividends from historical dividend payout ratios in order to achieve and maintain the threshold amounts of retained earnings under our retained earnings policy. Additionally, Finance Agency regulations on capital classifications could restrict our ability to pay a dividend.

Our ability to declare dividends in the form of capital stock may be restricted by Finance Agency rules regarding excess stock. Pursuant to Finance Agency regulations, any FHLBank with excess stock greater than one percent of its total assets will be prohibited from further increasing member excess stock by paying stock dividends or otherwise issuing new excess stock. If our total assets are significantly decreased, our ability to issue dividends in stock may be impaired which could, in turn, adversely affect demand for our advances.

Lack of a public market and restrictions on transferring our stock could result in an illiquid investment for the holder. Under the GLB Act, Finance Agency regulations and our capital plan, our Class A Common Stock may be redeemed upon the expiration of a six-month redemption period and our Class B Common Stock after a five-year redemption period following our receipt of a redemption request. Only capital stock in excess of a member’s minimum investment requirement, capital stock held by a member that has submitted a notice to withdraw from membership or capital stock held by a member whose membership has been terminated may be redeemed at the end of the redemption period. Further, we may elect to repurchase excess capital stock of a member at any time at our sole discretion.

We cannot guarantee, however, that we will be able to redeem capital stock even at the end of the redemption periods. The redemption or repurchase of our capital stock is prohibited by Finance Agency regulations and our capital plan if the redemption or repurchase of the capital stock would cause us to fail to meet our minimum regulatory capital requirements. Likewise, under such regulations and the terms of our capital plan, we could not honor a member’s capital stock redemption request if the redemption would cause the member to fail to maintain its minimum capital stock investment requirement. Moreover, since our capital stock may only be owned by our members (or, under certain circumstances, former members and certain successor institutions), and our capital plan requires our approval before a member may transfer any of its capital stock to another member, we cannot assure that a member would be allowed to sell or transfer any excess capital stock to another member at any point in time.

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We may also suspend the redemption of capital stock if we reasonably believe that the redemption would prevent us from maintaining adequate capital against a potential risk, or would otherwise prevent us from operating in a safe and sound manner. In addition, approval from the Finance Agency for redemptions or repurchases is required if the Finance Agency or our Board of Directors were to determine that we have incurred, or are likely to incur, losses that result in, or are likely to result in, charges against our capital. Under such circumstances, we cannot assure that the Finance Agency would grant such approval or, if it did, upon what terms it might do so. We may also be prohibited from repurchasing or redeeming our capital stock if the principal and interest due on any consolidated obligations that we issued through the Office of Finance has not been paid in full or if we become unable to comply with regulatory liquidity requirements or satisfy our current obligations.

Accordingly, there are a variety of circumstances that would preclude us from redeeming or repurchasing our capital stock that is held by a member. Since there is no public market for our capital stock and transfers require our approval, we cannot assure that a member’s purchase of our capital stock would not effectively become an illiquid investment.

Changes in the application of relevant accounting standards, especially those related to the accounting for derivatives, could materially increase earnings volatility. We are subject to earnings volatility because of our use of derivatives and the application of GAAP for those derivatives. This earnings volatility is caused primarily by the changes in the fair values of derivatives that do not qualify for hedge accounting (referred to as economic hedges where the change in fair value of the derivative is not offset by any change in fair value on a hedged item) and to a much lesser degree by hedge ineffectiveness, which is the difference in the amounts recognized in our earnings for the changes in fair value of a derivative and the related hedged item. If we did not apply hedge accounting, the result could be an increase in volatility of our earnings from period to period. Such increases in earnings volatility could affect our ability to pay dividends, our ability to meet our retained earnings threshold, and our members’ willingness to hold the stock necessary for membership and/or activity with us, such as advance and mortgage loan activities.

We rely heavily upon information systems and other technology. We rely heavily upon information systems and other technology to conduct and manage our business. If key technology platforms become obsolete, or if we experience disruptions, including difficulties in our ability to process transactions, our revenue or results of operations could be materially adversely affected. To the extent that we experience a failure or interruption in any of these systems or other technology, we may be unable to conduct and manage our business effectively, including, without limitation, our funding, hedging and advance activities. Additionally, a failure in or breach of our operational or security systems or infrastructure, or those of third parties with which we do business, including as a result of cyber attacks, could disrupt our business and result in the disclosure or misuse of confidential or proprietary information. While we have implemented disaster recovery, business continuity and legacy software reduction plans, we can make no assurance that these plans will be able to prevent, timely and adequately address, or mitigate the negative effects of any such failure or interruption. A failure to maintain current technology, systems and facilities or an operational failure or interruption could significantly harm our customer relations, risk management and profitability, which could negatively affect our financial condition and results of operations

We rely on financial models to manage our market and credit risk, to make business decisions and for financial accounting and reporting purposes. The impact of financial models and the underlying assumptions used to value financial instruments may have an adverse impact on our financial condition and results of operations. We make significant use of financial models for managing risk. For example, we use models to measure and monitor exposures to interest rate and other market risks, including prepayment risk, as well as credit risk. We also use models in determining the fair value of financial instruments for which independent price quotations are not available or reliable. The degree of management judgment in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments that are actively traded and have quoted market prices or parameters readily available, there is little to no subjectivity in determining fair value. If market quotes are not available, fair values are based on discounted cash flows using market estimates of interest rates and volatility or on dealer prices or prices of similar instruments. Pricing models and their underlying assumptions are based on management's best estimates for discount rates, prepayments, market volatility, and other factors. These assumptions may have a significant effect on the reported fair values of assets and liabilities, including derivatives, the related income and expense, and the expected future behavior of assets and liabilities. While the models we use to value instruments and measure risk exposures are subject to regular validation by independent parties, rapid changes in market conditions could impact the value of our instruments. The use of different models and assumptions, as well as changes in market conditions, could impact our financial condition and results of operations.

The information provided by these models is also used in making business decisions relating to strategies, initiatives, transactions and products, and in financial statement reporting. We have adopted policies, procedures, and controls to monitor and manage assumptions used in these models. However, models are inherently imperfect predictors of actual results because they are based on assumptions about future performance. Changes in any models or in any of the assumptions, judgments or estimates used in the models may cause the results generated by the model to be materially different. If the results are not reliable due to inaccurate assumptions, we could make poor business decisions, including asset and liability management, or other decisions, which could result in an adverse financial impact. Furthermore, any strategies that we employ to attempt to manage the risks associated with the use of models may not be effective.

We could be negatively affected by local and national business and economic conditions, as well as other events that are outside of our control. Local and national economic conditions could be less favorable than expected or could have a more direct and pronounced effect on our business than expected. For example, conditions affecting interest rates, money supply and capital markets, including those stemming from policies of governmental entities such as the Federal Reserve Board or the U.S. Treasury, have a significant impact on our operations. Changes in these conditions could adversely affect our ability to increase and maintain the quality of our interest-earning assets and could increase the costs of our interest-bearing liabilities. For example, a prolonged or worsening economic downturn or the continued deterioration of property values could cause higher delinquency and default rates on our outstanding mortgage loans and even cause a loss on our advances, although we have never incurred a credit loss on an advance.

Furthermore, natural disasters, acts of terrorism and other events outside of our control, especially if they occur in our four-state district, could negatively affect us, including damaging our members’ businesses, our real property and the collateral for our advances and mortgage loans, and in other ways. For example, if there is a natural disaster or other event, such as the terrorist attacks of September 11, 2001, that limits or prevents the FHLBank System from accessing the capital markets for a period of time, our business would be significantly affected, including our ability to provide advances to our members.

We could experience losses on our MBS/CMO and HFA investments as a result of losses in the home mortgage loan market or the failure of a third-party insurer. Increased delinquency rates and credit losses related to mortgage loans pooled into MBS/CMO and HFA securities, which are insured by one of the monoline mortgage insurance companies, could adversely affect the yield on or value of our MBS/CMO and HFA investments. The magnitude of the losses in the home mortgage loan market could potentially overwhelm one or more of the monoline mortgage insurance companies resulting in such company’s failure to perform. If the collateral losses exceed the coverage ability of the insurance company, the MBS/CMO or HFA bondholders could experience losses of principal.

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A third-party insurer (obligated under PMI or SMI) of portions of our MPF Program loans could also fail to perform as expected. Should a PMI third-party insurer fail to perform, it would increase our credit risk exposure because our FLA is the next layer to absorb credit losses on mortgage loan pools. Likewise, if an SMI third-party insurer fails to perform, it would increase our credit risk exposure because it would reduce the participating member’s CE obligation loss layer since SMI is purchased by PFIs to cover all or a portion of their CE obligation exposure for mortgage pools.

Reliance on the FHLBank of Chicago as MPF Provider could have a negative impact on our business if the FHLBank of Chicago were to default on its contractual obligations owed to us.As part of our business, we participate in the MPF Program with FHLBank of Chicago. In its role as MPF Provider, FHLBank of Chicago provides the infrastructure and operational support for the MPF Program and is responsible for publishing and maintaining the MPF Guides, which detail the requirements PFIs must follow in originating or selling and servicing MPF mortgage loans. If FHLBank of Chicago changes its MPF Provider role, ceases to operate the MPF Program, or experiences a failure or interruption in its information systems and other technology, our mortgage products could be adversely affected, and we could experience a related decrease in our net interest margin and profitability. In the same way, we could be adversely affected if any of FHLBank of Chicago's third-party vendors engaged in the operation of the MPF Program were to experience operational or technical difficulties.

The government support for the home mortgage market could have an adverse impact on our mortgage loans held for portfolio. Government policy and actions by the U.S. Treasury, the Federal Reserve, Fannie Mae, Freddie Mac, and the FDIC have been focused on lowering home mortgage rates. These actions may increase the rate of mortgage prepayments which may adversely affect the earnings on our mortgage investments.

A high proportion of advances and capital is concentrated with a few members, and a loss of, or change in business activities with, such institutions could adversely affect us. We have a high concentration of advances (see Table 23) and capital with a few institutions. A reduction in advances by such institutions, or the loss of membership by such institutions, whether through merger, consolidation, withdrawal, or other action, may result in a reduction in our total assets and a possible reduction of capital as a result of the repurchase or redemption of capital stock. The reduction in assets and capital may also reduce our net income.

Merger or consolidation of our members may result in a loss of business to us. The financial services industry periodically experiences consolidation. If future consolidation occurs within our district, it may reduce the number of current and potential members in our district, resulting in a loss of business to us and a potential reduction in our profitability. If our advances are concentrated in a smaller number of members, our risk of loss resulting from a single event (such as the loss of a member’s business due to the member’s acquisition by a nonmember) would become proportionately greater.

Member failures, out-of-district consolidations and changes in member business with us may adversely affect our financial condition and results of operations. Over the last several years, the financial services industry has experienced increasing defaults on, among other things, home mortgage, commercial real estate, and credit card loans, which caused increased regulatory scrutiny and required capital to cover non-performing loans. These factors led to an increase in both the number of financial institution failures and the number of mergers and consolidations. During that time, we experienced member failures, member consolidations and significant changes in the level of advance activity with certain members. If the number of member institution failures and consolidations accelerates, these activities may reduce the number of current and potential members in our district. The resulting loss of business could negatively impact our financial condition and the results of operations, as well as our operations generally.

Further, while member failures may cause us to liquidate pledged collateral if the outstanding advances are not repaid, the failures of the past several years have been resolved either through repayment directly from the FDIC or through the purchase and assumption of the advances by another surviving financial institution. Liquidation of pledged collateral may cause financial statement losses. Additionally, as members become financially distressed, we may, at the request of their regulators, decrease lending limits or, in certain circumstances, cease lending activities to certain members if they do not have adequate eligible collateral to support additional borrowings. If members are unable to obtain sufficient liquidity from us, further deterioration of that member institution may continue. This may negatively impact our reputation and, therefore, negatively impact our financial condition and results of operations.

Our controls and procedures may fail or be circumvented, and risk management policies and procedures may be inadequate. We may fail to identify and manage risks related to a variety of aspects of our business, including without limitation, operational risk, legal and compliance risk, human capital risk, liquidity risk, market risk and credit risk. We have adopted controls, procedures, policies and systems to monitor and manage these risks. Our management cannot provide complete assurance that such controls, procedures, policies and systems are adequate to identify and manage the risks inherent in our business and because our business continues to evolve, we may fail to fully understand the implications of changes in our business, and therefore, we may fail to enhance our risk governance framework to timely or adequately address those changes. Failed or inadequate controls and risk management practices could have an adverse effect on our financial condition, reputation, results of operations, and value to our membership.

Item 1B: Unresolved Staff Comments

Not applicable.

Item 2: Properties

We occupy approximately 62,796 square feet of leased office space at One Security Benefit Place, Suite 100, Topeka, Kansas. We also maintain in Topeka a leased off-site back-up facility with approximately 3,000 square feet. A small office is leased in Oklahoma for member account management personnel.

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Item 3: Legal Proceedings

We are subject to various pending legal proceedings arising in the normal course of business. After consultation with legal counsel, management does not anticipate that the ultimate liability, if any, arising out of these matters will have a material adverse effect on our financial condition or results of operations. Additionally, management does not believe that we are subject to any material pending legal proceedings outside of ordinary litigation incidental to our business.

Item 4: Mine Safety Disclosures

Not applicable.

PART II

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

As a cooperative, members own almost all of our Class A Common Stock and Class B Common Stock with the remainder of the capital stock held by former members that are required to retain capital stock ownership to support outstanding advances executed and mortgage loans sold while they were members. Note, however, that the portion of our capital stock subject to mandatory redemption is treated as a liability and not as capital, including the capital stock of former members. There is no public trading market for our capital stock.

All of our member directors are elected by and from the membership, and we conduct our business in advances and mortgage loan acquisitions almost exclusively with our members. Depending on the class of capital stock, it may be redeemed at par value either six months (Class A Common Stock) or five years (Class B Common Stock) after we receive a written request by a member, subject to regulatory limits and to the satisfaction of any ongoing stock investment requirements applying to the member under our capital plan. We may repurchase shares held by members in excess of the members’ required stock holdings at our discretion at any time at par value. Par value of all common stock is $100 per share. As of March 13, 2013, we had 826 stockholders of record and 5,188,471 shares of Class A Common Stock and 8,394,691 shares of Class B Common Stock outstanding, including 47,875 shares of Class A Common Stock and 3,000 shares of Class B Common Stock subject to mandatory redemption by members or former members. We are not currently required to register either class of our stock under the Securities Act of 1933 (as amended). The Recovery Act amended the Exchange Act to require the registration of a class of common stock of each FHLBank under Section 12(g) and for each FHLBank to maintain such registration and to be treated as an “issuer” under the Exchange Act, regardless of the number of members holding such a class of stock at any given time. Pursuant to a Finance Agency regulation, we were required to file a registration statement in order to voluntarily register one of our classes of stock pursuant to section 12(g)(1) of the Exchange Act. Our registration was effective July 14, 2006.

We paid quarterly stock dividends during the years ended December 31, 2012 and 2011, which excludes dividends treated as interest expense for mandatorily redeemable shares. Dividends paid on capital stock are outlined in Table 7 (in thousands):

Table 7

	Class A Common Stock									Class B Common Stock
	Percent			Dividends Paid in Cash1		Dividends Paid in Class B Common Stock		Total Dividends Paid2		Percent			Dividends Paid in Cash1		Dividends Paid in Class B Common Stock		Total Dividends Paid2
12/31/2012		0.25	%	$	40	$	261	$	301		3.50	%	$	30	$	7,694	$	7,724
09/30/2012		0.25			42		251		293		3.50			31		7,564		7,595
06/30/2012		0.25			43		300		343		3.50			29		7,113		7,142
03/31/2012		0.25			41		314		355		3.50			29		6,708		6,737
12/31/2011		0.25			41		313		354		3.50			28		6,688		6,716
09/30/2011		0.25			46		333		379		3.50			41		6,945		6,986
06/30/2011		0.40			41		567		608		3.00			27		5,885		5,912
03/31/2011		0.40			45		558		603		3.00			93		5,968		6,061

1	The cash dividends listed are cash dividends paid for partial shares and dividends paid to former members. Stock dividends are paid in whole shares.
2	Excludes dividends paid on mandatorily redeemable capital stock classified as interest expense.

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Management anticipates that we will continue to pay quarterly dividends in the future, primarily in shares of Class B Common Stock. Dividends may be paid in cash or Class B Common Stock as authorized under our capital plan and approved by our Board of Directors. We believe that dividends paid in the form of stock are advantageous to members because FHLBank stock dividends generally qualify as tax-deferred stock dividends under the Internal Revenue Code (IRC) and are, therefore, not taxable at the time declared and credited to a member. Dividends paid in stock can be utilized by members to support future activity with us or can be redeemed by the member if the amounts represent excess stock, subject to stock redemption request procedures and limitations. Our dividends generally increase as short-term interest rates rise and decrease as short-term interest rates fall. The dividend percent paid has historically been a function of or closely tied to our net income for a dividend period. We have a retained earnings policy that was considered by the Board of Directors when dividends were declared during 2012 and 2011, but the retained earnings threshold calculated in accordance with the policy did not significantly affect the level of dividends declared and paid in any of those periods. See Item 1 – “Business – Capital, Capital Rules and Dividends” for more information regarding our retained earnings policy, and also see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Capital” for a discussion of restrictions on dividend payments in the form of capital stock. We do not expect that our retained earnings policy will significantly affect dividends paid during 2013. We expect that we will continue to be able to make additions to retained earnings while paying Class B Common Stock dividends at or above short-term market interest rates and Class A Common Stock dividends (paid in cash or in Class B Common Stock) at or slightly below short-term market interest rates, on average. While the average Class A Common Stock dividend rate for 2012 was 0.25 percent per annum, well above short-term interest rates such as overnight Federal funds (average of 0.14 percent for 2012), this relationship will not remain at such levels when short-term interest rates begin to rise. There is also a possibility that dividend levels might be reduced in order to meet the threshold level of retained earnings under the policy since the threshold level fluctuates from period to period, because it is a function of the size and composition of our balance sheet and the risks contained therein.

In accordance with Finance Agency regulation, we are limited in our ability to create member excess stock under certain circumstances. Any FHLBank with excess stock greater than one percent of its total assets will be barred from further increasing member excess stock by paying stock dividends or otherwise issuing new excess stock. We anticipate that we will be able to manage our excess capital stock position in order to continue to pay stock dividends, but cannot guarantee that we will always be able to do so in the future.

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Item 6: Selected Financial Data

Table 8

Selected Financial Data (dollar amounts in thousands):

	12/31/2012			12/31/2011			12/31/2010			12/31/2009			12/31/2008
Statement of Condition (as of year end)
Total assets	$	33,818,627		$	33,190,182		$	38,706,067		$	42,631,611		$	58,556,231
Investments1		10,774,411			10,576,537			14,845,941			16,347,941			19,435,809
Advances		16,573,348			17,394,399			19,368,329			22,253,629			35,819,674
Mortgage loans, net2		5,940,517			4,933,332			4,293,431			3,333,784			3,023,805
Deposits		1,181,957			997,371			1,209,952			1,068,757			1,703,531
Consolidated obligation discount notes, net3		8,669,059			10,251,108			13,704,542			11,586,835			26,261,411
Consolidated obligation bonds, net3		21,973,902			19,894,483			21,521,435			27,524,799			27,421,634
Total consolidated obligations, net3		30,642,961			30,145,591			35,225,977			39,111,634			53,683,045
Mandatorily redeemable capital stock		5,665			8,369			19,550			22,437			34,806
Capital stock		1,264,456			1,327,827			1,454,396			1,602,696			2,240,335
Total retained earnings		481,282			401,461			351,754			355,075			156,922
Accumulated other comprehensive income (loss)		(25,257	)		(27,841	)		(22,672	)		(11,861	)		(2,012	)
Total capital		1,720,481			1,701,447			1,783,478			1,945,910			2,395,245
Statement of Income (for the year ended)
Net interest income		219,680			230,926			249,876			259,011			247,287
Provision for credit losses on mortgage loans		2,496			1,058			1,582			1,254			196
Other income (loss)		(42,916	)		(78,328	)		(154,694	)		108,021			(168,312	)
Other expenses		51,696			53,781			47,899			43,586			40,002
Income before assessments		122,572			97,759			45,701			322,192			38,777
Assessments		12,261			20,433			12,153			85,521			10,338
Net income		110,311			77,326			33,548			236,671			28,439
Ratios and Other Financial Data
Dividends paid in cash4		285			362			316			367			345
Dividends paid in stock4		30,205			27,257			36,553			41,500			79,935
Weighted average dividend rate5		2.26	%		1.99	%		2.36	%		2.29	%		3.64	%
Dividend payout ratio6		27.64	%		35.72	%		109.90	%		17.69	%		282.29	%
Return on average equity		6.23	%		4.43	%		1.79	%		11.24	%		1.17	%
Return on average assets		0.32	%		0.21	%		0.08	%		0.48	%		0.05	%
Average equity to average assets		5.13	%		4.73	%		4.46	%		4.31	%		4.15	%
Net interest margin7		0.64	%		0.63	%		0.60	%		0.53	%		0.43	%
Total capital ratio8		5.09	%		5.13	%		4.61	%		4.56	%		4.09	%
Regulatory capital ratio9		5.18	%		5.24	%		4.72	%		4.64	%		4.15	%
Ratio of earnings to fixed charges10		1.45			1.31			1.12			1.56			1.02

1	Includes trading securities, available-for-sale securities, held-to-maturity securities, interest-bearing deposits, securities purchased under agreements to resell and Federal funds sold.
2	Includes mortgage loans held for portfolio and held for sale. The allowance for credit losses on mortgage loans held for portfolio was $5,416,000, $3,473,000, $2,911,000, $1,897,000 and $884,000 as of December 31, 2012, 2011, 2010, 2009 and 2008, respectively.
3	Consolidated obligations are bonds and discount notes that we are primarily liable to repay. See Note 10 to the financial statements for a description of the total consolidated obligations of all 12 FHLBanks for which we are jointly and severally liable under the requirements of the Finance Agency which governs the issuance of debt for the 12 FHLBanks.
4	Dividends reclassified as interest expense on mandatorily redeemable capital stock and not included as GAAP dividends were $41,000, $174,000, $346,000, $504,000 and $609,000 for the years ended December 31, 2012, 2011, 2010, 2009 and 2008, respectively.
5	Dividends paid in cash and stock on both classes of stock as a percentage of average capital stock eligible for dividends.
6	Dividends declared as a percentage of net income.
7	Net interest income as a percentage of average earning assets.
8	GAAP capital stock, which excludes mandatorily redeemable capital stock, plus retained earnings and AOCI as a percentage of total assets.
9	Regulatory capital (i.e., permanent capital and Class A capital stock) as a percentage of total assets.
10	Total earnings divided by fixed charges (interest expense including amortization/accretion of premiums, discounts and capitalized expenses related to indebtedness).

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to assist the reader in understanding our business and assessing our operations both historically and prospectively. This discussion should be read in conjunction with our audited financial statements and related notes presented under Item 8 of this annual report on Form 10-K. Our MD&A includes the following sections:

§   Executive Level Overview – a general description of our business and financial highlights;

§   Financial Market Trends – a discussion of current trends in the financial markets and overall economic environment, including the related impact on our operations;

§   Critical Accounting Policies and Estimates – a discussion of accounting policies that require critical estimates and assumptions;

§   Results of Operations – an analysis of our operating results, including disclosures about the sustainability of our earnings;

§   Financial Condition – an analysis of our financial position;

§   Liquidity and Capital Resources – an analysis of our cash flows and capital position;

§   Risk Management – a discussion of our risk management strategies; and

§   Recently Issued Accounting Standards.

Executive Level Overview

We are a regional wholesale bank that makes advances (loans) to, purchases mortgages from, and provides limited other financial services to our member institutions. We are one of 12 district FHLBanks which, together with the Office of Finance, a joint office of the FHLBanks, make up the FHLBank System. As independent, member-owned cooperatives, the FHLBanks seek to maintain a balance between their public purpose and their ability to provide adequate returns on the capital supplied by their members. The FHLBanks are supervised and regulated by the Finance Agency, an independent agency in the executive branch of the U.S. government. The Finance Agency’s mission with respect to the FHLBanks is to provide effective supervision, regulation and housing mission oversight of the FHLBanks to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market.

We serve eligible financial institutions in Colorado, Kansas, Nebraska and Oklahoma (collectively, the Tenth District of the FHLBank System). Initially, members are required to purchase shares of Class A Common Stock to give them access to advance borrowings or to enable them to sell mortgage loans to us under the MPF Program. Our capital increases when members are required to purchase additional capital stock in the form of Class B Common Stock to support an increase in advance borrowings or when members sell additional mortgage loans to us. At our discretion, we may repurchase excess capital stock if a member’s advances or mortgage loan balances decline. We believe it is important to manage our business and the associated risks so that we can always meet the following objectives: (1) achieve our liquidity, housing finance and community development missions by meeting member credit needs by offering advances, supporting residential mortgage lending through the MPF Program and through other products; (2) repurchase excess capital stock in order to appropriately manage the size of our balance sheet; and (3) pay appropriate dividends.

Net income (loss) for the year ended December 31, 2012 was $110.3 million compared to $77.3 million for the year ended December 31, 2011. The increase was primarily attributable to the following:

§ $11.2 million decrease in net interest income (decrease income);

§ $48.8 million decrease related to net gain (loss) on trading securities (decrease income);

§ $87.3 million increase related to net gain (loss) on derivatives and hedging activities (increase in income);

§   $3.1 million decrease in net other-than-temporary impairment losses on held-to-maturity securities (increase in income);

§   $4.4 million decrease related to net gain (loss) on mortgage loans held for sale (decrease income);

§ $2.1 million decrease in other expenses (increase income); and

§ $8.2 million decrease in assessments (increase income).

The smaller net loss on derivatives and hedging activities for 2012 is primarily the result of a smaller relative decline in interest rates and steepness of the yield curve in 2012 compared to 2011. The market value of our trading securities portfolio decreased in value in 2012 compared to 2011. Net interest income, which does not include market value fluctuations, has primarily declined as a result of a smaller average balance sheet over the periods since net interest margin increased at the same time. Detailed discussion relating to the fluctuations in net gain (loss) on derivatives and hedging activities, net gain (loss) on trading securities and net interest income can be found under this Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.” For additional information relating to OTTI, see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Investments.” For additional information relating to the 2011 net gain (loss) on mortgage loans held for sale, see Note 6 of the Notes to the Financial Statements under Item 8. The decrease in other expenses and the decrease in total assessments, which is related to the satisfaction of our REFCORP obligation in June 2011, are discussed in this Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.”

Total assets increased by less than two percent from December 31, 2011 to December 31, 2012 but had several compositional changes. We experienced a significant increase in the amount of mortgage loans outstanding in 2012. The primary factors impacting the growth in mortgage loans include: (1) the increased number of new and delivering PFIs; (2) the mortgage loan origination volume of current PFIs; (3) refinancing activity; (4) the level of interest rates and the shape of the yield curve; and (5) the relative competitiveness of the MPF Program compared to other purchasers of mortgage loans. Advance balances declined, with a majority of the decline due to net pay downs by large borrowers, particularly insurance company borrowers. Among specific advance products, the balance on line of credit borrowings increased significantly from December 31, 2011 to December 31, 2012, which partially offset significant declines in balances of other advance products over the same period. Although investment balances (see Table 8) did not change much between December 31, 2012 and 2011, the composition of the investments did change. As of December 31, 2012, we had significant balances in secured reverse repurchase agreements backed by high quality collateral; however, we had no reverse repurchase agreements outstanding as of December 31, 2011. We decreased our investments in Federal funds sold, marketable certificates of deposit and commercial paper to further reduce exposure to unsecured investments with counterparties in Europe and with those having credit ratings below certain thresholds. The total balance of MBS increased slightly during 2012 as we attempted to maintain balances at approximately 300 percent of regulatory capital. For additional information relating to changes in investment balances, see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Investments.”

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Over the last two years, total average assets decreased $2.4 billion, or 6.4 percent, from 2011 to 2012. This reduction in average assets was due to a strategic decision near the end of 2011 to reduce our allocation of unsecured money market investments and slightly de-lever the balance sheet.

On the liability side of the balance sheet, from December 31, 2011 to December 31, 2012, consolidated obligation bonds and member deposits increased and consolidated obligation discount notes decreased. The increase in bonds, both in absolute dollars and as a percentage of total consolidated obligations, was primarily due to increased issuance of unswapped callable bonds used to fund the growth in our fixed rate mortgage assets. We also increased our use of non-callable floating rate bonds to enhance our liquidity position in response to potential market disruptions related to Congressional fiscal cliff and debt ceiling debates. This desire to lengthen the maturity of our liabilities was also the primary reason discount notes decreased both in absolute dollars and as a percentage of total consolidated obligations from December 31, 2011 to December 31, 2012.

The increase in our weighted average dividend rate paid during 2012 compared to 2011 can be attributed to the combination of a dividend rate change in the middle of 2011 and a change in the capital requirements in 2012. In September 2011, we lowered the dividend rate on Class A shares by 15 bps and increased the dividend rate on Class B Common Stock by 50 bps as a way to better compensate the users of our products. The average dividend rate was also affected by a reduction in the membership stock requirement initiated in mid-2012 which resulted in the issuance of additional Class B Common Stock to members to replace the excess membership Class A Common Stock created by the reduced requirement and previously used to support their advance and mortgage loan activity (Class A Common Stock up to the amount of a member’s membership stock purchase requirement can be used to support advance and mortgage loan activity, but excess Class A Common Stock cannot).

Financial Market Trends

The primary external factors that affect net interest income are market interest rates and the general state of the economy.

General discussion of the level of market interest rates:

Table 9 presents selected market interest rates as of the dates or for the periods shown.

Table 9

Market Instrument	Average Rate for 2012			Average Rate for 2011			December 31, 2012 Ending Rate			December 31, 2011 Ending Rate
Overnight Federal funds effective/target rate1		0.14	%		0.10	%	0.0 to 0.25		%	0.0 to 0.25		%
Federal Open Market Committee (FOMC) target rate for overnight Federal funds1	0.0 to 0.25			0.0 to 0.25			0.0 to 0.25			0.0 to 0.25
Three-month Treasury bill1		0.08			0.05			0.02			0.01
Three-month LIBOR1		0.43			0.34			0.31			0.58
Two-year U.S. Treasury note1		0.27			0.44			0.25			0.25
Five-year U.S. Treasury note1		0.75			1.51			0.71			0.85
Ten-year U.S. Treasury note1		1.78			2.76			1.74			1.88
30-year residential mortgage note rate2		3.84			4.53			3.52			4.07

1	Source is Bloomberg (Overnight Federal funds rate is the effective rate for the yearly averages and the target rate for the ending rates).
2	Mortgage Bankers Association weekly 30-year fixed rate mortgage contract rate obtained from Bloomberg.

At its January 30, 2013 meeting, the FOMC reaffirmed the significant accommodation that it announced in September and December 2012 that it will “...continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month.” The FOMC believes that these actions, including continuing its policies of reinvesting principal payments from its agency debt and agency MBS into agency MBS and rolling over maturing U.S. Treasury securities at auction, will “...maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.” The January 2013 statement also reiterated the open-ended nature of its accommodation, initially added in the September 2012 statement, that if the outlook for labor market does not “improve substantially” it will continue “...purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability.” At the January 30, 2013 meeting, the Committee also maintained the Federal funds target rate at a range of zero to 0.25 percent and stated that it anticipated that this range “...will be appropriate at least as long as the unemployment rate remains above 6.5 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be anchored.” In its December 2012 assessments of appropriate monetary policy, 14 of the 19 FOMC participants judged that the appropriate time for increasing the target rate was 2015 or greater. The majority of the participants believed that over the longer run four percent or greater was the appropriate level for the target Federal funds rate.

The daily average of three-month LIBOR increased from 2011 to 2012, primarily in response to the European debt crisis which began in the spring of 2010 but became more acute in the fall of 2011and persisted through the spring and summer of 2012. Three-month LIBOR peaked on January 5, 2012 at 0.5825 percent and began declining gradually throughout the year in response to actions taken by the European Central Bank (ECB) and the International Monetary Fund (IMF) to address the crisis. The decline in three-month LIBOR accelerated in the summer of 2012 declining from 0.4606 percent on June 30, 2012 to 0.3060 percent on December 31, 2012 with most of the declines occurring through October 2012. The daily average one-month LIBOR also increased slightly from 2011 to 2012 for the same reasons. Changes in LIBOR rates have an impact on interest income and expense because a considerable portion of our assets and liabilities are either directly or indirectly tied to LIBOR. Imbalances in the mix of these assets and liabilities results in exposure to basis risk which can impact net interest income. While other short-term rates such as those for U.S. Treasury bills, repo rates and our consolidated obligation discount notes have remained relatively low throughout most of 2012, they did increase from the end of 2011 likely due, in part, to the impact of sales of shorter-term U.S. Treasuries under the FOMC’s maturity extension program (“Operation Twist”).

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Both long and short-term U.S. Treasury rates have been significantly influenced by Federal Reserve policy over the last several years. In November 2010, the Federal Reserve initiated a second round of quantitative easing by announcing that it would expand its holding of longer-term securities by purchasing an additional $600 billion in long-term U.S. Treasury securities which was completed as scheduled in June 2011. In September 2011, the Federal Reserve announced additional measures by introducing Operation Twist by which it would extend the average maturity of its holdings of securities. As mentioned above, while still relatively low, short-term U.S. Treasury rates out to, and including, the one-year point of the curve increased in 2012 from the extremely low levels at the end of 2011 likely reflecting increased supply and the impact of sales of shorter-term U.S. Treasuries from the FOMC’s Operation Twist. The portion of the U.S. Treasury rate curve beyond one year declined from December 30, 2011 to December 31, 2012. In general longer-term U.S. Treasury rates increased in the first quarter of 2012 before falling significantly through the end of July 2012. Rates moved higher from these lows but generally stayed relatively low for the remainder of 2012. For some portions of the yield curve, the shape of the yield curve flattened from December 31, 2011 to December 31, 2012. During this period of time, the spread between the two-year U.S. Treasury note and the 10-year U.S. Treasury note decreased by 13.6 bps likely reflecting the market’s cautious outlook for economic growth and employment for much of 2012 and the impact of additional monetary actions taken by the FOMC and potential for additional monetary actions in the future. However, over the same period, the spread between the two-year U.S. Treasury note and the 30-year U.S. Treasury bond increased 4.2 bps as improving economic data resulted in increasing rates in the latter part of 2012. When the economy improves and the Federal Reserve ends its purchases of U.S. Treasury bonds, the inflationary impact of large budget deficits and the current and anticipated volumes of U.S. Treasury issuance will likely result in increasing interest rates. Because we issue debt at a spread above U.S. Treasury securities, higher interest rates increase the cost of issuing FHLBank consolidated obligations and increase the cost of advances to our members.

Other factors impacting FHLBank consolidated obligations:

Investors continue to view short-term FHLBank consolidated obligations as carrying a relatively strong credit profile, even after the ratings downgrade by S&P in August 2011. This has resulted in steady investor demand for FHLBank discount notes and short-term bonds. Because of this demand and other factors (some of which are listed below), the overall cost to issue short-term consolidated obligations remained low throughout 2012. However, while remaining relatively low, yields on discount notes increased from December 31, 2011 to December 31, 2012 likely because of an increase in supply of competing instruments, such as U.S. Treasury bills, repurchase agreements and short-term U.S. Treasury securities sold as a part of Operation Twist, and as a result of higher rates on these alternative short-term investments, despite mixed economic data and continuing, although lessened, concerns about the European sovereign debt crisis.Several factors might result in lower short-term rates in 2013, including discount notes, such as the expiration of the Transaction Account Guarantee (TAG) program (unlimited deposit insurance on non-interest bearing checking accounts) program on December 31, 2012, the end of the sales of short-term U.S. Treasuries from Operation Twist, and the FOMC commitments to keep rates “exceptionally low” and continue unsterilized asset purchases until the job market improves significantly. The expiration of Operation Twist sales might result in lower short-term rates as the supply of U.S. Treasury securities in the market declines, capacity on dealer balance sheets that was dedicated to purchases of Operation Twist securities is freed up making room for purchases of other investments, like discount notes, and repurchase agreement rates might decline due to the reduction of net supply of U.S. Treasury securities from the market, increasing demand for alternative investments, like FHLBank discount notes or other short-term consolidated obligations. The expiration of the TAG program could result in a significant amount of money moving from commercial bank deposits into money market funds or direct investments resulting in an increase in demand for discount notes or other short-term consolidated obligations.

Indicative spreads of fixed rate, non-callable FHLBank debt relative to similar term U.S. Treasury instruments have decreased from December 31, 2011 to December 31, 2012 for maturities greater than one year. For example, the spread between the on-the-run FHLBank two-year bullet debenture and the two-year U.S. Treasury note decreased from 15.0 bps on December 31, 2011 to 5.5 bps on December 31, 2012. The spread between the on-the-run FHLBank five-year bullet debenture and the five-year U.S. Treasury note decreased from 28.2 bps on December 31, 2011 to 11.5 bps as of December 31, 2012. Indicative FHLBank three-month lockout callable bond spreads to U.S. Treasuries for all tenors two years and greater decreased significantly from December 30, 2011 to December 31, 2012, which suggests improved investor demand for these structures over the period. We fund a large portion of our fixed rate mortgage assets and some fixed rate advances with unswapped callable bonds. For further discussion see this Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Consolidated Obligations.” Likely an important factor in the improved spreads to U.S. Treasuries for non-callable and callable fixed rate bonds was FOMC accommodation throughout 2012 and particularly its actions announced in its September and December meetings (see previous discussion). In response to these actions, demand for investments with yields higher than U.S. Treasuries likely increased as investors were anticipating low yields for a longer period of time.

The spreads on FHLBank fixed rate, non-callable debentures relative to the LIBOR swap curve deteriorated notably for all maturities out to seven years from December 31, 2011 to December 31, 2012 while spreads relative to LIBOR for maturities greater than seven years improved over the same period of time. An important factor in the deterioration of some of the theoretical spreads relative to LIBOR was the narrowing of market spreads between the LIBOR swap curve and our debt likely in response to easing concerns about the European sovereign debt crisis primarily in the second half of 2012. The theoretical swap level of the on-the-run FHLBank two-year bullet deteriorated significantly from three-month LIBOR minus 32.0 bps on December 31, 2011 to three-month LIBOR minus 7.4 bps on December 31, 2012. The theoretical swap level of the on-the-run FHLBank five-year bullet also deteriorated from three-month LIBOR minus 9.1 bps on December 31, 2011 to three-month LIBOR plus 1.6 bps on December 31, 2012. Because we issue a large amount of liabilities swapped to both one-month and three-month LIBOR, the deterioration in these spreads indicate deterioration in our funding costs for structures indexed or swapped to LIBOR. In 2012, we substantially increased our issuance of longer-term swapped and, to a lesser extent, unswapped, non-callable floating rate bonds in anticipation of future maturities of swapped liabilities and to increase our liquidity position in anticipation of potential year-end financial market disruptions resulting from the “fiscal cliff” and possible disruptions in early 2013 from political events around the increase of the debt ceiling. For additional information, see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Consolidate Obligations.” Many of the concerns over the impact of the fiscal cliff were addressed and eliminated in the American Taxpayer Relief Act of 2012 that was signed by President Obama on January 2, 2013. Additionally, the statutory debt ceiling was temporarily suspended for three months in early February 2013 which, according to some estimates, will allow issuance of U.S. Treasury securities until the summer of 2013. However, in addition to another debt ceiling debate later in 2013, there are several events in 2013 that could result in disruptions in financial markets and/or the economy including spending sequestration and the expiration of continuing budget resolution.

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Foreign investor holdings of Agencies (both debentures and MBS), as reported by the Federal Reserve System, decreased on a daily average basis for the week ended December 26, 2012 from the week ended December 28, 2011. Foreign investor holdings of U.S. Treasury securities increased significantly over the same periods. Foreign investors have historically been significant buyers of FHLBank debentures and decreasing demand from this investor segment can negatively impact our cost of funds. Taxable money market fund assets in Agency debt, excluding floating rate notes, and the percentage of total money market fund assets allocated to this category declined overall in 2012, but increased notably in the fourth quarter of 2012 likely reflecting the expiration of the FDIC’s TAG program on December 31, 2012. Taxable money market fund holdings of FHLBank debt increased in 2012 and ended 2012 at its highest levels of the year. On November 19, 2012, the FSOC released for public comment money market reform proposals which include significant changes to money market funds and include capital buffers, redemption limits and floating net asset value proposals. Public comments on the proposals were due on February 15, 2013. Because money market funds are such a large and important investor base for FHLBank consolidated obligations, typically short-term obligations, including discount notes, variable rate consolidated obligation bonds and short-term consolidated obligation bonds, changes in demand from money market funds for these consolidated obligations or changes to the overall structure of money market funds could result in changes in costs to issue our short-term consolidated obligations which will typically impact the cost of advances for our members.

Economic and other factors potentially impacting net interest income:

Several rating agencies took action during the third quarter of 2011 in response to steps taken by the U.S. government to address the U.S. government’s borrowing limit and overall U.S. debt burden. Because of the credit rating agencies’ methodology and their assumption of the U.S. government’s implicit support of FHLBank debt, changes to the credit rating of U.S. Treasuries were passed through to the credit ratings of FHLBank debentures and to the ratings of individual FHLBanks as outlined under Item 1 – “Business - General.” Credit ratings downgrades can adversely impact us in the following ways: (1) increase the funding cost of FHLBank debt issues; (2) have negative liquidity implications; (3) increase collateral posting requirements under certain of our derivatives agreements (see Note 8 of the Notes to the Financial Statements under Item 8 for additional information regarding derivative collateral requirements); and (4) impact our ability to offer certain member credit products such as letters of credit, which are generally dependent upon our credit rating. Following the downgrade by S&P, the FHLBank observed some minor and temporary impacts in several of these areas; however, we did not consider any of them to be significant or material. It is possible that the United States’ long-term sovereign credit rating will be further downgraded or downgraded by additional credit rating agencies in 2013. Additional downgrades could increase the likelihood and/or the severity of the impacts detailed above.

Critical Accounting Policies and Estimates

The preparation of our financial statements in accordance with GAAP requires management to make a number of judgments and assumptions that affect our reported results and disclosures. Several of our accounting policies are inherently subject to valuation assumptions and other subjective assessments and are more critical than others in terms of their importance to results. These assumptions and assessments include the following:

§   Accounting related to derivatives;

§   Fair value determinations;

§   Accounting for OTTI of investments;

§   Accounting for deferred premium/discount associated with MBS; and

§   Determining the adequacy of the allowance for credit losses.

Changes in any of the estimates and assumptions underlying critical accounting policies could have a material effect on our financial statements.

The accounting policies that management believes are the most critical to an understanding of our financial results and condition and require complex management judgment are described below.

Accounting for Derivatives: Derivative instruments are carried at fair value on the Statements of Condition. Any change in the fair value of a derivative is recorded each period in current period earnings or other comprehensive income (OCI), depending upon whether the derivative is designated as part of a hedging relationship and, if it is, the type of hedging relationship. A majority of our derivatives are structured to offset some or all of the risk exposure inherent in our lending, mortgage purchase, investment and funding activities. We are required to recognize unrealized gains or losses on derivative positions, regardless of whether offsetting gains or losses on the underlying assets or liabilities being hedged may be recognized in a symmetrical manner. Therefore, the accounting framework introduces the potential for considerable income variability from period to period. Specifically, a mismatch can exist between the timing of income and expense recognition from assets or liabilities and the income effects of derivative instruments positioned to mitigate market risk and cash flow variability. Therefore, during periods of significant changes in interest rates and other market factors, reported earnings may exhibit considerable variability. We emphasize hedging techniques that are effective under the hedge accounting requirements. However, in some cases, we have elected to retain or enter into derivatives that are economically effective at reducing our risk but do not meet the hedge accounting requirements, either because the cost of the derivative hedge was economically superior to non-derivative hedging alternatives or because no non-derivative hedging alternative was available. As required by Finance Agency regulation and our RMP, derivative instruments that do not qualify as hedging instruments may be used only if we document a non-speculative purpose at the inception of the derivative transaction.

A hedging relationship is created from the designation of a derivative financial instrument as either hedging our exposure to changes in the fair value of a financial instrument or changes in future cash flows attributable to a balance sheet financial instrument or anticipated transaction. Fair value hedge accounting allows for the offsetting fair value of the hedged risk in the hedged item to also be recorded in current period earnings. Highly effective hedges that use interest rate swaps as the hedging instrument and that meet certain stringent criteria can qualify for “shortcut” fair value hedge accounting. Shortcut hedge accounting allows for the assumption of no ineffectiveness, which means that the change in fair value of the hedged item can be assumed to be equal to the change in fair value of the derivative. If the hedge is not designated for shortcut hedge accounting, it is treated as a “long haul” fair value hedge, where the change in fair value of the hedged item must be measured separately from the derivative, and for which effectiveness testing must be performed regularly with results falling within established tolerances. If the hedge fails effectiveness testing, the hedge no longer qualifies for hedge accounting and the derivative is marked to estimated fair value through current period earnings without any offsetting change in estimated fair value related to the hedged item. We discontinued using shortcut hedge accounting for all derivative transactions entered into on or after July 1, 2008.

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For derivative transactions that potentially qualify for long haul fair value hedge accounting treatment, management must assess how effective the derivatives have been, and are expected to be, in hedging offsetting changes in the estimated fair values attributable to the risks being hedged in the hedged items. Hedge effectiveness testing is performed at the inception of the hedging relationship and on an ongoing basis for long haul fair value hedges. We perform testing at hedge inception based on regression analysis of the hypothetical performance of the hedging relationship using historical market data. We then perform regression testing on an ongoing basis using accumulated actual values in conjunction with hypothetical values. Specifically, each month we use a consistently applied statistical methodology that employs a sample of 30 historical interest rate environments and includes an R-squared test (commonly used statistic to measure correlation of the data), a slope test and an F-statistic test (commonly used statistic to measure how well the regression model describes the collection of data). These tests measure the degree of correlation of movements in estimated fair values between the derivative and the related hedged item. For the hedging relationship to be considered effective, results must fall within established tolerances.

Given that a derivative qualifies for long haul fair value hedge accounting treatment, the most important element of effectiveness testing is the price sensitivity of the derivative and the hedged item in response to changes in interest rates and volatility as expressed by their effective durations. The effective duration will be influenced mostly by the final maturity and any option characteristics. In general, the shorter the effective duration, the more likely it is that effectiveness testing would fail because of the impact of the short-term LIBOR side of the interest rate swap. In this circumstance, the slope criterion is the more likely factor to cause the effectiveness test to fail.

The estimated fair values of the derivatives and hedged items do not have any cumulative economic effect if the derivative and the hedged item are held to maturity, or contain mutual optional termination provisions at par. Since these fair values fluctuate throughout the hedge period and eventually return to zero (derivative) or par value (hedged item) on the maturity or option exercise date, the earnings impact of fair value changes is only a timing issue for hedging relationships that remain outstanding to maturity or the call termination date.

For derivative instruments and hedged items that meet the requirements as described above, we do not anticipate any significant impact on our financial condition or operating performance. For derivative instruments where no identified hedged item qualifies for hedge accounting, changes in the market value of the derivative are reflected in income. As of December 31, 2012 and 2011, we held a portfolio of derivatives that are marked to market with no offsetting qualifying hedged item. This portfolio of economic hedges consisted primarily of: (1) fixed rate non-MBS trading investments; (2) adjustable rate MBS with embedded caps; and (3) variable rate consolidated obligation bonds. While the fair value of these derivative instruments, with no offsetting qualifying hedged item, will fluctuate with changes in interest rates and the impact on our earnings can be material, the change in market value of trading securities being hedged by economic hedges is expected to partially offset that impact. The change in fair value of the derivatives classified as economic hedges is only partially offset by the change in the market value of trading securities being hedged by economic hedges because the amount of economic hedges exceeds the amount of swapped trading securities. See Tables 70 and 71 under Item 7A: Quantitative and Qualitative Disclosures About Market Risk, which present the notional amount and fair value amount (fair value includes net accrued interest receivable or payable on the derivative) for derivative instruments by hedged item, hedging instrument, hedging objective and accounting designation. The total par value of trading securities related to economic hedges was $1.0 billion as of December 31, 2012, which matches the notional amount of interest rate swaps hedging the GSE debentures in trading securities on that date. For asset/liability management purposes, the majority of our fixed rate GSE debentures currently classified as trading are matched to interest rate swaps that effectively convert the securities from fixed rate investments to variable rate instruments. See Tables 15 through 17 under this Item 7, which show the relationship of gains/losses on economic derivative hedges and gains/losses on the trading GSE debentures being hedged by economic derivatives. Our projections of changes in fair value of the derivatives have been consistent with actual results

Fair Value: As of December 31, 2012 and 2011, certain assets and liabilities, including investments classified as trading, and all derivatives were presented in the Statements of Condition at fair value. Under GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair values play an important role in the valuation of certain assets, liabilities and derivative transactions. The fair values we generate directly impact the Statements of Condition, Statements of Income, Statements of Comprehensive Income, Statements of Capital and Statements of Cash Flows as well as risk-based capital, duration of equity (DOE) and market value of equity (MVE) disclosures. Management also estimates the fair value of collateral that borrowers pledge against advance borrowings and other credit obligations to confirm that we have sufficient collateral to meet regulatory requirements and to protect ourselves from a credit loss.

Fair values are based on market prices when they are available. If market quotes are not available, fair values are based on discounted cash flows using market estimates of interest rates and volatility, or on prices of similar instruments. Pricing models and their underlying assumptions are based on our best estimates for discount rates, prepayment speeds, market volatility and other factors. We validate our financial models at least annually and the models are calibrated to values from outside sources on a monthly basis. We validate modeled values to outside valuation services routinely to determine if the values generated from discounted cash flows are reasonable. Additionally, due diligence procedures are completed for third-party pricing vendors. The assumptions used by third-party pricing vendors or within our models may have a significant effect on the reported fair values of assets and liabilities, including derivatives, and the related income and expense. See Note 16 of the Notes to the Financial Statements included under Item 8 – “Financial Statements and Supplementary Data” for a detailed discussion of the assumptions used to calculate fair values and the due diligence procedures completed. The use of different assumptions as well as changes in market conditions could result in materially different net income and retained earnings.

We made a change in market observable inputs used to value our derivatives at December 31, 2012. Prior to December 31, 2012, the FHLBank utilized the LIBOR Swap Curve to estimate the fair value of its interest-related derivatives. During the fourth quarter of 2012, the FHLBank observed an increasing trend in the use of the Overnight Indexed Swap (OIS) Curve by other market participants to value collateralized derivative contracts. The FHLBank performed an assessment of market participants and determined the OIS Curve was the appropriate curve to be used for valuation of its collateralized interest rate derivatives. As such, effective December 31, 2012, the FHLBank utilized the OIS Curve to estimate the fair value of its interest-related derivatives.

As of December 31, 2012, we had no fair values that were classified as level 3 valuations for financial instruments that are measured on a recurring basis at fair value. However, we have real estate owned (REO), which were written down to their fair values and considered level 3 valuations as of year-end. Based on the validation of our inputs and assumptions with other market participant data, we have concluded that the pricing derived should be considered level 3 valuations.

Accounting for OTTI of Investments: The deterioration of credit performance related to residential mortgage loans and the accompanying decline in residential real estate values in a significant number of localities in the U.S. have increased the level of credit risk to which we are exposed in our investments in mortgage-related securities, primarily private-label MBS. Investments in mortgage-related securities are directly or indirectly supported by underlying mortgage loans. Due to the decline in values of residential U.S. real estate that occurred from 2007 through mid-2012 and difficult conditions in the credit markets for the early part of that period, we closely monitor the performance of our investment securities classified as held-to-maturity on at least a quarterly basis to evaluate our exposure to the risk of loss on these investments in order to determine whether a loss is other-than-temporary.

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When the fair value of a debt security is less than its amortized cost as of the balance sheet date, an entity is required to assess whether: (1) it has the intent to sell the debt security; (2) it is more likely than not that it will be required to sell the debt security before its anticipated recovery; (3) or it does not expect to recover the entire amortized cost basis of the security. If any of these conditions is met, an OTTI on the security must be recognized.

In instances in which a determination is made that a credit loss (defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis) exists, but we do not intend to sell the debt security, nor is it more likely than not that we will be required to sell the debt security before the anticipated recovery of its remaining amortized cost basis (i.e., the amortized cost basis less any current-period credit loss), both the credit and non-credit components of OTTI are presented in the Statements of Income. In these instances, the OTTI is separated into: (1) the amount of the OTTI related to the credit loss; and (2) the amount of the OTTI related to all other factors (non-credit component). If our analysis of expected cash flows results in a present value of expected cash flows that is less than the amortized cost basis of a security (that is, a credit loss exists), an OTTI is considered to have occurred. If there is no credit loss, any impairment is not other-than-temporary. If we determine that an OTTI exists, the investment security is accounted for as if it had been purchased on the measurement date of the OTTI at an amortized cost basis equal to the previous amortized cost basis less OTTI recognized in non-interest income. The difference between the new amortized cost basis and the cash flows expected to be collected is accreted into interest income prospectively over the remaining life of the investment security based on the amount and timing of estimated future cash flows (with no effect on other income (loss) unless the security is subsequently sold or there are additional decreases in cash flows expected to be collected). See additional discussion regarding the recognition and presentation of OTTI in Note 1 of the Notes to the Financial Statements included under Item 8 – “Financial Statements and Supplementary Data.”

Beginning in the first quarter of 2009, to ensure consistency in determination of the OTTI for investment securities among all FHLBanks, the FHLBanks began using the same key modeling assumptions for purposes of their cash flow analysis. During the second quarter of 2009, the FHLBanks formed an OTTI Governance Committee consisting of representatives from each FHLBank. The OTTI Governance Committee develops the modeling assumptions to be used by the FHLBanks to produce expected cash flows for use in analyzing credit losses and OTTI for residential private-label MBS.

Guidance provided by the Finance Agency, some of which was based upon written guidance and other of which was provided only through informal comments to the FHLBanks, indicated that an FHLBank may use an alternative risk model with alternative loan information data if certain conditions are met. The written guidance also indicated that an FHLBank that does not have access to the required risk model and loan information data sources or does not meet the conditions for using an alternative risk model as required under the Finance Agency guidance may engage another FHLBank to perform the cash flow analysis underlying its OTTI determination.

Private-label MBS are evaluated by estimating projected cash flows using models that incorporate projections and assumptions typically based on the structure of the security and certain economic environment assumptions such as delinquency and default rates, loss severity, home price appreciation/depreciation, interest rates and securities’ prepayment speeds while factoring in the underlying collateral and credit enhancement. A significant input to such analysis is the forecast of housing price changes for the relevant states and metropolitan statistical areas, which are based on an assessment of the relevant housing markets. See additional discussion regarding the projections and assumptions in Note 4 of the Notes to the Financial Statements included under Item 8 – “Financial Statements and Supplementary Data.” The loan level cash flows and losses are allocated to various security classes, including the security classes owned by the FHLBank, based on the cash flow and loss allocation rules of the individual security.

For certain private-label MBS where underlying collateral data is not available, alternative procedures as determined by each FHLBank are used to assess these securities for OTTI. These evaluations are inherently subjective and consider a number of qualitative factors. In addition to monitoring the credit ratings of these securities for downgrades, as well as placement on negative outlook or credit watch, we evaluate other factors that may be indicative of OTTI. These include, but are not limited to, an evaluation of the type of security, the length of time and extent to which the fair value of a security has been less than its cost, any credit enhancement or insurance, and certain other collateral-related characteristics such as credit scores provided by Fair Isaac Corporation (FICO®), LTV ratios, delinquency and foreclosure rates, geographic concentration and the security’s past performance.

Each FHLBank is responsible for making its own determination of OTTI and performing the required present value calculations using appropriate historical cost bases and yields. FHLBanks that hold in common private-label MBS are required to consult with one another to ensure that any decision that a commonly-held private-label MBS is other-than-temporarily impaired, including the determination of fair value and the credit loss component of the unrealized loss, is consistent between or among those FHLBanks. The process of estimating the future cash flows of the private-label MBS requires a significant amount of judgment to formulate the assumptions that are utilized in this process. The assumptions we utilize for the majority of our private-label MBS are reviewed and approved by the FHLBanks’ OTTI Governance Committee.

Deferred Premium/Discount Associated with MBS: When we purchase MBS, we often pay an amount that is different than the unpaid principal balance. The difference between the purchase price and the contractual note amount is a premium if the purchase price is higher and a discount if the purchase price is lower. Accounting guidance permits us to amortize (or accrete) the premiums (or discounts) in a manner such that the yield recognized on the underlying asset is constant over the asset’s estimated life. We typically pay more than the unpaid principal balances when the interest rates on the MBS are greater than prevailing market rates for similar MBS on the transaction date. The net purchase premiums paid are then amortized using the level-yield method over the expected lives of the MBS as a reduction in yield (decreases interest income). Similarly, if we pay less than the unpaid principal balance because interest rates on the MBS are lower than prevailing market rates on similar MBS on the transaction date, the net discounts are accreted in the same manner as the premiums, resulting in an increase in yield (increases interest income). The level-yield amortization method is applied using expected cash flows that incorporate prepayment projections that are based on mathematical models which describe the likely rate of consumer mortgage loan refinancing activity in response to incentives created (or removed) by changes in interest rates. Changes in interest rates have the greatest effect on the extent to which mortgage loans may prepay, although, during the recent disruption in the financial market, tight credit and declining home prices, consumer mortgage refinancing behavior has also been significantly affected by the borrower’s credit score and the value of the home in relation to the outstanding loan value. Generally, however, when interest rates decline, mortgage loan prepayment speeds are likely to increase, which accelerates the amortization of premiums and the accretion of discounts. The opposite occurs when interest rates rise. We use a third-party data service that provides estimates of cash flows, from which we determine expected asset lives for the MBS. The level-yield method uses actual prepayments received and projected future mortgage prepayment speeds, as well as scheduled principal payments, to determine the amount of premium/discount that must be recognized and will result in a constant monthly yield until maturity. Amortization of MBS premiums could accelerate in falling interest-rate environments or decelerate in rising interest-rate environments. Exact trends will depend on the relationship between market interest rates and coupon rates on outstanding MBS, the historical evolution of mortgage interest rates, the age of the underlying mortgage loans, demographic and population trends, and other market factors such as increased foreclosure activity, falling home prices, tightening credit standards by mortgage lenders and the other housing GSEs, and other repercussions from the current financial market conditions.

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Allowance for Credit Losses: We have established an allowance methodology for each of our portfolio segments to estimate the allowance for credit losses, if necessary, to provide for probable losses inherent in our portfolio segments.

Mortgage Loans – We estimate the allowance for loan loss on homogeneous pools of mortgage loans or on an individual mortgage loan basis to assess the credit losses that are inherent in the portfolio but have not been realized.

§   Collectively Evaluated Mortgage Loans – The assessment of loan loss for the pools of loans entails breaking the loan pool into strata based on each of the current classifications of each loan (i.e., current, delinquent, non-performing, referred to foreclosure). We perform a migration analysis to determine the probability of default for each stratum of loans based on a short- and mid-term horizon utilizing historical statistics. In addition, we determine the pool’s historical loss statistics based on a short- and mid-term horizon to determine the loss severity. Loan balances, probability of default and loss severity are then utilized to determine the expected loan loss for the pool.

§   Individually Evaluated Mortgage Loans – We calculate an allowance for loan loss on individual loans if events or circumstances make it probable that we will not be able to collect all amounts due according to the contractual terms for a subset of the mortgage loans. We have determined that all mortgage loans in the MPF Program are considered collateral dependent and have elected to measure individual loan impairment based on collateral value less estimated cost to sell. Collateral value is based on appraisals, if available, or estimated property values using housing pricing indices. If the collateral value less cost to sell is less than the recorded investment in the loan, the loan is considered impaired. The excess of the recorded investment in the loan over the loan’s collateral value less cost to sell is recorded as the loan’s estimate of allowance for loan loss. If a loan has an individual impairment recorded, it is excluded from the collectively evaluated assessment process.

Once the collectively evaluated and individually evaluated assessments are completed, the total estimates of loan losses are accumulated to the master commitment level to determine if, and by how much, the estimated loan losses exceed the FLA. The estimated loan losses in excess of the FLA by master commitment may be covered up to the PFI’s CE obligation amount (provided directly by the PFI or through the PFI’s purchase of supplemental mortgage insurance). We are responsible for any estimated loan losses in excess of the PFI’s CE obligation for each master commitment. For additional information on the loss allocation rules for each traditional MPF product, see Item 1 – “Business – Mortgage Loans.” The estimated losses that will be allocated to us (i.e., excluding estimated losses covered by CE obligations) are recorded as the balance in the allowance for loan loss with the resulting offset being presented as the provision for credit losses on mortgage loans.

Credit products – We have never experienced a credit loss on an advance and we currently do not anticipate any credit losses on advances. Based on the collateral held as security for advances, credit analysis and prior repayment history, no allowance for losses on advances is deemed necessary. We are required by statute to obtain and maintain security interests in sufficient collateral on advances to protect against losses, and to accept as collateral on such advances only certain qualified types of collateral, which are primarily U.S. government or government Agency/GSE securities, certain residential mortgage loans, deposits in the FHLBank and other real estate related assets. See Item 1 – “Business – Advances” for a more detailed collateral discussion.

Direct financing lease receivable – We have a recorded investment in a direct financing lease receivable with a member for a building complex and property. Under the office complex agreement, we have all rights and remedies under the lease agreement as well as all rights and remedies available under the members’ Advance, Pledge and Security Agreement. Consequently, we can apply any excess collateral securing credit products to any shortfall in the leasing arrangement.

The process of determining the allowance for credit losses requires a high degree of judgment. It is possible that others, given the same information, may at any point in time reach different reasonable conclusions. Because of variability in the data underlying the assumptions made in the process of determining the allowance for credit losses, estimates of the portfolio’s inherent risks will change as warranted by changes in the economy. The degree to which any particular change would affect the allowance for credit losses would depend on the severity of the change.

For additional information regarding allowances for credit losses, see Note 7 of the Notes to Financial Statements included under Item 8 – “Financial Statements and Supplementary Data.”

Results of Operations (Years Ended December 31, 2012, 2011 and 2010)

The primary source of our earnings is net interest income, which is interest earned on advances, mortgage loans, and investments less interest paid on consolidated obligations, deposits, and other borrowings. The decrease in net interest income from 2011 to 2012 can primarily be attributed to a decrease in average interest-earning assets along with a slight deterioration in our net interest spread. Interest income on advances declined as a result of both lower average advance balances and average rate. The impact on interest income from the growth in the size of the mortgage loan portfolio, both nominally and relative to other assets, was offset by a decline in the average rate on this portfolio as borrowers refinanced their mortgages in order to take advantage of lower average residential mortgage rates experienced throughout much of 2012 and from the growth in balances with new mortgage loans placed into our portfolio at average rates below existing mortgage loans in the portfolio. Interest income on our total investment portfolio, which consists of interest-bearing deposits, Federal funds sold, reverse repurchase agreements and investment securities decreased due to compositional changes in the portfolio. On the liability side, declining interest rates have allowed us to actively manage the debt used to fund long-term assets by calling higher cost callable debt and replacing it with lower cost callable and/or bullet debt. Consequently, our 2012 interest expense declined as a result of both a decrease in the average balances and a decrease in average rate. See Tables 13 and 14 for further information.

Although net interest income decreased during 2011 and 2012, due primarily to a shrinking balance sheet, falling interest rates and asset mix changes, net income has improved in both years due to significant changes in the market value of various derivatives. See “Net Gain (Loss) on Derivative and Hedging Activities” in this Item 7 for a discussion of the impact of these activities by year.

We fulfill our mission by: (1) providing liquidity to our members through the offering of advances to finance housing, economic development and community lending; (2) supporting residential mortgage lending through the MPF Program; and (3) providing regional affordable housing programs that create housing opportunities for low- and moderate-income families. In order to effectively accomplish our mission, we must obtain adequate funding amounts at acceptable rate levels. We use derivatives as tools to reduce our funding costs and manage interest rate risk and prepayment risk. We acquire and classify certain investments as trading investments for liquidity and asset-liability management purposes. Although we manage the risks mentioned and utilize these transactions for asset-liability tools, we do not manage the fluctuations in fair value of our derivatives or trading securities. We are essentially a “hold-to-maturity” investor and transact derivatives only for hedging purposes.

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Adjusted income is a non-GAAP measure used by management to evaluate the quality of our ongoing earnings. We believe that the presentation of income as measured for management purposes enhances the understanding of our performance by highlighting our underlying results and profitability. By removing volatility created by market value fluctuations and items such as prepayment fees, we can compare longer-term trends in earnings that might otherwise be indeterminable. Therefore, as part of evaluating our financial performance, we adjust net income reported in accordance with GAAP for the impact of: (1) AHP and REFCORP assessments (assessments for AHP and REFCORP through June 30, 2011 were equivalent to an effective minimum income tax rate of 26.5 percent; and, upon satisfaction of the REFCORP obligation as of June 30, 2011, the assessment for AHP is equivalent to an effective minimum income tax rate of 10 percent); (2) market value changes on derivatives (excludes net interest settlements related to derivatives not qualifying for hedge accounting); and (3) other items excluded because they are not considered a part of our routine operations or ongoing business model, such as prepayment fees, gain/loss on retirement of debt, gain/loss on mortgage loans held for sale and gain/loss on securities. The result is referred to as “adjusted income,” which is a non-GAAP measure of income. Adjusted income is used to compute an adjusted return on equity (ROE) that is then compared to the average overnight Federal funds effective rate, with the difference referred to as adjusted ROE spread. Adjusted income and adjusted ROE spread are used: (1) to measure performance under our incentive compensation plans; (2) as a key measure in determining the level of quarterly dividends; and (3) in strategic planning. While we utilize adjusted income as a key measure in determining the level of dividends, we consider GAAP income volatility caused by gain (loss) on derivatives and trading securities in determining the adequacy of our retained earnings as determined under GAAP. Because the adequacy of GAAP retained earnings is considered in setting the level of our quarterly dividends, gain (loss) on derivatives and trading securities can play a factor when setting the level of our quarterly dividends. Because we are primarily a “hold-to-maturity” investor and do not trade derivatives, we believe that adjusted income, adjusted ROE and adjusted ROE spread are helpful in understanding our operating results and provide a meaningful period-to-period comparison in contrast to GAAP income, ROE based on GAAP income and ROE spread based on GAAP income, which can vary significantly from period to period because of market value changes on derivatives and certain other items that management excludes when evaluating operational performance since the added volatility does not provide a consistent measurement analysis.

Derivative and hedge accounting affects the timing of income or expense from derivatives, but not the economic income or expense from these derivatives when held to maturity or call date. For example, interest rate caps are purchased with an upfront fixed cost to provide protection against the risk of rising interest rates. Under derivative accounting guidance, these instruments are then marked to market each month, which can result in having to recognize significant gains and losses from year to year, producing volatility in our GAAP income. However, the sum of such gains and losses over the term of a derivative will equal its original purchase price of a purchased cap if held to maturity.

In addition to impacting the timing of income and expense from derivatives, derivative accounting also impacts the presentation of net interest settlements on derivatives and hedging activities. This presentation differs under GAAP for economic hedges compared to hedges that qualify for hedge accounting. Net interest settlements on economic hedges are included with the market value changes and recorded in net gain (loss) on derivatives and hedging activities while the net interest settlements on qualifying fair value or cash flow hedges are included in net interest margin. Therefore, only the market value changes included in the net gain (loss) on derivatives and hedging activities are removed to arrive at adjusted income (i.e., net interest settlements on economic hedges, which represent actual cash inflows or outflows and do not create market value volatility, are not removed).

Table 10 presents a reconciliation of GAAP income to adjusted income for the years ended December 31, 2012, 2011 and 2010 (in thousands):

Table 10

	2012		2011		2010
Net income, as reported under GAAP	$	110,311	$	77,326	$	33,548
Total assessments		12,261		20,433		12,153
Income before assessments		122,572		97,759		45,701
Derivative-related and other excluded items1		7,824		32,079		92,502
Adjusted income (a non-GAAP measure)2	$	130,396	$	129,838	$	138,203

1

Consists of market value changes on derivatives (excludes net interest settlements on derivatives not qualifying for hedge accounting) and trading securities as well as prepayment fees on terminated advances and net gain (loss) on mortgage loans held for sale.

2

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. To mitigate these limitations, we have procedures in place to calculate these measures using the appropriate GAAP components. Although these non-GAAP measures are frequently used by our stakeholders in the evaluation of our performance, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

Table 11 presents adjusted ROE (a non-GAAP measure) compared to the average Federal funds rate, which we use as a key measure of effective use and management of members’ capital (amounts in thousands):

Table 11

	2012			2011			2010
Average GAAP total capital for the period	$	1,771,641		$	1,745,252		$	1,873,427
ROE, based upon GAAP net income		6.23	%		4.43	%		1.79	%
Adjusted ROE, based upon adjusted income1		7.36	%		7.44	%		7.38	%
Average overnight Federal funds effective rate		0.14	%		0.10	%		0.18	%
Adjusted ROE as a spread to average Federal funds rate1		7.22	%		7.34	%		7.20	%

1 Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied and are not audited. To mitigate these limitations, we have procedures in place to calculate these measures using the appropriate GAAP components. Although these non-GAAP measures are frequently used by our stakeholders in the evaluation of our performance, they have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analyses of results as reported under GAAP.

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Earnings Analysis: Table 12 presents changes in the major components of our earnings for the past three years (in thousands):

Table 12

	Increase (Decrease) In Earnings Components
	Dollar Change						Percent Change
	2012 vs. 2011			2011 vs. 2010			2012 vs. 2011			2011 vs. 2010
Total interest income	$	(51,704	)	$	(83,524	)		(9.5	)%		(13.3	)%
Total interest expense		(40,458	)		(64,574	)		(12.8	)		(17.0	)
Net interest income		(11,246	)		(18,950	)		(4.9	)		(7.6	)
Provision for credit losses on mortgage loans		1,438			(524	)		135.9			(33.1	)
Net interest income after mortgage loan loss provision		(12,684	)		(18,426	)		(5.5	)		(7.4	)
Net gain (loss) on trading securities		(48,820	)		6,347			(235.0	)		44.0
Net gain (loss) on derivatives and hedging activities		87,265			65,931			80.2			37.7
Other non-interest income		(3,033	)		4,088			(31.5	)		73.6
Total non-interest income (loss)		35,412			76,366			45.2			49.4
Operating expenses		(364	)		2,252			(0.9	)		5.6
Other non-interest expense		(1,721	)		3,630			(15.2	)		47.2
Total other expense		(2,085	)		5,882			(3.9	)		12.3
AHP assessments		3,650			4,845			42.4			128.7
REFCORP assessments		(11,822	)		3,435			(100.0	)		41.0
Total assessments		(8,172	)		8,280			(40.0	)		68.1
NET INCOME	$	32,985		$	43,778			42.7	%		130.5	%

Net Interest Income: Net interest income decreased from 2011 to 2012, primarily as a result of a decrease in average interest-earning assets as well as a slight deterioration in our net interest spread. Despite the small decrease in net interest spread, our net interest margin, which is net interest income as a percentage of average interest-earning assets, increased slightly as a result of an increase in retained earnings and non-interest bearing liabilities, which has the effect of increasing net interest income relative to interest-earning assets. Despite the slight decrease in net interest spread and slight improvement in net interest margin in 2012, both of these measures improved since 2010. Some key factors in the improvement or stability in our net interest margin and net interest spread since 2010, were: (1) improvements in the funding cost of bonds and deposits; (2) active management of the debt used to fund long-term assets by calling higher cost callable debt and replacing with lower cost callable and/or bullet debt; and (3) an increase in the proportion of higher earning assets, including mortgage loans and advances, to total average interest-earning assets as short-term money market investments, on average, declined. Some key factors in the small decline in our net interest spread for the year ending December 31, 2012 were: (1) lower yields on average earning assets as declining average yields on mortgage loans and advances more than offset the higher average yields on Federal funds sold, securities purchased under agreements to resell and investment securities; and (2) a smaller decline in the average yield of interest-bearing liabilities relative to the decline in the average yield on interest-earning assets. Over the last several years, active management of our debt has been an important factor in the improvements in and stability of our net interest spread and margin. However if we stay in the current historically low interest rate environment for a prolonged period of time, it is unlikely that we will be able to maintain this trend of refinancing our debt costs faster than the decline in mortgage yields, which could result in a lower net interest spread and margin in the future.

The average yields on advances decreased from 2011 to 2012 (see Table 13). The average advance yield is impacted by the interplay between advance product pricing, product mix changes, interest rate changes and changes in the average maturity of various advances. In 2012, an important compositional change pushing overall advance portfolio yields lower was an increase in line of credit advances, which are typically lower yielding advances, as a percentage of the total advance portfolio. As discussed under this Item 7 – “Financial Condition – Advances,” a significant portion of our advance portfolio either matures or effectively re-prices within three months by product design or through the use of derivatives. Because of the relatively short nature of the advance portfolio, including the impact of any interest rate swaps qualifying as fair value hedges, the average yield in this portfolio typically responds quickly to changes in the general level of short-term interest rates.

Our investment portfolio is comprised of interest-bearing deposits, Federal funds sold, reverse repurchase agreements and investment securities. The average yield on each of these components in our investment portfolio increased in 2012 relative to 2011, with the increase in the yield on our investment securities primarily due to compositional changes in this portfolio. The compositional change was the result of management’s decision to reduce non-MBS investments as a percentage of total assets which had the effect of increasing the balances of higher yielding longer term investments, both fixed and variable rate, as a percentage of the total investment securities portfolio. The resulting higher yields from the compositional changes were at least partially offset by the impact of prepayments of higher rate MBS/CMOs (higher fixed rates plus higher spreads over LIBOR) and the acquisition of new lower rate MBS/CMOs (lower spreads over LIBOR plus lower fixed rates).

As discussed under this Item 7 – “Financial Condition – Investments,” we expanded our MBS portfolio in April 2008 under temporary authority granted by Finance Agency Resolution 2008-08. In the first quarter of 2010, we further expanded our MBS portfolio by $2.4 billion in Agency variable rate CMOs with embedded caps. As a result, the balances of these higher yielding MBS/CMOs remained elevated relative to capital throughout 2011. We did not purchase any additional MBS until February 2012. Since mid-2006, and prior to this year, our primary MBS investment strategy focused more on variable rate Agency MBS/CMOs because we believed they generally had a higher overall risk-adjusted return relative to our cost of funds than comparable fixed rate MBS. Many of these floating-rate securities have coupons that are capped at certain levels, and we have generally purchased interest rate caps to offset some of this risk. See additional discussion on the impact of interest rate caps under this Item 7 – “Net Gain (Loss) on Derivatives and Hedging Activities.”

38

The average yields on the mortgage loan portfolio declined notably during 2012 compared to 2011 (see Table 13) due to several factors including: (1) borrowers refinancing their mortgages in order to take advantage of lower average residential mortgage rates; (2) the growth in mortgage loan balances with new mortgage loans placed into our portfolio at average rates below existing mortgage loans in the portfolio; and (3) increased write-offs of premiums associated with mortgage loan prepayments. Although the growth of this portfolio appears to be slowing in recent months, we expect the portfolio yield to continue to decline for the next several quarters due to these factors.

The average rate paid on all deposits decreased from 2011 to 2012 (see Table 13). The average rate paid on deposits generally fluctuates in tandem with the movement in short-term interest rates. The level of short-term interest rates is primarily driven by the FOMC decisions on the target rate for overnight Federal funds, but is also influenced by the expectations of capital market participants. However, because of the low interest rate environment at the time (and which has continued), we established a floor of 5 bps on demand deposits and 15 bps on overnight deposits in June 2009. The floor on overnight deposits was decreased even further from 15 bps to 10 bps in October 2011, thus contributing to the decrease from 2011 to 2012 in the average rate paid on all deposits.

The average yield on consolidated obligation discount notes increased slightly from 2011 to 2012 (see Table 13). An important factor pushing discount note yields higher for 2012 when compared to 2011 was the sale of short-term U.S. Treasury securities as a part of the FOMC’s maturity extension program. The maturity extension program, commonly referred to as Operation Twist, offset factors that resulted in lower average yields on discount notes in the first part of 2012, including the flight-to-quality demand for Agency discount notes in response to the European debt crisis and other geopolitical events that occurred or carried over into the fourth quarter of 2011. Many of the discount notes issued during this period of low rates had maturity dates throughout the first half of 2012. Because the U.S. government and FOMC programs that were likely a factor in pushing short-term rates higher expired on December 31, 2012 (Operation Twist and TAG), we anticipate that average yields on discount notes could actually decline in 2013.

The average yield on bonds declined from 2011 to 2012 (see Table 13). Some important factors in the decline in consolidated obligation bond yields were: (1) generally lower intermediate and longer-term term market interest rates; and (2) our ability to refinance a large portion of our longer-term unswapped callable bonds.

As discussed above, during 2011 and 2012 we were able to lower our long-term consolidated obligation funding costs by calling previously issued callable debt and replacing it with new lower-cost debt with similar characteristics. Replacing this debt usually increases costs in the short term due to the acceleration of unamortized concessions on the debt when it is called because we amortize concession costs to contractual maturity. However, this increase is offset by the lower rate on the debt and by funding benefits from timing differences between the date the debt is called and the settlement date of the new debt. We use unswapped callable debt with short lockouts (primarily three months to one year) as a primary funding tool for long-term amortizing assets. This provided us with the opportunity to take advantage of lower debt costs at various times during 2012. We also increased the size of our portfolio of unswapped callable bonds in 2012 from $4.4 billion as of December 31, 2011 to $5.3 billion as of December 31, 2012, which because of lower interest rates during 2012 than interest rates on the existing funding portfolio, also decreased the cost of consolidated obligation bonds from 2011 to 2012. The biggest reason why our portfolio of callable bonds increased was because of the increase in our mortgage loan portfolio. Callable bonds are an effective instrument for funding fixed rate mortgage-related assets because they provide a way to effectively manage the prepayment risk on these assets. This is especially true for callable bonds with short lockouts because they allow us to react quickly to mortgage prepayments attributable to a drop in interest rates. For a further discussion of how we use callable bonds see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Consolidated Obligations.”

Derivative and hedging activities impacted our net interest spread as well. The assets and liabilities hedged with derivative instruments designated under fair value hedging relationships are adjusted for changes in fair values even as other assets and liabilities continue to be carried at historical cost. The result is that positive basis adjustments on: (1) advances reduce the average annualized yield; and (2) consolidated obligations decrease the average annualized cost. The positive hedging adjustments on advances exceeded those on consolidated obligations over the last three years. Therefore, the average net interest spread has been negatively affected by the hedging adjustments included in the asset and liability balances and is not necessarily comparable between years. Additionally, the differentials between accruals of interest receivables and payables on derivatives designated as fair value hedges as well as the amortization/accretion of hedging activities are recognized as adjustments to the interest income or expense of the designated underlying hedged item. However, net interest payments or receipts on derivatives that do not qualify for hedge accounting (economic hedges) flow through Net Gain (Loss) on Derivatives and Hedging Activities instead of Net Interest Income (net interest received/paid on economic derivatives is identified in Tables 15 through 17 under this Item 7), which distorts yields especially for trading investments that are swapped to a variable rate.

As explained in more detail in Item 7A – “Quantitative and Qualitative Disclosure About Market Risk – Interest Rate Risk Management – Duration of Equity,” our DOE remains within both the RMP limits and the operating rates and continues to remain relatively short. The historically short DOE is the result of the short maturities (or short reset periods) of the majority of our assets and liabilities. Accordingly, our net interest income is quite sensitive to the level of short-term interest rates. The fact that the yield on assets and the cost of liabilities can change quickly makes it crucial for management to tightly control and minimize any duration mismatch of short-term assets and liabilities to lessen any adverse impact on net interest income from changes in short-term rates.

39

Table 13 presents average balances and yields of major earning asset categories and the sources funding those earning assets (in thousands):

Table 13

	12/31/2012							12/31/2011							12/31/2010
	Average Balance		Interest Income/ Expense		Yield			Average Balance		Interest Income/ Expense		Yield			Average Balance		Interest Income/ Expense		Yield
Interest-earning assets:
Interest-bearing deposits	$	353,494	$	513		0.15	%	$	206,898	$	204		0.10	%	$	122,380	$	230		0.19	%
Federal funds sold and securities purchased under agreements to resell		2,226,596		4,027		0.18			1,928,804		2,219		0.12			2,519,690		4,826		0.19
Investment securities1		8,880,851		139,488		1.57			11,912,420		180,482		1.52			14,331,632		239,107		1.67
Advances2,3		17,348,927		154,560		0.89			17,847,711		165,514		0.93			21,179,801		209,453		0.99
Mortgage loans2,4,5		5,526,009		194,363		3.52			4,612,061		195,828		4.25			3,661,819		173,756		4.75
Other interest-earning assets		29,305		1,832		6.25			35,272		2,240		6.35			41,024		2,639		6.43
Total earning assets		34,365,182		494,783		1.44			36,543,166		546,487		1.50			41,856,346		630,011		1.51
Other non interest-earning assets		166,083							343,859							189,916
Total assets	$	34,531,265						$	36,887,025						$	42,046,262
Interest-bearing liabilities:
Deposits	$	1,601,019	$	1,511		0.09	%	$	1,951,644	$	2,594		0.13	%	$	1,932,023	$	2,805		0.15	%
Consolidated obligations2:
Discount Notes		9,674,078		9,237		0.10			11,051,415		9,591		0.09			13,839,192		21,017		0.15
Bonds		20,698,141		264,134		1.28			21,474,224		302,765		1.41			23,578,262		355,164		1.51
Other borrowings		13,818		221		1.60			26,022		611		2.35			41,070		1,149		2.80
Total interest-bearing liabilities		31,987,056		275,103		0.86			34,503,305		315,561		0.91			39,390,547		380,135		0.97
Capital and other non-interest-bearing funds		2,544,209							2,383,720							2,655,715
Total funding	$	34,531,265						$	36,887,025						$	42,046,262
Net interest income and net interest spread6			$	219,680		0.58	%			$	230,926		0.59	%			$	249,876		0.54	%
Net interest margin7						0.64	%						0.63	%						0.60	%

1	The non-credit portion of the other-than-temporary impairment discount on held-to-maturity securities is excluded from the average balance for calculations of yield since the change runs through equity.
2	Interest income/expense and average rates include the effect of associated derivatives.
3	Advance income includes prepayment fees on terminated advances.
4	CE fee payments are netted against interest earnings on the mortgage loans. The expense related to CE fee payments to PFIs was $4.2 million, $3.5 million and $2.8 million for the years ending December 31, 2012, 2011 and 2010, respectively.
5	Mortgage loans average balance includes outstanding principal for non-performing conventional loans. However, these loans no longer accrue interest.
6	Net interest spread is the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities.
7	Net interest margin is net interest income as a percentage of average interest-earning assets.

40

Changes in the volume of interest-earning assets and the level of interest rates influence changes in net interest income, net interest spread and net interest margin. Table 14 summarizes changes in interest income and interest expense between 2012 and 2011 and between 2011 and 2010 (in thousands):

Table 14

	2012 vs. 2011									2011 vs. 2010
	Increase (Decrease) Due to									Increase (Decrease) Due to
	Volume1,2			Rate1,2			Total			Volume1,2			Rate1,2			Total
Interest Income:
Interest-bearing deposits	$	186		$	123		$	309		$	114		$	(140	)	$	(26	)
Federal funds sold and securities purchased under agreements to resell		384			1,424			1,808			(965	)		(1,642	)		(2,607	)
Investment securities		(47,403	)		6,409			(40,994	)		(37,960	)		(20,665	)		(58,625	)
Advances		(4,550	)		(6,404	)		(10,954	)		(31,483	)		(12,456	)		(43,939	)
Mortgage loans		35,237			(36,702	)		(1,465	)		41,715			(19,643	)		22,072
Other assets		(374	)		(34	)		(408	)		(365	)		(34	)		(399	)
Total earning assets		(16,520	)		(35,184	)		(51,704	)		(28,944	)		(54,580	)		(83,524	)
Interest Expense:
Deposits		(414	)		(669	)		(1,083	)		28			(239	)		(211	)
Consolidated obligations:
Discount Notes		(1,262	)		908			(354	)		(3,653	)		(7,773	)		(11,426	)
Bonds		(10,655	)		(27,976	)		(38,631	)		(30,512	)		(21,887	)		(52,399	)
Other borrowings		(233	)		(157	)		(390	)		(374	)		(164	)		(538	)
Total interest-bearing liabilities		(12,564	)		(27,894	)		(40,458	)		(34,511	)		(30,063	)		(64,574	)
Change in net interest income	$	(3,956	)	$	(7,290	)	$	(11,246	)	$	5,567		$	(24,517	)	$	(18,950	)

1	Changes in interest income and interest expense not identifiable as either volume-related or rate-related have been allocated to volume and rate based upon the proportion of the absolute value of the volume and rate changes.
2	Amounts used to calculate volume and rate changes are based on numbers in dollars. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same results.

Net Gain (Loss) on Derivative and Hedging Activities: The volatility in other income (loss) is predominately driven by market value fluctuations on derivative and hedging transactions, which include interest rate swaps, caps and floors. Net gain (loss) from derivative and hedging activities is sensitive to several factors, including: (1) the general level of interest rates; (2) the shape of the term structure of interest rates; and (3) implied price volatilities. The market value of options, in particular interest rate caps and floors, are also impacted by the time value decay that occurs as the options approach maturity, but this factor represents the normal amortization of the cost of these options and flows through income irrespective of any changes in the other factors impacting the market value of the options (level of rates, shape of curve and implied volatility).

As evidenced in Tables 15 through 17, the majority of the derivative gains and losses are related to economic hedges, such as interest rate swaps matched to GSE debentures classified as trading securities and interest rate caps and floors, which do not qualify for hedge accounting treatment under GAAP. Because of the mix of these economic hedges, we generally record gains on derivatives when the general level of interest rates rises over the period and record losses when the general level of interest rates falls over the period. During the last nine months of 2012, as interest rates generally declined, we recorded sizeable losses on our economic hedges. The largest portion of this 2012 loss was primarily attributable to the net interest received (paid) on economic hedges related to our swapped investment securities, which are classified as trading. These investment securities were swapped to LIBOR at acquisition and carry fixed rates which are high relative to LIBOR resulting in net interest paid. While the net interest received (paid) on the associated interest rate swap is recorded in net gain (loss) on derivatives and hedging activities, the interest on the underlying hedged item, the investment securities, is recorded in interest income with any changes in fair value recognized in net gain (loss) on trading securities. Because these swaps require us to pay a rate substantially higher than LIBOR, they possess a negative fair value. However, despite the decline in interest rates during 2012, which would typically cause the fair values of these swaps to become more negative, the fair value of these swaps actually increased in value due primarily to the passage of time. As these swaps approach maturity, their current negative fair values will converge to zero resulting in an increase in their fair market value (i.e., time decay). The second largest contribution to our net loss on derivative activity can be attributed to our interest rate cap portfolio, which is an economic hedge of caps embedded in our variable rate MBS/CMO investment portfolio. During 2012, intermediate and long-term interest rates declined, the yield curve steepened and volatility declined. The larger decline in interest rates and volatility, which have the affect of decreasing the fair value of our interest rate caps, was partially offset by the steepening in the yield curve. The larger decrease in value experienced in 2011 can be attributed to a more significant decline in interest rates relative to 2012 combined with a flattening of the yield curve.

The absolute levels of interest rates, the shape of the interest rate curve, passage of time and implied volatility are all critical components in valuing options such as interest rate caps. While the absolute level of interest rates is an intuitive factor in valuing interest rate caps, the shape of the interest rate curve is also an important component as a steepening curve implies higher future short-term interest rates than does a flatter interest rate curve. Higher future short-term rates implied by a steepening interest rate curve would generally result in higher cap values while lower future short-term rates implied by a flatter interest rate curve would generally result in lower cap values. Generally, the greater the implied price volatility of the interest rate cap, the higher the value; and the lower the implied price volatility of the interest rate caps, the lower the value. See Tables 70 and 71 under Item 7A – “Quantitative and Qualitative Disclosures About Market Risk” for additional detail regarding notional and fair value amounts of derivative instruments.

41

Table 15 categorizes the 2012 earnings impact by product for hedging activities (in thousands):

Table 15

	Advances			Investments			Mortgage Loans			Consolidated Obligation Discount Notes			Consolidated Obligation Bonds			Intermediary Positions			Total
Impact of derivatives and hedging activities in net interest income:
Amortization/accretion of hedging activities	$	(11,278	)	$	-		$	(5,389	)	$	-		$	(906	)	$	-		$	(17,573	)
Net interest settlements		(175,082	)		-			-			12			143,261			-			(31,809	)
Subtotal		(186,360	)		-			(5,389	)		12			142,355			-			(49,382	)
Net gain (loss) on derivatives and hedging activities:
Fair value hedges		(1,825	)		-			-			(21	)		4,638			-			2,792
Economic hedges – unrealized gain (loss) due to fair value changes		-			(5,184	)		7,509			-			8,580			(1	)		10,904
Economic hedges – net interest received (paid)		-			(41,294	)		-			-			6,105			15			(35,174	)
Subtotal		(1,825	)		(46,478	)		7,509			(21	)		19,323			14			(21,478	)
Net impact of derivatives and hedging activities		(188,185	)		(46,478	)		2,120			(9	)		161,678			14			(70,860	)
Net gain (loss) on trading securities hedged on an economic basis with derivatives		-			(21,679	)		-			-			-			-			(21,679	)
TOTAL	$	(188,185	)	$	(68,157	)	$	2,120		$	(9	)	$	161,678		$	14		$	(92,539	)

Table 16 categorizes the 2011 earnings impact by product for hedging activities (in thousands):

Table 16

	Advances			Investments			Mortgage Loans			Consolidated Obligation Discount Notes			Consolidated Obligation Bonds			Intermediary Positions			Total
Impact of derivatives and hedging activities in net interest income:
Amortization/accretion of hedging activities	$	(18,019	)	$	-		$	(748	)	$	-		$	(1,391	)	$	-		$	(20,158	)
Net interest settlements		(216,798	)		-			-			1,254			213,634			-			(1,910	)
Subtotal		(234,817	)		-			(748	)		1,254			212,243			-			(22,068	)
Net gain (loss) on derivatives and hedging activities:
Fair value hedges		(2,031	)		-			-			(336	)		4,431			-			2,064
Economic hedges – unrealized gain (loss) due to fair value changes		-			(85,576	)		10,146			-			5,129			(17	)		(70,318	)
Economic hedges – net interest received (paid)		-			(49,564	)		-			-			9,046			29			(40,489	)
Subtotal		(2,031	)		(135,140	)		10,146			(336	)		18,606			12			(108,743	)
Net impact of derivatives and hedging activities		(236,848	)		(135,140	)		9,398			918			230,849			12			(130,811	)
Net gain (loss) on trading securities hedged on an economic basis with derivatives		-			25,288			-			-			-			-			25,288
TOTAL	$	(236,848	)	$	(109,852	)	$	9,398		$	918		$	230,849		$	12		$	(105,523	)

42

Table 17 categorizes the 2010 earnings impact by product for hedging activities (in thousands):

Table 17

	Advances			Investments			Mortgage Loans		Consolidated Obligation Discount Notes		Consolidated Obligation Bonds			Intermediary Positions			Total
Impact of derivatives and hedging activities in net interest income:
Amortization/accretion of hedging activities	$	(13,038	)	$	-		$	292	$	-	$	(1,206	)	$	-		$	(13,952	)
Net interest settlements		(277,176	)		-			-		1,903		291,622			-			16,349
Subtotal		(290,214	)		-			292		1,903		290,416			-			2,397
Net gain (loss) on derivatives and hedging activities:
Fair value hedges		(1,429	)		-			-		321		(116	)		-			(1,224	)
Economic hedges – unrealized gain (loss) due to fair value changes		-			(113,107	)		4,138		-		(11,273	)		(37	)		(120,279	)
Economic hedges – net interest received (paid)		-			(58,335	)		-		-		5,121			43			(53,171	)
Subtotal		(1,429	)		(171,442	)		4,138		321		(6,268	)		6			(174,674	)
Net impact of derivatives and hedging activities		(291,643	)		(171,442	)		4,430		2,224		284,148			6			(172,277	)
Net gain (loss) on trading securities hedged on an economic basis with derivatives		-			21,630			-		-		-			-			21,630
TOTAL	$	(291,643	)	$	(149,812	)	$	4,430	$	2,224	$	284,148		$	6		$	(150,647	)

Net Gain (Loss) on Trading Securities: All gains and losses related to trading securities are recorded in other income (loss) as net gain (loss) on trading securities; however, only gains and losses relating to trading securities that are related to economic hedges are included in Tables 15 through 17. Unrealized gains (losses) fluctuate as the fair value of our trading portfolio fluctuates. There are a number of factors that can impact the value of a trading security including the movement in absolute interest rates, changes in credit spreads, the passage of time and changes in price volatility. Table 18 presents the major components of the net gain (loss) on trading securities for the years ended December 31, 2012, 2011 and 2010 (in thousands):

Table 18

	2012			2011			2010
GSE debentures	$	(24,493	)	$	23,690		$	21,630
U.S. Government guaranteedobligations		(5,558	)		(3,259	)		-
U.S. Treasury note		-			1,449			(16,535	)
Short-term money market securities		718			(887	)		60
Agency MBS/CMO		1,285			(221	)		9,270
TOTAL	$	(28,048	)	$	20,772		$	14,425

The largest component of our trading portfolio is comprised of fixed and variable rate GSE debentures with the majority of the fixed rate securities related to economic hedges. The fair values of the fixed rate GSE securities tied to economic hedges are more affected by changes in long-term interest rates (e.g., two- year, five-year and 10-year rates) while the remaining fixed rate GSE securities are more affected by changes in intermediate-term interest rates (e.g., one-year and 18-month rates). The variable rate securities reset daily off the Federal funds effective rate. The gains experienced in 2011 can be primarily attributed to a significant decline in interest rates during 2011. In 2012, interest rates continued to decline but the movement in rates was smaller relative to 2011. These fixed rate GSE securities possess coupons which are well above market rates and, therefore, priced at a substantial premium. Despite the decline in rates and a compression in credit spreads, these securities decreased in value due primarily to the values being significantly above par coupled with the passage of time (i.e., the natural amortization of the high premium market price as the security approaches maturity). As these securities approach maturity, their prices will converge to par resulting in a decrease in their current premium price (i.e., time decay). Because the variable rate GSE debentures re-price daily, they generally account for a very small portion of the net gain (loss) on trading securities unless current market spreads on these variable rate securities diverge from the spreads at the time of our acquisition of the security.

The variable rate Agency MBS/CMOs designated as trading for asset/liability purposes also reset off of a short-term index (e.g., one-month LIBOR) and would generally account for a very small portion of the net gain (loss) on trading securities. However, the gains experienced in 2010 on these securities are a reflection of the general improvement in the mortgage market following the financial market crisis of 2007 and 2008. The gain in 2012 can be attributed to a tightening in mortgage spread during the year.

43

The short-term fixed rate U.S. Government guaranteed (by the FDIC or the National Credit Union Administration (NCUA)) bonds, like the fixed rate GSE securities, also possess coupons that are well above market rates and subsequently are priced at a substantial premium. As these securities approach maturity, their prices will converge to par resulting in a decrease in their current premium price (i.e., time decay).

In November 2010, we acquired a 10-year U.S. Treasury security as an asset-liability management tool to extend the duration of our assets in order to protect against the negative ramifications of declining interest rates. This instrument was classified as trading to provide the flexibility to adjust the position as our risk profile changed. For further discussion on our DOE and market risk position, see Item 7A – “Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk Management – Duration of Equity.” The increase in interest rates following the acquisition of the U.S. Treasury security resulted in an unrealized loss on this security during 2010 but also resulted in an improvement in our duration profile. Therefore, in early January 2011, we decreased the position by selling $100 million of this security. As our duration profile continued to improve through January, February and March 2011, we decreased the position further by selling an additional $100 million in mid-March 2011. As our duration profile continued to improve through April and May 2011, we closed our position by selling the remaining $100 million by the end of May 2011. In general, however, because of the influence of the fixed rate bonds in our trading portfolio, as interest rates rise the value of this portfolio will decrease, causing an unrealized loss to be recorded.

Controllable Operating Expenses: Controllable operating expenses include compensation and benefits and other operating expenses. As noted in Table 19, approximately two-thirds of our operating expenses consists of compensation and benefits expense. We expect the number of employees to remain stable or increase slightly during 2013 and an increase in other expenses relating to the implementation of several new regulatory requirements. Table 19 presents operating expenses for the last three years (in thousands):

Table 19

	For the Year Ended December 31,						Percent Increase (Decrease)
	2012		2011		2010			2012/2011		2011/2010
Compensation and benefits	$	29,231	$	28,604	$	26,365		2.2	%	8.5	%
Occupancy cost		1,348		1,362		1,331		(1.0	)	2.3
Other operating expense		11,518		12,495		12,513		(7.8	)	(0.1	)
TOTAL CONTROLLABLE OPERATING EXPENSES	$	42,097	$	42,461	$	40,209		(0.9	)%	5.6	%

Finance Agency and Office of Finance Expenses: We, together with the other FHLBanks, are charged for the cost of operating the Finance Agency and the Office of Finance. The Finance Agency’s operating costs are also shared by Fannie Mae and Freddie Mac, and the Recovery Act prohibits assessments on the FHLBanks for operating costs in excess of the costs and expenses related to the FHLBanks. The Recovery Act established an Office of Inspector General (OIG) within the Finance Agency to provide independent and objective reporting through its audit and investigative activities. This OIG was created in late 2010 within the Finance Agency, which increased our 2011 and 2012 expenses compared to 2010. The extent of additional costs to be shared by the FHLBanks is unknown at this time but we do not anticipate a significant increase in our Finance Agency expenses for 2013.

Assessments – AHP and REFCORP Expenses: AHP and REFCORP expenses are based on a percentage of net income and fluctuate accordingly. As noted in Item 1 – “Business – Tax Status,” each of the 12 FHLBanks was required to pay a portion of its earningstoREFCORP. However, the FHLBanks’ REFCORP obligation was satisfied as of the end of the second quarter of 2011 with the final payments made in July 2011. Accordingly, our total assessment percentage declined in 2011 and declined further in 2012. Additionally, each FHLBank is required to establish, fund and administer an AHP. As part of our AHP, we provide subsidies in the form of direct grants or below-market interest rate advances to members which use the funds to assist in the purchase, construction or rehabilitation of housing for very low-, low- and moderate-income households (see Item 1 – “Business – Other Mission-related Activities” for the specific programs funded through the AHP). The required annual AHP funding is charged to earnings and an offsetting liability is established.

44

Financial Condition

Overall: Table 20 presents changes in the major components of our Statements of Condition from December 31, 2011 to December 31, 2012 (in thousands):

Table 20

	Increase (Decrease) in Components
	December 31, 2012 vs. 2011
	Dollar Change			Percent Change
Assets:
Cash and due from banks	$	253,956			218.9	%
Investments1		197,874			1.9
Advances		(821,051	)		(4.7	)
Mortgage loans, net		1,007,185			20.4
Derivative assets		11,128			79.3
Other assets		(20,647	)		(13.2	)
TOTAL ASSETS	$	628,445			1.9	%
Liabilities:
Deposits	$	184,586			18.5	%
Consolidated obligations, net		497,370			1.6
Derivative liabilities		(16,799	)		(12.0	)
Other liabilities		(55,746	)		(27.1	)
Total liabilities		609,411			1.9
Capital:
Capital stock outstanding		(63,371	)		(4.8	)
Retained earnings		79,821			19.9
Accumulated other comprehensive income (loss)		2,584			9.3
Total capital		19,034			1.1
TOTAL LIABILITIES AND CAPITAL	$	628,445			1.9	%

1 Investments also include interest-bearing deposits, Federal funds sold and securities purchased under agreements to resell.

Advances: Our advance programs are developed, as authorized in the Bank Act and in regulations established by the Finance Agency, to meet the specific liquidity and term funding needs of our members. As a wholesale provider of funds, we compete with brokered certificates of deposit and security repurchase agreements. We strive to price our advances relative to our marginal cost of funds while trying to remain competitive with these markets. While there is less competition in the long-term maturities, member demand for advances in these maturities has historically been lower than the demand for advances with short- and medium-term maturities. Nonetheless, long-term advances are also priced at relatively low spreads to our cost of funds.

45

Table 21 summarizes advances outstanding by product as of December 31, 2012 and 2011 (in thousands):

Table 21

	December 31, 2012					December 31, 2011
	Dollar		Percent			Dollar		Percent
Adjustable rate:
Standard advance products:
Line of credit	$	1,879,317		11.7	%	$	1,084,389		6.4	%
Regular adjustable rate advances		5,000		-			-		-
Adjustable rate callable advances		5,206,859		32.3			5,787,230		34.4
Customized advances:
Adjustable rate advances with embedded caps or floors		127,000		0.8			127,000		0.8
Standard housing and community development advances:
Adjustable rate callable advances		93,934		0.6			24,243		0.1
Total adjustable rate advances		7,312,110		45.4			7,022,862		41.7
Fixed rate:
Standard advance products:
Short-term fixed rate advances		81,766		0.5			233,107		1.4
Regular fixed rate advances		5,245,443		32.6			5,597,135		33.2
Fixed rate callable advances		80,045		0.5			36,000		0.2
Standard housing and community development advances:
Regular fixed rate advances		261,911		1.6			319,494		1.9
Fixed rate callable advances		-		-			11,300		0.1
Total fixed rate advances		5,669,165		35.2			6,197,036		36.8
Convertible:
Standard advance products:
Fixed rate convertible advances		2,079,092		12.9			2,693,292		16.0
Amortizing:
Standard advance products:
Fixed rate amortizing advances		538,729		3.3			522,654		3.1
Fixed rate callable amortizing advances		42,653		0.3			5,683		-
Standard housing and community development advances:
Fixed rate amortizing advances		461,168		2.9			408,714		2.4
Fixed rate callable amortizing advances		5,680		-			252		-
Fixed rate amortizing advances funded through the AHP		-		-			2		-
Total amortizing advances		1,048,230		6.5			937,305		5.5
TOTAL PAR VALUE	$	16,108,597		100.0	%	$	16,850,495		100.0	%

Note that an individual advance may be reclassified to a different product type between periods due to the occurrence of a triggering event such as the passing of a call date (i.e., from fixed rate callable advance to regular fixed rate advance) or conversion of an advance (i.e., from fixed rate convertible advance to adjustable rate callable advance).

Total advances as a percentage of total assets decreased from 52.4 percent as of December 31, 2011 to 49.0 percent as of December 31, 2012. As of December 31, 2012 and 2011, 62.8 percent and 64.9 percent, respectively, of our members carried outstanding advance balances.

Amongst our five largest borrowers as of the end of 2012 and 2011, advance balances declined by 8.0 percent or a net of $691.7 million (see Table 23), accounting for 93.2 percent of the overall advance reduction between December 31, 2011 and December 31, 2012. The majority of the decrease is due to the repayment of advances from several larger insurance company members. This decline is also reflected in Table 22, which reflects an overall decrease in advances to insurance companies of $1.8 billion during 2012. A few of the other large borrowers increased advances during the year, which is also reflected in the $1.1 billion increase in advances to commercial banks, thrifts and credit unions included in Table 22. The overall demand for FHLBank advances can be largely attributed to the growth in deposits and the demand for loans that our depository members are experiencing in their communities. It is also influenced by our insurance company members’ need for operational liquidity and ability to profitably invest advance funding. Currently, there is no evidence to indicate that our advances will increase significantly until there is an improvement in U.S. economic activity that results in a decrease in deposits (outflow into the stock market or other investments) or an increase in loan demand at our member financial institutions. In addition, the expiration of government programs, such as the TAG program on December 31, 2012, has not materially impacted the demand for advances thus far in 2013. If advances continue to decline, we expect to: (1) repurchase excess capital stock, consistent with past practice, when and as requested; and (2) leverage capital in the range of 18:1 to 20:1 as conditions dictate. Our current practice is to target our level of non-MBS investments as a means of managing our unsecured credit risk, rather than targeting a specific leverage ratio. For this reason, it is possible that our leverage may rise above or fall below the indicated leverage ratio from time-to-time. In addition, when, and if, member advance demand changes, a few larger members could have a significant impact on the amount of total outstanding advances.

46

Rather than match fund long-term, large dollar advances, we elected to swap a significant portion of large dollar advances with longer maturities to short-term indices (one- or three-month LIBOR) to synthetically create adjustable rate advances. Consequently, advances that effectively re-price at least every three months represent 80.5 percent and 81.6 percent of our total advance portfolio as of December 31, 2012 and 2011, respectively.

Our potential credit risk from advances is concentrated in commercial banks, thrift institutions, insurance companies and credit unions in our four-state district, but also includes potential credit risk exposure to three housing associates and a small number of non-members. Table 22 presents advances outstanding by borrower type (in thousands):

Table 22

	December 31, 2012		December 31, 2011
Member advances:
Commercial banks	$	5,845,465	$	5,373,920
Thrift institutions		5,989,427		5,458,845
Credit unions		762,221		666,697
Insurance companies		3,379,736		5,213,088
Total member advances		15,976,849		16,712,550
Non-member advances:
Housing associates		60,273		46,100
Non-member borrowers1		71,475		91,845
Total non-member advances		131,748		137,945
TOTAL PAR VALUE	$	16,108,597	$	16,850,495

1 Includes former members that have merged into or were acquired by non-members.

Table 23 presents information on our five largest borrowers as of December 31, 2012 and 2011 (in thousands). If the borrower was not one of our top five borrowers for one of the periods presented, the applicable columns are left blank. We have rights to collateral with an estimated fair value in excess of the book value of these advances and, therefore, do not expect to incur any credit losses on these advances.

Table 23

	December 31, 2012					December 31, 2011
Borrower Name	Advance Par Value		Percent of Total Advance Par			Advance Par Value		Percent of Total Advance Par
MidFirst Bank	$	2,898,000		18.0	%	$	2,195,000		13.0	%
Capitol Federal Savings Bank		2,550,000		15.8			2,550,000		15.1
Security Life of Denver Ins. Co.		1,100,000		6.8			1,640,000		9.8
Security Benefit Life Insurance Co.		765,000		4.8			1,259,330		7.5
United of Omaha Life Ins. Co		639,636		4.0
Pacific Life Insurance Co.							1,000,000		5.9
TOTAL	$	7,952,636		49.4	%	$	8,644,330		51.3	%

47

Table 24 presents the interest income associated with the five borrowers with the highest interest income for the years ended December 31, 2012 and 2011 (in thousands).

Table 24

	2012					2011
Borrower Name	Advance Income		Percent of Total Advance Income1			Advance Income		Percent of Total Advance Income1
Capitol Federal Savings Bank	$	69,263		21.4	%	$	82,410		22.2	%
Pacific Life Insurance Co.		25,180		7.8			26,612		7.2
American Fidelity Assurance Co.		18,035		5.6			17,606		4.7
Security Benefit Life Insurance Co.		11,262		3.5			10,444		2.8
United of Omaha Life Ins. Co		8,420		2.6			8,228		2.2
TOTAL	$	132,160		40.9	%	$	145,300		39.1	%

1 Total advance income by borrower excludes net interest settlements on derivatives hedging the advances. Total advance income for all borrowers is net of interest receipts/(payments) on derivatives hedging advances of $(175.1) million in 2012 and $(216.8) million in 2011.

Prepayment Fees – Advances are priced based on our marginal cost of issuing matched-maturity funding while considering our related administrative and operating costs, pricing on other funding alternatives available to members and desired profitability targets. Advances with a maturity or re-pricing period greater than three months that do not include call features that can be exercised at the option of the member generally incorporate a fee sufficient to make us financially indifferent should the borrower decide to prepay the advance.

Letters of Credit – We also issue letters of credit for members. Members must collateralize letters of credit at the date of issuance and at all times thereafter. Letters of credit are secured in accordance with the same requirements as for advances. However, letters of credit issued or confirmed on behalf of a member to: (1) facilitate residential housing finance; or (2) facilitate community lending may also be secured by state and local government securities. Outstanding letters of credit balances totaled $2.6 billion and $2.8 billion as of December 31, 2012 and 2011, respectively.

Housing Associates – We are permitted under the Bank Act to make advances to housing associates, which are non-members that are approved mortgagees under Title II of the National Housing Act. All outstanding advances to housing associates are to state housing finance authorities. Totals as of December 31, 2012 and 2011, which are noted in Table 22, represent less than one percent of total advance par values for each period presented.

MPF Program: The MPF Program is an attractive secondary market alternative for our members, especially the smaller institutions in our district. We participate in the MPF Program through the MPF Provider, a division of FHLBank of Chicago. Under the MPF Program, participating members can sell us fixed rate, size-conforming, single-family mortgage loans.

The amount of new loans acquired from in-district PFIs during 2012 was $2.5 billion. These new originations and acquisitions, net of loan payments received and excluding amounts participated to other FHLBanks, resulted in a sizable increase in the outstanding balance of our mortgage loan portfolio from December 31, 2011 to December 31, 2012 (see Table 20). With only a slight increase in total assets and the acquisition level of new originations increasing, mortgage loans as a percentage of total assets increased from 14.9 percent as of December 31, 2011 to 17.6 percent as of December 31, 2012.

The primary factors that may influence future growth in mortgage loans held for portfolio include: (1) the number of new and delivering PFIs; (2) the mortgage loan origination volume of current PFIs; (3) refinancing activity; (4) the level of interest rates and the shape of the yield curve; (5) the relative competitiveness of MPF pricing to the prices offered by other buyers of mortgage loans; and (6) reclassifying and selling specific mortgage loan pools. In an effort to manage the level of mortgage loans on our books, management has researched and continues to review options that may help manage the overall level of our mortgage loan portfolio. Those options include participating loan volume or selling whole loans to other FHLBanks, members or other investors.

In 2012, we began an MPF loan volume participation arrangement with another FHLBank and also implemented the MPF Xtra product. The combination of these two options is expected to provide management with adequate means to control the amount of MPF portfolio volume retained on the balance sheet. Both options are still in use in 2013 and are described below:

§   Mortgage Loan Participations – We entered into an agreement with FHLBank of Indianapolis in 2012 to sell participation interests in master commitments of FHLBank Topeka’s PFIs and as a result, FHLBank of Indianapolis acquired $230.8 million in participation volume during the year from certain of our PFIs. The risk sharing and rights are allocated pro-ratably based upon each FHLBank’s percentage participation in the related master commitment. We, as the Owner Bank, remain responsible for managing the PFI relationship and ensuring compliance with program requirements. The risk sharing and rights of us and FHLBank of Indianapolis are as follows:

·   Each pays its respective pro rata share of each mortgage loan acquired;

·   Each receives its respective pro rata share of principal and interest payments and is responsible for CE Fees based upon its participation percentage for each mortgage loan under the related delivery commitment; and

·   Each is responsible for its respective pro rata share of FLA exposure and losses incurred with respect to the master commitment based upon the overall risk sharing percentage for the master commitment.

§   MPF Xtra – As described under Item 1 – “Business – Mortgage Loans,” the MPF Xtra product is a structure where our PFIs sell loans to FHLBank Chicago and simultaneously to Fannie Mae. We receive a counterparty fee from FHLBank Chicago (Fannie Mae seller-servicer) for our PFI participating in the MPF Xtra product. Although volume was minimal in 2012, we anticipate increased participation in this product in 2013.

48

The number of approved PFIs increased from 221 as of December 31, 2011 to 245 as of December 31, 2012. During 2012, we purchased loans from 185 PFIs with no one PFI accounting for more than 7 percent of the total volume purchased by the FHLBank. Although there is no guarantee, we anticipate that the number of PFIs delivering loans will continue to increase during 2013 as other secondary mortgage outlets become less competitive or less available to many of our members. Table 25 presents our top five PFIs, the outstanding balances of mortgage loans sold to us as of December 31, 2012 and 2011 (in thousands) and the percentage of those loans to total mortgage loans outstanding on those dates. If a PFI was not one of the top five for one of the years presented, the applicable columns are left blank. The outstanding balances for Bank of America and Bank of the West (non-members that do not have the ability to actively sell loans to us under the MPF Program) have declined with the prepayment of loans held in those portfolios.

Table 25

	Mortgage Loan Balance as of December 31, 2012		Percent of Total Mortgage Loans			Mortgage Loan Balance as of December 31, 2011		Percent of Total Mortgage Loans
Mutual of Omaha Bank	$	402,279		6.9	%	$	444,959		9.1	%
Bank of America, N.A.1		174,582		3.0			234,903		4.8
Farmers Bank & Trust N.A.		155,887		2.7			195,978		4.0
FirstBank of Colorado		150,184		2.6
Bank of the West2		129,891		2.2			183,313		3.8
West Gate Bank3							128,325		2.6
TOTAL	$	1,012,823		17.4	%	$	1,187,478		24.3	%

1	Formerly La Salle Bank, N.A., an out-of-district PFI in which we previously participated in mortgage loans with the FHLBank of Chicago.
2	Formerly Commercial Federal Bank, FSB headquartered in Omaha, NE. Bank of the West acquired Commercial Federal Bank, FSB on December 2, 2005. Bank of the West is a member of the FHLBank of San Francisco.
3	On October 15, 2010, Security Savings Bank, FSB was placed into receivership by the FDIC and the servicing and CE obligation were subsequently purchased from the FDIC by West Gate Bank, Lincoln, NE. On August 26, 2011, we entered into a settlement agreement with the FDIC to satisfy the originating representations and warranties.

Table 26 presents information regarding the asset quality of our mortgage loan portfolio as of December 31, 2012, 2011, 2010, 2009 and 2008 (in thousands):

Table 26

	2012			2011			2010			2009			2008
Nonaccrual, past due and restructured loans
Nonaccrual loans, unpaid principal balance1	$	25,139		$	25,772		$	25,714		$	22,730		$	8,934
Loans past due 90 days or more and still accruing interest, unpaid principal balance		7,798			11,397			9,439			4,800			948
Allowance for credit losses on mortgage loans
Beginning balance	$	3,473		$	2,911		$	1,897		$	884		$	844
Charge-offs/recoveries2		(553	)		(496	)		(483	)		(241	)		(156	)
Provision for mortgage loan losses		2,496			1,058			1,582			1,254			196
Mortgage loans transferred to held for sale		-			-			(85	)		-			-
Ending balance	$	5,416		$	3,473		$	2,911		$	1,897		$	884
Interest income shortfall for nonaccrual loans
Gross amount of interest income that would have been recorded based on original terms	$	1,580		$	1,669		$	1,785		$	1,413		$	585
Interest actually recognized in income during the period		(1,155	)		(1,168	)		(1,401	)		(1,108	)		(494	)
Shortfall	$	425		$	501		$	384		$	305		$	91

1

Conventional real estate mortgage loans are classified as nonaccrual when they are contractually past due 90 days or more at which time interest is no longer accrued. Interest continues to accrue on government-insured real estate mortgage loans (e.g., FHA, VA, HUD and RHS loans) that are contractually past due 90 days or more. Nonaccrual loans include troubled debt restructurings of $1.3 million, $0.5 million and $0.2 million as of December 31, 2012, 2011 and 2010, respectively. Troubled debt restructurings are restructurings in which we, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

2

The ratio of net charge-offs/recoveries to average loans outstanding was less than one basis point for the periods ending December 31, 2012, 2011, 2010, 2009 and 2008.

49

The serious delinquency rate of the mortgage loan portfolio declined slightly from December 31, 2011 to December 31, 2012 (see Table 27). According to the December 31, 2012 Mortgage Bankers Association National Delinquency survey, the weighted average of all conventional mortgage loans 90 days or more past due was 3.3 percent. This is approximately eight times the level of seriously delinquent loans in our mortgage loan portfolio. Table 27 presents delinquency information for the unpaid principal of conventional mortgage loans as of December 31, 2012 and December 31, 2011 (in thousands):

Table 27

	December 31, 2012			December 31, 2011
30 to 59 days delinquent and not in foreclosure	$	24,525		$	29,958
60 to 89 days delinquent and not in foreclosure		7,780			8,787
90 days or more delinquent and not in foreclosure		10,666			10,310
In process of foreclosure1		11,519			13,242
Total conventional mortgage loans delinquent or in process of foreclosure	$	54,490		$	62,297
Real estate owned (carrying value)	$	3,915		$	4,489
Serious delinquency rate2		0.4	%		0.6	%

1	Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported.
2	Conventional loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total conventional loan portfolio principal balance. Only fixed rate prime conventional mortgage loans are held in the MPF portfolio.

Two indications of credit quality are FICO scores and LTV ratios. FICO is a widely used credit industry indicator to assess borrower credit quality with scores typically ranging from 300 to 850 with the low end of the scale indicating greater credit risk. In February 2010, the MPF Program instituted a minimum FICO score of 620 for all conventional loans. Table 28 provides the percentage distribution of FICO scores at origination for conventional mortgage loans outstanding in the traditional MPF products as of December 31, 2012 and 2011:

Table 28

FICO Score1	December 31, 2012			December 31, 2011
< 620		1.2	%		1.7	%
620 to < 660		3.7			4.0
660 to < 700		10.8			11.7
700 to < 740		18.2			19.0
>= 740		66.1			63.6
		100.0	%		100.0	%
Weighted average		752			748

1 Represents the original FICO score of the lowest-scoring borrower for the related loan.

LTV is a primary variable in credit performance. Generally speaking, a higher LTV ratio means greater risk of loss in the event of a default and also means higher loss severity. Table 29 provides LTV ratios at origination for conventional mortgage loans outstanding in the traditional MPF products as of December 31, 2012 and 2011:

Table 29

LTV	December 31, 2012			December 31, 2011
<= 60%		19.2	%		19.4	%
> 60% to 70%		15.5			15.4
> 70% to 80%		52.7			52.0
> 80% to 90%		7.3			7.8
> 90% to < 100%		5.3			5.4
		100.0	%		100.0	%
Weighted average		71.8	%		71.8	%

50

Our mortgage loans held in portfolio were dispersed across all 50 states and the District of Columbia as of December 31, 2012 and 2011. Table 30 is a summary of the geographic concentration percentage of our conventional mortgage loan portfolio by state as of December 31, 2012 and 2011.

Table 30

	12/31/2012			12/31/2011
Kansas		33.5	%		33.0	%
Nebraska		25.3			27.8
Oklahoma		13.3			11.9
Colorado		11.5			7.8
California		2.9			3.3
All other		13.5			16.2
TOTAL		100.0	%		100.0	%

The credit risk of MPF loans sold under the traditional products is managed by structuring potential credit losses into certain layers. As is customary for conventional mortgage loans, PMI is required for MPF loans with LTVs greater than 80 percent. Losses beyond the PMI layer are absorbed by an FLA established for each pool of mortgage loans sold by a PFI up to the maximum amount of the remaining FLA net of credit losses.

If losses beyond our FLA layer are incurred for any given pool of mortgage loans, they are then absorbed through a CE obligation of the PFI that sold the mortgage loans to us, limited to the remaining CE obligation (see Item 1 – “Business – Mortgage Loans” for additional information). For additional information regarding the layers of loss protection, see Note 7 of the Notes to Financial Statements included under Item 8 – “Financial Statements and Supplementary Data.” Table 31 presents the outstanding principal balance and average CE obligation by traditional MPF product for our mortgage loan portfolio as of December 31, 2012 and 2011 (amounts in thousands):

Table 31

	December 31, 2012					December 31, 2011
	Outstanding Balance		Average CE Obligation			Outstanding Balance		Average CE Obligation
Original MPF	$	3,626,257		6.4	%	$	3,036,659		5.7	%
MPF 100		122,562		8.9			188,371		5.9
MPF 125		1,229,060		4.0			806,914		3.4
MPF Plus		174,582		-			234,903		-
MPF Government		685,285					603,032
TOTAL PAR VALUE	$	5,837,746				$	4,869,879

Allowance for Credit Losses on Mortgage Loans Held for Portfolio – The allowance for credit losses on mortgage loans held for portfolio is based on our estimate of probable credit losses inherent in our portfolio as of the Statement of Condition date. The estimate is based on an analysis of our historical loss experience (see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” for further information). The provision for mortgage loan losses has increased with an increase in the outstanding balance of mortgage loans. We believe that policies and procedures are in place to effectively manage the credit risk on mortgage loans held for portfolio.

Investments: Investments other than MBS are generally used for liquidity purposes. In addition, but to a lesser extent, non-MBS investments are utilized to leverage capital during periods when advances decline, debt cannot be efficiently retired and capital stock is not reduced in proportion to the decline in advances.

Short-term Investments – Short-term investments, which are used to provide funds to meet the credit needs of our members and to maintain liquidity, consist primarily of reverse repurchase agreements, deposits in banks, overnight Federal funds, term Federal funds, certificates of deposit and commercial paper. The Bank Act and Finance Agency regulations set liquidity requirements for us, and our board of directors has also adopted additional liquidity policies. In addition, we maintain a contingency liquidity plan in the event of operational disruptions. See “Risk Management – Liquidity Risk Management” under this Item 7 for a discussion of the FHLBanks’ liquidity management.

Within our portfolio of short-term investments, we face credit risk from unsecured exposures. Our unsecured credit investments have maturities generally ranging between overnight and three months and include the following types:

§  Interest-bearing deposits. Primarily consists of unsecured deposits that earn interest.

§  Federal funds sold. Unsecured loans of reserve balances at the Federal Reserve Banks between financial institutions that are made on either an overnight or term basis.

§  Commercial paper. Unsecured debt issued by corporations, typically for the financing of accounts receivable, inventories, and meeting short-term liabilities.

§  Certificates of deposit. Unsecured negotiable promissory notes issued by banks and payable to the bearer on demand.

51

Table 32 presents the carrying value of our unsecured credit exposure with private counterparties by investment type as of December 31, 2012 and 2011 (in thousands). The unsecured investment credit exposure presented may not reflect the average or maximum exposure during the period as the balances presented reflect the balances at period end. There has been a substantial reduction in unsecured short term investments between the end of 2011 and 2012. Most of the reduction in unsecured short term investments has been transitioned to secured short term investments through the use of reverse repurchase agreements with approved counterparties and broker/dealers.

Table 32

	12/31/2012		12/31/2011
Federal funds sold	$	850,000	$	1,040,000
Commercial paper		59,996		599,482
Certificates of deposit		325,006		1,019,520
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	1,235,002	$	2,659,002

__________

1 Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies and instrumentalities, GSEs and supranational entities and does not include related accrued interest.

As of December 31, 2012, all of our unsecured investment credit exposure was to U.S. branches and agency offices of foreign commercial banks.

We actively monitor our credit exposures and the credit quality of our counterparties, including an assessment of each counterparty’s financial performance, capital adequacy, sovereign support and the current market perceptions of the counterparties. General macro-economic, political and market conditions may also be considered when deciding on unsecured exposure. As a result, we may further limit existing exposures.

Finance Agency regulations include limits on the amount of unsecured credit an individual FHLBank may extend to a counterparty or to a group of affiliated counterparties. This limit is based on a percentage of eligible regulatory capital and the counterparty’s overall credit rating. Under these regulations, the level of eligible regulatory capital is determined as the lesser of an individual FHLBank’s total regulatory capital or the eligible amount of regulatory capital of the counterparty. The eligible amount of regulatory capital is then multiplied by a stated percentage. The percentage that an FHLBank may offer for term extensions of unsecured credit ranges from 1 percent to 15 percent based on the counterparty’s long-term credit rating. The calculation of term extensions of unsecured credit includes on-balance sheet transactions, off-balance sheet commitments and derivative transactions. See “Risk Management – Credit Risk Management” under this Item 2 for additional information related to derivative exposure.

Finance Agency regulation also permits us to extend additional unsecured credit for overnight extensions of credit. Our total overnight unsecured exposure to a counterparty may not exceed twice the regulatory limit for term exposures, or a total of 2 percent to 30 percent of the eligible amount of regulatory capital, based on the counterparty’s credit rating. We, however, generally limit our unsecured exposure to any private counterparty to no more than the balance of our retained earnings. As of December 31, 2012, we were in compliance with the regulatory limits established for unsecured credit, and our unsecured credit exposure to any individual private counterparty did not exceed the balance of our retained earnings on that date.

We are prohibited by Finance Agency regulation from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks. Our unsecured credit exposures to U.S. branches and agency offices of foreign commercial banks include the risk that, as a result of political or economic conditions in a country, the counterparty may be unable to meet their contractual repayment obligations. Our unsecured credit exposures to domestic counterparties and U.S. subsidiaries of foreign commercial banks include the risk that these counterparties have extended credit to foreign counterparties. We are in compliance with the regulation and did not own any financial instruments issued by foreign sovereign governments, including those countries that are members of the European Union, as of and for the period ended December 31, 2012.

We manage our credit risk by conducting pre-purchase credit due diligence and on-going surveillance described previously and generally investing in unsecured investments of highly-rated counterparties. From time to time, we extend unsecured credit to qualified members by investing in overnight Federal funds issued by them. In general, we treat members as any other market participant. However, since they are members and we have more access to specific financial information about our members, we have a lower capital requirement than for non-members, but members must still meet our credit ratings requirements. As of December 31, 2012, all unsecured term investments were rated as investment grade based on NRSROs (see Table 36).

Table 33 (in thousands) presents the remaining contractual maturity of our unsecured investment credit exposure by the domicile of the counterparty or the domicile of the counterparty’s parent for U.S. branches and agency offices of foreign commercial banks. We also mitigate the credit risk on investments by generally investing in investments that have short-term maturities. As of December 31, 2012, 68.8 percent of the carrying value of the total unsecured investments held by the FHLBank had overnight maturities.

Table 33

Domicile of Counterparty	Overnight		Due 2 – 30 days		Due 31 – 90 days		Total
U.S. Branches and agency offices of foreign commercial banks:
Canada	$	300,000	$	125,003	$	-	$	425,003
Netherlands		300,000		-		-		300,000
Australia		-		59,996		200,003		259,999
Sweden		150,000		-		-		150,000
Norway		100,000		-		-		100,000
TOTAL UNSECURED INVESTMENT CREDIT EXPOSURE1	$	850,000	$	184,999	$	200,003	$	1,235,002

__________

1 Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies and instrumentalities, GSEs and supranational entities and does not include related accrued interest.

52

In response to the ongoing sovereign debt crisis in Europe and the continuing deterioration in the credit profile of many European financial institutions, we initiated a realignment of our unsecured money market investment portfolio during the latter part of 2011. This portfolio realignment resulted in a reduction in our exposure to private counterparties on an unsecured basis and an increase in exposure to private counterparties on a secured basis through the use of reverse repurchase agreements. We anticipate the continuation of investing on a secured basis through the use of reverse repurchase agreements in the future and maintaining a reduced unsecured exposure to financial institutions, especially foreign financial institutions. To enhance our liquidity position, we classify our unsecured short-term investment securities as Trading, which allows us to sell these securities if necessary.

Long-term investments – Our long-term investment portfolio consists primarily of Agency debentures, MBS/ABS, and taxable state housing finance agency securities. Our Risk Management Policy (RMP) restricts the acquisition of investments to highly rated long-term securities. Long-term securities are used to provide a reliable income flow and to achieve a desired maturity structure. The majority of these long-term securities are Agency MBS/CMOs, which provide an alternative means to promote liquidity in the mortgage finance markets while providing attractive returns. Agency debentures are the other significant investment class that we hold in our long-term investment portfolio. They provide attractive returns, can serve as excellent collateral (e.g., repurchase agreements and net derivatives exposure) and are classified as trading securities to enhance our liquidity position. Over half of our unsecured Agency debentures are fixed rate bonds, which are swapped from fixed to variable rates. The swaps do not qualify for hedge accounting, which results in the net interest payments or receipts on these economic hedges flowing through Net Gain (Loss) on Derivatives and Hedging Activities instead of Net Interest Income. All swapped Agency debentures are classified as trading securities.

According to Finance Agency regulation codified at 12 C.F.R. §1267.3, no additional MBS purchases can be made if the amortized cost of our mortgage securities exceeds 300 percent of our regulatory capital. Further, quarterly increases in holdings of mortgage securities are restricted to no more than 50 percent of regulatory capital. During 2012, we purchased $1.8 billion par amount of fixed and variable rate Agency MBS/CMOs and pass-throughs. Of these mortgage investments, $0.3 billion were fixed rate and $1.5 billion were variable rate. Of the variable rate purchases, $0.6 billion were Agency Delegated Underwriting and Servicing (DUSTM) multi-family MBS without an embedded interest rate cap. We anticipate making further purchases of MBS/CMOs throughout 2013 as pay downs reduce our MBS portfolio below 300 percent of regulatory capital. As of December 31, 2012, the amortized cost of our MBS/CMO portfolio represented 306 percent of our regulatory capital. As of December 31, 2012, we held $253.0 million of par value in MBS/CMOs in our trading portfolio for liquidity purposes and to provide additional balance sheet flexibility. All of the MBS/CMOs in the trading portfolio are variable rate Agency securities.

We provide standby bond purchase agreements (SBPA) to two state HFAs within the Tenth District. For a predetermined fee, we accept an obligation to purchase the authorities’ bonds if the remarketing agent is unable to resell the bonds to suitable investors, and to hold the bonds until: (1) the designated remarketing agent can find a suitable investor; (2) we successfully exercise our right to sell the bonds; or (3) the HFA repurchases the bonds according to a schedule established by the SBPA. Although we only had SBPAs with state HFAs within the Tenth District as of the end of the 2011, during 2012 we acquired a participation interest in a SBPA between another FHLBank and an HFA in its district. The standby bond purchase commitments executed and outstanding as of December 31, 2012 expire no later than 2015 though they are renewable upon request of the HFA and at our option. Total commitments for bond purchases under the SBPAs were $1.6 billion and $1.5 billion as of December 31, 2012 and 2011. We were not required to purchase any bonds under these agreements during 2012 or 2011. We plan to continue to support the state HFAs in our district by continuing to execute SBPAs where appropriate and when allowed by our RMP. We may continue to acquire participation interests in SBPAs with other FHLBanks and/or directly enter into SBPAs with out-of-district HFAs in the future.

Major Security Types – Securities for which we have the ability and intent to hold to maturity are classified as held-to-maturity securities and recorded at carrying value, which is the net total of par, premiums, discounts and credit and non-credit OTTI discounts. We classify certain investments as trading securities and carry them at fair value. Changes in the fair values of these investments are recorded through other income and original premiums/discounts on these investments are not amortized. We do not practice active trading, but hold trading securities for asset/liability management purposes, including liquidity. Certain investments that we may sell before maturity are classified as available-for-sale and carried at fair value, although we had no available-for-sale securities as of December 31, 2012 or 2011. If fixed rate securities are hedged with interest rate swaps, we classify the securities as trading securities so that the changes in fair values of both the derivatives hedging the securities and the trading securities are recorded in other income. Securities acquired as asset/liability management tools to manage duration risk, which are likely to be sold when the duration risk is no longer present, are classified as available-for-sale or trading securities. See Note 4 in the Notes to Financial Statements included in Item 8 to this report for additional information on our different investment classifications including what types of securities are held under each classification. The carrying value of our investments as of December 31, 2012, 2011 and 2010 are summarized by security type in Table 34 (in thousands).

53

Table 34

	December 31, 2012		December 31, 2011		December 31, 2010
Trading securities:
Commercial paper	$	59,996	$	599,482	$	2,349,565
Certificates of deposit		325,006		1,019,520		1,755,013
U.S. guaranteed debentures		-		494,236		-
U.S. Treasury notes		-		-		282,996
GSE debentures		2,126,327		2,098,844		1,505,723
Mortgage-backed securities:
Other U.S. obligation residential MBS		1,277		1,380		1,534
GSE residential MBS		252,312		345,701		440,108
Total trading securities		2,764,918		4,559,163		6,334,939
Held-to-maturity securities:
State and local housing agency obligations		69,442		84,548		99,012
Mortgage-backed or asset-backed securities:
Other U.S. obligation residential MBS		85,484		18,167		23,048
GSE residential MBS		4,509,121		4,064,679		5,374,220
Private-label residential MBS		494,631		771,478		1,217,904
Private-label commercial MBS		-		37,077		40,022
Manufactured housing loan ABS		-		-		88
Home equity loan ABS		1,072		1,383		1,684
Total held-to-maturity securities		5,159,750		4,977,332		6,755,978
Total securities		7,924,668		9,536,495		13,090,917
Interest-bearing deposits		455		42		24
Federal funds sold		850,000		1,040,000		1,755,000
Securities purchased under agreements to resell		1,999,288		-		-
TOTAL INVESTMENTS	$	10,774,411	$	10,576,537	$	14,845,941

54

The contractual maturities of our investments as of December 31, 2012 are summarized by security type in Table 35 (in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

Table 35

	Due in one year or less			Due after one year through five years			Due after five years through 10 years			Due after 10 years			Carrying Value
Trading securities:
Commercial paper	$	59,996		$	-		$	-		$	-		$	59,996
Certificates of deposit		325,006			-			-			-			325,006
GSE debentures		237,435			1,888,892			-			-			2,126,327
Mortgage-backed securities:
Other U.S. obligation residential MBS		-			-			-			1,277			1,277
GSE residential MBS		-			-			-			252,312			252,312
Total trading securities		622,437			1,888,892			-			253,589			2,764,918
Yield on trading securities		0.64	%		2.94	%		-	%		1.57	%
Held-to-maturity securities:
State and local housing agency obligations		-			-			22,780			46,662			69,442
Mortgage-backed or asset-backed securities:
Other U.S. obligation residential MBS		-			171			711			84,602			85,484
GSE residential MBS		-			-			676,116			3,833,005			4,509,121
Private-label residential MBS		-			2,647			70,720			421,264			494,631
Home equity loan ABS		-			-			-			1,072			1,072
Total held-to-maturity securities		-			2,818			770,327			4,386,605			5,159,750
Yield on held-to-maturity securities		-	%		4.14	%		2.13	%		2.00	%
Total securities		622,437			1,891,710			770,327			4,640,194			7,924,668
Yield on total securities		0.64	%		2.94	%		2.13	%		1.98	%
Interest-bearing deposits		455			-			-			-			455
Federal funds sold		850,000			-			-			-			850,000
Securities purchased under agreements to resell		1,999,288			-			-			-			1,999,288
TOTAL INVESTMENTS	$	3,472,180		$	1,891,710		$	770,327		$	4,640,194		$	10,774,411

55

Securities Ratings – Table 36 presents the carrying value of our investments by rating as of December 31, 2012 (in thousands). The ratings presented are the lowest ratings available for each security based on NRSROs.

Table 36

	Investment Ratings December 31, 2012 Carry Value1
	Investment Grade								Below Investment
	Triple-A		Double-A		Single-A		Triple-B		Grade		Unrated		Total
Interest-bearing deposits	$	-	$	455	$	-	$	-	$	-	$	-	$	455
Federal funds sold2		-		450,000		400,000		-		-		-		850,000
Securities purchased under agreements to resell3		-		-		1,299,288		-		-		700,000		1,999,288
Investment securities:
Non-mortgage-backed securities:
Commercial paper2		-		59,996		-		-		-		-		59,996
Certificates of deposit2		-		325,006		-		-		-		-		325,006
GSE debentures		-		2,126,327		-		-		-		-		2,126,327
State or local housing agency obligations		21,347		30,000		-		18,095		-		-		69,442
Total non-mortgage-backed securities		21,347		2,541,329		-		18,095		-		-		2,580,771
Mortgage-backed or asset-backed securities:
Other U.S. obligations residential MBS		-		86,761		-		-		-		-		86,761
GSE residential MBS		-		4,761,433		-		-		-		-		4,761,433
Private label residential MBS		3,475		55,094		42,235		170,997		222,710		120		494,631
Home equity loan ABS		-		-		-		-		1,072		-		1,072
Total mortgage-backed securities		3,475		4,903,288		42,235		170,997		223,782		120		5,343,897
TOTAL INVESTMENTS	$	24,822	$	7,895,072	$	1,741,523	$	189,092	$	223,782	$	700,120	$	10,774,411

1	Investment amounts represent the carrying value and do not include related accrued interest receivable of $24.0 million at December 31, 2012.
2	Amounts represent unsecured credit exposure with original maturities ranging between overnight and 92 days.
3	Amounts represent collateralized overnight borrowings by counterparty rating.

56

Table 37 presents the carrying value of our investments by rating as of December 31, 2011 (in thousands). The ratings presented are the lowest ratings available for each security based on NRSROs.

Table 37

	Investment Ratings December 31, 2011 Carry Value1
	Investment Grade								Below Investment
	Triple-A		Double-A		Single-A		Triple-B		Grade		Total
Interest-bearing deposits	$	-	$	42	$	-	$	-	$	-	$	42
Federal funds sold2		-		890,000		150,000		-		-		1,040,000
Investment securities:
Non-mortgage-backed securities:
Commercial paper2		-		599,482		-		-		-		599,482
Certificates of deposit2		-		1,019,520		-		-		-		1,019,520
U.S. guaranteed debentures		-		494,236		-		-		-		494,236
GSE debentures		-		2,098,844		-		-		-		2,098,844
State or local housing agency obligations		26,073		37,035		-		21,440		-		84,548
Total non-mortgage-backed securities		26,073		4,249,117		-		21,440		-		4,296,630
Mortgage-backed or asset-backed securities:
Other U.S. obligations residential MBS		-		19,547		-		-		-		19,547
GSE residential MBS		-		4,410,380		-		-		-		4,410,380
Private label residential MBS		173,167		56,560		98,035		166,335		277,381		771,478
Private label commercial MBS		37,077		-		-		-		-		37,077
Home equity loan ABS		-		-		-		-		1,383		1,383
Total mortgage-backed securities		210,244		4,486,487		98,035		166,335		278,764		5,239,865
TOTAL INVESTMENTS	$	236,317	$	9,625,646	$	248,035	$	187,775	$	278,764	$	10,576,537

1	Investment amounts represent the carrying value and do not include related accrued interest receivable of $28.9 million at December 31, 2011.
2	Amounts represent unsecured credit exposure with original maturities ranging between overnight and 93 days.

Securities Concentrations – Table 38 presents securities held from issuers, excluding securities issued or guaranteed by U.S. government agencies, with book values greater than ten percent of our capital as of December 31, 2012 (in thousands):

Table 38

December 31, 2012
Name of Issuer	Total Book Value		Total Fair Value
National Australia Bank Ltd.	$	200,003	$	200,003

Note: The issuer of these securities is not an FHLBank Topeka member or a subsidiary of an FHLBank Topeka member.

Private-label Mortgage-backed and Asset-backed Securities – We have not purchased a private-label MBS/ABS investment since June 2006, and on March 24, 2011, our Board of Directors approved management’s recommendation to remove our authority to purchase these types of investments from our RMP. All of our prior acquisitions of private-label MBS/ABS investments carried the highest ratings from Moody’s, Fitch or S&P when acquired. Only private-label residential MBS investments with weighted average FICO scores of 700 or above and weighted average LTVs of 80 percent or lower at the time of acquisition were purchased. We classify private-label MBS/ABS as prime, Alt-A and subprime based on the originator’s classification at the time of origination or based on classification by an NRSRO upon issuance of the MBS/ABS.

57

Table 39 presents a summary of the UPB of private-label MBS/ABS by interest rate type and by type of collateral as of December 31, 2012 and 2011 (in thousands):

Table 39

	December 31, 2012						December 31, 2011
	Fixed Rate1		Variable Rate1		Total		Fixed Rate1		Variable Rate1		Total
Private-label residential MBS:
Prime	$	142,031	$	146,728	$	288,759	$	320,747	$	174,778	$	495,525
Alt-A		131,801		104,021		235,822		180,663		127,746		308,409
Total private-label residential MBS		273,832		250,749		524,581		501,410		302,524		803,934
Private-label commercial MBS:
Prime		-		-		-		37,077		-		37,077
Home equity loan ABS:
Subprime		-		3,685		3,685		-		4,272		4,272
TOTAL	$	273,832	$	254,434	$	528,266	$	538,487	$	306,796	$	845,283

1 The determination of fixed or variable rate is based upon the contractual coupon type of the security.

58

During 2008, we experienced a significant decline in the estimated fair values of our private-label MBS/ABS due to interest rate volatility, illiquidity in the market place and credit deterioration in the U.S. mortgage markets. Beginning in the second quarter of 2009, the pace of this decline slowed appreciably and since that time, the fair value of many of our prime, early vintage private-label MBS/ABS actually improved from year-end 2008. Fair values continued to improve, although only slightly through 2012. The declines in fair values were particularly evident across the market for private-label MBS/ABS securitized in 2006, 2007 and 2008 due to less stringent underwriting standards used by mortgage originators during those years. Ninety-six percent of our private-label MBS/ABS were securitized prior to 2006, and there are no securities in the portfolio issued after June 2006. As a result of this higher quality, well-seasoned portfolio, we have not experienced significant losses in our private-label MBS/ABS portfolio from OTTI. While some of the most significant declines in fair values have been in the late 2006, 2007 and 2008 vintage MBS/ABS, earlier vintages have not been immune to the declines in fair value. Tables 40 through 42 present statistical information for our private-label MBS/ABS by year of securitization and collateral type as of December 31, 2012 (dollar amounts in thousands):

Table 40

Private-Label Mortgage-Backed Securities and Home Equity Loan Asset-Backed Securities By Year of Securitization - Prime
	Total			2006			2005			2004 and Prior
Private-label residential MBS:
UPB by credit rating:
Triple-A	$	3,475		$	-		$	-		$	3,475
Double-A		45,615			-			-			45,615
Single-A		38,656			-			-			38,656
Triple-B		93,351			-			6,200			87,151
Below investment grade:
Double-B		53,591			7,718			10,860			35,013
Single-B		24,888			2,983			18,290			3,615
Triple-C		3,928			-			-			3,928
Double-C		20,907			10,250			10,657			-
Single-C		4,228			-			4,228			-
Unrated		120			-			-			120
TOTAL	$	288,759		$	20,951		$	50,235		$	217,573
Amortized cost	$	287,015		$	20,548		$	49,601		$	216,866
Gross unrealized losses		(12,156	)		-			(314	)		(11,842	)
Fair value		277,454			20,937			49,974			206,543
OTTI:
Credit-related OTTI	$	502		$	227		$	81		$	194
Non-credit-related OTTI		92			223			(81	)		(50	)
TOTAL	$	594		$	450		$	-		$	144
Weighted average percentage of fair value to UPB		96.1	%		99.9	%		99.5	%		94.9	%
Original weighted average credit support1		3.6			3.0			3.1			3.8
Weighted average credit support1		9.3			4.3			5.8			10.6
Weighted average collateral delinquency2		7.6			11.3			8.9			7.0

1	Credit support is defined as the percentage of subordinate tranches and over-collateralization, if any, in a security structure that will absorb losses before the holders of the security will incur losses.
2	Collateral delinquency is based on the sum of loans greater than 60 days delinquent plus loans in foreclosure plus loans in bankruptcy plus REO.

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Table 41

Private-Label Mortgage-Backed Securities and Home Equity Loan Asset-Backed Securities By Year of Securitization – Alt-A
	Total			2005			2004 and Prior
Private-label residential MBS:
UPB by credit rating:
Double-A	$	9,567		$	-		$	9,567
Single-A		3,702			-			3,702
Triple-B		77,801			-			77,801
Below investment grade:
Double-B		18,774			2,200			16,574
Single-B		43,869			15,744			28,125
Triple-C		48,780			26,842			21,938
Double-C		9,795			6,728			3,067
Single-D		23,534			23,534			-
TOTAL	$	235,822		$	75,048		$	160,774
Amortized cost	$	228,265		$	68,131		$	160,134
Gross unrealized losses		(13,366	)		(6,652	)		(6,714	)
Fair value		217,737			62,034			155,703
OTTI:
Credit-related OTTI	$	1,024		$	875		$	149
Non-credit-related OTTI		3,487			(873	)		4,360
TOTAL	$	4,511		$	2		$	4,509
Weighted average percentage of fair value to UPB		92.3	%		82.7	%		96.8	%
Original weighted average credit support1		5.0			5.7			4.7
Weighted average credit support1		10.5			5.6			12.8
Weighted average collateral delinquency2		11.4			14.4			10.1

1	Credit support is defined as the percentage of subordinate tranches and over-collateralization, if any, in a security structure that will absorb losses before the holders of the security will incur losses.
2	Collateral delinquency is based on the sum of loans greater than 60 days delinquent plus loans in foreclosure plus loans in bankruptcy plus REO.

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Table 42

Private-Label Mortgage-Backed Securities and Home Equity Loan Asset-Backed Securities By Year of Securitization - Subprime
	Total1
Home equity loan ABS:
UPB by credit rating:
Below investment grade:
Single-B	$	1,072
Triple-C		580
Double-C		2,033
TOTAL	$	3,685
Amortized cost	$	1,269
Gross unrealized losses		(3	)
Fair value		2,421
OTTI:
Credit-related OTTI	$	134
Non-credit-related OTTI		(134	)
TOTAL	$	-
Weighted average percentage of fair value to UPB		65.7	%
Original weighted average credit support2		36.0
Weighted average credit support2		2.4
Weighted average collateral delinquency3		28.1

1	All subprime investments were securitized prior to 2005.
2	Credit support is defined as the percentage of subordinate tranches and over-collateralization, if any, in a security structure that will absorb losses before the holders of the security will incur losses.
3	Collateral delinquency is based on the sum of loans greater than 60 days delinquent plus loans in foreclosure plus loans in bankruptcy plus REO.

As of December 31, 2012, the amortized cost of private-label securities with unrecognized losses was $278.1 million. (See Note 4 of the Notes to the Financial Statements included under Item 8 – “Financial Statements and Supplementary Data” for a summary of held-to-maturity securities with unrecognized losses aggregated by major security type and length of time that the individual securities have been in a continuous unrecognized loss position.) Table 43 presents characteristics of our private-label MBS/ABS in a gross unrecognized loss position as of December 31, 2012 (in thousands). The underlying collateral for all prime loans was first lien mortgages, and the underlying collateral for all subprime loans is second lien mortgages.

Table 43

	Unpaid Principal Balance		Amortized Cost		Gross Unrecognized Losses		Weighted- Average Collateral Delinquency Rate1
Private-label residential MBS:
Prime	$	155,116	$	154,666	$	12,156		7.7	%
Alt-A:
Alt-A option arm		6,797		6,796		747		16.6
Alt-A other		119,075		116,531		12,619		12.1
Total Alt-A		125,872		123,327		13,366		12.3
Home equity loan ABS:
Subprime		71		57		3		30.7
TOTAL	$	281,059	$	278,050	$	25,525		9.8	%

1 Weighted-average collateral delinquency is based on the sum of loans greater than 60 days delinquent plus loans in foreclosure plus loans in bankruptcy plus REO as of December 31, 2012. The reported collateral delinquency percentage represents the weighted-average based on the UPB of the individual securities in the category and their respective collateral delinquency as of December 31, 2012.

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Other-than-temporary Impairment – As mentioned previously, we experienced a significant decline in the estimated fair values of our private-label MBS/ABS due to interest rate volatility, illiquidity in the marketplace and credit deterioration in the U.S. mortgage markets beginning in early 2008. Despite the improvement in the fair value since that time, the fair values of a portion of our private-label MBS remain below amortized cost as of December 31, 2012. However, based upon our OTTI evaluation process that results in a conclusion as to whether a credit loss exists (present value of our best estimate of the cash flows expected to be collected is less than the amortized cost basis of each individual security), we have concluded that, except for 32 private-label MBS upon which we have recognized OTTI, there is no evidence of a likely credit loss in our other 134 private-label MBS/ABS; there is no intent to sell, nor is there any requirement to sell; and, thus, there is no OTTI for the remaining private-label MBS that have declined in value.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” under this Item 7 and Note 4 of the Notes to Financial Statements under Item 8 – “Financial Statements and Supplementary Data” for additional information on our OTTI evaluation process. We utilize a process for the determination of OTTI under an approach that is consistent with the other 11 FHLBanks in accordance with guidance issued by the Finance Agency. Each FHLBank performs its OTTI analysis primarily using key modeling assumptions provided and approved by the FHLBanks’ OTTI Governance Committee, of which we are an active member, for the majority of its private-label residential MBS and home equity loan investments. Certain private-label MBS backed by multi-family real estate loans, home equity lines of credit and other securities that were not able to be cash flow tested were outside of the scope of the OTTI Governance Committee. We analyzed these private-label MBS/ABS for OTTI using other methods. The dollar amount of private-label MBS/ABS analyzed for OTTI using other methods represents 4.2 percent of our total private-label MBS/ABS UPB.

We perform OTTI analysis on 100 percent of our private-label MBS/ABS portfolio. To the extent underlying collateral data is available in the loan information data source for our private-label MBS/ABS, we perform OTTI cash flow analysis using the FHLBanks’ common platform and approved assumptions. The FHLBank of San Francisco, for quality control purposes, provides the expected cash flows for us utilizing the key modeling assumptions developed and approved by the FHLBanks’ OTTI Governance Committee. For certain private-label MBS where underlying collateral data was not available, we used other methods to assess these securities for OTTI. The risk models and loan information data sources used in 2012 were the same as in 2011. Enhancements to these models have been made over time with the periodic release of new versions by the corresponding vendors.

Tables 44 and 45 present a summary of the significant inputs used to evaluate all non-Agency MBS for OTTI for the year ended December 31, 2012 as well as related current credit enhancement. Credit enhancement is defined as the percentage of subordinated tranches and over-collateralization, if any, in a security structure that will generally absorb losses before we will experience a loss on the security. The calculated averages represent the dollar-weighted averages of all the private-label MBS investments, except for those securities that are qualitatively evaluated, in each category shown. The classification (prime, Alt-A and subprime) is based on the classification at the time of origination.

Table 44

Private-label residential MBS
Year of Securitization	Significant Inputs									Weighted Average Current Credit Support
	Weighted Average Projected Prepayment Rates			Weighted Average Projected Default Rates			Weighted Average Projected Loss Severities
Prime:
2006		14.2	%		15.1	%		40.1	%		4.3	%
2005		15.5			14.2			34.1			5.8
2004 and prior		17.6			7.3			27.2			10.4
Total prime		17.0			9.1			29.4			9.1
Alt-A:
2005		11.2			20.5			41.3			5.6
2004 and prior		14.0			13.1			32.5			12.8
Total Alt-A		13.1			15.5			35.3			10.5
TOTAL		15.2	%		12.0	%		32.0	%		9.8	%

Table 45

Home Equity Loan ABS
Year of Securitization	Significant Inputs									Weighted Average Current Credit Support
	Weighted Average Projected Prepayment Rates			Weighted Average Projected Default Rates			Weighted Average Projected Loss Severities
Subprime:
2004 and earlier		2.6	%		6.4	%		97.3	%		2.4	%

We also evaluate other non-mortgage related investment securities, primarily consisting of municipal bonds issued by housing finance authorities, for potential impairment. During 2012, we did not identify any non-MBS/ABS securities as having impairment.

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Based on the evaluation of all outstanding non-Agency MBS/ABS for OTTI, we have recognized OTTI on 32 private-label MBS/ABS securities from 2008 through 2012, including 6 that were first identified as other-than-temporarily impaired in 2012. Subsequent to their initial OTTI classification, some of these securities experienced further OTTI losses in ensuing quarters. We expect to recover the amortized cost on the rest of our held-to-maturity securities portfolio that are in an unrealized loss position based on individual security evaluations.

The FHLBank recognized OTTI on its held-to-maturity securities portfolio for the years ended December 31, 2012, 2011 and 2010 based on the FHLBank’s impairment analysis of its investment portfolio, as follows (in thousands):

Table 46

	2012							2011							2010
	OTTI Related to Credit Losses		OTTI Related to Non-credit Losses			Total OTTI Losses		OTTI Related to Credit Losses		OTTI Related to Non-credit Losses			Total OTTI Losses		OTTI Related to Credit Losses		OTTI Related to Non-credit Losses			Total OTTI Losses
Private-label residential MBS:
Prime	$	502	$	92		$	594	$	687	$	2,938		$	3,625	$	256	$	254		$	510
Alt-A		1,024		3,487			4,511		3,719		6,342			10,061		2,601		14,667			17,268
Total private-label residential MBS		1,526		3,579			5,105		4,406		9,280			13,686		2,857		14,921			17,778
Home equity loan ABS:
Subprime		134		(134	)		-		305		(305	)		-		1,177		(1,177	)		-
TOTAL	$	1,660	$	3,445		$	5,105	$	4,711	$	8,975		$	13,686	$	4,034	$	13,744		$	17,778

See Note 4 of the Notes to Financial Statements under Item 8 – “Financial Statements and Supplementary Data” for additional information regarding OTTI losses recognized.

In addition to evaluating all of our private-label MBS/ABS under a base case (or best estimate) scenario for generating expected cash flows, a cash flow analysis is also performed for each security under a more stressful housing price scenario. The more stressful scenario is designed to provide an indication of the sensitivity of our private-label MBS/ABS to the deterioration in housing prices beyond our base case estimates. The more stressful housing price scenario assumes a housing price forecast that is 5 percentage points lower at the trough than the base case scenario followed by a flatter recovery path. Under this more stressful scenario, home prices for the vast majority of markets were projected to decline by 3 percent to 7 percent during the fourth quarter of 2012. Beginning January 1, 2013, home prices in these markets were projected to recover using one of four different recovery paths that vary by housing market. Table 47 presents projected home price recovery ranges by months under the adverse case scenario. See Note 4 of the Notes to the Financial Statements included under Item 8 – “Financial Statements and Supplementary Data” for a description of the assumptions used to determine actual credit-related OTTI.

Table 47

Months	Recovery Range of Annualized Rates
1 – 6		0.0 - 1.9	%
7 – 18		0.0 - 2.0
19 – 24		0.7 - 2.7
25 – 30		1.3 - 2.7
31 – 42		1.9 - 3.4
43 – 66		1.9 - 4.0
Thereafter		1.9 - 3.8

Table 48 represents the impact on credit-related OTTI in the more stressful housing price scenario compared to actual credit-related OTTI recorded during the quarter ended December 31, 2012 using base-case housing price index assumptions by collateral type, which is based on the originator’s classification at the time of origination or based on classification by an NRSRO upon issuance of the MBS (dollar amounts in thousands). The stress test scenario and associated results do not represent our current expectations and therefore, should not be construed as a prediction of future results, market conditions or the actual performance of these securities. Rather, the results from the hypothetical stress test scenario provide a measure of the credit losses that we might incur if home price declines (and subsequent recoveries) are more adverse than those projected as our best estimate in our OTTI assessment.

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Table 48

Housing Price Scenarios As of December 31, 2012
Security Type	Base Case1						Hypothetical Results Under Stress Test Scenario2
	Number of Securities		Unpaid Principal Balance		OTTI Related to Credit Loss		Number of Securities		Unpaid Principal Balance		OTTI Related to Credit Loss
Total Private-label RMBS:
Prime		4	$	12,982	$	30		7	$	24,910	$	51
Alt-A		5		31,359		169		14		98,206		1,120
Total private-label RMBS		9		44,341		199		21		123,116		1,171
Home equity loan ABS:
Subprime		4		2,354		38		4		2,354		46
TOTAL		13	$	46,695	$	237		25	$	125,470	$	1,217

1	Represents OTTI credit losses for the quarter ended December 31, 2012 that were recognized on 13 of our 32 OTTI securities. No additional OTTI credit losses were recognized on the other 19 OTTI securities.
2	Represents OTTI credit losses that would have been recognized for the quarter ended December 31, 2012 and includes OTTI credit losses on 24 of our 32 OTTI securities.

Deposits: Deposit programs are offered for the benefit of our members and certain other qualifying non-members. Deposit products offered primarily include demand and overnight deposits and short-term certificates of deposit. Most deposits are very short-term and, as a matter of prudence, we hold short-term assets with maturities similar to the deposits (see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk Management”). The majority of deposits is in overnight or demand accounts that generally re-price daily based upon a market index such as overnight Federal funds. However, because of the extremely low interest rate environment, we have established a current floor of 5 bps on demand deposits and 10 bps on overnight deposits. The level of deposits is driven by member demand for deposit products, which in turn is a function of the liquidity position of members. Factors that influence deposit levels include turnover in member investment and loan portfolios, changes in members’ customer deposit balances, changes in members’ demand for liquidity and our deposit pricing as compared to other short-term market rates. Declines in the level of deposits could occur during 2013 if demand for loans at member institutions increases, if members continue to de-lever their balance sheets or if decreases in the general level of liquidity of members should occur. Fluctuations in deposits have little impact on our ability to obtain liquidity. We have stable and ready access to the capital markets through consolidated obligations and can replace any reduction in deposits with similarly priced borrowings.

Table 49 presents the maturities for time deposits in denominations of $100,000 or more by remaining maturity as of December 31, 2012 and 2011 respectively (in thousands):

Table 49

	3 months or less		Over 3 months but within 6 months		Over 6 months but within 12 months		Total
Time certificates of deposit (by remaining maturity as of December 31, 2012)	$	39,900	$	-	$	-	$	39,900
Time certificates of deposit (by remaining maturity as of December 31, 2011)		2,700		-		-		2,700

Table 50 presents the average amount of and the annual rate paid on deposit types that exceed 10 percent of average deposits for 2012, 2011 and 2010 (in thousands). Deposit types are included only in the year(s) that the 10 percent threshold is met.

Table 50

	2012					2011					2010
	Amount		Rate			Amount		Rate			Amount		Rate
Overnight deposits	$	1,275,065		0.10	%	$	1,698,584		0.14	%	$	1,650,450		0.15	%
Demand deposits		265,936		0.05

Consolidated Obligations: Consolidated obligations are the joint and several debt obligations of the 12 FHLBanks and consist of bonds and discount notes. Consolidated obligations represent the primary source of liabilities we use to fund advances, mortgage loans and investments. As noted under Item 7A – “Quantitative and Qualitative Disclosures About Market Risk,” we use debt with a variety of maturities and option characteristics to manage our interest rate risk profile. We make extensive use of derivative transactions, executed in conjunction with specific consolidated obligation debt issues, to synthetically structure funding terms and costs.

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Bonds are primarily used to fund longer-term (one year or greater) advances, mortgage loans and investments. To the extent that the bond is funding variable rate assets, we typically either issue a bond that has variable rates matching the asset index or utilize an interest rate swap to change the bond’s characteristics in order to match the asset’s index. Additionally, we sometimes use fixed rate, variable rate or complex consolidated obligation bonds that are swapped to LIBOR to fund short-term advances and money market investments.

Discount notes are primarily used to fund: (1) shorter-term advances or adjustable rate advances with indices and resets based on our short-term cost of funds; and (2) investments with maturities of three months or less. However, we sometimes use discount notes to fund longer-term assets, including fixed rate assets, variable rate assets, assets swapped to synthetically create variable rate assets and short-term anticipated cash flows generated by longer-term fixed rate assets.

Total consolidated obligations increased from December 31, 2011 to December 31, 2012 and the mix between discount notes and bonds changed over the period. Discount notes decreased in both absolute balances and as a percentage of total consolidated obligations. Discount notes decreased from 34.0 percent of total outstanding consolidated obligations as of the end of 2011 to 28.3 percent as of December 31, 2012. Consolidated obligation bonds increased in both absolute balances and, as a percentage of total consolidated obligations outstanding. Bonds increased from 66.0 percent of total outstanding consolidated obligations as of the end of 2011 to 71.7 percent as of December 31, 2012. The increase in bonds from the end of 2011 to the end of 2012 was primarily due to increased issuance of: (1) swapped and, to a lesser extent, unswapped floating rate bonds in anticipation of future maturities of swapped liabilities and/or to enhance liquidity; and (2) unswapped callable bonds used to fund our fixed rate mortgage assets and some fixed rate advances. We substantially increased our issuance of longer-term swapped and, to a lesser extent, unswapped, non-callable floating rate bonds in anticipation of future maturities of swapped liabilities and to increase our liquidity position in anticipation of potential year-end financial market disruptions resulting from the “fiscal cliff” and possible disruptions in early 2013 from political events around the extension of the debt ceiling. This increase in non-callable floating rate bonds was the primary reason discount notes decreased from December 31, 2011 to December 31, 2012.

We monitor the spread between one- and three-month LIBOR and the overnight Federal funds effective rate because we occasionally have assets with rates that are sensitive to Federal funds rate changes funded with liabilities that are tied to LIBOR. The spread between these two indices began 2012 at its widest level for the year as the European debt crisis contributed to an elevated LIBOR and a flight-to-quality response that resulted in a low Federal funds effective rate. This spread has narrowed throughout 2012 as European Union initiatives to address the debt crisis have helped reduce investors’ concerns resulting in a decline in LIBOR and an increase in the Federal funds effective rate. Three-month LIBOR has declined from 0.58 percent on December 31, 2011 to 0.31 percent on December 31, 2012. One-month LIBOR also declined from 0.30 percent on December 31, 2011 to 0.21 percent on December 31, 2012. At the same time the Federal funds effective rate increased from 0.04 percent on December 31, 2011 to 0.09 percent on December 31, 2012. At the end of 2012, the spread for three-month LIBOR to the Federal funds effective rate decreased to 21.6 bps from 54.1 bps as of December 31, 2011 and the one-month LIBOR spread decreased to 11.9 bps from 25.5 bps as of December 31, 2011. Because of concerns of risk contagion surrounding the European sovereign debt crisis and its possible impact on LIBOR rates, we managed our balance sheet throughout much of the first nine months of 2012 to minimize our LIBOR basis risk and, in general, to maintain balances of liabilities that are indexed to LIBOR or swapped to LIBOR less than or approximately proportional to our assets that are indexed to LIBOR or swapped to LIBOR. However, as mentioned above, we issued a substantial amount of floating rate consolidated obligation bonds swapped to LIBOR and, to a lesser extent, unswapped floating rate consolidated obligation bonds indexed to LIBOR, in the second and third quarters of 2012 in anticipation of future maturities of swapped liabilities and/or to enhance liquidity which has resulted in increasing the amount of our LIBOR-based debt above the amount of our LIBOR-based assets. We are willing to accept this short term basis risk because we anticipate it will be temporary due to scheduled maturities of our LIBOR-based funding.

During 2012, we continued to issue unswapped callable debt with relatively short lockout periods (primarily three months but up to one year) to fund fixed rate assets with prepayment characteristics and some fixed rate advances in order to ensure optionality in the liability portfolios used to fund these assets. We called $7.7 billion of unswapped callable bonds, and issued $8.7 billion of new unswapped callable bonds during 2012. The issuances were used to: (1) refinance called debt used to fund fixed rate mortgage assets and some fixed rate advances; and (2) fund growth in our fixed rate asset portfolios, mainly our mortgage loan portfolio. The portfolio refinancing has an impact on portfolio spreads by reducing funding costs over time due to the issuance of new debt at a lower cost. For a discussion on yields and spreads, see Tables 13 and 14 under this Item 7 – “Results of Operations.”Refinancing debt usually increases costs in the short term due to the acceleration of unamortized concessions on the debt being retired. However, this is offset by the lower rate on the newly issued unswapped callable debt and by funding benefits from timing differences between the date the debt is called and the settlement date of the replacement bond. The issuance of these unswapped callable bonds also had an impact on our interest rate risk profile during 2012 because a substantial amount of the unswapped callable bonds issued had short lockout periods and relatively long terms to maturity, which help protect against the possibility of both faster prepayment speeds (short locks) and slower prepayment speeds (long final maturities) on mortgage assets. For further discussion of how our portfolio of unswapped callable bonds impacted interest rate risk, see Item 7A – “Quantitative and Qualitative Disclosures About Market Risk.”

Several recent developments have the potential to impact the demand for FHLBank short-term consolidated obligations in 2013 and perhaps beyond. For a discussion of the impact of these recent developments, U.S. government programs and the financial markets on the cost of FHLBank consolidated obligations, see “Financial Market Trends” under this Item 7.

While we had stable access to funding markets during 2012, future developments could impact the cost of replacing outstanding debt. Some of these include, but are not limited to, a large increase in call volume, significant increases in advance demand, legislative and regulatory changes, proposals addressing GSEs, derivative and financial market reform, a decline in investor demand for consolidated obligations, further rating agency downgrades of U.S. Treasury obligations that will in turn impact the rating on FHLBank consolidated obligations and changes in Federal Reserve policies and outlooks.

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Borrowings with original maturities of one year or less are considered short-term. Table 51 summarizes short-term borrowings for the years ended December 31, 2012, 2011 and 2010 (in thousands):

Table 51

	Consolidated Obligation Discount Notes									Consolidated Obligation Bonds With Original Maturities of One Year or Less
	2012			2011			2010			2012			2011			2010
Outstanding at end of the period1	$	8,670,442		$	10,251,723		$	13,706,746		$	1,050,000		$	725,000		$	1,150,000
Weighted average rate at end of the period2		0.12	%		0.03	%		0.16	%		0.19	%		0.19	%		0.28	%
Daily average outstanding for the period1	$	9,675,239		$	11,053,091		$	13,843,259		$	975,137		$	1,138,082		$	808,082
Weighted average rate for the period2		0.09	%		0.10	%		0.16	%		0.20	%		0.23	%		0.42	%
Highest outstanding at any month-end1	$	10,705,373		$	13,386,905		$	15,613,655		$	1,075,000		$	1,650,000		$	2,345,000

1	Par value
2	Computed based on par value and coupon/interest rate

Derivatives: All derivatives are marked to fair values, netted by counterparty with any associated accrued interest, offset by the fair value of any cash collateral received or delivered and included on the Statements of Condition as an asset when there is a net fair value gain or as a liability when there is a net fair value loss. Fair values of our derivatives primarily fluctuate as the OIS and LIBOR/Swap interest rate curves fluctuate. Other factors such as implied price/interest rate volatility, the shape of the above interest rate curves and time decay can also drive the market price for derivatives.

We use derivatives in three ways: (1) by designating them as either a fair value or cash flow hedge of an underlying financial instrument, firm commitment or a forecasted transaction; (2) by acting as an intermediary; and (3) in asset/liability management (i.e., economic hedge). Economic hedges are defined as derivatives hedging specific or non-specific underlying assets, liabilities or firm commitments that do not qualify for hedge accounting, but are acceptable hedging strategies under our RMP. To meet the hedging needs of our members, we enter into offsetting derivatives, acting as an intermediary between members and other counterparties. This intermediation allows smaller members indirect access to the derivatives market. However, because of increased regulatory requirements and the uncertainty surrounding the cost associated with clearing intermediated derivatives we have placed a temporary moratorium on these intermediated derivative transactions until such time that we can determine their future cost structure. The derivatives used in intermediary activities do not receive hedge accounting and are separately marked-to-market through earnings (classified as economic hedges). For additional information on how we use derivatives, see Item 1 – “Business – Use of Derivatives.”

The notional amount of total derivatives outstanding decreased by $0.9 billion from December 31, 2011 to December 31, 2012. The notional amount of total derivatives outstanding decreased as almost all types of derivatives declined except for derivatives swapping variable rate consolidated obligation bonds which increased significantly from December 31, 2011 to December 31, 2012. These derivatives were primarily swaps of non-callable floating rate consolidated obligation bonds issued in 2012 that were indexed to the effective Federal funds rate and swapped to LIBOR in anticipation of future maturities of swapped liabilities and/or to enhance liquidity. For additional information regarding the types of derivative instruments and risks hedged, see Tables 70 and 71 under Item 7A – “Quantitative and Qualitative Disclosures About Market Risk.”

Capital: Total capital consists of capital stock, retained earnings and AOCI.

Capital stock decreased due to: (1) declining advances; (2) our management of excess stock; and (3) mergers and acquisitions.

§   The majority of the decrease in capital is attributable to the decrease in capital stock required to support advances. Under our capital plan, members must purchase additional activity-based stock as their advances increase or as they sell mortgage loans into the MPF Program. As member advance activity decreases, as it has during the past two years, stock held by members will likewise decrease as members request redemption of stock previously supporting advances (now excess stock) and, at our discretion, we repurchase this excess stock.

§   Excess stock represents the amount of stock held by a member in excess of that institution’s minimum stock purchase. As member advance activity or participation in the MPF Program declines, excess stock is created since the member no longer needs the same level of activity-based capital stock. If our excess stock exceeds 1.0 percent of our assets before or after the payment of a dividend in the form of stock, we would be prohibited by Finance Agency regulation from paying dividends in the form of stock. To manage the amount of excess stock, we repurchased excess Class A Common Stock over maximum amounts held by any individual member as of specific dates throughout the year. The current practice of regular weekly exchanges of all excess Class B Common Stock over $50,000 for Class A Common Stock began October 20, 2010 and is still in effect. As reflected in Table 53, the amount of excess stock held by members increased. This increase is at least partially attributable to the fact we pay our quarterly dividends in the form of Class B Common Stock, but the increase from stock dividends is counterbalanced by: (1) our capital management practices initiated; (2) a common practice by some of our members to request redemptions of excess stock; and (3) our subsequent discretionary repurchase of member requests.

§   Capital stock also decreased, to a smaller extent, due to the loss of members resulting from failures and mergers and acquisitions of 27 members during 2012.

Under our cooperatively structured capital plan, our capital stock balances should fluctuate along with any growth (increased capital stock balances) or reduction (decreased capital stock balances) in advance and mortgage loan balances in future periods. Any repurchase of excess capital stock is at our discretion and subject to statutory and regulatory limitations discussed below, including being in compliance with all of our regulatory capital requirements after any such discretionary repurchase.

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The increase in retained earnings from December 31, 2011 to December 31, 2012 is attributed to the net income for the year of $110.3 million exceeding the $30.5 million payment of dividends in 2012. The Board of Directors believed that it was appropriate and prudent to aggressively grow our retained earnings during this period when our earnings were strong, allowing us to pay an acceptable dividend on our members’ capital stock investments and also build retained earnings. Another factor is the JCE Agreement with the other 11 FHLBanks that provides that, upon the satisfaction of the FHLBanks’ obligations to REFCORP effective June 30, 2011, each FHLBank, on a quarterly basis, allocates at least 20 percent of its net income to a separate restricted retained earnings account (RRE Account) until the balance of that account equals at least one percent of that FHLBank’s average balance of outstanding consolidated obligations for the previous quarter. These restricted retained earnings are not available to pay dividends (see the discussion of our JCE Agreement and the amendment to our capital plan under Item 1 – “Business – Capital, Capital Rules and Dividends”).

Our capital stock is not publicly traded. Members may request to redeem any capital stock in excess of the minimum stock purchase requirements, but any repurchase of excess capital stock prior to the end of the redemption period is entirely at our discretion (see Item 1 – “Business – Capital, Capital Rules and Dividends”). All redemptions (at member request at the end of the redemption period) or repurchases (at our discretion, prior to the end of any applicable redemption period if made at a member’s request) are made at the par value of $100 per share. Stock redemption periods are six months for Class A Common Stock and five years for Class B Common Stock, although we can, at our discretion, repurchase amounts over a member’s minimum stock purchase requirements at any time prior to the end of the redemption periods as long as we will remain in compliance with our regulatory capital requirements after such repurchase. Ownership of our capital stock is concentrated within the financial services industry, and is stratified across various institutional entities as reflected in Table 52 as of December 31, 2012 and 2011 (amounts in thousands):

Table 52

	2012				2011
	Count		Amount		Count		Amount
Commercial banks		684	$	650,998		700	$	651,170
Thrift institutions		34		344,459		37		321,968
Credit unions		76		84,314		72		70,743
Insurance companies		24		184,685		24		283,946
Total members and GAAP capital stock		818		1,264,456		833		1,327,827
Mandatorily redeemable capital stock		10		5,665		11		8,369
TOTAL REGULATORY CAPITAL STOCK		828	$	1,270,121		844	$	1,336,196

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Following are highlights from our capital plan:

§   Two classes of authorized stock – Class A Common Stock and Class B Common Stock;

§   Both classes have $100 par value and both are defined as common stock;

§   Class A Common Stock is required for membership. The membership or asset-based stock requirement is currently 0.1 percent of total assets at the end of the prior calendar year, with a minimum requirement of 10 shares ($1,000) and a cap of 5,000 shares ($500,000). The asset-based stock requirement is subject to change by our Board of Directors within ranges specified in the capital plan. The membership or asset-based stock requirement is initially calculated on the date of membership then recalculated once a year except in the case of mergers. Class A Common Stock, up to a member’s asset-based stock requirement, is used to satisfy a member’s activity-based stock requirement before any Class B Common Stock is purchased by the member;

§   To the extent a member’s asset-based requirement in Class A Common Stock is insufficient to support its calculated activity-based requirement, Class B Common Stock must be purchased in order to support a member’s activities with us. The activity-based requirements listed below are the current requirements, but are subject to change by our Board of Directors within ranges specified in the capital plan. The activity-based stock requirement is the sum of the stock requirements for each activity less the asset-based stock requirement in Class A Common Stock and is calculated whenever a member enters into a transaction as follows:

§  Advances – 5.0 percent of outstanding advances (range = 4.0 to 6.0 percent);

§  Letters of credit – 0.0 percent of outstanding letters of credit (range = 0.0 to 1.0 percent);

§  AMA – 2.0 percent of the principal amount of member’s mortgage loans (range = 0.0 to 6.0 percent), limited to a maximum of 1.5 percent of the member’s total assets at the end of the prior calendar year (range = 1.0 to 3.0 percent); and

§  Derivatives (interest rate swaps, caps, floors and equity options) – 0.0 percent of the total notional amount (range = 0.0 to 2.0 percent);

§   Excess stock is calculated daily. We may exchange excess Class B Common Stock for Class A Common Stock, but only if we remain in compliance with our regulatory capital requirements after the exchange;

§   A member may hold excess Class A or Class B Common Stock, subject to our rights to repurchase excess stock or to exchange excess Class B Common Stock for Class A Common Stock, or may ask to redeem all or part of its excess Class A or Class B Common Stock. A member may also ask to exchange all or part of its excess Class A or Class B Common Stock for Class B or Class A Common Stock, respectively, but all such exchanges are completed at our discretion;

§   As a member increases its activities with us above the amount of activity supported by its asset-based requirement, excess Class A Common Stock is first exchanged for Class B Common Stock to meet the activity requirement prior to the purchase of additional Class B Common Stock;

§   Under the plan, the Board of Directors establishes a dividend parity threshold that is a rate per annum expressed as a positive or negative spread relative to a published reference interest rate index (e.g., LIBOR, Federal funds, etc.) or an internally calculated reference interest rate based upon any of our assets or liabilities (average yield on advances, average cost of consolidated obligations, etc.);

§   Class A and Class B Common Stock share in dividends equally up to the dividend parity threshold, then the dividend rate for Class B Common Stock can exceed the rate for Class A Common Stock, but the Class A Common Stock dividend rate can never exceed the Class B Common Stock dividend rate;

§   Members were notified of the initial reference interest rate and spread that defined the dividend parity threshold prior to implementation of the plan and have been, and will continue to be, notified at least 90 days prior to any change thereof;

§   A member may submit a redemption request to us for any or all of its excess Class A and/or Class B Common Stock;

§   Within five business days of receipt of a redemption request for excess Class A Common Stock, we must notify the member if we decline to repurchase the excess Class A Common Stock, at which time the six-month waiting period will apply. Otherwise, we will repurchase any excess Class A Common Stock within five business days, though it is usually repurchased on same date as the member’s redemption request;

§   Within five business days of receipt of a redemption request for excess Class B Common Stock, we must notify the member if we decline to repurchase the excess Class B Common Stock, at which time the five-year waiting period will apply. Otherwise, we will repurchase any excess Class B Common Stock within five business days, though it is usually repurchased on same date as the member’s redemption request;

§   A member may cancel or revoke its written redemption request prior to the end of the redemption period (six months for Class A Common Stock and five years for Class B Common Stock) or its written notice of withdrawal from membership prior to the end of a six-month period starting on the date we received the member’s written notice of withdrawal from membership. Our capital plan provides that we will charge the member a cancellation fee in accordance with a schedule where the amount of the fee increases with the passage of time. There is no grace period after the submission of a redemption request during which the member may cancel its redemption request without being charged a cancellation fee; and

§   Each required share of Class A and Class B Common Stock is entitled to one vote up to the statutorily imposed voting caps.

On May 10, 2012, the Board of Directors approved a decrease in the amount of Class A Common Stock needed to meet the FHLBank membership or asset-based stock requirement. Lowering the membership stock requirement results in our members’ capital investments and dividends received being more proportionate with their advance and mortgage loan activities. The requirement was changed from 0.2 percent of each member’s total assets to 0.1 percent with the cap reduced from $1,000,000 to $500,000 beginning May 14, 2012. The change reduced the membership stock requirements in the form of Class A Common Stock in half. For members that were not using their membership stock to support activity (advances and/or mortgage loans), the reduced membership requirement became excess Class A Common Stock. For members utilizing their membership stock to support activity, the stock was exchanged into Class B Common Stock. The new membership stock requirement is within percentage of member assets and cap ranges established in our capital plan, which provides that a member must be brought into compliance with the new requirements the earlier of: (1) the date of any activity before the end of a 60-day period; or (2) the end of the 60-day period from the effective date of the new requirement. These changes took place from May 14, 2012 through July 13, 2012, with all Class A required membership stock balances for members without any activity during the 60-day period being adjusted on July 13, 2012 As a result of the change in the membership stock requirement, required Class A Common Stock declined from 27.7 percent of total required stock as of December 31, 2011 to 15.6 percent of total required stock as of December 31, 2012. See Table 53. Additionally, because of the change in the composition of our stock between the two classes, the weighted average dividend rate increased in the third and fourth quarters of 2012 despite the dividend rate per annum for both Class A and Class B stock remaining static throughout 2012 (see Table 54).

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Our activity-based requirements are consistent with our cooperative structure: members’ stock ownership requirements generally increase as their activities with us increase. To the extent that a member’s asset-based stock purchase requirement is insufficient to cover the member’s activity-based requirement and the member is required to purchase Class B Common Stock, the required purchase of Class B Common Stock may deter the member from entering into additional activity with us. Factors that affect members’ willingness to enter into activity with us and purchase additionally required activity-based stock include, but are not limited to, our dividend rates, the risk-based capital weighting of our capital stock and alternative investment opportunities available to the members. Based on anecdotal evidence (such as member advance activity and discussions with members), we believe that our activity-based stock purchase requirement for advances has not significantly reduced advance activity with our members, although that may not hold true in the future. Given the competitiveness of the mortgage loan market and the fact that member balance sheets do not increase as mortgage loans are sold into the secondary market or sold into the MPF Program, it is possible that our activity-based requirement for AMA might have a significant bearing on a member’s willingness to sell mortgage loans to us under our MPF Program. This is one of the reasons that the initial activity-based stock purchase requirement for AMA was capped at 1.5 percent of a member’s total assets and was set at the lower end of our permissible range under the capital plan (range = 0.0 to 6.0 percent of the current outstanding balance of AMA originated by or through the member and acquired by us). However, we do not believe that our activity-based stock purchase requirement for AMA assets has had any significant negative influence on members’ willingness to participate in the MPF Program and sell us mortgage loans under the MPF Program, although this may not hold true in the future. Table 53 provides a summary of member capital requirements under our current capital plan as of December 31, 2012 and 2011 (in thousands):

Table 53

Requirement	12/31/2012		12/31/2011
Asset-based (Class A only)	$	151,325	$	289,698
Activity-based (additional Class B)1		819,206		757,953
Total Required Stock2		970,531		1,047,651
Excess Stock (Class A and B)		299,590		288,545
Total Stock2	$	1,270,121	$	1,336,196
Activity-based Requirements:
Advances3	$	801,856	$	840,220
AMA assets (mortgage loans)4		115,348		89,730
Total Activity-based Requirement		917,204		929,950
Asset-based Requirement (Class A stock) not supporting member activity1		53,327		117,701
Total Required Stock2	$	970,531	$	1,047,651

1	Class A Common Stock, up to a member’s asset-based stock requirement, will be used to satisfy a member’s activity-based stock requirement before any Class B Common Stock is purchased by the member.
2	Includes mandatorily redeemable capital stock.
3	Advances to housing associates have no activity-based requirements because housing associates cannot own FHLBank stock.
4	Out-of-district AMA mortgage loan participations purchased through other FHLBanks do not have activity-based stock requirements because these assets are not purchased from members of FHLBank Topeka. However, in-district AMA mortgage loans purchased from our members and participated to other FHLBanks have activity-based stock requirements since these assets are purchased from members of FHLBank Topeka.

We are subject to three capital requirements under provisions of the GLB Act, the Finance Agency’s capital structure regulation and our current capital plan: risk-based capital requirement, total capital requirement and leverage capital requirement. Under the risk-based capital requirement, we are required to maintain permanent capital at all times in an amount at least equal to the sum of our credit risk, market risk and operations risk capital requirements, calculated in accordance with the rules and regulations of the Finance Agency. Only permanent capital, defined as retained earnings and Class B stock, can be used to satisfy our risk-based capital requirement. The Finance Agency, at its discretion, may require us to maintain a greater amount of permanent capital than is required by the risk-based capital requirements. We are required to maintain total capital at all times of at least four percent of total assets. Total capital is the sum of permanent capital, Class A stock, any general loss allowance, if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the Finance Agency as available to absorb losses. Finally, we are required to maintain leverage capital of at least five percent of total assets. Leverage capital is defined as the sum of permanent capital weighted 1.5 times and other capital weighted 1.0 times divided by total assets. We have been in compliance with each of the aforementioned capital rules and requirements at all times since the implementation of our capital plan. See Note 13 in the Notes to Financial Statements included under Item 8 for compliance as of December 31, 2012 and 2011.

Capital Distributions: Dividends may be paid in cash or capital stock as authorized by our Board of Directors. Quarterly dividends can be paid out of current and previous unrestricted retained earnings, subject to Finance Agency regulation and our capital plan (see the discussion of our JCE Agreement and the amendment to our capital plan under Item 1 – “Business – Capital, Capital Rules and Dividends”). The dividend payout ratio represents the percentage of net income paid out as dividends. The significant fluctuations in the dividend payout ratios for recent year-ends (see Table 8 under Item 6 – “Selected Financial Data”) are primarily attributable to the changes in net income due to the volatility of net gain (loss) on derivatives and hedging activities (see this Item 7 – “Results of Operations” for additional discussion).

Within our capital plan, we have the ability to pay different dividend rates to the holders of Class A Common Stock and Class B Common Stock. This differential is implemented through a mechanism referred to as the dividend parity threshold. Class A stockholders and Class B stockholders share in dividends equally up to the dividend parity threshold for a dividend period, then the dividend rate for Class B stockholders can exceed the rate for Class A stockholders, but the dividend rate on Class A Common Stock can never exceed the dividend rate on Class B Common Stock. In essence, the dividend parity threshold: (1) serves as a soft floor to Class A stockholders since we must pay Class A stockholders the dividend parity threshold rate before paying a higher rate to Class B stockholders; (2) indicates a potential dividend rate to Class A stockholders so that they can make decisions as to whether or not to hold excess Class A Common Stock; and (3) provides us with a tool to manage the amount of excess stock through higher or lower dividend rates by varying the desirability of holding excess shares of Class A Common Stock (i.e., the lower the dividend rate on Class A Common Stock, the less desirable it is to hold excess Class A Common Stock).

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The current dividend parity threshold is equal to the average effective overnight Federal funds rate for a dividend period minus 100 bps. This dividend parity threshold was effective for dividends paid for all of 2010, 2011 and 2012 and will continue to be effective until such time as it may be changed by our Board of Directors. With the overnight Federal funds target rate range of zero to 0.25 percent, the dividend parity threshold is effectively floored at zero percent at this time. Under the capital plan, all dividends paid in the form of capital stock must be paid in the form of Class B Common Stock. Tables 54 and 55 present the dividend rates per annum paid on capital stock under our capital plan during 2012 and 2011:

Table 54

Applicable Rate per Annum	12/31/2012			09/30/2012			06/30/2012			03/31/2012
Class A Common Stock		0.25	%		0.25	%		0.25	%		0.25	%
Class B Common Stock		3.50			3.50			3.50			3.50
Weighted Average1		2.35			2.36			2.19			2.12
Dividend Parity Threshold:
Average effective overnight Federal funds rate		0.16	%		0.15	%		0.15	%		0.11	%
Spread to index		(1.00	)		(1.00	)		(1.00	)		(1.00	)
TOTAL (floored at zero percent)		0.00	%		0.00	%		0.00	%		0.00	%

1 Weighted average dividend rates are dividends paid in cash and stock on both classes of stock divided by the average of capital stock eligible for dividends.

Table 55

Applicable Rate per Annum	12/31/2011			09/30/2011			06/30/2011			03/31/2011
Class A Common Stock		0.25	%		0.25	%		0.40	%		0.40	%
Class B Common Stock		3.50			3.50			3.00			3.00
Weighted Average1		2.12			2.10			1.87			1.89
Dividend Parity Threshold:
Average effective overnight Federal funds rate		0.08	%		0.08	%		0.09	%		0.16	%
Spread to index		(1.00	)		(1.00	)		(1.00	)		(1.00	)
TOTAL (floored at zero percent)		0.00	%		0.00	%		0.00	%		0.00	%

1 Weighted average dividend rates are dividends paid in cash and stock on both classes of stock divided by the average of capital stock eligible for dividends.

We anticipate that dividend rates on Class A Common Stock will be at or above the upper end of the current overnight Federal funds target rate range for future dividend periods until such time as the dividend parity threshold calculation results in a positive number. We also expect that the differential between the two classes of stock for 2013 will remain close to the differential for the fourth quarter of 2012, subject to sufficient earnings to meet retained earnings thresholds and still pay such dividends. While there is no assurance that our Board of Directors will not change the dividend parity threshold in the future, the capital plan requires that we provide members with 90 days notice prior to the end of a dividend period in which a different dividend parity threshold is utilized in the payment of a dividend.

We expect to continue paying dividends primarily in the form of capital stock in 2013, but this may change depending on any future impact of the Finance Agency rule on excess stock that became effective January 29, 2007. We believe that dividends paid in the form of capital stock are advantageous to members because our capital stock dividends generally qualify as tax-deferred stock dividends under the Internal Revenue Code and are, therefore, not taxable at the time declared and credited to a member’s capital stock account. Dividends paid in capital stock can be utilized by members to support future activity with us or can be requested by the member to be redeemed if the amounts represent excess capital stock, subject to stock redemption request procedures and limitations (see the discussion of stock redemption requests in Item 1 – “Business – Capital, Capital Rules and Dividends”). If we were to change our practice and pay all dividends in the form of cash, we would utilize liquidity resources. However, payment of cash dividends would not have a significant impact on our liquidity position.

Capital Adequacy: As of December 31, 2012, 73.5 percent of our capital was capital stock, and 26.5 percent was retained earnings and AOCI. As of December 31, 2011, 78.0 percent of our capital was capital stock, and 22.0 percent was retained earnings and AOCI. We were in compliance with our minimum regulatory capital requirements as of December 31, 2012 as mentioned previously. Additionally, within our RMP we have an internal minimum total capital-to-asset ratio requirement of 4.04 percent, which is in excess of the 4.00 percent regulatory requirement. All regulatory and internal capital ratios include mandatorily redeemable capital stock as capital, which we otherwise treat as a liability under GAAP. We expect to maintain a regulatory capital-to-asset percentage greater than the regulatory minimum of 4.0 percent and greater than our RMP minimum of 4.04 percent. However, our GAAP total capital percentage could drop below these levels because mandatorily redeemable capital stock is considered a liability under GAAP. See Table 8 under Item 6 – “Selected Financial Data” for reported percentages for total capital ratio and regulatory capital ratio.

Liquidity: To meet our mission of serving as an economical funding source for our members and housing associates, we must maintain high levels of liquidity. We are required to maintain liquidity in accordance with certain Finance Agency regulations and guidelines and with policies established by management and the Board of Directors (see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Liquidity Risk Management”). We need liquidity to repay maturing consolidated obligations and other borrowings, to meet advance needs of our members, to make payments of dividends to our members and to repurchase excess capital stock at our discretion, whether upon the request of a member or at our own initiative (mandatory stock repurchases).

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A primary source of our liquidity is the issuance of consolidated obligations. The capital markets traditionally have treated FHLBank obligations as U.S. government agency debt. As a result, even though the U.S. government does not guarantee FHLBank debt, we generally have comparatively stable access to funding at relatively favorable spreads to U.S. Treasury rates. We are primarily and directly liable for our portion of consolidated obligations (i.e., those obligations issued on our behalf). In addition, we are jointly and severally liable with the other 11 FHLBanks for the payment of principal and interest on the consolidated obligations of all 12 FHLBanks. See Item 1 – “Business – Debt Financing – Consolidated Obligations” for additional discussion regarding the FHLBanks joint and several liability.

Our other sources of liquidity include deposit inflows, repayments of advances or mortgage loans, maturing investments, interest income, and proceeds from securities purchased under agreements to resell (i.e., reverse repurchase agreements) or the sale of unencumbered assets. Uses of liquidity include issuing advances, purchasing mortgage loans, purchasing investments, deposit withdrawals, capital repurchases, maturing or called consolidated obligations, interest expense, dividend payments to members, other contractual payments, and contingent funding or purchase obligations including letters of credit and any required purchases of securities under standby bond purchase agreements.

Total cash and short-term investments with remaining maturities of one year or less, which include term and overnight Federal funds sold, certificates of deposit, commercial paper and reverse repurchase agreements, increased from $3.6 billion as of December 31, 2011 to $3.8 billion as of December 31, 2012 primarily due to increases in reverse repurchase agreements. Total cash and short-term investments increased as a result of higher leverage and an increase in deposits. Cash and short-term investments had declined significantly in the latter part of the third quarter of 2011 and the fourth quarter of 2011 as a result of management actions to: (1) reduce non-MBS investments as a percentage of total assets; and (2) further reduce exposure to unsecured investments with U.S. branches of European and other foreign counterparties. The maturities of our short-term investments are structured to provide periodic cash flows to support our ongoing liquidity needs. To enhance our liquidity position short-term investment securities (i.e., commercial paper and marketable certificates of deposit) are also classified as trading so that they can be readily sold should liquidity be needed immediately. We also maintain a portfolio of GSE debentures and U.S. government-guaranteed debentures that can be pledged as collateral for financing in the securities repurchase agreement market and are classified as trading to enhance our liquidity position. These debentures decreased to $2.0 billion in par value as of December 31, 2012 from $2.4 billion in par value as of December 31, 2011, reflecting maturities of these debentures during 2012.

In order to assure that we can take advantage of those sources of liquidity that will affect our leverage capital requirements, we manage our average capital ratio to stay sufficiently above our minimum regulatory and RMP requirements so that we can utilize the excess capital capacity should the need arise. Managing our average capital ratio sufficiently above minimum regulatory and RMP requirements helps ensure our ability to meet the liquidity needs of our members and to increase our ability to repurchase excess stock either: (1) initiated at our discretion to adjust our balance sheet size; or (2) upon the submission of a redemption request by a member.

We are subject to five metrics for measuring liquidity, and have remained in compliance with each of these liquidity requirements throughout 2012 (see “Risk Management – Liquidity Risk Management” under this Item 7 for additional discussion on our liquidity requirements). In order to ensure a sufficient liquidity cushion, we generally maintain a relatively longer weighted-average maturity on our consolidated obligation discount notes than the weighted average maturity of short-term assets. The weighted average remaining days to maturity of discount notes outstanding decreased to 49 days as of December 31, 2012 from 55 days as of December 31, 2011. The weighted average remaining maturity of our money market investment portfolio (Federal funds sold, marketable certificates of deposit, commercial paper and reverse repurchase agreements), and non-earning cash left in our Federal Reserve Bank account, decreased to 5 days as of December 31, 2012 from 40 days as of December 31, 2011 primarily due to the reduction in our term money market investments in favor of overnight reverse repurchase agreements. As a result of the decline in the weighted average maturity of these short-term assets and the decrease in the weighted average maturity of discount notes outstanding, the mismatch of discount notes and our money market investment portfolio increased from 15 days on December 31, 2011 to 44 days on December 31, 2012. This additional mismatch was the result of our strategy to increase balance sheet liquidity should market access deteriorate during fiscal cliff and debt ceiling negotiations between Congress and the administration. Over time, especially as the yield curve steepens on the short end, maintaining the differential between the weighted average original maturity between discount notes and money market investments will marginally increase our cost of funds.

We sometimes leave cash in our non-earning Federal Reserve Bank account at the end of the day for several reasons including: (1) advance payoffs that occur late in the day; (2) insufficient returns in the Federal funds market to compensate us for the associated credit risk; and (3) the desire not to increase our balance sheet allocation to other investment categories. We left $369.7 million in our Federal Reserve Bank account on December 31, 2012 compared to $116.0 million on December 31, 2011.

In addition to the balance sheet sources of liquidity discussed previously, we have established lines of credit with numerous counterparties in the Federal funds market as well as with the other 11 FHLBanks. Accordingly, we expect to maintain a sufficient level of liquidity for the foreseeable future.

Off-Balance Sheet Arrangements: In the ordinary course of business, we engage in financial transactions that, in accordance with GAAP, are not recorded on the Statements of Condition or may be recorded on the Statements of Condition in amounts that are different from the full contract or notional amount of the transactions. See Note 17 of the Notes to Financial Statements under Item 8 – “Financial Statements and Supplementary Data” for more information on our off-balance sheet arrangements.

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Contractual Obligations: Table 56 represents the payment due dates or expiration terms under the specified contractual obligation type, excluding derivatives, by period as of December 31, 2012 (in thousands). Consolidated obligations listed exclude discount notes, which have maturities of one year or less, and are based on contractual maturities. Actual distributions could be influenced by factors affecting potential early redemptions.

Table 56

			Payments due by period
Contractual Obligations	Total		1 Year or Less		After 1 Through 3 Years		After 3 Through 5 Years		After 5 Years
Consolidated obligation bonds	$	21,787,250	$	6,989,000	$	5,327,700	$	2,720,650	$	6,749,900
Operating leases		342		113		163		66		-
Commitments to fund mortgage loans		106,355		106,355		-		-		-
Expected future pension benefit payments		11,911		307		725		920		9,959
Mandatorily redeemable capital stock		5,665		5,361		304		-		-
TOTAL	$	21,911,523	$	7,101,136	$	5,328,892	$	2,721,636	$	6,759,859

Risk Management

Active risk management continues to be an essential part of our operations and a key determinant of our ability to maintain earnings to return an acceptable dividend to our members and meet retained earnings thresholds. Proper identification, assessment and management of risks, complemented by adequate internal controls, enable our stakeholders to have confidence in our ability to meet our housing finance mission, serve our stockholders, earn a profit, compete in the industry, and sustain and prosper over the long term. We maintain comprehensive risk management processes to facilitate, control and monitor risk taking. Periodic reviews by internal and external auditors, Finance Agency examiners and independent consultants subject our practices to additional scrutiny, further strengthening the process.

We maintain an enterprise risk management (ERM) program in an effort to enable the identification of all significant risks to the organization and institute the prompt and effective management of any major risk exposures. Under this program, we perform annual risk assessments designed to identify and evaluate all material risks that could adversely affect the achievement of our performance objectives and compliance requirements. As set forth in our Enterprise Risk Management and Internal Control Policy, we define ERM as a process, effected by our Board of Directors, management and other personnel, applied in strategy setting and across the FHLBank. It is designed to identify potential events that may affect us, manage risk within the FHLBank’s Risk Appetite Statement and provide reasonable assurance regarding the achievement of objectives in the following categories: (1) Strategic – strategic initiatives and objectives that align with our mission and vision; (2) Operations – effective and efficient use of our resources to achieve basic business objectives, including performance and profitability goals and safeguarding of resources; (3) Reporting – reliability of reporting, including filings with the SEC, interim and condensed financial statements and selected financial data derived from such statements, such as earnings releases reported publicly and other FHLBank financial information posted on our website or provided to the Office of Finance in connection with the FHLBank System Combined Financial Reports; and (4) Compliance – complying with laws and regulations to which we are subject. Our ERM program is a structured and disciplined approach that aligns strategy, processes, people, technology and knowledge with the purpose of identifying, evaluating and managing the uncertainties we face as we create value. It is a continuous process of identifying, prioritizing, assessing and managing inherent enterprise risks (i.e., business, compliance, credit, liquidity, market and operations) before they become realized risk events.

Our Risk Philosophy Statement, approved by our Board of Directors, establishes the broad parameters we consider in executing our business strategy and represents a set of shared attitudes and beliefs that characterize how we consider risk in everything we do. Our Risk Appetite Statement, also approved by our Board of Directors, defines the level of risk exposure we are willing to accept or retain in pursuit of stakeholder value. While we consider our risk appetite first in evaluating strategic alternatives, defining and managing to a specific risk appetite does not ensure we will not incur greater than expected losses or that we won’t be faced with an unexpected, catastrophic loss. By defining and managing to a specific risk appetite, our Board of Directors and senior management ensure that there is a common understanding of our desired risk profile, which enhances the ability of both to make improved strategic and tactical decisions. Our monthly Risk Dashboard provides a holistic view of our risk profile and the means for reporting our key risk metrics as defined within our Risk Appetite Metrics, which is also approved by our Board of Directors. The Risk Dashboard is intended to demonstrate, at an entity level, whether our enterprise risks are well controlled and normal operations are expected with standard Board of Directors’ involvement (low residual risk environment).

As part of our ERM program, entity level risk assessment workshops are conducted with our management committees to identify and reach a general consensus on the primary risks that must be managed to help ensure achievement of our strategic objectives and allow for future success for the organization. By using this type of top-down assessment, we seek to: (1) gain an understanding of our current risk universe; (2) obtain management’s input on new and/or increasing areas of exposure; (3) determine the impact our primary risks might have on achieving our strategic business plan objectives; (4) discuss and validate our current risk management approach; (5) identify other strategies that might be implemented to help improve our overall success; and (6) prioritize the allocation of resources to address those areas where current risk management strategies may be falling short relative to the overall level of perceived risk. These risk assessment workshops have resulted in the development of risk strategies and action plans in an effort to enhance the risk management practices throughout the FHLBank. The results of these activities are summarized in an annual risk assessment report, which is reviewed by the Strategic Risk Management Committee and approved by the Risk Oversight Committee of the Board of Directors.

Business units also play a key role in our risk management program. We utilize a customized business unit risk assessment approach in order to ensure that: (1) risk assessments are completed annually for all of our business units; (2) effective internal controls and strategies are in place for managing the identified risks within the key processes throughout the FHLBank; and (3) risk management or internal control weaknesses are properly identified with necessary corrective actions taken. As a result of our efforts, 22 business unit risk assessments were completed in 2012 addressing 116 key processes throughout the FHLBank. The number of business unit risk assessments and key processes fluctuate over time as organizational changes occur, responsibilities shift and new products and services are developed. All risk assessments are reviewed by senior management and presented to the Risk Oversight Committee of the Board of Directors on a scheduled basis in order to keep our Board of Directors apprised of any weaknesses in the current risk management process of each business unit and the steps undertaken by management to address any identified weaknesses. The outcomes of these business unit risk assessments are reviewed during our entity level risk assessment workshops to ensure consistency between the top down and bottom up approaches and to ensure that no risks are overlooked.

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Effective risk management programs include not only conformance to risk management best practices by management but also incorporate Board of Director oversight. As previously noted, our Board of Directors plays an active role in the ERM process by regularly reviewing risk management policies and approving aggregate levels of risk. Involvement by the Board of Directors in establishing risk tolerance levels, including oversight of the development and maintenance of programs to manage it, should be substantial and reflect a high level of director fiduciary responsibility and accountability. In addition to establishing the formal risk philosophy, risk appetite statement, risk appetite metrics and reviewing the annual and business unit risk assessment reports, our Board of Directors reviews both the RMP and Member Products Policy at least annually. Various management committees, including the Strategic Risk Management Committee, the Strategic Planning Group, the Market Risk Analysis Committee, the Credit Underwriting Committee, the Operations Risk Committee, the Disclosure Committee and the Asset/Liability Committee oversee our risk management process. The following discussion highlights our different strategies to diversify and manage risk. See Item 7A – “Quantitative and Qualitative Disclosures About Market Risk” for a separate discussion of market risk.

Credit Risk Management: Credit risk is defined as the risk that counterparties to our transactions will not meet their contractual obligations. We manage credit risk by following established policies, evaluating the creditworthiness of our counterparties and utilizing collateral agreements and settlement netting for derivative transactions. The most important step in the management of credit risk is the initial decision to extend credit. Continuous monitoring of counterparties is completed for all areas where we are exposed to credit risk, whether that is through lending, investing or derivative activities.

Credit risk arises partly as a result of our lending and AMA activities (members’ CE obligations on mortgage loans that we acquire through the MPF Program). We manage our exposure to credit risk on advances, letters of credit and members’ CE obligations on mortgage loans through a combined approach that provides ongoing review of the financial condition of our members coupled with prudent collateralization. See Item 1 – “Business – Advances” for a description of eligible collateral on advances as well as disclosures regarding our security interest in collateral.

As provided in the Bank Act, a member’s investment in our capital stock is held as additional collateral for the member’s advances and other credit obligations (letters of credit, CE obligations, etc.). In addition, we can call for additional collateral or substitute collateral during the life of an advance or other credit obligation to protect our security interest.

Credit risk arising from AMA activities under our MPF Program falls into three categories: (1) the risk of credit losses on the mortgage loans represented in our FLA and last loss positions; (2) the risk that a PFI will not perform as promised with respect to its loss position provided through its CE obligations on mortgage pools, which are covered by the same collateral arrangements as those described for advances; and (3) the risk that a third-party insurer (obligated under PMI or SMI arrangements) will fail to perform as expected. Should a PMI third-party insurer fail to perform, it would increase our credit risk exposure because our FLA is the next layer to absorb credit losses on mortgage loan pools. Likewise, if an SMI third-party insurer fails to perform, it would increase our credit risk exposure because it would reduce the participating member’s CE obligation loss layer since SMI is purchased by PFIs to cover all or a portion of their CE obligation exposure for mortgage pools. Credit risk exposure to third-party insurers to which we have PMI and/or SMI exposure is monitored on a monthly basis and regularly reported to the Board of Directors. We perform credit analysis of third-party PMI and SMI insurers on at least an annual basis. On a monthly basis, we review trends that could identify risks with the mortgage loan portfolio, including low FICO scores and high LTV ratios. Based on the credit underwriting standards under the MPF Program and this monthly review, we have concluded that the mortgage loans we hold would not be considered subprime. Table 57 presents the UPB and maximum coverage outstanding with the top five third-party primary mortgage insurers and all others for seriously delinquent loans as of December 31, 2012 (in thousands):

Table 57

Insurance Provider	Credit Rating1	Unpaid Principal Balance2		Maximum Coverage Outstanding3
Genworth Mortgage Insurance Corp.	Single-B	$	2,291	$	606
Mortgage Guaranty Insurance Co.	Single-B		1,661		446
Republic Mortgage Insurance Co.	No Rating		685		188
Radian Guaranty, Inc.	Single-B		461		156
United Guaranty Residential Insurance Co.	Triple-B		393		101
All others4			16,695		118
TOTAL		$	22,186	$	1,615

1	Represents the lowest credit ratings of S&P, Moody’s or Fitch as of December 31, 2012.
2	Represents the UPB of conventional loans 90 days or more delinquent or in the process of foreclosure. Assumes PMI in effect at time of origination. Insurance coverage may be discontinued once a certain LTV ratio is met.
3	Represents the estimated contractual limit for reimbursement of principal losses (i.e., risk in force) assuming the PMI at origination is still in effect. The amount of expected claims under these insurance contracts is substantially less than the contractual limit for reimbursement.
4	Includes the UPB of all remaining seriously delinquent loans as of December 31, 2012 regardless of whether or not there is third-party PMI.

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Credit risk also arises from investment and derivative activities. As noted previously, the RMP restricts the acquisition of investments to high-quality, short-term money market instruments and highly rated long-term securities. The short-term investment portfolio represents unsecured credit and securities purchased under agreements to resell (i.e., reverse repurchase agreements). Therefore, counterparty ratings are monitored daily while performance and capital adequacy are monitored on a monthly basis in an effort to mitigate unsecured credit risk on our short-term investments. Collateral valuation and compliance with collateral eligibility and transaction margin requirements are monitored daily to limit secured credit risk on our reverse repurchase agreements. MBS represent the majority of our long-term investments. We hold MBS issued by agencies and GSEs, CMOs securitized by GSEs, private-issue MBS/ABS rated triple-A at the time of purchase and CMOs securitized by whole loans. Some of our private-label MBS/ABS have been downgraded below triple-A subsequent to purchase (see Table 36), but the downgraded securities have been and are currently paying according to contractual agreements with the exception of one security that experienced de minimis cash flow shortfalls during 2012. Approximately 89 percent of our MBS/CMO portfolio is securitized by Fannie Mae or Freddie Mac. The securities we hold that are classified as being backed by subprime mortgage loans are private-label home equity ABS. We also have potential credit risk exposure to MBS/CMOs and ABS that are insured by two of the monoline mortgage insurance companies, one of which is in bankruptcy proceedings. We analyze these securities quarterly as part of the OTTI determination and assume no coverage potential from this monoline insurance provider. Under the RMP in effect at the time of acquisition, the insurer had to be rated no lower than double-A. We monitor the credit ratings daily, financial performance at least annually and capital adequacy quarterly for all primary mortgage insurers, secondary mortgage insurers and master servicers to which we have potential credit risk exposure. Other long-term investments include unsecured GSE debentures and collateralized state and local housing finance agency securities that were rated at least double-A at the time of purchase.

Counterparty credit risk is managed through netting procedures, credit analysis, collateral management and other credit enhancements. In derivative transactions, credit risk arises when the market value of transactions, such as interest rate swaps, result in the counterparty owing money to us in excess of delivered collateral. We manage this risk by executing derivative transactions with experienced counterparties with high credit quality (defined by us as rated single-A or better); by requiring netting of individual derivatives transactions with the same counterparty; diversifying our derivatives across counterparties; and by executing transactions under master agreements that require counterparties to post collateral if we are exposed to a potential credit loss on the related derivatives exceeding an agreed-upon threshold. Our credit risk exposure from derivative transactions with member institutions is fully collateralized under our Advance Pledge and Security Agreement. We regularly monitor the exposures on our derivative transactions by determining the market value of positions using internal pricing models. The market values generated by the pricing model used to value derivatives are compared to dealer model results on a monthly basis to ensure that our derivative pricing model is reasonably calibrated to actual market pricing methodologies utilized by the dealers. As a result of these risk mitigation initiatives, management does not anticipate any credit losses on our derivative transactions.

The contractual or notional amount of derivatives reflects our involvement in various classes of financial instruments and does not measure credit risk. The maximum credit exposure is significantly less than the notional amount. The maximum credit exposure is the estimated cost of replacing the net receivable positions for individual counterparties on interest rate swaps and forward agreements, and purchased interest rate caps, interest rate floors and swaptions, net of the value of any related collateral, in the event of a counterparty default. In determining maximum credit exposure, we consider accrued interest receivables and payables as well as the legal right to net derivative transactions by counterparty. Table 58 presents derivative notional amounts and counterparty credit exposure, net of collateral and excluding instances where our pledged collateral exceeds our net position, by whole-letter rating (in the event of a split rating, we use the lowest rating published by Moody’s or S&P) for derivative positions with counterparties to which we had credit exposure as of December 31, 2012 (in thousands):

Table 58

Credit Rating	Notional Amount		Net Derivatives Fair Value Before Collateral		Cash Collateral Pledged From Counterparty		Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Double-A	$	196,000	$	4,173	$	-	$	4,173
Single-A		7,040,825		47,719		27,004		20,715
TOTAL DERIVATIVE POSITIONS WITH CREDIT EXPOSURE	$	7,236,825	$	51,892	$	27,004	$	24,888

Table 59 presents derivative notional amounts and counterparty credit exposure, net of collateral and excluding instances where our pledged collateral exceeds our net position, by whole-letter rating (in the event of a split rating, we use the lowest rating published by Moody’s or S&P) for derivative positions with counterparties to which we had credit exposure as of December 31, 2011 (in thousands):

Table 59

Credit Rating	Notional Amount		Net Derivatives Fair Value Before Collateral		Cash Collateral Pledged From Counterparty		Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Double-A	$	559,000	$	6,938	$	-	$	6,938
Single-A		5,623,667		31,856		26,581		5,275
TOTAL DERIVATIVE POSITIONS WITH CREDIT EXPOSURE	$	6,182,667	$	38,794	$	26,581	$	12,213

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Table 60 presents the derivative counterparties that represent five percent or more of net exposure after collateral and their ratings (in the event of a split rating we use the lowest rating published by Moody’s or S&P) as of December 31, 2012:

Table 60

Counterparty Name	Counterparty Rating	Percent of Net Exposure After Collateral
BNP Paribas	Single-A		74.3	%
Bank of New York Mellon	Double-A		13.4
Bank of America NA	Single-A		6.1
All other counterparties			6.2

Table 61 presents the derivative counterparties that represent five percent or more of net exposure after collateral and their ratings (in the event of a split rating we use the lowest rating published by Moody’s or S&P) as of December 31, 2011:

Table 61

Counterparty Name	Counterparty Rating	Percent of Net Exposure After Collateral
Bank of New York Mellon	Double-A		36.6	%
Bank of America NA	Single-A		30.2
Rabobank International	Double-A		9.3
Deutsche Bank AG	Single-A		8.9
HSBC Bank USA	Double-A		7.0
All other counterparties			8.0

Foreign Counterparty Risk – Cross-border outstandings are defined as loans, acceptances, interest-bearing deposits with other banks, other interest-bearing investments and any other monetary assets payable to us by entities of foreign countries, regardless of the currency in which the claim is denominated. Our cross-border outstandings consist primarily of short-term trading securities and Federal funds sold issued by banks and other financial institutions, which are non-sovereign entities, and derivative asset exposure with counterparties that are also non-sovereign entities. Secured reverse repurchase agreements are excluded from cross-border outstandings because they are fully collateralized.

In addition to credit risk, cross-border outstandings have the risk that, as a result of political or economic conditions in a country, borrowers may be unable to meet their contractual repayment obligations of principal and/or interest when due because of the unavailability of, or restrictions on, foreign exchange needed by borrowers to repay their obligations. In the latter part of the third quarter of 2011, management consciously decided to change the composition of our investments by transitioning away from unsecured credit exposure with foreign entities for the more favorable credit profile of domestic GSEs and secured reverse repurchase agreements.

Table 62 presents the fair value of cross-border outstandings to countries in which we do business that amounted to at least one percent of our total assets as of December 31, 2012 (in thousands):

Table 62

	Canada					Other1					Total
	Amount		Percent of Total Assets			Amount		Percent of Total Assets			Amount		Percent of Total Assets
Federal funds sold2	$	300,000		0.9	%	$	550,000		1.6	%	$	850,000		2.5	%
Trading securities3		125,003		0.4			259,999		0.8			385,002		1.2
Derivative assets:
Net exposure at fair value		-					19,928					19,928
Cash collateral held		-					-					-
Net exposure after cash collateral		-		-			19,928		-			19,928		-
TOTAL	$	425,003		1.3	%	$	829,927		2.4	%	$	1,254,930		3.7	%

__________

1	Represents other foreign countries where individual exposure is less than one percent of total assets. Total cross-border outstandings to countries that individually represented between 0.75 and 1.0 percent of our total assets as of December 31, 2012 were $0.6 billion (Australia and Netherlands).
2	Consists solely of overnight Federal funds sold.
3	Consists of commercial paper and certificates of deposit with remaining maturities of less than three months.

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Table 63 presents the fair value of cross-border outstandings to countries in which we do business that amounted to at least one percent of our total assets as of December 31, 2011 (in thousands):

Table 63

	Canada					Australia					Sweden					Finland					Other1						Total
	Amount		Percent of Total Assets			Amount		Percent of Total Assets			Amount		Percent of Total Assets			Amount		Percent of Total Assets			Amount			Percent of Total Assets			Amount			Percent of Total Assets
Federal funds sold2	$	240,000		0.7	%	$	-		-	%	$	225,000		0.7	%	$	225,000		0.7	%	$	350,000			1.0	%	$	1,040,000			3.1	%
Trading securities3		414,736		1.3			624,592		1.9			154,989		0.5			149,983		0.4			-			-			1,344,300			4.1
Derivative assets:
Net exposure at fair value		-					-					-					-					3,715						3,715
Cash collateral held		-					-					-					-					(130	)					(130	)
Net exposure after cash collateral		-		-			-		-			-		-			-		-			3,585			-			3,585			-
TOTAL	$	654,736		2.0	%	$	624,592		1.9	%	$	379,989		1.2	%	$	374,983		1.1	%	$	353,585			1.0	%	$	2,387,885			7.2	%

__________

1	Represents other foreign countries where individual exposure is less than one percent of total assets. There were no cross-border outstandings to any individual country that totaled between 0.75 and 1.0 percent of our total assets as of December 31, 2011.
2	Consists solely of overnight Federal funds sold.
3	Consists of commercial paper and certificates of deposit with remaining maturities of less than three months.

Table 64 presents the fair value of cross-border outstandings to countries in which we do business that amounted to at least one percent of our total assets as of December 31, 2010 (in thousands):

Table 64

	France					Canada					United Kingdom					Australia					Sweden					Other1						Total
	Amount		Percent of Total Assets			Amount		Percent of Total Assets			Amount		Percent of Total Assets			Amount		Percent of Total Assets			Amount		Percent of Total Assets			Amount			Percent of Total Assets			Amount			Percent of Total Assets
Federal funds sold2	$	700,000		1.8	%	$	85,000		0.2	%	$	160,000		0.4	%	$	-		-	%	$	-		-	%	$	610,000			1.6	%	$	1,555,000			4.0	%
Trading securities3		649,976		1.7			819,872		2.1			504,884		1.3			479,970		1.2			394,990		1.0			879,953			2.3			3,729,645			9.6
Derivative assets:
Net exposure at fair value		-					-					-					-					-					31,589						31,589
Cash collateral held		-					-					-					-					-					(25,484	)					(25,484	)
Net exposure after cash collateral		-		-			-		-			-		-			-		-			-		-			6,105			-			6,105			-
TOTAL	$	1,349,976		3.5	%	$	904,872		2.3	%	$	664,884		1.7	%	$	479,970		1.2	%	$	394,990		1.0	%	$	1,496,058			3.9	%	$	5,290,750			13.6	%

__________

1	Represents other foreign countries where individual exposure is less than one percent of total assets. Total cross-border outstandings to countries that individually represented between 0.75 and 1.0 percent of our total assets as of December 31, 2010 were $0.6 billion (Switzerland and Germany).
2	Consists solely of overnight Federal funds sold.
3	Consists of commercial paper and certificates of deposit with remaining maturities of less than three months.

Liquidity Risk Management: Maintaining the ability to meet our obligations as they come due and to meet the credit needs of our members and housing associates in a timely and cost-efficient manner is the primary objective of managing liquidity risk. We seek to be in a position to meet our members’ credit, debt service and liquidity needs without maintaining excessive holdings of low-yielding liquid investments or being forced to incur unnecessarily high borrowing costs.

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Finance Agency regulations require us at all times to have at least an amount equal to our current deposits received from our members invested in obligations of the United States, deposits in eligible banks or trust companies, or advances with maturities not exceeding five years. Table 65 summarizes our compliance with the Bank Act liquidity requirements as of December 31, 2012 and 2011 (in thousands):

Table 65

	12/31/2012		12/31/2011
Liquid assets1	$	1,219,745	$	1,155,966
Total qualifying deposits		1,181,957		997,371
Excess liquid assets over requirement	$	37,788	$	158,595

1 Although we have other assets that qualify as eligible investments under the liquidity requirements, only Federal funds sold and deposits with the Federal Reserve are listed because these exceed the liquidity requirements without the consideration of any other eligible investments.

Finance Agency regulations and our RMP require us to maintain contingency liquidity, which is defined as eligible transactions that we may use to meet our liquidity needs for a minimum of five business days without access to the consolidated obligation debt markets. Eligible transactions for meeting the contingency liquidity requirement are defined below. Both the Finance Agency and our liquidity measures depend on certain assumptions which may or may not prove valid in the event of an actual market disruption. We believe that under normal operating conditions, routine member borrowing needs and consolidated obligation maturities could be met without access to the consolidated obligation debt markets for at least five business days; however, under extremely adverse market conditions, our ability to meet a significant increase in member advance demand could be impaired if we are denied access to the consolidated obligation debt markets. We complete our contingency liquidity calculation weekly, or more often if deemed necessary.

We are required to maintain daily contingency liquidity in an amount not less than:

§   20 percent of demand, overnight and certificates of deposit; plus

§   100 percent of Federal funds purchased that mature within one week; plus

§   100 percent of consolidated obligations and other borrowings that mature within one week (less consolidated obligations settling within one week); plus

§   100 percent of consolidated obligations expected to be called within one week; plus

§   100 percent of consolidated obligation amortization payments expected within one week.

For contingency liquidity purposes under our RMP, we are authorized to hold the following investments, with the limitation that a security pledged under a repurchase agreement cannot be used to satisfy liquidity requirements:

§   Marketable assets with a maturity of one year or less;

§   Self-liquidating assets with a maturity of seven days or less;

§   Assets that are generally accepted as collateral in the repurchase agreement market; and

§   Irrevocable lines of credit from financial institutions rated not lower than the second highest credit rating category by an NRSRO.

Table 66 summarizes our compliance with the Finance Agency’s regulatory requirements and our RMP contingency liquidity requirements as of the most recently available weekly computation dated March 12, 2013 (in thousands):

Table 66

	03/12/2013
Sources of Contingency Liquidity:
Marketable assets with a maturity of one year or less	$	2,913,331
Self-liquidating assets with a maturity of 7 days or less		1,255,037
Assets that are generally accepted as collateral in the repurchase agreement market		3,473,242
Total Sources		7,641,610
Uses of Contingency Liquidity:
20 percent of demand, overnight and certificates of deposit		278,458
100 percent of consolidated obligations and other borrowings maturing within one week		1,124,975
Less 100 percent of consolidated obligations settling within one week		(6,300	)
100 percent of consolidated obligations expected to be called within one week		20,000
Total Uses		1,417,133
EXCESS CONTINGENCY LIQUIDITY	$	6,224,477

Operational liquidity, or the ability to meet operational requirements in the normal course of business, is currently defined in our RMP as sources of cash from both our ongoing access to the capital markets and our holding of liquid assets. The RMP provides that we shall maintain a daily operational liquidity level in an amount not less than:

§   20 percent of the sum of our balance of demand and overnight deposits and other overnight borrowings; plus

§   10 percent of the sum of our term deposits, consolidated obligations and other borrowings that mature within one year.

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As set forth in our RMP, the following investments are eligible for compliance with operational liquidity requirements, with the limitation that a security pledged under a repurchase agreement cannot be used to satisfy liquidity requirements:

§   Overnight Federal funds sold and overnight deposits;

§   Overnight reverse repurchase agreements;

§   All securities classified as Trading under ASC 320;

§   Cash and collected balances held at the Federal Reserve Banks, net of member pass-through deposit reserves; and

§   Securities that are generally accepted as collateral in the repurchase agreement market.

In 2012, we managed exposure to operational liquidity risk by maintaining appropriate daily liquidity levels above the thresholds established by our RMP. We were in compliance with the operational liquidity requirements of our RMP during 2012.

Finance Agency guidelines and our RMP require us to maintain a minimum number of calendar days of positive cash balances without access to the capital markets for the issuance of consolidated obligations under two different scenarios as described below:

§   10 to 20 days (initial and current target set by Finance Agency at 15 days) of positive cash balances under the roll-off scenario. Under the roll-off scenario, we assume that maturing member advances are not renewed; and

§   Three to seven days (initial and current target set by Finance Agency at five days) of positive cash balances under the renew scenario. Under the renew scenario, we assume that all maturing advances are renewed.

We calculate our liquidity under these guidelines daily and are required to submit the calculations in a report to the Finance Agency each Wednesday. Under each of these scenarios, we are allowed to include U.S. Treasury and Agency securities classified as trading securities as available liquidity two days after the day of the report and consider Federal funds sold and money market assets classified as trading securities (commercial paper and certificates of deposit) as available liquidity on the day of the report. We were in compliance with these requirements during 2012.

We generally maintained stable access to the capital markets throughout 2012. For additional discussion of the market for our consolidated obligations and the overall market affecting liquidity see “Financial Market Trends” under this Item 7.

An entity’s liquidity position is vulnerable to any rating, event, performance or ratio trigger (collectively called triggers) that would lead to the termination of the entity’s credit availability or the acceleration of repayment of credit obligations owed by the entity. We have reviewed the appropriate documents concerning our vulnerability to transactions that contain triggers to gain an understanding of the manner in which risks can arise from such triggers. Triggers adverse to us currently exist in agreements for derivatives and SBPAs. Our staff monitors triggers in order to properly manage any type of potential risks from triggers.

With respect to advances, letters of credit, standby credit facility commitments, SBPAs and member derivatives, we are the beneficiary of certain triggers based on the member’s or housing associate’s financial performance (or the ratings of bonds underlying SBPAs) as defined in detail in our policies and/or the appropriate agreements. See Notes 1 and 7 in Item 8 – “Financial Statements and Supplementary Data – Notes to Financial Statements” for collateral requirements designed for our credit products.

All derivative transactions entered into with non-member counterparties, including interest rate swaps, swaptions, interest rate caps and interest rate floors, have two-way bilateral triggers based on our ratings or the counterparties’ ratings, as applicable to the situation (i.e., which party is at risk). These transactions also have two-way rating triggers that provide for early termination, at the option of us or the counterparty, if the other party’s rating falls to or below the rating trigger level. Early termination by a counterparty may result in losses to us. Our agreements with counterparties incorporate termination triggers at ratings of BBB+ and Baa1 or lower. The triggers are incorporated in a master derivatives credit support annex or bilateral security agreement. Collateral-related triggers are designed to reduce the amount of unsecured credit risk exposure that we or the counterparty are willing to accept for a given rating level determined by the NRSROs. The maximum threshold amount of unsecured credit risk exposure for each rating level is defined in Table 67:

Table 67

S&P or Fitch Ratings	Moody’s Ratings	Exposure Threshold
AAA	Aaa	$50 million
AA+, AA, AA-	Aa1, Aa2, Aa3	$15 million
A+, A	A1, A2	$3 million
A-	A3	$1 million
Below A-	Below A3	$0

If the FHLBank’s or a counterparty’s exposure to the other ever exceeds the threshold based on the other’s NRSRO rating, a margin call is promptly issued requiring the party to collateralize the amount of credit risk exposure in excess of the exposure threshold. The agreement with one AAA/Aa2-rated special purpose vehicle also includes one ratings trigger event that would result in termination of any outstanding transactions at a mid-market level. The collateral posted by our counterparties as of December 31, 2012 and 2011 was in the form of cash. For additional information regarding our credit exposure relating to derivative contracts, see Note 8 in Item 8 – “Financial Statements and Supplementary Data – Notes to Financial Statements.”

The amount of collateral that we must post for derivative transactions is determined by the market value of the transactions and our credit rating. In August 2011, our rating was downgraded from AAA to AA+, and as a result we had to increase our collateral requirements. We had sufficient liquidity to satisfy this change and believe that our liquidity position is such that we could accommodate additional collateral requirements associated with potential further credit downgrades.

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We have executed SBPAs with multiple state housing finance authorities. All of the SBPAs contain rating triggers beneficial to us providing that if the housing finance authority bonds covered by the SBPA are rated below investment grade (triple-B), we would not be obligated to purchase the bonds even though we were otherwise required to do so under the terms of the SBPA contract. In addition, some transactions also contain a provision that allows us to terminate our obligation to purchase these bonds under the SBPA upon 30 days prior written notice if the long-term rating on the underlying bonds were to be withdrawn, suspended or reduced below single-A. The SBPAs also generally provide that we can be replaced as the liquidity provider in these transactions should our short-term rating by S&P or, in some cases, Moody’s, ever fall below A-1 or P-1, respectively. As of December 31, 2012 and 2011, we had 21 and 19 SBPAs that covered $1.6 billion and $1.5 billion in outstanding principal plus interest, respectively.

Business Risk Management: Business risk is the risk of an adverse impact on our profitability resulting from external factors that may occur in both the short and long term. We manage business risk, in part, through a commitment to strategic planning and by having a strategic business plan in effect at all times that describes how the business activities will achieve our mission and also details the operating goals and strategic objectives for each major business activity. The Strategic Business Plan is intended to make transparent our strategic plans as well as the strategic planning process that helps formulate those plans. The Strategic Business Plan is augmented from time-to-time, at least annually, with appropriate research and analyses. The Strategic Business Plan provides a mechanism for the Board of Directors to fulfill its responsibility for establishing our long-term strategic direction. Directors’ knowledge of the external environment through their positions with member institutions in the financial services industry as well as a variety of other professions provides a strong experience base to complement the capabilities and competencies of management. During 2011, we established a Strategic Planning and Development department to further enhance our strategic planning process. Full development of the Strategic Business Plan, including tactical strategies and implementation, is delegated to management and facilitated by the Strategic Planning and Development department. The Board of Directors plays a key role in the development of the strategic business plan and regularly monitors progress in the achievement of business objectives. Additionally, two Board of Directors’ meetings are set aside each year for strategic planning purposes.

To manage business concentration risk, earnings simulations are conducted annually with estimated base-, best- and worst-case assumptions. The worst-case scenario includes the effects on us if one or more of our larger members significantly reduce its advance levels or was no longer a member. The total advance growth and distribution for our top five borrowers is monitored on a monthly basis by the Asset-Liability Committee. See Table 23 under this Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Advances” for advance concentration to the top five borrowers.

Business risk also includes political, reputation and regulatory risk. Various legislation, including proposals to substantially change the regulatory system for the FHLBanks and other housing GSEs and possibly reform the FHLBank System in a manner which could significantly limit the ability of the FHLBanks to fulfill their mission, is from time to time introduced in Congress. This legislation might change applicable statutes and our operating environment in substantial and unpredictable ways. If enacted, legislation could impact our cost of doing business, limit or expand permissible activities or change the competitive balance among the FHLBanks and other housing GSEs. Consequently, we seek to positively influence legislative outcomes; support, oppose or comment upon regulatory proposals; and continually educate all stakeholders about our positive impact on the communities we serve. To manage these types of business risks, we maintain a Government Relations Officer position and work with lobbying firms in Washington, D.C. Additionally, we are, along with the other 11 FHLBanks, a member of the Council of FHLBanks, whose mission is to work with the 12 FHLBanks to ensure their common legislative and regulatory interests may be served, promote enactment of laws and regulations beneficial to the FHLBanks and oppose detrimental laws and regulations and enhance awareness and understanding of the FHLBanks among Washington leaders, including members of Congress and their staffs, executive departments, regulators and trade associations and the financial media. We annually prepare a detailed Congressional Outreach Plan in an effort to create awareness and educate our members of Congress so that they become more familiar with the value we bring to the citizens and communities in our districts. The plan is intended to help positively influence legislation affecting us, make relevant Congressional delegations more aware of our mission and activities and to deliver our message in a clear and consistent manner.

Joint and Several Liability – Although we are primarily liable for our portion of consolidated obligations (i.e., those issued on our behalf), we are also jointly and severally liable with the other 11 FHLBanks for the payment of principal and interest on consolidated obligations of all the FHLBanks. See Item 1 – “Business – Debt Financing – Consolidated Obligations” and Note 10 in the Notes to Financial Statements under Item 8 for additional information regarding the FHLBank’s joint and several liability.

On October 25, 2010, the FHLBank of Seattle and the Finance Agency entered into a Stipulation and Consent to the Issuance of a Consent Order (Consent Order). Among other things, the Consent Order includes certain prohibitions on dividends and requires the FHLBank of Seattle to undertake an asset improvement program and submit a capital repurchase plan to the Finance Agency. The Consent Order also establishes a stabilization period that ended with the filing of the FHLBank of Seattle’s June 30, 2011 financial statements with the Securities and Exchange Commission. The Consent Order required the FHLBank of Seattle to meet certain financial metrics by the end of the stabilization period and maintain them for each quarter-end thereafter. The Consent Order will remain in place until modified or terminated by the Finance Agency. The FHLBank of Seattle is currently classified as “adequately capitalized” and is subject to continuing limitations on stock redemptions and repurchases. Any stock repurchases and redemptions and dividend payments will be subject to Finance Agency approval.

We have concluded that the above-mentioned actions do not materially increase the risk to us under our joint and several liability obligation. Management continues to perform appropriate due diligence as well as closely monitor any developments in the financial condition and regulatory status of FHLBank of Seattle. However, while supervisory orders and agreements are sometimes publicly announced, we cannot provide assurance that we have been informed or will be informed of regulatory actions taken at other FHLBanks that may impact our risk.

Operations Risk Management: Operations risk is the risk of loss due to human error, circumvention or failure of internal controls and procedures, systems malfunctions, man-made or natural disasters, internal or external fraud or unenforceability of legal contracts. This category of risk is inherent in our daily business activities and involves people, information technology (IT) systems, processes, accounting/financial disclosure, legal and external events. A number of strategies are used to mitigate operations risk, including systems and procedures to monitor transactions and financial positions, segregation of duties, documentation of transactions, secondary reviews, annual comprehensive risk assessments conducted at the entity and business unit level, and periodic reviews by our Internal Audit department. The Operations Risk Committee serves as the primary venue for overseeing all of our operations risk management initiatives and activities.

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Human Error and Circumvention or Failure of Internal Controls and Procedures – Employees play a vital role in implementing our risk management practices and strategies. We look to recruit, retain, develop and promote the best employees by offering a fair and competitive rewards package and by providing a comfortable, secure and professional work environment. To ensure our employees understand the importance of establishing and maintaining an effective internal control system, we maintain an ERM and Internal Control Policy which, in addition to defining ERM and describing the eight interrelated components of the FHLBank’s ERM framework, outlines the objectives and principles for our internal controls, establishes and delineates business unit managers’ responsibilities for implementing internal controls, and establishes the Internal Audit department as the business unit responsible for reviewing the adequacy of our internal controls. We have established and maintain an effective internal control system, guided by the ERM and Internal Control Policy, that addresses the efficiency and effectiveness of our activities, the safeguarding of our assets, and the reliability, completeness and timely reporting of financial and management information to the Board of Directors and outside parties, including the Office of Finance, the SEC and the Finance Agency. The annual business unit risk assessment program serves to reinforce our focus on maintaining strong internal control by identifying significant inherent risks and the internal controls and strategies used to mitigate those risks to acceptable residual risk levels. The business unit risk assessment program provides management and the Board of Directors with a thorough understanding of our risk management and internal control structure.

Systems Malfunctions and Information Security Threats – We rely heavily on IT systems and other technology to conduct our business. To manage operations risk as it relates to IT systems, we devote significant management attention and resources to technology. Executive management reviews and approves all major projects to ensure alignment of IT resources with our strategic direction. Our Technology Committee assists executive management in overseeing the development and implementation of significant technology strategies. The Technology Committee is also charged with providing strategic oversight of all technology-related activities, monitoring the strategic alignment and synchronization of IT services with our Strategic Business Plan (as well as our immediate and long-term goals and objectives), and reviewing new and/or anticipated future projects related to our strategic initiatives. Protection of our information assets is also necessary to establish and maintain trust between us and our customers, maintain compliance with applicable laws and regulations, and protect our reputation. Consequently, we maintain an enterprise-wide information security program. The goal of our enterprise information security program is to maintain an information security framework such that: (1) information assets are protected from unauthorized access, modification, disclosure, and destruction; (2) integrity and confidentiality of information is maintained; (3) information assets and information systems are available when needed; and (4) security threats are identified, assessed and appropriately managed or mitigated.

Man-made or Natural Disasters – Business disruption and systems failure due to man-made or natural disasters are managed by having in place at all times a disaster recovery plan, the purpose of which is to provide contingency plans for situations where the operations cannot be carried out in their normal manner. We maintain contingency plans which deal with business interruptions lasting for a prolonged period of time. An off-site recovery operations center is also maintained which is an important component of our overall disaster recovery planning effort. The recovery center is maintained on a different power grid and is serviced by another telephone central office than our main headquarters. An on-site power generator supports the site in case of total power failure. The off-site recovery center is also used to store computer information, supplies and other resources specifically acquired for business continuity purposes. Comprehensive testing is conducted at the off-site recovery location at least once each year with additional limited tests conducted on a quarterly basis. The disaster recovery plans are reviewed and updated semi-annually with employee emergency contact information updated nightly through our human resource information system. We also have a reciprocal back-up agreement in place with the FHLBank of Boston to provide short-term advances in the event that our facilities are inoperable. In the event that the FHLBank of Boston’s facilities are inoperable, we have agreed to provide short-term liquidity advances to the FHLBank of Boston’s members. An annual test of this agreement is completed by the FHLBank and FHLBank of Boston to ensure the process and related systems are functioning properly.

Internal or External Fraud – Our Anti-Fraud Policy, which includes our Whistleblower Procedures, establishes our methodology for preventing, detecting, deterring, reporting, remediating and punishing fraudulent or dishonest activity and violations of the Code of Ethicsthat could create risks for us or undermine the public’s confidence in the integrity of our activities. Employees and contractors may submit good faith complaints or concerns regarding accounting or auditing matters, fraud concerns, potential wrongdoing or violations of applicable securities laws and regulations, or violations of the Commodity Exchange-Act and relevant implementing regulations to management or our anonymous reporting service without fear of dismissal or retaliation of any kind. No complaints have been received under the Whistleblower Procedures of the Anti-Fraud Policy since the inception of the program.

Impact of Recently Issued Accounting Standards

See Note 2 of the Notes to the Financial Statements included under Item 8 – “Financial Statements and Supplementary Data” for a discussion of recently issued accounting standards.

Item 7A: Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk Management

We measure interest rate risk exposure by various methods, including the calculation of DOE and MVE in different interest rate scenarios.

Duration of Equity: DOE aggregates the estimated sensitivity of market value for each of our financial assets and liabilities to changes in interest rates. In essence, DOE indicates the sensitivity of theoretical MVE to changes in interest rates. However, MVE should not be considered indicative of our market value as a going concern or our value in a liquidation scenario. A positive DOE results when the duration of assets and designated derivatives is greater than the duration of liabilities and designated derivatives. A positive DOE generally indicates a degree of interest rate risk exposure in a rising interest rate environment, and a negative DOE indicates a degree of interest rate risk exposure in a declining interest rate environment. Higher DOE numbers, whether positive or negative, indicate greater volatility of MVE in response to changing interest rates. That is, if we have a DOE of 3.0, a 100 basis point (one percent) increase in interest rates would cause our MVE to decline by approximately three percent whereas a 100 basis point decrease in interest rates would cause our MVE to increase by approximately three percent. However, it should be noted that a decline in MVE does not translate directly into a decline in near-term income, especially for entities that do not trade financial instruments. Changes in market value may indicate trends in income over longer periods, and knowing our sensitivity of market value to changes in interest rates provides a measure of the interest rate risk we take.

Under the RMP approved by our Board of Directors, our DOE is generally limited to a range of ±5.0 assuming current interest rates. In addition, our DOE is generally limited to a range of ±7.0 assuming an instantaneous parallel increase or decrease in interest rates of 200 bps. During periods of extremely low interest rates, such as the current interest rate environment, the Finance Agency requires that FHLBanks employ a constrained down shock analysis to limit the evolution of forward interest rates to positive non-zero values. Since our market risk model imposes a zero boundary on post-shock interest rates, no additional calculations are necessary in order to meet this Finance Agency requirement.

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The DOE parameters established by our Board of Directors represent one way to establish general limits on the amount of interest rate risk that we find acceptable. If our DOE exceeds the policy limits established by the Board of Directors, we either: (1) take asset/liability actions to bring the DOE back within the range established in our RMP; or (2) review and discuss potential asset/liability management actions with the Board of Directors at the next regularly scheduled meeting that could bring the DOE back within the ranges established in the RMP and ascertain a course of action, which can include a determination that no asset/liability management actions are necessary. A determination that no asset/liability management actions are necessary can be made only if the Board of Directors agrees with management’s recommendations. All of our DOE measurements were inside Board of Director established policy limits (discussed in previous paragraph) and operating ranges (discussed in next paragraph) as of December 31, 2012. On an ongoing basis, we actively monitor portfolio relationships and overall DOE dynamics as a part of our evaluation processes for determining acceptable future asset/liability management actions.

We typically maintain DOE within the above ranges through management of the durations of our assets, liabilities and derivatives. Significant resources in terms of staffing, software and equipment are continuously devoted to assuring that the level of interest rate risk existing in our balance sheet is properly measured and limited to prudent and reasonable levels. The DOE that management and the Board of Directors consider prudent and reasonable is somewhat lower than the RMP limits mentioned above and can change depending upon market conditions and other factors. As set forth in our Risk Appetite Metrics approved by the Board of Directors, we typically manage the current base DOE to remain in the range of ±2.5 and DOE in the ±200 basis point interest rate shock scenarios to remain in the range of ±4.0. When DOE exceeds either the limits established by the RMP or the more narrowly-defined ranges to which we manage DOE, corrective actions taken may include: (1) the purchase of interest rate caps, interest rate floors, swaptions or other derivatives; (2) the sale of assets; and/or (3) the addition to the balance sheet of assets or liabilities having characteristics that are such that they counterbalance the excessive duration observed. For example, if DOE has become more positive than desired due to variable rate MBS that have reached cap limits, we may purchase interest rate caps that have the effect of removing those MBS cap limits. We would be short caps in the MBS investments and long caps in the offsetting derivative positions, thus reducing DOE. Further, if an increase in DOE were due to the extension of mortgage loans, MBS or new advances to members, the more appropriate action would be to add new long-term liabilities, whether callable or non-callable, to the balance sheet to offset the lengthening asset position.

Table 68 presents the DOE in the base case and the up and down 100 and 200 basis point interest rate shock scenarios for 2012 and 2011:

Table 68

Duration of Equity
Date	Up 200 Bps	Up 100 Bps	Base	Down 100 Bps	Down 200 Bps
12/31/2012	0.3	-3.0	-0.6	-0.1	-0.1
09/30/2012	0.1	-3.0	-2.2	0.1	-0.2
06/30/2012	1.1	-2.0	-1.0	2.1	0.3
03/31/2012	2.7	0.2	-0.2	1.2	0.7
12/31/2011	0.2	-2.1	-0.4	1.5	0.9
09/30/2011	-0.5	-2.7	-0.4	1.1	1.5
06/30/2011	1.3	-0.5	-0.3	1.9	-1.5
03/31/2011	1.8	0.0	-1.0	1.7	-2.9

All DOE results continue to remain inside our operating range of ±2.5 in the base scenario and ±4.0 in the ±200 basis point interest rate shock scenarios. The DOE as of December 31, 2012 decreased in the base (became more negative) and the down 200 basis point shock scenarios and increased in the up 200 basis point shock scenario from December 31, 2011. The primary factors contributing to the changes in duration during the period were: (1) the general decline of interest rates and mortgage rates during the period; (2) the continued increase in the fixed rate mortgage loan portfolio during the period and the associated increase of this portfolio as a percent of total assets; and (3) asset/liability actions taken by management throughout the period, including the continued issuance of long-term, unswapped callable consolidated obligation bonds with short lock-out periods in response to declining interest rates and growth in the fixed rate mortgage loan portfolio.

The decrease in interest rates during 2012 generally results in a shortening duration profile for both the fixed rate mortgage loan portfolio and the associated unswapped callable consolidated obligation bonds funding these assets. With the continued growth in our mortgage loan portfolio during 2012, as discussed in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – MPF Program,” the duration profile typically results in an absolute lengthening of the assets since new production loans generally have a longer duration than existing loans and typically provides a net positive duration impact for the portfolio. However, with the steady decline in interest rates throughout 2012, the duration of the outstanding fixed rate mortgage loan portfolio shortened as the projected prepayments increased, indicating an increased refinancing incentive for borrowers, thus at least partially offsetting the duration lengthening attributable to the 20.4 percent growth in the portfolio during 2012.

With the increasing balance of the fixed rate mortgage loan portfolio, the portfolio continued to increase as an overall percentage of total assets, increasing from 14.9 percent of total assets as of the end of 2011 to 17.6 percent as of the end of 2012. This weighting increase then magnified the duration shortening of this portfolio as rates declined. This magnification occurs when a portfolio weighting as a percent of the overall balance sheet changes, causing the remaining portfolios to be a smaller or larger component of the total balance sheet composition. For example, when advance balances decline, our mortgage loan portfolio effectively increases as a total proportion of total assets, assuming all other asset portfolios remain constant. This relationship then causes the duration of the mortgage loan portfolio to have a greater contribution impact to the overall DOE since DOE is a weighted measurement. Couple this example with an absolute growth in the mortgage loan portfolio during the same period, and the mortgage loan portfolio becomes an even greater percentage of the balance sheet, causing the DOE profile to be further impacted by the mortgage loan duration profile.

With respect to the current period, the mortgage loan portfolio effectively increased as a proportion of total assets, causing the duration of the mortgage loan portfolio to contribute a greater impact to the overall DOE. This impact contributed to the overall change in the balance sheet duration for all scenarios during the period. With these balance sheet dynamics, we continue to actively manage and monitor the contributing factors of our risk profile, including DOE. As the relationship of the fixed rate mortgage assets and the associated callable liabilities vary based on market conditions, we evaluate and manage these market driven sensitivities as both portfolios continue to grow.

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To effectively manage the growth of the mortgage loan portfolio and related sensitivity to changes in market conditions, a continued issuance of unswapped callable consolidated obligation bonds with short lock-out periods (generally three months) positioned us to replace called bonds as the interest rate environment declined at different times during the year. The call of higher rate callable bonds and reissuance of these bonds at lower interest rates in this manner generally extends the duration profile of this portfolio as bonds are called that are in-the-money (above market rates) and subsequently reissued at lower interest rates (at market rates). This liability extension corresponds with the expected longer duration profile of the new fixed rate mortgage loans, all else being equal. As discussed above, as interest rates continued to decline and the fixed rate mortgage prepayment projections increased, the short lock-out periods of the callable bonds provided the opportunity to effectively refinance our liabilities. Further, as the fixed rate mortgage portfolio continued to grow, we could issue funding liabilities at lower rate levels and provide for effective management of our DOE profile. In addition, issuance of discount notes was sustained to provide adequate liquidity sources to appropriately address potential customer advance and capital stock activity. Further discussion of the unswapped callable bond calls and reissuance in relation to the mortgage portfolios is discussed in Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Consolidated Obligations.” The combination of these factors contributed to the net DOE decrease of 0.2 in the base scenario and caused the balance sheet duration profile to become slightly more liability sensitive.

In addition, we purchased Agency fixed rate CMOs and variable rate multifamily DUS MBS without caps during the latter part of 2012 as allowable according to Finance Agency regulations. As mentioned previously, the addition of mortgage securities, whether fixed or variable rate, typically lengthens the duration profile of the respective portfolios and generally lengthens DOE. However, as discussed, the increase in the fixed rate mortgage loan portfolio and the overall shortening of the portfolio duration profile as rates declined, along with the increase of the mortgage loan portfolio as an overall percentage of assets and the increased issuance of unswapped callable debt, caused the balance sheet to become slightly more liability sensitive.

With respect to the down instantaneous shock scenarios, the sensitivities of both the assets and liabilities are impacted to a large extent by the absolute level of rates and the zero boundary methodology as discussed previously. Since the term structure of interest rates is at or near historically low levels, an instantaneous parallel shock of down 100 basis points or 200 basis points will effectively produce a flattened term structure of interest rates near zero. This flattened term structure will produce slight, if any, variations in valuations, which generate near zero duration results since the duration measurement captures the sensitivity of valuations to changes in rates. These near zero duration results should be viewed in the context of the broader risk profile of the base and positive interest rate shock scenarios to establish a sufficient vantage point for helping discern the overall sensitivity of the balance sheet and of DOE. As with all scenario changes that occurred during the period, the impact from various sensitivities was expected and discussed during our regular interest-rate risk profile review process.

The net DOE increase of 0.1 in the up 200 basis point shock scenario during 2012 is generally a function of related factors mentioned previously and the relationship of the variable rate Agency MBS/CMOs and the purchased interest rate cap portfolio. We purchase interest rate caps to offset the impact of the embedded caps in the variable rate Agency MBS/CMOs. As expected, these interest rate caps are a satisfactory interest rate risk hedge and provide an off-setting risk response to the risk profile changes in the Agency variable rate CMOs. We periodically assess derivative strategies to ensure that overall balance sheet risk is appropriately hedged within established risk appetite and make adjustments to the derivative portfolio as needed. This evaluation is completed considering not only the par value of the variable rate MBS/CMO investments with embedded caps being hedged with purchased caps, but the composition of the purchased cap portfolio and expected prepayments of the variable rate MBS/CMO investments with embedded caps. Our purchases of interest rate caps tend to partially offset the negative convexity of our mortgage assets and the effects of the interest rate caps embedded in the adjustable rate MBS/CMOs. We purchased no new interest rate caps during 2012.

Convexity is the measure of the exponential change in prices for a given change in interest rates; or more simply stated, it measures the rate of change in duration as interest rates change. When an instrument is negatively convex, price increases as interest rates decline. When an instrument’s convexity profile decreases, it simply demonstrates that the duration profile is flattening or that the duration is changing at an increasingly slower rate. When an instrument’s convexity profile increases, the duration profile is steepening and is decreasing in price at an increasingly faster rate. Duration is a measure of the relative risk of a financial instrument, and the more rapidly duration changes as interest rates change, the riskier the instrument. The variable rate MBS/CMOs have negative convexity as a result of the embedded caps and prepayment options. All of our mortgage loans are fixed rate, so they have negative convexity only as a result of the prepayment options. We seek to mitigate this negative convexity with purchased options that have positive convexity and callable liabilities that have negative convexity, which offset some or all of the negative convexity risk in our assets. While changes in current capital market conditions, the extremely low level of interest rates and the general shape of the yield curve all make it challenging to manage our market risk position, we continue to take measured asset/liability actions to stay within established policy limits.

If at any point a risk measurement nears or exceeds an operating range or policy limit established by the Board of Directors, certain actions may be implemented both by management and the Board of Directors. We typically manage a DOE measurement that exceeds the established limits with various asset/liability management actions. Whenever an established limit is exceeded, the Board of Directors is advised by management and the issue is discussed at the next regularly scheduled Board of Directors’ meeting. If after discussion, the Board of Directors determines that asset/liability management action is required, the Board-approved approach is implemented by management to address the situation. Even though all DOE measurements are inside management’s operating range as of December 31, 2012, active monitoring of portfolio relationships and overall DOE dynamics continues as do evaluation processes for acceptable future asset/liability management actions.

In calculating DOE, we also calculate our duration gap, which is the difference between the duration of our assets and the duration of our liabilities. Our base duration gap was -0.4 month and –0.3 month as of December 31, 2012 and 2011, respectively. Again, as discussed previously, the decrease (became more negative) in duration gap was primarily the result of the changes in the fixed rate mortgage loan portfolio and the associated funding decisions made by management in response to the declining interest rate environment. All 12 FHLBanks are required to submit this base duration gap number to the Office of Finance as part of the quarterly reporting process created by the Finance Agency.

Matching the duration of assets with the duration of liabilities funding those assets is accomplished through the use of different debt maturities and embedded option characteristics, as well as the use of derivatives, primarily interest rate swaps, caps, floors and swaptions as discussed previously. Interest rate swaps increase the flexibility of our funding alternatives by providing desirable cash flows or characteristics that might not be as readily available or cost-effective if obtained in the standard GSE debt market. Finance Agency regulation prohibits the speculative use of derivatives, and we do not engage in derivatives trading for short-term profit. Because we do not engage in the speculative use of derivatives through trading or other activities, the primary risk posed by derivative transactions is credit risk in that a counterparty may fail to meet its contractual obligations on a transaction and thereby force us to replace the derivative at market price (see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Management – Credit Risk Management” for additional information).

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As mentioned previously, the funding of mortgage loans and prepayable assets with liabilities that have similar duration or average cash flow patterns over time is our primary strategy for and means of managing the interest rate risk for these assets. To achieve the desired liability durations, we issue debt across a broad spectrum of final maturities. Because the durations of mortgage loans and other prepayable assets change as interest rates change, callable consolidated obligation bonds with similar duration characteristics are frequently issued. The duration of callable bonds shortens when interest rates decrease and lengthens when interest rates increase, allowing the duration of the debt to better match the typical duration of mortgage loans and other prepayable assets as interest rates change. In addition to actively monitoring this relationship, the funding and hedging profile and process are continually measured and reevaluated. We may also use purchased interest rate caps, floors and swaptions to manage the duration of our assets and liabilities. For example, in order to manage our interest-rate risk in rising interest rate environments, we may purchase out-of-the-money caps to help manage the duration extension of mortgage assets, especially variable rate MBS/CMOs with periodic and lifetime embedded interest rate caps. We may also purchase receive-fixed or pay-fixed swaptions (options to enter into receive-fixed rate or pay-fixed rate interest rate swaps) to manage our overall DOE in falling or rising interest rate environments, respectively. During times of falling interest rates, when mortgage assets are prepaying quickly and shortening in duration, we may also synthetically convert fixed rate debt to variable rate using interest rate swaps in order to shorten the duration of our liabilities to more closely match the shortening duration of mortgage assets. As we need to lengthen the liability duration, we terminate selected interest rate swaps to effectively extend the duration of the previously swapped debt.

Market Value of Equity: MVE is the net value of our assets and liabilities. Estimating sensitivity of MVE to changes in interest rates is another measure of interest rate risk. We generally maintain a MVE within limits specified by the Board of Directors in the RMP. The RMP measures our market value risk in terms of the MVE in relation to total regulatory capital stock outstanding (TRCS). TRCS includes all capital stock outstanding, including stock subject to mandatory redemption. As a cooperative, we believe using the TRCS results in an appropriate measure because it reflects our market value relative to the book value of our capital stock. Our RMP stipulates MVE shall not be less than: (1) 90 percent of TRCS under the base case scenario; and (2) 85 percent of TRCS under a ±200 basis point instantaneous parallel shock in interest rates. Table 69 presents MVE as a percent of TRCS as of December 31, 2012 as well as information for previous periods for comparability. As of December 31, 2012, all scenarios are well within the specified limits and much of the relative level in the ratios during the two-year period covered by the table can be attributed to the increase in the fixed rate mortgage loan market values as rates have declined and the relative value impact of the refinancing activities of the associated unswapped callable consolidated obligation bonds.

Table 69

Market Value of Equity as a Percent of Total Regulatory Capital Stock
Date	Up 200 Bps	Up 100 Bps	Base	Down 100 Bps	Down 200 Bps
12/31/2012	167	165	158	161	160
09/30/2012	164	162	155	155	155
06/30/2012	151	150	145	147	149
03/31/2012	143	144	142	144	145
12/31/2011	142	140	136	139	141
09/30/2011	141	137	132	134	136
06/30/2011	137	138	136	139	137
03/31/2011	135	137	135	135	135

Detail of Derivative Instruments by Type of Instrument by Type of Risk: Various types of derivative instruments are utilized to mitigate the interest rate risks described in the preceding sections as well as to better match the terms of assets and liabilities. We currently employ derivative instruments by designating them as either a fair value or cash flow hedge of an underlying financial instrument or a forecasted transaction; by acting as an intermediary; or in asset/liability management (i.e., an economic hedge). An economic hedge is defined as a derivative hedging specific or non-specific underlying assets, liabilities or firm commitments that either does not qualify for hedge accounting, or for which we have not elected hedge accounting, but is an acceptable hedging strategy under our RMP. For hedging relationships that are not designated for shortcut hedge accounting (see additional details in Note 1 – Summary of Significant Accounting Policies under Item 8), we formally assess (both at the hedge’s inception and monthly on an ongoing basis) whether the derivatives used have been highly effective in offsetting changes in the fair values or cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. We typically use regression analyses or similar statistical analyses to assess the effectiveness of our long haul hedges. See Note 9 – Derivatives and Hedging Activities in the Notes to Financial Statements under Item 8 for information on effectiveness methods used. We determine the hedge accounting to be applied when the hedge is entered into by completing detailed documentation, which includes a checklist setting forth criteria that must be met to qualify for hedge accounting.

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Table 70 presents the notional amount and fair value amount (fair value includes net accrued interest receivable or payable on the derivative) for derivative instruments by hedged item, hedging instrument, hedging objective and accounting designation as of December 31, 2012 (in thousands):

Table 70

Hedged Item	Hedging Instrument	Hedging Objective	Accounting Designation	Notional Amount		Fair Value Amount
Advances
Fixed rate non-callable advances	Pay fixed, receive floating interest rate swap	Convert the advance’s fixed rate to a variable rate index	Fair Value Hedge	$	2,682,500	$	(160,247	)
Fixed rate callable advances	Pay fixed, receive floating interest rate swap	Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance	Fair Value Hedge		76,000		(3,107	)
Fixed rate convertible advances	Pay fixed, receive floating interest rate swap	Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance	Fair Value Hedge		2,814,657		(323,759	)
Variable rate advances with embedded caps clearly and closely related	Interest rate cap	Offset the interest rate cap embedded in a variable rate advance	Fair Value Hedge		247,000		(4,429	)
Investments
Fixed rate non-MBS trading investments	Pay fixed, receive floating interest rate swap	Convert the investment’s fixed rate to a variable rate index	Economic Hedge		1,011,320		(166,047	)
Adjustable rate MBS with embedded caps	Interest rate cap	Offset the interest rate cap embedded in a variable rate investment	Economic Hedge		5,726,800		27,408
Fixed rate private-label MBS/ABS	Interest rate floor	Limit duration of equity risk from MBS/ABS prepayments in a declining interest rate environment	Economic Hedge		50,000		2,291
Mortgage Loans Held for Portfolio
Fixed rate mortgage purchase commitments	Mortgage purchase commitment	Protect against fair value risk	Economic Hedge		106,355		6
Consolidated Obligation Bonds
Fixed rate non-callable consolidated obligation bonds	Receive fixed, pay floating interest rate swap	Convert the bond’s fixed rate to a variable rate index	Fair Value Hedge		3,637,000		186,632
Fixed rate callable consolidated obligation bonds	Receive fixed, pay floating interest rate swap	Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond	Fair Value Hedge		880,000		26,199
Callable step-up consolidated obligation bonds	Receive floating interest rate with embedded features, pay floating interest rate swap	Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond	Fair Value Hedge		2,270,000		(324	)
Variable rate consolidated obligation bonds	Receive floating interest rate, pay floating interest rate swap	Reduce basis risk by converting an undesirable variable rate index in the bond to a more desirable variable rate index	Economic Hedge		4,765,000		6,747
Intermediary Derivatives
Interest rate swaps executed with members	Pay fixed, receive floating interest rate swap or receive fixed, pay floating interest rate swap	Offset interest rate swaps executed with members by executing interest rate swaps with derivatives counterparties	Economic Hedge		30,000		17
Interest rate caps executed with members	Interest rate cap	Offset interest rate caps executed with members by executing interest rate caps with derivatives counterparties	Economic Hedge		96,000		-
TOTAL				$	24,392,632	$	(408,613	)

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Table 71 presents the notional amount and fair value amount (fair value includes net accrued interest receivable or payable on the derivative) for derivative instruments by hedged item, hedging instrument, hedging objective and accounting designation as of December 31, 2011 (in thousands):

Table 71

Hedged Item	Hedging Instrument	Hedging Objective	Accounting Designation	Notional Amount		Fair Value Amount
Advances
Fixed rate non-callable advances	Pay fixed, receive floating interest rate swap	Convert the advance’s fixed rate to a variable rate index	Fair Value Hedge	$	3,228,828	$	(220,853	)
Fixed rate callable advances	Pay fixed, receive floating interest rate swap	Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance	Fair Value Hedge		36,000		(812	)
Fixed rate convertible advances	Pay fixed, receive floating interest rate swap	Convert the advance’s fixed rate to a variable rate index and offset option risk in the advance	Fair Value Hedge		3,223,256		(346,886	)
Variable rate advances with embedded caps clearly and closely related	Interest rate cap	Offset the interest rate cap embedded in a variable rate advance	Fair Value Hedge		247,000		(5,075	)
Investments
Fixed rate non-MBS trading investments	Pay fixed, receive floating interest rate swap	Convert the investment’s fixed rate to a variable rate index	Economic Hedge		1,111,320		(187,328	)
Adjustable rate MBS with embedded caps	Interest rate cap	Offset the interest rate cap embedded in a variable rate investment	Economic Hedge		6,675,533		45,420
Fixed rate private-label MBS/ABS	Interest rate floor	Limit duration of equity risk from MBS/ABS prepayments in a declining interest rate environment	Economic Hedge		200,000		7,295
Mortgage Loans Held for Portfolio
Fixed rate mortgage purchase commitments	Mortgage purchase commitment	Protect against fair value risk	Economic Hedge		119,945		843
Consolidated Obligation Discount Notes
Fixed rate non-callable discount notes	Receive fixed, pay floating interest rate swap	Convert the discount note’s fixed rate to a variable rate	Fair Value Hedge		106,803		(20	)
Consolidated Obligation Bonds
Fixed rate non-callable consolidated obligation bonds	Receive fixed, pay floating interest rate swap	Convert the bond’s fixed rate to a variable rate index	Fair Value Hedge		4,780,000		229,919
Fixed rate callable consolidated obligation bonds	Receive fixed, pay floating interest rate swap	Convert the bond’s fixed rate to a variable rate index and offset option risk in the bond	Fair Value Hedge		1,096,000		35,453
Callable step-up consolidated obligation bonds	Receive floating interest rate with embedded features, pay floating interest rate swap	Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond	Fair Value Hedge		1,920,000		18,050
Complex consolidated obligation bonds	Receive floating interest rate with embedded features, pay floating interest rate swap	Reduce interest rate sensitivity and repricing gaps by converting the bond’s variable rate to a different variable rate index and/or to offset embedded options risk in the bond	Fair Value Hedge		248,000		1,178
Variable rate consolidated obligation bonds	Receive floating interest rate, pay floating interest rate swap	Reduce basis risk by converting an undesirable variable rate index in the bond to a more desirable variable rate index	Economic Hedge		2,135,000		(2,202	)
Intermediary Derivatives
Interest rate swaps executed with members	Pay fixed, receive floating interest rate swap or receive fixed, pay floating interest rate swap	Offset interest rate swaps executed with members by executing interest rate swaps with derivatives counterparties	Economic Hedge		70,000		19
Interest rate caps executed with members	Interest rate cap	Offset interest rate caps executed with members by executing interest rate caps with derivatives counterparties	Economic Hedge		136,000		-
TOTAL				$	25,333,685	$	(424,999	)

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Item 8: Financial Statements and Supplementary Data

The following financial statements and accompanying notes, including the Report of Independent Registered Public Accounting Firm, are set forth on pages F-1 to F-53 of this Form 10-K.

Audited Financial Statements

Description	Page Number
Management's Report on Internal Control over Financial Reporting	F-1
Report of Independent Registered Public Accounting Firm – PricewaterhouseCoopers LLP	F-2
Statements of Condition as of December 31, 2012 and 2011	F-3
Statements of Income for the Years Ended December 31, 2012, 2011 and 2010	F-5
Statements of Comprehensive Income for the Years Ended December 31, 2012, 2011 and 2010	F-6
Statements of Capital for the Years Ended December 31, 2012, 2011 and 2010	F-7
Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010	F-8
Notes to Financial Statements	F-10

Tables 72 and 73 present supplementary quarterly financial information (unaudited) for the years ended December 31, 2012 and 2011 (in thousands):

Table 72

	2012
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
Interest income	$	119,202		$	123,139		$	124,379		$	128,063
Interest expense		66,007			70,075			69,296			69,725
Net interest income		53,195			53,064			55,083			58,338
Provision for credit losses on mortgage loans		(22	)		1,062			417			1,039
Net interest income after mortgage loan loss provision		53,217			52,002			54,666			57,299
Other non-interest income (loss)		(8,577	)		(8,774	)		(16,750	)		(8,815	)
Other non-interest expense		12,871			12,204			13,142			13,479
Assessments		3,177			3,103			2,479			3,502
NET INCOME/(LOSS)	$	28,592		$	27,921		$	22,295		$	31,503

Table 73

	2011
	4th Quarter			3rd Quarter			2nd Quarter			1st Quarter
Interest income	$	130,400		$	137,627		$	135,048		$	143,412
Interest expense		74,246			77,185			80,149			83,981
Net interest income		56,154			60,442			54,899			59,431
Provision for credit losses on mortgage loans		(178	)		327			344			565
Net interest income after mortgage loan loss provision		56,332			60,115			54,555			58,866
Other non-interest income (loss)		(9,022	)		(49,502	)		(7,135	)		(12,669	)
Other non-interest expense		12,122			13,164			15,136			13,359
Assessments		3,520			(250	)		8,447			8,716
NET INCOME/(LOSS)	$	31,668		$	(2,301	)	$	23,837		$	24,122

The significant fluctuations that have occurred in non-interest income (loss) are primarily the result of the recognition of net gains/losses on derivatives and hedging activities as well as the mark-to-market revaluations of trading securities. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” for additional information.

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no changes in or disagreements with our accountants on accounting and financial disclosure during the two most recent fiscal years.

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Item 9A: Controls and Procedures

Disclosure Controls and Procedures

Senior management is responsible for establishing and maintaining a system of disclosure controls and procedures designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Management evaluated the effectiveness of the design and operation of our disclosure controls and procedures with the participation of the President and Chief Executive Officer (CEO), our principal executive officer, and Chief Accounting Officer (CAO), our principal financial officer, as of December 31, 2012. Based upon that evaluation, the CEO and CAO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-(e) under the Securities Exchange Act of 1934, as amended) were effective at a reasonable assurance level as of December 31, 2012.

Management’s Report on Internal Control Over Financial Reporting

Management’s Report on Internal Control over Financial Reporting and the Report of Independent Registered Public Accounting Firm with respect to the FHLBank’s internal control over financial reporting are included under Item 8 – “Financial Statements and Supplementary Data.”

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting that occurred during the last fiscal quarter of the fiscal year for which this annual report on Form 10-K is filed that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B: Other Information

None.

PART III

Item 10: Directors, Executive Officers and Corporate Governance

Executive Officers

Table 74 sets forth certain information regarding each of our executive officers as of the date of this annual report on Form 10-K.

Table 74

Executive Officer	Age	Position Held
Andrew J. Jetter	57	President/Chief Executive Officer
David S. Fisher	57	SEVP/Chief Operating Officer
Mark E. Yardley	57	EVP/Chief Risk Officer
Sonia R. Betsworth	51	SVP/Director of Credit
Denise L. Cauthon	49	SVP/Chief Accounting Officer
Patrick C. Doran	52	SVP/General Counsel/Corporate Secretary
Dan J. Hess	47	SVP/Director of Member Products
Thomas E. Millburn	42	SVP/Chief Internal Audit Officer
William W. Osborn	47	SVP/Chief Financial Officer
Terence C. Wise	60	FVP/Director of Strategic Planning and Development

No executive officer has any family relationship with any other executive officer or director. All executive officers, other than the Chief Internal Audit Officer or CRO, may be removed from office or discharged by the Board of Directors or the President and CEO with or without cause. The Chief Internal Audit Officer may be removed from office, with or without cause, only with the approval of the Audit Committee. The CRO may be removed from office, with or without cause, only with the approval of the Risk Oversight Committee.

There are no arrangements or understandings between any executive officer and any other person pursuant to which the executive officer was or is to be selected as an officer of the FHLBank, including no employment agreement between any executive officer and the FHLBank.

No executive officer serves as a director of any public company.

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Except as otherwise indicated below, each officer has been engaged in the principal occupation listed above for at least five years:

Andrew J. Jetter became President and CEO of the FHLBank in September 2002. He served as Executive Vice President and Chief Operating Officer from January 1998 to September 2002. Mr. Jetter joined the FHLBank in 1987 as an attorney and was promoted to General Counsel in 1989, Vice President in 1993, and Senior Vice President in 1996.

David S. Fisher became Senior Executive Vice President and Chief Operating Officer (COO) of the FHLBank in April 2008. He served as Executive Vice President and COO from January 2006 through March 2008.

Mark E. Yardley became Executive Vice President and CRO of the FHLBank in May 2010. Mr. Yardley previously served as Executive Vice President and CFO from February 2005 to May 2010, First Senior Vice President and CFO from December 1999 through February 2005 and as First Senior Vice President, Director of Finance, from January 1999 to December 1999. Mr. Yardley joined the FHLBank in 1984 as Director of Internal Audit and was promoted to Assistant Vice President in 1990 and Vice President in 1991.

Sonia R. Betsworth became Senior Vice President, Director of Credit in July 2009. She served as Senior Vice President, Director of Member Products from April 2006 through June 2009, Director of Sales, Lending and Collateral from 2002 to April 2006 and Director of Credit and Collateral from 1999 to 2002. She joined the FHLBank in 1983. Ms. Betsworth was named Assistant Vice President in 1994 and Vice President in 1998.

Denise L. Cauthon became Senior Vice President and CAO in December 2010. Ms. Cauthon served as First Vice President and CAO from May to November 2010, served as First Vice President and Controller from March 2007 to April 2010, and served as Vice President and Controller from January 2005 to March 2007. Ms. Cauthon joined the FHLBank in 1989 as a staff internal auditor and was promoted to Assistant Liability Manager and then Financial Reporting Accountant in 1998. Ms. Cauthon was promoted to Financial Reporting and Operations Manager in 1999 and was named Assistant Vice President in 2000. She was promoted to Assistant Controller-Financial Reporting in 2002 and became Vice President in 2004.

Patrick C. Doran became Senior Vice President, General Counsel and Corporate Secretary of the FHLBank in May 2004 and has served in that capacity since that date.

Thomas E. Millburn became Senior Vice President, Chief Internal Audit Officer in March 2011. Mr. Millburn previously served as Senior Vice President, Director of Internal Audit since December 2010. Mr. Millburn joined the FHLBank in 1994 as a staff internal auditor and was promoted to Assistant Vice President, Director of Internal Audit in 1999, Vice President in 2000 and then to First Vice President in March 2004.

William W. Osborn became Senior Vice President and CFO in June 2010. Mr. Osborn joined the FHLBank in May 2006 as Director of Product, Profitability and Pricing. He was promoted to Director of Banking Strategies in January 2008, to FVP in April 2008 and to SVP in April 2009.

Dan J. Hess became Senior Vice President, Director of Member Products in July 2009. Mr. Hess previously served as First Vice President, Director of Sales from April 1, 2002 to May 2009, and became Senior Vice President, Director of Sales in May 2009. Mr. Hess joined the FHLBank in 1995 as a Correspondent Banking Account Manager for Kansas. He was promoted to Lending Officer in 1997, to Assistant Vice President and Lending Manager in 1999 and to Vice President in 2000.

Terence C. Wise became First Vice President, Director of Strategic Planning and Development in October 2011. Prior to joining the FHLBank in July 2011 as Director of Strategic Planning and Development, Mr. Wise was Senior Vice President – Finance and Treasurer for Affirmative Insurance Holdings, a distributor and producer of non-standard personal automobile insurance policies and related products and services located in Burr Ridge, Illinois, from July 2008 to January 2011. He was a private consultant providing strategic planning, corporate finance and merger and acquisition advisory services to the financial services and manufacturing industries from April 2007 to June 2008 and was Vice President of Investor Relations for BankFinancial Corporation, a holding company for a community-oriented federal savings bank located in Burr Ridge, Illinois from July 2005 to March 2007.

Directors

As of the date of this annual report on Form 10-K, we have 15 directors, nine of whom are serving directorships as “member directors” (as such term is defined under the Bank Act) and six of whom are serving directorships as “independent directors” (as such term is also defined under the Bank Act).

On December 13, 2012, we declared elected Neil F.M. McKay as an independent director, Thomas H. Olson, Jr. as a member director from the state of Colorado, and L. Kent Needham as a member director from the state of Kansas, as reported in our current report on Form 8-K filed with the SEC on December 13, 2012. Each of the foregoing directors will serve four year terms commencing as of January 1, 2013 and expiring on December 31, 2016.

The Bank Act (as amended by the Recovery Act) and Finance Agency regulations mandate that our Board of Directors consist of 13 directors or such other number as may be provided by the Bank Act and Finance Agency regulations, a majority of whom are to be member directors and at least two-fifths of whom are to be independent directors. Due to the interplay of the “method of equal proportions,” which the Finance Agency uses to allocate member directorships to each state in our four-state district, the requirement that at least two-fifths of the directorate must be comprised of independent directors and the requirement that the number of member directorships allocated to each of those four states must be at least equal to the number allocated to each state on December 31, 1960, the Finance Agency may be required from time to time to allocate additional member director seats. For 2013, the Finance Agency has designated our Board of Directors to consist of 15 directors, 9 of whom are to be member directors and 6 of whom are to be independent directors. Under the Finance Agency regulations, new and re-elected directors serve four-year terms, subject to adjustment by the Finance Agency to establish staggering of the board. Directors cannot serve more than three consecutive full terms. A director may be re-elected to a directorship for a term that commences no earlier than two years after the expiration of the third full term. Each director must be: (1) a citizen of the United States; (2) either be a resident in our district or serve as an officer or director of a member located in our district; and (3) elected by a vote of the members, in accordance with the Bank Act and Finance Agency regulations. Additionally, at least two of the independent directors must qualify as public interest directors. To qualify as a public interest director, an individual must have more than four years of experience in representing consumer or community interests in banking services, credit needs, housing, or consumer financial protections.

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Member directorships are designated to each of the four states in our district and each of our members is entitled to nominate and vote for candidates representing the state in which the member’s principal place of business is located. To qualify as a nominee for a member directorship, a nominee must be an officer or director of a member located in the state to which the director of the Finance Agency has allocated the directorship, and such member must meet all minimum capital requirements established by its appropriate Federal banking agency or appropriate state regulator. Member directors are nominated by members located in the state to which the member directorship is assigned, based on a determination by the nominating institution that the nominee possesses the applicable experience, qualifications, attributes and skills to qualify the nominee to serve as an FHLBank director, without any participation from our Board of Directors. An FHLBank director, acting in his or her personal capacity, may support the nomination or election of any individual for a member directorship, provided that no such individual shall purport to represent the views of the FHLBank or its Board of Directors in doing so. Following the nomination process, a member is entitled to cast, for each applicable member directorship, one vote for each share of capital stock that the member is required to hold, subject to a statutory limitation. Under this limitation, the total number of votes that each member may cast is limited to the average number of shares of each class of capital stock that were required to be held by all members in that state as of the record date for voting.

Each of our member directors meets the required qualifications and, as such, each is an officer or director of a member in the respective state from which they were nominated and elected.

Independent directors are elected by ballot from among those eligible persons nominated by the Board of Directors after consultation with the Affordable Housing Advisory Council and after the nominee has been submitted to the Finance Agency for review. In nominating independent directors, our Board of Directors may consider an individual’s current and prior experience on the Board of Directors, the qualifications of nominees, and the skills and experience most likely to add strength to the Board of Directors, among other skills, qualifications and attributes. Finance Agency regulations require us to encourage the consideration of diversity in nominating or soliciting nominees for positions on its Board of Directors. Our Board of Directors will consider diversity in nominating independent directors and in electing member directors when the Board of Directors is permitted to elect member directors in the event of a vacancy. If our Board of Directors nominates only one individual for each independent directorship, then each nominee must receive at least 20 percent of the number of votes eligible to be cast in the election to be elected. If our Board of Directors nominates more persons for the type of independent directorship to be filled than there are directorships of that type to be filled in the election, then the nominee receiving the highest number of votes will be elected. Each member voting in the independent director election is entitled to cast one vote for each share of capital stock that the member is required to hold, subject to the statutory limitation discussed above. Our Board of Directors has adopted procedures for the nomination and election of independent directors, which are set forth in the FHLBank’s Amended and Restated Bylaws, attached as Exhibit 3.2 to this Form 10-K and incorporated herein by this reference.

There are no arrangements or understandings between any director and any other person pursuant to which the director was or is to be selected as a director or nominee. No director has any family relationship with any other director or executive officer. No director or person nominated to become a director or executive officer of the FHLBank has been involved in any legal proceeding during the past ten years that would affect the integrity or ability of such director or nominee to serve in such capacity.

Table 75 sets forth certain information regarding each of our directors as of the date of this annual report on Form 10-K.

Table 75

Director	Age	Type of Directorship	Director Since	Current Term Expiration	Board Committee Membership1
Harley D. Bergmeyer	71	Member	January 2011	December 2014	(b), (e)
Robert E. Caldwell, II	42	Independent	January 2004	December 2014	(b), (c) Vice Chair, (e) Chair, (f)
G. Bridger Cox	60	Member	January 2011	December 2015	(b), (c) Chair
James R. Hamby	61	Member	January 2007	December 2013	(a), (c), (f) Chair
Thomas E. Henning	60	Independent	April 2007	December 2015	(a), (b), (c), (d) Chair
Andrew C. Hove, Jr.	78	Independent	April 2007	December 2013	(a), (e), (f)
Michael B. Jacobson	59	Member	January 2012	December 2015	(a), (e)
Jane C. Knight	69	Independent	January 2004	December 2014	(d), (e)
Richard S. Masinton	71	Independent	April 2007	December 2013	(b) Chair, (c), (d)
Neil F. M. McKay	72	Independent	April 2007	December 2016	(a), (f)
L. Kent Needham	59	Member	January 2013	December 2016	(d), (e)
Mark J. O’Connor	48	Member	May 2011	December 2013	(b), (d), (f)
Thomas H. Olson, Jr.	47	Member	January 2013	December 2016	(a), (f)
Mark W. Schifferdecker	48	Member	January 2011	December 2014	(a) Chair, (b), (c), (d)
Bruce A. Schriefer	63	Member	January 2007	December 2015	(d), (e), (f)

1 Board of Director committees are as follows: (a) Audit; (b) Compensation; (c) Executive; (d) Risk Oversight; (e) Housing and Governance; and (f) Operations.

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The following describes the principal occupation, business experience, qualifications and skills, among other matters, of the 15 directors who currently serve on the Board of Directors. Except as otherwise indicated, each director has been engaged in the principal occupation described below for at least five years:

Harley D. Bergmeyer has been Chairman of First State Bank, Wilber, Nebraska, since 2007. Mr. Bergmeyer previously served as Chairman of the Bank of Yutan, Yutan, Nebraska, from 2004 through 2007. From 1977 through 2000, Mr. Bergmeyer served as President, Chairman & CEO of Saline State Bank, Wilber, Nebraska, and continued to serve as Chairman of Saline State Bank through 2007. Although the Board of Directors did not participate in Mr. Bergmeyer’s nomination since he is a member director, Mr. Bergmeyer possesses over 45 years of commercial and agricultural banking management experience, and prior experience as an FHLBank director, that assists in his service as a director. Prior to his current term, Mr. Bergmeyer served as a member director of the FHLBank from January 2003 through December 2006.

Robert E. Caldwell, II has been President and CEO of Hampton Enterprises, Inc., a commercial real estate development, general contracting, construction management and property management firm, since 2006. Prior to 2006, he served as General Counsel for Linweld, Inc., a large independent manufacturer and distributor of industrial/medical gases and welding supplies. The Board of Directors considered Mr. Caldwell’s qualifications, skills and attributes, including his B.S. in business administration, his J.D. and MBA, his experience as General Counsel for Linweld, Inc., a subsidiary of a Japanese public company, his service as President and CEO of a commercial real estate and construction company, and his prior service as an FHLBank director, when making his nomination. Mr. Caldwell currently serves as Vice Chairman of the FHLBank’s Board of Directors and also served as Vice Chairman of the FHLBank’s Board of Directors from January 2004 through December 2006.

G. Bridger Cox is the Chairman of our Board of Directors. Mr. Cox has been Chairman and President of Citizens Bank & Trust Company, Ardmore, Oklahoma, since 1996. Although the Board of Directors did not participate in Mr. Cox’s nomination since he is a member director, Mr. Cox is a graduate of the Stonier Graduate School of Banking at Rutgers University, possesses more than 30 years of banking management experience, has served on the board of directors of the Oklahoma Industrial Finance Authority and the Oklahoma Development Finance Authority, and has prior experience as an FHLBank director, that assists in his service as a director. Prior to his current term, Mr. Cox served as a member director of the FHLBank from January 1998 through December 2006.

James R. Hamby has been CEO of Vision Bank, Ada, Oklahoma, since 1990. Although the Board of Directors did not participate in Mr. Hamby’s nomination since he is a member director, Mr. Hamby possesses an MBA and is a graduate of the Graduate School of Banking at Southern Methodist University, has over 30 years of banking experience, including more than 20 years as CEO of a bank, significant experience in bank investments, bank accounting and all other aspects of banking, and prior experience as an FHLBank director, that assists in his service as a director. Prior to his current term, Mr. Hamby served as a member directorof the FHLBank from January 1995 through December 2000.

Thomas E. Henning has been the Chairman, President and CEO of the Assurity Security Group, Inc. (ASGI), a mutual holding company of life insurance companies, in Lincoln, Nebraska, since 2005 and was employed by Security Financial Life Insurance Co., a predecessor to ASGI, from 1990 to 2006. He is also the Chairman, President and CEO of ASGI’s wholly owned subsidiary, Assurity Life Insurance Company. Mr. Henning has served on the board of Nelnet, Inc., a public company and provider of education finance and services, headquartered in Lincoln, Nebraska, since 2003. Mr. Henning also serves on the board of the American Council of Life Insurers. The Board of Directors considered Mr. Henning’s qualifications, skills and attributes, including his past experience as President and CEO of a community bank and President and COO of a regional banking group, his current experience as Chairman, President and CEO of a medium sized life and health insurance company, his 30 years of financial services experience, his extensive background in financial analysis and accounting, strategic planning and business plan execution, and his prior service as an FHLBank director, when making his nomination.

Andrew C. Hove, Jr., now retired, previously served as Vice Chairman and Acting Chairman of the Federal Deposit Insurance Corporation from 1991 to 2001, and prior to that he served as the Chairman and CEO of Minden Exchange Bank and Trust, Minden, Nebraska. Mr. Hove currently serves on the boards of directors of NeighborWorks Lincoln, Prairie Gold Homes in Lincoln, Nebraska and Great Western Bank, Sioux Falls, South Dakota. Mr. Hove also previously served on the board of directors of Sovereign Bank, Wyomissing, Pennsylvania, a public company, until 2009. The Board of Directors considered Mr. Hove’s qualifications, skills and attributes, including his experience as Chairman and CEO of a community bank, his experience as Vice Chairman and Acting Chairman of the Federal Deposit Insurance Corporation, his activities and affiliation with NeighborWorks Lincoln, and his prior service as an FHLBank director, when making his nomination.

Michael B. Jacobson has been President and CEO of NebraskaLand National Bank, North Platte, Nebraska, since 1998. Although the Board of Directors did not participate in Mr. Jacobson’s nomination since he is a member director, Mr. Jacobson possesses a B.S. in agricultural economics, is a graduate of the Colorado Graduate School of Banking and has over 30 years of banking experience, including more than 17 years as the CEO of a bank, that assists in his service as a director.

Jane C. Knight, now retired, served as Vice President of Site-based Strategies for Kansas Big Brothers Big Sisters from 2002 through 2005. Prior to that, she directed the Wichita office for Kansas Governor Bill Graves and was in charge of addressing constituent concerns, including housing issues. The Board of Directors considered Ms. Knight’s qualifications, skills and attributes, including her ability to provide the Board of Directors with gender diversity, her prior management skills, including her service as Director of the Kansas Governor’s regional office, her experience with housing issues through the Governor’s office and Habitat for Humanity, her experience with not-for-profit organizations, and her prior service as an FHLBank director, when making her nomination.

Richard S. Masinton has been Executive Vice President of Quinn Capital, LLC, a private equity company in Leawood, Kansas since January 2009. Mr. Masinton previously served as Chief Financial Officer and Executive Vice President of Russell Stover Candies, a candy manufacturer, in Kansas City, Missouri, from 1996 until 2008. In January 2009, Mr. Masinton was elected to the board of directors of No More Homeless Pets Kansas City, an animal welfare charity. He also sits on the boards of directors of Eco-Choice Springwater, LLC and CRB Biosoft, LLC. Mr. Masinton previously retired from the boards of directors of OneNeck IT Services Corp in 2008 and Enterprise Financial Services Corporation, a publicly owned bank holding company, in 2007. He has also served on the board of advisors of the University of Kansas School of Business and on an advisory board at the University of Oklahoma School of Business. The Board of Directors considered Mr. Masinton’s qualifications, skills and attributes, including his Masters Degree in Accounting, Finance and Economics, his certification as a CPA, his experience on the board of a publicly owned bank holding company, including his seven years of experience as Chairman of the audit committee of such bank holding company, his 40 years of experience as a corporate executive, and his prior service as an FHLBank director, when making his nomination.

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Neil F. M. McKay was Chief Financial Officer and Treasurer of Capitol Federal Savings in Topeka, Kansas, from 1994 through March 2006. Mr. McKay, now retired, has held significant executive positions in various financial institutions including Heartland Federal Savings in Ponca City, Oklahoma, and First Nationwide Bank (now part of Citibank) in San Francisco, California. He was also a CPA in public practice for 12 years. The Board of Directors considered Mr. McKay’s qualifications, skills and attributes, including his certification as a CPA, his 12 years of service as an audit manager of large, publicly traded banks, his experience as Controller of a $30 billion publicly traded bank, his experience as CFO of an $8 billion publicly traded bank, and his prior service as an FHLBank director, when making his nomination.

L. Kent Needham has served as Chairman of The First Security Bank, Overbrook, Kansas, since 2006 and President and CEO since 2008. Although the Board of Directors did not participate in Mr. Needham’s nomination since he is a member director, Mr. Needham possesses an MBA, is a graduate of the Colorado Graduate School of Banking, and has over 35 years of banking experience, including more than 20 years as CEO, that assists in his service as a director.

Mark J. O’Connor currently serves as Vice President of FirstBank, Lakewood, Colorado, and has served as Senior Vice President, FirstBank Holding Company, since 2002. Although the Board of Directors would generally not participate in the election or nomination of member directors due to regulatory limitations, the Board of Directors elected Mr. O’Connor to fill a vacancy in May 2011 as authorized pursuant to the regulations of the Finance Agency. The Board of Directors considered Mr. O’Connor’s qualifications, skills and attributes, including his education as a graduate of the Pacific Coast Banking School, his more than 23 years of banking experience, including more than 9 years as the investment portfolio manager of a large bank holding company, and his experience on the board, including service as chairman, of a state housing finance authority, when electing him to the board.

Thomas H. Olson, Jr. has been CEO of Points West Community Bank, Julesburg, Colorado, since 1998. Mr. Olson is currently a director and the President-elect of the Independent Bankers of Colorado, is Chairman of the Gateway Medical Foundation, and serves as a director of Points West Community Bank, Sidney, Nebraska, Fullerton National Bank, Fullerton, Nebraska, Lisco State Bank, Lisco, Nebraska, Bank of Estes Park, Estes Park, Colorado, First Nebraska Bancs, Inc., First National Financial, Lisco State Company, Woodstock Land & Cattle and Rush Creek Land & Livestock. Although the Board of Directors did not participate in Mr. Olson’s nomination since he is a member director, Mr. Olson possesses a B.S. in Finance and Accounting, is a graduate of the Colorado Graduate School of Banking, and has over 20 years of banking experience, including more than 15 years as CEO, that assists in his service as a director.

Mark W. Schifferdecker has been President and CEO of The Girard National Bank, Girard, Kansas, since 2003. Although the Board of Directors did not participate in Mr. Schifferdecker’s nomination since he is a member director, Mr. Schifferdecker has experience as a CPA, possesses more than 10 years of experience as the CEO of a community bank, served more than 10 years as an auditor with KPMG, served six years on the board of directors of the Federal Reserve Bank of Kansas City, including two years as chairman of the Audit Committee, and served on the board of directors of Bankers’ Bank of Kansas, N.A., including one year as chairman, that assists in his service as a director.

Bruce A. Schriefer joined Bankers’ Bank of Kansas, Wichita, Kansas, in 1996 and has served as President, CEO and director since that time. Although the Board of Directors did not participate in Mr. Schriefer’s nomination since he is a member director, Mr. Schriefer possesses 40 years of experience at various levels of commercial banking, experience as a former director of the Federal Reserve Bank of Kansas City, experience on the boards of directors of various national and state trade associations, experience as a member of the FDIC Advisory Committee on Community Banking, and prior experience as an FHLBank director, that assists in his service as a director.

Code of Ethics

We have adopted a Code of Ethics that applies to our directors, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions) and employees. Our Code of Ethics has been posted on our website at www.fhlbtopeka.com. We will also post on our website any amendments to, or waivers from, a provision of our Code of Ethics that applies to the principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions as required by applicable rules and regulations. The Code of Ethics is available, in print, free of charge, upon request. Written requests may be made to the General Counsel of the FHLBank at One Security Benefit Place, Suite 100, Topeka, Kansas, 66606.

Audit Committee Financial Expert

We have a separately-designated, standing audit committee, which consists of Mark W. Schifferdecker, the chairman of the Audit Committee, James R. Hamby, Thomas E. Henning, Andrew C. Hove, Jr., Michael B. Jacobson, Neil F.M. McKay and Thomas H. Olson, Jr.

The Board of Directors has determined that Neil F.M. McKay qualifies as an “audit committee financial expert” as that term is defined under SEC regulations. Mr. McKay is “independent” in accordance with the Nasdaq Independence Standards for audit committee members, as those standards apply to the FHLBank.

The Compensation Committee Report is included following the Compensation Discussion and Analysis in Item 11 – “Executive Compensation.”

Item 11. Executive Compensation

Compensation Discussion and Analysis

Overview of Previous Year Performance and Compensation: Our overall executive compensation philosophy is to attract, retain, and motivate highly-qualified executive officers who will advance: (1) our business objectives to promote our long-term growth and profitability in accordance with achievement of our long-term strategic objectives; and (2) our mission of supporting our members’ interests.

We continued to achieve our mission in 2012 as evidenced by our outstanding results. We met or exceeded all of our short-term and long-term objectives. These objectives were designed to drive our performance in key areas that align our incentive compensation with our members’ view of our performance and with our ongoing financial stability over the long term.

The named executive officers in 2012 were comprised of the President and CEO, the Senior Executive Vice President and COO, the Executive Vice President and CRO, the Senior Vice President and General Counsel, and the Senior Vice President and CAO (the Named Executive Officers). In determining the appropriate total compensation package for our Named Executive Officers, we considered the principal objectives of our compensation program as: (1) attracting and retaining highly-qualified and talented individuals; and (2) motivating these individuals to achieve short- and long-term individual and FHLBank-wide performance goals through incentive compensation.

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In 2012, we demonstrated the value of our executive compensation philosophy by providing competitive compensation opportunities for our Named Executive Officers based on thoughtful adjustments to base salary and on incentive compensation achievable through our new Executive Incentive Compensation Plan (EICP). The EICP provides cash-based annual incentives combined with deferral incentive awards to promote achievement of short- and long-term objectives.

In addition, our performance over the three-year performance period of our Long Term Incentive Plan (LTIP), commencing January 1, 2010 and concluding December 31, 2012, was outstanding as reflected by our achievement of meeting our Expense Growth goal and by significantly exceeding our Total Return goal. As discussed in more detail in this Compensation Discussion & Analysis section of Item 11, achievement of both short- and long-term goals translated to incentive awards earned by our Named Executive Officers in exchange for their contribution to our overall success as part of their total compensation package.

Framework for Compensation Decisions: The Compensation Committee of the Board of Directors (Compensation Committee) oversees the compensation of the Named Executive Officers. The Compensation Committee’s responsibilities in 2012 included:

§   Advising the Board of Directors on the establishment of appropriate compensation, incentive and benefits programs, including recommending performance goals for the EICP and our Transitional Long Term Incentive Plan (TLTIP);

§   Approving the base salaries and salary adjustments of the COO, CRO, General Counsel, and CAO, as recommended by the CEO; and

§   Recommending to the Board of Directors the base salary and salary adjustments of the CEO.

Elements of Executive Compensation in 2012: To implement our compensation objectives, the elements of our 2012 compensation program for the Named Executive Officers included: (1) annual base salary; (2) annual and deferred cash incentive award opportunities under our EICP; (3) award opportunities under our LTIP; (4) retirement and other benefits; and (5) limited perquisites.

Annual Base Salary – A significant element of each Named Executive Officer’s total compensation is annual base salary, which is designed to reward our Named Executive Officers for past performance and their commitment to future performance and to serve as the foundation for competitive total compensation. Adjustments to annual base salaries for the Named Executive Officers are considered annually and may be made in April following an analysis of our compensation practices and the FHLBank’s performance in the previous year, as well as projections for future years and other factors.

Annual and Deferred Cash Incentive Awards – Effective January 1, 2012, we adopted the EICP as a cash-based annual incentive plan with a long-term deferral component that establishes individual incentive compensation award opportunities related to achievement of performance objectives by us during three-year performance periods. The EICP establishes two performance periods. Named Executive Officers may earn an annual cash incentive during a “base performance period” and a deferred cash incentive during a “deferral performance period.” For each base performance period the Board will establish a total base opportunity for Named Executive Officers. The total base opportunity is equal to a percentage of each Named Executive officer’s annual base salary at the beginning of the base performance period, and is composed of the cash incentive and the deferred incentive. The EICP effectively combines our Executive Short Term Incentive Plan (ESTIP) and LTIP. We no longer sponsor the ESTIP previously in place to reward our Named Executive Officers’ achievement of annual goals that were aligned with our mission and business objectives. A detailed discussion related to the analysis undertaken in establishing the performance goals for the EICP is provided below under “Establishment of Performance Goals for Incentive Opportunities.”

Long Term Cash Incentive Awards – While the EICP long-term deferral component provides incentive awards for achievement of performance indicated through 2015, our Named Executive Officers were eligible as of December 31, 2012 for award opportunities based on the achievement of strategic goals over the three-year performance period of 2010-2012 under our LTIP. Cash incentive awards under the LTIP were tied to measures for our long-term growth and profitability, which were directly related to long-term strategic objectives during this three-year period for carrying out our mission.

A TLTIP was adopted to transition from our existing LTIP, during the three-year period commencing January 1, 2012 and ending December 31, 2014, to the newly adopted EICP. Thus, the LTIP remained in effect for the 2011-2013 performance period. Following the expiration of the 2011-2013 performance period on December 31, 2013, the TLTIP will provide long-term award opportunities for the 2012-2014 performance period. Following the expiration of the TLTIP, the EICP will provide deferred incentive opportunities to eligible employees for all periods thereafter. For detailed information about the terms of the EICP and the TLTIP, see our current report on Form 8-K filed with the SEC on December 21, 2011 to which the EICP is attached as Exhibit 10.1 and the TLTIP is attached as Exhibit 10.2.

Retirement and Other Benefits – We maintain a comprehensive retirement program for our eligible officers comprised of two qualified retirement plans: (1) the Pentegra Defined Benefit Plan for Financial Institutions, a tax-qualified multiple-employer defined-benefit plan (DB Plan); and (2) the Pentegra Financial Institutions Thrift Plan, a defined contribution retirement savings plan qualified under the Internal Revenue Code (IRC) for employees of the FHLBank (DC Plan).

In 2012, each of the Named Executive Officers participated in the DB Plan, which required no contribution from any Named Executive Officer. Employees hired after January 1, 2009 are not eligible to participate in the DB Plan. However, because each of our Named Executive Officers was hired prior to January 1, 2009, each remains eligible to participate in the DB Plan.

All employees who have met the eligibility requirements can choose to participate in the DC Plan. We match employee contributions based on the length of service and the amount of an employee’s contribution. These employer contributions are immediately 100 percent vested. Matching ratios for all employees, including the Named Executive Officers, under the DC Plan are as follows:

Year 1	No match
Years 2 through 3	100 percent match up to 3 percent of employee’s eligible compensation
Years 4 through 5	150 percent match up to 3 percent of employee’s eligible compensation
After 5 years	200 percent match up to 3 percent of employee’s eligible compensation

In response to federal legislation, which imposed restrictions on the pension benefits payable to our executives, we subsequently established a third retirement plan, the Benefit Equalization Plan (BEP) in order to maintain the competitive level of our total compensation for executive officers, including the Named Executive Officers. Generally, the BEP is characterized as a non-qualified “excess benefit” plan, which restores those retirement benefits that exceed the IRC limits applicable to the qualified DB Plan and DC Plan. In this respect, the BEP is an extension of our retirement commitment to our Named Executive Officers in the Executive Group and other eligible highly compensated employees that preserves and restores the full pension benefits that, due to IRC limitations, are not payable from the qualified pension plans. The BEP was amended on October 27, 2011 to add our CAO and other individuals as participating members and to delegate to the Compensation Committee the responsibility for administering the BEP.

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As of December 31, 2012, each of the Named Executive Officers would be entitled to receive his or her respective balance of compensation deferred through participation under the BEP within ninety days of any such Named Executive Officer’s termination of employment due to death, disability or retirement and upon a change in control as defined in the BEP and in accordance with IRC Section 409A and applicable regulations. For each Named Executive Officer, these amounts are listed in Table 87 under the column titled “Aggregate Balance at Last FYE.”

We are also committed to providing competitive, high-quality benefits designed to promote health, well-being, good will and income protection for all employees, including the Named Executive Officers. We offer all employees a core level of benefits and a variety of optional benefits including medical, dental, prescription drug, life insurance, long-term disability, flexible spending accounts, employee assistance program and travel accident insurance. The Named Executive Officers participate in these core benefit programs on the same basis as all other full-time employees.

Perquisites – The Board of Directors views limited perquisites afforded to the Named Executive Officers as an element of the total compensation program. Any perquisites provided, however, are not intended to materially add to any Named Executive Officer’s compensation package and, as such, are provided to them primarily as a convenience associated with their respective duties and responsibilities. Examples of perquisites that were provided to the Named Executive Officers in 2012 are the personal use of an FHLBank-owned automobile for the President and spousal travel.

Categorical types of perquisites provided to the Named Executive Officers in 2012 are presented and detailed in the Summary Compensation Table (see Table 83 under this Item 11) and are more specifically described in the case that aggregate perquisites to any single Named Executive Officer exceeded $10,000.

Analysis of Compensation Decisions in 2012: For 2012, the Compensation Committee again determined that appropriate annual base salaries for each Named Executive Officer should be competitive with the salaries of comparable executive positions within financial institutions that the Compensation Committee defined as our peers for purposes of providing guideposts for a competitive compensation analysis, as discussed in more detail below under “Use of Benchmarks.” Adjustments to annual base salaries of the Named Executive Officers for 2012 were based on: (1) each Named Executive Officer’s scope of responsibility and accountability; (2) analysis of our comparator peer groups (as described below); (3) performance of the FHLBank based on achievement levels of FHLBank-wide goals in the prior year; (4) the perceived performance of each Named Executive Officer, as a subjective matter; and (5) other factors such as experience, time in position, general economic conditions, and labor supply and demand conditions.

The Compensation Committee also considered guidance and communications from its regulator, the Finance Agency, in determining total compensation for the Named Executive Officers as more specifically addressed below under “Finance Agency Oversight.”

Use of Benchmarks – We believe a key to attracting and retaining highly-qualified executive officers is the identification of the appropriate peer groups within which we must compete for executive talent. We have historically recruited nationally in our efforts to attract highly-qualified candidates for the Named Executive Officer positions. To ensure that we are offering and paying competitive compensation to retain our Named Executive Officers, the Board of Directors (and/or Compensation Committee) has periodically retained compensation consultants to assist with comparative analyses of the Named Executive Officers’ total compensation through a review of survey data reflecting potential comparator benchmarks for total compensation. Our Compensation Committee has used such survey data as guideposts in considering and determining competitive levels of base salary and total compensation for our Named Executive Officers among other factors as described above.

In 2012, the Compensation Committee considered the competitiveness of the total compensation paid to our Named Executive Officers by reviewing comparative survey data obtained from the compensation consultant, McLagan Partners. The Compensation Committee looked primarily to McLagan’s FHLBank Custom Compensation Survey and available pay data; and secondarily to a subset of McLagan’s proprietary survey database for financial services institutions. Based on advice of McLagan Partners, the Compensation Committee selected a subset of survey data within McLagan Partners’ proprietary survey database to reflect information about a more narrow survey group of comparator financial services institutions.

The decision to remain competitive primarily with the other FHLBanks and to also consider the broader labor market of a limited group of financial services institutions reflects our belief that the knowledge and skills necessary to effectively perform our Named Executive Officers’ duties may be developed as a result of experience not only at other FHLBanks, but also at a variety of other financial services institutions. We also recognize that Topeka’s geographic location may be a disadvantage in attracting executives, but generally is a positive factor in retaining executives.

Of the FHLBank-based survey data and the broader survey data utilized, the Compensation Committee considered the 25th percentile, 50th percentile (median) and 75th percentile compensation ranges for analyzing executive positions similar to those of our Named Executive Officers in considering the competitiveness of our total compensation for the Named Executive Officers. The Compensation Committee generally strives to establish annual base salary and incentive compensation opportunities for our Named Executive Officers in the median range of the survey data reviewed assuming target level goals would be achieved. The ultimate compensation determined appropriate in any given year, however, will depend on the scope of a Named Executive Officer’s responsibilities as compared to similar positions within our identified peer groups, the experience and performance of the individual Named Executive Officer, and our overall performance. Generally, the Compensation Committee and CEO operate to recommend below median pay for poor performance and above median pay for superior performance. While survey information is one factor in setting compensation for our Named Executive Officers, we believe that surveys should not override the need for independent decisions by the Compensation Committee that are consistent with our financial condition and future prospects.

Consideration of Individual Performance – As an additional factor, the individual performance of each Named Executive Officer is considered by the Compensation Committee and by the CEO in determining whether it is appropriate to increase annual base salaries of our Named Executive Officers based on a subjective determination of the perceived merit of each Named Executive Officer.

Consideration of Internal Pay Equity – A final factor that the Compensation Committee generally considers in determining base salary increases in its effort to retain our Named Executive Officers is the relative difference in compensation between the executive officers as well as the pay relationship between executive officers and other employees at the FHLBank. The Compensation Committee believes that internal pay equity provides an additional perspective to that of peer group survey compensation information. While comparisons to compensation levels of executive positions within our peer groups are the primary basis used to assess the overall competitiveness of our compensation program, we also believe that our executive compensation practices should be internally consistent and equitable.

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In 2012, the Compensation Committee and the CEO determined that, with respect to competitive pay positioning for purposes of retaining our Named Executive Officers, it was appropriate to increase the base salaries of the Named Executive Officers to maintain competitive total compensation. Consideration was also given to each Named Executive Officer’s scope of responsibility, the perceived performance of each Named Executive Officer and other factors as described above, including the performance of the FHLBank. As a result of the Compensation Committee’s consideration of these factors, the Compensation Committee recommended and the Board approved an increase to our CEO’s base salary effective April 1, 2012 of three percent from 2011. For the same reasons, the Compensation Committee determined to increase the base salaries for our COO and CRO by 2.5 percent and our General Counsel and CAO by five percent in 2012. These increases were generally consistent with increases of approximately three percent received by most of our other employees’ base salaries for 2012 due to the financial performance of the FHLBank and individual performance. Our General Counsel and CAO received higher increases in base salary for 2012 than the other Named Executive Officers as a result of market-based adjustments in comparison to survey data and in recognition of previous performance.

Establishment of Performance Goals for Incentive Award Opportunities in 2012: We believe that well-designed incentive compensation plans provide important opportunities to motivate our Named Executive Officers to accomplish financial and operational goals that promote our mission. Thus, motivating our Named Executive Officers to accomplish business and financial short- and long-term goals that promote a high level of performance for our members is a key objective of our total compensation program. Consequently, our compensation and benefits programs are designed to motivate our Named Executive Officers to engage in the behaviors and performance necessary to deliver our desired results of operations in a highly competitive environment.

To effectively motivate the Named Executive Officers to accomplish both short- and long-term goals that promote our performance, we believe that incentive awards must represent pay at risk. In other words, the administration of our incentive compensation plans must be such that awards are distributed only in exchange for accomplishing pre-established, Board of Directors-approved goals, and are distributed only in accordance with such achievement. In 2012, we achieved this compensation objective through attainment of objectives under our EICP and attainment of long-term objectives over the three-year performance period of our LTIP that began in 2010.

EICP – Beginning in the fourth quarter of 2011, goal metrics, metric performance ranges and metric weights for award opportunities under the 2012 EICP were developed. The proposed performance objectives reflected the drivers of our business and mission and were based upon the Compensation Committee’s and management’s discussions with respect to our primary mission and stockholder perceptions of success. The Compensation Committee and management appropriately aligned the performance objectives to the Strategic Business Plan. The Compensation Committee reviewed and analyzed the proposed performance objectives, as appropriate, for 2012 before submitting the objectives to the Board of Directors for approval in December 2011.

For the Base Performance Period of January 1, 2012 to December 31, 2012, the Board of Directors approved a Total Base Opportunity equal to a percentage of each Named Executive Officer’s annual base salary at the beginning of the Base Performance Period. Certain Named Executive Officers have a greater and more direct impact than others on the success of the FHLBank; therefore, these differences are recognized by varying the Total Base Opportunity by level of participation. The Total Base Opportunity is the amount that may be earned for achieving performance levels under established Performance Measures and is comprised of the Cash Incentive and the Deferred Incentive. The Deferred Incentive is 50 percent of the Total Base Opportunity, which shall be deferred for the Deferred Performance Period, which is the three-year period from January 1, 2013 to December 31, 2015, over which the FHLBank’s performance is measured based on specific parameters. The Cash Incentive is the portion of the Total Base Opportunity that is not the Deferred Incentive and becomes payable two and a half months after the end of the Base Performance Period upon achievement of established Performance Measures, subject to approval by the Director of the Finance Agency.

Awards under the EICP may be granted for achievement of Performance Measures corresponding to achievement levels, from threshold, to target, to optimum performance for each goal metric. Threshold represents the minimum achievement level; target represents the expected achievement level; and optimum represents the achievement level that substantially exceeds the target level. Awards may be earned for performance anywhere within these achievement levels at a percentage of base salary that corresponds to actual performance. For performance that falls between any two levels of achievement, linear interpolation is used to ensure that the annual award is consistent with the level of performance achieved. Named Executive Officers may earn annual awards expressed as a percent of their earned base salary. Table 76 presents the Total Base Opportunity, Cash Incentive and Deferred Incentive for each Named Executive Officer for each achievement level for the Base Performance Period:

Table 76

	Total Base Opportunity									Cash Incentive									Deferred Incentive
Position	Threshold Award			Target Award			Optimum Award			Threshold Award			Target Award			Optimum Award			Threshold Award			Target Award			Optimum Award
CEO		60.0	%		80.0	%		100.0	%		30.0	%		40.0	%		50.0	%		30.0	%		40.0	%		50.0	%
COO		45.0			65.0			85.0			22.5			32.5			42.5			22.5			32.5			42.5
CRO, General Counsel  and CAO		30.0			50.0			70.0			15.0			25.0			35.0			15.0			25.0			35.0

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The Total Base Opportunity Goal Metrics for 2012 are described in Table 77:

Table 77

Total Base Opportunity Goal Metric	Definition
Adjusted Return Spread on Class B Common Stock1	The spread between pre-hedging, pre-AHP adjusted return available for Class B Common Stock (weighted by the amount of Class B Common Stock outstanding each day) and the weighted average daily overnight Federal funds effective rate
Net Income After Capital Charge1	The dollar amount of adjusted income, but post-AHP assessment, which exceeds the cost of the required return on capital
Retained Earnings	The dollar amount of GAAP retained earnings as of 12/31/2012
Mission Product Utilization	Member usage of mission-oriented products consisting of AHP, CICA,HSP and JOBS programs
Risk Management – Market, Credit and Liquidity Risks	Management of FHLBank risks as determined by the weighted average rating by the Board of Directors in an annual evaluation of the Risk Appetite metrics in the areas of market, credit, and liquidity risks
Risk Management – Compliance, Business and Operations Risks	Management of FHLBank risks as determined by the weighted average rating by the Board of Directors in an annual evaluation of the Risk Appetite metrics in the areas of compliance, business and operations risks

1 As part of evaluating our financial performance and measuring EICP performance, we adjust net income reported in accordance with GAAP for the impact of: (1) AHP assessments; (2) items related to derivatives and hedging activities; and (3) other items excluded because they are not considered a part of our routine operations or ongoing business model, such as interest expense on mandatorily redeemable capital stock, prepayment fees, gain/loss on retirement of debt, realized or unrealized gain/loss on securities and amortization/accretion of premium/discount on unswapped MBS classified as trading. The result is referred to as adjusted income, which is a non-GAAP measure of income. Adjusted income is used to compute an adjusted ROE that is then compared to the average overnight Federal funds effective rate with the difference referred to as adjusted ROE spread. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” for discussion of adjusted income and adjusted ROE.

The profit-oriented objectives of “Adjusted Return Spread on Class B Common Stock” and “Net Income After Capital Charge” (non-GAAP measures) were based on: (1) the belief that profitability is critical to the long-term viability of the organization; and (2) the understanding that the holders of Class B Common Stock represent the members constituting the primary users of our products and services. The “Risk Management” objectives were included in recognition of the impact that the Named Executive Officers have on management of business, operations, market, credit, liquidity and capital risks and an effort to reward positive risk management performance as determined by the Board of Directors. We divided the risk management objectives to provide balance and focus in the amount of risk exposure we are willing to accept/retain in pursuit of stakeholder value. Finally, the performance objective for “Mission Product Utilization” addresses the members’ usage of profit-generating products and non-profit-generating products, respectively.

Award levels were set at threshold, target and optimum percentages of annual base salary (except for the Risk Management objectives, as set forth in Table 78 below). See Table 85 for the results of achievement of each objective for each Named Executive Officer.

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Table 78 sets forth the specific annual goal performance ranges and the actual achievement for each of our Total Base Opportunity Goal Metrics in 2012:

Table 78

Total Base Opportunity Goal Metrics		Annual Performance Range
Adjusted Return Spread on Class B Common Stock	Threshold		5.73	%
	Target		9.84	%
	Optimum		13.96	%
	Achievement		11.36	%
Net Income After Capital Charge	Threshold	$	26,631,425
	Target	$	53,262,850
	Optimum	$	79,894,275
	Achievement	$	75,012,872
Retained Earnings	Threshold	$	404,426,667
	Target	$	445,961,018
	Optimum	$	487,495,369
	Achievement	$	481,281,843
Mission Product Utilization1	Threshold		300
	Target		350
	Optimum		400
	Achievement		393
Risk Management – Market, Credit and Liquidity Risks (5.0 point scoring scale)	Threshold		2.5
	Target		3.0
	Optimum		5.0
	Achievement		4.86
Risk Management – Compliance, Business and Operations Risks (5.0 point scoring scale)	Threshold		2.5
	Target		3.0
	Optimum		5.0
	Achievement		4.45

1 The performance range for “Mission Product Utilization” is based on the number of our members at the time of mission product usage that qualify as users of a product at any time during the calendar year. Program participation use is credited and remains credited for the entire calendar year irrespective of whether the participating member is subsequently acquired, merged or otherwise terminates its membership.

As reflected in Table 78, 2012 was a strong year for the FHLBank regarding the achievement of our EICP base opportunity performance objectives.

Table 79 provides the: (1) metric weight for each Total Base Opportunity Goal Metric as a percent of the Total Base Opportunity for each Named Executive Officer in 2012; and (2) the 2012 goal achievement percentage for all goals.

Table 79

	Metric Weight
Performance Objective	CEO/ COO			CRO/ CAO			General Counsel
Adjusted Return Spread on Class B Common Stock		20	%		10	%		15	%
Net Income After Capital Charge		20			10			15
Retained Earnings		10			20			10
Mission Product Utilization		10			10			10
Risk Management – Market, Credit, and Liquidity Risks		20			20			20
Risk Management – Compliance, Business, and Operations Risks		20			30			30

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The final value of the Deferred Incentive portion of the Total Base Opportunity is measured by evaluating Deferred Incentive Goal Metrics as presented in Table 80, which provides a template of how amounts will be calculatedfor the calendar year 2013 to calendar year 2015:

Table 80

	Minimum	Threshold	Target	Maximum
Total Return1:	> 8/12 vs. FHLBanks	8/12 vs. FHLBanks	5/12 vs. FHLBanks	2/12 or 1/12 vs. FHLBanks
Deferred Incentive	$	$	$	$
Performance Measure Percentage	0%	75%	100%	125%
Weighting	0.375	0.375	0.375	0.375
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weighting)	$	$	$	$
Expense Growth2:	> 9/12 vs. FHLBanks	9/12 vs. FHLBanks	6/12 vs. FHLBanks	2/12 or 1/12 vs. FHLBanks
Deferred Incentive	$	$	$	$
Performance Measure Percentage	0%	75%	100%	125%
Weighting	0.25	0.25	0.25	0.25
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weighting)	$	$	$	$
MVE/TRCS3:	> 9/12 vs. FHLBanks	9/12 vs. FHLBanks	6/12 vs. FHLBanks	2/12 or 1/12 vs. FHLBanks
Deferred Incentive	$	$	$	$
Performance Measure Percentage	0%	75%	100%	125%
Weighting	0.375	0.375	0.375	0.375
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weighting)	$	$	$	$
Total Value (Dollar Value for Total Return + Dollar Value for Expense Growth + Dollar Value for MVE/TRCS)	$	$	$	$
Base Award Opportunity Percentage: Level 1 (40.0%) Level 2 (32.5%) Level 3 (25.0%)	%	%	%	%
Total Base Award (Total Value x Base Award Opportunity Percentage)	$	$	$	$

__________

1	Total Return equals total dividends, plus the change in retained earnings, divided by average capital. For FHLBank Topeka, total dividends is defined as the sum of the actual dividends paid on required Class A Common Stock and all Class B Common Stock during the three-year performance period; change in retained earnings is defined as the change in retained earnings from December 31, 2012 to December 31, 2015; and average capital is defined as the average daily ending balance of required Class A Common Stock and all Class B Common Stock for dates starting with January 1, 2013 and ending December 31, 2015. For the other FHLBanks, unless determined otherwise by the Compensation Committee, total dividends is defined as all dividends paid on all capital stock during the three-year period; change in retained earnings is defined as the change in retained earnings from December 31, 2012 to December 31, 2015; and average capital is defined as the average daily ending balance of all capital stock outstanding for dates starting with January 1, 2013 and ending December 31, 2015. For performance comparison purposes, we will be ranked against the other FHLBanks, with the highest total return being the best performance, and ranking first out of the 12 FHLBanks.
2	Expense Growth is the dollar amount of the change in operating expenses (including salaries and benefits, costs of quarters and other operating expenses) at FHLBank Topeka from calendar year 2012 to calendar year 2015. For performance comparison purposes, we will be ranked against the other FHLBanks, with the lowest increase (or greatest decrease) being the best performance, and a first out of the 12 FHLBanks being the highest ranking.
3	MVE/TRCS is calculated by dividing base case MVE by TRCS (calculated as total regulatory capital minus retained earnings) calculated at the end of the Performance Period. For performance comparison purposes, we will be ranked against the other FHLBanks, with the highest MVE/TRCS being the best performance, and ranking first out of the 12 FHLBanks.

For any Performance Period, a Final Award will not be payable if we fail to achieve performance at or above the Performance Measure(s) set by the Compensation Committee or under any of the following circumstances: (1) we receive a cumulative “3” or “4” rating in our Finance Agency examination in any single year in any single Base Performance Period or Deferral Performance Period; (2) the Board of Directors finds a serious, material safety-soundness problem or a serious, material risk management deficiency exists; (3) during the most recent Finance Agency examination, the Finance Agency identified an unsafe or unsound practice or condition that is material to the financial operation of the FHLBank within a Named Executive Officer’s area(s) of responsibility and such unsafe or unsound practice or condition is not subsequently resolved in favor of the FHLBank by the last day of the Base Performance Period or Deferral Performance Period; or (4) a given participant does not achieve satisfactory individual achievement levels (as determined in the sole discretion of the Compensation Committee) during the Deferral Performance Period. Additionally, the Final Award shall be reduced by one-third for each year during the Deferral Performance Period in which we have negative net income, as defined and in accordance with GAAP.

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LTIP – Under the LTIP for January 1, 2010 – December 31, 2012, the achievement of base award opportunities is measured over a three-year performance period. Table 81 presents the Base Award Opportunity Percentage for each Named Executive Officer eligible to participate in the Performance Period under the LTIP for January 1, 2010 – December 31, 2012:

Table 81

Named Executive Officer1	Level	2010-2012 Base Award Opportunity Percentage			2010-2012 Base Award Opportunity Percentage Achieved
Andrew J. Jetter	Level I		40	%		51.25	%
David S. Fisher	Level II		30			38.44
Mark E. Yardley	Level II		30			38.44
Patrick C. Doran	Level III		20			25.62

1 The CAO was not eligible to participate in the Performance Period under the LTIP for January 1, 2010 – December 31, 2012; thus, no Base Award Opportunity Percentage is listed.

The weighted average achievement for the 2010-2012 performance goals was 128.125 percent. The metric weight for the 2010-2012 performance goals as a percent of the total LTIP award opportunity for all Named Executive Officers and the 2010-2012 goal achievement percentage is included in Table 82:

Table 82

Objective	Metric Weight			2010-2012 Goal Achievement Percentage
Total Return		75	%		137.5	%
Expense Growth		25			100.0

Why We Choose to Pay These Elements: We believe the Compensation Committee’s analyses described above provided an appropriate process to determine 2012 compensation levels for each Named Executive Officer that reasonably positions us to competitively manage our operations for success and to accomplish our mission.

The mix of compensation elements that comprised the total compensation of our Named Executive Officers in 2012, particularly allowed us to provide total compensation that we believe appropriately balanced reasonable guaranteed pay through carefully considered base salary determinations with additional at-risk cash compensation opportunities for the Named Executive Officers. This means that while we strived to match an appropriate level of compensation comparable to that reflected by our perceived peer groups and internal pay analysis through annual base salary and retirement benefits components, we also strived to provide a component of compensation that is at-risk in both the shorter term and the longer term. These at-risk awards represent an opportunity to reward our Named Executive Officers based on the achievement of both our annual and long-term performance goals and the discretion vested in our Compensation Committee.

The Committee believes that the Supplemental Thrift Plan, as defined under “Deferred Compensation” in this Item 11, and the defined benefit portion of the BEP provide additional retirement benefits that are necessary for our total compensation package to remain competitive, particularly compared with competitors who may offer equity-based compensation. Additional information regarding these plans can be found in the narratives to the Pension Benefits and Nonqualified Deferred Compensation tables in this Item 11.

Severance Benefits: We provide severance benefits to the Named Executive Officers pursuant to our Officer Severance Policy. The policy’s primary objective is to provide a level of protection to officers from loss of income during a period of unemployment. These officers are eligible to receive severance pay under the policy if we terminate the officer’s employment with or without cause, subject to certain limitations. These limitations include: (1) the officer voluntarily terminates employment; (2) the officer’s employment is terminated by us for misconduct; or (3) the officer accepts employment or refuses other employment offered by us at or before the time of termination.

Provided the requirements of the policy are met and the Named Executive Officer provides us an enforceable release, the Named Executive Officer will receive severance pay equal to the following amount of his or her final annual base salary indicated for the officer’s title.

President (CEO)	52 weeks
Executive Vice President (COO and CRO)	39 weeks
Senior Vice President (General Counsel and CAO)	26 weeks

See “Potential Payments Upon Termination or Change in Control” in this Item 11 for more information related to potential payouts on termination or change in control attributable to each Named Executive Officers as of December 31, 2012.

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Finance Agency Oversight: Section 1113 of the Recovery Act requires that the Director of the Finance Agency prevent an FHLBank from paying compensation to its executive officers that is not reasonable and comparable to that paid for employment in similar businesses involving similar duties and responsibilities. In 2009, the Finance Agency published a proposed regulation designed to implement these statutory requirements covering compensation payable to members of an FHLBank’s senior executive team and defines “reasonable” and “comparable” compensation. In addition, under the proposed regulation, the Finance Agency Director would have authority to approve certain compensation and termination benefits. The proposed regulation has not been finalized. Also in 2009, the Finance Agency issued an advisory bulletin establishing certain principles for executive compensation at the FHLBanks and the Office of Finance that include: (1) such compensation must be reasonable and comparable to that offered to executives in similar positions at comparable financial institutions; (2) such compensation should be consistent with sound risk management and preservation of the par value of FHLBank stock; (3) a significant percentage of an executive’s incentive based compensation should be tied to longer-term performance and outcome-indicators and be deferred and made contingent upon performance over several years; and (4) the Board of Directors should promote accountability and transparency in the process of setting compensation.

On April 14, 2011, the Finance Agency issued a joint proposed rule, along with six other federal financial regulators, that could impose additional requirements and restrictions on incentive compensation for our Named Executive Officers. We have taken the proposed rule into consideration in adopting our EICP, effective January 1, 2012. However, it is unknown what requirements will ultimately be enacted by the Finance Agency.

The FHLBanks have been directed to provide all compensation actions affecting their Named Executive Officers to the Finance Agency for review.

Compensation Committee Report: The Compensation Committee of our Board of Directors has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in our annual report on Form 10-K.

The Compensation Committee

of the Board of Directors

Richard S. Masinton, Chair

Harley D. Bergmeyer

Robert E. Caldwell II

G. Bridger Cox

Thomas E. Henning

Mark J. O’Connor

Mark W. Schifferdecker

99

Table 83 presents the Summary Compensation Table for the Named Executive Officers.

Table 83

Name and Principal Position	Year	Salary		Non-Equity Incentive Plan Compensation1		Change in Pension Value and Nonqualified Deferred Compensation Earnings2		All Other Compensation3		Total
Andrew J. Jetter4	2012	$	646,350	$	604,913	$	813,382	$	55,075	$	2,119,720
President & CEO	2011		627,500		606,062		1,169,289		55,792		2,458,643
	2010		609,226		416,210		791,982		49,001		1,866,419
David S. Fisher5	2012		427,875		319,683		206,265		43,805		997,628
SEVP & COO	2011		416,925		324,486		214,844		40,026		996,281
	2010		404,726		226,227		141,859		30,982		803,794
Mark E. Yardley6	2012		320,925		217,346		399,674		32,748		970,693
EVP & CRO	2011		312,675		226,287		609,535		30,723		1,179,220
	2010		303,476		169,632		404,807		27,447		905,362
Patrick C. Doran7	2012		266,675		145,549		111,128		21,880		545,232
SVP & General Counsel	2011		255,025		151,455		134,988		20,033		561,501
	2010		247,276		107,503		73,510		21,106		449,395
Denise L. Cauthon8	2012		200,275		63,268		168,000		19,175		450,718
SVP & CAO	2011		189,750		71,559		250,000		14,999		526,308
	2010		174,584		75,900		125,000		15,671		391,155

1	All compensation reported under “non-equity incentive plan compensation” represents performance awards earned pursuant to achievement of performance objectives under the FHLBank’s ESTIP (for 2010 and 2011), EICP (for 2012), and LTIP (for the 2008-2010, 2009-2011, and 2010-2012 performance periods in 2010, 2011, and 2012, respectively). Ms. Cauthon became eligible for the ESTIP effective May 26, 2010 and was not a participant in the 2009-2011 LTIP or the 2010-2012 LTIP.
2	The Change in Pension Value and Nonqualified Deferred Compensation Earnings includes above market earnings attributable to the BEP, which are calculated by multiplying the nonqualified deferred compensation balance as of January 1, 2012 by the average rate of return in excess of the long-term applicable Federal rate (120 percent compounded quarterly) published by the IRS.
3	The 2012 components of All Other Compensation are provided in Table 84.
4	Above market earnings attributable to the BEP for Mr. Jetter were $29,382, $15,289 and $12,982 for 2012, 2011 and 2010, respectively. The aggregate change in the value of Mr. Jetter’s accumulated benefit under the FHLBank’s DB Plan was $182,000, $310,000 and $154,000 for 2012, 2011 and 2010, respectively. The aggregate change in the value of his accumulated benefit under the defined benefit portion of the FHLBank’s BEP was $602,000, $844,000 and $625,000 for 2012, 2011 and 2010, respectively.
5	Above market earnings attributable to the BEP for Mr. Fisher were $9,265, $3,844 and $1,859 for 2012, 2011 and 2010, respectively. The aggregate change in the value of Mr. Fisher’s accumulated benefit under the FHLBank’s DB Plan was $74,000, $84,000 and $48,000 for 2012, 2011 and 2010, respectively. The aggregate change in the value of his accumulated benefit under the defined benefit portion of the BEP was $123,000, $127,000 and $92,000 for 2012, 2011 and 2010, respectively.
6	Above market earnings attributable to the BEP for Mr. Yardley were $16,674, $8,535 and $6,807 for 2012, 2011 and 2010, respectively. The aggregate change in the value of Mr. Yardley’s accumulated benefit under the FHLBank’s DB Plan was $200,000, $344,000 and $173,000 for 2012, 2011 and 2010, respectively. The aggregate change in the value of his accumulated benefit under the defined benefit portion of the BEP was $183,000, $257,000 and $225,000 for 2012, 2011 and 2010, respectively.
7	Above market earnings attributable to the BEP for Mr. Doran were $2,128, $988 and $510 for 2012, 2011 and 2010, respectively. The aggregate change in the value of Mr. Doran’s accumulated benefit under the FHLBank’s DB Plan was $72,000, $92,000 and $45,000 for 2012, 2011 and 2010, respectively. The aggregate change in the value of his accumulated benefit under the defined benefit portion of the BEP was $37,000, $42,000 and $28,000 in 2012, 2011 and 2010, respectively.
8	The aggregate change in the value of Ms. Cauthon’s accumulated benefit under the FHLBank’s DB Plan was $149,000, $246,000 and $125,000 for 2012, 2011 and 2010, respectively. The aggregate change in the value of her accumulated benefit under the defined benefit portion of the BEP was $19,000 and $4,000 for 2012 and 2011, respectively. Ms. Cauthon did not participate in the defined contribution portion of the BEP during 2010.

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Table 84 presents the components of “All Other Compensation” for 2012 as summarized in Table 83.

Table 84

Named Executive Officer	Perquisites and Personal Benefits1		Individual Disability Insurance		Life Insurance Premiums		Long Term Disability Premiums		FHLBank Contribution to DC Plan		FHLBank Contribution to Defined Contribution Portion of BEP		Other Miscellaneous		Total All Other Compensation
Andrew J. Jetter	$	-	$	6,732	$	1,444	$	923	$	15,000	$	30,880	$	96	$	55,075
David S. Fisher		-		6,457		907		923		14,700		20,722		96		43,805
Mark E. Yardley		-		3,946		674		923		15,000		12,109		96		32,748
Patrick C. Doran		-		-		533		853		15,000		5,398		96		21,880
Denise L. Cauthon		-		-		399		639		15,000		3,041		96		19,175

1 Perquisites and personal benefits are only included if more than $10,000 in aggregate for an individual.

Table 85 presents the Grants of Plan Based Awards Table for the Named Executive Officers.

Table 85

		Estimated Future Payouts Under Non-Equity Incentive Plan Awards1
Name	Plan	Threshold		Target		Maximum
Andrew J. Jetter	EICP-Cash Incentive	$	189,630	$	252,840	$	316,050
President & CEO	EICP-Deferred Incentive Opportunity2		189,630		252,840		316,050
	TLTIP (2012-2014)		189,630		252,840		316,050
David S. Fisher	EICP-Cash Incentive		94,500		136,500		178,500
SEVP & COO	EICP-Deferred Incentive Opportunity2		94,500		136,500		178,500
	TLTIP (2012-2014)		102,375		136,500		170,625
Mark E. Yardley	EICP-Cash Incentive		47,250		78,750		110,250
EVP & CRO	EICP-Deferred Incentive Opportunity2		47,250		78,750		110,250
	TLTIP (2012-2014)		59,063		78,750		98,438
Patrick C. Doran	EICP-Cash Incentive		38,550		64,250		89,950
SVP & General Counsel	EICP-Deferred Incentive Opportunity2		38,550		64,250		89,950
	TLTIP (2012-2014)		48,188		64,250		80,313
Denise L. Cauthon	EICP-Cash Incentive		28,950		48,250		67,550
SVP & CAO	EICP-Deferred Incentive Opportunity2		28,950		48,250		67,550
	TLTIP (2012-2014)		36,188		48,250		60,313

1

Amounts reflected for the EICP and TLTIP represent the applicable range of estimated future payouts and do not represent amounts actually earned or awarded for the fiscal year ended December 31, 2012. Award amounts are calculated using the base salaries in effect on January 1 at the beginning of the performance period. The EICP-Cash Incentive, if any, are earned and vested at year end. Awards, if any, under the EICP-Deferred Incentive Opportunity and TLTIP are payable in the year following the end of the three-year performance period. See discussion under EICP and TLTIP under this Item 11 for a description of the terms of the EICP and TLTIP and future payouts.

2

The final value of the EICP-Deferred Incentive Opportunity may be $0 if threshold metrics are not met, 75 percent of initial deferral at threshold, 100 percent at target and 125 percent at maximum.

Forfeiture Provisions – A Named Executive Officer, in the discretion of the Compensation Committee, may be required to forfeit an award earned under the EICP if the Named Executive Officer is: (1) discharged from employment with the FHLBank for Good Cause as defined under the EICP; (2) engages in competition with the FHLBank or interferes with the business relationships of the FHLBank during his employment or following his termination; (3) discloses confidential information of the FHLBank; or (4) refuses to report to the FHLBank any discoveries or improvements conceived by the Named Executive Officer during the course of employment that relate to the business of the FHLBank.

“Transitional” Long- Term Incentive Plan: The TLTIP provides eligible executive officers the opportunity to earn long-term incentive compensation based on our attainment of certain financial goals determined by the Compensation Committee and the Board of Directors. The Compensation Committee, in consultation with the CEO, is responsible for administering the TLTIP and has the full authority to construe, interpret, implement, and administer the TLTIP in such capacity.

The identities of the individual employees eligible for participation under the TLTIP will be recommended by the CEO to the Compensation Committee for approval for the Performance Period. “Performance Period” is defined under the TLTIP as a three-year period, extending from January 1, 2012 to December 31, 2014. Eligibility under the TLTIP is limited to the CEO and senior officers who are recommended by the CEO.

In 2012, a participant’s award under the TLTIP equaled the Base Award Opportunity, which means the total award that may be earned during the Performance Period for achieving Target performance levels under each Performance Measure, plus any discretionary awards that may be recommended by the CEO to the Compensation Committee for any Level II and/or Level III participant for extraordinary performance (the “Final Award”). The Final Award earned by a participant in the plan will be paid out by a single cash payment after the end of the Performance Period.

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The Base Award opportunity Percentage for each Named Executive Officer that was eligible to participate in the TLTIP for the Performance period beginning January 1, 2012 and ending December 31, 2014 is:

Andrew J. Jetter	40.0%
David S. Fisher	32.5%
Mark E. Yardley	25.0%
Patrick C. Doran	25.0%
Denise L. Cauthon	25.0%

The TLTIP uses a formula based on FHLBank’s Performance Measures for the Performance Period, which are set by the Compensation Committee. The metric weight for the 2012-2014 performance goals as a percent of the total TLTIP award opportunity for all Named Executive Officers is as follows:

Total Return	37.5%
Expense Growth	25.0%
Total Regulatory Capital Stock (TRCS)	37.5%

For the Performance Period, a Final Award will not be payable if we fail to achieve performance at or above the Performance Measure(s) set by the Compensation Committee or under any of the following circumstances:

(1)   We receive a cumulative “3” or “4” rating in our Finance Agency examination, in any single year during the Performance Period;

(2)   We find a serious, material safety-soundness problem, or a serious, material risk-management deficiency exists, or if:

(i)   Operational errors or omissions result in material revisions to the financial results, information submitted to the Finance Agency, or data used to determine incentive payouts;

(ii)   Submission of material information to certain government agencies is past due; or

(iii)   We fail to make sufficient progress in the timely remediation of significant examination, monitoring or other supervisory findings;

(3)   During its most recent examination, the Finance Agency identifies an unsafe or unsound practice or condition that is material to our financial operation within the participant’s areas of responsibility and that unsafe or unsound practice or condition is not subsequently resolved by the last day of the Performance Period; or

(4)   A given participant does not achieve “satisfactory” individual achievement levels during the applicable Performance Period. 

The determination of whether performance is deemed “satisfactory” is in the sole discretion of the Compensation Committee. Additionally, the Final Award shall be reduced by one-third for each year during the Performance Period in which we have negative net income, as defined and in accordance with GAAP.

Pension Benefits: Table 86 presents the 2012 Pension Benefits Table for the Named Executive Officers.

Table 86

Name	Plan Name	Number of Years of Credited Services		Present Value Of Accumulated Benefit		Payments During Last Fiscal Year
Andrew J. Jetter	Pentegra Defined Benefit Plan for Financial Institutions		24.583	$	1,351,000	$	-
President & CEO	FHLBank Benefit Equalization Plan		24.583		4,186,000		-
David S. Fisher	Pentegra Defined Benefit Plan for Financial Institutions		5.917		289,000		-
SEVP & COO	FHLBank Benefit Equalization Plan		5.917		476,000		-
Mark E. Yardley	Pentegra Defined Benefit Plan for Financial Institutions		27.250		1,537,000		-
EVP & CRO	FHLBank Benefit Equalization Plan		27.250		1,368,000		-
Patrick C. Doran	Pentegra Defined Benefit Plan for Financial Institutions		7.667		309,000		-
SVP & General Counsel	FHLBank Benefit Equalization Plan		7.667		160,000		-
Denise L. Cauthon	Pentegra Defined Benefit Plan for Financial Institutions		22.333		894,000		-
SVP & CAO	FHLBank Benefit Equalization Plan		22.333		23,000		-

Our DB Plan covers all full time employees of the FHLBank as of January 1, 2009 who have met the eligibility requirements of: (1) attainment of age 21; (2) completion of twelve months of employment; and (3) employed by the FHLBank as of December 31, 2008, including the Named Executive Officers. Employees are not fully vested until they have completed five years of employment. The regular form of retirement benefits provides a single life annuity; a lump-sum payment or other additional payment options also available to a limited degree for those Named Executive Officers who were employed prior to the plan change in 2003. The benefits are not subject to offset for social security or any other retirement benefits received.

The DB Plan provides a normal retirement benefit at or after age 65 where a Named Executive Officer has met the vesting requirement of completing five years of employment equal to 2.0 percent of his/her highest three-year average salary multiplied by his/her years of benefit service, up to 30 years. Three Named Executive Officer participants (Mr. Jetter, Mr. Yardley and Ms. Cauthon) are eligible to receive benefits in excess of 2.0 percent because of a plan change in 2003. The amount in excess of 2.0 percent is a calculated “frozen add-on” determined at the time of the plan change. The formula for this “frozen add-on” is the old benefit formula as of August 31, 2003 minus the new benefit formula as of September 1, 2003. Earnings are defined as base salary plus overtime and bonuses, subject to an annual IRC Section 401(a)(17) limit of $250,000 on earnings for 2012. Annual benefits provided under the DB Plan also are subject to IRC limits, which vary by age and benefit option selected. The annual IRC Section 415 (b)(1)(A) benefit limit is $200,000 for 2012. Benefits are payable in the event of retirement, death, disability, or termination of employment if vested. Only the portion of the benefit accrued before September 1, 2003 is payable as a lump sum to employees who have attained age 50, otherwise benefits are paid in installments.

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Early retirement benefits are payable at a reduced rate. Upon termination of employment prior to age 65, Named Executive Officers meeting the five year vesting and age 45 early retirement eligibility criteria are entitled to an early retirement benefit. Each of the Named Executive Officers is eligible for early retirement. The early retirement benefit amount is calculated by taking the normal retirement benefit amount and reducing it by 3.0 percent times the difference between the age of the early retiree and age 65. If the Named Executive Officer was employed prior to September 1, 2003 and his/her age and benefit service added together totaled 70 (Rule of 70), the normal retirement benefit amount would be reduced by 1.5 percent for each year between the age of the early retiree and age 65 for the portion of the normal retirement benefit accrued prior to September 1, 2003.

The FHLBank’s BEP is, in part, a non-qualified defined benefit plan. The defined benefit portion of the BEP provides benefits under the same terms and conditions as the DB Plan. However, the BEP does not limit the annual earnings or benefits of the Named Executive Officers. Benefits that would otherwise be provided under the BEP are reduced by benefits provided under the DB Plan.

Our contributions to the DB Plan through June 30, 2012, represented the normal cost of the plan. Funding and administrative costs of the DB Plan charged to compensation and benefits expense were $3,419,000 in 2012. The DB Plan is a multiemployer plan and therefore is not required to disclose the accumulated benefit obligations, plan assets and the components of annual pension expense.

The measurement date used to determine the current year’s benefit obligation was December 31, 2012. The present value of the accrued benefit of the DB Plan, calculated through September 1, 2003, was valued at 50 percent of benefit value using the 2000 RP Mortality table (generational table for annuities) and 50 percent of benefit value using the 2000 RP Mortality table (statistical mortality table for lump sums), discounted to the current age of each Named Executive Officer at 4.05 percent interest. The present value of benefits accrued after September 1, 2003 are multiplied by a present value factor which uses the 2000 RP Mortality table (generational table for annuities) discounted to the current age of each Named Executive Officer at 4.05 percent interest. As of December 31, 2012, the actuary’s calculations utilized: (1) the projected unit credit valuation method; (2) the 2000 RP Mortality table (generational mortality table); (3) a 5.06 percent average salary increase adjustment; and (4) a 3.75 percent discount rate as the primary assumptions attributable to valuation of benefits under the DB portion of the BEP.

Deferred Compensation: Table 87 presents the 2012 Nonqualified Deferred Compensation Table for the Named Executive Officers. Our fiscal year (FY) is 2012, with a fiscal year end (FYE) of December 31, 2012.

Table 87

Name	Executive Contributions in Last FY1		Registrant Contributions in Last FY2		Aggregate Earnings in Last FY		Aggregate Withdrawals/ Distributions		Aggregate Balance at Last FYE2
Andrew J. Jetter President & CEO	$	30,880	$	15,440	$	60,159	$	-	$	1,179,335
David S. Fisher SEVP & COO		20,722		36,038		20,373		-		424,284
Mark E. Yardley EVP & CRO		12,109		20,181		34,493		-		682,458
Patrick C. Doran SVP & General Counsel		5,398		5,398		4,748		-		100,027
Denise L. Cauthon SVP & CAO		3,041		4,054		39		-		7,134

1

All amounts are also included in the salary column of the Summary Compensation Table.

2

The total amount reported as preferential (above market) earnings in the aggregate balance at last FYE reported as compensation to each NEOin the Executive Group in our Summary Compensation Tables for previous years (2006-2011) was $66,819 for Mr. Jetter, $6,560 for Mr. Fisher, $24,792 for Mr. Yardley, and $2,168 for Mr. Doran. The amounts reported as preferential (above market) earnings for the current year are presented in Table 83.

The BEP is also, in part, an unfunded, nonqualified deferred compensation plan (the Supplemental Thrift Plan). The Supplemental Thrift Plan allows the Named Executive Officers, who so choose, to receive a credit for elective contributions in excess of the maximum permitted by the IRC limitations in the FHLBank’s DC Plan in which they participate. If portions of the Named Executive Officer’s regular DC Plan account contributions are returned after the end of the preceding year because of IRC limitations, the Named Executive Officer is credited with make-up contributions under the Supplemental Thrift Plan equal to the Named Executive Officer’s returned portions.

The Supplemental Thrift Plan allows Named Executive Officers to receive a rate of return based on our return on equity for the previous year. For 2012, the rate of return earned on the Supplemental Thrift Plan was 5.36 percent, which was our return on equity for 2011.

Named Executive Officers are at all times 100 percent vested in their Supplemental Thrift Plan accounts. In the event of unforeseen emergencies, they may request withdrawals equal to the lesser of the amounts necessary to meet their financial hardships or the amount of their account balances. Upon retirement or termination of employment with the FHLBank, the Named Executive Officer’s account balance would be paid in a lump sum, as soon as practicable.

Potential Payments Upon Termination/Change in Control: Table 88 represents a description of the elements of potential payments upon termination or change in control and the total amount that would be payable to the Named Executive Officers as of December 31, 2012 had their employment been terminated unless on or prior to that date: (1) the Named Executive Officer voluntarily terminated employment; (2) the Named Executive Officer’s employment was terminated by the FHLBank for misconduct; or (3) the Named Executive Officer accepted employment elsewhere or refused other employment offered by the FHLBank at or before the time of termination. Additional material conditions to the receipt of severance payments upon termination or change of control are discussed under “Severance Benefits” in the Compensation Discussion and Analysis section of this Item 11.

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All termination payment amounts are payable as a lump sum. The total termination payment amount equals the number of weeks of base salary as described under Severance Benefits under the Compensation Discussion and Analysis section of this Item 11, any earned but unpaid incentive awards, the respective aggregate balance that would be payable under our nonqualified deferred compensation plans within ninety days of a Named Executive Officer’s termination of employment due to death, disability or retirement, and the payment that may be due under our BEP, as described under Pension Benefits in this Item 11, upon a change in control as defined in the BEP, each as of December 31, 2012.

Table 88

Officer	Severance Amount1		Earned and Unpaid 2012 Incentive Awards		Deferred Compensation Payable		Payout Under BEP		Total Termination Payment Amount
Andrew J. Jetter	$	651,100	$	604,913	$	1,179,335	$	4,186,000	$	6,621,348
David S. Fisher		322,875		319,683		424,284		476,000		1,542,842
Mark E. Yardley		242,175		217,346		682,458		1,368,000		2,509,979
Patrick C. Doran		134,950		145,549		100,027		160,000		540,526
Denise L. Cauthon		101,350		63,268		7,134		23,000		194,752

1 Severance amount equals the number of weeks of base salary as described under Severance Benefits under the Compensation Discussion and Analysis under this Item 11.

Director Compensation: Table 89 presents the Director Compensation Table for our 2012 Board of Directors.

Table 89

Name	Fees Earned or Paid in Cash
Michael M. Berryhill	$	85,000
Harley D. Bergmeyer		75,000
Robert E. Caldwell II		85,000
G. Bridger Cox		75,000
James R. Hamby		85,000
Thomas E. Henning		85,000
Andrew C. Hove, Jr.		75,000
Michael B. Jacobson		75,000
Jane C. Knight		75,000
Richard S. Masinton		85,000
Neil F. M. McKay		75,000
Mark J. O’Connor		75,000
Mark W. Schifferdecker		75,000
Bruce A. Schriefer		75,000
Ronald K. Wente		100,000

Director Fees – The Board establishes on an annual basis a Board of Directors Compensation Policy governing compensation for Board meeting attendance. Our 2012 Board of Directors Compensation Policy (2012 Policy) was adopted December 15, 2011 and became effective January 1, 2012. The policy was amended effective June 28, 2012, to allow for decreases in compensation to reflect lesser attendance or performance by a director at board or committee meetings. This policy was established in accordance with the Bank Act and Finance Agency regulations that were amended in 2008 to remove the statutory cap on director compensation. The applicable statutes and regulations allow each FHLBank to pay its directors reasonable compensation and expenses, subject to the authority of the Director of the Finance Agency to object to, and to prohibit prospectively, compensation and/or expenses that the Director of the Finance Agency determines are not reasonable. Our 2012 Policy provided that directors shall be paid a meeting fee for each day in attendance at a regular meeting of the Board of Directors up to a maximum annual compensation amount as set forth in the 2012 Policy.

In determining reasonable compensation for our directors, we participated in an FHLBank System review of director compensation, which included a study prepared by McLagan Partners. FHLBank director compensation that was established by the Board under the 2012 Policy reflected this analysis. The 2013 Policy establishes annual compensation limits of $100,000 for the Chairman, $85,000 for the Vice Chairman and Committee Chairs and $75,000 for all other directors.

Director Expenses – Directors are also reimbursed for all necessary and reasonable travel, subsistence and other related expenses incurred in connection with the performance of their duties. For expense reimbursement purposes, directors’ official duties can include:

§   Meetings of the Board and Board Committees;

§   Meetings requested by the Finance Agency;

§   Meetings of FHLBank System committees;

§   FHLBank System director orientation meetings;

§   Meetings of the Council of Federal Home Loan Banks and Council committees; and

§   Attendance at other events on behalf of the FHLBank.

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Total travel expenses in the amount of $204,000 were paid for our directors in 2012 for travel integrally and directly related to the performance of the directors’ duties.

Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We are a cooperative. Our members or former members own all of our outstanding capital stock. A majority of our directors are elected from our membership. One of the voting rights of members is for the election of member and independent directors. Each member is eligible to vote for those open member director seats in the state in which its principal place of business is located and for all open independent director seats, which are elected by members of the entire FHLBank district. Membership is voluntary; however, members must give notice of their intent to withdraw from membership. A member that withdraws from membership may not be readmitted to membership for five years after the date upon which its required membership stock (Class A Common Stock) is redeemed by the FHLBank.

Management cannot legally and, therefore, does not, own our capital stock. We do not offer any compensation plan to our employees under which equity securities of the FHLBank are authorized for issuance.

Table 90 presents information on member institutions holding five percent or more of the total outstanding capital stock, which includes mandatorily redeemable capital stock, of the FHLBank as of March 13, 2013. Of these stockholders, no officer or director currently serves on our Board of Directors.

Table 90

Member Institutions Holding 5 Percent or More Capital Stock
Borrower Name	Address	City	State	Number of Shares		Percent of Total
MidFirst Bank	501 NW Grand Blvd	Oklahoma City	OK		1,739,000		12.8	%
Capitol Federal Savings Bank	700 S Kansas Ave	Topeka	KS		1,307,843		9.6
TOTAL					3,046,843		22.4	%

Additionally, because of the fact that a majority of our Board of Directors is nominated and elected from our membership (“member directors”), these member directors are officers or directors of member institutions that own our capital stock. Table 91 presents total outstanding capital stock, which includes mandatorily redeemable capital stock, held as of March 13, 2013, for member institutions whose officers or directors served as our directors as of March 13, 2013:

Table 91

Total Capital Stock Outstanding to Member Institutions whose Officers or Directors Serve as a Director
Borrower Name	Address	City	State	Number of Shares		Percent of Total
FirstBank	10403 W. Colfax Ave	Lakewood	CO		67,383		0.5	%
Girard National Bank	100 E Forest	Girard	KS		43,506		0.3
Vision Bank	1800 Arlington St	Ada	OK		29,564		0.2
First State Bank Nebraska	4915 Old Cheney Rd	Lincoln	NE		22,248		0.2
NebraskaLand National Bank	121 N. Dewey	North Platte	NE		17,151		0.1
Citizens Bank & Trust Co	1100 N Commerce	Ardmore	OK		9,818		0.1
Points West Community Bank	841 Illinois St	Sidney	NE		7,743		0.1
Points West Community Bank	100 E. 3rd St	Julesburg	CO		5,303		0.1
Fullerton National Bank	406 Broadway	Fullerton	NE		3,911		0.0
Bankers’ Bank of Kansas, NA	555 N Woodlawn	Wichita	KS		2,720		0.0
Bank of Estes Park	255 Park Lane	Estes Park	CO		2,216		0.0
First Security Bank	312 Maple	Overbrook	KS		1,524		0.0
Lisco State Bank	102 Coldwater	Lisco	NE		1,047		0.0
TOTAL					214,134		1.6	%

Item 13: Certain Relationships and Related Transactions, and Director Independence

Certain Relationships and Related Transactions

Since we are a cooperative, ownership of our capital stock is a prerequisite for our members to transact business with us. In recognition of this organizational structure, the SEC granted us an accommodation pursuant to a “no action letter,” dated May 23, 2006, which relieves us from the requirement to make disclosures under Item 404(a) of Regulation S-K for transactions with related persons, such as our members and directors, which occur in the ordinary course of business. Further, the Recovery Act codified this accommodation.

Members with beneficial ownership of more than five percent of our total outstanding capital stock and all of our directors are classified as related persons under SEC regulations. Transactions with members deemed related persons of the FHLBank occur in the ordinary course of our business since we conduct our advance and mortgage loan business almost exclusively with our members. Our member directors are officers or directors of members that own our capital stock and conduct business with us.

Information with respect to the directors who are officers or directors of our members is set forth under Item 10 – “Directors and Executive Officers of the FHLBank and Corporate Governance – Directors.” Additional information regarding members that are beneficial owners of more than five percent of our total outstanding capital stock is provided in Item 12 – “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

105

See Item 11 for a discussion of the compensation of our Named Executive Officers and directors.

We have a written “Related Person Transactions Policy” (Policy) that provides for the review and approval or ratification by our Audit Committee of any transaction with a related person that is outside the ordinary course of business. Under the Policy, transactions with related persons that are in the ordinary course of business are deemed pre-approved.

A “Related Person” under the Policy is:

§   Any person who is, or at any time since the beginning of our last fiscal year was, a director or an executive officer of the FHLBank;

§   Any immediate family member of any of the foregoing persons;

§   Any firm, corporation, or other entity in which any of the foregoing persons is an executive officer, a general partner or principal or in a similar position; or

§   Any member institution (or successor) of the FHLBank who is known to be the beneficial owner of more than five percent of our voting securities.

“Ordinary course of business” is defined in the Policy as activities conducted with members, including but not limited to providing our products and services to the extent such product and service transactions are conducted on terms no more favorable than the terms of comparable transactions with similarly situated members or housing associates, as applicable, or transactions between the FHLBank and a Related Person where the rates and charges involved in the transactions are subject to competitive bidding. Our products and services include: (1) credit products (i.e., line of credit, advances, letters of credit, standby credit facility and derivative transactions); (2) MPF Program products; (3) Housing and Community Development Program products; and (4) other services (i.e., deposit accounts, wire transfer services, safekeeping services, consolidated obligation direct placement and unsecured credit transactions permissible under the RMP.

Transactions outside the ordinary course of business, with Related Persons that have a direct or indirect material interest, and exceed $120,000 are subject to Audit Committee review and approval under the Policy and include situations in which: (1) we obtain products or services from a Related Person of a nature, quantity or quality, or on terms, that are not readily available from alternative sources; (2) we provide products or services to a Related Person on terms not comparable to those provided to unrelated parties; or (3) the rates or charges involved in the transactions are not subject to competitive bidding.

Director Independence

Board Operating Guidelines and Nasdaq Standards: The Board Operating Guidelines of the FHLBank (Guidelines), available at www.fhlbtopeka.com, require that the Board of Directors make an affirmative determination as to the independence of each director, as that term is defined by Rule 5605(a)(2) of the Nasdaq Marketplace Rules (the “Nasdaq Independence Standards”).

The Board of Directors has affirmatively determined that each one of its directors, both independent and member directors (each of whom is listed in Item 10 of this Form 10-K), is independent in accordance with the Nasdaq Independence Standards.

In order to assist the Board of Directors in making an affirmative determination of each director’s independence under the Nasdaq Independence Standards, the Board of Directors: (1) applied categorical standards for independence contained in the Guidelines and under the Nasdaq Independence Standards; (2) determined subjectively the independence of each director; and (3) considered the recommendation of the Audit Committee following its assessment of the independence of each director. The Board of Directors’ determination of independence under the Nasdaq Independence Standards rested upon a finding that each director has no relationship which, in the opinion of the Board of Directors, would interfere with that director’s exercise of independent judgment in carrying out the responsibilities of the director. Since under Finance Agency regulations, each independent director must be a bona fide resident of our district, and each member director must be an officer or director of one of our members, the Board of Directors included in its consideration whether any of these relationships would interfere with the exercise of independent judgment of a particular director.

Committee Independence

Audit Committee: In addition to the Nasdaq Independence Standards for committee members, our Audit Committee members are subject to the independence standards of the Finance Agency. Finance Agency regulations state that a director will be considered sufficiently independent to serve as an Audit Committee member if that director does not have a disqualifying relationship with the FHLBank or its management that would interfere with the exercise of that director’s independent judgment. Disqualifying relationships include but are not limited to:

§   Being employed by the FHLBank in the current year or any of the past five years;

§   Accepting compensation from the FHLBank other than compensation for service as a director;

§   Serving or having served in any of the past five years as a consultant, advisor, promoter, underwriter, or legal counsel of the FHLBank; or

§   Being an immediate family member of an individual who is, or has been in any of the past five years, employed by the FHLBank as an executive officer.

In addition to the independence standards for Audit Committee members required under the Finance Agency regulations, Section 10A(m) of the Exchange Act sets forth the independence requirements of directors serving on the Audit Committee of a reporting company. Under Section 10A(m), in order to be considered independent, a member of the Audit Committee may not, other than in his or her capacity as a member of the Board of Directors or any other Board Committee: (1) accept any consulting, advisory, or other compensation from the FHLBank; or (2) be an affiliated person of the FHLBank.

As of March 15, 2013, all members of our Audit Committee were independent under the Finance Agency’s audit committee independence criteria and under the independence criteria of Section 10A(m) of the Exchange Act.

The Finance Agency’s criteria for audit committee independence are posted on the corporate governance page of our website at www.fhlbtopeka.com.

106

Item 14: Principal Accounting Fees and Services

The Audit Committee’s policy is to pre-approve all audit, audit-related and permissible non-audit services provided by our independent accountants. The Audit Committee pre-approved all such services provided by the independent accountants during 2012 and 2011. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent accountants and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent accountants in accordance with its pre-approval and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

Table 92 sets forth the aggregate fees we were billed for the years ended December 31, 2012 and 2011 by our external accounting firm, PricewaterhouseCoopers LLP (in thousands):

Table 92

	2012		2011
Audit fees	$	636	$	697
Audit-related fees		93		49
Tax fees		-		-
All other fees		-		-
TOTAL	$	729	$	746

Audit fees during the years ended December 31, 2012 and 2011 were for professional services rendered for the audits of our annual financial statements and review of financial statements included in our annual reports on Form 10-K and quarterly reports on Form 10-Q.

Audit-related fees during the years ended December 31, 2012 and 2011 were for discussions regarding miscellaneous accounting-related matters.

We are assessed our proportionate share of the costs of operating the Office of Finance, which includes the expenses associated with the annual audits of the combined financial statements of the 12 FHLBanks. The audit fees for the combined financial statements are billed directly by PricewaterhouseCoopers LLP to the Office of Finance and we are assessed our proportionate share of these expenses. In 2012 and 2011, we were assessed $30,000 and $24,000, respectively, for the costs associated with PricewaterhouseCoopers LLP’s audits of the combined financial statements for those years. These assessments are not included in the table above.

We are exempt from all federal, state and local taxation, with the exception of real property tax. Therefore, no tax consultation fees were paid during the years ended December 31, 2012 and 2011.

Prior to approving PricewaterhouseCoopers LLP as our independent accountants for 2012, the Audit Committee considered whether PricewaterhouseCoopers LLP’s provision of services other than audit services is compatible with maintaining the accountants’ independence.

107

PART IV

Item 15: Exhibits, Financial Statement Schedules

a)      The financial statements included as part of this Form 10-K are identified in the index to Audited Financial Statements appearing in Item 8 of this Form 10-K and which index is incorporated in this Item 15 by reference.

b)      Exhibits.

We have incorporated by reference certain exhibits as specified below pursuant to Rule 12b-32 under the Exchange Act.

Exhibit No.	Description
3.1	Exhibit 3.1 to the FHLBank’s registration statement on Form 10, filed May 15, 2006, and made effective on July 14, 2006 (File No. 000-52004) (the “Form 10 Registration Statement”), Federal Home Loan Bank of Topeka Articles and Organization Certificate, is incorporated herein by reference as Exhibit 3.1.
3.2	Exhibit 3.2 to the Current Report on Form 8-K, filed September 28, 2012, Amended and Restated Bylaws, is incorporated herein by reference as Exhibit 3.2.
4.1	Exhibit 99.1 to the Current Report on Form 8-K, filed August 5, 2011, Federal Home Loan Bank of Topeka Capital Plan, is incorporated herein by reference as Exhibit 4.1.
10.1*	Exhibit 10.1 to the Current Report on Form 8-K, filed November 1, 2011, Federal Home Loan Bank of Topeka Benefit Equalization Plan, is incorporated herein by reference as Exhibit 10.1.
10.2	Exhibit 10.4 to the Form 10 Registration Statement, Federal Home Loan Bank of Topeka Office Complex Lease Agreement, is incorporated herein by reference as Exhibit 10.2.
10.2.1	Exhibit 10.4.1 to the Form 10 Registration Statement, Federal Home Loan Bank of Topeka Office Complex Lease Amendment, is incorporated herein by reference as Exhibit 10.2.1.
10.2.2	Exhibit 10.4.2 to the Form 10 Registration Statement, Federal Home Loan Bank of Topeka Office Second Complex Lease Amendment, is incorporated herein by reference as Exhibit 10.2.2.
10.3	Exhibit 10.5 to the Form 10 Registration Statement, Federal Home Loan Bank of Topeka Lease Agreement, is incorporated herein by reference as Exhibit 10.3.
10.4	Exhibit 10.6 to the 2009 Annual Report on Form 10-K, filed March 25, 2010, Federal Home Loan Bank of Topeka Form of Advance, Pledge and Security Agreement (Specific Pledge), is incorporated herein by reference as Exhibit 10.4.
10.5	Federal Home Loan Bank of Topeka Form of Advance, Pledge and Security Agreement (Blanket Pledge).
10.6	Exhibit 10.8 to the 2009 Annual Report on Form 10-K, filed March 25, 2010, Federal Home Loan Bank of Topeka Form of Confirmation of Advance, is incorporated herein by reference as Exhibit 10.6.
10.7*	Exhibit 10.10 to the 2010 Annual Report on Form 10-K, filed March 24, 2011, Federal Home Loan Bank of Topeka Long-Term Incentive Plan, is incorporated herein by reference as Exhibit 10.7.
10.8*	Federal Home Loan Bank of Topeka Executive Incentive Compensation Plan, amended December 14, 2012.
10.9*	Federal Home Loan Bank of Topeka 2012 Executive Incentive Compensation Plan Targets.
10.10*	Federal Home Loan Bank of Topeka 2013 Executive Incentive Compensation Plan Targets.
10.11*	Exhibit 10.3 to the Current Report on Form 8-K, filed December 21, 2011, Federal Home Loan Bank of Topeka “Transitional” Long-Term Incentive Plan, is incorporated herein by reference as Exhibit 10.9.
10.12*	Exhibit 10.1 to the Current Report on Form 8-K, filed December 19, 2012, 2013 Federal Home Loan Bank of Topeka Board of Directors Compensation Policy, is incorporated herein by reference as Exhibit 10.10.
12.1	Federal Home Loan Bank of Topeka Statements of Computation of Ratios.
14.1	Federal Home Loan Bank of Topeka Code of Ethics, amended December 14, 2012.
24	Power of Attorney.
31.1	Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Senior Vice President and Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification of President and Chief Executive Officer and Senior Vice President and Chief Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Federal Home Loan Bank of Topeka Audit Committee Charter, amended December 14, 2012.
99.2	Federal Home Loan Bank of Topeka Audit Committee Report.

*      Represents a management contract or a compensatory plan or arrangement.

108

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Federal Home Loan Bank of Topeka
Date: March 15, 2013	By: /s/Andrew J. Jetter
	Andrew J. Jetter
	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on the dates indicated.

Signature	Title	Date
/s/Andrew J. Jetter	President and Chief Executive Officer	March 15, 2013
Andrew J. Jetter	(Principal Executive Officer)
/s/Denise L. Cauthon	Senior Vice President and Chief Accounting Officer	March 15, 2013
Denise L. Cauthon	(Principal Financial Officer and Principal Accounting Officer)
/s/G. Bridger Cox*	Chairman of the Board of Directors	March 15, 2013
G. Bridger Cox
/s/Robert E. Caldwell, II*	Vice Chairman of the Board of Directors	March 15, 2013
Robert E. Caldwell, II
/s/Harley D. Bergmeyer*	Director	March 15, 2013
Harley D. Bergmeyer
/s/James R. Hamby*	Director	March 15, 2013
James R. Hamby
/s/Thomas E. Henning*	Director	March 15, 2013
Thomas E. Henning
/s/Andrew C. Hove, Jr. *	Director	March 15, 2013
Andrew C. Hove, Jr.
/s/Michael B. Jacobson*	Director	March 15, 2013
Michael B. Jacobson
/s/Jane C. Knight*	Director	March 15, 2013
Jane C. Knight
/s/Richard S. Masinton*	Director	March 15, 2013
Richard S. Masinton
/s/Neil F. M. McKay*	Director	March 15, 2013
Neil F. M. McKay
/s/L. Kent Needham*	Director	March 15, 2013
L. Kent Needham
/s/Mark J. O’Connor*	Director	March 15, 2013
Mark J. O’Connor
/s/Thomas H. Olson, Jr.*	Director	March 15, 2013
Thomas H. Olson, Jr.
/s/Mark W. Schifferdecker*	Director	March 15, 2013
Mark W. Schifferdecker
/s/Bruce A. Schriefer*	Director	March 15, 2013
Bruce A. Schriefer

* Pursuant to Power of Attorney

109

Management’s Report on Internal Control over Financial Reporting

Management of the Federal Home Loan Bank of Topeka (FHLBank) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The FHLBank’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the FHLBank’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the FHLBank are being made only in accordance with authorizations of the FHLBank’s management and board of directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the FHLBank’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management of the FHLBank assessed the effectiveness of the FHLBank’s internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on this evaluation under the COSO framework, management has concluded that the FHLBank’s internal control over financial reporting was effective as of December 31, 2012.

The effectiveness of the FHLBank’s internal control over financial reporting as of December 31, 2012 has been audited by PricewaterhouseCoopers LLP, the FHLBank’s independent registered public accounting firm, as stated in their accompanying report.

 /s/Andrew J. Jetter

Andrew J. Jetter

President and Chief Executive Officer

/s/Denise L. Cauthon

Denise L. Cauthon

Senior Vice President and Chief Accounting Officer

(Principal Financial Officer)

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

of the Federal Home Loan Bank of Topeka:

In our opinion, the accompanying statements of condition and the related statements of income, comprehensive income, capital, and cash flows present fairly, in all material respects, the financial position of the Federal Home Loan Bank of Topeka (the "FHLBank") at December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2012 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the FHLBank maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The FHLBank's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements and on the FHLBank's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/PricewaterhouseCoopers LLP

Dallas, Texas

March 15, 2013

F-2

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION
(In thousands, except par value)
	December 31,		December 31,
	2012		2011
ASSETS
Cash and due from banks (Note 3)	$	369,997	$	116,041
Interest-bearing deposits		455		42
Securities purchased under agreements to resell		1,999,288		-
Federal funds sold		850,000		1,040,000
Investment securities:
Trading securities (Note 4)		2,764,918		4,559,163
Held-to-maturity securities1 (Note 4)		5,159,750		4,977,332
Total investment securities		7,924,668		9,536,495
Advances (Notes 5, 7, 18)		16,573,348		17,394,399
Mortgage loans held for portfolio:
Mortgage loans held for portfolio (Notes 6, 7, 18)		5,945,933		4,936,805
Less allowance for credit losses on mortgage loans (Note 7)		(5,416)		(3,473)
Mortgage loans held for portfolio, net		5,940,517		4,933,332
Accrued interest receivable		77,445		85,666
Premises, software and equipment, net		8,874		11,379
Derivative assets (Note 8)		25,166		14,038
Other assets (Note 17)		48,869		58,790
TOTAL ASSETS	$	33,818,627	$	33,190,182
LIABILITIES AND CAPITAL
Liabilities:
Deposits:
Interest-bearing (Notes 9, 18)	$	1,117,627	$	958,445
Non-interest-bearing (Notes 9, 18)		64,330		38,926
Total deposits		1,181,957		997,371
Consolidated obligations, net:
Discount notes (Notes 10, 17)		8,669,059		10,251,108
Bonds (Notes 10, 17)		21,973,902		19,894,483
Total consolidated obligations, net		30,642,961		30,145,591
Overnight loans from other FHLBanks		-		35,000
Mandatorily redeemable capital stock (Note 13)		5,665		8,369
Accrued interest payable		81,801		96,237
Affordable Housing Program (Note 11)		31,198		31,392
Derivative liabilities (Note 8)		123,414		140,213
Other liabilities (Notes 15, 17)		31,150		34,562
TOTAL LIABILITIES		32,098,146		31,488,735
Commitments and contingencies (Notes 1, 5, 6, 7, 8, 10, 11, 13, 15, 17)

1     Fair value: $5,192,330 and $4,967,585 as of December 31, 2012 and 2011, respectively.

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

F-3

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CONDITION (continued)
(In thousands, except par value)
	December 31,		December 31,
	2012		2011
Capital:
Capital stock outstanding - putable:
Class A ($100 par value; 4,053 and 5,373 shares issued and outstanding) (Notes 13, 18)	$	405,304	$	537,304
Class B ($100 par value; 8,592 and 7,905 shares issued and outstanding) (Notes 13, 18)		859,152		790,523
Total capital stock		1,264,456		1,327,827
Retained earnings:
Unrestricted		453,346		395,588
Restricted (Note 13)		27,936		5,873
Total retained earnings		481,282		401,461
Accumulated other comprehensive income (loss) (Note 14)		(25,257)		(27,841)
TOTAL CAPITAL		1,720,481		1,701,447
TOTAL LIABILITIES AND CAPITAL	$	33,818,627	$	33,190,182

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

F-4

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF INCOME
(In thousands)
	Year Ended December 31,
	2012		2011		2010
INTEREST INCOME:
Interest-bearing deposits	$	513	$	204	$	230
Federal funds sold and securities purchased under agreements to resell		4,027		2,219		4,826
Trading securities (Note 4)		69,244		81,388		90,884
Held-to-maturity securities (Note 4)		70,244		99,094		148,223
Advances (Note 5)		148,032		154,536		194,878
Prepayment fees on terminated advances (Note 5)		6,528		10,978		14,575
Mortgage loans held for sale (Note 6)		-		2,142		-
Mortgage loans held for portfolio (Note 6)		194,363		193,686		173,756
Other		1,832		2,240		2,639
Total interest income		494,783		546,487		630,011
INTEREST EXPENSE:
Deposits (Note 9)		1,511		2,594		2,805
Consolidated obligations:
Discount notes (Note 10)		9,237		9,591		21,017
Bonds (Note 10)		264,134		302,765		355,164
Securities sold under agreements to repurchase		-		-		3
Mandatorily redeemable capital stock (Note 13)		41		174		346
Other		180		437		800
Total interest expense		275,103		315,561		380,135
NET INTEREST INCOME		219,680		230,926		249,876
Provision for credit losses on mortgage loans (Note 7)		2,496		1,058		1,582
NET INTEREST INCOME AFTER MORTGAGE LOAN LOSS PROVISION		217,184		229,868		248,294
OTHER INCOME (LOSS):
Total other-than-temporary impairment losses on held-to-maturity securities (Note 4)		(5,105)		(13,686)		(17,778)
Portion of other-than-temporary impairment losses on held-to-maturity securities recognized in other comprehensive income (loss)		3,445		8,975		13,744
Net other-than-temporary impairment losses on held-to-maturity securities		(1,660)		(4,711)		(4,034)
Net gain (loss) on trading securities (Note 4)		(28,048)		20,772		14,425
Net gain (loss) on derivatives and hedging activities (Note 8)		(21,478)		(108,743)		(174,674)
Net gain (loss) on mortgage loans held for sale (Note 6)		-		4,425		-
Standby bond purchase agreement commitment fees		4,687		4,064		3,219
Letters of credit fees		3,079		3,347		3,406
Other		504		2,518		2,964
Total other income (loss)		(42,916)		(78,328)		(154,694)
OTHER EXPENSES:
Compensation and benefits (Note 15)		29,231		28,604		26,365
Other operating (Note 17)		12,866		13,857		13,844
Finance Agency		3,117		4,039		1,866
Office of Finance		2,287		2,236		1,922
Other		4,195		5,045		3,902
Total other expenses		51,696		53,781		47,899
INCOME (LOSS) BEFORE ASSESSMENTS		122,572		97,759		45,701
Affordable Housing Program (Note 11)		12,261		8,611		3,766
REFCORP (Note 12)		-		11,822		8,387
Total assessments		12,261		20,433		12,153
NET INCOME	$	110,311	$	77,326	$	33,548

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

F-5

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
	Year Ended December 31,
	2012		2011		2010
Net income	$	110,311	$	77,326	$	33,548
Other comprehensive income (loss):
Net non-credit portion of other-than-temporary impairment losses on held-to-maturity securities:
Non-credit portion		(4,634)		(12,144)		(16,398)
Reclassification of non-credit portion included in net income		1,189		3,169		2,654
Accretion of non-credit portion		6,358		4,507		4,172
Total net non-credit portion of other-than-temporary impairment losses on held-to-maturity securities		2,913		(4,468)		(9,572)
Defined benefit pension plan:
Net gain (loss)		(661)		(1,020)		(1,586)
Amortization of net loss		332		319		353
Amortization of prior service cost		-		-		(6)
Total defined benefit pension plan		(329)		(701)		(1,239)
Total other comprehensive income (loss)		2,584		(5,169)		(10,811)
TOTAL COMPREHENSIVE INCOME	$	112,895	$	72,157	$	22,737

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

F-6

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CAPITAL
(In thousands)
	Capital Stock1																		Accumulated
	Class A				Class B				Total				Retained Earnings						Other
	Shares		Par Value		Shares		Par Value		Shares		Par Value		Unrestricted		Restricted		Total		Comprehensive Income (Loss)		Total Capital
BALANCE - DECEMBER 31, 2009		2,936	$	293,554		13,091	$	1,309,142		16,027	$	1,602,696	$	355,075	$	-	$	355,075	$	(11,861)	$	1,945,910
Proceeds from issuance of capital stock		48		4,797		1,031		103,106		1,079		107,903										107,903
Repurchase/redemption of capital stock		-		-		(137)		(13,720)		(137)		(13,720)										(13,720)
Comprehensive income (loss)														33,548		-		33,548		(10,811)		22,737
Net reclassification of shares to mandatorily redeemable capital stock		(1,224)		(122,362)		(1,567)		(156,674)		(2,791)		(279,036)										(279,036)
Net transfer of shares between Class A and Class B		4,174		417,397		(4,174)		(417,397)		-		-										-
Dividends on capital stock (Class A - 0.6%, Class B - 3.0%):
Cash payment														(316)				(316)				(316)
Stock issued						366		36,553		366		36,553		(36,553)				(36,553)				-
BALANCE - DECEMBER 31, 2010		5,934		593,386		8,610		861,010		14,544		1,454,396		351,754		-		351,754		(22,672)		1,783,478
Proceeds from issuance of capital stock		65		6,468		1,803		180,260		1,868		186,728										186,728
Repurchase/redemption of capital stock		(343)		(34,272)		(49)		(4,934)		(392)		(39,206)										(39,206)
Comprehensive income (loss)														71,453		5,873		77,326		(5,169)		72,157
Net reclassification of shares to mandatorily redeemable capital stock		(1,747)		(174,660)		(1,267)		(126,688)		(3,014)		(301,348)										(301,348)
Net transfer of shares between Class A and Class B		1,464		146,382		(1,464)		(146,382)		-		-										-
Dividends on capital stock (Class A - 0.3%, Class B - 3.2%):
Cash payment														(362)				(362)				(362)
Stock issued						272		27,257		272		27,257		(27,257)				(27,257)				-
BALANCE - DECEMBER 31, 2011		5,373		537,304		7,905		790,523		13,278		1,327,827		395,588		5,873		401,461		(27,841)		1,701,447
Proceeds from issuance of capital stock		44		4,421		4,307		430,682		4,351		435,103										435,103
Repurchase/redemption of capital stock		(1,283)		(128,329)		(186)		(18,667)		(1,469)		(146,996)										(146,996)
Comprehensive income (loss)														88,248		22,063		110,311		2,584		112,895
Net reclassification of shares to mandatorily redeemable capital stock		(660)		(65,986)		(3,157)		(315,697)		(3,817)		(381,683)										(381,683)
Net transfer of shares between Class A and Class B		579		57,894		(579)		(57,894)		-		-										-
Dividends on capital stock (Class A - 0.3%, Class B - 3.5%):
Cash payment														(285)				(285)				(285)
Stock issued						302		30,205		302		30,205		(30,205)				(30,205)				-
BALANCE DECEMBER 31, 2012		4,053	$	405,304		8,592	$	859,152		12,645	$	1,264,456	$	453,346	$	27,936	$	481,282	$	(25,257)	$	1,720,481

1 Putable

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

F-7

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS
(In thousands)
	Year Ended December 31,
	2012		2011		2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	110,311	$	77,326	$	33,548
Adjustments to reconcile income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization:
Premiums and discounts on consolidated obligations, net		(25,103)		(32,919)		(20,622)
Concessions on consolidated obligations		18,125		12,276		16,557
Premiums and discounts on investments, net		(1,665)		(2,210)		(2,748)
Premiums and discounts on advances, net		(12,829)		(19,915)		(13,988)
Premiums, discounts and deferred loan costs on mortgage loans, net		20,432		7,904		3,892
Fair value adjustments on hedged assets or liabilities		17,588		20,160		13,976
Premises, software and equipment		2,152		2,866		3,655
Other		332		319		347
Provision for credit losses on mortgage loans		2,496		1,058		1,582
Non-cash interest on mandatorily redeemable capital stock		38		169		279
Net other-than-temporary impairment losses on held-to-maturity securities		1,660		4,711		4,034
Net realized (gain) loss on sale of mortgage loans held for sale		-		(4,425)		-
Net realized (gain) loss on disposals of premises, software and equipment		1,951		(6)		100
Other (gains) losses		230		195		(210)
Net (gain) loss on trading securities		28,048		(20,772)		(14,425)
(Gain) loss due to change in net fair value adjustment on derivative and hedging activities		42,501		128,534		79,596
(Increase) decrease in accrued interest receivable		8,197		7,676		9,722
Change in net accrued interest included in derivative assets		(2,031)		7,551		7,574
(Increase) decrease in other assets		3,730		(751)		(4,388)
Increase (decrease) in accrued interest payable		(14,435)		(32,321)		(25,155)
Change in net accrued interest included in derivative liabilities		990		4,668		(3,343)
Increase (decrease) in Affordable Housing Program liability		(194)		(7,834)		(4,891)
Increase (decrease) in REFCORP liability		-		(8,014)		(3,542)
Increase (decrease) in other liabilities		141		2,510		4,318
Total adjustments		92,354		71,430		52,320
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		202,665		148,756		85,868
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits		5,947		(244,248)		(6,370)
Net (increase) decrease in Federal funds sold		190,000		715,000		(810,000)
Net (increase) decrease in securities purchased under resale agreements		(1,999,288)		-		-
Net (increase) decrease in short-term trading securities		1,234,706		2,241,242		1,685,054
Proceeds from sale of long-term trading securities		-		284,445		152,435
Proceeds from maturities of and principal repayments on long-term trading securities		931,454		836,675		154,253
Purchases of long-term trading securities		(399,975)		(1,566,397)		(299,531)
Proceeds from maturities of and principal repayments on long-term held-to-maturity securities		1,674,628		1,777,260		3,003,436
Purchases of long-term held-to-maturity securities		(1,849,115)		-		(2,375,111)
Principal collected on advances		38,133,313		33,427,385		42,109,928
Advances made		(37,377,918)		(31,353,692)		(39,177,843)
Proceeds from sale of mortgage loans held for sale		-		111,444		-
Principal collected on mortgage loans		1,521,806		845,353		834,466
Purchase or origination of mortgage loans		(2,555,771)		(1,600,648)		(1,802,231)
Proceeds from sale of foreclosed assets		7,938		6,960		8,099
Principal collected on other loans made		1,848		1,728		1,616
Proceeds from sale of premises, software and equipment		36		24		55
Purchases of premises, software and equipment		(1,634)		(1,654)		(1,844)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(482,025)		5,480,877		3,476,412

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

F-8

FEDERAL HOME LOAN BANK OF TOPEKA
STATEMENTS OF CASH FLOWS (continued)
(In thousands)
	Year Ended December 31,
	2012		2011		2010
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	$	166,706	$	(231,781)	$	140,060
Net proceeds from issuance of consolidated obligations:
Discount notes		67,338,915		61,943,402		96,901,294
Bonds		19,854,295		13,010,952		18,400,033
Payments for maturing and retired consolidated obligations:
Discount notes		(68,922,319)		(65,392,039)		(94,786,419)
Bonds		(17,700,300)		(14,638,320)		(24,425,252)
Net increase (decrease) in overnight loans from other FHLBanks		(35,000)		35,000		-
Net increase (decrease) in other borrowings		(5,000)		(5,000)		(5,000)
Proceeds from financing derivatives		-		-		142
Net interest payments received (paid) for financing derivatives		(67,378)		(70,528)		(93,096)
Proceeds from issuance of capital stock		435,103		186,728		107,903
Payments for repurchase/redemption of capital stock		(146,996)		(39,206)		(13,720)
Payments for repurchase of mandatorily redeemable capital stock		(384,425)		(312,698)		(282,202)
Cash dividends paid		(285)		(362)		(316)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		533,316		(5,513,852)		(4,056,573)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		253,956		115,781		(494,293)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		116,041		260		494,553
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	369,997	$	116,041	$	260
Supplemental disclosures:
Interest paid	$	274,240	$	340,160	$	395,154
Affordable Housing Program payments	$	13,210	$	16,984	$	8,908
REFCORP payments	$	-	$	19,836	$	11,929
Net transfers of mortgage loans to real estate owned	$	6,597	$	6,799	$	7,188
Net transfers of mortgage loans held for portfolio to held for sale	$	-	$	-	$	120,525

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

F-9

FEDERAL HOME LOAN BANK OF TOPEKA

Notes to Financial Statements

For the years ended December 2012, 2011 and 2010

BACKGROUND INFORMATION

The Federal Home Loan Bank of Topeka (FHLBank or FHLBank Topeka), a federally chartered corporation, is one of 12 district Federal Home Loan Banks (FHLBanks). The FHLBanks are government-sponsored enterprises (GSE) that serve the public by enhancing the availability of credit for residential mortgages and targeted community development and provide a readily available, competitively-priced source of funds to their members. The FHLBank is a cooperative whose member institutions own substantially all of the outstanding capital stock of the FHLBank and generally receive dividends on their stock investments. Regulated financial depositories and insurance companies engaged in residential housing finance are eligible to apply for membership. Additionally, qualified community development financial institutions are eligible for membership. State and local housing authorities that meet certain statutory requirements may become housing associates of the FHLBank and also be eligible to borrow from the FHLBank. While eligible to borrow, housing associates are not members of the FHLBank and, as such, are not permitted or required to hold capital stock.

All members are required to purchase stock in the FHLBank located in their district in accordance with the capital plan of that FHLBank. Under FHLBank Topeka’s capital plan, members must own capital stock in the FHLBank based on the amount of their total assets. Each member is also required to purchase activity-based capital stock as it engages in certain business activities with the FHLBank, including advances and Acquired Member Assets (AMA). Former members that still have outstanding business transactions with the FHLBank are also required to maintain their investments in FHLBank capital stock until the transactions mature or are paid off. As a result of these requirements, the FHLBank conducts business with members in the ordinary course of its business. For financial reporting purposes, the FHLBank defines related parties as those members: (1) with investments in excess of 10 percent of the FHLBank’s total capital stock outstanding, which includes mandatorily redeemable capital stock; or (2) with an officer or director serving on the FHLBank’s board of directors. See Note 18 for more information on related party transactions.

The FHLBanks are supervised and regulated by the Federal Housing Finance Agency (Finance Agency), an independent agency in the executive branch of the U.S. government. The Finance Agency’s mission with respect to the FHLBanks is to provide effective supervision, regulation and housing mission oversight of the FHLBanks to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market. Each FHLBank is operated as a separate entity and has its own management, employees and board of directors. The FHLBanks do not have any special purpose entities or any other type of off-balance sheet conduits.

The FHLBanks have established a joint office called the Office of Finance to facilitate the issuance and servicing of the debt instruments of the FHLBanks, known as consolidated obligation bonds and consolidated obligation discount notes (collectively referred to as consolidated obligations) and to prepare the combined quarterly and annual financial reports of the 12 FHLBanks. As provided by the Federal Home Loan Bank Act of 1932, as amended (Bank Act), and applicable regulations, consolidated obligations are backed only by the financial resources of the 12 FHLBanks. Consolidated obligations are the primary source of funds for the FHLBanks in addition to deposits, other borrowings and capital stock issued to members. The FHLBank primarily uses these funds to provide advances to members and to acquire mortgage loans from members through the Mortgage Partnership Finance® (MPF®) Program. In addition, the FHLBank also offers correspondent services such as wire transfer, security safekeeping and settlement services.

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

Reclassifications: Certain amounts in the financial statements and related footnotes have been reclassified to conform to current period presentations. Such reclassifications have no impact on total assets, net income or capital.

Use of Estimates: The preparation of financial statements under GAAP requires management to make estimates and assumptions as of the date of the financial statements in determining the reported amounts of assets, liabilities and estimated fair values and in determining the disclosure of any contingent assets or liabilities. Estimates and assumptions by management also affect the reported amounts of income and expense during the reporting period. The most significant of these estimates include the fair value of derivatives, the determination of other-than-temporary impairment (OTTI) on investments and the allowance for credit losses. Many of the estimates and assumptions, including those used in financial models, are based on financial market conditions as of the date of the financial statements. Because of the volatility of the financial markets, as well as other factors that affect management estimates, actual results may vary from these estimates.

Fair Values: The fair value amounts, recorded on the Statements of Condition and presented in the note disclosures for the periods presented, have been determined by the FHLBank using available market and other pertinent information and reflect the FHLBank’s best judgment of appropriate valuation methods. Although the FHLBank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any valuation technique. Therefore, these fair values may not be indicative of the amounts that would have been realized in market transactions at the reporting dates. See Note 16 for more information.

Cash Flows: For purposes of the Statements of Cash Flows, the FHLBank considers cash on hand and non-interest-bearing deposits in banks as cash and cash equivalents.

F-10

Interest-bearing Deposits, Securities Purchased Under Agreements to Resell and Federal Funds Sold: These investments provide short-term liquidity and are carried at cost. The FHLBank treats securities purchased under agreements to resell as short-term collateralized loans, which are classified as assets on the Statements of Condition. Securities purchased under agreements to resell are held in safekeeping in the FHLBank’s name by third-party custodians approved by the FHLBank. If the market value of the underlying securities decreases below the market value required as collateral, the counterparty has the option to: (1) place an equivalent amount of additional securities in safekeeping in the FHLBank’s name; or (2) remit an equivalent amount of cash; otherwise, the dollar value of the resale agreement will be decreased accordingly. Federal funds sold consist of short-term unsecured loans conducted with investment-grade counterparties.

Investment Securities: The FHLBank classifies investments as trading, available-for-sale and held-to-maturity at the date of acquisition. Purchases and sales of securities are recorded on a trade date basis.

Trading: Securities classified as trading are held for liquidity purposes and/or to provide a fair value offset to interest rate swaps tied to securities or for securities acquired as asset liability management tools and carried at fair value. The FHLBank records changes in the fair value of thesesecurities through other income (loss) as net gains (losses) on trading securities. Finance Agency regulation and the FHLBank’s Risk Management Policy (RMP) prohibit trading in or the speculative use of these instruments and limits credit risk arising from these instruments. While the FHLBank classifies certain securities as trading for financial reporting purposes, it does not actively trade any of these securities with the intent of realizing gains and holds these investments indefinitely as management periodically evaluates its asset/liability and liquidity needs. Short-term money market investments with maturities of three months or less are acquired and classified as trading securities primarily for liquidity purposes. These short-term money market investments are periodically sold to meet the FHLBank’s cash flow needs.

Available-for-Sale: Securities that are not classified as trading or held-to-maturity are classified as available-for-sale and are carried at fair value. The change in fair value of available-for-sale securities is recorded in other comprehensive income (loss) (OCI) as a net unrealized gain or loss on available-for-sale securities.

Held-to-Maturity: Securities that the FHLBank has both the ability and intent to hold to maturity are classified as held-to-maturity and are carried at cost, adjusted for periodic principal repayments, amortization of premiums, accretion of discounts and OTTI recognized in net income and OCI.

The FHLBank may change its intent to hold to maturity a held-to-maturity investment without changing its intent to hold to maturity other held-to-maturity investments for the following circumstances: (1) evidence of a significant deterioration in the issuer’s creditworthiness; (2) a change in statutory or regulatory requirements significantly modifying either what constitutes a permissible investment or the maximum level of investments in certain kinds of investments, thereby causing the FHLBank to dispose of a held-to-maturity investment; (3) a significant increase by a regulator in the FHLBank’s capital requirements that causes the FHLBank to downsize by selling held-to-maturity investments; or (4) a significant increase in the risk weights of debt securities used for regulatory risk-based capital purposes. The FHLBank considers the following situations maturities for purposes of assessing ability and intent to hold to maturity: (1) the sale of the security is near enough to maturity (or call date if exercise of the call is probable) that interest rate risk is substantially eliminated as a pricing factor and the changes in market interest rates would not have a significant effect on the security’s fair value; or (2) the sale of a security occurs after the FHLBank has already collected a substantial portion (at least 85 percent) of the principal outstanding at acquisition either due to prepayments on the debt security or to scheduled payments on a debt security payable in equal installments (both principal and interest) over its term.

Premiums and Discounts: The FHLBank computes the amortization of purchased premiums and accretion of purchased discounts on mortgage-backed securities (MBS) using the level-yield method over the estimated cash flows of the securities. This method requires a retrospective adjustment of the effective yield each time the FHLBank receives a principal repayment or changes the estimated remaining cash flows as if the actual principal repayments and new estimated cash flows had been known since the original acquisition dates of the securities. The FHLBank uses nationally recognized, market-based third-party prepayment models to estimate future cash flows. The FHLBank computes the amortization of premiums and accretion of discounts on other investments using the level-yield method to the contractual maturities of the securities.

Gains and Losses on Sales: Gains and losses on the sales of investment securities are computed using the specific identification method and are included in other income (loss).

Investment Securities – Other-than-temporary Impairment: The FHLBank evaluates its individual held-to-maturity investment securities holdings in an unrealized loss position for OTTI at least quarterly, or more frequently if events or changes in circumstances indicate that these investments may be other-than-temporarily impaired. An investment is considered impaired when its fair value is less than its amortized cost basis. The FHLBank considers an OTTI to have occurred under any of the following circumstances:

§   If the FHLBank has the intent to sell the impaired debt security;

§   If, based on available evidence, the FHLBank believes it is more likely than not that it will be required to sell the debt security before the recovery of its amortized cost basis; or

§   If the FHLBank does not expect to recover the entire amortized cost basis of the impaired debt security.

Recognition of OTTI: If either of the first two conditions above is met, the FHLBank recognizes an OTTI charge in earnings equal to the entire difference between the security’s amortized cost basis and its fair value as of the Statement of Condition date. For securities in an unrealized loss position that meet neither of the first two conditions, the entire loss position, or total OTTI, is evaluated to determine the extent and amount of credit loss.

To determine whether a credit loss exists, the FHLBank performs an analysis, which includes a cash flow analysis for private-label MBS/ABS, to determine if it will recover the entire amortized cost basis of each of these securities. The present value of the cash flows expected to be collected is compared to the amortized cost basis of the security to determine if a credit loss exists. If there is a credit loss, the carrying value of the security is adjusted to its fair value. However, rather than recognizing the entire difference between the amortized cost basis and the fair value in earnings, only the amount of the impairment representing the credit loss (i.e., the credit component) is recognized in earnings, while the amount related to all other factors (i.e., the non-credit component) is recognized in Accumulated OCI (AOCI), which is a component of capital. The credit loss on a debt security is limited to the amount of that security’s unrealized losses.

The total OTTI is presented in the Statements of Income with an offset for the amount of the non-credit potion of OTTI that is recognized in AOCI. The remaining amount in the Statements of Income represents the credit loss for the period.

F-11

Accounting for OTTI Recognized in AOCI: For subsequent accounting of other-than-temporarily impaired securities, the FHLBank records an additional OTTI if the present value of cash flows expected to be collected is less than the amortized cost basis. The total amount of this additional OTTI is determined as the difference between its carrying amount prior to the determination of this additional OTTI and its fair value. Additional credit losses related to previously other-than-temporarily impaired securities are reclassified out of AOCI into the Statements of Income, but only to the extent of a security’s unrealized losses (i.e., difference between the security’s amortized cost and its fair value). The OTTI recognized in AOCI is accreted to the carrying value of each security on a prospective basis, based on the amount and timing of future estimated cash flows (with no effect on earnings unless the security is subsequently sold or there are additional decreases in cash flows expected to be collected).

Interest Income Recognition: The FHLBank recognizes subsequent interest income in accordance with the method described in accounting guidance for beneficial interests in securitized financial assets. As of the impairment measurement date, a new accretable yield is calculated for the impaired investment security. This adjusted yield is used to calculate the amount to be recognized into income over the remaining life of the security so as to match the amount and timing of future cash flows expected to be collected. Subsequent changes in estimated cash flows change the accretable yield on a prospective basis. The estimated cash flows and accretable yield are re-evaluated on a quarterly basis.

Advances: The FHLBank presents advances (secured loans to members, former members or housing associates) net of unearned commitment fees, premiums, discounts and fair value basis adjustments. The FHLBank amortizes the premiums and accretes the discounts on advances to interest income using the level-yield method. The FHLBank records interest on advances to interest income as earned.

Advance Modifications:In cases in which the FHLBank funds a new advance concurrent with or within a short period of time before or after the prepayment of an existing advance, the FHLBank evaluates whether the new advance meets the accounting criteria to qualify as a modification of an existing advance or whether it constitutes a new advance. The FHLBank compares the present value of cash flows on the new advance to the present value of cash flows remaining on the existing advance. If there is at least a 10 percent difference in the cash flows or if the FHLBank concludes the differences between the advances are more than minor based on qualitative factors, the advance is accounted for as a new advance. In all other instances, the new advance is accounted for as a modification.

Prepayment Fees: The FHLBank charges prepayment fees to its borrowers when certain advances are repaid before their original maturities. The FHLBank records prepayment fees net of hedging fair value basis adjustments included in the book basis of the advance, as “Prepayment fees on terminated advances” in the interest income section of its Statements of Income.

If a new advance does not qualify as a modification of an existing advance, it is treated as an advance termination and any prepayment fee, net of hedging adjustments, is recorded to “Prepayment fees on terminated advances” in the interest income section of the Statements of Income.

If the new advance qualifies as a modification, the net prepayment fee received on the prepaid advance is deferred as a discount and included in the basis of the modified advance. The basis adjustment is amortized over the life of the modified advance to advance interest income. If the modified advance is hedged, the fair value gain or loss on the advance and the prepayment fee are included in the carrying amount of the modified advance, and any prior gains or losses and prepayment fees are amortized to interest income over the life of the modified advance using the level-yield method. Modified hedged advances are marked to benchmark fair value after the modification, and subsequent fair value changes are recorded in “Net gain (loss) on derivatives and hedging activities” in other income (loss).

Mortgage Loans Held for Portfolio: The FHLBank carries mortgage loans classified as held for investment at their principal amount outstanding, net of unamortized premiums, unaccreted discounts, deferred loan fees associated with table funded loans, hedging adjustments, unrealized gains and losses from mortgage purchase commitments and other fees. The FHLBank has the intent and ability to hold these mortgage loans to maturity.

Premiums and Discounts: The FHLBank defers and amortizes/accretes mortgage loan origination fees (agent fees) and premiums and discounts paid to and received from FHLBank members as interest income using the contractual method. The contractual method uses the cash flows required by the loan contracts, as adjusted for actual prepayments, to apply the interest method. The contractual method does not utilize estimates of future prepayments of principal.

Credit Enhancement Fees: The credit enhancement (CE) obligation is an obligation on the part of the participating financial institution (PFI) that ensures the retention of credit risk on loans it originates on behalf of or sells to the FHLBank. The amount of the CE obligation is determined so that any losses in excess of the CE obligation for each pool of mortgage loans purchased approximate those experienced by an investor in a double-A rated MBS. As a part of our methodology to determine the amount of credit enhancement necessary, we analyze the risk characteristics of each mortgage loan using a model licensed from a Nationally Recognized Statistical Rating Organization (NRSRO). We use the model to evaluate loan data provided by the PFI as well as other relevant information.

The FHLBank pays the PFI a CE fee for managing this portion of the credit risk in the pool of loans. CE fees are paid monthly based on the remaining unpaid principal balance (UPB) of the loans in a master commitment. The required CE obligation amount may vary depending on the various product alternatives selected by the PFI. CE fees are recorded as an offset to mortgage loan interest income. To the extent the FHLBank experiences a loss in a master commitment, the FHLBank may be able to recapture CE fees paid to the PFIs to offset these losses.

Mortgage Loan Participations: The FHLBank has entered into an agreement with FHLBank of Indianapolis to sell participation interests in master commitments of FHLBank Topeka’s PFIs. The risk sharing and rights are allocated pro-ratably based upon each FHLBank’s percentage participation in the related master commitment.

Other Fees: The FHLBank may receive other non-origination fees, such as delivery commitment extension fees and pair-off fees as part of the mark-to-market on derivatives to which they related or as part of the loan basis, as applicable. Delivery commitment extension fees are received when a PFI requires an extension of the delivery commitment period beyond the original stated maturity. These fees compensate the FHLBank for lost interest as a result of late funding and represent the member purchasing a derivative from the FHLBank. Pair-off fees are received from the PFI when the amount funded is more than or less than a specific percentage range of the delivery commitment amount. These fees compensate the FHLBank for hedge costs associated with the under-delivery or over-delivery. To the extent that pair off fees relate to under-deliveries of loans, they are included in the mark-to-market of the related delivery commitment derivative. If they relate to over-deliveries, they represent purchase price adjustments to the related loans acquired and are recorded as a part of the loan basis.

F-12

Allowance for Credit Losses: An allowance for credit losses is a valuation allowance separately established for each identified portfolio segment, if necessary, to provide for probable losses inherent in the FHLBank’s portfolios as of the Statement of Condition date. To the extent necessary, an allowance for credit losses for off-balance sheet credit exposures is recorded as a liability. See Note 7 for details on each allowance methodology.

Portfolio Segments: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. The FHLBank has developed and documented a systematic methodology for determining an allowance for credit losses, where applicable, for: (1) credit products (advances, letters of credit and other extensions of credit to members); (2) government-guaranteed or insured mortgage loans held for portfolio; (3) conventional mortgage loans held for portfolio; (4) the direct financing lease receivable; and (5) term Federal funds sold.

Classes of Finance Receivables:Classes of finance receivables generally are a disaggregation of a portfolio segment to the extent that it is needed to understand the exposure to credit risk arising from these financing receivables. The FHLBank has determined that no further disaggregation of portfolio segments identified previously is needed as the credit risk arising from these financing receivables is assessed and measured at the portfolio segment level.

Non-accrual Loans: The FHLBank places a conventional mortgage loan on non-accrual status if it is determined that either: (1) the collection of interest or principal is doubtful; or (2) interest or principal is past due for 90 days or more, except when the loan is well-secured (e.g., through credit enhancements) and in the process of collection. The FHLBank does not place government-guaranteed or insured mortgage loans on non-accrual status due to the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met. For those mortgage loans placed on non-accrual status, accrued but uncollected interest is reversed against interest income. The FHLBank records cash payments received on non-accrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful. If the collection of the remaining principal amount due is considered doubtful then cash payments received would be applied first solely to principal until the remaining principal amount due is expected to be collected and then as a recovery of any charge-off, if applicable, followed by recording interest income. A loan on non-accrual status may be restored to accrual when: (1) none of its contractual principal and interest is due and unpaid, and the FHLBank expects repayment of the remaining contractual principal and interest; or (2) it otherwise becomes well secured and in the process of collection.

Impairment Methodology: A loan is considered impaired when, based on current information and events, it is probable that the FHLBank will be unable to collect all amounts due according to the contractual terms of the loan agreement.

Loans that are on non-accrual 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 balance on the loan. Interest income on impaired loans is recognized in the same manner as non-accrual loans.

Charge-off Policy: The FHLBank evaluates whether to record a charge-off on a conventional mortgage loan upon the occurrence of a confirming event. Confirming events include, but are not limited to, the occurrence of foreclosure or notification of a claim against any of the credit enhancements. A charge-off is recorded if the recorded investment in the loan will not be recovered.

Real Estate Owned: Real estate owned (REO) includes assets that have been received in satisfaction of debt through foreclosures. REO is recorded at the lower of cost or fair value less estimated selling costs. The FHLBank recognizes a charge-off to the allowance for credit losses if the fair value of the REO less estimated selling costs is less than the recorded investment in the loan at the date of transfer from loans to REO. Any subsequent realized gains, realized or unrealized losses and carrying costs are included in other expense in the Statements of Income. REO is recorded in other assets in the Statements of Condition.

Derivatives: All derivatives are recognized on the Statements of Condition at their fair value and are reported as either derivative assets or derivative liabilities, net of cash collateral and accrued interest from counterparties. The fair values of derivatives are netted by counterparty pursuant to the provisions of the FHLBank’s master netting arrangements. If these netted amounts are positives, they are classified as an asset and, if negative, they are classified as a liability. Cash flows associated with derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be a financing derivative.

Derivative Designations: Each derivative is designated as one of the following:

§   a qualifying hedge of the fair value of: (1) a recognized asset or liability; or (2) an unrecognized firm commitment (a fair value hedge);

§   a qualifying hedge of: (1) a forecasted transaction; or (2) the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a cash flow hedge);

§   a non-qualifying hedge of an asset or liability (an economic hedge) for asset/liability management purposes; or

§   a non-qualifying hedge of another derivative (an intermediary hedge) that is offered as a product to members.

Accounting for Qualifying Hedges: If hedging relationships meet certain criteria, including, but not limited to, formal documentation of the hedging relationship and an expectation to be highly effective, they qualify for hedge accounting and the offsetting changes in fair value of the hedged items may be recorded in earnings (fair value hedges) or AOCI (cash flow hedges). Two approaches to hedge accounting include:

§   Long haul hedge accounting – The application of long haul hedge accounting generally requires the FHLBank to formally assess (both at the hedge's inception and at least quarterly) 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 or forecasted transactions and whether those derivatives may be expected to remain effective in future periods.

§   Shortcut hedge accounting – Transactions that meet more stringent criteria qualify for the shortcut method of hedge accounting in which an assumption can be made that the change in fair value of a hedged item exactly offsets the change in fair value of the related derivative. Under the shortcut method, the entire change in fair value of the interest rate swap is considered to be effective at achieving offsetting changes in fair values or cash flows of the hedged asset or liability.

F-13

Derivatives are typically executed at the same time as the hedged item, and the FHLBank designates the hedged item in a qualifying hedge relationship at the trade date. In many hedging relationships, the FHLBank may designate the hedging relationship upon its commitment to disburse an advance or trade a consolidated obligation in which settlement occurs within the shortest period of time possible for the type of instrument based on market settlement conventions. The FHLBank defines market settlement conventions for advances to be five business days or less and for consolidated obligations to be thirty calendar days or less, using a next business day convention. The FHLBank then records the changes in fair value of the derivative and the hedged item beginning on the trade date.

Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge, along with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk (including changes that reflect losses or gains on firm commitments), are recorded in current period earnings. Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge, to the extent that the hedge is effective, are recorded in AOCI, a component of capital, until earnings are affected by the variability of the cash flows of the hedged transaction (i.e., until the recognition of interest on a variable rate asset or liability is recorded in earnings). For both fair value and cash flow hedges, any hedge ineffectiveness (which represents the amount by which the change in the fair value of the derivative differs from the change in fair value of the hedged item or the variability in the cash flows of the forecasted transaction) is recorded in current period earnings.

Accounting for Non-Qualifying Hedges: An economic hedge is defined as a derivative hedging specific or non-specific underlying assets, liabilities or firm commitments that does not qualify for hedge accounting but is an acceptable hedging strategy under the FHLBank’s RMP. These economic hedging strategies also comply with Finance Agency regulatory requirements prohibiting speculative hedge transactions. An economic hedge by definition introduces the potential for earnings variability caused by changes in fair value on the derivatives that are recorded in the FHLBank’s income but not offset by corresponding changes in the fair value of the economically hedged asset, liability or firm commitment being recorded simultaneously in income. As a result, the FHLBank recognizes only the net interest and the change in fair value of these derivatives in other income (loss) as “Net gain (loss) on derivatives and hedging activities” with no offsetting fair value adjustments for the asset, liability or firm commitment.

The derivatives used in intermediary activities do not qualify for 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 FHLBank. These amounts are recorded in other income (loss) as “Net gains (losses) on derivatives and hedging activities.”

Accrued Interest Receivables and Payables: The differentials between accruals of interest receivables and payables on derivatives designated as fair value or cash flow hedges are recognized as an adjustment to the interest income or expense of the designated underlying investment securities, advances, consolidated obligations or other financial instruments, thereby affecting the reported amount of net interest income on the Statements of Income. Changes in the fair value of an economic or intermediary hedge are recorded in current period earnings. The differentials between accruals of interest receivables and payables on intermediated derivatives for members and other economic hedges are recognized as other income (loss). Therefore, both the net interest on the stand-alone derivatives and the fair value changes are recorded in other income (loss) as “Net gain (loss) on derivatives and hedging activities.”

Discontinuance of Hedge Accounting: The FHLBank discontinues hedge accounting prospectively when: (1) 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); (2) the derivative and/or the hedged item expires or is sold, terminated or exercised; (3) it is no longer probable that the forecasted transaction will occur in the originally expected period; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designating the derivative as a hedging instrument is no longer appropriate.

When hedge accounting is discontinued because the FHLBank determines that the derivative no longer qualifies as an effective fair value hedge of an existing hedged item, the FHLBank continues to carry the derivative on its Statements of Condition at fair value, ceases to adjust the hedged asset or liability for changes in fair value, and begins amortizing the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using the level-yield method. When hedge accounting is discontinued because the FHLBank determines that the derivative no longer qualifies as an effective cash flow hedge of an existing hedged item, the FHLBank continues to carry the derivative on its Statements of Condition at fair value and amortizes the cumulative OCI adjustment to earnings when earnings are affected by the original forecasted transaction. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the FHLBank carries the derivative at fair value on its Statements of Condition, recognizing changes in the fair value of the derivative in current-period earnings. When the FHLBank discontinues hedge accounting because it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses in AOCI will be recognized immediately in earnings. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the FHLBank continues to carry the derivative on its Statements of Condition at fair value, removing any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.

Embedded Derivatives: The FHLBanks may issue debt, make advances, or purchase financial instruments in which a derivative instrument is embedded. Upon execution of these transactions, the FHLBank assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance, debt or purchased financial instrument (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When the FHLBank determines that: (1) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (2) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and designated as a stand-alone derivative instrument pursuant to an economic hedge. However, if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current period earnings (such as an investment security classified as trading), or if the FHLBank cannot reliably identify and measure the embedded derivative for purposes of separating that derivative from its host contract, the entire contract is carried on the Statements of Condition at fair value and no portion of the contract is designated as a hedging instrument.

F-14

Premises, Software and Equipment: The FHLBank records premises, software and equipment at cost less accumulated depreciation and amortization. Depreciation is computed on the straight-line method over the estimated useful lives of the assets ranging from 3 to 20 years. Leasehold improvements are amortized on the straight-line basis over the shorter of the estimated useful life of the improvement or the remaining term of the lease. Improvements and major renewals are capitalized, and ordinary maintenance and repairs are expensed as incurred. As of December 31, 2012 and 2011, the accumulated depreciation and amortization related to premises, software and equipment was $24,187,000 and $22,662,000, respectively. Depreciation and amortization expense was $2,152,000, $2,866,000 and $3,655,000 for the years ended December 31, 2012, 2011 and 2010, respectively. Gains and losses on disposals are included in other income (loss). The net realized gain (loss) on disposal of premises, software and equipment was $(1,951,000), $6,000 and $(100,000) for the years ended December 31, 2012, 2011 and 2010, respectively. The loss on disposal of premises, software and equipment for 2012 includes the write-off of two software projects prior to implementation.

The cost of purchased software and certain costs incurred in developing computer software for internal use is capitalized and amortized over future periods. Amortization is computed on the straight-line method over three years for purchased software and five years for developed software. As of December 31, 2012 and 2011, the FHLBank had $1,309,000 and $2,935,000, respectively, in unamortized computer software costs included in premises, software and equipment on its Statements of Condition. Amortization of computer software costs charged to expense was $764,000, $1,378,000 and $2,162,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

Consolidated Obligations: Consolidated obligations are recorded at amortized cost.

Discounts and Premiums:The FHLBank expenses the discounts on consolidated obligation discount notes on the straight-line method over the terms of the related notes due to their short-term nature. Consolidated obligation bond discounts are accreted and premiums are amortized to interest expense using a level-yield methodology over the contractual maturities of the corresponding bonds.

Concessions: Amounts paid to dealers in connection with sales of consolidated obligations are deferred and amortized using the level-yield method over the contractual terms of the consolidated obligations. Concession amounts are prorated to the FHLBank by the Office of Finance based on the percentage of each consolidated obligation issued by the Office of Finance on behalf of the FHLBank. Unamortized concessions are included in “Other assets” and the amortization of such concessions is included in consolidated obligation interest expense.

Mandatorily Redeemable Capital Stock: The FHLBank reclassifies all stock subject to redemption from capital to liability once a member submits a written redemption request, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination or involuntary termination from membership, since the member shares will then meet the definition of a mandatorily redeemable financial instrument. There is no distinction as to treatment for reclassification from capital to liability between in-district redemption requests and those redemption requests triggered by out-of-district acquisitions. The FHLBank does not take into consideration its members’ right to cancel a redemption request in determining when shares of capital stock should be classified as a liability because such cancellation would be subject to a substantial cancellation fee. Member and non-member shares meeting the definition of mandatorily redeemable capital stock are reclassified to a liability at fair value, which has been determined to be par value ($100) plus any estimated accrued but unpaid dividends. The FHLBank’s dividends are declared and paid at each quarter-end; therefore, the fair value reclassified equals par value. Dividends declared on member shares for the time after classification as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repurchase of these mandatorily redeemable financial instruments by the FHLBank are reflected as financing cash outflows in the Statements of Cash Flows once settled.

If a member submits a written request to cancel a previously submitted written redemption request, the capital stock covered by the written cancellation request is reclassified from a liability to capital at fair value. After the reclassification, dividends on the capital stock are no longer classified as interest expense.

Restricted Retained Earnings: In 2011, the FHLBank entered into a Joint Capital Enhancement Agreement, as amended (JCE Agreement). Under the JCE Agreement, beginning in the third quarter of 2011, the FHLBank allocates 20 percent of its quarterly net income to a separate restricted retained earnings (RRE) account until the account balance equals at least 1 percent of its average balance of outstanding consolidated obligations for the previous quarter. These restricted retained earnings are not available to pay dividends and are presented separately on the Statements of Condition.

Finance Agency Expenses: A portion of the Finance Agency’s expenses and working capital fund are allocated among the FHLBanks based on the pro rata share of the annual assessments based on the ratio between each FHLBank’s minimum required regulatory capital and the aggregate minimum required regulatory capital of every FHLBank.

Office of Finance Expenses: Effective January 1, 2011, each FHLBank’s proportionate share of Office of Finance operating and capital expenditures is calculated using a formula that is based upon the following components: (1) two-thirds based upon each FHLBank’s share of total consolidated obligations outstanding; and (2) one-third based upon an equal pro rata allocation. Prior to January 1, 2011, the FHLBanks were assessed for Office of Finance operating and capital expenditures based equally on each FHLBank’s percentage of the following components: (1) capital stock; (2) consolidated obligations issued; and (3) consolidated obligations outstanding.

Assessments:

Affordable Housing Program (AHP):The FHLBank is required to establish, fund and administer an AHP. The AHP funds provide subsidies to members to assist in the purchase, construction or rehabilitation of housing for very low-, low- and moderate-income households. The required annual AHP funding is charged to earnings, and an offsetting liability is established.

F-15

Resolution Funding Corporation (REFCORP): Although the FHLBank is exempt from all federal, state and local taxation except for real property taxes, it was required to make quarterly payments to REFCORP through the second quarter of 2011 to be used to pay a portion of the interest on bonds issued by REFCORP. REFCORP is a corporation established by Congress in 1989 that provided funding for the resolution and disposition of insolvent savings institutions. Officers, employees and agents of the Office of Finance are authorized to act for and on behalf of REFCORP to carry out the functions of REFCORP.

NOTE 2 – RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS AND CHANGES IN AND ADOPTIONS OF ACCOUNTING PRINCIPLES

Joint and Several Liability: In February 2013, the Financial Accounting Standards Board (FASB) issued guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. This guidance requires an entity to measure these obligations as the sum of: (1) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors; and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors. In addition, this guidance requires an entity to disclose the nature and amount of the obligation as well as other information about these obligations. This guidance is effective for interim and annual periods beginning on or after December 15, 2013 and should be applied retrospectively. The FHLBank does not expect this new guidance to have a material effect on its financial condition, results of operations or cash flows.

Offsetting Assets and Liabilities: In December 2011, the FASB and the International Accounting Standards Board (IASB) issued common disclosure requirements intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on an entity’s financial position, regardless of whether an entity’s financial statements are prepared on the basis of GAAP or International Financial Reporting Standards (IFRS). This guidance will require the FHLBank to disclose both gross and net information about financial instruments, including derivative instruments, which are either offset on its Statements of Condition or subject to an enforceable master netting arrangement or similar agreement. This guidance will be effective for the FHLBank for interim and annual periods beginning on January 1, 2013 and will be applied retrospectively for all comparative periods presented. The adoption of this guidance will result in increased interim and annual financial statement disclosures, but will not affect the FHLBank’s financial condition, results of operations or cash flows.

Comprehensive Income – Presentation of Comprehensive Income: In June 2011, FASB issued guidance which requires all non-owner changes in stockholders’ equity to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The option to present the components of OCI as part of the statement of changes in stockholders’ equity has been eliminated by this new guidance. The FHLBank decided to present non-owner changes using the two-statement approach. The two-statement approach requires the first statement to present total net income and its components followed, consecutively, by a second statement that presents total OCI, the components of OCI, and total comprehensive income. The guidance was effective for interim and annual periods beginning after December 15, 2011, including retrospective application for all periods presented. The FHLBank adopted this guidance as of January 1, 2012. The adoption of this guidance resulted in new presentation within the Statements of Income and the Statements of Capital, but did not impact the FHLBank’s financial condition, results of operations or cash flows.

Comprehensive Income – Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income: In February 2013, the FASB issued guidance which requires entities to provide information about significant reclassifications of items out of AOCI by component. Entities are required to report the effect of significant reclassifications out of AOCI on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety. For other amounts not required to be reclassified in their entirety, the entity is required to cross-reference to other disclosures that provide additional detail about these amounts. This guidance will be effective prospectively for the FHLBank for interim and annual periods beginning on January 1, 2013. The adoption of this guidance will result in increased interim and annual financial statement disclosures, but will not impact the FHLBank’s financial condition, results of operations or cash flows.

Fair Value Measurement – Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs: In May 2011, the FASB issued guidance which represents the converged guidance of FASB and the IASB on fair value measurement and disclosures. In particular, the new guidance: (1) requires the disclosure of the level within the fair value hierarchy level for financial instruments that are not measured at fair value but for which the fair value is required to be disclosed; (2) expands level 3 fair value disclosures about valuation process and sensitivity of the fair value measurement to changes in unobservable inputs; (3) permits an exception to measure fair value of a net position for financial assets and financial liabilities managed on a net position basis; and (4) clarifies that the highest and best use measurement is only applicable to nonfinancial assets. The guidance was effective for interim and annual periods beginning after December 15, 2011 with early application not permitted. The FHLBank adopted this guidance as of January 1, 2012. The adoption of this guidance resulted in increased financial statement disclosures, but did not impact the FHLBank’s financial condition, results of operations or cash flows.

Transfers and Servicing – Reconsideration of Effective Control for Repurchase Agreements: In April 2011, the FASB issued guidance that removed the criterion which required the transferor of financial assets to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee to preclude sales accounting for the transfer. In addition, the new guidance removed the collateral maintenance implementation guidance from the determination of maintaining effective control over the transferred financial assets. This guidance became effective for interim and annual periods beginning on or after December 15, 2011 and was required to be applied prospectively to transactions or modifications occurring on or after the effective date. The FHLBank adopted this guidance as of January 1, 2012. The adoption of this guidance did not have a material impact on the FHLBank’s financial condition, results of operations or cash flows.

NOTE 3 – CASH AND DUE FROM BANKS

Balances represent non-interest bearing deposits in banks.

Pass-through Deposit Reserves: The FHLBank acts as a pass-through correspondent for members required to deposit reserves with the Federal Reserve Banks (FRB). The amount shown as cash and due from banks includes $360,000 and $348,000 of reserve deposits with the FRB as of December 31, 2012 and 2011, respectively.

F-16

NOTE 4 – INVESTMENT SECURITIES

Major Security Types: Trading and held-to-maturity securities as of December 31, 2012 are summarized in the following table (in thousands):

	Trading		Held-to-maturity
	Fair Value		Carrying Value		OTTI Recognized in OCI		Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
Commercial paper	$	59,996	$	-	$	-	$	-	$	-	$	-	$	-
Certificates of deposit		325,006		-		-		-		-		-		-
Government-sponsored enterprise obligations1.2		2,126,327		-		-		-		-		-		-
State or local housing agency obligations		-		69,442		-		69,442		170		8,686		60,926
Non-mortgage-backed securities		2,511,329		69,442		-		69,442		170		8,686		60,926
Mortgage-backed securities:
U.S. obligation residential3		1,277		85,484		-		85,484		650		-		86,134
Government-sponsored enterprise residential4		252,312		4,509,121		-		4,509,121		39,571		1,034		4,547,658
Private-label mortgage-backed securities:
Residential loans		-		494,631		20,649		515,280		5,433		25,522		495,191
Home equity loans		-		1,072		197		1,269		1,155		3		2,421
Mortgage-backed securities		253,589		5,090,308		20,846		5,111,154		46,809		26,559		5,131,404
TOTAL	$	2,764,918	$	5,159,750	$	20,846	$	5,180,596	$	46,979	$	35,245	$	5,192,330

1 Represents debentures issued by other FHLBanks, Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal Farm Credit Bank (Farm Credit), and Federal Agricultural Mortgage Corporation (Farmer Mac). GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

2 See Note 19 for transactions with other FHLBanks.

3 Represents MBS issued by Government National Mortgage Association (Ginnie Mae), which are guaranteed by the U.S. government.

4 Represents MBS issued by Fannie Mae and Freddie Mac.

F-17

Trading and held-to-maturity securities as of December 31, 2011 are summarized in the following table (in thousands):

	Trading		Held-to-maturity
	Fair Value		Carrying Value		OTTI Recognized in OCI		Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
Commercial paper	$	599,482	$	-	$	-	$	-	$	-	$	-	$	-
Certificates of deposit		1,019,520		-		-		-		-		-		-
TLGP obligations1		494,236		-		-		-		-		-		-
Government-sponsored enterprise obligations2,3		2,098,844		-		-		-		-		-		-
State or local housing agency obligations		-		84,548		-		84,548		78		10,121		74,505
Non-mortgage-backed securities		4,212,082		84,548		-		84,548		78		10,121		74,505
Mortgage-backed securities:
U.S. obligation residential4		1,380		18,167		-		18,167		760		-		18,927
Government-sponsored enterprise residential5		345,701		4,064,679		-		4,064,679		39,197		1,976		4,101,900
Private-label mortgage-backed securities:
Residential loans		-		771,478		23,402		794,880		4,585		67,023		732,442
Commercial loans		-		37,077		-		37,077		573		-		37,650
Home equity loans		-		1,383		357		1,740		503		82		2,161
Mortgage-backed securities		347,081		4,892,784		23,759		4,916,543		45,618		69,081		4,893,080
TOTAL	$	4,559,163	$	4,977,332	$	23,759	$	5,001,091	$	45,696	$	79,202	$	4,967,585

1 Represents corporate debentures guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program (TLGP).

2 Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit, and Farmer Mac. GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

3 See Note 19 for transactions with other FHLBanks.

4 Represents MBS issued by Ginnie Mae, which are guaranteed by the U.S. government.

5 Represents MBS issued by Fannie Mae and Freddie Mac.

The amortized cost of the FHLBank’s MBS/asset-backed securities (ABS) included credit losses, OTTI-related accretion adjustments and purchase premiums and discounts netting to discount amounts of $6,547,000 and $13,134,000 as of December 31, 2012 and 2011, respectively.

The following table summarizes (in thousands) the held-to-maturity securities with unrecognized losses as of December 31, 2012. The unrecognized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrecognized loss position.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
Non-mortgage-backed securities:
State or local housing agency obligations	$	-	$	-	$	40,719	$	8,686	$	40,719	$	8,686
Non-mortgage-backed securities		-		-		40,719		8,686		40,719		8,686
Mortgage-backed securities:
Government-sponsored enterprise residential1		338,126		829		126,814		205		464,940		1,034
Private-label mortgage-backed securities:
Residential loans		5,830		8		246,641		25,514		252,471		25,522
Home equity loans		-		-		53		3		53		3
Mortgage-backed securities		343,956		837		373,508		25,722		717,464		26,559
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	343,956	$	837	$	414,227	$	34,408	$	758,183	$	35,245

__________

1 Represents MBS issued by Fannie Mae and Freddie Mac.

F-18

The following table summarizes (in thousands) the held-to-maturity securities with unrecognized losses as of December 31, 2011. The unrecognized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrecognized loss position.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
Non-mortgage-backed securities:
State or local housing agency obligations	$	29,215	$	2,970	$	24,610	$	7,151	$	53,825	$	10,121
Non-mortgage-backed securities		29,215		2,970		24,610		7,151		53,825		10,121
Mortgage-backed securities:
Government-sponsored enterprise residential1		122,180		96		579,599		1,880		701,779		1,976
Private-label mortgage-backed securities:
Residential loans		77,231		507		373,008		66,516		450,239		67,023
Home equity loans		-		-		442		82		442		82
Mortgage-backed securities		199,411		603		953,049		68,478		1,152,460		69,081
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	228,626	$	3,573	$	977,659	$	75,629	$	1,206,285	$	79,202

__________

1 Represents MBS issued by Fannie Mae and Freddie Mac.

Redemption Terms:The amortized cost, carrying value and fair values of held-to-maturity securities by contractual maturity as of December 31, 2012 and 2011 are shown in the following table (in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

	12/31/2012						12/31/2011
	Amortized Cost		Carrying Value		Fair Value		Amortized Cost		Carrying Value		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	-	$	-	$	-	$	-	$	-	$	-
Due after one year through five years		-		-		-		-		-		-
Due after five years through 10 years		22,780		22,780		20,741		5,095		5,095		5,095
Due after 10 years		46,662		46,662		40,185		79,453		79,453		69,410
Non-mortgage-backed securities		69,442		69,442		60,926		84,548		84,548		74,505
Mortgage-backed securities		5,111,154		5,090,308		5,131,404		4,916,543		4,892,784		4,893,080
TOTAL	$	5,180,596	$	5,159,750	$	5,192,330	$	5,001,091	$	4,977,332	$	4,967,585

Interest Rate Payment Terms: The following table details interest rate payment terms for the amortized cost of held-to-maturity securities as of December 31, 2012 and 2011 (in thousands):

	12/31/2012		12/31/2011
Non-mortgage-backed securities:
Fixed rate	$	16,662	$	21,088
Variable rate		52,780		63,460
Non-mortgage-backed securities		69,442		84,548
Mortgage-backed securities:
Pass-through securities:
Fixed rate		170		290
Variable rate		595,078		4,841
Collateralized mortgage obligations:
Fixed rate		687,770		684,040
Variable rate		3,828,136		4,227,372
Mortgage-backed securities		5,111,154		4,916,543
TOTAL	$	5,180,596	$	5,001,091

Gains and Losses: Net gains (losses) on trading securities during the years ended December 31, 2012, 2011 and 2010 were as follows (in thousands):

	2012		2011		2010
Net gains (losses) on trading securities held as of December 31, 2012	$	(19,164)	$	35,875	$	42,830
Net gains (losses) on trading securities sold or matured prior to December 31, 2012		(8,884)		(15,103)		(28,405)
NET GAIN (LOSS) ON TRADING SECURITIES	$	(28,048)	$	20,772	$	14,425

F-19

Other-than-temporary Impairment: The FHLBank has established processes for evaluating its individual held-to-maturity investment securities holdings in an unrealized loss position for OTTI. The FHLBanks’ OTTI Governance Committee, which is comprised of representation from all 12 FHLBanks, has responsibility for reviewing and approving the key modeling assumptions, inputs and methodologies to be used by the FHLBanks to generate cash flow projections used in analyzing credit losses and determining OTTI for private-label MBS/ABS. To support consistency among the FHLBanks, FHLBank Topeka completed its OTTI analysis primarily based upon cash flow analysis prepared by FHLBank of San Francisco on behalf of FHLBank Topeka using key modeling assumptions provided by the FHLBanks’ OTTI Governance Committee for the majority of its private-label residential MBS and home equity loan ABS. Certain private-label MBS backed by multi-family and commercial real estate loans, home equity lines of credit and manufactured housing loans were outside of the scope of the OTTI Governance Committee and were analyzed for OTTI by the FHLBank utilizing other methodologies.

An OTTI cash flow analysis is run by FHLBank of San Francisco for each of the FHLBank’s remaining private-label MBS/ABS using the FHLBank System’s common platform and agreed-upon assumptions. For certain private-label MBS/ABS where underlying collateral data is not available, alternative procedures as determined by each FHLBank are used to assess these securities for OTTI.

The evaluation includes estimating projected cash flows that are likely to be collected based on assessments of all available information about each individual security, including the structure of the security and certain assumptions as determined by the FHLBanks’ OTTI Governance Committee such as: (1) the remaining payment terms for the security; (2) prepayment speeds; (3) default rates; (4) loss severity on the collateral supporting the FHLBank’s security based on underlying loan-level borrower and loan characteristics; (5) expected housing price changes; and (6) interest rate assumptions. In performing a detailed cash flow analysis, the FHLBank 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 a security (that is, a credit loss exists), an OTTI is considered to have occurred.

To assess whether the entire amortized cost basis of securities will be recovered, the FHLBank of San Francisco, on behalf of the FHLBank, performed a cash flow analysis using two third-party models. The first third-party model considers borrower characteristics and the particular attributes of the loans underlying the FHLBank’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 upon 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 of 10,000 or more people. For the vast majority of housing markets, the FHLBank’s housing price forecast as of December 31, 2012 assumed home price changes for the fourth quarter of 2012 ranging from declines of 2 percent to increases of 2 percent. Beginning January 1, 2013, home prices in these markets were projected to recover (or continue to recover) using one of four different recovery paths that vary by housing market. The following table presents projected home price recovery by months as of December 31, 2012:

	Recovery Range of Annualized Rates
Months	Low			High
1 - 6		-	%		2.8	%
7 - 18		-			3.0
19 - 24		1.0			3.0
25 - 30		2.0			4.0
31 - 42		2.8			5.0
43 - 66		2.8			6.0
Thereafter		2.8			5.6

The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, defaults 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 the securitization structure in accordance with its prescribed cash flow and loss allocation rules. In a securitization in which the credit enhancement for the senior securities is derived from the presence of subordinate securities, losses are generally allocated first to the subordinate securities until their principal balances are 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 model approach reflects a best estimate scenario and includes a base case current-to-trough housing price forecast and a base case housing price recovery path.

F-20

For those securities for which an OTTI was determined to have occurred during the year ended December 31, 2012 (that is, securities for which the FHLBank determined that it was more likely than not that the amortized cost basis would not be recovered), the following tables present a summary of the significant inputs used to measure the amount of credit loss recognized in earnings during this period as well as related current credit enhancement. Credit enhancement is defined as the percentage of subordinated tranches and over-collateralization, if any, in a security structure that will generally absorb losses before the FHLBank will experience a loss on the security. The calculated averages represent the dollar-weighted averages of all the private-label MBS/ABS investments in each category shown and represent significant inputs associated with the most recent OTTI charge in 2012.Private-label MBS/ABS are classified as prime, Alt-A and subprime based on the originator’s classification at the time of origination or based on classification by an NRSRO upon issuance of the MBS/ABS.

Private-label residential MBS
Year of	Significant Inputs									Current Credit
Securitization	Prepayment Rates			Default Rates			Loss Severities			Enhancements
Prime:
2004 and prior		7.1	%		11.9	%		28.2	%		8.8	%
2005		15.0			13.7			37.0			3.3
2006		9.0			20.0			40.7			3.6
Total Prime		11.1			15.4			36.1			4.7
Alt-A:
2004 and prior		9.5			24.3			35.9			10.9
2005		10.7			22.6			41.8			4.2
Total Alt-A		10.3			23.1			39.8			6.4
TOTAL		10.6	%		20.6	%		38.6	%		5.9	%

Home Equity Loan ABS
Year of	Significant Inputs									Current Credit
Securitization	Prepayment Rates			Default Rates			Loss Severities			Enhancements
Subprime:
2004 and prior		2.8	%		6.6	%		98.8	%		3.8	%

For the 32 private-label securities with OTTI during the lives of the securities, the FHLBank’s reported balances as of December 31, 2012 are as follows (in thousands):

	Unpaid Principal Balance		Amortized Cost		Carrying Value		Fair Value
Private-label residential MBS:
Prime	$	43,400	$	42,050	$	39,967	$	41,871
Alt-A		92,453		85,075		66,509		76,703
Total private-label residential MBS		135,853		127,125		106,476		118,574
Home equity loans:
Subprime		3,685		1,269		1,072		2,421
TOTAL	$	139,538	$	128,394	$	107,548	$	120,995

The following table presents a roll-forward of OTTI activity for the periods ended December 31, 2012, 2011 and 2010 related to credit losses recognized in earnings (in thousands):

	2012		2011		2010
Balance, beginning of period	$	10,342	$	5,938	$	2,034
Additional charge on securities for which OTTI was not previously recognized1		271		1,219		617
Additional charge on securities for which OTTI was previously recognized1		1,389		3,492		3,417
Realized principal losses on securities paid down during the period		(323)		-		-
Amortization of credit component of OTTI2		(711)		(307)		(130)
Balance, end of period	$	10,968	$	10,342	$	5,938

1 For the years ended December 31, 2012, 2011 and 2010, securities previously impaired represent all securities that were impaired prior to January 1, 2012, 2011 and 2010, respectively.

2 The FHLBank amortizes the credit component based on estimated cash flows prospectively up to the amount of expected principal to be recovered. The discounted cash flows will move from the discounted loss value to the ultimate principal to be written off at the projected date of loss. If the expected cash flows improve, the amount of expected loss decreases which causes a corresponding decrease in the calculated amortization. Based on the level of improvement in the cash flows, the amortization could become a positive adjustment to income.

F-21

Although there has been improvement in the fair value of the FHLBank’s held-to-maturity securities portfolio during 2012, the fair value of a portion of this portfolio remains below the amortized cost of the securities due to interest rate volatility, illiquidity in the marketplace and credit deterioration in the U.S. mortgage markets since early 2008. However, the decline in fair value of these securities is considered temporary as the FHLBank expects to recover the entire amortized cost basis on the remaining held-to-maturity securities in unrecognized loss positions and neither intends to sell these securities nor is it more likely than not that the FHLBank will be required to sell these securities before its anticipated recovery of the remaining amortized cost basis.

NOTE 5 – ADVANCES

General Terms: The FHLBank offers a wide range of fixed and variable rate advance products with different maturities, interest rates, payment characteristics and optionality. Fixed rate advances generally have maturities ranging from 3 days to 15 years. Variable rate advances generally have maturities ranging from overnight to 15 years, where the interest rates reset periodically at a fixed spread to the London Interbank Offered Rate (LIBOR) or other specified index. As of December 31, 2012 and 2011, the FHLBank had advances outstanding at interest rates ranging from 0.12 percent to 8.01 percent and 0 percent (AHP advances) to 8.01 percent, respectively. The following table presents advances summarized by year of contractual maturity as of December 31, 2012 and 2011 (in thousands):

	12/31/2012					12/31/2011
Year of Contractual Maturity	Amount		Weighted Average Interest Rate			Amount		Weighted Average Interest Rate
Due in one year or less	$	3,433,058		1.11	%	$	2,878,887		1.45	%
Due after one year through two years		1,454,725		2.39			1,891,670		2.46
Due after two years through three years		1,691,471		1.88			1,828,334		2.87
Due after three years through four years		1,757,905		1.99			1,594,565		1.94
Due after four years through five years		2,529,511		2.84			1,662,373		2.06
Thereafter		5,241,927		1.36			6,994,666		1.96
Total par value		16,108,597		1.76	%		16,850,495		2.03	%
Discounts		(29,767)					(29,099)
Hedging adjustments1		494,518					573,003
TOTAL	$	16,573,348				$	17,394,399

1 See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

The FHLBank’s advances outstanding include advances that contain call options that may be exercised with or without prepayment fees at the borrower’s discretion on specific dates (call dates) before the stated advance maturities (callable advances). In exchange for receiving the right to call the advance on a predetermined call schedule, the borrower may pay a higher fixed rate for the advance relative to an equivalent maturity, non-callable, fixed rate advance. The borrower normally exercises its call options on these advances when interest rates decline (fixed rate advances) or spreads change (adjustable rate advances). The FHLBank’s advances as of December 31, 2012 and 2011 include callable advances totaling $5,429,171,000 and $5,864,707,000, respectively. Of these callable advances, there were $5,300,793,000 and $5,811,473,000 of variable rate advances as of December 31, 2012 and 2011, respectively.

Convertible advances allow the FHLBank to convert an advance from one interest payment term structure to another. When issuing convertible advances, the FHLBank may purchase put options from a member that allow the FHLBank to convert the fixed rate advance to a variable rate advance at the current market rate or another structure after an agreed-upon lockout period. A convertible advance carries a lower interest rate than a comparable-maturity fixed rate advance without the conversion feature. As of December 31, 2012 and 2011, the FHLBank had convertible advances outstanding totaling $2,079,092,000 and $2,693,292,000, respectively.

The following table presents advances summarized by contractual maturity or next call date (for callable advances) and by contractual maturity or next conversion date (for convertible advances) as of December 31, 2012 and 2011 (in thousands):

	Year of Contractual Maturity or Next Call Date				Year of Contractual Maturity or Next Conversion Date
Redemption Term	12/31/2012		12/31/2011		12/31/2012		12/31/2011
Due in one year or less	$	8,483,653	$	8,476,239	$	5,430,875	$	4,983,229
Due after one year through two years		1,335,481		1,541,946		1,412,850		1,940,195
Due after two years through three years		1,346,362		1,637,945		1,593,371		1,786,459
Due after three years through four years		1,094,410		854,065		1,606,405		1,446,465
Due after four years through five years		2,033,422		882,386		1,534,569		1,510,873
Thereafter		1,815,269		3,457,914		4,530,527		5,183,274
TOTAL PAR VALUE	$	16,108,597	$	16,850,495	$	16,108,597	$	16,850,495

F-22

Interest Rate Payment Terms: The following table details additional interest rate payment terms for advances as of December 31, 2012 and 2011 (in thousands):

	12/31/2012		12/31/2011
Fixed rate:
Due in one year or less	$	1,301,041	$	1,572,998
Due after one year		7,495,446		8,254,635
Total fixed rate		8,796,487		9,827,633
Variable rate:
Due in one year or less		2,132,017		1,305,889
Due after one year		5,180,093		5,716,973
Total variable rate		7,312,110		7,022,862
TOTAL PAR VALUE	$	16,108,597	$	16,850,495

Credit Risk Exposure and Security Terms: The FHLBank’s potential credit risk from advances is concentrated in thrifts (37.2 percent of total advances), commercial banks (36.7 percent of total advances) and insurance companies (21.0 percent of total advances). As of December 31, 2012 and 2011, the FHLBank had outstanding advances of $5,448,000,000 and $4,745,000,000, respectively, to two members that individually held 10 percent or more of the FHLBank’s advances, which represents 33.8 percent and 28.2 percent, respectively, of total outstanding advances. The income from advances to these members during 2012 and 2011 totaled $77,517,000 and $89,163,000, respectively. Both of the members were the same each year.

See Note 7 for information related to the FHLBank’s credit risk on advances and allowance for credit losses.

See Note 18 for detailed information on transactions with related parties.

Information about the fair value of advances is included in Note 16.

NOTE 6 – MORTGAGE LOANS

The MPF Program involves the FHLBank investing in mortgage loans, which have been funded by the FHLBank through or purchased from its participating members. These mortgage loans are government-insured or guaranteed (by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the Rural Housing Service of the Department of Agriculture (RHS) and/or the Department of Housing and Urban Development (HUD)) loans and conventional residential loans credit-enhanced by PFIs. Depending upon a member’s product selection, the servicing rights can be retained or sold by the participating member. The FHLBank does not buy or own any mortgage servicing rights.

Mortgage Loans Held for Sale: On December 31, 2010, the FHLBank transferred mortgage loans held for portfolio to held for sale based on its intent to sell specifically identified mortgage loans. All of these loans were classified as conventional mortgage loans. On May 6, 2011, all mortgage loans held for sale were sold at a net gain, which is included in other income (loss) on the Statements of Income. Following are details of the sale (in thousands):

		2011
Net proceeds	$	111,444
Cost basis		(107,019)
NET REALIZED GAIN (LOSS) ON SALE OF MORTGAGE LOANS HELD FOR SALE	$	4,425

Mortgage Loans Held for Portfolio: The following table presents information as of December 31, 2012 and 2011 on mortgage loans held for portfolio (in thousands):

	12/31/2012		12/31/2011
Real estate:
Fixed rate, medium-term1, single-family mortgages	$	1,711,275	$	1,362,379
Fixed rate, long-term, single-family mortgages		4,126,471		3,507,500
Total unpaid principal balance		5,837,746		4,869,879
Premiums		98,887		62,223
Discounts		(4,483)		(6,694)
Deferred loan costs, net		1,549		2,327
Other deferred fees		(312)		(521)
Hedging adjustments2		12,546		9,591
Total before Allowance for Credit Losses on Mortgage Loans		5,945,933		4,936,805
Allowance for Credit Losses on Mortgage Loans		(5,416)		(3,473)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	5,940,517	$	4,933,332

1	Medium-term defined as a term of 15 years or less.
2	See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

F-23

The following table presents information as of December 31, 2012 and 2011 on the outstanding UPB of mortgage loans held for portfolio (in thousands):

	12/31/2012		12/31/2011
Conventional loans	$	5,152,461	$	4,266,847
Government-guaranteed or insured loans		685,285		603,032
TOTAL UNPAID PRINCIPAL BALANCE	$	5,837,746	$	4,869,879

See Note 7 for information related to the FHLBank’s credit risk on mortgage loans and allowance for credit losses.

See Note 18 for detailed information on transactions with related parties.

Information about the fair value of mortgage loans held for portfolio is included in Note 16.

NOTE 7 – ALLOWANCE FOR CREDIT LOSSES

The FHLBank has established an allowance methodology for each of its portfolio segments: credit products (advances, letters of credit and other extensions of credit to borrowers); government mortgage loans held for portfolio; conventional mortgage loans held for portfolio; and the direct financing lease receivable.

Credit products: The FHLBank 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/lending policies to limit risk of loss while balancing borrowers’ needs for a reliable source of funding. In addition, the FHLBank lends to its members in accordance with Federal statutes and Finance Agency regulations. Specifically, the FHLBank complies with the Bank Act, which requires the FHLBank to obtain sufficient collateral to fully secure credit products. The estimated value of the collateral required to secure each member’s credit products is calculated by applying collateral discounts, or haircuts, to the par value or market value of the collateral. The FHLBank accepts certain investment securities, residential mortgage loans, deposits, and other real estate related assets as collateral. In addition, community financial institutions are eligible to utilize expanded statutory collateral provisions for small business loans, agriculture loans and community development loans. The FHLBank’s capital stock owned by borrowing members is held by the FHLBank as further collateral security for all indebtedness of the member to the FHLBank. Collateral arrangements may vary depending upon borrower credit quality, financial condition and performance; borrowing capacity; and overall credit exposure to the borrower. The FHLBank can call for additional or substitute collateral to protect its security interest. The FHLBank’s management believes that these policies effectively manage the FHLBank’s credit risk from credit products.

Based upon the financial condition of the member, the FHLBank either allows a member to retain physical possession of the collateral assigned to it, or requires the member to specifically assign or place physical possession of the collateral with the FHLBank or its safekeeping agent. The FHLBank perfects its security interest in all pledged collateral. The Bank Act affords any security interest granted to the FHLBank by a member priority over the claims or rights of any other party except for claims or rights of a third party that would be entitled to priority under otherwise applicable law and are held by a bona fide purchaser for value or by a secured party holding a prior perfected security interest.

Using a risk-based approach and taking into consideration each borrower’s financial strength, the FHLBank considers the type and level of collateral to be the primary indicator of credit quality on its credit products. As of December 31, 2012 and 2011, the FHLBank had rights to collateral on a member-by-member basis with an estimated value in excess of its outstanding extensions of credit.

The FHLBank continues to evaluate and make changes to its collateral guidelines, as necessary, based on current market conditions. As of December 31, 2012 and 2011, the FHLBank did not have any advances that were past due, on nonaccrual status or considered impaired. In addition, there have been no troubled debt restructurings related to credit products during 2012 and 2011.

Based upon the collateral held as security, management’s credit extension and collateral policies, management’s credit analysis and the repayment history on credit products, the FHLBank currently does not anticipate any credit losses on its credit products. Accordingly, as of December 31, 2012 and 2011, the FHLBank has not recorded any allowance for credit losses on credit products, nor has it recorded any liability to reflect an allowance for credit losses for off-balance sheet credit exposures. For additional information on the FHLBank’s off-balance sheet credit exposure see Note 17.

Government Mortgage Loans Held For Portfolio: The FHLBank invests in government-guaranteed or insured (by FHA, VA, RHA and/or HUD) fixed rate mortgage loans secured by one-to-four family residential properties. The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable insurance or guarantee with respect to defaulted government mortgage loans. Any losses on such loans that are not recovered from the issuer or guarantor are absorbed by the servicers. Therefore, the FHLBank only has credit risk for these loans if the servicer fails to pay for losses not covered by the insurance or guarantee. Based on the FHLBank’s assessment of its servicers, the FHLBank has not established an allowance for credit losses on government mortgage loans. Further, none of these mortgage loans have been placed on non-accrual status because of the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.

Conventional Mortgage Loans Held For Portfolio: The allowances for conventional loans are determined by performing migration analysis to determine the probability of default and loss severity rates. This is done through analyses that include consideration of various data observations such as past performance, current performance, loan portfolio characteristics, collateral-related characteristics, industry data and prevailing economic conditions. The measurement of the allowance for loan losses may consist of: (1) reviewing all residential mortgage loans at the individual master commitment level; (2) reviewing specifically identified collateral-dependent loans for impairment; (3) reviewing homogeneous pools of residential mortgage loans; and/or (4) estimating credit losses in the remaining portfolio.

F-24

The FHLBank’s management of credit risk in the MPF Program involves several layers of loss protection that are defined in agreements among the FHLBank and its PFIs. The availability of loss protection may differ slightly among MPF products. The FHLBank’s loss protection consists of the following loss layers, in order of priority:

§   Homeowner Equity.

§   Primary Mortgage Insurance (PMI). PMI is on all loans with homeowner equity of less than 20 percent of the original purchase price or appraised value.

§   First Loss Account (FLA). The FLA functions as a tracking mechanism for determining the FHLBank’s potential loss exposure under each master commitment prior to the PFI’s CE obligation. If the FHLBank experiences losses in a master commitment, these losses will either be: (1) recovered through the withholding of future performance-based CE fees from the PFI; or (2) absorbed by the FHLBank. As of December 31, 2012 and 2011, the FHLBank’s exposure under the FLA was $30,313,000 and $23,792,000, respectively.

§   CE Obligation. PFIs have a CE obligation to absorb losses in excess of the FLA in order to limit the FHLBank’s loss exposure to that of an investor in an MBS that is rated the equivalent of double-A by an NRSRO. PFIs must either fully collateralize their CE obligation with assets considered acceptable by the FHLBank’s Member Products Policy (MPP) or purchase supplemental mortgage insurance (SMI) from mortgage insurers. Any incurred losses that would be absorbed by the CE obligation are not reserved as part of the FHLBank’s allowance for loan losses. Accordingly, the calculated allowance was reduced by $2,113,000 and $804,000 as of December 31, 2012 and 2011, respectively, for the amount in excess of the FLA to be covered by PFIs’ CE obligations. As of December 31, 2012 and 2011, CE obligations available to cover losses in excess of the FLA (excluding SMI) were $301,346,000 and $213,972,000, respectively.

The FHLBank pays the participating member a fee, a portion of which may be based on the credit performance of the mortgage loans, in exchange for absorbing the CE obligation loss layer up to an agreed-upon amount. Performance-based fees may be withheld to cover losses allocated to the FHLBank. The FHLBank records CE fees paid to the participating members as a reduction to mortgage interest income. The following table presents net CE fees paid to participating members for the years ended December 31, 2012, 2011 and 2010 (in thousands):

	2012		2011		2010
Gross CE fees paid to PFIs	$	4,396	$	3,744	$	2,989
Performance-based CE fees recovered from PFIs		(179)		(199)		(193)
Net CE fees paid	$	4,217	$	3,545	$	2,796

Mortgage Loans Evaluated at the Individual Master Commitment Level:The credit risk analysis of all conventional loans is performed at the individual master commitment level to properly determine the credit enhancements available to recover losses on mortgage loans under each individual master commitment.

Collectively Evaluated Mortgage Loans: The credit risk analysis of conventional loans evaluated collectively for impairment considers loan pool specific attribute data, applies estimated loss severities and incorporates the associated credit enhancements in order to determine the FHLBank’s best estimate of probable incurred losses. Migration analysis is a methodology for determining, through the FHLBank’s experience over a historical period, the rate of default on pools of similar loans. The FHLBank applies migration analysis to loans based on the following categories: (1) loans in foreclosure; (2) nonaccrual loans; (3) delinquent loans; and (4) all other remaining loans. The FHLBank then estimates how many loans in these categories may migrate to a realized loss position and applies a loss severity factor to estimate losses incurred as of the Statement of Condition date.

Individually Evaluated Mortgage Loans:Certain conventional mortgage loans, primarily impaired mortgage loans that are considered collateral-dependent, may be specifically identified for purposes of calculating the allowance for credit losses. A mortgage loan is considered collateral-dependent if repayment is only expected to be provided by the sale of the underlying property, that is, if it is considered likely that the borrower will default and there is no CE obligation from a PFI to offset losses under the master commitment. The estimated credit losses on impaired collateral-dependent loans may be separately determined because sufficient information exists to make a reasonable estimate of the inherent loss for such loans on an individual loan basis. The FHLBank applies an appropriate loss severity rate, which is used to estimate the fair value of the collateral. The resulting incurred loss is equal to the difference between the carrying value of the loan and the estimated fair value of the collateral less estimated selling costs.

Direct Financing Lease Receivable: The FHLBank has a recorded investment in a direct financing lease receivable with a member for a building complex and property. Under the office complex agreement, the FHLBank has all rights and remedies under the lease agreement as well as all rights and remedies available under the member’s Advance, Pledge and Security Agreement. Consequently, the FHLBank can apply any excess collateral securing credit products to any shortfall in the leasing arrangement.

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Rollforward of Allowance for Credit Losses: As of December 31, 2012, the FHLBank determined that an allowance for credit losses was only necessary on conventional mortgage loans held for portfolio. The following table presents a roll-forward of the allowance for credit losses for the year ended December 31, 2012 as well as the method used to evaluate impairment relating to all portfolio segments regardless of whether or not an estimated credit loss has been recorded as of December 31, 2012 (in thousands):

	Conventional Loans		Government Loans		Credit Products		Direct Financing Lease Receivable		Total
Allowance for credit losses:
Balance, beginning of period	$	3,473	$	-	$	-	$	-	$	3,473
Charge-offs		(553)		-		-		-		(553)
Provision for credit losses		2,496		-		-		-		2,496
Balance, end of period	$	5,416	$	-	$	-	$	-	$	5,416
Allowance for Credit Losses, end of period:
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Collectively evaluated for impairment	$	5,416	$	-	$	-	$	-	$	5,416
Recorded investment1, end of period:
Individually evaluated for impairment2	$	-	$	-	$	16,597,209	$	25,527	$	16,622,736
Collectively evaluated for impairment	$	5,270,183	$	705,209	$	-	$	-	$	5,975,392

__________

1	The recorded investment in a financing receivable is the UPB, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedge adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	No financing receivables individually evaluated for impairment were determined to be impaired.

The following table presents a roll-forward of the allowance for credit losses for the year ended December 31, 2011 as well as the method used to evaluate impairment relating to all portfolio segments regardless of whether or not an estimated credit loss has been recorded as of December 31, 2011 (in thousands):

	Conventional Loans		Government Loans		Credit Products		Direct Financing Lease Receivable		Total
Allowance for credit losses:
Balance, beginning of period	$	2,911	$	-	$	-	$	-	$	2,911
Charge-offs		(496)		-		-		-		(496)
Provision for credit losses		1,058		-		-		-		1,058
Balance, end of period	$	3,473	$	-	$	-	$	-	$	3,473
Allowance for Credit Losses, end of period:
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Collectively evaluated for impairment	$	3,473	$	-	$	-	$	-	$	3,473
Recorded investment1, end of period:
Individually evaluated for impairment2	$	-	$	-	$	17,422,926	$	27,385	$	17,450,311
Collectively evaluated for impairment	$	4,346,603	$	618,161	$	-	$	-	$	4,964,764

___________

1	The recorded investment in a financing receivable is the UPB, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedge adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	No financing receivables individually evaluated for impairment were determined to be impaired.

Credit Quality Indicators: The FHLBank’s key credit quality indicators include the migration of: (1) past due loans; (2) non-accrual loans; (3) loans in process of foreclosure; and (4) impaired loans, all of which are used either on an individual or pool basis to determine the allowance for credit losses.

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The following table summarizes the delinquency aging and key credit quality indicators for all of the FHLBank’s portfolio segments as of December 31, 2012 (dollar amounts in thousands):

	Conventional Loans			Government Loans			Credit Products			Direct Financing Lease Receivable			Total
Recorded investment1:
Past due 30-59 days delinquent	$	24,954		$	16,990		$	-		$	-		$	41,944
Past due 60-89 days delinquent		8,016			5,787			-			-			13,803
Past due 90 days or more delinquent		21,576			8,177			-			-			29,753
Total Past Due		54,546			30,954			-			-			85,500
Total current loans		5,215,637			674,255			16,597,209			25,527			22,512,628
Total recorded investment	$	5,270,183		$	705,209		$	16,597,209		$	25,527		$	22,598,128
Other delinquency statistics:
In process of foreclosure, included above2	$	11,593		$	3,085		$	-		$	-		$	14,678
Serious delinquency rate3		0.4	%		1.2	%		-	%		-	%		0.1	%
Past due 90 days or more and still accruing interest	$	-		$	8,176		$	-		$	-		$	8,176
Loans on non-accrual status4	$	25,300		$	-		$	-		$	-		$	25,300

__________

1	The recorded investment in a loan is the UPB of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedging adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.
3	Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment for the portfolio class.
4	Loans on non-accrual status include $1,286,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which the FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

The following table summarizes the key credit quality indicators for the FHLBank’s mortgage loans as of December 31, 2011 (dollar amounts in thousands):

	Conventional Loans			Government Loans			Credit Products			Direct Financing Lease Receivable			Total
Recorded investment1:
Past due 30-59 days delinquent	$	30,473		$	15,811		$	-		$	-		$	46,284
Past due 60-89 days delinquent		8,926			5,809			-			-			14,735
Past due 90 days or more delinquent		23,383			11,876			-			-			35,259
Total Past Due		62,782			33,496			-			-			96,278
Total current loans		4,283,821			584,665			17,422,926			27,385			22,318,797
Total recorded investment	$	4,346,603		$	618,161		$	17,422,926		$	27,385		$	22,415,075
Other delinquency statistics:
In process of foreclosure, included above2	$	13,267		$	4,375		$	-		$	-		$	17,642
Serious delinquency rate3		0.5	%		2.0	%		-	%		-	%		0.2	%
Past due 90 days or more and still accruing interest	$	-		$	11,876		$	-		$	-		$	11,876
Loans on non-accrual status4	$	25,849		$	-		$	-		$	-		$	25,849

__________

1	The recorded investment in a loan is the UPB of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedging adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.
3	Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment for the portfolio class.
4	Loans on non-accrual status include $496,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which the FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

The FHLBank had $3,915,000 and $4,489,000 classified as real estate owned recorded in other assets as of December 31, 2012 and 2011, respectively.

NOTE 8 – DERIVATIVES AND HEDGING ACTIVITIES

Nature of Business Activity: The FHLBank is exposed to interest rate risk primarily from the effect of interest rate changes on its interest-earning assets and its funding sources that finance these assets. The goal of the FHLBank’s interest-rate risk management strategy is not to eliminate interest-rate risk, but to manage it within appropriate limits. To mitigate the risk of loss, the FHLBank has established policies and procedures, which include guidelines on the amount of exposure to interest rate changes it is willing to accept. In addition, the FHLBank monitors the risk to its revenue, net interest margin and average maturity of interest-earning assets and funding sources.

Consistent with Finance Agency regulation, the FHLBank enters into derivatives only to: (1) reduce the interest rate risk exposures inherent in otherwise unhedged assets and funding positions; (2) achieve risk management objectives; and (3) act as an intermediary between its members and counterparties. Finance Agency regulation and the FHLBank’s Risk Management Policy (RMP) prohibit trading in or the speculative use of these derivative instruments and limit credit risk arising from these instruments. The use of derivatives is an integral part of the FHLBank’s financial management strategy.

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The FHLBank uses derivatives to:

§   Reduce funding costs by combining an interest rate swap with a consolidated obligation because the cost of a combined funding structure can be lower than the cost of a comparable consolidated obligation;

§   Reduce the interest rate sensitivity and repricing gaps of assets and liabilities;

§   Preserve a favorable interest rate spread between the yield of an asset (e.g., an advance) and the cost of the related liability (e.g., the consolidated obligation used to fund the advance). Without the use of derivatives, this interest rate spread could be reduced or eliminated when a change in the interest rate on the advance does not match a change in the interest rate on the consolidated obligation;

§   Mitigate the adverse earnings effects of the shortening or extension of certain assets (e.g., advances or mortgage assets) and liabilities;

§   Manage embedded options in assets and liabilities; and

§   Manage its overall asset-liability management.

Application of Derivatives: Derivative financial instruments may be used by the FHLBank as follows:

§   As a fair value or cash flow hedge of an associated financial instrument, a firm commitment or an anticipated transaction;

§   As an economic hedge to manage certain defined risks in its statement of condition. These hedges are primarily used to manage mismatches between the coupon features of its assets and liabilities. For example, the FHLBank may use derivatives in its overall interest rate risk management activities to adjust the interest rate sensitivity of consolidated obligations to approximate more closely the interest rate sensitivity of its assets (both advances and investments) and to adjust the interest rate sensitivity of advances or investments to approximate more closely the interest rate sensitivity of its liabilities; and

§   As an intermediary hedge to meet the asset/liability management needs of its members. The FHLBank acts as an intermediary by entering into derivatives with its members and offsetting derivatives with other counterparties. This intermediation grants smaller members indirect access to the derivatives market. The 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 FHLBank.

Derivative financial instruments are used by the FHLBank when they are considered to be the most cost-effective alternative to achieve the FHLBank’s financial and risk management objectives. The FHLBank reevaluates its hedging strategies from time to time and may change the hedging techniques it uses or adopt new strategies.

The FHLBank transacts a significant portion of its derivatives with major banks and primary broker/dealers. Some of these banks and broker/dealers or their affiliates buy, sell and distribute consolidated obligations. No single entity dominates the FHLBank’s derivatives business. The FHLBank is not a derivatives dealer and thus does not trade derivatives for short-term profit.

Types of Derivatives: The FHLBank commonly enters into interest rate swaps (including callable and putable swaps), swaptions, and interest rate cap and floor agreements (collectively, derivatives) to reduce funding costs and to manage its exposure to interest rate risks inherent in the normal course of business. These instruments are recorded at fair value and reported in derivative assets or derivative liabilities on the Statements of Condition. Premiums paid at acquisition are accounted for as the basis of the derivative at inception of the hedge.

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 time. In return for this promise, this party receives cash flows equivalent to the interest on the same notional principal amount at a variable interest rate index for the same period of time. The variable interest rate received by the FHLBank in most derivative agreements is 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 FHLBank against future interest rate changes. The FHLBank purchases both payer swaptions and receiver swaptions to decrease its interest rate risk exposure related to the prepayment of certain assets. A payer swaption is the option to make fixed interest payments at a later date and a receiver swaption is the option to receive fixed interest payments at a later date.

Interest Rate Caps and Floors – In an interest rate 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 or interest rate. In an interest rate 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 or interest rate. 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 or falling below a certain level. The FHLBank purchases interest rate caps and floors to hedge option risk on the MBS held in the FHLBank’s held-to-maturity portfolio and to hedge embedded caps or floors in the FHLBank’s advances.

Types of Hedged Items: At the inception of every hedge transaction, the FHLBank documents all hedging relationships between derivatives designated as hedging instruments and the 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: (1) assets and/or liabilities on the Statements of Condition; (2) firm commitments; or (3) forecasted transactions. The FHLBank formally assesses (both at the hedge’s inception and at least quarterly on an ongoing basis) whether the derivatives that are used 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 FHLBank typically uses regression analyses or similar statistical analyses to assess the effectiveness of its hedging relationships.

Consolidated Obligations – While consolidated obligations are the joint and several obligations of the 12 FHLBanks, each FHLBank enters into derivatives to hedge the interest rate risk associated with its specific debt issuances. The FHLBank manages the risk arising from changing market prices and volatility of a consolidated obligation by matching the cash inflow on the derivative with the cash outflow on the consolidated obligation.

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For instance, in a typical transaction involving more than one FHLBank, fixed rate consolidated obligation bonds are issued for one or more FHLBanks, including FHLBank Topeka. In connection with its share of the bond issuance, FHLBank Topeka simultaneously enters into a matching derivative in which the counterparty pays fixed cash flows to FHLBank Topeka designed to mirror in timing and amount the cash outflows FHLBank Topeka pays on the consolidated obligation. In this type of transaction, FHLBank Topeka typically pays the derivative counterparty a variable cash flow that closely matches the interest payments it receives on short-term or variable rate advances (typically one- or three-month LIBOR). These transactions are designated as fair value hedges. Note, though, that most of the FHLBank’s swapped consolidated obligation bonds are fixed rate, callable bonds where the FHLBank is the sole issuer of the particular debt issue. The swap transaction with a counterparty for debt upon which the FHLBank is the sole issuer follows the same process reflected above (simultaneous, matching terms, etc.).

This strategy of issuing bonds while simultaneously entering into derivatives enables the FHLBank to offer a wider range of attractively priced advances to its members and may allow the FHLBank to reduce its funding costs. The continued attractiveness of such debt depends on yield relationships between the bond and derivative markets. If conditions in these markets change, the FHLBank may alter the types or terms of the bonds that it issues. By acting in both the capital and derivatives markets, the FHLBank can raise funds at lower costs than through the issuance of simple fixed or variable rate consolidated obligations in the capital markets alone.

Advances – With the issuance of a convertible advance, the FHLBank purchases from the member an option that enables the FHLBank to convert an advance from fixed rate to variable rate if interest rates increase. Once the FHLBank exercises its option to convert an advance to an at-the-market variable rate, the member then owns the option to terminate the converted advance without fee or penalty on the conversion date and each interest rate reset date thereafter. The FHLBank hedges a convertible advance by entering into a cancelable derivative with a non-member counterparty where the FHLBank pays a fixed rate and receives a variable rate. The derivative counterparty may cancel the derivative on a put date. This type of hedge is designated as a fair value hedge. The counterparty’s decision to cancel the derivative would normally occur in a rising rate environment. If the option is in-the-money, the derivative is cancelled by the derivative counterparty at par (i.e., without any premium or other payment to the FHLBank). When the derivative is cancelled, the FHLBank exercises its option to convert the advance to a variable rate. If a convertible advance is not prepaid by the member upon conversion to an at-the-market variable rate advance (i.e., callable variable rate advance), any hedge-related unamortized basis adjustment is amortized as a yield adjustment.

When fixed rate advances are issued to one or more borrowers, the FHLBank can either fund the advances with fixed rate consolidated obligations with the same tenor or simultaneously enter into a matching derivative in which the counterparty receives fixed cash flows from the FHLBank designed to mirror in timing and amount the cash inflows the FHLBank receives on the advance. Such transactions are designated as fair value hedges. In this type of transaction, the FHLBank typically receives from the derivative counterparty a variable cash flow that closely matches the interest payments on short-term discount notes or swapped consolidated obligation bonds.

The optionality embedded in certain financial instruments held by the FHLBank can create interest rate risk. For example, when a member prepays an advance, the FHLBank could suffer lower future income if the principal portion of the prepaid advance were invested in lower-yielding assets that continue to be funded by higher-cost debt. To protect against this risk, the FHLBank generally charges a prepayment fee on an advance that makes it financially indifferent to a member’s decision to prepay the advance. When the FHLBank offers advances (other than short-term advances) that a member may prepay without a prepayment fee, it usually finances such advances with callable debt or otherwise hedges the option being sold to the member.

Mortgage Loans – The FHLBank invests in fixed rate mortgage loans through the MPF Program. The prepayment options embedded in these mortgage loans can result in extensions or contractions in the expected lives of these investments, depending on changes in estimated future cash flows, which usually occur as a result of interest rate changes. The FHLBank may manage the interest rate and prepayment risk associated with mortgages through a combination of debt issuance and derivatives. The FHLBank issues both callable and non-callable debt to achieve cash flow patterns and liability durations similar to those expected on the mortgage loans. The FHLBank may use derivatives in conjunction with debt issuance to better match the expected prepayment characteristics of its mortgage loan portfolio.

Interest rate caps and floors, swaptions and callable swaps may also be used to hedge prepayment risk on the mortgage loans. Although these derivatives are valid economic hedges against the prepayment risk of the portfolio of mortgage loans, they are not specifically linked to individual loans and, therefore, do not receive either fair value or cash flow hedge accounting. The derivatives are marked-to-market through earnings.

Firm Commitments – Commitments that obligate the FHLBank to purchase closed fixed rate mortgage loans from its members are considered derivatives. Accordingly, each mortgage purchase commitment is recorded as a derivative asset or derivative liability at fair value, with changes in fair value recognized in current period earnings. When a mortgage purchase commitment derivative settles, the current market value of the commitment is included with the basis of the mortgage loan and amortized accordingly.

The FHLBank may also hedge a firm commitment for a forward starting advance or consolidated obligation bond through the use of an interest rate swap. In this case, the swap functions as the hedging instrument for both the hedging relationship involving the firm commitment and the subsequent hedging relationship involving the advance or bond. The basis movement associated with the firm commitment is rolled into the basis of the advance or bond at the time the commitment is terminated and the advance or bond is issued. The basis adjustment is then amortized into interest income or expense over the life of the advance or bond.

Investments – The FHLBank invests in U.S. Treasury securities, U.S. Agency securities, government-guaranteed securities, GSE securities, MBS and the taxable portion of state or local housing finance agency securities. The interest rate and prepayment risk associated with these investment securities is managed through a combination of debt issuance and derivatives. The FHLBank may manage the prepayment and interest-rate risks by funding investment securities with consolidated obligations that have call features or by economically hedging the prepayment risk with caps or floors, callable swaps or swaptions. The FHLBank may manage against prepayment and duration risks by funding investment securities with consolidated obligations that have call features. The FHLBank may also manage the risk arising from changing market prices and volatility of investment securities by entering into derivatives (economic hedges) that offset the changes in fair value or cash flows of the securities. The FHLBank’s derivatives associated with investment securities (currently includes interest rate caps, floors and swaps) are designated as economic hedges with the changes in fair values of the derivatives being recorded as “Net gain (loss) on derivatives and hedging activities” in other income (loss) on the Statements of Income. The investment securities hedged with interest rate swaps are classified as trading securities with the changes in fair values recorded as “Net gain (loss) on trading securities” in other income (loss) on the Statements of Income.

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Interest rate caps and floors, swaptions and callable swaps may also be used to hedge prepayment and option risk on the MBS held in the FHLBank’s trading and held-to-maturity portfolios. Most of these derivatives are purchased interest rate caps that hedge interest rate caps embedded in the FHLBank’s trading and held-to-maturity variable rate Agency MBS. Although these derivatives are valid economic hedges against the prepayment and option risk of the portfolio of MBS, they are not specifically linked to individual investment securities and, therefore, do not receive either fair value or cash flow hedge accounting. The derivatives are marked-to-market through earnings.

Anticipated Debt Issuance – The FHLBank enters into interest rate swaps for the anticipated issuance of fixed rate consolidated obligation bonds to hedge the variability in forecasted interest payments associated with fixed rate debt that has not yet been issued. The interest rate swap is terminated upon issuance of the fixed rate bond, with the realized gain or loss on the interest rate swap recorded in OCI. 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.

Financial Statement Impact and Additional Financial Information: The notional amount in derivative contracts serves as a factor in determining periodic interest payments or cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor the overall exposure of the FHLBank to credit and market risk. The risks of derivatives can be measured meaningfully on a portfolio basis that takes into account the counterparties, the types of derivatives, the items being hedged and any offsets between the derivatives and the items being hedged.

The FHLBank considers accrued interest receivables and payables and the legal right to offset derivative assets and liabilities by counterparty. Consequently, derivative assets and liabilities reported on the Statements of Condition include the net cash collateral and accrued interest from counterparties. Therefore, an individual derivative may be in an asset position (counterparty would owe the FHLBank the current fair value, which includes net accrued interest receivable or payable on the derivative, if the derivative was settled as of the Statement of Condition date) but when the derivative fair value and cash collateral fair value (includes accrued interest on the collateral) are netted by counterparty, the derivative may be recorded on the Statements of Condition as a derivative liability. Conversely, a derivative may be in a liability position (FHLBank would owe the counterparty the fair value if settled as of the Statement of Condition date) but may be recorded on the Statements of Condition as a derivative asset after netting.

The following table represents outstanding notional balances and fair values (includes net accrued interest receivable or payable on the derivatives) of the derivatives outstanding by type of derivative and by hedge designation as of December 31, 2012 (in thousands):

	12/31/2012
	Gross Asset Positions				Gross Liability Positions				Net Derivative Assets				Net Derivative Liabilities
	Notional		Fair Value		Notional		Fair Value		Notional		Fair Value		Notional		Fair Value
Fair value hedges:
Interest rate swaps	$	5,337,000	$	218,909	$	7,023,157	$	(493,515)	$	2,574,325	$	33,707	$	9,785,832	$	(308,313)
Interest rate caps/floors		-		-		247,000		(4,429)		100,000		(1,420)		147,000		(3,009)
Total fair value hedges		5,337,000		218,909		7,270,157		(497,944)		2,674,325		32,287		9,932,832		(311,322)
Economic hedges:
Interest rate swaps		4,710,000		7,607		1,096,320		(166,890)		3,170,000		5,190		2,636,320		(164,473)
Interest rate caps/floors		4,528,800		29,761		1,344,000		(62)		1,482,500		14,591		4,390,300		15,108
Mortgage delivery commitments		62,378		102		43,977		(96)		62,378		102		43,977		(96)
Total economic hedges		9,301,178		37,470		2,484,297		(167,048)		4,714,878		19,883		7,070,597		(149,461)
TOTAL	$	14,638,178	$	256,379	$	9,754,454	$	(664,992)	$	7,389,203		52,170	$	17,003,429		(460,783)
Fair value of cash collateral delivered to counterparties												-				337,369
Fair value of cash collateral received from counterparties												(27,004)				-
NET DERIVATIVE FAIR VALUE											$	25,166			$	(123,414)

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The following table represents outstanding notional balances and fair values (includes net accrued interest receivable or payable on the derivatives) of the derivatives outstanding by type of derivative and by hedge designation as of December 31, 2011 (in thousands):

	12/31/2011
	Gross Asset Positions				Gross Liability Positions				Net Derivative Assets				Net Derivative Liabilities
	Notional		Fair Value		Notional		Fair Value		Notional		Fair Value		Notional		Fair Value
Fair value hedges:
Interest rate swaps	$	6,446,000	$	287,805	$	8,192,887	$	(571,776)	$	4,175,367	$	71,605	$	10,463,520	$	(355,576)
Interest rate caps/floors		-		-		247,000		(5,075)		90,000		(1,759)		157,000		(3,316)
Total fair value hedges		6,446,000		287,805		8,439,887		(576,851)		4,265,367		69,846		10,620,520		(358,892)
Economic hedges:
Interest rate swaps		375,000		2,353		2,941,320		(191,864)		520,000		(40,149)		2,796,320		(149,362)
Interest rate caps/floors		6,372,533		53,004		639,000		(289)		1,435,300		10,079		5,576,233		42,636
Mortgage delivery commitments		119,945		843		-		-		119,945		843		-		-
Total economic hedges		6,867,478		56,200		3,580,320		(192,153)		2,075,245		(29,227)		8,372,553		(106,726)
TOTAL	$	13,313,478	$	344,005	$	12,020,207	$	(769,004)	$	6,340,612		40,619	$	18,993,073		(465,618)
Fair value of cash collateral delivered to counterparties												-				343,706
Fair value of cash collateral received from counterparties1												(26,581)				(18,301)
NET DERIVATIVE FAIR VALUE											$	14,038			$	(140,213)

1 The FHLBank held cash with a fair value of $44,882,000 as collateral as of December 31, 2011. Exposure can change on a daily basis; and thus, there is often a short lag time between the date the exposure is identified, collateral is requested and when the collateral is actually received. Likewise, there is a lag time for excess collateral to be returned. Excess collateral held by the FHLBank as of December 31, 2011 resulted in positive exposure (fair value plus accrued interest) with one counterparty being recorded as a derivative liability.

The following tables provide information regarding gains and losses on derivatives and hedging activities by type of hedge and type of derivative and gains and losses by hedged item for fair value hedges.

For the years ended December 31, 2012, 2011 and 2010, the FHLBank recorded net gain (loss) on derivatives and hedging activities as follows (in thousands):

	2012		2011		2010
Derivatives and hedge items in fair value hedging relationships:
Interest rate swaps	$	2,792	$	2,122	$	(1,160)
Interest rate caps/floors		-		(58)		(64)
Total net gain (loss) related to fair value hedge ineffectiveness		2,792		2,064		(1,224)
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps		27,428		(9,870)		(40,634)
Interest rate caps/floors		(24,032)		(70,577)		(83,746)
Net interest settlements		(35,174)		(40,489)		(53,171)
Mortgage delivery commitments		7,509		10,146		4,138
Intermediary transactions:
Interest rate swaps		(1)		(29)		(42)
Interest rate caps/floors		-		12		5
Total net gain (loss) related to derivatives not designated as hedging instruments		(24,270)		(110,807)		(173,450)
NET GAIN (LOSS) ON DERIVATIVES AND HEDGING ACTIVITIES	$	(21,478)	$	(108,743)	$	(174,674)

F-31

The FHLBank carries derivative instruments at fair value on its Statements of Condition. Any change in the fair value of derivatives designated under a fair value hedging relationship is recorded each period in current period earnings. Fair value hedge accounting allows for the offsetting fair value of the hedged risk in the hedged item to also be recorded in current period earnings. For the years ended December 31, 2012, 2011 and 2010, the FHLBank recorded net gain (loss) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on the FHLBank’s net interest income as follows (in thousands):

	2012
	Gain (Loss) on Derivatives		Gain (Loss) on Hedged Items		Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on Net Interest Income1
Advances	$	44,010	$	(45,836)	$	(1,826)	$	(186,360)
Consolidated obligation bonds		(63,877)		68,515		4,638		142,355
Consolidated obligation discount notes		114		(134)		(20)		12
TOTAL	$	(19,753)	$	22,545	$	2,792	$	(43,993)
	2011
	Gain (Loss) on Derivatives		Gain (Loss) on Hedged Items		Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on Net Interest Income1
Advances	$	(113,640)	$	111,609	$	(2,031)	$	(234,817)
Consolidated obligation bonds		21,401		(16,970)		4,431		212,243
Consolidated obligation discount notes		(1,120)		784		(336)		1,254
TOTAL	$	(93,359)	$	95,423	$	2,064	$	(21,320)
	2010
	Gain (Loss) on Derivatives		Gain (Loss) on Hedged Items		Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on Net Interest Income1
Advances	$	(106,531)	$	105,102	$	(1,429)	$	(290,214)
Consolidated obligation bonds		28,540		(28,656)		(116)		290,416
Consolidated obligation discount notes		964		(643)		321		1,903
TOTAL	$	(77,027)	$	75,803	$	(1,224)	$	2,105

1 The differentials between accruals of interest receivables and payables on derivatives designated as fair value hedges as well as the amortization/accretion of hedging activities are recognized as adjustments to the interest income or expense of the designated underlying hedged item.

There were no amounts for the years ended December 31, 2012, 2011 and 2010 that were reclassified into earnings as a result of the discontinuance of cash flow hedges because it became probable that the original forecasted transactions would not occur by the end of the originally specified time period or within a two-month period thereafter. As of December 31, 2012, no amounts relating to hedging activities remain in AOCI.

Managing Credit Risk on Derivatives: The FHLBank is subject to credit risk due to nonperformance by counterparties to the derivative agreements. The degree of counterparty risk on derivative agreements depends on the extent to which master netting arrangements are included in such contracts to mitigate the risk. The FHLBank manages counterparty credit risk through credit analyses, collateral requirements and adherence to the requirements set forth in its RMP. The FHLBank requires collateral agreements on all derivatives that establish collateral delivery thresholds. Additionally, collateral related to derivatives with member institutions includes collateral assigned to the FHLBank, as evidenced by a written security agreement and held by the member institution for the benefit of the FHLBank. Based on credit analyses and collateral requirements, FHLBank management does not anticipate any credit losses on its derivative agreements. The maximum credit risk applicable to a single counterparty was $28,512,000 and $30,135,000 as of December 31, 2012 and 2011, respectively. The counterparty was the same each period.

The following table presents credit risk exposure on derivative instruments as of December 31, 2012 and 2011, excluding circumstances where the FHLBank’s pledged collateral exceeds the FHLBank’s net position (in thousands):

	12/31/2012		12/31/2011
Total net exposure at fair value1	$	52,170	$	40,619
Cash collateral held		(27,004)		(26,581)
Net positive exposure after cash collateral		25,166		14,038
Other collateral2		(278)		(1,825)
NET EXPOSURE AFTER COLLATERAL	$	24,888	$	12,213

1 Includes net accrued interest receivable of $5,731,000 and $3,700,000 as of December 31, 2012 and 2011, respectively.

2 Collateral held with respect to derivatives with members which represents either collateral physically held by or on behalf of the FHLBank or collateral assigned to the FHLBank as evidenced by a written security agreement and held by the member for the benefit of the FHLBank.

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Certain of the FHLBank’s derivative instruments contain provisions that require the FHLBank to post additional collateral with its counterparties if there is deterioration in the FHLBank’s credit rating. If the FHLBank’s credit rating is lowered by an NRSRO, the FHLBank may be required to deliver additional collateral on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with derivative counterparties containing credit-risk-related contingent features that were in a net derivative liability position as of December 31, 2012 and 2011 was $460,626,000 and $483,294,000, respectively, for which the FHLBank has posted collateral with a fair value of $337,369,000 and $343,706,000, respectively, in the normal course of business. If the FHLBank’s credit rating had been lowered one level (e.g., from double-A to single-A), the FHLBank would have been required to deliver an additional $93,770,000 and $112,037,000 of collateral to its derivative counterparties as of December 31, 2012 and 2011.

NOTE 9 – DEPOSITS

The FHLBank offers demand and overnight deposit programs to its members and to other qualifying non-members. In addition, the FHLBank offers short-term deposit programs to members. A member that services mortgage loans may deposit with the FHLBank funds collected in connection with the mortgage loans, pending disbursement of such funds to owners of the mortgage loans. The FHLBank classifies these items as “Non-interest-bearing other deposits.” The following table details the types of deposits held by the FHLBank as of December 31, 2012 and 2011 (in thousands):

	12/31/2012		12/31/2011
Interest-bearing:
Demand	$	253,527	$	156,345
Overnight		824,200		799,400
Term		39,900		2,700
Total interest-bearing		1,117,627		958,445
Non-interest-bearing:
Demand		360		348
Other		63,970		38,578
Total non-interest-bearing		64,330		38,926
TOTAL DEPOSITS	$	1,181,957	$	997,371

NOTE 10 – CONSOLIDATED OBLIGATIONS

Consolidated obligations consist of consolidated bonds and discount notes and, as provided by the Bank Act or Finance Agency regulation, are backed only by the financial resources of the FHLBanks. The FHLBanks jointly issue consolidated obligations with the Office of Finance acting as their agent. The Office of Finance tracks the amounts of debt issued on behalf of each FHLBank. In addition, the FHLBank separately tracks and records as a liability its specific portion of consolidated obligations for which it is the primary obligor. The FHLBank utilizes a debt issuance process to provide a scheduled monthly issuance of global bullet consolidated obligation bonds. As part of this process, management from each of the FHLBanks determine and communicate a firm commitment to the Office of Finance for an amount of scheduled global debt to be issued on its behalf. If the FHLBanks’ commitments do not meet the minimum debt issue size, the proceeds are allocated to all FHLBanks based on the larger of the FHLBank’s commitment or allocated proceeds based on the individual FHLBank’s regulatory capital to total system regulatory capital. If the FHLBanks’ commitments exceed the minimum debt issue size, the proceeds are allocated based on relative regulatory capital of the FHLBanks with the allocation limited to the lesser of the allocation amount or actual commitment amount.

The Finance Agency and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office of Finance. The FHLBanks can, however, pass on any scheduled calendar slot and not issue any global bullet consolidated obligation bonds upon agreement of 8 of the 12 FHLBanks. Consolidated obligation bonds are issued primarily to raise intermediate- and long-term funds for the FHLBanks and are not subject to any statutory or regulatory limits as to maturities. Consolidated obligation discount notes, which are issued to raise short-term funds, are issued at less than their face amounts and redeemed at par when they mature.

Although the FHLBank is primarily liable for its portion of consolidated obligations (i.e., those issued on its behalf), the FHLBank is also jointly and severally liable with the other 11 FHLBanks for the payment of principal and interest on all consolidated obligations of each of the FHLBanks. The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations for which the FHLBank is not the primary obligor. Although it has never occurred, to the extent that an FHLBank would be required to make a payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank would be entitled to reimbursement from the non-complying FHLBank. However, if the Finance Agency determines that the non-complying FHLBank is unable to satisfy its obligations, then the Finance Agency may allocate the non-complying FHLBank’s outstanding consolidated obligation debt among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis the Finance Agency may determine to ensure that the FHLBanks operate in a safe and sound manner.

The par value of outstanding consolidated obligations of all FHLBanks, including outstanding consolidated obligations issued on behalf of the FHLBank, was approximately $687,902,143,000 and $691,867,651,000 as of December 31, 2012 and 2011 respectively. See Note 19 for FHLBank obligations acquired by FHLBank Topeka as investments. Finance Agency regulations require that each FHLBank maintain unpledged qualifying assets equal to its participation in the total consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; assets with an assessment or rating at least equivalent to the current assessment or rating of the consolidated obligations; obligations of or fully guaranteed by the United States; obligations, participations or other instruments of or issued by Fannie Mae or Ginnie Mae; mortgages, obligations or other securities, which are or have ever been sold by Freddie Mac under the Bank Act; and such securities as fiduciary and trust funds may invest in under the laws of the state in which the FHLBank is located.

F-33

Consolidated Obligation Bonds: The following table presents the FHLBank’s participation in consolidated obligation bonds outstanding as of December 31, 2012 and 2011 (in thousands):

	12/31/2012					12/31/2011
Year of Contractual Maturity	Amount		Weighted Average Interest Rate			Amount		Weighted Average Interest Rate
Due in one year or less	$	6,989,000		1.14	%	$	5,211,300		1.23	%
Due after one year through two years		3,774,700		1.18			4,151,000		1.76
Due after two years through three years		1,553,000		1.32			1,757,200		2.48
Due after three years through four years		1,244,650		2.21			1,172,500		2.00
Due after four years through five years		1,476,000		2.74			1,302,500		2.73
Thereafter		6,749,900		2.45			6,050,900		3.47
Total par value		21,787,250		1.74	%		19,645,400		2.29	%
Premium		54,585					51,199
Discounts		(5,479)					(7,272)
Hedging adjustments1		137,546					205,156
TOTAL	$	21,973,902				$	19,894,483

1 See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

Consolidated obligation bonds are issued with either fixed rate coupon or variable rate coupon payment terms. Variable rate coupon bonds use a variety of indices for interest rate resets including LIBOR, U.S. Treasury bills, Prime, Constant Maturity Treasuries (CMT) and Eleventh District Cost of Funds Index (COFI). In addition, to meet the specific needs of certain investors in consolidated obligation bonds, fixed rate and variable rate bonds may contain certain features that may result in complex coupon payment terms and call features. When the FHLBank issues such structured bonds that present interest rate or other risks that are unacceptable to the FHLBank, it will simultaneously enter into derivatives containing offsetting features that effectively alter the terms of the complex bonds to the equivalent of simple fixed rate coupon bonds or variable rate coupon bonds tied to indices such as those detailed above.

The FHLBank’s participation in consolidated obligation bonds outstanding as of December 31, 2012 and 2011 includes callable bonds totaling $8,461,000,000 and $7,599,000,000, respectively. The FHLBank uses the unswapped callable bonds for financing its callable advances (Note 5), MBS (Note 4) and mortgage loans (Note 6). Contemporaneous with a portion of its fixed rate callable bond issues, the FHLBank will also enter into interest rate swap agreements (in which the FHLBank generally pays a variable rate and receives a fixed rate) with call features that mirror the options in the callable bonds (a sold callable swap). The combined sold callable swap and callable debt transaction allows the FHLBank to obtain attractively priced variable rate financing. The following table summarizes the FHLBank’s participation in consolidated obligation bonds outstanding by year of maturity, or by the next call date for callable bonds as of December 31, 2012 and 2011 (in thousands):

Year of Maturity or Next Call Date	12/31/2012		12/31/2011
Due in one year or less	$	14,900,000	$	11,615,300
Due after one year through two years		3,847,700		4,946,000
Due after two years through three years		1,024,000		1,191,200
Due after three years through four years		809,650		350,500
Due after four years through five years		688,000		567,500
Thereafter		517,900		974,900
TOTAL PAR VALUE	$	21,787,250	$	19,645,400

In addition to having fixed rate or simple variable rate coupon payment terms, consolidated obligation bonds may also have the following broad terms, regarding either the principal repayment or coupon payment:

§   Optional principal redemption bonds (callable bonds) that may be redeemed in whole or in part at the discretion of the FHLBank on predetermined call dates in accordance with terms of bond offerings;

§   Range bonds that have coupons at fixed or variable rates and pay the fixed or variable rate as long as the index rate is within the established range, but generally pay zero percent or a minimal interest rate if the specified index rate is outside the established range;

§   Conversion bonds that have coupons that convert from fixed to variable, or variable to fixed, or from one index to another, on predetermined dates according to the terms of the bond offerings; and

§   Step bonds that have coupons at fixed or variable rates for specified intervals over the lives of the bonds. At the end of each specified interval, the coupon rate or variable rate spread increases (decreases) or steps up (steps down). These bond issues generally contain call provisions enabling the bonds to be called at the FHLBank’s discretion on the step dates.

The following table summarizes interest rate payment terms for consolidated obligation bonds as of December 31, 2012 and 2011 (in thousands):

	12/31/2012		12/31/2011
Fixed rate	$	13,507,250	$	13,697,400
Variable rate		6,010,000		3,780,000
Step up		2,270,000		1,920,000
Range bonds		-		248,000
TOTAL PAR VALUE	$	21,787,250	$	19,645,400

F-34

Consolidated Discount Notes: Consolidated discount notes are issued to raise short-term funds. Consolidated discount notes are consolidated obligations with original maturities of up to one year. These consolidated discount notes are issued at less than their face amount and redeemed at par value when they mature.

The following table summarizes the FHLBank’s participation in consolidated obligation discount notes, all of which are due within one year (in thousands):

	Book Value		Par Value		Weighted Average Interest Rate
December 31, 2012	$	8,669,059	$	8,670,442		0.12	%
December 31, 2011	$	10,251,108	$	10,251,723		0.03	%

Concessions on Consolidated Obligations: Unamortized concessions were $12,392,000 and $11,160,000 as of December 31, 2012 and 2011, respectively, and are included in other assets. Amortization of such concessions is included in consolidated obligation interest expense. Amortization of concessions on bonds totaled $17,948,000, $12,276,000 and $16,557,000 in 2012, 2011 and 2010, respectively. Concessions on discount notes totaled $177,000, $210,000 and $932,000 in 2012, 2011 and 2010, respectively.

Information about the fair value of the consolidated obligations is included in Note 16.

NOTE 11 – AFFORDABLE HOUSING PROGRAM

The Bank Act, as amended by the Financial Institutions Reform, Recovery and Enforcement Act of 1989, requires each FHLBank to establish an AHP. As a part of its AHP, the FHLBank provides subsidies in the form of direct grants or below-market interest rate advances to members that use the funds to assist in the purchase, construction or rehabilitation of housing for very low-, low- and moderate-income households. By regulation, to fund the AHP, the 12 district FHLBanks as a group must annually set aside the greater of $100,000,000 or 10 percent of the current year’s net earnings after any assessment for REFCORP. For purposes of the AHP calculation, the term “net earnings” is defined as income before interest expense related to mandatorily redeemable capital stock and the assessment for AHP, but after the assessment to REFCORP. Prior to July 1, 2011, the AHP and REFCORP assessments were calculated simultaneously because of their interdependence on each other. The FHLBank accrues this expense monthly based on its net earnings. Calculation of the REFCORP assessment and satisfaction of that liability is discussed in Note 12.

The amount set aside for AHP is charged to expense and recognized as a liability. As subsidies are provided through the disbursement of grants or issuance of subsidized advances, the AHP liability is reduced accordingly. If the FHLBank’s net earnings before AHP and REFCORP would ever be zero or less, the amount of AHP liability would generally be equal to zero. However, if the result of the aggregate 10 percent calculation described above is less than the $100,000,000 minimum for all 12 FHLBanks, then the Bank Act requires the shortfall to be allocated among the FHLBanks based on the ratio of each FHLBank’s income for the previous year. If an FHLBank determines that its required AHP contributions are exacerbating any financial instability of that FHLBank, it may apply to the Finance Agency for a temporary suspension of its AHP contributions. The FHLBank has never applied to the Finance Agency for a temporary suspension of its AHP contributions.

As of December 31, 2012, the FHLBank’s AHP accrual on its Statements of Condition consisted of $15,916,000 for the 2013 AHP (uncommitted, including amounts recaptured and reallocated from prior years) and $15,282,000 for prior years’ AHP (committed but undisbursed).

The following table details the change in the AHP liability for the years ended December 31, 2012, 2011 and 2010 (in thousands):

	2012		2011		2010
Appropriated and reserved AHP funds as of the beginning of the period	$	31,392	$	39,226	$	44,117
AHP set aside based on current year income		12,261		8,611		3,766
Direct grants disbursed		(13,210)		(16,984)		(8,908)
Recaptured funds1		755		539		251
Appropriated and reserved AHP funds as of the end of the period	$	31,198	$	31,392	$	39,226

__________ 

 1 Recaptured funds are direct grants returned to the FHLBank in those instances where the commitments associated with the approved use of funds are not met and repayment to the FHLBank is required by regulation. Recaptured funds are returned as a result of: (1) AHP-assisted homeowner’s transfer or sale of property within the five-year retention period that the assisted homeowner is required to occupy the property; (2) homeowner’s failure to acquire sufficient loan funding (funds previously approved and disbursed cannot be used); or (3) unused grants.

NOTE 12 – RESOLUTION FUNDING CORPORATION (REFCORP)

On August 5, 2011, the Finance Agency certified that the FHLBanks had fully satisfied their REFCORP obligation with their payments made on July 15, 2011, which were accrued as applicable in each FHLBank’s June 30, 2011 financial statements. The FHLBanks entered into a Joint Capital Enhancement (JCE) Agreement, as amended, which requires each FHLBank to allocate 20 percent of its net income to a separate restricted retained earnings account, beginning in the third quarter of 2011. See Note 13 for further discussion regarding establishment of a separate restricted retained earnings account and the JCE Agreement.

Prior to the satisfaction of the FHLBanks’ REFCORP obligation, each FHLBank had been required to pay 20 percent of income calculated in accordance with GAAP after the assessment for AHP, but before the assessment for REFCORP. The FHLBanks expensed these amounts until the aggregate amount actually paid by all 12 FHLBanks was equivalent to a $300,000,000 annual annuity (or a scheduled payment of $75,000,000 per quarter) whose final maturity date was April 15, 2030. The Finance Agency in consultation with the Secretary of the Treasury selected the appropriate discounting factors to be used in this annuity calculation.

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NOTE 13 – CAPITAL

The FHLBank is subject to three capital requirements under the provisions of the Gramm-Leach-Bliley Act (GLB Act) and the Finance Agency’s capital structure regulation. Regulatory capital does not include AOCI but does include mandatorily redeemable capital stock.

▪ Risk-based capital. The FHLBank must maintain at all times permanent capital in an amount at least equal to the sum of its credit risk, market risk and operations risk capital requirements. The risk-based capital requirements are all calculated in accordance with the rules and regulations of the Finance Agency.Only permanent capital, defined as Class B Common Stock and retained earnings, can be used by the FHLBank to satisfy its risk-based capital requirement. The Finance Agency may require the FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined, but the Finance Agency has not placed any such requirement on the FHLBank to date.

▪ Total regulatory capital. The GLB Act requires the FHLBank to maintain at all times at least a 4.0 percent total capital-to-asset ratio. Total regulatory capital is defined as the sum of permanent capital, Class A stock, any general loss allowance, if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the Finance Agency as available to absorb losses.

▪ Leverage capital. The FHLBank is required to maintain at all times a leverage capital-to-assets ratio of at least 5.0 percent, with the leverage capital ratio defined as the sum of permanent capital weighted 1.5 times and non-permanent capital (currently only Class A Common Stock) weighted 1.0 times divided by total assets.

The following table illustrates that the FHLBank was in compliance with its regulatory capital requirements as of December 31, 2012 and 2011 (in thousands):

	12/31/2012						12/31/2011
	Required			Actual			Required			Actual
Regulatory capital requirements:
Risk-based capital	$	300,742		$	1,340,740		$	227,407		$	1,193,058
Total regulatory capital-to-asset ratio		4.0	%		5.2	%		4.0	%		5.2	%
Total regulatory capital	$	1,352,745		$	1,751,403		$	1,327,607		$	1,737,657
Leverage capital ratio		5.0	%		7.2	%		5.0	%		7.0	%
Leverage capital	$	1,690,931		$	2,421,772		$	1,659,509		$	2,334,185

The FHLBank offers two classes of stock, Class A Common Stock and Class B Common Stock. Each member is required to hold capital stock to become and remain a member of the FHLBank (Asset-based Stock Purchase Requirement; Class A Common Stock) and enter into specified activities with the FHLBank including, but not limited to, access to the FHLBank’s credit products and selling AMA to the FHLBank (Activity-based Stock Purchase Requirement; Class A Common Stock to the extent of a member’s Asset-based Stock Purchase Requirement, then Class B Common Stock for the remainder). The amount of Class A Common Stock a member must acquire and maintain is the Asset-based Stock Purchase Requirement, which is currently equal to 0.1 percent of a member’s total assets as of December 31 of the preceding calendar year, with a minimum requirement of $1,000, and a maximum requirement of $500,000. The amount of Class B Common Stock a member must acquire and maintain is the Activity-based Stock Purchase Requirement, which is currently equal to the sum of the following less the member’s Asset-based Stock Purchase Requirement:

§   5.0 percent of the principal amount of advances outstanding to the member; plus

§   2.0 percent of the current outstanding principal balance of AMA originated by or through the member and acquired by the FHLBank subject to a maximum AMA requirement of 1.5 percent of the member’s total assets as of December 31 of the preceding calendar year; plus

§   0.0 percent of the principal amount of letters of credit outstanding at the request of the member; plus

§   0.0 percent of the notional principal of any outstanding derivatives with the member.

The percentages listed above are subject to change by the FHLBank within ranges established in its capital plan. Changes to the percentages outside of the capital plan percentages require the FHLBank to request Finance Agency approval of an amended capital plan. See Note 18 for detailed information on transactions with related parties.

Any member may make a written request not in connection with a notice of withdrawal or attaining nonmember status for the redemption of a part of its Class A Common Stock or all or part of its Class B Common Stock (i.e., excess stock redemption request). Within five business days of receipt of a member’s written redemption request, the FHLBank may notify the member that it declines to repurchase the excess stock before the end of that five business day period, at which time the applicable redemption period shall commence. Otherwise, the FHLBank will repurchase any excess stock within the five business day period. The redemption periods are six months for Class A Common Stock and five years for Class B Common Stock. Subject to certain limitations, the FHLBank may choose to repurchase a member’s excess stock on or before the end of the applicable redemption period.

The GLB Act made membership voluntary for all members. As outlined in the FHLBank’s capital plan, members that withdraw from membership must wait five years from the divestiture date for all capital stock that is held as a condition of membership (Class A Common Stock up to member’s Asset-based Stock Purchase Requirement), unless the member cancels its notice of withdrawal prior to that date, before being readmitted to membership in any FHLBank.

The FHLBank’s board of directors may declare and pay non-cumulative dividends, expressed as a percentage rate per annum based upon the par value of capital stock on shares of Class A Common Stock outstanding and on shares of Class B Common Stock outstanding, out of previously unrestricted retained earnings and current earnings in either cash or Class B Common Stock. There is no dividend preference between Class A Common Stockholders and Class B Common Stockholders up to the Dividend Parity Threshold (DPT). Dividend rates in excess of the DPT may be paid on Class A Common Stock or Class B Common Stock at the discretion of the board of directors, provided, however, that the dividend rate paid per annum on the Class B Common Stock equals or exceeds the dividend rate per annum paid on the Class A Common Stock for any dividend period. The DPT can be changed at any time by the board of directors but will only be effective for dividends paid at least 90 days after the date members are notified by the FHLBank. The DPT effective for dividends paid during 2012, 2011 and 2010 was equal to the average overnight Federal funds effective rate minus 100 basis points. This DPT will continue to be effective until such time as it may be changed by the FHLBank’s board of directors. When the overnight Federal funds effective rate is below 1.00 percent, the DPT is zero percent for that dividend period (DPT is floored at zero).

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The board of directors cannot declare a dividend if: (1) the FHLBank’s capital position is below its minimum regulatory capital requirements; (2) the FHLBank’s capital position will be below its minimum regulatory capital requirements after paying the dividend; (3) the principal or interest due on any consolidated obligation of the FHLBank has not been paid in full; (4) the FHLBank fails to provide the Finance Agency the quarterly certification prior to declaring or paying dividends for a quarter; or (5) the FHLBank fails to provide notification upon its inability to provide such certification or upon a projection that it will fail to comply with statutory or regulatory liquidity requirements or will be unable to timely and fully meet all of its current obligations.

Restricted Retained Earnings: Effective February 28, 2011, the FHLBank entered into a JCE Agreement with the other 11 FHLBanks. The JCE Agreement is intended to enhance the capital position of each FHLBank and allocates that portion of each FHLBank’s earnings historically paid to satisfy its REFCORP obligation to a separate retained earnings account at that FHLBank. See Note 12 for a discussion of the calculation of the REFCORP assessment and satisfaction of that liability.

The JCE Agreement provides that, upon satisfaction of the FHLBanks’ obligations to REFCORP, each FHLBank will, on a quarterly basis, allocate at least 20 percent of its net income to a separate restricted retained earnings account (RRE Account) until the balance of that account equals at least one percent of that FHLBank’s average balance of outstanding consolidated obligations for the previous quarter. These restricted retained earnings are not available to pay dividends.

Mandatorily Redeemable Capital Stock: The FHLBank is a cooperative whose members and former members own all of the FHLBank’s capital stock. Member shares cannot be purchased or sold except between the FHLBank and its members at its $100 per share par value. If a member cancels its written notice of redemption or notice of withdrawal, the FHLBank will reclassify mandatorily redeemable capital stock from a liability to equity. After the reclassification, dividends on the capital stock would no longer be classified as interest expense.

The following table provides the related dollar amounts for activities recorded in “Mandatorily redeemable capital stock” during the years ended December 31, 2012, 2011 and 2010 (in thousands):

	2012		2011		2010
Balance at beginning of period	$	8,369	$	19,550	$	22,437
Capital stock subject to mandatory redemption reclassified from equity during the period		381,687		301,438		279,036
Capital stock previously subject to mandatory redemption reclassified to equity		(4)		(90)		-
Redemption or repurchase of mandatorily redeemable capital stock during the period		(384,425)		(312,698)		(282,202)
Stock dividend classified as mandatorily redeemable capital stock during the period		38		169		279
Balance at end of period	$	5,665	$	8,369	$	19,550

The Finance Agency issued a regulatory interpretation confirming that the mandatorily redeemable capital stock accounting treatment for certain shares of FHLBank capital stock does not affect the definition of regulatory capital for purposes of determining the FHLBank’s compliance with its regulatory capital requirements, calculating its mortgage securities investment authority (various percentages of total FHLBank capital depending on the date acquired), calculating its unsecured credit exposure to other GSEs (100 percent of total FHLBank capital) or calculating its unsecured credit limits to other counterparties (various percentages of total FHLBank capital depending on the rating of the counterparty).

The following table shows the amount of mandatorily redeemable capital stock by contractual year of redemption as of December 31, 2012 and 2011 (in thousands). The year of redemption in the table is the end of the redemption period in accordance with the FHLBank’s capital plan. The FHLBank is not required to redeem or repurchase membership stock until six months (Class A Common Stock) or five years (Class B Common Stock) after the FHLBank receives notice for withdrawal. Additionally, the FHLBank is not required to redeem or repurchase activity-based stock until any activity-based stock becomes excess stock as a result of an activity no longer remaining outstanding. However, the FHLBank intends to repurchase the excess activity-based stock of non-members to the extent that it can do so and still meet its regulatory capital requirements.

Contractual Year of Repurchase	12/31/2012		12/31/2011
Year 1	$	-	$	-
Year 2		1		-
Year 3		303		769
Year 4		-		303
Year 5		-		-
Past contractual redemption date due to remaining activity1		5,361		7,297
TOTAL	$	5,665	$	8,369

__________

1 Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because there is activity outstanding to which the mandatorily redeemable capital stock relates.

A member may cancel or revoke its written redemption request prior to the end of the redemption period (six months for Class A Common Stock and five years for Class B Common Stock) or its written notice of withdrawal from membership prior to the end of a six-month period starting on the date the FHLBank received the member’s written notice of withdrawal from membership. At the end of the six-month period, the member’s membership is terminated and the Class A Common Stock held to meet its Asset-based Stock Purchase Requirement will be redeemed by the FHLBank, as long as the FHLBank will continue to meet its regulatory capital requirements and as long as the Class A Common Stock is not needed to meet the former member’s Activity-based Stock Purchase Requirements. The FHLBank’s capital plan provides that the FHLBank will charge the member a cancellation fee in accordance with a schedule where the amount of the fee increases with the passage of time, the fee being 1.0 percent for any Class A Common Stock cancellation and starting at 1.0 percent in year one for Class B Common Stock and increasing by 1.0 percent each year to a maximum of 5.0 percent for cancellations in the fifth year for Class B Common Stock. During 2012, the FHLBank’s Board of Directors terminated the memberships of two members after their placement into Federal Deposit Insurance Corporation (FDIC) receivership. During 2011, the FHLBank’s Board of Directors terminated the memberships of eight members after their placement into FDIC receivership. During 2010, the FHLBank’s Board of Directors terminated the memberships of four members after their placement into FDIC receivership and one member after it was closed by the National Credit Union Administration. As of December 31, 2012, the balance of mandatorily redeemable capital stock represented two former members in FDIC receivership and eight out-of-district mergers.

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Excess Capital Stock: Excess capital stock is defined as the amount of stock held by a member (or former member) in excess of that institution’s minimum stock purchase requirement. Finance Agency rules limit the ability of the FHLBank to create member excess stock under certain circumstances. The FHLBank may not pay dividends in the form of capital stock or issue new excess stock to members if the FHLBank’s excess stock exceeds one percent of its total assets or if the issuance of excess stock would cause the FHLBank’s excess stock to exceed one percent of its total assets. As of December 31, 2012, the FHLBank’s excess stock was less than one percent of total assets.

Capital Classification Determination:The Finance Agency implemented the prompt corrective action (PCA) provisions of the Housing and Economic Recovery Act of 2008. The rule established four capital classifications (i.e., adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized) for FHLBanks and implemented the PCA provisions that apply to FHLBanks that are not deemed to be adequately capitalized. The Finance Agency determines each FHLBank’s capital classification on at least a quarterly basis. If an FHLBank is determined to be other than adequately capitalized, the FHLBank becomes subject to additional supervisory authority by the Finance Agency. Before implementing a reclassification, the Director of the Finance Agency is required to provide the FHLBank with written notice of the proposed action and an opportunity to submit a response. As of the most recent review by the Finance Agency, the FHLBank has been classified as adequately capitalized.

NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes in AOCI for the years ended December 31, 2012, 2011 and 2010 (in thousands):

	Net Non-credit Portion of OTTI Losses on Held-to-maturity Securities		Defined Benefit Pension Plan		Total Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2009	$	(9,719)	$	(2,142)	$	(11,861)
Other comprehensive income (loss)		(9,572)		(1,239)		(10,811)
Balance, December 31, 2010		(19,291)		(3,381)		(22,672)
Other comprehensive income (loss)		(4,468)		(701)		(5,169)
Balance, December 31, 2011		(23,759)		(4,082)		(27,841)
Other comprehensive income (loss)		2,913		(329)		2,584
Balance, December 31, 2012	$	(20,846)	$	(4,411)	$	(25,257)

NOTE 15 – PENSION AND POSTRETIREMENT BENEFIT PLANS

Qualified Defined Benefit Multiemployer Plan: The FHLBank participates in the Pentegra Defined Benefit Plan for Financial Institutions (Pentegra Defined Benefit Plan), a tax-qualified defined-benefit pension plan. The Pentegra Defined Benefit Plan is treated as a multiemployer plan for accounting purposes but operates as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. As a result, certain multiemployer plan disclosures, including certified zone status, are not applicable to the Pentegra Defined Benefit Plan. Under the Pentegra Defined Benefit Plan, contributions made by a participating employer may be used to provide benefits to employees of other participating employers because assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer. Also, in the event a participating employer is unable to meet its contribution requirements, the required contributions for the other participating employers could increase proportionately.

The Pentegra Defined Benefit Plan covers substantially all officers and employees of the FHLBank who began employment prior to January 1, 2009.

The Pentegra Defined Benefit Plan operates on a fiscal year from July 1 through June 30 and files one Form 5500 on behalf of all employers who participate in the plan. The Employer Identification Number is 13-5645888 and the three-digit plan number is 333. There are no collective bargaining agreements in place at the FHLBank.

The Pentegra Defined Benefit Plan’s annual valuation process includes calculating the plan’s funded status and separately calculating the funded status of each participating employer. The funded status is defined as the market value of assets divided by the funding target (100 percent of the present value of all benefit liabilities accrued at that date). As permitted by ERISA, the Pentegra Defined Benefit Plan accepts contributions for the prior plan year up to eight and a half months after the asset valuation date. As a result, the market value of assets at the valuation date (July 1) will increase by any subsequent contributions designated for the immediately preceding plan year ended June 30.

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The most recent Form 5500 available for the Pentegra Defined Benefit Plan is for the year ended June 30, 2011. For the Pentegra Defined Benefit Plan years ended June 30, 2011 and 2010, the FHLBank’s contributions did not represent more than five percent of the total contributions to the Pentegra Defined Benefit Plan. The pension provisions under Moving Ahead for Progress in the 21st Century  (MAP-21), enacted July 6, 2012, changed the discount rate to be used in the valuation of future benefits. The increased rates will decrease the valuation as well as the minimum required contributions. By maintaining a level of funding comparative to prior periods (contributing more than the minimum required contribution), the FHLBank is effectively increasing its funded status in the short-term. The following table presents the net pension cost and funded status of the FHLBank relating to the Pentegra Defined Benefit Plan (amounts in thousands):

	2012			2011			2010
Net pension cost charged to compensation and benefits expense	$	3,419		$	4,864		$	3,829
Pentegra Defined Benefit Plan funded status as of July 11		108.2	%		90.3	%		88.0	%
FHLBank's funded status as of July 1		112.4	%		92.5	%		90.0	%

1 The funded status as of July 1, 2012 using the MAP-21 discount rate is preliminary and may increase because the plan’s participants were permitted to make contributions for the plan year ended June 30, 2012 through March 15, 2013. Contributions made on or before March 15, 2013, and designated for the plan year ended June 30, 2012, will be included in the final valuation as of July 1, 2012. The final funded status as of July 1, 2012 will not be available until the Form 5500 for the plan year July 1, 2012 through June 30, 2013 is filed (this Form 5500 is due to be filed no later than April 2014). The funded status as of July 1, 2011 is preliminary and may increase because the plan’s participants were permitted to make contributions for the plan year ended June 30, 2011 through March 15, 2012. Contributions made on or before March 15, 2012, and designated for the plan year ended June 30, 2011, will be included in the final valuation as of July 1, 2011. The final funded status as of July 1, 2011 will not be available until the Form 5500 for the plan year July 1, 2011 through June 30, 2012 is filed (this Form 5500 is due to be filed no later than April 2013).

Qualified Defined Contribution Plans: The FHLBank also participates in the Pentegra Defined Contribution Plan for Financial Institutions, a tax-qualified, defined contribution pension plan. Substantially all officers and employees of the FHLBank are covered by the plan. The FHLBank contributes a matching amount equal to a percentage of voluntary employee contributions, subject to certain limitations. The FHLBank’s contributions of $840,000, $739,000 and $717,000 to the Pentegra Defined Contribution Plan in 2012, 2011 and 2010, respectively, were charged to compensation and benefits expense.

Nonqualified Supplemental Retirement Plan: The FHLBank maintains a benefit equalization plan (BEP) covering certain senior officers. This non-qualified plan contains provisions for a deferred compensation component and a defined benefit pension component. The BEP is, in substance, an unfunded supplemental retirement plan. The cost of the defined benefit pension component of the BEP charged to compensation and benefits expense was $1,214,000, $1,150,000 and $1,176,000 in 2012, 2011 and 2010, respectively. Compensation and benefits expense and other interest expense include deferred compensation and accrued earnings under the BEP of $305,000, $250,000 and $263,000 in 2012, 2011 and 2010, respectively.

As indicated, the BEP is a supplemental retirement plan for covered retirees. There are no funded plan assets that have been designated to provide for the deferred compensation component or defined benefit pension component of the BEP. The obligations and funding status of the defined benefit portion of the FHLBank’s BEP as of December 31, 2012 and 2011 were as follows (in thousands):

	2012		2011
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	10,603	$	8,988
Service cost		433		373
Interest cost		439		451
Benefits paid		(225)		(229)
Actuarial (gain) loss		661		1,020
Projected benefit obligation at end of year		11,911		10,603
Change in plan assets:
Fair value of plan assets at beginning of year		-		-
Employer contributions		225		229
Benefits paid		(225)		(229)
Fair value of plan assets at end of year		-		-
FUNDED STATUS	$	11,911	$	10,603

Components of the net periodic pension cost for the defined benefit portion of the FHLBank’s BEP for the years ended December 31, 2012, 2011 and 2010 were (in thousands):

	2012		2011		2010
Service cost	$	433	$	373	$	344
Interest cost		439		451		472
Amortization of prior service cost		-		-		(6)
Amortization of net loss		332		319		353
NET PERIODIC POSTRETIREMENT BENEFIT COST	$	1,204	$	1,143	$	1,163

The estimated actuarial (gain) loss that will be amortized from AOCI into net periodic benefits costs over the next fiscal year is $402,000.

The measurement date used to determine the current year’s benefit obligation was December 31, 2012.

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Key assumptions and other information for the actuarial calculations for the defined benefit portion of the FHLBank’s BEP for the years ended December 31, 2012, 2011 and 2010 were (dollar amounts in thousands):

	2012			2011			2010
Discount rate - benefit obligation		3.75	%		4.20	%		5.25	%
Discount rate - net periodic benefit cost		4.20	%		5.25	%		5.75	%
Salary increases		5.06	%		4.92	%		4.97	%
Amortization period (years)		9			7			8
Accumulated benefit obligation	$	9,904		$	8,517		$	7,232

The FHLBank estimates that its required contributions to the defined benefit portion of the FHLBank’s BEP for the year ended December 31, 2013 will be $307,000.

The estimated benefits to be paid by the FHLBank under the defined benefit portion of the BEP for the next five fiscal years and the combined five fiscal years thereafter are provided in the following table (in thousands):

Year ending December 31,	Estimated Benefit Payments
2013	$	307
2014		343
2015		382
2016		429
2017		491
2018 through 2022		3,901

NOTE 16 – FAIR VALUES

The fair value amounts recorded on the Statements of Condition and presented in the note disclosures have been determined by the FHLBank using available market and other pertinent information and reflect the FHLBank’s best judgment of appropriate valuation methods. Although the FHLBank uses its best judgment in estimating the fair value of its financial instruments, there are inherent limitations in any valuation technique. Therefore, the fair values may not be indicative of the amounts that would have been realized in market transactions as of December 31, 2012 and 2011.

Subjectivity of Estimates: Estimates of the fair value of advances with options, mortgage instruments, derivatives with embedded options and consolidated obligation bonds with 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. The use of different assumptions could have a material effect on the fair value estimates.

Fair Value Hierarchy: The FHLBank records trading securities, derivative assets and derivative liabilities at fair value on a recurring basis and on occasion, certain private-label MBS/ABS and non-financial assets on a non-recurring basis. The fair value hierarchy requires the FHLBank to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of the market observability of the fair value measurement for the asset or liability. The FHLBank must disclose the level within the fair value hierarchy in which the measurements are classified for all assets and liabilities.

The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels:

§   Level 1 Inputs – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the FHLBank can access on the measurement date.

§   Level 2 Inputs – Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets and liabilities in active markets; (2) quoted prices for similar assets and liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals and implied volatilities); and (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

§   Level 3 Inputs – Unobservable inputs for the asset or liability.

The FHLBank reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. These reclassifications, if any, are reported as transfers in/out as of the beginning of the quarter in which the changes occur. There were no such transfers during the years ended December 31, 2012 and 2011.

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The carrying value and fair value of the FHLBank’s financial assets and liabilities as of December 31, 2012 and 2011 are summarized in the following tables (in thousands). These values do not represent an estimate of the overall market value of the FHLBank as a going concern, which would take into account future business opportunities and the net profitability of assets and liabilities.

	12/31/2012
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral
Assets:
Cash and due from banks	$	369,997	$	369,997	$	369,997	$	-	$	-	$	-
Interest-bearing deposits		455		455		-		455		-		-
Federal funds sold and securities purchased under agreements to resell		2,849,288		2,849,288		-		2,849,288		-		-
Trading securities		2,764,918		2,764,918		-		2,764,918		-		-
Held-to-maturity securities		5,159,750		5,192,330		-		4,633,792		558,538		-
Advances		16,573,348		16,714,319		-		16,714,319		-		-
Mortgage loans held for portfolio, net of allowance		5,940,517		6,256,905		-		6,256,905		-		-
Accrued interest receivable		77,445		77,445		-		77,445		-		-
Derivative assets		25,166		25,166		-		256,379		-		(231,213)
Liabilities:
Deposits		1,181,957		1,181,957		-		1,181,957		-		-
Consolidated obligation discount notes		8,669,059		8,669,327		-		8,669,327		-		-
Consolidated obligation bonds		21,973,902		22,189,631		-		22,189,631		-		-
Mandatorily redeemable capital stock		5,665		5,665		5,665		-		-		-
Accrued interest payable		81,801		81,801		-		81,801		-		-
Derivative liabilities		123,414		123,414		-		664,992		-		(541,578)
Other Asset (Liability):
Standby letters of credit		(1,039)		(1,039)		-		(1,039)		-		-
Standby bond purchase agreements		588		4,922		-		4,922		-		-

	12/31/2011
	Carrying Value		Fair Value
Assets:
Cash and due from banks	$	116,041	$	116,041
Interest-bearing deposits		42		42
Federal funds sold		1,040,000		1,040,000
Trading securities		4,559,163		4,559,163
Held-to-maturity securities		4,977,332		4,967,585
Advances		17,394,399		17,564,068
Mortgage loans held for portfolio, net of allowance		4,933,332		5,184,775
Accrued interest receivable		85,666		85,666
Derivative assets		14,038		14,038
Liabilities:
Deposits		997,371		997,371
Consolidated obligation discount notes		10,251,108		10,250,885
Consolidated obligation bonds		19,894,483		20,195,131
Overnight loans from other FHLBanks		35,000		35,000
Mandatorily redeemable capital stock		8,369		8,369
Accrued interest payable		96,237		96,237
Derivative liabilities		140,213		140,213
Other Asset (Liability):
Standby letters of credit		(1,401)		(1,401)
Standby bond purchase agreements		384		2,788

Fair Value Methodologies and Techniques and Significant Inputs:

Cash and Due From Banks: The fair values approximate the carrying values.

Interest-bearing Deposits: The balance is comprised of interest-bearing deposits in banks. Based on the nature of the accounts, the carrying value approximates the fair value.

Federal Funds Sold: The carrying value of overnight Federal funds approximates fair value, and term Federal funds are valued using projected future cash flows discounted at the current replacement rate.

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Securities Purchased Under Agreements to Resell: The balance is comprised of overnight collateralized borrowings. The carrying value approximates fair value.

Investment Securities – non-MBS: The fair values of short-term non-MBS investments are determined using an income approach based on the LIBOR swap interest rate curve, adjusted for a spread, which may be based on unobservable information. Differing spreads may be applied to distinct term points along the discount curve in determining the fair values of instruments with varying maturities.

For non-MBS long-term (as determined by original issuance date) securities, the FHLBank obtains prices from up to four designated third-party pricing vendors when available. The pricing vendors use various proprietary models to price investments. The inputs to those models are derived from various sources including, but not limited to: benchmark yields, reported trades, dealer estimates, issuer spreads, benchmark securities, bids, offers and other market-related data. Each pricing vendor has an established challenge process in place for all valuations, which facilitates resolution of potentially erroneous prices identified by the FHLBank. The use of multiple pricing vendors provides the FHLBank with additional data points regarding levels of inputs and final prices that are used to validate final pricing of investment securities.The utilization of the average of available vendor prices within a cluster tolerance and the evaluation of reasonableness of outlier prices described below does not discard available information.

Periodically, the FHLBank conducts reviews of the four pricing vendors to confirm and further augment its understanding of the vendors’ pricing processes, methodologies and control procedures. The FHLBank’s review process includes obtaining available vendors’ independent auditors’ reports regarding the internal controls over their valuation process, although the availability of pertinent reports varies by vendor.

The FHLBank utilizes a valuation technique for estimating the fair values of non-MBS long-term securities as follows:

§   The FHLBank’s valuation technique first requires the establishment of a median price for each security. If four prices are received, the average of the middle two 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 some type of validation.

§   All prices that are within a specified tolerance threshold of the median price are included in the cluster of prices that are averaged to compute a default price.

§   Prices that are outside the threshold (outliers) are subject to further analysis (including, but not limited to, comparison to prices provided by an additional third-party valuation service, prices for similar securities, and/or non-binding dealer estimates) to determine if an outlier is a better estimate of fair value.

§   If an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair value, then the outlier (or the other price as appropriate) is used as the final price rather than the default price.

§   If, on the other hand, the analysis confirms that an outlier (or outliers) is (are) in fact not representative of fair value and the default price is the best estimate, then the default price is used as the final price. In all cases, the final price is used to determine the fair value of the security.

§   If all prices received for a security are outside the tolerance threshold level of the median price, then there is no default price, and the final price is determined by an evaluation of all outlier prices as described above.

As of December 31, 2012, four prices were received for substantially all of the FHLBank’s non-MBS long-term holdings with most vendor prices falling within the tolerances so the final prices for those securities were computed by averaging the prices received. Based on the FHLBank’s reviews of the pricing methods and controls employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or, in those instances in which there were outliers, the FHLBank’s additional analyses), the FHLBank has concluded that its final prices result in reasonable estimates of fair value and that the fair value measurements are classified appropriately in the fair value hierarchy. Based on the significant lack of market activity for state or local housing agency obligations, the fair value measurements for those securities were classified as Level 3 within the fair value hierarchy as of December 31, 2012.

Investment Securities – MBS/ABS: For MBS/ABS securities, the FHLBank obtains prices from up to four designated third-party pricing vendors when available. These pricing vendors use various proprietary models to price investments. The inputs to those models are derived from various sources including, but not limited to: benchmark yields, reported trades, dealer estimates, issuer spreads, benchmark securities, bids, offers and other market-related data (certain inputs are actively quoted and can be validated to external sources). Since many MBS/ABS are not traded on a daily basis, the pricing vendors use available information as applicable such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to determine the prices for individual securities.Each pricing vendor has an established challenge process in place for all valuations, which facilitates resolution of potentially erroneous prices identified by the FHLBank. The use of multiple pricing vendors provides the FHLBank with additional data points regarding levels of inputs and final prices that are used to validate final pricing of investment securities. The utilization of the average of available vendor prices within a cluster tolerance and the evaluation of reasonableness of outlier prices does not discard available information.

Similar to the description above for non-MBS long-term securities, the FHLBank has conducted reviews of the four pricing vendors and has established a price for each MBS/ABS using a formula that was based upon the number of prices received, subject to review of outliers. As an additional step, the FHLBank reviewed the final fair value estimates of its private-label MBS/ABS holdings as of December 31, 2012 for reasonableness using an implied yield test. The FHLBank calculated an implied yield for each of its private-label MBS/ABS using the estimated fair value derived from the process described above and the security’s projected cash flows from the FHLBank’s OTTI process and compared such yield to the yield for comparable securities according to dealers and other third-party sources to the extent comparable yield data was available. This analysis did not indicate that any adjustments to the fair value estimates were necessary.

As of December 31, 2012, four vendor prices were received for substantially all of the FHLBank’s MBS/ABS holdings with most vendor prices falling within the tolerances so the final prices for those securities were computed by averaging the prices received. Based on the FHLBank’s reviews of the pricing methods and controls employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or, in those instances in which there were outliers or significant yield variances, the FHLBank’s additional analyses), the FHLBank has concluded that its final prices result in reasonable estimates of fair value and that the fair value measurements are classified appropriately in the fair value hierarchy. Based on the significant lack of market activity for private-label MBS/ABS, the fair value measurements for those securities were classified as Level 3 within the fair value hierarchy as of December 31, 2012 and 2011.

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Advances: The fair values of advances are determined by calculating the present values of the expected future cash flows from the advances, excluding the amount of accrued interest receivable. The discount rates used in these calculations are equivalent to the replacement advance rates for advances with similar terms.

The inputs used to determine the fair values of advances are as follows:

§   CO Curve and LIBOR Curve. The Office of Finance constructs an internal curve, referred to as the CO Curve, using the U.S. Treasury Curve as a base curve that is then adjusted by adding indicative spreads obtained from market observable sources. These market indications are generally derived from pricing indications from dealers, historical pricing relationships, recent GSE trades and secondary market activity. The CO Curve is used for fixed rate callable and non-callable advances. The LIBOR Curve is used for variable rate advances and certain fixed rate advances with other optionality.

§   Volatility assumption. To estimate the fair values of advances with optionality, the FHLBank uses market-based expectations of future interest rate volatility implied from current market prices for similar options.

§   Spread adjustment. Represents an adjustment to the CO Curve or LIBOR Curve.

In accordance with Finance Agency regulations, an advance with a maturity or repricing period greater than six months requires a prepayment fee sufficient to make the FHLBank financially indifferent to the borrower’s decision to prepay the advance. Therefore, the fair value of an advance does not assume prepayment risk. The FHLBank did not adjust the fair value measurement for creditworthiness primarily because advances were fully collateralized.

Mortgage Loans Held for Portfolio:The fair values of mortgage loans are determined based on quoted market prices of similar mortgage loans. These prices, however, can change rapidly based upon market conditions and are highly dependent upon the underlying prepayment assumptions.

Accrued Interest Receivable and Payable:The fair values approximate the carrying values.

Derivative Assets/Liabilities: The FHLBank bases the fair values of derivatives on instruments with similar terms or available market prices, when available. However, active markets do not exist for many of the FHLBank’s derivatives. Consequently, fair values for these instruments are generally estimated using standard valuation techniques such as discounted cash flow analysis and comparisons to similar instruments. The FHLBank is subject to credit risk in derivative transactions because of the potential nonperformance by the derivative counterparties, which are generally highly-rated institutions. To mitigate this risk, the FHLBank enters into master netting agreements for derivative agreements with its derivative counterparties. In addition, the FHLBank has entered into bilateral security agreements with all active derivative dealer counterparties. These agreements provide for delivery of collateral at specified levels tied to counterparty credit ratings to limit the FHLBank’s net unsecured credit exposure to these counterparties. The FHLBank has evaluated the potential for the fair value of the instruments to be impacted by counterparty credit risk and its own credit risk and has determined that no adjustments were significant or necessary to the overall fair value measurements of derivatives.

The fair values of the FHLBank’s derivative assets and liabilities include accrued interest receivable/payable and cash collateral remitted to/received from counterparties. The estimated fair values of the accrued interest receivable/payable and cash collateral approximate their carrying values due to their short-term nature. The derivative fair values are netted by counterparty pursuant to the provisions of the master netting agreements. If these netted amounts are positive, they are classified as an asset and, if negative, a liability.

The discounted cash flow model uses market-observable inputs. Inputs by class of derivative are as follows:

§   Interest-rate related:

·   Prior to December 31, 2012, the FHLBank utilized the LIBOR Swap Curve to estimate the fair value of its interest-related derivatives. During the fourth quarter of 2012, the FHLBank observed an increasing trend in the use of the Overnight-index Swap (OIS) Curve by other market participants to value collateralized derivative contracts. The FHLBank performed an assessment of market participants and determined the OIS Curve was the appropriate curve to be used for valuation of its collateralized interest rate derivatives. As such, effective December 31, 2012, the FHLBank utilized the OIS Curve to estimate the fair value of its interest-related derivatives, which did not have a material impact on the fair values;

·   Volatility assumptions - market-based expectations of future interest rate volatility implied from current market prices for similar options; and

·   Prepayment assumptions.

§   Mortgage delivery commitments:

·   To be announced (TBA) price - market-based prices of TBAs by coupon class and expected term until settlement.

Deposits: The fair values of deposits are determined by calculating the present values of the expected future cash flows from the deposits. The calculated present values are reduced by the accrued interest payable. The discount rates used in these calculations are the cost of deposits with similar terms.

Consolidated Obligations: The fair values for consolidated obligation bonds and discount notes are determined by using standard valuation techniques and inputs based on the cost of raising comparable term debt.

The inputs used to determine the fair values of consolidated obligations are as follows:

§   CO Curve and LIBOR Curve. Fixed rate consolidated obligations that do not contain options are discounted using a replacement rate based on the CO Curve. Variable rate consolidated obligations that do not contain options are discounted using LIBOR. Consolidated obligations that contain optionality are discounted using LIBOR.

§   Volatility assumption. To estimate the fair values of consolidated obligations with optionality, the FHLBank uses market-based expectations of future interest rate volatility implied from current market prices for similar options.

Overnight Loans from Other FHLBanks: The carrying value approximates fair value.

Mandatorily Redeemable Capital Stock: The fair value of capital stock subject to mandatory redemption is generally at par value. Fair value also includes estimated dividends earned at the time of reclassification from equity to liabilities, until such amount is paid, and any subsequently declared stock dividend. The FHLBank’s dividends are declared and paid at each quarter end; therefore, fair value equaled par value as of the end of the periods presented. Stock can only be acquired by members at par value and redeemed or repurchased at par value. Stock is not traded and no market mechanism exists for the exchange of stock outside the cooperative structure.

Standby Letters of Credit: The fair values of standby letters of credit are based on the present value of fees currently charged for similar agreements. The value of these guarantees is recognized and recorded in other liabilities.

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Standby Bond Purchase Agreements: The fair values of the standby bond purchase agreements are estimated using the present value of the future fees on existing agreements with fees determined using rates currently charged for similar agreements.

Fair Value Measurements: The following table presents, for each hierarchy level, the FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of December 31, 2012 (in thousands). The FHLBank measures certain held-to-maturity securities at fair value on a nonrecurring basis due to the recognition of a credit loss. For held-to-maturity securities that had credit impairment recorded at period end for which no total impairment was recorded (the full amount of additional credit impairment was a reclassification from non-credit impairment previously recorded in AOCI), these securities were recorded at their carrying values and not fair value. Real estate owned is measured at fair value when the asset’s fair value less costs to sell is lower than its carrying amount.

	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
Commercial paper	$	59,996	$	-	$	59,996	$	-	$	-
Certificates of deposit		325,006		-		325,006		-		-
Government-sponsored enterprise obligations2,3		2,126,327		-		2,126,327		-		-
U.S. obligation residential MBS4		1,277		-		1,277		-		-
Government-sponsored enterprise residential MBS5		252,312		-		252,312		-		-
Total trading securities		2,764,918		-		2,764,918		-		-
Derivative assets:
Interest-rate related		25,064		-		256,277		-		(231,213)
Mortgage delivery commitments		102		-		102		-		-
Total derivative assets		25,166		-		256,379		-		(231,213)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	2,790,084	$	-	$	3,021,297	$	-	$	(231,213)
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	123,318	$	-	$	664,896	$	-	$	(541,578)
Mortgage delivery commitments		96		-		96		-		-
Total derivative liabilities		123,414		-		664,992		-		(541,578)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	123,414	$	-	$	664,992	$	-	$	(541,578)
Nonrecurring fair value measurements - Assets:
Real estate owned6		540		-		-		540		-
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	540	$	-	$	-	$	540	$	-

1 Represents the effect of legally enforceable master netting agreements that allow the FHLBank to net settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same counterparties.

2 Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit, and Farmer Mac. GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

3 See Note 19 for transactions with other FHLBanks.

4 Represents MBS issued by Ginnie Mae, which are guaranteed by the U.S. government.

5 Represents MBS issued by Fannie Mae and Freddie Mac.

6 Includes real estate owned written down to fair value during the quarter ended December 31, 2012 and still outstanding as of December 31, 2012.

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The following table presents, for each hierarchy level, the FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of December 31, 2011 (in thousands):

	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
Commercial paper	$	599,482	$	-	$	599,482	$	-	$	-
Certificates of deposit		1,019,520		-		1,019,520		-		-
TLGP obligations2		494,236		-		494,236		-		-
Government-sponsored enterprise obligations3,4		2,098,844		-		2,098,844		-		-
U.S. obligation residential MBS5		1,380		-		1,380		-		-
Government-sponsored enterprise residential MBS6		345,701		-		345,701		-		-
Total trading securities		4,559,163		-		4,559,163		-		-
Derivative assets:
Interest-rate related		13,195		-		343,162		-		(329,967)
Mortgage delivery commitments		843		-		843		-		-
Total derivative assets		14,038		-		344,005		-		(329,967)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	4,573,201	$	-	$	4,903,168	$	-	$	(329,967)
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	140,213	$	-	$	769,004	$	-	$	(628,791)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	140,213	$	-	$	769,004	$	-	$	(628,791)
Nonrecurring fair value measurements - Assets:
Held-to-maturity securities7:
Private-label residential MBS	$	10,453	$	-	$	-	$	10,453	$	-
Real estate owned8		1,067		-		-		1,067		-
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	11,520	$	-	$	-	$	11,520	$	-

1 Represents the effect of legally enforceable master netting agreements that allow the FHLBank to net settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same counterparties.

2 Represents corporate debentures guaranteed by FDIC under the TLGP.

3 Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit, and Farmer Mac. GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

4 See Note 19 for transactions with other FHLBanks.

5 Represents MBS issued by Ginnie Mae, which are guaranteed by the U.S. government.

6 Represents MBS issued by Fannie Mae and Freddie Mac.

7 Excludes impaired securities with carrying values less than their fair values at date of impairment.

8  Includes real estate owned written down to fair value during the quarter ended December 31, 2011 and still outstanding as of December 31, 2011.

NOTE 17 – COMMITMENTS AND CONTINGENCIES

Joint and Several Liability: As provided by the Bank Act or Finance Agency regulation and as described in Note 10, consolidated obligations are backed only by the financial resources of the FHLBanks. FHLBank Topeka is jointly and severally liable with the other 11 FHLBanks for the payment of principal and interest on all of the consolidated obligations issued by the FHLBanks. The par amounts for which FHLBank Topeka is jointly and severally liable were approximately $657,444,451,000 and $661,970,528,000 as of December 31, 2012 and 2011, respectively. To the extent that an FHLBank makes any consolidated obligation payment on behalf of another FHLBank, the paying FHLBank is entitled to reimbursement from the FHLBank with primary liability. However, if the Finance Agency determines that the primary obligor is unable to satisfy its obligations, then the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis that the Finance Agency may determine. No FHLBank has ever failed to make any payment on a consolidated obligation for which it was the primary obligor. As a result, the regulatory provisions for directing other FHLBanks to make payments on behalf of another FHLBank or allocating the liability among other FHLBanks have never been invoked.

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The joint and several obligations are mandated by Finance Agency regulations and are not the result of arms-length transactions among the FHLBanks. As described above, the FHLBanks have no control over the amount of the guaranty or the determination of how each FHLBank would perform under the joint and several liability. Because the FHLBanks are subject to the authority of the Finance Agency as it relates to decisions involving the allocation of the joint and several liability for the FHLBank’s consolidated obligations, FHLBank Topeka regularly monitors the financial condition of the other 11 FHLBanks to determine whether it should expect a loss to arise from its joint and several obligations. If the FHLBank were to determine that a loss was probable and the amount of such loss could be reasonably estimated, the FHLBank would charge to income the amount of the expected loss. Based upon the creditworthiness of the other 11 FHLBanks as of December 31, 2012, FHLBank Topeka has concluded that a loss accrual is not necessary at this time.

Off-balance Sheet Commitments: As of December 31, 2012 and 2011, off-balance sheet commitments were as follows (in thousands):

	12/31/2012						12/31/2011
Notional Amount	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	$	2,533,506	$	21,332	$	2,554,838	$	2,728,450	$	29,777	$	2,758,227
Commitments for standby bond purchases		532,028		1,065,176		1,597,204		99,737		1,438,939		1,538,676
Commitments to fund or purchase mortgage loans		106,355		-		106,355		119,945		-		119,945
Commitments to issue consolidated bonds, at par		165,000		-		165,000		160,000		-		160,000

Commitments to Extend Credit: Standby letters of credit are executed for members for a fee. A standby letter of credit is a short-term financing arrangement between the FHLBank and its member or non-member housing associate. If the FHLBank is required to make payment for a beneficiary’s draw, these amounts are converted into a collateralized advance to the member. As of December 31, 2012, outstanding standby letters of credit had original terms of 3 days to 10 years with a final expiration in 2020. As of December 31, 2011, outstanding standby letters of credit had original terms of 5 days to 10 years with a final expiration in 2020. Unearned fees as well as the value of the guarantees related to standby letters of credit are recorded in other liabilities and amounted to $1,039,000 and $1,401,000 as of December 31, 2012 and 2011, respectively. The standby letters of credit are fully collateralized with assets allowed by the FHLBank’s MPP. Based upon management’s credit analysis of members and collateral requirements under the MPP, the FHLBank does not expect to incur any credit losses on the letters of credit. The fair values of standby letters of credit as of December 31, 2012 and 2011 are reported in Note 16.

Standby Bond-Purchase Agreements: The FHLBank has entered into standby bond purchase agreements with state housing authorities whereby the FHLBank, for a fee, agrees to purchase and hold the authorities’ bonds until the designated marketing agent can find a suitable investor or the housing authority repurchases the bond according to a schedule established by the standby agreement. Each standby agreement dictates the specific terms that would require the FHLBank to purchase the bond. The bond purchase commitments entered into by the FHLBank expire no later than 2015, though some are renewable at the option of the FHLBank. As of December 31, 2012, the total commitments for bond purchases were with two in-district and one out-of-district state housing authorities. As of December 31, 2011, the total commitments for bond purchases were with the same two in-district state housing authorities. The FHLBank was not required to purchase any bonds under these agreements during the years ended December 31, 2012 and 2011. The fair values of standby bond purchase agreements as of December 31, 2012 and 2011 are reported in Note 16.

Commitments to Fund or Purchase Mortgage Loans: These commitments that unconditionally obligate the FHLBank to fund/purchase mortgage loans from participating FHLBank Topeka members in the MPF Program are generally for periods not to exceed 60 calendar days. Certain commitments are recorded as derivatives at their fair values on the Statements of Condition. The FHLBank recorded mortgage delivery commitment net derivative asset balances of $6,000 and $843,000 as of December 31, 2012 and 2011, respectively.

Lease Commitments: Net rental costs under operating leases of approximately $110,000, $116,000 and $104,000 in 2012, 2011 and 2010, respectively, for premises and equipment have been charged to other operating expenses. Future minimum net rentals are summarized in the following table (in thousands):

Year	Premises		Equipment		Total
2013	$	50	$	63	$	113
2014		45		63		108
2015		45		10		55
2016		45		2		47
2017		19		-		19
Thereafter		-		-		-
TOTAL	$	204	$	138	$	342

Safekeeping Custodial Arrangements: The FHLBank acts as a securities safekeeping custodian on behalf of participating members. Actual securities are held by a third-party custodian acting as agent for the FHLBank. As of December 31, 2012, the total original par value of customer securities held by the FHLBank under this arrangement was $31,164,412,000.

Other commitments and contingencies are discussed in Notes 1, 5, 6, 7, 8, 10, 11, 13, 14 and 15.

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NOTE 18 – TRANSACTIONS WITH STOCKHOLDERS AND HOUSING ASSOCIATES

The FHLBank is a cooperative whose members own the capital stock of the FHLBank and generally receive dividends on their investments. In addition, certain former members that still have outstanding transactions are also required to maintain their investments in FHLBank capital stock until the transactions mature or are paid off. Nearly all outstanding advances are with current members, and the majority of outstanding mortgage loans held for portfolio were purchased from current or former members. The FHLBank also maintains demand deposit accounts for members primarily to facilitate settlement activities that are directly related to advances and mortgage loan purchases.

As provided by statute, the FHLBank’s members have the right to vote on the election of directors. In accordance with the Bank Act and Finance Agency regulations, members elect all of the FHLBank’s board of directors. Under the statute and regulations, each member directorship is designated to one of the four states in the FHLBank’s district, and a member is entitled to vote only for candidates for the state in which the member’s principal place of business is located. Each independent director is elected by the members at large from among individuals nominated by the FHLBank’s board of directors. A member is entitled to cast, for each applicable directorship, one vote for each share of capital stock that the member is required to hold as of the record date for voting, subject to a statutory limitation. Under this limitation, the total number of votes that a member may cast is limited to the average number of shares of the FHLBank’s capital stock that were required to be held by all members in that state as of the record date for voting. Non-member stockholders are not entitled to cast votes for the election of directors. As of December 31, 2012 and 2011, no member owned more than 10 percent of the voting interests of the FHLBank due to the statutory limitation on members’ voting rights as discussed above.

Transactions with members are entered into in the ordinary course of business. In instances where members also have officers or directors who are directors of the FHLBank, transactions with those members are subject to the same eligibility and credit criteria, as well as the same terms and conditions, as other transactions with members. For financial reporting and disclosure purposes, the FHLBank defines related parties as FHLBank directors’ financial institutions and members with capital stock investments in excess of 10 percent of the FHLBank’s total regulatory capital stock outstanding, which includes mandatorily redeemable capital stock.

Activity with Members that Exceed a 10 Percent Ownership in FHLBank Capital Stock: The following tables present information as of December 31, 2012 on members that owned more than 10 percent of outstanding FHLBank regulatory capital stock in 2012 (amounts in thousands). None of the officers or directors of these members currently serve on the FHLBank’s board of directors. As of December 31, 2011, no members owned more than 10 percent of FHLBank regulatory capital stock.

12/31/2012
Member Name	State	Total Class A Stock Par Value		Percent of Total  Class A			Total Class B Stock  Par Value		Percent  of Total  Class B			Total Capital Stock  Par Value		Percent of Total Capital Stock
MidFirst Bank	OK	$	500		0.1	%	$	145,727		16.9	%	$	146,227		11.5	%
Capitol Federal Savings Bank	KS		2,002		0.5			128,782		15.0			130,784		10.3
TOTAL		$	2,502		0.6	%	$	274,509		31.9	%	$	277,011		21.8	%

Advance and deposit balances with members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of December 31, 2012 are summarized in the following table (amounts in thousands).

	12/31/2012					12/31/2012
Member Name	Outstanding Advances		Percent of Total			Outstanding Deposits		Percent of Total
MidFirst Bank	$	2,898,000		18.0	%	$	13		-	%
Capitol Federal Savings Bank		2,550,000		15.8			1,247		0.1
TOTAL	$	5,448,000		33.8	%	$	1,260		0.1	%

MidFirst Bank and Capitol Federal Savings Bank did not originate any mortgage loans for or sell mortgage loans into the MPF Program during the year ended December 31, 2012.

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Transactions with FHLBank Directors’ Financial Institutions: The following tables present information as of December 31, 2012 and 2011 for members that had an officer or director serving on the FHLBank’s board of directors in 2012 or 2011 (in thousands). Information is only listed for the year in which the officer or director served on the FHLBank’s board of directors. Capital stock listed is regulatory capital stock, which includes mandatorily redeemable capital stock.

12/31/2012
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A			Total Class B Stock Par Value		Percent of Total Class B			Total Capital Stock Par Value		Percent of Total Capital Stock
FirstBank	CO	$	500		0.1	%	$	5,700		0.7	%	$	6,200		0.5	%
Girard National Bank	KS		623		0.2			3,728		0.4			4,351		0.3
Golden Belt Bank, FSA	KS		1,192		0.3			2,143		0.3			3,335		0.3
Vision Bank, NA	OK		2,000		0.5			956		0.1			2,956		0.2
First State Bank Nebraska	NE		510		0.1			1,715		0.2			2,225		0.2
Morgan Federal Bank	CO		907		0.2			1,162		0.1			2,069		0.2
NebraskaLand National Bank	NE		961		0.2			754		0.1			1,715		0.1
Citizens Bank & Trust Co.	OK		931		0.2			51		-			982		0.1
Bankers' Bank of Kansas, NA	KS		270		0.1			2		-			272		-
TOTAL		$	7,894		1.9	%	$	16,211		1.9	%	$	24,105		1.9	%

12/31/2011
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A			Total Class B Stock Par Value		Percent of Total Class B			Total Capital Stock Par Value		Percent of Total Capital Stock
Girard National Bank	KS	$	995		0.2	%	$	3,204		0.4	%	$	4,199		0.3	%
Vision Bank, NA	OK		3,757		0.7			53		-			3,810		0.3
FirstBank	CO		3,260		0.6			55		-			3,315		0.3
Golden Belt Bank, FSA	KS		1,376		0.2			1,886		0.3			3,262		0.2
First State Bank Nebraska	NE		955		0.2			1,228		0.2			2,183		0.2
Morgan Federal Bank	CO		896		0.2			1,130		0.1			2,026		0.1
Security State Bank	NE		279		-			1,663		0.2			1,942		0.1
Citizens Bank & Trust Co.	OK		927		0.2			51		-			978		0.1
Bankers' Bank of Kansas, NA	KS		270		-			1		-			271		-
TOTAL		$	12,715		2.3	%	$	9,271		1.2	%	$	21,986		1.6	%

Advance and deposit balances with members that had an officer or director serving on the FHLBank’s board of directors as of December 31, 2012 and 2011 are summarized in the following table (amounts in thousands). Information is only listed for the year in which the officer or director served on the FHLBank’s board of directors.

	12/31/2012					12/31/2011					12/31/2012					12/31/2011
Member Name	Outstanding Advances		Percent of Total			Outstanding Advances		Percent of Total			Outstanding Deposits		Percent of Total			Outstanding Deposits		Percent of Total
FirstBank	$	38,000		0.2	%	$	-		-	%	$	7,252		0.6	%	$	98		-	%
Girard National Bank		37,514		0.2			38,609		0.2			2,333		0.2			3,149		0.3
Golden Belt Bank, FSA		10,887		0.1			10,974		0.1			3,247		0.3			2,347		0.3
Vision Bank, NA		23,543		0.2			18,169		0.1			781		0.1			95		-
First State Bank Nebraska		33,867		0.2			30,914		0.2			866		0.1			117		-
Morgan Federal Bank		11,800		0.1			14,933		0.1			6,224		0.5			2,071		0.2
NebraskaLand National Bank		11,000		0.1								76		-
Citizens Bank & Trust Co.		1,000		-			2,000		-			110		-			127		-
Bankers' Bank of Kansas, NA		1,975		-			1,975		-			13		-			9		-
Security State Bank							5,792		-								2,134		0.2
TOTAL	$	169,586		1.1	%	$	123,366		0.7	%	$	20,902		1.8	%	$	10,147		1.0	%

F-48

The following table presents mortgage loans funded or acquired during the years ended December 31, 2012 and 2011 for members that had an officer or director serving on the FHLBank’s board of directors in 2012 or 2011 (amounts in thousands). Information is only listed for the year in which the officer or director served on the FHLBank’s board of directors.

	12/31/2012					12/31/2011
Member Name	Total Mortgage Loans		Percent of Total			Total Mortgage Loans		Percent of Total
FirstBank	$	152,817		6.1	%	$	-		-	%
Girard National Bank		28,000		1.1			22,719		1.4
Golden Belt Bank, FSA		32,083		1.3			25,021		1.6
Vision Bank, NA		6,498		0.3			-		-
First State Bank Nebraska		15,569		0.6			5,434		0.4
Morgan Federal Bank		9,976		0.4			8,800		0.6
NebraskaLand National Bank		12,427		0.5
Citizens Bank & Trust Co		-		-			1,531		0.1
Bankers Bank of Kansas, NA		-		-			-		-
Security State Bank							23,886		1.5
TOTAL	$	257,370		10.3	%	$	87,391		5.6	%

Direct Financing Lease: During 2002, the FHLBank entered into a 20-year direct financing lease with a member for a building complex and property. Either party has the option to terminate this lease after 15 years. The net investment in the direct financing lease with the member is recorded in other assets. The FHLBank’s $7,896,000 up-front payment for its portion of the building complex is recorded in premises, software and equipment. On October 31, 2005, the FHLBank amended its lease to occupy additional building space, thereby reducing the portion of the property previously leased back to the member and decreasing the member’s future lease payments. All other provisions of the original lease remain in effect. The net reduction in the lease receivable is recorded in premises, software and equipment.

NOTE 19 – TRANSACTIONS WITH OTHER FHLBANKS

FHLBank Topeka had the following business transactions with other FHLBanks during the years ended December 31, 2012, 2011 and 2010 (in thousands). All transactions occurred at market prices.

Business Activity	2012		2011		2010
Average overnight interbank loan balances to other FHLBanks1	$	2,242	$	1,432	$	507
Average overnight interbank loan balances from other FHLBanks1		3,907		4,963		4,000
Average deposit balance with FHLBank of Chicago for shared expense transactions2		108		65		47
Average deposit balance with FHLBank of Chicago for MPF transactions2		1,139		23		28
Transaction charges paid to FHLBank of Chicago for transaction service fees3		2,879		2,334		1,760
Par amount of purchases of consolidated obligations issued on behalf of other FHLBanks4		-		-		-

__________

1 Occasionally, the FHLBank loans (or borrows) short-term funds to (from) other FHLBanks. Interest income on loans to other FHLBanks is included in Other Interest Income and interest expense on borrowings from other FHLBanks is included in Other Interest Expense on the Statements of Income.

2 Balance is interest bearing and is classified on the Statements of Condition as interest-bearing deposits.

3 Fees are calculated monthly based on 5.5 basis points per annum of outstanding loans originated since January 1, 2010 and are recorded in other expense. For outstanding loans originated since January 1, 2004 and through December 31, 2009, fees are calculated monthly based on 5.0 basis points per annum.

Purchases of consolidated obligations issued on behalf of one FHLBank and purchased by the FHLBank occur at market prices with third parties and are accounted for  in the same manner as similarly classified investments. Outstanding fair value balances totaling $126,828,000 and $127,389,000 as of December 31, 2012 and 2011, respectively, are included in the non-MBS GSE obligationstotals presented in Note 4; all were purchased prior to 2009. Interest income earned on these securities totaled $5,582,000, $5,582,000, and $8,944,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

F-49

EX-10.5

Advance, Pledge and Security Agreement

(Blanket Pledge)

Institution:  

Address:      

This Advance, Pledge and Security Agreement (Agreement) is made by and between the Federal Home Loan Bank of Topeka (FHLBank) and the above-described institution (Institution).

CONTENTS

	DEFINITIONS	4.4	Payment of Prepayment Charges
1.1	Defined Terms	4.5	Default Rate
	ADVANCES AND OTHER INDEBTEDNESS	4.6	Sale of Collateral
2.1	Advance Procedures; Demand Deposit Account		MISCELLANEOUS
2.2	Estoppel	5.1	General Representations and Warranties
2.3	Obligation to Repay	5.2	FIRREA Covenant
2.4	Funding Commitments; Ineligibility	5.3	Good Faith; Liability of FHLBank
2.5	Stock Purchase	5.4	Assignment of Indebtedness
	SECURITY AGREEMENT	5.5	Discretion to Deny Advances
3.1	Blanket Pledge; Required Collateral	5.6	Access to FHLBank Records
3.2	Listed Collateral; Perfection	5.7	Amendments; Waivers
3.3	Listed Collateral; Deletion or Redelivery	5.8	Jurisdiction; Legal Fees
3.4	Representations and Warranties	5.9	Applicable Law; Severability
3.5	Reports, Audits and Access	5.10	Successors and Assigns
3.6	FHLBank’s Responsibility as to Collateral	5.11	Notices
3.7	Application of Payments	5.12	Consent to Receive Information
	DEFAULT; REMEDIES; POWER OF ATTORNEY	5.13	Recorded Conversations
4.1	Events of Default; Acceleration	5.14	Entire Agreement
4.2	Remedies	5.15	Counterparts
4.3	Power of Attorney

FHLBank and the Institution agree as follows:

DEFINITIONS

1.1         Defined Terms.  The following terms shall have the following meanings:

a.      “Act” means the Federal Home Loan Bank Act, as amended, 12 U.S.C. 1421, et seq.

b. “Advance” or “Advances” means any and all loans or other extensions of credit, including without limitation Interest Rate Exchange and Option Transactions, letters of credit, credit enhancement obligations in connection with acquired member assets, and guarantees or other arrangements intended to facilitate transactions between the Institution and third parties (but excluding any obligations that FHLBank may now or hereafter have to honor such as items or transfer orders under a depository or similar agreement between the Institution and FHLBank), regardless of whether FHLBank’s obligation is contingent upon the occurrence or nonoccurrence of any condition, and including all loans or other extensions of credit by FHLBank to the Institution prior to the date hereof.

c. “Business Day” means any day that the Federal Reserve Bank of Kansas City is open for business.

d. “Capital Stock” means all of the capital stock of FHLBank, of any class or classes, owned by the Institution and all payments that have been or hereafter are made on account of any subscription for such capital stock and all unpaid dividends on such capital stock.

e. “Collateral” means all assets and property, including the proceeds thereof, assigned, transferred or pledged to FHLBank by the Institution pursuant to Section 3.1 of the Agreement or otherwise.

f. “Commitment” or “Commitments” means any agreement under which FHLBank is obligated to make an Advance to the Institution.

g. “Confirmation” means a written or machine-readable electronic transmission issued by FHLBank from time to time confirming an Advance, including the notation of the Advance on the Institution’s demand deposit account statement.

h. “Member Products Policy” means the Member Products Policy of FHLBank as published from time to time or, if FHLBank ceases to have a policy with that title, any other policy or policies of FHLBank governing credit, lending, collateral, pricing and acquired member assets.

i. “Eligible Collateral” means Collateral, other than Capital Stock, which (1) qualifies as security for Advances under the terms and conditions of the Act and the Regulations and satisfies the requirements that may be established by FHLBank from time to time; and (2) is owned by the Institution free and clear of any liens, encumbrances or interests other than the interest of FHLBank hereunder.

j. “Indebtedness” means all indebtedness of the Institution to FHLBank, whether now outstanding or hereafter incurred, including all Advances and any other sums owed by the Institution to FHLBank pursuant to any provision hereof, and all other obligations and liabilities of the Institution to FHLBank.

k. “Lending Value” means the value that FHLBank shall from time to time, in its sole discretion, ascribe to the various types of Collateral.

l. “Listed Collateral” means all individual items of Collateral which (1) the Institution has specifically identified as Collateral in a written or electronic communication to FHLBank (including the description of any individual item of Collateral in a financing statement or similar document); or (2) the Institution has delivered or caused to be delivered to FHLBank or to a bailee, custodian or agent acting on FHLBank’s behalf.

m. “Regulations” means the regulations of the Federal Housing Finance Agency or its successor, as amended.

n. “Required Collateral Amount” means the aggregate dollar amount that FHLBank may specify from time to time with respect to each Advance and any other obligation or liability of the Institution to FHLBank.  The FHLBank may increase or decrease the Required Collateral Amount at any time.

o. “Interest Rate Exchange and Option Transaction” or “Interest Rate Exchange and Option Transactions” means any and all interest rate swaps, interest rate caps, floors or collars, options, futures, forward contracts, currency exchange transactions, or similar transactions entered into between FHLBank and the Institution.

ADVANCES AND OTHER INDEBTEDNESS

2.1 Advance Procedures; Demand Deposit Account.  All Advances are subject to and governed by the Member Products Policy, which is incorporated in and made a part of this Agreement.  Periodically, the Institution may apply to FHLBank for Advances in accordance with the procedures established by FHLBank.  Unless otherwise agreed to in writing by FHLBank, each Advance shall be evidenced by a Confirmation and shall be made by crediting a demand deposit account of the Institution with FHLBank, and payments of interest, principal or other amounts owed to FHLBank shall be made by debiting such account.  The Institution shall maintain sufficient available balances in the account to fund all payments due to FHLBank.

2.2 Estoppel.  Failure of the Institution to deliver a written notice to FHLBank specifying any disputed term or condition of an Advance within ten (10) Business Days after FHLBank mails by first-class mail or transmits electronically a Confirmation to the Institution shall constitute the agreement and acknowledgment by the Institution that the terms and conditions of the Advance as stated in the Confirmation are valid and are those that the Institution requested and by which the Institution agreed to be bound.  The Institution shall thereafter be estopped from asserting any claim or defense with respect to the repayment of such Advance and all interest, fees and other charges thereon or in connection therewith.

2.3   Obligation to Repay.  The Institution unconditionally agrees to repay all Advances and other Indebtedness, together with all interest and any fees, costs and expenses in connection therewith, at the applicable interest rate per annum provided in the Confirmation pertaining thereto, all upon the terms and conditions stated in the applicable Confirmation, FHLBank’s Member Products Policy for such type of Advance or Indebtedness and as otherwise specified herein.  Accrued interest on each Advance shall be due and payable at the times specified in FHLBank’s Member Products Policy, Confirmation or as otherwise specified in writing by FHLBank.

2.4   Funding Commitments; Ineligibility.  In the event the Institution’s access to Advances is restricted by any applicable law or regulatory directive, FHLBank shall not fund outstanding Commitments to the Institution.  The Institution shall immediately notify FHLBank if it becomes ineligible for Advances under any applicable law or regulatory directive.

2.5 Stock Purchase.  The Institution unconditionally agrees that whenever it receives an Advance or transacts any other business with FHLBank, it shall purchase Capital Stock as and when required by FHLBank’s Capital Plan, Member Products Policy, and any applicable laws, Regulations, resolutions of FHLBank’s board of directors and provisions of FHLBank’s Organization Certificate or bylaws, all as in effect at the time the Advance or other transaction is entered into (or, if at that time FHLBank does not have a Capital Plan, any other plans or policies of FHLBank governing Capital Stock and capital structure).  The Institution authorizes FHLBank to effect such purchase by exchanging shares of classes of Capital Stock held by the Institution and/or debiting the Institution’s accounts at FHLBank in accordance with such Capital Plan, Member Products Policy, and any applicable laws, Regulations, resolutions of FHLBank’s board of directors and provisions of FHLBank’s Organization Certificate or bylaws, as amended.

SECURITY AGREEMENT

3.1 Blanket Pledge; Required Collateral.

a. As security for all present and future Indebtedness, the Institution hereby assigns, transfers and pledges to FHLBank, and grants to FHLBank a security interest in, all assets and properties now owned or hereafter acquired by the Institution, wherever located, including, without limitation, all (1) Capital Stock; (2) instruments (including, without limitation, all notes, promissory notes, and all other instruments evidencing a debt, and any mortgage, deed of trust, title or other document securing a debt); (3) investment property (including, without limitation, mortgage-backed securities, other securities, share certificates or other participation interests in any securities trust, and mortgage loan participation certificates); (4) chattel paper; (5) choses in action; (6) general intangibles; (7) certificates of deposit; (8) accounts and deposit accounts (including, without limitation, deposit accounts of the Institution held by FHLBank); and (9) proceeds of all of the foregoing.

b. The Institution shall at all times have granted FHLBank a security interest in an amount of Eligible Collateral that has a Lending Value at least equal to the Required Collateral Amount applicable to the Institution.

c. While the Institution may, except as provided below, retain the documents evidencing any Collateral it has pledged to FHLBank, it is specifically understood and agreed that the Institution holds such documents solely for the benefit, and subject to the direction and control, of FHLBank.  The Institution shall at all times retain (or deliver to a custodian or other bailee to hold for the exclusive benefit of the Institution) the original, executed notes, mortgages and any assignments and amendments thereof for all mortgage loans that the Institution represents to be Eligible Collateral (by including their value in any report of Eligible Collateral or otherwise), unless it delivers such originals to FHLBank.

d. The Institution may use, commingle and dispose of the Collateral and collect, compromise and dispose of the proceeds of the Collateral, and any transferee of such Collateral shall take free and clear of any security or other interest granted to FHLBank in Section 3.1(a) hereof, subject only to the Institution’s obligation to maintain the Collateral as provided in Section 3.1(b); provided, however, that this Section 3.1(d) shall not apply to Listed Collateral.

e. FHLBank may take such steps as it reasonably deems necessary to protect its security interest in Collateral including, without limitation, filing financing statements, requiring delivery, and requiring the pledging and/or perfection of additional collateral whether or not such additional collateral is Eligible Collateral.

3.2 Listed Collateral; Perfection.

a. Immediately upon FHLBank’s request, and from time to time thereafter, the Institution shall provide FHLBank an amount of Listed Collateral which is also Eligible Collateral that has a Lending Value at all times at least equal to the Required Collateral Amount applicable to the Institution.  The Institution shall take all actions as FHLBank shall reasonably deem necessary or appropriate to perfect FHLBank’s security interest in the Listed Collateral, including but not limited to the making, execution and delivery to FHLBank of such assignments, listings, powers, financing statements or other instruments and documents as FHLBank may require.  The Institution shall not assign, pledge, transfer, create any security interest in, sell or otherwise dispose of any Listed Collateral without the prior written consent of FHLBank.

b. The Institution agrees to pay to FHLBank upon demand such fees and charges as may be assessed by FHLBank to cover overhead and other costs relating to the perfection of FHLBank’s security interest in the Listed Collateral (including without limitation the receipt, holding and redelivery of Collateral and to reimburse FHLBank upon request for all recording fees) and other reasonable expenses, disbursements and advances incurred or made by FHLBank in connection therewith (including the reasonable compensation and the expenses and disbursements of any bailee that may be appointed by FHLBank hereunder, and the agents and legal counsel of FHLBank and of such bailee).

c. In the event any Listed Collateral that was Eligible Collateral ceases to be Eligible Collateral, the Institution will promptly notify FHLBank in writing of the reason such Listed Collateral has ceased to be Eligible Collateral and request the deletion or redelivery of such Listed Collateral pursuant to Section 3.3.

d. The form and sufficiency of all documents pertaining to the Listed Collateral shall be satisfactory to FHLBank.  Any Listed Collateral that is not satisfactory to FHLBank may be rejected by FHLBank or may have a Lending Value ascribed thereto that shall be less than the value normally ascribed thereto under FHLBank’s Member Products Policy, or as FHLBank may otherwise specify.

3.3 Listed Collateral; Deletion or Redelivery.  Upon receipt by FHLBank of a written request from the Institution asking for the deletion or redelivery of any Listed Collateral, FHLBank shall promptly redeliver to the Institution, at the Institution’s expense, or acknowledge the deletion of, the Listed Collateral specified in said written request.  Notwithstanding anything to the contrary herein, while an Event of Default shall have occurred and be continuing, or at any time that FHLBank’s records indicate that such deletion or redelivery would reduce the Lending Value of the Institution’s Eligible Collateral below the Required Collateral Amount, or at any time that FHLBank reasonably and in good faith deems itself insecure, FHLBank may refuse such request.

3.4 Representations and Warranties.  The Institution represents and warrants to FHLBank, as of the date hereof and as of each date on which there shall be any outstanding Indebtedness or Commitment, as follows:

a. The Institution owns and has title to all Collateral and has the right and authority to grant a security interest to FHLBank in all Collateral and to subject all Collateral to this Agreement.

b. All Listed Collateral, and all other Collateral that the Institution represents to be Eligible Collateral (by including its value in any report of Eligible Collateral or otherwise), meets the standards and requirements for Eligible Collateral from time to time established by FHLBank, the Act and the Regulations.

c. The Institution has not conveyed or otherwise created, and there does not otherwise exist, any participation interest (except as permitted by the Member Products Policy) or other direct, indirect, legal or beneficial interest, lien or encumbrance, in any Listed Collateral or any other Collateral that the Institution represents to be Eligible Collateral, in favor of any person or entity other than FHLBank and the Institution, except as specifically communicated in writing to FHLBank.

3.5 Reports, Audits and Access.

a. The Institution shall provide FHLBank with written periodic reports containing such information on the Collateral as FHLBank shall require from time to time, including listings of mortgages and securities, unpaid principal balances thereof and certifications concerning the status of payments of mortgages and of taxes and insurance on property securing mortgages.  The Institution shall give FHLBank access at all reasonable times to Collateral in the possession of the Institution and to the books and records of account of the Institution relating to the Collateral for the purpose of permitting FHLBank to examine, verify or reconcile the Collateral and the reports of the Institution to FHLBank thereon.

b. All Collateral and the satisfaction by the Institution of the Required Collateral Amount shall be subject to periodic audit and verification by or on behalf of FHLBank.  Such audits and verifications may occur without notice during the Institution’s normal business hours or upon reasonable notice at such other times as FHLBank may reasonably request.  The Institution shall provide access to, and shall make adequate working facilities available to, the representatives or agents of FHLBank for purposes of such audits and verifications.  The Institution agrees to pay to FHLBank such reasonable fees and charges as may be assessed by FHLBank to cover overhead and other costs relating to such audits and verifications.

c. The Institution shall furnish to FHLBank, if FHLBank requests, an audit report prepared by an external independent auditor of the Institution in such form as FHLBank may require certifying the accuracy of any or all information required to be given to FHLBank by the Institution with respect to the Collateral, and copies of any available audited financial statements, management letters and directors’ exams in regard to the Institution.

d. In order for FHLBank to adequately assess and monitor the financial and business condition of the Institution, the Institution authorizes FHLBank to obtain all information, examination reports and all other reports, and any regulatory notices, actions or orders, in paper or electronic form, concerning or relating to the Institution or its affiliates and prepared or issued by or for any agency or other governmental subdivision, department, division, office, board, bureau or other instrumentality that regulates or examines the Institution.  FHLBank shall take reasonable precautions to maintain the confidentiality of all information, reports and other documents obtained under this Section 3.5.

e. If the Lending Value of the Eligible Collateral owned by the Institution shall at any time fall below the Required Collateral Amount, the Institution shall immediately notify FHLBank.

f. As a condition for the extension of credit by FHLBank, the Institution shall notify FHLBank of any material adverse change in or affecting the Institution’s financial condition no later than three business days after the Institution becomes aware of such change.

3.6 FHLBank’s Responsibility as to Collateral.  In the event that FHLBank shall take possession of any Collateral hereunder, FHLBank’s duty as to such Collateral shall be solely to use reasonable care in the custody and preservation of the Collateral in its possession.  This duty shall not require FHLBank to take any steps necessary to preserve rights against prior parties or the duty to send notices, perform services or take any action in connection with the management of the Collateral.  The Institution shall make and maintain copies, microfilm or other recordings of all Collateral delivered to FHLBank.

3.7 Application of Payments.  FHLBank may, in its sole discretion, apply any payments by or recovery from the Institution, which are received by FHLBank without any designation from the Institution (at the time of such payment or recovery) as to the intended application thereof, at such time and in such manner and order of priority as FHLBank shall deem appropriate.

DEFAULT; REMEDIES; POWER OF ATTORNEY

4.1 Events of Default; Acceleration.  Upon the occurrence of and during the continuation of any of the following events or conditions (Event of Default), FHLBank may at its option and notwithstanding any other provision hereof, by a notice to the Institution, declare all Indebtedness, including but not limited to any accrued interest and any prepayment charges that are provided for upon payment of an Advance before the date(s) scheduled for repayment, to be immediately due and payable, without presentment, demand, protest or any further notice:

a. Failure of the Institution to keep sufficient available balances on deposit with FHLBank to pay any interest, principal or other amount then due and owing to FHLBank one (1) Business Day after FHLBank gives notice to the Institution that its available balances on deposit with FHLBank are insufficient to pay amounts then due and owing; or

b. Continued failure of the Institution to perform any promise or obligation or to satisfy any condition or liability contained in this Agreement for five (5) Business Days after FHLBank gives notice to the Institution of such failure; or

c. Continued failure of the Institution to provide adequate Eligible Collateral as required by FHLBank for three (3) Business Days after FHLBank gives notice to the Institution of such failure unless the Institution shall reduce its Required Collateral Amount during such three (3) Business Day period such that the Institution has sufficient Eligible Collateral; or

d. Any suspension of payment by the Institution to any creditor of sums due or the occurrence of any event that results (or which with the giving of notice or passage of time or both will result) in acceleration of the maturity of any indebtedness of the Institution to others under any security agreement, indenture, loan agreement or other undertaking, provided that such indebtedness is a material amount with respect to the Institution and is not subject to a good faith dispute, or the Institution’s admission that it is unable to pay its debts as they mature; or

e. Appointment of a trustee, conservator, receiver, liquidator, custodian or similar official for the Institution, or for substantially all of the Institution’s property, or the entry of a judgment, decree or administrative decision adjudicating the Institution insolvent or bankrupt, or the commencement of proceedings seeking any of the foregoing if such proceedings have not been dismissed within 30 calendar days; or

f. Sale by the Institution of all or substantially all of the Institution’s assets or the taking of any action by the Institution to liquidate or dissolve; or

g. Termination of the Institution’s membership in FHLBank or the Institution’s ceasing to be a type of financial institution that is eligible under the Act to become a member of FHLBank; or

h. Merger, consolidation or other combination of the Institution with an entity that is not a member of FHLBank if the nonmember entity is the surviving entity in such transaction; or

i. FHLBank determines that any representation or warranty made or furnished by the Institution, its employees or other representatives to FHLBank, in this Agreement or in any other manner, in connection with any Advance or other Indebtedness or Collateral, is incorrect or misleading in any material respect; or

j. FHLBank reasonably and in good faith determines that a material adverse change has occurred in the financial condition of the Institution that materially impairs its ability to pay its debts as they mature; or

k. Failure of the Institution to make such notification as required by Section 3.5(f).

4.2 Remedies.  Upon the occurrence of any Event of Default, FHLBank shall have all of the rights and remedies provided by applicable law, which shall include, but not be limited to, all of the remedies of a secured party under the Uniform Commercial Code as in effect in the State of Kansas.  In addition, FHLBank may take immediate possession of any of the Collateral or any part thereof wherever the same may be found.  FHLBank may sell, assign and deliver the Collateral or any part thereof to public or private sale for such price as FHLBank deems appropriate without any liability for any loss due to decrease in the market value of the Collateral during the period held.  FHLBank shall have the right to purchase all or part of the Collateral at such sale.  If the Collateral includes instruments or securities that will be redeemed by the issuer upon surrender, or any accounts or deposits in the possession of FHLBank, FHLBank may realize upon such Collateral without notice to the Institution.  If any notification of intended disposition of any of the Collateral is required by applicable law, such notification shall be deemed reasonable and properly given if mailed, postage prepaid, at least five (5) Business Days before any such disposition to the address of the Institution appearing on the records of FHLBank.  Upon the occurrence of any Event of Default, FHLBank may, in its sole discretion, apply any payment by or recovery from the Institution or any sum realized from Collateral, at such time and in such manner and order of priority as FHLBank shall deem fit, regardless of any manifestation of any contrary intention or desire on the part of the Institution or the provisions of any other agreement between FHLBank and the Institution.  The Institution agrees that FHLBank may exercise its right of setoff upon the occurrence of an Event of Default in the same manner as if the Advances and Commitments were unsecured.  Notwithstanding any other provision hereof, upon the occurrence of any Event of Default at any time when all or part of the obligations of the Institution to FHLBank hereunder shall be the subject of any guarantee by a third party for FHLBank’s benefit and there shall be other outstanding obligations of the Institution to FHLBank that are not so guaranteed but that are secured by the Collateral, then any sums realized by FHLBank from the Collateral, or from any other Collateral pledged or furnished to FHLBank by the Institution under any other agreement, shall be applied first to the satisfaction of such other non-guaranteed obligations and then to the Institution’s guaranteed obligations hereunder.  The Institution agrees to pay all the costs and expenses of FHLBank in the collection of the Indebtedness and enforcement and preservation of FHLBank’s rights and remedies in case of default, including, without limitation, reasonable attorneys’ fees.  FHLBank in its discretion may apply any surplus after payment of Indebtedness, provision for repayment to FHLBank of any amounts to be paid under outstanding Commitments and all costs of collection and enforcement, to third parties claiming a secondary security interest in the Collateral, with any remaining surplus paid to the Institution.  The Institution shall be liable to FHLBank for any deficiency remaining.

4.3 Power of Attorney.  After the occurrence of an Event of Default, FHLBank may in its discretion, in its own name or in the name of its nominee or of the Institution, do any and all things and take any and all actions that are pertinent to the protection of FHLBank’s interest hereunder and, if such actions are subject to the laws of a state, are lawful under the laws of the State of Kansas, including the following:

a. Terminate any consent given hereunder;

b. Notify obligors on any Collateral to make payments thereon directly to FHLBank;

c. Endorse any Collateral that is in the Institution’s name or that has been endorsed by others to the Institution’s name;

d. Enter into any extension, compromise, settlement or other agreement relating to or affecting any Collateral;

e. Take any action the Institution is required to take or that is otherwise necessary to:  (1) sign and record a financing statement or otherwise perfect a security interest in any or all of the Collateral; or (2) to obtain, preserve, protect, enforce or collect the Collateral;

f. Take control of any funds or other proceeds generated by or arising from the Collateral and use the same to reduce Indebtedness as it becomes due; and

g. Cause the Collateral to be transferred to FHLBank’s name or the name of its nominee.

The Institution hereby appoints FHLBank as its true and lawful attorney, for and on behalf of the Institution and in its name, place and stead, to prepare, execute and record endorsements and assignments to FHLBank of all or any item of Collateral (including the identification and listing, by exhibit prepared by FHLBank or otherwise, of mortgage loans constituting such Collateral), giving or granting to FHLBank, as such attorney, full power and authority to do or perform every lawful act necessary or proper in connection therewith as fully as the Institution could or might do.  The Institution hereby ratifies and confirms all that FHLBank shall lawfully do or cause to be done by virtue of this special power of attorney.  This special power of attorney (i) is granted for a period commencing on the date of  the Event of Default and continuing until the discharge of all Indebtedness and all obligations of the Institution hereunder, (ii) is coupled with an interest, and (iii) is irrevocable for the period granted.  As the Institution’s true and lawful attorney-in-fact, FHLBank shall have no responsibility to take any steps necessary to preserve rights against other parties or the duty to send notices, perform services or take any action in connection with the management of the Collateral.

4.4 Payment of Prepayment Charges.  Any prepayment fees or charges for which provision is made, whether under a Confirmation or otherwise, with respect to any Advance shall be payable at the time of any voluntary or involuntary payment of the principal of such Advance prior to the originally scheduled maturity thereof.  This shall include, without limitation, payments that are made in connection with the liquidation of the Institution or that become due as a result of an acceleration by FHLBank pursuant to Section 4.1, whether such payment is made by the Institution, by a trustee, conservator, receiver, liquidator, custodian or similar official, of or for the Institution, or by any successor to or any assignee of the Institution.  The Institution acknowledges and agrees that the damages incurred by FHLBank due to a prepayment of an Advance will be difficult to ascertain at the time of such prepayment and, in lieu thereof, the Institution and FHLBank agree that the formula for calculation of the prepayment fee (or for calculation of the fee payable upon prepayment of a non-prepayable Advance) set forth in the Confirmation or in the Member Products Policy at the time the Advance is issued constitutes a fair, reasonable and good faith estimate of the damages suffered by FHLBank because of such prepayment and is therefore payable as a prepayment fee or charge.

4.5 Default Rate.  Any payment of principal or interest or any other sum due hereunder if not made when due (whether at stated maturity, by acceleration or otherwise) shall bear interest, to the maximum extent permitted by applicable law, at a rate per annum for each day during the period commencing on the due date thereof until such amount shall be paid in full equal to 315 basis points above the previous business day's daily effective federal funds rate as provided in Federal Reserve Statistical Release H.15 and daily updates thereto, or any equivalent successor rate, release or publication, or as otherwise set forth in the Member Products Policy.

4.6 Sale of Collateral.  In view of the possibility that federal and state securities and other laws may impose certain restrictions on the method by which sale of the Collateral may be effected, FHLBank and the Institution agree that any sale of the Collateral as a result of an Event of Default shall be deemed “commercially reasonable” regardless of whether the notice or manner of such sale contains provisions or imposes, or is subject to, conditions or restrictions deemed appropriate to comply with the Securities Act of 1933 or any other applicable federal or state securities or other law.  It is further agreed that from time to time FHLBank may attempt to sell the Collateral by means of private placement.  In so doing, FHLBank may restrict the bidders and prospective purchasers to those who will represent and agree that they are purchasing for investment only and not for distribution, or otherwise impose restrictions deemed appropriate by FHLBank for the purpose of complying with the requirements of applicable securities laws.  FHLBank may solicit offers to buy such Collateral, for cash or otherwise, from a limited number of investors deemed by FHLBank to be responsible parties who might be interested in purchasing such Collateral.  If FHLBank solicits offers from at least three (3) such investors, then the acceptance by FHLBank of the highest offer obtained therefrom (whether or not three (3) offers are obtained) shall be deemed to be a commercially reasonable method of disposing of the Collateral.

MISCELLANEOUS

5.1 General Representations and Warranties.  The Institution hereby represents and warrants that to the best of its knowledge as of the date hereof and as of each date on which there shall be any outstanding Indebtedness or Commitment:

a. The Institution is not now, and neither the execution of nor the performance of any of the transactions or obligations of the Institution under this Agreement shall, with the passage of time, the giving of notice, or otherwise, cause the Institution to be: (1) in violation of its charter or articles of incorporation, by-laws, the Act or the Regulations, any other law or administrative regulation, any court decree or any order of any regulatory authority, or (2) in default under or in breach of any indenture, contract or other instrument or agreement to which the Institution is a party or by which the Institution or any of its property may be bound; in each case so as to materially affect the Institution’s ability to perform its obligations under this Agreement.

b. The Institution has full corporate power and authority and has received all corporate and governmental authorizations and approvals as may be required to enter into and perform its obligations under this Agreement and to borrow each Advance.

c. The information given by the Institution in any document provided, or in any oral statement made, in connection with an application or request for an Advance or a Commitment, or a pledge, specification or delivery of Collateral, is true, accurate and complete in all material respects.

5.2 FIRREA Covenant.  If the Institution is an insured depository institution, it further represents and warrants to, and covenants and agrees with, FHLBank that the necessary action to authorize the delivery of this Agreement and the performance of its obligations hereunder includes all authorizations required for insured depository institutions under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended, and the Institution will at all times during the term of this Agreement continuously include and maintain this Agreement, including all exhibits, attachments, supplements, Confirmations incorporated herein and evidence of all necessary approvals, as part of its official written books and records.  In addition to any other remedies which FHLBank may have under this Agreement or otherwise, if the Institution breaches or defaults on any of its obligations set forth in this paragraph, FHLBank shall be entitled to apply to any court of competent jurisdiction for an order requiring specific performance by the Institution of such obligations, and the Institution shall not contest any such application and shall comply with any such order.

5.3 Good Faith; Liability of FHLBank.  The Institution and FHLBank shall have an obligation of good faith in the performance and enforcement of every duty or right imposed or granted by this Agreement, and any other actions or inactions taken or not taken with respect to this Agreement.  “Good Faith” shall mean honesty in fact (i.e., an objective standard rather than a subjective standard).  FHLBank shall not be liable for any costs, expenses, damages, liabilities or claims (including attorneys’ and accountants’ fees) incurred by the Institution, except those costs, expenses, damages, liabilities or claims arising out of the gross negligence or willful misconduct of FHLBank or any of its employees or duly appointed agents.  In no event shall FHLBank be liable to the Institution or any third party for special, indirect or consequential damages, or lost profits or loss of business, arising under or in connection with this Agreement, even if previously informed of the possibility of such damages and regardless of the form of action.

5.4 Assignment of Indebtedness.  The Institution hereby gives FHLBank the full right, power and authority to pledge or assign to any party all or part of the Indebtedness, together with a proportionate amount of the Collateral, as security for Consolidated Federal Home Loan Bank Obligations issued pursuant to the provisions of the Act or for any other purpose authorized by the Act, the Regulations or the Federal Housing Finance Agency.  In the case of any such pledge or assignment, FHLBank shall have no further responsibility with respect to Collateral transferred to the pledgee or assignee, and all references herein to “FHLBank” shall be read to refer instead to the pledgee or assignee with respect to such Collateral.  The Institution may not voluntarily or involuntarily or by operation of law or otherwise assign or transfer any of its rights or obligations hereunder or with respect to any Indebtedness or Commitments without the express prior written consent of FHLBank.

5.5 Discretion to Deny Advances.  Nothing contained herein or in any documents describing or setting forth FHLBank’s Member Products Policy or other policies shall be construed as an agreement or commitment on the part of FHLBank to grant Advances hereunder, or to enter into any other transaction, the right and power of FHLBank in its discretion to either grant (with or without conditions) or deny any Advance or other transaction requested hereunder being expressly reserved.

5.6 Access to FHLBank Records.  The FHLBank shall grant to all governmental regulatory agencies having jurisdiction over the Institution, to the Institution’s independent public accountants (to be named by written notice delivered to FHLBank) and to the Institution’s internal auditors the right at any reasonable time to examine and audit the Institution’s records in FHLBank’s possession, the right to request directly from FHLBank any reports, summaries or information of FHLBank relating to the Institution and the right to observe the processing of reports or examine the Institution’s documents at FHLBank; provided, however, FHLBank’s obligations hereunder shall not apply to the extent that the records, reports, summaries, information or documents sought or requested are contained in or derived from data not provided by FHLBank to the Institution or by the Institution to FHLBank pursuant to this Agreement.

5.7 Amendments; Waivers.  No modification, amendment or waiver of any provision of this Agreement or consent to any departure therefrom shall be effective unless executed by the party against whom such change is asserted and shall be effective only in the specific instance and for the purpose for which given.  No notice to or demand on the Institution in any case shall entitle the Institution to any other or further notice or demand in the same, or similar or other circumstance.  Any forbearance, failure or delay by FHLBank in exercising any right, power or remedy hereunder shall not be deemed to be a waiver thereof, and any single or partial exercise by FHLBank of any right, power or remedy hereunder shall not preclude the further exercise thereof.  Every right, power and remedy of FHLBank shall continue in full force and effect until specifically waived by FHLBank in writing.

5.8 Jurisdiction; Legal Fees.  In any action or proceeding brought by FHLBank or the Institution to enforce any right or remedy under this Agreement, the parties consent to, and agree that they will submit to, the jurisdiction of the United States District Court for the District of Kansas, or if such action or proceeding may not be brought in federal court, the jurisdiction of the District Court of the County of Shawnee, State of Kansas, to the exclusion of all other courts.  The Institution agrees that if any action or proceeding is brought by the Institution seeking to obtain any legal or equitable relief against FHLBank under or arising out of this Agreement or any transaction contemplated hereby, and such relief is not granted by the final decision, after any and all appeals, of a court of competent jurisdiction, the Institution will pay all attorneys’ fees and other costs incurred by FHLBank in connection therewith.  The Institution agrees to reimburse FHLBank for all costs and expenses (including reasonable fees and out-of-pocket expenses of counsel for FHLBank) incurred by FHLBank in connection with the enforcement or preservation of FHLBank’s rights under this Agreement including, but not limited to, its rights in respect of any Collateral and the audit or possession thereof.

5.9 Applicable Law; Severability.  This Agreement and all Advances granted under this Agreement shall be governed by the statutory and common law of the United States and, to the extent federal law incorporates or defers to state law, the laws (exclusive of choice of law provisions) of the State of Kansas.  In the event that any portion of this Agreement conflicts with applicable law, such conflict shall not affect other provisions of this Agreement that can be given effect without the conflicting provision, and to this end the provisions of the Agreement shall be severable.

5.10 Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the successors and permitted assignees of the Institution and FHLBank.

5.11 Notices.  Any notice, advice, request, consent or direction given, made or withdrawn pursuant to this Agreement shall be in writing or by machine-readable electronic transmission, and shall be deemed to have been duly given to and received by a party hereto three (3) Business Days after it shall have been mailed to such party at its address herein provided, if delivered by first-class mail, or if delivered by hand or by machine-readable electronic transmission, when actually received by such party at its principal office.

5.12 Consent to Receive Information.  By executing this Agreement the Institution grants permission to FHLBank to send to the Institution from time to time notices, announcements, press releases and other communications, some of which may be deemed advertisements, concerning FHLBank and its products and services and other information which FHLBank believes may be of interest or benefit to its members, by mail, delivery service or e-mail, or facsimile to the facsimile number(s) set forth below the Institution’s signature, or to such other facsimile number(s) as the Institution shall indicate from time to time.

5.13 Recorded Conversations.  Each party authorizes the other, in its discretion, to record telephone conversations between employees or other representatives of the parties concerning any proposed or actual Advances or other transactions between the parties.  Such recorded conversations shall be admissible evidence of the terms and conditions of such transactions and the parties waive any right to object to the admission of such evidence on the ground that it is not in writing.  The parties shall not be obligated to inform the other party of such recording at any time.

5.14 Entire Agreement.  This Agreement embodies the entire agreement and understanding between the parties hereto relating to the subject matter hereof and supersedes all prior agreements between such parties, and all oral and written statements by either party, that relate to such subject matter.  Notwithstanding the above, Advances made by FHLBank to the Institution prior to the execution of this Agreement shall continue to be governed by the terms of the Confirmation pursuant to which such Advances were made, and otherwise by the terms and conditions of this Agreement.

5.15 Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall constitute but one Agreement.

IN WITNESS WHEREOF, FHLBank and the Institution have caused this Agreement to be signed in their names by their duly authorized officers.

INSTITUTION                                                                                                 FEDERAL HOME LOAN BANK OF TOPEKA

One Security Benefit Place, Suite 100

Topeka, KS  66606-2444

By:           _____________________________________

  Authorized Signature

By:           _________________________________________

____________________________________________                                                                           Authorized Signature

        Name and Title

_  _______________________________________________

                                        Name and Title

Attest:      _           _______________________________

Signature                                           Date:       ___________________________

Name:      _____________________________________

Secretary                                           Attest:       _________________________________________

                                  Signature

Fax No(s).:              ______________________________

Name:       _________________________________________

   ______________________________                                                                                        Secretary

AdvAgree (Blanket) 06-12Page of [INSERT PAGE NUMBER]

EX-10.8

Executive Incentive

CompensationPlan

December 14, 2012

Policy Information

Document Title:	Executive Incentive Compensation Plan
Content Owner:	Director of HRA
Certification of Compliance Contact:	N/A
Policy Category:	FHLBank Policy
FHLBank-Level Approver:	Policy Oversight Group
Board-Level Approver:	Full Board (Compensation)
Review Frequency:	Annually
Initial Effective Date:	1/1/2012
Last POG Approval Date:	11/28/2012
Next Review Date:	12/2013

■EXECUTIVEINCENTIVE COMPENSATION PLAN|December 14, 2012

Table of Contents

1.0   Plan Objectives2

2.0   Definitions     3

3.0   Eligibility  4

4.0   Total Base Opportunity   6

5.0   Performance Measures        6

6.0   Final Award Determination            7

7.0   Distribution of Final Awards 8

8.0   Plan Communication         8

9.0   Administrative Control    9

10.0   Miscellaneous Conditions 9

Appendices      15

1.0   Plan Objectives

1.1   The purpose of the Federal Home Loan Bank of Topeka Executive Incentive Compensation Plan is to:

1.1.1   Promote consistently high value creation for FHLBank Topeka members by promoting the long-term growth and profitability of FHLBank Topeka in accordance with the achievement of its long-term strategic objectives and mission;

1.1.2   Promote the mission and financial performance of FHLBank Topeka by providing incentives to key employees for accomplishing annual goals that are aligned with FHLBank Topeka’s mission and business objectives;

1.1.3   Promote key employee loyalty and dedication to FHLBank Topeka and its strategic objectives by rewarding performance that facilitates the growth and financial stability and success of FHLBank Topeka; and

1.1.4   Enhance FHLBank Topeka’s capacity to attract, retain, and motivate key employees by offering competitive short-term and long-term total incentive compensation opportunities, including those Deferred Incentive opportunities provided in Plan Section 2.1.7, to key employees who are also vital to FHLBank Topeka’s future success.

1.2   Payments awarded under this Plan, when combined with base salary and other benefits, are designed to provide competitive total compensation to key employees for achieving FHLBank Topeka’s desired strategic objectives.

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1.3   The Plan is a cash-based annual incentive plan with a long-term deferral component that establishes individual incentive compensation award opportunities related to achievement of performance objectives by FHLBank Topeka and by Participants during Performance Periods.

2.0   Definitions

2.1   When used in this Plan, the following words and phrases shall have the following meaning:

2.1.1   Base Performance Period means the period over which FHLBank Topeka’s performance is measured based on parameters set forth in the Target Document, and over which a Cash Incentive can be earned and vested;

2.1.2   Boardmeans FHLBank Topeka’s Board of Directors;

2.1.3 Cash Incentive means the portion of the Total Base Opportunity that is not the Deferred Incentive, and becomes payable to the Participant (i) no later than 2 ½   months following the later of the end of the Base Performance Period upon achievement of the Performance Measures, or (ii) as soon as practicable after a determination of the director of the FHFA that the director will not act upon his authority to prohibit compensation that is not reasonable and comparable to compensation paid to executives at other financial institutions.

2.1.4   Cause has the meaning given to it in Section 10.4c;

2.1.5   CEO means the Chief Executive Officer of FHLBank Topeka;

2.1.6   CompensationCommitteemeans the Compensation Committee of the Board;

2.1.7   Deferred Incentive means 50% of the Total Base Opportunity, which shall be deferred for the Deferral Performance Period and is subject to adjustment based upon the extent of achievement of the Performance Measures during the Deferral Performance Period as set forth in the Target Document for a Performance Period;

2.1.8   Deferral Performance Period is the three-year period directly following each Base Performance Period over which FHLBank Topeka’s performance is measured based on parameters set forth in the Target Document and during which a Deferred Incentive can be earned;

2.1.9   Disability has the meaning given to it in Section 10.4.a;

2.1.10   ExtraordinaryOccurrencesmeans those events that, in the opinion and discretion of the Compensation Committee, are outside the significant influence of the Participant or FHLBank Topeka and are likely to have a significant unanticipated effect, whether positive or negative, on FHLBank Topeka’s operating and/or financial results;

2.1.11   FHFAmeans the Federal Housing Finance Agency or any successor;

2.1.12   FHLBankTopekameans the Federal Home Loan Bank of Topeka;

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2.1.13   FinalAwardmeans either the Cash Incentive amount ultimately paid to a Participant under the Plan for a Base Performance Period or a Deferred Incentive ultimately paid to a Participant under the Plan for a Deferral Performance Period, as otherwise applicable herein;

2.1.14   Participantmeans a person who is eligible to take part in the Plan for the designated Performance Period as determined by the Board;

2.1.15   Participation Agreement means the agreement between FHLBank Topeka and a Participant, the terms of which govern a Participant’s participation in this Plan, an example of which is set forth in Appendix A;

2.1.16   PerformanceMeasuremeans each performance factor that is taken into consideration under the Plan in determining the value of a Final Award;

2.1.17   PerformancePeriods means the Base Performance Period and the Deferral Performance Period;

2.1.18   Planmeans the Federal Home Loan Bank of Topeka Executive Incentive Compensation Plan;

2.1.19   PlanAwardmeans an amount that is provisionally determined at the end of the Base Performance Period for the Cash Incentive and for the Deferred Incentive, subject to adjustment as provided in Section 6.4;

2.1.20   Retirement has the meaning given to it in Section 10.4b;

2.1.21   Target Document means the document in effect for a Performance Period, as approved and adopted by the Board, that sets forth the Total Base Opportunity, Performance Measures, and other applicable terms and conditions relevant to the operation of this Plan;

2.1.22   Termination of Service means the occurrence of any act or failure to act that actually or effectively causes or results in a Participant ceasing, for whatever reason, to be an employee of FHLBank Topeka;

2.1.23   Total Base Opportunitymeans the Plan Award that may be earned during a Base Performance Period and a Deferral Performance Period for achieving performance levels under each Performance Measure, including the Cash Incentive and the Deferred Incentive;

3.0   Eligibility

3.1   Individual employees eligible for participation in the Plan for each Base Performance Period and corresponding Deferral Performance Period will be recommended by the CEO to the Board for approval. In the case of the CEO, the Board has sole authority to approve the CEO’s eligibility during the applicable periods.

3.2   Eligibility shall be limited to a select group of key management or other highly-compensated employees (i.e., key employees), but normally will be further limited to the CEO and senior officers who are recommended as a Participant by the CEO. Other key employees may be recommended by the CEO to participate on a limited basis to address extraordinary performance and/or other criteria and considerations as approved by the Board.

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3.3   There will be three levels of participation by eligible employees based on the eligible employee’s position and responsibility. The Board shall determine each Participant’s level of participation.

3.4   The list of Participants for each Base Performance Period and corresponding Deferral Performance Period shall be established by the Board.

3.5   An eligible employee shall become a Participant in the Plan through the signing of a Participation Agreement, and shall cease to be a Participant in the Plan upon Termination of Service, or through a violation of either of the following obligations:

a)   Non-disclosure. During and as a result of the Participant’s employment with FHLBank Topeka, Participant is or will be making use of, acquiring knowledge of and/or adding to confidential or proprietary information relating to FHLBank Topeka and its affiliates, including, without limitation, FHLBank Topeka’s systems, procedures, policies, manuals, trade secrets, business plans, financial data, strategies, methods of conducting business, processes, procedures, standards, know-how, manuals, techniques, technology, confidential reports and all other information, knowledge, or data of any kind or nature relating to the products, services, or business of FHLBank Topeka (collectively, “Confidential Information”). As a material inducement to FHLBank Topeka to allow Participant to be eligible under the Plan, Participant shall not, at any time during or following the term of his employment with FHLBank Topeka, directly or indirectly, except in accordance with FHLBank Topeka policies, use, disseminate, divulge or disclose, for any purpose whatsoever, any Confidential Information.

b)   Non-solicitation. In acknowledgement and recognition of the highly competitive and unique nature of FHLBank Topeka’s business, Participant shall not, during his or her continued employment and for the one-year period following Termination of Service, directly or indirectly, either by himself or herself or through others, as an individual, partner, employee, agent, officer, stockholder, or otherwise:

a. solicit, divert, take away, or attempt to take away the business of FHLBank Topeka’s present or past customers that otherwise exist at the time of termination, or such customers of any affiliated or related companies; and/or

b. solicit, hire, employ, or endeavor to employ any of FHLBank Topeka’s employees or independent contractors.

3.6   Remedies. By virtue of signing the Participation Agreement, Participant acknowledges and agrees to the terms and conditions of that Participation Agreement and the Plan and further acknowledges that FHLBank Topeka will suffer irreparable damage and injury and will not have an adequate remedy at law in the event of any actual, threatened, or attempted breach by the Participant of any provision of the Plan or the specific provisions of Section 3.5 above. Accordingly, in the event of a threatened, attempted or actual breach by Participant of any provision of the Plan, including but not limited to Section 3.5, in addition to all other remedies to which FHLBank Topeka is entitled at law, in equity or otherwise, Participant shall forfeit any and all further and unpaid Cash Incentive or Deferred Incentive that he or she would otherwise have been entitled to under the Plan, and/or FHLBank Topeka may be entitled to a temporary restraining order and a permanent injunction or a decree of specific performance of any provision of Plan Section 3.5. The foregoing remedies will not be deemed to be the exclusive rights or remedies of FHLBank Topeka for any breach of or noncompliance with the terms of this Plan, or the Participation Agreement signed by the Participant, but will be in addition to all other rights and remedies available to FHLBank Topeka at law, in equity, or otherwise.

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4.0   Total Base Opportunity

4.1   For each Base Performance Period, the Board will present a Total Base Opportunity to Participants. The Total Base Opportunity is equal to a percentage of each Participant’s annual base salary at the beginning of the Base Performance Period. Certain key employees have a greater and more direct impact than others on the success of FHLBank Topeka; therefore, these differences are recognized by varying Total Base Opportunities for each Participant by level of participation.

4.2   The Total Base Opportunity is composed of the Cash Incentive and the Deferred Incentive each payable in accordance with Section 6.0.  Such Deferred Incentive amount may increase or decrease in accordance with the achievement of Performance Measures as set forth in the Target Document in effect for the Performance Period.

5.0   Performance Measures

5.1   Three achievement levels will be defined for each Performance Measure:

Threshold -     The minimum achievement level acceptable for the Performance Measure.

Target -            The expected achievement level for the Performance Measure.

Maximum -      The achievement level for the Performance Measure that substantially exceeds the Target level of achievement.

5.2   Performance between Threshold - Target, and Target - Maximum shall be calculated by linear interpolation of the achievement point in the applicable performance range, as determined by the Compensation Committee.

5.3   Performance Measures will be established by the Board.

5.4   Performance Measures for the Deferred Incentive and for the Cash Incentive shall be set forth in the Target Document then in effect.

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6.0   Final Award Determination

6.1   Plan Awards are based on the achievement of performance goals as set forth in the Target Document and achievement of satisfactory levels of individual performance; provided, however, if FHLBank Topeka fails to achieve performance at or above threshold Performance Measures, the Compensation Committee has discretion to reduce or eliminate a Final Award for the Base Performance Period and for any Deferral Performance Period, if otherwise applicable under the circumstances.

6.2   Final Awards for a Base Performance Period or Deferral Performance Period are determined by the Compensation Committee promptly after the Base Performance Period or Deferral Performance Period based upon the Compensation Committee’s analysis of all applicable standards set forth herein and consideration of performance that is not captured in the Performance Measures. The Compensation Committee may also consider Extraordinary Occurrences when assessing performance results and determining Final Awards and may adjust the Performance Measures and/or Final Awards to ensure that the purpose of the Plan is served.

6.3   The above notwithstanding, the Compensation Committee may, in its discretion, reduce or eliminate a Final Award for any Base Performance Period or Deferral Performance Period under any of the following circumstances:

a)  FHLBank Topeka receives a composite “4” or “5” rating in its FHFA examination in any single year in any single Base Performance Period or Deferral Performance Period.

b)  The Board finds a serious, material safety or soundness problem, or a serious, material risk-management deficiency exists at FHLBank Topeka, or if: (i) operational errors or omissions result in material revisions to the financial results, information submitted to the FHFA, or to data used to determine incentive payouts; (ii) submission of material information to the SEC, Office of Finance, and/or FHFA is significantly past due, or (iii) FHLBank Topeka fails to make sufficient progress, as determined by the Board, in the timely remediation of significant examination, monitoring or other supervisory findings.

c) During the most recent examination of FHLBank Topeka by the FHFA, the FHFA identified an unsafe or unsound practice or condition that is material to the financial operation of FHLBank Topeka within the Participant’s area(s) of responsibility and such unsafe or unsound practice or condition is not subsequently resolved in favor of FHLBank Topeka by the last day of the Base Performance Period or Deferral Performance Period, then all of a Participant’s vested and unvested Cash Incentive or Deferred Incentive may be forfeited.

d)  Specific to each Participant only, such Participant does not achieve satisfactory individual achievement levels during the Deferral Performance Period. For purposes of the Plan, the determination of whether performance is deemed “satisfactory” is in the sole discretion of the Compensation Committee.

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6.4   The Deferred Incentive shall be reduced by one-third for each year during the Deferral Performance Period in which FHLBank Topeka has negative net income, as defined and in accordance with Generally Accepted Accounting Principles.

7.0   Distribution of Final Awards

7.1   All Final Awards will be paid out in cash and will be subject to appropriate payroll tax withholdings.

7.2   No Deferred Incentive Final Award received by a Participant shall be considered as compensation for purposes of determining benefits under any employee benefit plan of FHLBank Topeka, except as otherwise determined by FHLBank Topeka. Cash Incentive Final Awards shall be considered as compensation for purposes of determining benefits under the employee benefit plans of FHLBank Topeka if the plan so provides.

7.3   Final Awards will be made as soon as practical following the end of the Base Performance Period or Deferral Performance Period, but no later than (i) 2 ½  months following the later of the end of the applicable Base Performance Period or Deferral Performance Period, as applicable; or (ii) as soon as practicable after a determination of the director of the FHFA that the director will not act upon his authority to prohibit compensation that is not reasonable and comparable to compensation paid to executives at other financial institutions.

8.0   Plan Communication

8.1   The Compensation Committee, or its designee(s). shall communicate with Participant(s) regarding the Plan in accordance with the following schedule:

First quarter of the Base Performance Period  - Communicate Performance Measures and identify Plan Participants for the Performance Periods.

First quarter of the Base Performance Period -   Communicate Performance Measures and specific hurdles for the Performance Periods.

Annually -  Interim assessments of progress towards achieving Performance Measures as set forth in the Target Document.

End of Performance Periods - Final assessment of FHLBank Topeka and individual performance during Performance Periods.

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9.0   Administrative Control

9.1  Oversight of the Plan’s operation will be provided by the Compensation Committee. Administration of the Plan shall be provided by the Compensation Committee, with delegated authority to FHLBank Topeka’s CEO, Human Resources and Administration Department, or other employees as applicable.

9.2  The Compensation Committee, in consultation with the CEO, has full discretion and authority and is otherwise responsible for interpreting and applying the terms of the Plan. These interpretations and applications shall be final and binding.

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10.0  Miscellaneous Conditions

10.1  Except as provided in Section 10.3, Participants must be employed by FHLBank Topeka on the final day of the Base Performance Period and/or the Deferral Performance Period, and otherwise not in violation of Section 3.5, to receive a Final Award, as applicable.

10.2  Employees of FHLBank Topeka who are hired, transferred, or promoted during the first six months of the Base Performance Period may be recommended for: (i) participation in the Plan or (ii) participation in the Plan at a level other than the one originally designated, in accordance with the Target Document then in effect, and receive a prorated Total Base Opportunity calculated as a percentage of the employee’s new base salary  and/or level of participation at the time of the promotion.

10.3  Notwithstanding the provisions of Section 10.1, the following vesting provisions shall apply if a Participant incurs a Termination of Service (i) due to death, (ii) due to Disability, (iii) due to Retirement, or (iv) due to Termination of Service by FHLBank Topeka without Cause, as defined in Plan Section 10.4 below, during the Base Performance Period or Deferral Performance Period:

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a)  Pro-Rata Vesting of Total Base Opportunity during Base Performance Period

If a Participant terminates due to death, Disability, Retirement, or termination without Cause, and the Participant is employed for at least six months of the Base Performance Period, any portion of his or her Total Base Opportunity eligible to become earned in the Performance Periods in which the termination occurs, will, to the extent the Performance Measures for such Performance Periods are satisfied, be treated as earned and payable to the Participant or his or her beneficiary (as designated under a completed beneficiary designation, a sample of which is attached in Appendix B) in a pro rata manner equivalent to the period of time during the Performance Periods that the Participant participated in the Plan.

b)  Vesting of Deferred Incentive during Deferral Performance Period

i)  Death and Disability.  Notwithstanding and/or in addition to Plan Section 10.3.a above, if a Participant terminates employment before the end of the Deferral Performance Period on account of death or Disability as defined in Plan Section 10.4.a, after completing six months of the initial Base Performance Period, the Participant’s Deferred Incentive shall be immediately 100% vested at the Target Performance Measure and payment of the Deferred Incentive shall be accelerated and will occur on or before March 15 of the year following the year in which death or Disability occurred.

ii)  Retirement or Termination without Cause.  If a Participant terminates employment due to Retirement or Termination of Employment by FHLBank Topeka without Cause, as defined in Plan Section 10.4.c below, the Participant’s Deferred Incentive shall be treated as vested to the Participant or his or her beneficiary (as designated under a completed Beneficiary Designation) in a pro rata manner equivalent to the period of time during the Deferral Performance Period that the Participant participated in the Plan based on the Performance Measure achieved at the end of the Deferral Performance Period. Such Deferred Incentive shall be paid no later than (i) 2 ½ months following the end of the Deferral Performance Period, or (ii) as soon as practicable after a determination by the director of the FHFA that the director will not act upon his authority to prohibit compensation that is not reasonable and comparable to compensation paid to executives at other financial institutions.

11

Example 1:

Participant becomes Disabled on September 30 and (a) Participant’s Total Base Opportunity for the Base Performance Period would have been $100,000, and (b) Participant has $50,000 in Deferred Incentive opportunities from prior year(s).

a)  The Total Base Opportunity of $100,000 is reduced pro rata, to account for nine months of the Base Performance Period: $100,000 × 75% = $75,000 paid to Participant on or before March 15 following the Base Performance Period (to include $37,500 in Cash Incentive and $37,500 from accelerated Deferred Incentive).

b) The $50,000 Deferred Incentive from the previous Deferral Performance Period is paid to the Participant (reflecting an assumed achievement of the Target Performance Measure), with the Final Award of the Deferred Incentive amount being paid no later than (i) 2 ½ months following the end of the Deferral Performance Period, or (ii) as soon as practicable after a determination by the director of the FHFA that the director will not act upon his authority to prohibit compensation that is not reasonable and comparable to compensation paid to executives at other financial institutions.

Example 2:

Participant retires on September 30 and (a) the Participant’s Total Base Opportunity for the full year would have been $100,000, and (b) Participant has $100,000 in Deferred Incentive opportunities from prior year(s).

a)  The Participant’s Total Base Opportunity of $100,000 during the Base Performance Period is reduced pro rata: $100,000 × 75% = $75,000, with $37,500 in Cash Incentive being paid to the Participant on or before March 15 following the Base Performance Period, unless otherwise determined as of a later date by the FHFA director.  The remaining $37,500 from the Base Performance Period represents the Deferred Incentive that is otherwise earned during the Deferral Performance Period, and is paid on or before the March 15 following the end of the Deferral Performance Period unless otherwise determined as of a later date by the FHFA director, based on the Performance Measures achieved during the Deferral Performance Period as applicable.

b)  The $100,000 Deferred Incentive from the previous Deferral Performance Period is determined based on the Participant’s months of participation in the Plan during the Deferral Performance Period in comparison to the total Deferral Performance Period in total, and based on the actual Performance Measure achieved for the Deferral Performance Period, with the Final Award of the Deferred Incentive amount being paid on or before March 15 of the following year after the end of the Deferral Performance Period, or as otherwise determined by the FHFA Director.

c) Forfeiture upon voluntary termination or termination for Cause

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In the case of the Participant’s voluntary termination or involuntary termination for Cause prior to the end of the Base Performance Period, 100% of the Total Base Opportunity shall be forfeited.  In the case of the Participant’s involuntary termination for cause prior to the end of the Deferral Performance Period, 100% of the Deferred Incentive shall be forfeited.

10.4  For purposes of the Plan and this section the following definitions shall apply:

a) Disability means, as a result of the Participant’s incapacity due to physical or mental illness, the Participant has been absent from his or her duties with FHLBank Topeka for an aggregate of twelve out of fifteen consecutive months and, within thirty calendar days after a written notice of termination is thereafter given by FHLBank Topeka to the Participant, the Participant does not return to the full-time performance of the Participant’s duties.

b)  Retirementmeans the planned and voluntary termination of the Participant’s employment, that being the date on which an employee is eligible for normal retirement under the terms of the Pentegra Defined Benefit Plan for Financial Institutions, as adopted by FHLBank Topeka.

c)  Cause means (1) continued failure of the Participant to perform his or her duties with FHLBank Topeka (other than any such failure resulting from Disability), after a written demand for performance is delivered to the Participant; (2) personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, or willful violation of any law, rule or regulation (other than routine traffic violations or similar offenses); (3) willful engagement in any misconduct in the performance of his duty that materially injures FHLBank Topeka; or (4) removal of the Participant for cause by the FHFA pursuant to 12 U.S.C. 4636a, or by any successor agency to the FHFA pursuant to a similar statute.

10.5  The designation of an employee as a Participant in the Plan does not guarantee employment. Nothing in this Plan will confer on any employee the right to be retained in the service of FHLBank Topeka nor limit the right of FHLBank Topeka to terminate or otherwise deal with any employee.

10.6  The Board has the right to revise, modify, or terminate the Plan in whole or in part at any time or for any reason without the consent of any Participant.

10.7  No benefit or interest available under the Plan will be subject in any manner to anticipation or alienation and no Participant has any direct or indirect right to sell, transfer, assign, pledge, attach, garnish or otherwise encumber any anticipated Final Award and any effort(s) to do so shall be void and unenforceable, and FHLBank Topeka shall not be liable in any manner for or subject to the debts, contracts, liabilities, engagements or torts of any person who might anticipate a Final Award under the Plan.

13

10.8  The Plan shall at all times be entirely unfunded and no provision shall at any time be made with respect to segregating assets of FHLBank Topeka for payment of any Final Award under this program.

10.9  Except to the extent superseded by laws of the United States, the laws of the State of Kansas will be controlling in all matters relating to the Plan without regard to the choice of law principles therein. The Plan and all Participant Agreements are intended to comply, and will be construed by FHLBank Topeka in a manner which they are exempt from or comply with the applicable provisions of Section 409A of the Internal Revenue Code of 1986, as amended. To the extent there is any conflict between a provision of the Plan and a provision of Code Section 409A, the applicable provision of Code Section 409A will control. The Plan and all Participation Agreements are intended to comply, and will be construed by FHLBank Topeka in a manner such that they comply with applicable provisions of Section 956 the Dodd-Frank Act, including the proposed rules at 12 CFR §1232, or any successor rules or applicable guidance issued by the FHFA.

10.10  The headings and subheadings in the Plan have been inserted for convenience of reference only and will not affect the construction of the Plan provisions. In any necessary construction, the masculine will include the feminine and the singular the plural, and vice versa.

10.11  This Plan may be executed in any number of counterparts, each one constituting but one and the same instrument, and may be sufficiently evidenced by any one counterpart.

10.12  The individual members of the Board and Compensation Committee will, in accordance with FHLBank Topeka’s Bylaws and other Board governance, be indemnified and held harmless by FHLBank Topeka with respect to any alleged breach of responsibilities performed or to be performed hereunder. In addition, notwithstanding any other provision of the Plan, neither FHLBank Topeka nor any individual acting as an employee or agent of FHLBank Topeka will be liable to a Participant for any claim, loss, liability or expense incurred in connection with the Plan, except when the same has been affirmatively determined by a court order or by the affirmative and binding determination of an arbitrator, to be due to the gross negligence or willful misconduct of that person.

10.13  If any person entitled to receive a distribution under the Plan is physically or mentally incapable of personally receiving and giving a valid receipt for any payment due (unless a prior claim for the distribution has been made by a duly qualified guardian or other legal representative), then, unless and until a claim for the distribution has been made by a duly appointed guardian or other legal representative of the person, the Compensation Committee may provide for the distribution to be made to any other individual or institution then contributing toward or providing for the care and maintenance of the person. Any payment made for the benefit of the person under this section will be a payment for the account of such person and a complete discharge of any liability of FHLBank Topeka and the Plan.

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10.14  Evidence required of anyone under the Plan may be by certificate, affidavit, document, or other information which the person relying on the evidence considers pertinent and reliable, and which is signed, made, or presented by the proper party or parties.

10.15  Any action required of or permitted by FHLBank Topeka under the Plan will be made by the Compensation Committee through delegated authority of the Board, or its designated authorities or individual designee(s), as authorized pursuant to this Plan.

10.16  In the event any provisions of the Plan are held to be illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and endorsed as if the illegal or invalid provisions had never been contained in the Plan.

10.17  A Participant, or any other person entitled to benefits under the Plan, must furnish the Compensation Committee with any and all documents, evidence, data, or other information the Compensation Committee considers necessary or desirable for the purpose of administering the Plan. Benefit payments under the Plan are conditioned on a Participant (or other person who is entitled to benefits) furnishing full, true, and complete data, evidence or other information to the Compensation Committee, and on the prompt execution of any document reasonably related to the administration of the Plan requested by the Compensation Committee.

10.18  The Plan will be binding upon and inure to the benefit of FHLBank Topeka and its successors and assigns, and the successors, assigns, designees, and estates of a Participant. The Plan will also be binding upon and inure to the benefit of any successor organization succeeding to substantially all of the assets and business of FHLBank Topeka, but nothing in the Plan will preclude FHLBank Topeka from merging or consolidating into or with or transferring all or substantially all of its assets to, another organization which assumes the Plan and all obligations of FHLBank Topeka hereunder. FHLBank Topeka agrees that it will make appropriate provision for the preservation of a Participant’s rights under the Plan in any agreement or plan which it may enter into to effect any merger, consolidation, reorganization or transfer of assets. Upon such a merger, consolidation, reorganization, or transfer of assets and assumption of Plan obligations of FHLBank Topeka, the term “FHLBank Topeka” will refer to such other organization and the Plan will continue in full force and effect.

15

■EXECUTIVEINCENTIVE COMPENSATION PLAN|December 14, 2012

Appendix A

Participation Agreement

Participant:                                                                            

Address:

Social Security No.:                                                   

Date of Birth:                                                                

1.   AgreementtoParticipate. The Participant (identified above and sometimes hereinafter referred to as “I”) hereby agrees to become a Participant in the Federal Home Loan Bank of Topeka Executive Incentive Compensation Plan (the “Plan”).

2.  Acknowledgements: I hereby acknowledge the following: (1) I have received and reviewed a copy of the Plan; (2) all benefits under the Plan remain subject to the claims of the general creditors of Federal Home Loan Bank of Topeka (“FHLBank Topeka”), and in the event of the bankruptcy, insolvency, or any similar situation involving FHLBank Topeka, I acknowledge that I would have the rights of a general unsecured creditor with respect to the benefits under the Plan; (3) that any right to benefits hereunder are subject to the specific terms and conditions of the Plan, including any specific Performance Measures set forth therein or in the Target Document; (4) no benefits will be paid under the Plan if I am terminated for “Cause” as set forth in the Plan Section 10.4.c; (5) no benefits will be paid under the Plan or other remedies may be available to FHLBank Topeka if I violate or fail to fulfill the non-disclosure or non-solicitation provisions set forth under Section 3.5 in the Plan, if applicable; (6) the benefits of the Plan may be subject to FICA taxes before such amounts are actually paid to me; and (7) all amounts received under the Plan shall be taxable to me as ordinary income.

IN WITNESS WHEREOF, I have executed this Participation Agreement as of the date set forth below.

Date:_____________, 20______                                     

·   Signature of Participant

Received and acknowledged this day of __________________, 20 .

FEDERAL HOME LOAN BANK OF TOPEKA

By:     

Print Name:  

Print Title:    

“FHLBank Topeka”

16

■EXECUTIVEINCENTIVE COMPENSATION PLAN|December 14, 2012

Appendix B

BENEFICIARY DESIGNATION

CAREFULLY READ THE INSTRUCTIONS FOUND AT THE END

OF THIS FORM BEFORE PROCEEDING.

Participant:   

Address: 

Social Security No.:                                   

Date of Birth:                  

The Participant hereby designates the following individual(s) or entity(ies) as his or her beneficiary(ies) pursuant to the terms of the Executive Incentive Compensation Plan of Federal Home Loan Bank of Topeka (“FHLBank Topeka”) [Insert Name, Social Security Number, Relationship, Date of Birth and Address of Individuals and/or fully identify any trust beneficiary by the Name of the Trust, Date of Execution of the Trust, the Trustee’s Name, the address of the trust, and the employer identification number of the trust]:

Primary Beneficiary(ies)                                                                                             SSN/Tax I.D.

Contingent Beneficiary(ies)

The Participant hereby reserves the right to change this Beneficiary Designation, and any such change shall be effective when the Participant has executed a new or amended Beneficiary Designation form, and the receipt of such form has been acknowledged by FHLBank Topeka, all in such manner as specified by FHLBank Topeka from time to time, or on a future date specified by any such new or amended Beneficiary Designation form.

17

■EXECUTIVEINCENTIVE COMPENSATION PLAN|December 14, 2012

IN WITNESS WHEREAS, the Participant has executed this Beneficiary Designation on the date designated below.

Date:_____________, ______                                                                

Signature of Participant  

Received

FEDERAL HOME LOAN BANK OF TOPEKA

Date:_____________, ______                                                                By:                                                              

Print Name:    

Print Title:   

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■EXECUTIVEINCENTIVE COMPENSATION PLAN|December 14, 2012

INSTRUCTIONS FOR COMPLETION

OF BENEFICIARY DESIGNATION FORM

As a participant in the Federal Home Loan Bank of Topeka Executive Incentive Compensation Plan (the “Plan”), you may be entitled to have certain benefits paid to a designated beneficiary under the Plan in the event of your death. We recommend that you consult your attorney concerning the completion of this form to assure that the desired federal tax consequences are achieved.

The originally-signed copy of this form must be mailed or delivered to FHLBank Topeka at the following address: Federal Home Loan Bank of Topeka, One Security Benefit Pl., Suite 100, P.O. Box 176, Topeka KS 66601-0176, and to the attention of Mr. Kurt Burger. You should also make and keep one copy of the form, and it should be kept with your other important documents.

If no Primary Beneficiary is alive when the payment becomes due, the benefits will be paid in equal shares to those of the Contingent Beneficiaries who are alive when the payment becomes due.

If you fail to designate a beneficiary, or if no designated beneficiaries are alive when the payment becomes due, or if insufficient information is available to reasonably determine your intent, the death benefits under the Plan will be paid to your estate.

THIS BENEFICIARY DESIGNATION DOES NOT ALTER OR MODIFY THE PROVISIONS OF THE PLAN. IN THE EVENT THAT THIS BENEFICIARY DESIGNATION FORM INADVERTENTLY CONFLICTS WITH THE PROVISIONS OF THE PLAN, THE PROVISIONS OF THE PLAN SHALL CONTROL.

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EX-10.9

Approved December 20, 2011

Revisions to Correct Typos Made 5/9/2012

Federal Home Loan Bank of Topeka

2012 Executive Incentive Compensation Plan Targets

Goal Metrics, Metric Performance Ranges, Participant Eligibility and Metric Weights

This document specifies goal metrics, metric performance ranges, metric weights and shareholder safeguard for the participants (Participants) in the Executive Incentive Compensation Plan (Plan).

A.   Total Base Opportunity Goal Metrics. The following goal metrics are assigned to the Participants under the Plan. All calculations including interest rates will be rounded to two decimal places.

1.    Adjusted Return Spread on Class B Common Stock

·   Definition: The spread between Pre-ASC 815 (formerly referred to as SFAS 133), Pre AHP adjusted return available for Class B Common Stock (weighted by the amount Class B Common Stock outstanding each day) and the weighted average daily Overnight Federal funds effective rate (Fed Effective).

·   Measure: Pre-ASC 815, AHP adjusted return available for Class B Common Stock (using core income as defined below), less earnings attributed to Class A Common Stock (defined as the sum of the daily amounts calculated by multiplying the outstanding Class A Common Stock times Fed Effective plus 0.84 percent for each day), relative to average Class B Common Stock outstanding for the period as a spread over the Fed Effective for the period.

Adjusted income is defined as follows:

o   Net income calculated under generally accepted accounting principles (GAAP)

o   Plus AHP assessments

o   Excluding the impact or adjustment required because of Accounting Standards Codification 815 (ASC 815)

o   Plus dividends on redeemable Class A and Class B Common Stock treated as interest expense under Statement of Financial Accounting Standards No. 150

o   Minus prepayment fees

o   Minus/plus realized or unrealized gains/losses on securities (excludes any charges for other-than-temporary impairment of securities)

o   Minus/plus gains/losses on early retirement of debt and related derivatives

o   Minus/plus any amortization/accretion of premium/discount on unswapped mortgage-backed securities in the FHLBank’s trading portfolio (not amortized/accreted under GAAP)

·   Performance Range:

	Annual Performance Range
Threshold	5.73%
Target	9.84%
Optimum	13.96%

1

2. Net Income after Capital Charge

·   Definition: The dollar amount of adjusted income as defined in the above metric, but Post-AHP assessment, which exceeds the cost of the required return on capital.

·   Measure: Adjusted income as defined in the Net Income after Capital Charge Definition above, less required return on all capital. The required return on capital is the sum of the outstanding Class B Common Stock times three-month LIBOR plus 1.00 percent for each day during the year plus the sum of all other capital (regulatory for Class A Common Stock and GAAP for retained earnings and other comprehensive income) times three-month LIBOR for each day during the year.

·   Performance Range:

	Annual Performance Range
Threshold	$26,631,425
Target	$53,262,850
Optimum	$79,894,275

3. Retained Earnings

Definition:  The dollar amount of GAAP Retained Earnings as of 12/31/2012.

·   Measure: Retained earnings as defined above as reported on the 12/31/12 balance sheet.

·   Performance Ranges:

	Annual Performance Range
Threshold	$404,426,667
Target	$445,961,018
Optimum	$487,495,369

4. Mission Product Utilization

·   Definition: Member usage of mission-oriented products. Mission-oriented products consist of the following:

o   Affordable Housing Program (AHP);

o   CICA - Community Housing Program (CHP); CHP Plus; Community Development Program (CDP); and Housing and Community Development Emergency Loan Program (HELP)

o   Homeownership Set-aside Programs (RFHP or TOP); and

o   Joint Opportunities for Building Success (JOBS).

·   Measure: Calculate the number of FHLBank members at the time of mission product usage that qualify as a user of a product (as defined below following each product) at any time during the current calendar year. For purposes of calculating the number of qualifying users a member is counted only once within each mission-oriented product category. Program participation use is credited and remains credited for the entire calendar year irrespective of whether the participating member is subsequently acquired, merged or otherwise terminates FHLBank membership.

2

·   Mission-oriented Product Category Usage Definitions

o   AHP - Applications submitted. Applications submitted by a member but subsequently deemed to be ineligible by FHLBank will be counted as a qualified use.

o   CICA - Applications approved.

o   Homeownership Set-aside Programs (RFHP or TOP) - Agreements submitted.

o   JOBS - Applications submitted.

·   Performance Range:

	Annual Performance Range
Threshold	300
Target	350
Optimum	400

5.  Risk Management – Market, Credit and Liquidity Risks

Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area. General risk categories are market, credit, and liquidity risks.

·   Performance Ranges

Weighted Average Score	Payout
5 (superior)	150%
4 (highly successful)	125%
3 (successful)	100%
2.5 (moderately successful)	50%
2 (marginally successful)	0%
1 (unsuccessful)	0%

·   Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:

Risk Management Area	Weighting
Liquidity Risk	30%
Market Risk	40%
Credit Risk	30%
Total	100%

3

6.  Risk Management – Compliance, Business and Operations Risks

Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area. General risk categories are compliance, business and operations risks.

·   Performance Ranges

Weighted Average Score	Payout
5 (superior)	150%
4 (highly successful)	125%
3 (successful)	100%
2.5 (moderately successful)	50%
2 (marginally successful)	0%
1 (unsuccessful)	0%

·   Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:

Risk Management Area	Weighting
Compliance Risk	30%
Business Risk	40%
Operations Risk	30%
Total	100%

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B.   Deferred Incentive Goal Metrics.

In calculating Base Award amounts, performance shall be measured by evaluating the following:

	Minimum	Threshold	Target	Maximum
Total Return(1)	>8/12 vs FHLBanks	8/12 vs FHLBanks	5/12 vs FHLBanks	2/12 or 1/12 vs FHLBanks
Deferred Incentive
Performance Measure Percentage	0%	75%	100%	125%
Weighting	0.375	0.375	0.375	0.375
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)	$	$	$	$
Expense Growth(2)	>9/12 vs FHLBanks	9/12 vs FHLBanks	6/12 vs FHLBanks	2/12 or 1/12 vs FHLBanks
Deferred Incentive
Performance Measure Percentage	0%	75%	100%	125%
Weighting	0.25	0.25	0.25	0.25
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)	$	$	$	$
Market Value of Equity (MVE) / Total Regulatory Capital Stock (TRCS)(3)	>9/12 vs FHLBanks	9/12 vs FHLBanks	6/12 vs FHLBanks	2/12 or 1/12 vs FHLBanks
Deferred Incentive
Performance Measure Percentage	0%	75%	100%	125%
Weighting	0.375	0.375	0.375	0.375
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)	$	$	$	$
Total Value (Dollar Value for Total Return + Dollar Value for Expense Growth + Dollar Value for MVE/TRCS)	$	$	$	$
Base Award Opportunity Percentage             Level I   (40%)             Level II  (32.5%)             Level III (25%)	%	%	%	%
Total Base Award (Total Value x Base Award Opportunity Percentage)	$	$	$	$

Footnotes:

1)      Total Return.  Total Return equals the Total Dividends, plus the Change in Retained Earnings, divided by the Average Capital. For FHLBank Topeka: Total Dividends is defined as the sum of the actual dividends paid on required Class A Common Stock and all Class B Common Stock during the three-year Performance Period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/12 to 12/31/15; and Average Capital is defined as the average daily ending balance of required Class A Common Stock and all Class B Common Stock for dates starting with 01/01/13 and ending 12/31/15.   For the other FHLBanks, unless determined otherwise by the Compensation Committee: Total Dividends is defined as all dividends paid on all capital stock during the three-year period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/12 to 12/31/15; and Average Capital is defined as the average daily ending balance of all capital stock outstanding for dates starting with 01/01/13 and ending 12/31/15.  For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest total return being the best performance, and ranking 1st out of the 12 FHLBanks.

2)      Expense Growth.  Expense growth is the dollar amount of the change in operating expenses (including salaries and benefits, costs of quarters and other operating expenses) at FHLBank Topeka from calendar year 2012 to calendar year 2015.  For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the lowest increase (or greatest decrease) being the best performance, and a 1st out of the 12 FHLBanks being the highest ranking.

3)      MVE/TRCS.  Using amounts reported on the Trendbook Analysis from the FHFA Call Report System (CRS), MVE/TRCS is calculated by dividing base case MVE by TRCS (TRCS calculated as Total Regulatory Capital minus Retained Earnings) calculated at the end of the Performance Period. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest MVE/TRCS being the best performance, and ranking 1st out of the 12 FHLBanks.

5

C.   Total Base Opportunity and Participant Levels.

Total Base Opportunity Matrix

(As a percent of base)

Participant	Total Base Opportunity			Cash Incentive			Deferred Incentive Opportunity *
	Thresh	Target	Max	Thresh	Target	Max	Thresh	Target	Max
Level 1
CEO	60	80	100	30	40	50	30	40	50
Level 2
COO	45	65	85	22.5	32.5	42.5	22.5	32.5	42.5
Level 3
CRO	30	50	70	15	25	35	15	25	35
General Counsel	30	50	70	15	25	35	15	25	35
CAO	30	50	70	15	25	35	15	25	35

* The final value of the deferred incentive opportunity may be $0 if at threshold metrics are not met, 75% of initial deferral at threshold, 100% at target and 125% at maximum.

D. Base Opportunity Metric Weights. The following metric weight for each goal metric is assigned to the Participants:

Objective	CEO/COO	CRO/CAO	General Counsel
1. Adjusted Return Spread on Class B     Common Stock	20%	10%	15%
2. Net Income after Capital Charge	20%	10%	15%
3. Retained Earnings	10%	20%	10%
4. Mission Product Utilization	10%	10%	10%
5. Risk Management- Market, Credit,      Liquidity	20%	20%	20%
6. Risk Management-  Compliance,      Business, Operations	20%	30%	30%
Total	100%	100%	100%

6

EX-10.10

December 14, 2012

Federal Home Loan Bank of Topeka

 Executive Incentive Compensation Plan Targets

Goal Metrics, Metric Performance Ranges, Participant Eligibility and Metric Weights

This document specifies goal metrics, metric performance ranges, metric weights and shareholder safeguard for the participants (Participants) in the Executive Incentive Compensation Plan (Plan).

The Plan targets contained in this document specifically cover the 2013 Base Performance Period and the 2014-2016 Deferral Performance Period.

A.   2013 Base Performance Period Metrics. The following goal metrics are assigned to the Participants under the Plan. All calculations including interest rates will be rounded to two decimal places.

1.    Adjusted Return Spread on Class B Common Stock

·   Definition: The spread between Pre-ASC 815 (formerly referred to as SFAS 133), Pre AHP adjusted return available for Class B Common Stock (weighted by the amount Class B Common Stock outstanding each day) and the  average daily Overnight Federal funds effective rate (Fed Effective).

·   Measure: Pre-ASC 815, AHP adjusted return available for Class B Common Stock (using adjusted income as defined below), less earnings attributed to Class A Common Stock (defined as the sum of the daily amounts calculated by multiplying the outstanding Class A Common Stock times Fed Effective plus 0.76 percent for each day), relative to average Class B Common Stock outstanding for the period as a spread over the Fed Effective for the period.

Adjusted income is defined as follows:

o   Net income calculated under generally accepted accounting principles (GAAP)

o   Plus AHP assessments

o   Excluding the impact or adjustment required because of Accounting Standards Codification 815 (ASC 815)

o   Plus dividends on redeemable Class A and Class B Common Stock treated as interest expense under Statement of Financial Accounting Standards No. 150

o   Minus prepayment fees

o   Minus/plus realized or unrealized gains/losses on securities (excludes any charges for other-than-temporary impairment of securities)

o   Minus/plus gains/losses on early retirement of debt and related derivatives

o   Minus/plus any amortization/accretion of premium/discount on unswapped mortgage-backed securities in the FHLBank’s trading portfolio (not amortized/accreted under GAAP)

·   Performance Range:

	Annual Performance Range
Threshold	6.24%
Target	11.28%
Optimum	16.32%

1

2.           Net Income after Capital Charge

·   Definition: The dollar amount of adjusted income as defined in the above metric, but Post-AHP assessment, which exceeds the cost of the required return on capital.

·   Measure: Adjusted income as defined in the Net Income after Capital Charge Definition above, less required return on all capital. The required return on capital is the sum of the outstanding regulatory Class B Common Stock times the average of three-month LIBOR plus 1.00 percent for each day during the year plus the sum of all other capital (regulatory for Class A Common Stock and GAAP for retained earnings and other comprehensive income) times the average of three-month LIBOR for each day during the year.

·   Performance Range:

	Annual Performance Range
Threshold	$39,780,680
Target	$79,561,359
Optimum	$119,342,039

3. Retained Earnings

Definition:  The dollar amount of GAAP Retained Earnings as of 12/31/2013.

·   Measure: Retained earnings as defined above as reported on the 12/31/2013 balance sheet.

·   Performance Ranges:

	Annual Performance Range
Threshold	$499,794,258
Target	$539,574,938
Optimum	$579,355,617

4. Mission Product Utilization

·   Definition: Member usage of mission-oriented products. Mission-oriented products consist of the following:

o   Affordable Housing Program (AHP);

o   CICA - Community Housing Program (CHP);  and Community Development Program (CDP)

o   Homeownership Set-aside Programs; and

o   Joint Opportunities for Building Success (JOBS).

·   Measure: Calculate the number of FHLBank members at the time of mission product usage that qualify as a user of a product (as defined below following each product) at any time during the current calendar year. For purposes of calculating the number of qualifying users a member is counted only once within each mission-oriented product category. Program participation use is credited and remains credited for the entire calendar year irrespective of whether the participating member is subsequently acquired, merged or otherwise terminates FHLBank membership.

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·   Mission-oriented Product Category Usage Definitions

o   AHP - Applications submitted. Applications submitted by a member but subsequently deemed to be ineligible by FHLBank will be counted as a qualified use.

o   CICA - Applications approved.

o   Homeownership Set-aside Programs - Agreements submitted.

o   JOBS - Applications submitted.

·   Performance Range:

	Annual Performance Range
Threshold	305
Target	360
Optimum	415

5.  Risk Management – Market, Credit and Liquidity Risks

Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale. General risk categories are market, credit, and liquidity risks.

·   Performance Ranges

	Score	Payout
Threshold	3.0	50%
Target	3.5	100%
Optimum	5.0	150%

·   Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:

Risk Management Category	Weighting
Liquidity Risk	30%
Market Risk	40%
Credit Risk	30%
Total	100%

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6.  Risk Management – Compliance, Business and Operations Risks

Definition: Management of FHLBank risks as determined by the weighted average rating by the board of directors in an annual evaluation of the Risk Appetite metrics in this area using a 1 (lowest) to 5 (highest) point scale . General risk categories are compliance, business and operations risks.

·   Performance Ranges

	Score	Payout
Threshold	3.0	50%
Target	3.5	100%
Optimum	5.0	150%

·   Risk Management Metric Weights: The following metric weight for each goal metric is assigned to the Participants:

Risk Management Category	Weighting
Compliance Risk	30%
Business Risk	35%
Operations Risk	35%
Total	100%

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B.   2014-2016 Deferral Performance Period Metrics.

These metrics apply to the 2014-2016 Deferral Performance Period.

In calculating Base Award amounts, performance shall be measured by evaluating the following:

	Minimum	Threshold	Target	Maximum
Total Return(1)	>8/12 vs FHLBanks	8/12 vs FHLBanks	5/12 vs FHLBanks	2/12 or 1/12 vs FHLBanks
Deferred Incentive
Performance Measure Percentage	0%	75%	100%	125%
Weighting	0.50	0.50	0.50	0.50
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)	$	$	$	$
Market Value of Equity (MVE) / Total Regulatory Capital Stock (TRCS)(2)	>9/12 vs FHLBanks	9/12 vs FHLBanks	6/12 vs FHLBanks	2/12 or 1/12 vs FHLBanks
Deferred Incentive
Performance Measure Percentage	0%	75%	100%	125%
Weighting	0.50	0.50	0.50	0.50
Dollar Value (Deferred Incentive x Performance Measure Percentage x Weight)	$	$	$	$
Total Value (Dollar Value for Total Return + Dollar Value for Expense Growth + Dollar Value for MVE/TRCS)	$	$	$	$
Deferred Incentive Opportunity Percentage             Level I   (40%)             Level II  (32.5%)             Level III (25%)	%	%	%	%
Deferred Incentive Award (Total Value x Deferred Incentive Opportunity Percentage)	$	$	$	$

Footnotes:

1)      Total Return.  Total Return equals the Total Dividends, plus the Change in Retained Earnings, divided by the Average Capital. For FHLBank Topeka: Total Dividends is defined as the sum of the actual dividends paid on required Class A Common Stock and all Class B Common Stock during the three-year Performance Period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/13 to 12/31/16; and Average Capital is defined as the average daily ending balance of required Class A Common Stock and all Class B Common Stock for dates starting with 01/01/14 and ending 12/31/16.   For the other FHLBanks, unless determined otherwise by the Compensation Committee: Total Dividends is defined as all dividends paid on all capital stock during the three-year period; Change in Retained Earnings is defined as the change in retained earnings from 12/31/13 to 12/31/16; and Average Capital is defined as the average daily ending balance of all capital stock outstanding for dates starting with 01/01/14 and ending 12/31/16.  For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest total return being the best performance, and ranking 1st out of the 12 FHLBanks.

2)      MVE/TRCS.  Using amounts reported on the Trendbook Analysis from the FHFA Call Report System (CRS), MVE/TRCS is calculated by dividing base case MVE by TRCS (TRCS calculated as Total Regulatory Capital minus Retained Earnings) calculated at the end of the Deferral Performance Period. For performance comparison purposes, FHLBank Topeka will be ranked against the other FHLBanks, with the highest MVE/TRCS being the best performance, and ranking 1st out of the 12 FHLBanks.

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C.   Total Base Opportunity and Participant Levels.

Total Base Opportunity Matrix

(As a percent of base)

Participant	Total Base Opportunity			Cash Incentive			Deferred Incentive Opportunity *
	Thresh	Target	Max	Thresh	Target	Max	Thresh	Target	Max
Level 1
CEO	60	80	100	30	40	50	30	40	50
Level 2
COO	45	65	85	22.5	32.5	42.5	22.5	32.5	42.5
Level 3
CRO	30	50	70	15	25	35	15	25	35
General Counsel	30	50	70	15	25	35	15	25	35
CAO	30	50	70	15	25	35	15	25	35

* The final value of the deferred incentive opportunity may be $0 if threshold metrics are not met, 75% of initial deferral at threshold, 100% at target and 125% at maximum.

D. Base Opportunity Metric Weights. The following metric weight for each goal metric is assigned to the Participants:

Objective	CEO/COO	CRO/CAO	General Counsel
1. Adjusted Return Spread on Class B     Common Stock	20%	10%	15%
2. Net Income after Capital Charge	20%	10%	15%
3. Retained Earnings	10%	20%	10%
4. Mission Product Utilization	10%	10%	10%
5. Risk Management- Market, Credit,      Liquidity	20%	25%	25%
6. Risk Management-  Compliance,      Business, Operations	20%	25%	25%
Total	100%	100%	100%

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EX-12.1

					Exhibit 12.1
FHLBANK TOPEKA
CALCULATION OF EARNINGS TO FIXED CHARGES
12/31/2012
(Thousands)
	12/31/2012	12/31/2011	12/31/2010	12/31/2009	12/31/2008
Earnings
Income Before Assessments	122,572	97,759	45,701	322,192	38,777
Total Fixed Charges	275,103	315,561	380,135	575,165	1,642,925
Capitalized Interest	-	-	-	-	-
Total Earnings	397,675	413,320	425,836	897,357	1,681,702
Fixed Charges
Interest Expense1	275,103	315,561	380,135	575,165	1,642,925
Capitalized Interest	-	-	-	-	-
Estimated Interest Attributable to Rental Expense 2	-	-	-	-	-
Total Fixed Charges	275,103	315,561	380,135	575,165	1,642,925
Earnings to Fixed Charges Ratio	1.45	1.31	1.12	1.56	1.02
1 For purposes of this calculation the amortization of premium, discount, and capitalized expenses related to
indebtedness are included in interest expense and have not been separately displayed in this calculation.
2 The FHLBank has rental expense; however, has not placed an estimated of the interest expense included
in rental expense in this calculation as the amount is very minimal.

EX-14.1

Code of Ethics

December 14, 2012

Policy Information

Document Title:	Code of Ethics
Content Owner:	General Counsel
Certification of Compliance Contact:	General Counsel
Policy Category:	FHLBank Policy
FHLBank-Level Approver:	Policy Oversight Group
Board-Level Approver:	Full Board (Housing & Governance)
Review Frequency:	Annually
Initial Effective Date:	12/20/2006
Last POG Approval Date:	11/28/2012
Next Review Date:	12/2013

Introduction

This FHLBank Policy, governed by the board of directors (“board”), establishes the principles to ensure the Federal Home Loan Bank of Topeka (“FHLBank”) maintains a legally compliant and highly ethical workplace. This Code of Ethics (“Code”) is intended to assist in FHLBank’s compliance with all applicable laws and regulations, including the provisions of the Federal Home Loan Bank Act, as amended (12 U.S.C. §§ 1421 – 1449), the regulations of the Federal Housing Finance Agency (“Finance Agency”) (12 C.F.R. Parts 900 – 998 and 1200-1299), and all Finance Agency advisory bulletins, regulatory interpretations, and other pronouncements affecting the FHLBank.

Purpose

Major financial services organizations are closely scrutinized by government regulators, the media and the public.  The FHLBank is subject to the same scrutiny, perhaps even more so given its status as a Government-Sponsored Enterprise.  Only through strict adherence to high standards of ethical and professional conduct can the FHLBank continue to meet the expectations of its customers (including members and housing associates), regulators, directors, employees, contractors, purchasers of FHLBank consolidated obligations, counterparties and vendors, as well as Congress and the public (all collectively called “Stakeholders”).

Scope

The Code applies to all regular FHLBank employees (both full- and part-time, collectively called “Employees”), directors and Affordable Housing Advisory Council (“AHAC”) members (all collectively called “Covered Parties”).

I.  Ethical Conduct is Essential

The FHLBank aspires to conduct every aspect of its business in accordance with the highest ethical standards.  To enable the FHLBank to achieve this goal, each Covered Party must comply with the requirements of this Code.  The Code is comprised of eight time-honored ethical principles, which are supplemented with supporting guidance and interpretation.  These principles set the standard for maintaining a legally compliant and highly ethical workplace.

Compliance is a condition of employment for Employees and for continued service in the case of members of the board and AHAC.  It is vitally important for each Covered Party to know, understand and embrace the principles set forth in the Code.

II. Ethical Principles

All Covered Parties are required to:

1.           Maintain the highest standards of honesty and integrity.

2.           Comply with the laws and regulations pertaining to the FHLBank.

3.           Avoid conflicts of interest, including even the appearance of a conflict of interest.

4.           Protect the confidential, personal and proprietary information of the FHLBank and its customers, counterparties, vendors and other Covered Parties.

5.           Protect FHLBank property and use it only for legitimate purposes.

6.           Deal fairly with the FHLBank’s customers, regulators, counterparties, vendors and other Covered Parties.

7.           Accurately record and report information to meet financial reporting, regulatory and legal obligations.

8.           Foster a safe, healthy and productive workplace.

III. General Responsibilities

Individual Responsibilities

Employees.  Each Employee must maintain the highest standards of ethics and professionalism, which includes fully complying with the Code.  The same principles apply regardless of the situation the Employee faces or the Stakeholder with whom they are dealing.  However, the Code is not designed to anticipate every ethical situation that Employees may face during their relationship with the FHLBank.  If there is any doubt regarding a situation not explicitly addressed in the Code, Employees are expected to consult with and seek advice from their managers, the General Counsel or Compliance Officer.

Managers.  Managers are expected to demonstrate a commitment to the Code by setting an example through their own conduct.  Managers must strive to maintain a workplace environment that encourages communication about and compliance with the Code, so that Employees and contractors are comfortable asking questions about and reporting potential violations of the Code.  If a manager becomes aware that an Employee or contractor plans to engage in an illegal or unethical behavior, he or she is expected to act affirmatively to prevent the prohibited conduct and to report the action to the General Counsel or Compliance Officer.

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Reporting Ethics Concerns

Covered Parties shall promptly report any violation or possible violation of the Code in accordance with the Whistleblower Procedures. If they are comfortable in doing so, Employees are welcome to first discuss the matter with their managers, the General Counsel or Compliance Officer.  Directors and AHAC members are welcome to first discuss the matter with the Chief Internal Audit Officer or General Counsel.

Administration of the Code

Interpretation.  The provisions set forth in the Code are intended to be interpreted and applied under a reasonableness standard.  If a Covered Party has any questions as to how a certain provision applies to a specific set of facts, he or she is expected to contact one of the appropriate officers identified in the above paragraph for an opinion as to the application of the provision(s) in question.

Distribution and Certification of Compliance.  A copy of the Code and any future amendments shall be provided to each Covered Party.  Each Covered Party is required, upon commencement of his or her employment or service with the FHLBank, and on an annual basis thereafter, to verify receipt of, verify compliance with and agree to continue to comply with the requirements of the Code, including any applicable policies incorporated by reference into the Code, and, in the case of Employees, annually disclose any matters required by this Code to be reported (except waivers reported to the Audit Committee of the board).  The Employees’ certification and disclosure forms shall be reviewed by the General Counsel or Compliance Officer, who will submit an annual report thereon to the Audit Committee of the board.  Covered Parties may also be required to verify their compliance any time an update or amendment is made to the Code, which may be amended or updated at any time at the discretion of the board.

Waivers.  A waiver of any provision of the Code applicable to an FHLBank director, member of the AHAC, or an FHLBank officer with the title of Vice President or higher may only be granted by the board.  The President or General Counsel may grant waivers to other Covered Parties.  All requests for waivers shall be in writing directed to the person(s) authorized to grant such waiver and shall describe all significant facts and circumstances relating to the request and the reasons for the request.  A waiver shall be granted only if the person(s) granting the waiver believe it to be in the best interest of the FHLBank.  All such waivers shall be in writing and shall be reported to the Audit Committee of the board and shall be disclosed as required by the Securities Exchange Act of 1934 and the rules thereunder.

Violations.  Any violation of the Code, even if well-intentioned or believed to be justified, will be seriously addressed.  A violation could result in corrective action up to and including termination of the Covered Party’s employment or service with the FHLBank.  Violations of the Code include, but are not limited to, violating the principles of the Code, failing to report a violation, condoning a violation by someone else, making a false report, failing to cooperate fully in an investigation of any violation, and retaliating against another Covered Party who reports in good faith a suspected violation.  All violations shall be reported to the Audit Committee of the board.

IV. Compliance with the Ethical Principles

Principle 1:  Honesty and Integrity

Covered Parties must maintain the highest standards of honesty and integrity at all times.

Ethical conduct starts with honesty and integrity in interacting with all of the FHLBank’s Stakeholders.

Responsibilities to all Stakeholders

Honesty in communications means that Covered Parties must always express the truth as best as they know it and not convey it in a way likely to mislead or deceive.  Covered Parties must be truthful in presenting the facts to the best of their knowledge.  Covered Parties need to avoid out-of-context statements or leaving an impression with a Stakeholder that is misleading.

Complete candor must be the norm.  Covered Parties are expected to be forthright, volunteering the information that the customer, vendor or counterparty needs to know to be fully informed when entering into a business transaction with the FHLBank.  The same applies to all communications with the FHLBank’s regulators.

Responsibilities to the FHLBank

Covered Parties shall not engage in criminal or otherwise disgraceful conduct, or other conduct prejudicial to the FHLBank, that adversely affects the confidence in, and reputation of, the FHLBank among customers, regulators, other Covered Parties and the public.

Covered Parties shall comply with FHLBank travel expense procedures.  When on FHLBank business, Covered Parties are expected to use good judgment, keep business expenses reasonable and request reimbursement only for needed business-related expenses.  Covered Parties also must ensure that their vacations and other absences are accurately and promptly recorded in the FHLBank’s attendance database.

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Principle 2:  Compliance with Laws and Regulations

Covered Parties must comply with all laws and regulations pertaining to the FHLBank.

Covered Parties must comply with all laws, rules, regulations, policies, guidelines and procedures applicable to the FHLBank.  Covered Parties are expected to obey the spirit, as well as the letter, of all laws and regulations in every area in which the FHLBank does business.  In particular, all Covered Parties should be knowledgeable of the laws, regulations and policies of the Finance Agency or any successor regulator, the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission that relate to their job responsibilities.

This section highlights some of the more important laws and regulations that apply to the FHLBank and Covered Parties.  If a Covered Party has questions about a specific law or regulation that applies to his or her job responsibilities, he or she should seek the advice of the Legal Department.

Duties to the FHLBank

Federal Home Loan Bank Act and Finance Agency Regulations.  Covered Parties shall comply with all provisions of the Federal Home Loan Bank Act, as amended, the regulations of the Finance Agency, and all Finance Agency advisory bulletins, regulatory interpretations, and other pronouncements affecting the FHLBank.

Securities Laws.  To avoid any possible violation of insider trading laws, all Covered Parties must comply with the Insider Trading Policy.  Covered Parties must also comply with the Policy on Fair Disclosure, which prohibits selective disclosure of material, non-public information to persons outside the FHLBank who might use the information for purchasing or selling securities of the FHLBank, and the Form 8-K Compliance Policy, if applicable.  The securities laws also require full, fair, accurate, timely and understandable disclosure of the FHLBank’s financial results and condition as discussed in Principle 7 of this Code. The policies in this section are incorporated by reference into this Code.

Copyright Laws.  Covered Parties shall not create unauthorized copies of copyrighted material.  Although copyright infringement most often involves the unauthorized copying of publications or other print media, it also can extend to unauthorized use of photographs and graphic displays or designs.  In addition, computer software is copyrighted.  It is sold subject to license agreements that restrict its use.  Covered Parties cannot copy software or use it on a different computer unless the license agreement so permits.

Trade Regulation Laws.  Covered Parties shall never agree with their counterparts at competitors on what prices or levels of rates should be charged their customers.  Under no circumstances shall a Covered Party accept any bribes or kickbacks from customers, vendors, counterparties or anyone wanting to do business with the FHLBank.

Duties to Employees

Discrimination and harassment are serious violations of federal and state laws and of FHLBank policy.  To this end, Covered Parties must fully comply with the Anti-harassment, Nondiscrimination & Mutual Respect Policy Statement as distributed from time to time.  When interviewing job applicants, managers may not ask specific questions that do not relate to the individual’s ability to perform the job, such as asking questions about his or her age, marital status and/or child-rearing responsibilities.  Managers must focus hiring and other employment decisions on the merits of a candidate’s qualifications.

The FHLBank is committed to providing all Employees with the same opportunities for success regardless of their race, color, religion, ancestry, national origin, age, sex, sexual orientation, parental status, veteran status, citizenship status, disability or any other non-job-related factor.  Covered Parties are required to comply with all other federal, state and local employment laws that apply to the FHLBank.  The FHLBank provides reasonable accommodation to applicants with disabilities and Covered Parties to enable them to apply for and to perform the essential functions of their jobs or positions.  Employees shall attend FHLBank-sponsored training regarding these requirements and seek the advice of the Human Resources and Administration or Legal Departments when necessary.

Duties to Government

When dealing with government officials, Covered Parties must be sensitive to the rules that govern government officials’ receipt of gifts and entertainment.  Under no circumstances may a Covered Party pay or offer anything of value to a government official, including political parties or candidates for public office, for the purpose of rewarding the official for his or her actions.

Principle 3:  Conflicts of Interest

Covered Parties are required to avoid conflicts of interest, including even the appearance of a conflict of interest.

Covered Parties are responsible for safeguarding the integrity of the FHLBank’s business decisions by ensuring that their decisions are made solely on the basis of what is best for the FHLBank and are not influenced by personal interests.  Conflicts of interest arise in any situation in which there is a potential for divided loyalties between a Covered Party’s personal interests and a Covered Party’s obligations to the FHLBank.  While an activity that is an actual conflict of interest is never acceptable, Covered Parties must also avoid activities that involve even the appearance of such a conflict.  Any conflict of interest that may arise and any material transaction or relationship that could be expected to give rise to a conflict involving a Covered Party shall be reported promptly as described above in “III. General Responsibilities” under the heading “Reporting Ethics Concerns,” except for conflicts, transactions and relationships which are specifically required by this Code to be disclosed annually.

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Certain Definitions

“Affiliate” means any person or company that controls, is controlled by, or is under common control with another entity or person, including any holding company, subsidiary or sister company. For purposes of this definition, control means ownership of 35 percent or more of the entity’s assets

“Financial Interest” means the ownership or control, directly or indirectly, of any of the following, but does not include a Passive Financial Interest:

·   Any shares of common or preferred capital stock (or options thereon);

·   Any other equity interest (e.g., partnership or trust shares or interests); or

·   Any debt security or obligation (except deposit or savings accounts).

“Immediate Family Member” means a Covered Party’s spouse, domestic partner or dependent children (regardless of residence).

“Passive Financial Interest” means any of the following:

·   An investment in a legally recognized entity that owns debt or equity securities if neither the Covered Party nor a Covered Party’s Immediate or Related Family Member controls the entity or plays any role in the purchase or sale of the securities owned by the entity, which would typically include 401(k) savings plans, employee stock ownership plans, money-market funds, bonds and other mutual fund holdings;

·   Debt or equity securities owned through an account managed by an investment advisor registered under the Investment Advisers Act of 1940 (15 U.S.C. §80b-1 et. seq.) if the investment advisor has sole control over the selection of securities acquired for the account; and

·   Investments held in a trust not controlled by a Covered Party or a Covered Party’s Immediate or Related Family Member

“Related Family Member” means (a) a Covered Party’s parent, sibling, or non-dependent children (regardless of residence), and (b) any other individual related to the Covered Party by blood, marriage or adoption residing in the Covered Party’s household.

Financial Interests and Transactions; Relationships

Customers. The best remedy for a conflict of interest is to avoid the conflict altogether.  Consequently, an Employee cannot serve on the governing board of a customer or any of its Affiliates.  Also, Employees and their Immediate and Related Family Members may not engage in any personal financial transaction with a customer or any of its Affiliates that relies to any extent on information obtained through their employment or service with the FHLBank.  Moreover, an Employee may not have a direct or indirect Financial Interest in a customer or any of its Affiliates except as follows:

(a)An Employee may have a Financial Interest in a customer or any of its Affiliates that was acquired prior to the commencement of FHLBank employment, through a change in marital status, or through other circumstances beyond the Employee's control (e.g., inheritance, gift, merger or acquisition, or other change in corporate ownership) until it is required to be divested as set forth below;

(b)An Immediate Family Member may purchase and own the securities of, or have a Financial Interest in, a customer or any of its Affiliates, provided that such Immediate Family Member is an employee of the customer or Affiliate.  While such Financial Interest is held, the Employee may not participate in any FHLBank decision affecting the customer or Affiliate or any FHLBank transaction with the customer or Affiliate; or

(c)A Related Family Member may purchase and own the securities of, or have a Financial Interest in, a customer or any of its Affiliates.

An Employee must disclose any Financial Interest under (a) or (b) above to the General Counsel or Compliance Officer within 30 days of the later of (i) beginning employment, (ii) acquiring the Financial Interest, or (iii) learning of an Immediate Family Member’s acquisition of the Financial Interest.  The Employee or Immediate Family Member will be provided a reasonable period of time, not to exceed 12 months (or, if divestiture of the Financial Interest is restricted by its terms, such longer time that the Financial Interest must be held before divestiture), to divest such Financial Interest acquired under (a) or (b) above.  Until such divestiture, the Employee may not participate in any FHLBank decision affecting the customer or Affiliate or any FHLBank transaction with the customer or Affiliate.

When doing business with a customer, Covered Parties and their Immediate and Related Family Members must never seek or accept preferential treatment (such as a discounted interest rate on a loan that would not be offered to a similarly situated individual) solely on the basis of the Covered Party’s association with the FHLBank.

Counterparties and Vendors.  Employees and their Immediate Family Members must not serve on the governing board of any FHLBank counterparty or vendor, or any of its Affiliates, if that relationship might cause them to have an actual or apparent conflict of interest, nor may an Employee or an Employee’s Immediate Family Member hold any Financial Interest in a counterparty or vendor, or any of its Affiliates, in an amount greater than the lesser of (1) $250,000 or (2) 0.01 percent of the market capitalization of the counterparty or vendor.  Covered Parties shall not use their position to solicit counterparties or vendors to provide preferential personal treatment to such Covered Parties or their Immediate or Related Family Members and must not accept any special discounts or privileges that are not available as part of a discount program that such counterparty or vendor offers to its customers generally.

Employment of Immediate Family Members.  If an Employee’s Immediate or Related Family Member is employed by, or is on the governing board of, any FHLBank customer, vendor or counterparty, or any of its Affiliates, the Employee must be especially sensitive to a possible conflict of interest.  He or she must promptly disclose the relationship to the General Counsel or Compliance Officer and may be advised to abstain from any decision-making responsibilities regarding that vendor or counterparty.  The relationship must also be reported on the annual certification and disclosure forms submitted to the Legal Department.

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Business Courtesies

The FHLBank recognizes that it is sometimes the custom for customers, vendors and counterparties seeking to do business or maintain business relationships with the FHLBank to offer business courtesies to Covered Parties.  Business courtesies may include, but are not limited to, such items as gifts (boxes of chocolates, fruit baskets, tickets to sporting events, etc.) and entertainment (meals, drinks, rounds of golf, attendance at a sporting event, transportation, accommodations, etc.).

Covered Parties generally should not accept substantial gifts or entertainment (i.e., gifts or entertainment with an aggregate value greater than $200) from any one customer, counterparty or vendor, including any of its Affiliates, in any calendar year.  The reason for this prohibition on substantial gifts and entertainment is to prevent the receipt of gifts or entertainment that could inappropriately influence a Covered Party’s actions or create the appearance of inappropriately influencing a Covered Party’s actions.  More specific guidance concerning gifts and entertainment follows.

Gifts.  All gifts accepted by an Employee from any customer, counterparty or vendor, or any of its Affiliates, above a de minimis value (i.e., gifts with an aggregate value greater than $50) in any calendar year must be reported on the annual certification and disclosure forms submitted to the Legal Department.

Examples of gifts below the de minimis value threshold that do not need to be reported on the annual certification and disclosure forms submitted to the Legal Department include promotional items such as a sleeve of golf balls, pens, pocket calendars, and tee-shirts.

Examples of gifts above the de minimis value threshold that need to be reported on the annual certification and disclosure forms submitted to the Legal Department include duffle bags, business portfolios, and golf shirts, even if made available to all participants or won at a raffle at an event.

Sometimes it may be impractical to return gifts with an aggregate value greater than $200 to the source, such as a holiday fruit basket or other perishables.  Whenever this occurs, such gifts must be shared with other FHLBank staff, or the Covered Party must reimburse the donor for the difference between $200 and the value of the gifts.  If the Covered Party reimburses the donor for the difference, he or she shall attach a copy of his or her cleared check to the annual certification and disclosure forms submitted to the Legal Department.

Covered Parties are never to request a gift from any third party.  In addition, cash or cash equivalents may never be accepted from any third party.

Entertainment.  Covered Parties should strive to develop a “business partner” relationship with FHLBank customers, vendors and counterparties, as opposed to a “seller-buyer” relationship.  Preferably, Covered Parties should generally attempt to pay their own share of any expense incurred when discussing business or building relationships with a customer, vendor or counterparty, or an organization wanting to do business with the FHLBank.  Covered Parties can accomplish this either by paying their share of the expenses at the time they are incurred, or reimbursing the provider after the event.  In circumstances in which it would be awkward or uncomfortable, or would impose a significant burden on, or would embarrass or offend the provider of the entertainment (including business meals) if a Covered Party sought to pay his or her own share, then a Covered Party may accept the entertainment, including substantial entertainment with an aggregate value greater than $200 per year, if: (1) it and all other business courtesies are accepted from the same source infrequently, (2) FHLBank business is discussed or acceptance of the entertainment is important to maintaining or building a business relationship, and (3) acceptance of the entertainment is reasonable and customary in the industry, with due consideration to the appearance and the FHLBank's role as a GSE.  Any entertainment with an aggregate value greater than $200 per year (net of any FHLBank reimbursement of the provider) accepted by an Employee from a customer, vendor or counterparty, or any of its Affiliates under these circumstances must be reported on the annual certification and disclosure forms submitted to the Legal Department.

Covered Parties are sometimes invited to a conference sponsored by a customer, vendor, counterparty, or an Affiliate of any such entities.  If a Covered Party, with the consent of his or her manager, determines that attending the conference is in the best interest of the FHLBank, the Covered Party preferably should pay for all travel, accommodations, recreation, meals, and other expenses associated with the conference or similar event (to be reimbursed by the FHLBank).  However, it is recognized that there are circumstances in which it is not practical for a Covered Party to do so.  In circumstances in which it would be awkward or uncomfortable, or would impose a significant burden on, or would embarrass or offend the conference sponsor if the Covered Party sought to pay his or her own share, then the Covered Party may attend the conference without paying for such costs, provided that, if such unpaid costs exceed $200, (a) the Covered Party (if an Employee) receives the prior approval of his or her manager or the FHLBank President, (b) it is determined by the Covered Party and, in the case of Employees, the Covered Party’s manager or the FHLBank President that (i) the conference will provide significant educational value, (ii) it and all other business courtesies are accepted from the same source infrequently, (iii) FHLBank business is likely to be discussed or attending the conference is important to maintaining or building a business relationship, and (iv) attendance without paying for such costs is reasonable and customary in the industry, with due consideration to the appearance and the FHLBank's role as a GSE, and (c) in the case of Employees, attendance at such conference is reported on the annual certification and disclosure forms submitted to the Legal Department.

Sometimes a number of Covered Parties may be invited to the same function sponsored by a customer, vendor, counterparty or other third party, such as a dinner or sporting event.  Managers shall ensure that the number of Covered Parties from the FHLBank who attend such an event is reasonable and appropriate under the circumstances, with due consideration to the possible appearance that the FHLBank’s judgment could be compromised by the volume of such entertainment.

In certain circumstances, business courtesies from the FHLBank’s customers, counterparties, and vendors can raise serious ethical and legal questions that could embarrass the Covered Party and the FHLBank.  Business courtesies of a type that would be potentially embarrassing to the FHLBank or offensive or dangerous to any participants are not acceptable.  For example, entertainment in an “adult entertainment” club is always inappropriate.  Asking either directly or indirectly for a business courtesy is not acceptable in any case, nor is accepting cash or cash equivalents as a business courtesy.

Covered Parties authorized to provide entertainment shall follow the guidance set forth in the Officers and Employees Travel Policy or Directors and Executive Officers Travel Policy, whichever applies to them.  Entertainment provided by Covered Parties must never be excessive, extravagant or potentially embarrassing to the FHLBank as described above.  Covered Parties shall not provide entertainment or gifts to any Stakeholder if the Covered Party has reason to believe that such Stakeholder is not complying with the ethics rules of his or her organization.

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Community Activities

While the FHLBank encourages active involvement in the community and community service organizations, Employees shall not engage in outside employment, community service or other outside activities that are incompatible with the full-time proper discharge of the duties and responsibilities of their employment with the FHLBank.  Paid outside employment is not acceptable for officers unless approved by the President.  Any outside employment, service or other activity that would require an Employee to be absent during assigned work hours must be approved in advance by his or her immediate supervisor.

Inappropriate activities include, but are not limited to:

(a)   acceptance of a fee, compensation, gift, payment of expense, or any other thing of monetary value, in circumstances in which acceptance may result in, or create the appearance of, a conflict of interest; and

(b)   outside employment, service or other activities that tend to impair the Covered Party’s mental or physical capacity to perform his or her duties and responsibilities in an acceptable manner.

A Covered Party shall not receive any salary or anything of monetary value from a private source as compensation for his or her services to the FHLBank.

Covered Parties are allowed to accept bona fide reimbursement for actual expenses for travel to fulfill an outside speaking engagement, for which no FHLBank payment or reimbursement will be made.

Community Lending Programs

If a community organization routinely applies for Housing and Community Development Department funding, a seat on such organization’s governing board is a potential conflict of interest and must be reported on the annual certification and disclosure forms submitted to the Legal Department.  The Covered Party shall abstain from participating in decisions at the FHLBank and the organization involving such funding application, and the records of the FHLBank and the organization shall clearly reflect such abstention.  Also, if the organization engages in discussions with or becomes an adversary of the FHLBank on a particular issue, the Covered Party shall abstain from any involvement in that particular issue or resign from the board (or from the AHAC if applicable and the Covered Party so chooses).  In any event, the Covered Party must make clear that in his or her service on the community organization he or she does not represent the FHLBank in any capacity.

No Covered Partyshall participate in, or attempt to influence decisions by the FHLBank regarding, the evaluation, approval, funding, monitoring, or any remedial process for an application or project administered by the Housing and Community Development Department in which the Covered Party or an Immediate or Related Family Member has a Financial Interest in, or is employed by or on the governing board of, an organization involved in a project that is the subject of a pending or approved application.  No such Covered Party shall participate, either directly or indirectly, in negotiating subsidy, monitoring, recapture, or other agreements between the FHLBank and the member or between the member and the project/organization on behalf of a member or the project/organization, and the relationship must be reported on the annual certification and disclosure forms submitted to the Legal Department.

Directors

In addition to the other provisions of this Code, the following applies to members of the board:

Definitions.  For purposes of this section only:

(a)           “Financial Interest” means a direct or indirect financial interest in any activity, transaction, property, or relationship that involves receiving or providing something of monetary value, and includes, but is not limited to any right, contractual or otherwise, to the payment of money, whether contingent or fixed.  It does not include a deposit or savings account maintained with a member, nor does it include a loan or extension of credit obtained from a member in the normal course of business on terms that are generally available to the public or a similarly situated individual.

(b)           “Business Associate” means any individual or entity with whom a director has a business relationship, including, but not limited to:

(i)  Any corporation or organization of which the director is an officer or partner, or in which the director beneficially owns ten percent or more of any class of equity security, including subordinated debt;

(ii)  Any other partner, officer, or beneficial owner of ten percent or more of any class of equity security, including subordinated debt, of any such corporation or organization; and

(iii)  Any trust or other estate in which a director has a substantial beneficial interest or as to which the director serves as trustee or in a similar fiduciary capacity.

In general.  All directors are charged under section 7(j) of the Federal Home Loan Bank Act with the duty of administering the affairs of the FHLBank in a fair and impartial manner and without discrimination in favor of or against any member.  A director shall treat all members equally; members may only be accorded different treatment if there exist meaningful criteria upon which to distinguish between members and the criteria are directly related to a proper objective of the FHLBank.

A director shall not use his or her official position for personal gain.  Directors must not disclose or use confidential information received by them solely by reason of their position with the FHLBank to obtain a financial benefit for themselves or for any other person.

A director shall not accept anything of monetary value from any outside source as compensation for his or her services to the FHLBank.  Without the express prior approval of the board, an individual director may not be retained by the FHLBank or by any other Federal Home Loan Bank to perform work and receive compensation.  Without the express prior approval of the board, the FHLBank may not purchase goods or services from a firm or organization of which a director is a director, officer, employee, or owner.

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A director shall not accept, and shall discourage his or her Immediate and Related Family Members from accepting, any gift when the director believes or has reason to believe that the gift is given with the intent to influence the director’s actions as a member of the board, or when acceptance of such gift gives the appearance of intending to influence the director’s actions as a member of the board.  However, a director may accept insubstantial gifts if the director does not have reason to believe the gift is given with the intent to influence the director’s actions as a member of the board. “Insubstantial gifts” shall include (i) gifts of a de minimis value (i.e., less than $50); (ii) entertainment or hospitality, the cost of which is considered reasonable, customary, and accepted business practice; and (iii) any other items or services for which a director pays fair market value. Such insubstantial gifts do not have the appearance of intending to influence a director.

A director shall disclose to the board any personal Financial Interests he or she has, as well as any Financial Interests known to the director of any Immediate or Related Family Members, or Business Associates of the director, in any matter to be considered by the board and in any other matter in which another person or entity does, or proposes to do, business with the FHLBank.  A director shall fully disclose to the board the nature of his or her interest in the matter and shall provide to the board any information requested to aid in its consideration of the director’s interest.

A director shall refrain from considering or voting on any issue in which the director, or any Immediate or Related Family Member, or any Business Associate has a Financial Interest.

Member Directors.  Member directors are confronted with an inherent conflict of interest in that actions which the board may take often directly affect the member of which the member director serves as a director or officer.  Member directors must recognize the conflict and vigorously guard against allowing such interests to affect their actions as directors.  A member director shall not vote on matters under consideration by the board that apply only to the member with which the director is associated or a small group of members of which the member is a part.  However, a member director may provide information to the board on such matters, provided that the director fully discloses the director’s conflict of interest.

Member directors should not abstain from voting on matters that generally apply to all members.  The Federal Home Loan Bank Act dictates that a majority of the board will be composed of directors who serve as officers or directors of members.  Consequently, member director involvement in actions that will affect his or her institution is clearly contemplated by the Act and should not prevent a member director from acting in the best interests of the FHLBank.

Independent Directors.  Independent directors shall not serve as an officer of any Federal Home Loan Bank or as an officer, employee or director of any member of the FHLBank or of any recipient of advances from the FHLBank. An independent director also shall not serve as an officer, employee or director of a holding company that controls one or more members of the FHLBank if member institutions of, or recipients of advances from, an FHLBank represent 35 percent or more of the holding company’s assets. The FHLBank will attribute to the independent director any officer position, employee position or directorship of the director’s spouse. The board chairperson and vice chairperson are considered officers of the board but are not FHLBank officers.

An independent director may sell services or products to a member in the normal course of the director’s business; however, the director must not use his or her position as a director to promote such sales, and such sales should not constitute a significant part of the director’s overall business activities.  An independent director may maintain deposit or savings accounts with a member and may also accept loans or other extensions of credit from a member.  With respect to all permitted financial relationships between an independent director and a member, the relationships must be transacted in the ordinary course of business, and the terms made available to the director must be no more favorable than would be available in like circumstances to persons who are not FHLBank directors.

In some instances, an independent director may have a conflict of interest similar to that of member directors.  For example, an independent director may be affiliated with a housing associate of the FHLBank.  An independent director shall not vote on matters under consideration by the board that apply only to the independent director or the independent director’s affiliated institution or a small group of institutions that includes the director’s affiliated institution.  However, an independent director may provide information on such matters to the board provided that the director fully discloses the director’s conflict of interest.

Compliance.  At least annually, the Audit Committee of the board shall examine the records of the board in order to evaluate the directors’ compliance with the provisions of this Code.

Violations.  The President of the FHLBank shall be responsible for reporting any alleged violation of this Code involving directors to the chairperson of the board or, in the event that the chairperson is the subject of or connected with the allegation, the vice chairperson of the board or, in the event the vice chairperson is also a subject of or connected with the allegation, such other director as the President shall choose.  The director to whom the President reports the alleged violation shall (1) appoint a committee of at least three but no more than five directors to investigate the allegation and report to the board, and (2) preside over any board meeting at the time when such allegations are considered.  Officers and Employees of the FHLBank shall make all information relating to the allegation available to the committee and shall assist the committee in carrying out its investigation.

After the committee concludes its investigation, it shall provide a full report of its findings to the board.  The board shall consider the report of the committee and any additional information it shall choose to consider, and any directors who are the subject of or connected with such allegations shall be given a reasonable opportunity to be heard by the board, but shall not be present during any other board consideration of such allegations and may not vote on any resolution or other action concerning such allegations.  If the board determines that a violation of this Code has occurred, it may take any of the following actions: (1) censure the director; (2) forward the findings of the board to the Finance Agency for further investigation; or (3) recommend to the Finance Agency that the director be suspended or removed.

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Principle 4:  Confidential Information

Covered Parties must protect the confidential, personal and proprietary information of the FHLBank and its customers, counterparties, vendors and other Covered Parties.

Covered Parties shall consider any information that concerns the FHLBank or its customers, Covered Parties, counterparties or vendors that is not generally available to others to be confidential.  Confidential information includes, but is not limited to, member examination reports, underwriting information, financial information about the FHLBank itself, FHLBank security and auditing procedures, FHLBank personnel information, technical data, planned new services and products, and other non-public information of the FHLBank.  The improper disclosure or unauthorized use of confidential information could have a seriously adverse impact on the FHLBank’s relationships with its Stakeholders and is strictly prohibited.

Covered Parties must take all reasonable measures to protect the confidentiality of non-public information about the FHLBank and its Stakeholders.  Covered Parties must also endeavor to prevent unauthorized disclosure of such information, unless required by applicable law or regulatory process.  Covered Parties must fully comply with the provisions of all FHLBank policies relating to confidentiality at all times.

Covered Party Information

The FHLBank respects the privacy of every Covered Party and only collects and retains Covered Party personal information that is required for effective operation of the FHLBank or that is required by law.  To help protect Covered Parties’ personal information, the FHLBank prohibits Covered Parties from accessing personal Covered Party information or communications between Covered Parties unless they have a legitimate business purpose to do so.  Covered Parties who are entrusted with personal Covered Party information shall make sure it is not disclosed inappropriately or misused.  Such information is to be stored in restricted access facilities and access shall be monitored and controlled.  Covered Parties must not search or take items from a Covered Party’s workspace (i.e., desk, inbox, and drawers) unless they have a legitimate business purpose.  Covered Parties also must not use someone else’s user identification or network password.  Certain authorized Information Technology Department personnel may access a Covered Party’s e-mail account only for the purpose of ensuring compliance with FHLBank policies.

FHLBank Information

If a Covered Party discovers information believed to be confidential, that Covered Party is expected to personally return it to the author of the document or the head of the department to which it belongs.  For example, if a Covered Party were to find a memorandum addressed to the board in a work room, it must be returned to the author.  Covered Parties are expected to avoid conversations in public places or other circumstances in which confidential information might inadvertently be disclosed.  Covered Parties also need to guard against disclosing confidential information in talking with family and friends.

Covered Parties must also comply with the Policy on Fair Disclosure, which prohibits selective disclosure of material, non-public information to persons outside the FHLBank who might use the information for purchasing or selling securities of the FHLBank.  All media inquiries are to be referred to the Public Relations and Communications Department and all legal inquiries are to be referred to the Legal Department.

The obligation to maintain the confidentiality of confidential information continues after the end of an Employee’s employment with the FHLBank or a director’s or AHAC member’s term of office.  Employees terminating employment with the FHLBank shall not remove any documents or electronic media unless their managers have reviewed and approved the removal.

Vendor, Counterparty and Customer Information

Just as the FHLBank closely guards its own confidential information, Covered Parties must respect the confidentiality rights of others.  To help protect the FHLBank’s relationships, Covered Parties must maintain the confidentiality of confidential customer information.  In promoting FHLBank products, Covered Parties may not publicly disclose how or why a customer uses an FHLBank product in a manner that might reveal that customer’s business strategies without the customer’s prior written approval.  Similarly, in conducting business with counterparties, Covered Parties may not reveal the pricing or modeling arrangements of other counterparties with whom the FHLBank conducts business.

Principle 5:  Protection of FHLBank Property

Covered Parties shall protect FHLBank property and use it only for legitimate purposes.

Every Covered Party has a responsibility to protect the FHLBank’s assets and ensure their efficient use.  The FHLBank’s property includes physical property (office supplies, copiers, computers, etc.) and intellectual property (FHLBank’s logo, copyrights, trademarks, etc.), as well as the information described under Principle 4: Confidential Information.  The FHLBank’s property may be used only for legitimate purposes.  Any improper use of the FHLBank’s property, whether for personal or business purposes, is prohibited and may be unlawful.  In using FHLBank property, Covered Parties must fully comply with the provisions of all FHLBank policies relating to confidentiality at all times.

FHLBank property, such as computers, telephones, cell phones, facsimile machines and copy machines are meant for FHLBank business.  The FHLBank allows limited personal use of these items as long as personal use meets the following criteria:

·   Limited to occasional use;

·   Does not result in excessive costs;

·   Does not interfere with work duties;

·   Complies with all applicable policies and laws;

·   Is not related to the conduct of an outside business; and

·   Would not cause embarrassment to the FHLBank.

9

The FHLBank’s corporate identity, logo and trademarks are also valuable business properties, and their improper use could be harmful to the FHLBank and its reputation.  Covered Parties may not use the FHLBank’s logo or identity to give the impression that a personal Covered Party’s or outside organization’s project or activity is approved or sponsored by the FHLBank.

Principle 6:  Fair Dealing

Covered Parties shall deal fairly with the FHLBank’s customers, regulators, counterparties, vendors and other Covered Parties.

The FHLBank’s ethical standards require fair dealing in all transactions and dealings with Stakeholders.  The FHLBank relies on these standards to gain and maintain the trust of customers and other Stakeholders.  Covered Parties are expected to communicate with candor and to endeavor to deal fairly with the FHLBank’s customers, counterparties, vendors and other Covered Parties.  No Covered Party may take unfair advantage of another Covered Party or other Stakeholder through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other intentional unfair-dealing practice.  In short, Covered Parties are expected to do what they say they will do and must communicate honestly and ethically in serving the FHLBank’s customers and conducting business with others.

Fair Dealing with Other Covered Parties

All Covered Parties are expected to be fair and impartial in their dealings with other Covered Parties.  Managers shall handle similar matters involving different Employees consistently.  Covered Parties, particularly managers, are to adhere to a balanced standard of fairness, making decisions without favoritism or prejudice.

Fair Dealing with Customers, Vendors and Counterparties

Covered Parties must avoid making misrepresentations, accidental or otherwise, to the FHLBank’s Stakeholders.  If a Covered Party believes a business contact may have misunderstood him or her, the Covered Party is required to promptly correct any potential misunderstanding.  Covered Parties must never counsel customers or counterparties to breach a contract with another company to do business with the FHLBank.

Covered Parties are expected to weigh all facts impartially in vendor or counterparty selection.  Covered Parties must never exert or attempt to exert influence within the FHLBank to obtain special treatment for a particular vendor based on personal reasons.  Covered Parties also are expected to promptly process all proper vendor invoices for payment.

Principle 7:  Transparency and FHLBank Records

Covered Parties are required to accurately record, report and disclose information to meet financial reporting, regulatory and legal obligations.

The integrity of the FHLBank’s financial records is vital to the operation of its business.  These records are crucial to maintaining the confidence and trust of Stakeholders, including the Finance Agency, the SEC, customers, purchasers of FHLBank consolidated obligations, and Covered Parties.  All transactions must be properly recorded in accordance with the law and FHLBank policy.

Responsibilities to the FHLBank

Covered Parties must fully comply with the policies of the FHLBank to protect and maintain all required documents and records.  Covered Parties shall make sure that their business unit schedules comply with the Records Management Program and that documents are retained for the proper amount of time.  No Covered Party shall alter, destroy, mutilate, conceal, cover up, falsify, or make a false entry in any record or document with the intent to impair, obstruct, or influence any legal or regulatory proceeding, investigation or proper administration of any FHLBank matter.

Responsibilities to Members and Other Stakeholders

The principal executive officer(s), the principal financial officer(s), the principal accounting officer, the controller, or persons performing similar functions (“Senior Financial Officers”) must ensure that all reasonable and necessary steps within their respective areas of responsibility are taken to provide full, fair, accurate, timely and understandable disclosure of the FHLBank’s financial results and condition in reports and documents filed with or submitted to the Finance Agency and the SEC, and that such reports and documents are fully compliant with all legal and regulatory requirements.

In addition, Senior Financial Officers must provide full, fair, accurate and understandable information whenever communicating with members or the general public.  Moreover, Senior Financial Officers shall not directly or indirectly take any action to fraudulently influence, coerce, manipulate or mislead the FHLBank’s independent public accountants for the purposes of rendering the financial statements of the FHLBank misleading.

Senior Financial Officers must also ensure that appropriate accounting and disclosure controls and procedures are in place, understood and followed.  Any material weakness in, or significant concerns regarding, the FHLBank’s disclosure or internal controls must be reported to the Audit Committee of the board.

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Principle 8:  Safe, Healthy and Productive Workplace

Covered Parties shall foster a safe, healthy and productive workplace.

The FHLBank does not tolerate behavior, comments, e-mail messages or other conduct that creates, encourages or permits an intimidating or offensive environment.  To this end, Covered Parties must fully comply with the Anti-harassment, Nondiscrimination & Mutual Respect Policy Statement as distributed from time to time.  In addition, an Employee holding a supervisory position shall not have a romantic or sexual relationship with an Employee who is directly or indirectly supervised by the supervisory Employee.  Such conduct will subject the supervisory Employee to disciplinary action, up to and including termination.

Covered Parties may not (1) purchase, consume, use, possess, sell or distribute illegal drugs (including misused prescription drugs), or (2) consume alcoholic beverages (except when properly served at FHLBank-sponsored events, including meals and social gatherings in connection with board meetings) while on the job or on FHLBank property.  Off-the-job illegal drug use and/or alcohol abuse that adversely affects a Covered Party’s job performance, board or committee service, attendance, or conduct or that jeopardizes the safety of others engaged in FHLBank-related activities also is prohibited.

Covered Parties are not permitted to participate in any illegal gambling activity, including operating gambling devices, unlawful lotteries, pools, games for money or property, numbers, tickets, or similar illegal activities, while on FHLBank premises or while on FHLBank business.  Activities legally administered by the Community Affairs Committee, the Human Resources and Administration Department, or otherwise by the FHLBank are permitted.

Covered Parties are also not permitted to bring a firearm or other dangerous weapons of any kind on FHLBank premises or to any FHLBank-sponsored meeting or function, except when participating in an FHLBank-sponsored meeting or function that involves hunting, sport shooting or related activities.

Exceptions/Violations

Any exceptions to or violations of this Code shall be addressed according to the provisions set forth previously in this Code. Similarly, any violation of this Code shall be addressed according to the provisions set forth previously in this Code and may result in disciplinary action up to and including termination of employment and/or legal action.

Policy Review

This Code shall be reviewed annually and revised as needed by the General Counsel. Following such review, the Code shall be submitted for review and approval by the Policy Oversight Group. In the event of any revisions to the Code, such revisions shall be submitted for review and approval by the Housing & Governance Committee and the board.

EX-24

Exhibit 24

POWER OF ATTORNEY

Each of the undersigned directors of the Federal Home Loan Bank of Topeka does hereby appoint Patrick C. Doran and David S. Fisher, signing singly, his or her true and lawful attorneys-in-fact and agents, to sign for and on behalf of the undersigned the annual report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) for the fiscal year ending December 31, 2012, to be filed with the Securities and Exchange Commission under the provisions of the Exchange Act, as amended, and any and all amendments to said Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents may lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, the undersigned have caused this Power of Attorney to be signed as of this 1st day of March, 2013.

/s/G. Bridger Cox__________________/s/Robert E. Caldwell, II_____________

G. Bridger Cox       Robert E. Caldwell, II

ChairVice Chair

/s/Harley D. Bergmeyer_____________                                                                              /s/James R. Hamby_________________

Harley D. Bergmeyer  James R. Hamby

/s/Thomas E. Henning______________                                                                               /s/Andrew C. Hove, Jr.______________

Thomas E. Henning Andrew C. Hove, Jr.

/s/Michael B. Jacobson_____________                                                                               /s/Jane C. Knight__________________

Michael B. Jacobson    Jane C. Knight

/s/Richard S. Masinton_____________                                                                                /s/Neil F.M. McKay________________

Richard S. MasintonNeil F.M. McKay

/s/L. Kent Needham_______________                                                                                /s/Mark J. O’Connor_______________

L. Kent Needham Mark J. O’Connor

/s/Thomas H. Olson, Jr.____________                                                                                 /s/Mark W. Schifferdecker__________

Thomas H. Olson, Jr.  Mark W. Schifferdecker

/s/Bruce A. Schriefer______________

Bruce A. Schriefer

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

     I, Andrew J. Jetter, President and Chief Executive Officer of Federal Home Loan Bank of Topeka (the “registrant”), certify that:

1.	I have reviewed this annual report on Form 10-K of the registrant;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 15, 2013

/s/Andrew J. Jetter

Andrew J. Jetter 

President and Chief Executive Officer 

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

     I, Denise L. Cauthon, Senior Vice President and Chief Accounting Officer (Principal Financial Officer) of Federal Home Loan Bank of Topeka (the “registrant”), certify that:

1.	I have reviewed this annual report on Form 10-K of the registrant;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: March 15, 2013

/s/Denise L. Cauthon

Denise L. Cauthon 

Senior Vice President and Chief Accounting Officer (Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION FURNISHED PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K of the Federal Home Loan Bank of Topeka (the “Bank”) for the period ended December 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Andrew J. Jetter, as President and Chief Executive Officer of the Bank, and Denise L. Cauthon, as Senior Vice President and Chief Accounting Officer (Principal Financial Officer) of the Bank, each hereby certifies, pursuant to 18 U.S.C. Section 1350, that, to the best of his/her knowledge:

(1)             The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)             The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Bank.

/s/Andrew J. Jetter	/s/Denise L. Cauthon
Andrew J. Jetter President and Chief Executive Officer March 15, 2013	Denise L. Cauthon Senior Vice President and Chief Accounting Officer (Principal Financial Officer) March 15, 2013

A signed original of this written statement required by Section 906 has been provided to the Bank and will be retained by the Bank and furnished to the Securities and Exchange Commission or its staff upon request.

EX-99.1

Exhibit 99.1

Approved December 14, 2012

Federal Home Loan Bank of Topeka

Audit Committee Charter

Audit Committee Purpose

The audit committee is established by the board of directors (board) of the Federal Home Loan Bank of Topeka (Bank) and will assist the board in fulfilling its fiduciary responsibilities and overseeing the internal and external (i.e., independent) audit functions. Members of the audit committee shall evaluate the Bank’s compliance with laws, regulations, policies and procedures, and determine if the Bank has established and is maintaining adequate administrative, operating and internal accounting controls. In addition, the audit committee shall provide reasonable assurance regarding the integrity of financial information used by the board, the Federal Housing Finance Agency (Finance Agency), Bank members, customers and the public.

Committee Membership

Composition

The audit committee shall consist of five or more persons drawn from the board, each of whom shall meet the criteria of independence set forth in the next section. The audit committee shall include a balance of representatives of community financial institutions and other members; and member and independent directors of the Bank. The terms of audit committee members shall be appropriately staggered so as to provide for continuity of service. At least one member of the audit committee shall have extensive accounting or related financial management experience. The members of the audit committee shall be appointed by the chairperson of the board, with the advice of the president of the Bank. The chairperson of the audit committee shall be designated by the chairperson of the board.

Independence

Any member of the board shall be considered to be sufficiently independent to serve as a member of the audit committee if that director does not have a disqualifying relationship with the Bank or its management that would interfere with the exercise of that director’s independent judgment. Such disqualifying relationships include, but are not limited to:

§   Being employed by the Bank in the current year or any of the past five years;

§   Accepting any compensation from the Bank other than compensation for service as a director;

§   Serving or having served in any of the past five years as a consultant, advisor, promoter, underwriter or legal counsel of or to the Bank; or,

§   Being an immediate family member of an individual who is, or has been in any of the past five years, employed by the Bank as an executive officer.

In addition, any member of the audit committee who otherwise qualifies as an “audit committee financial expert,” as defined by the Securities and Exchange Commission (SEC), shall meet the definition of “independent director” set forth in NASD Rule 4200(a)(15) and the other independence requirements set forth in NASD Rule 4350(d) and Section 10A(m)(3) of the Securities Exchange Act of 1934.

Meetings

The audit committee shall meet as often as it determines, but not less frequently than quarterly, with the internal auditors. A quorum for committee meetings is defined as one-half of the audit committee members, and action by the audit committee shall be upon the vote of a majority of those present at any meeting at which a quorum is present. The audit committee shall meet periodically, but not less frequently than annually, with management, the internal auditors and the independent auditor in separate executive sessions. The audit committee may request any officer or employee of the Bank or the Bank’s outside counsel or independent auditor to attend a meeting of the committee or to meet with any members of, or consultants to, the committee.

The audit committee shall prepare written minutes of each audit committee meeting, which shall be provided to the Finance Agency.

Committee Authority and Responsibilities

The audit committee shall provide an independent, direct channel of communication between the board and the internal and independent auditors. Both the internal and independent auditors shall have unrestricted access to the audit committee without the need for any prior management knowledge or approval. No restrictions should be imposed that would hinder the independence of the internal or independent auditors.

The audit committee shall have the sole authority to select, evaluate and, where appropriate, replace the Bank’s Chief Internal Audit Officer. The Chief Internal Audit Officer may be removed only with the approval of the audit committee. The Chief Internal Audit Officer shall report directly to the audit committee on substantive matters and shall report to the Bank President on administrative matters. The Chief Internal Audit Officer is ultimately accountable to the audit committee and the board.

The board shall have the sole authority to appoint or replace the independent auditor. The audit committee shall make recommendations to the board regarding the appointment, renewal or termination of the independent auditor. The audit committee shall be directly responsible for the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The independent auditor shall report directly to the audit committee.

The audit committee shall conduct or authorize investigations into any matters within the audit committee’s scope of responsibilities. The audit committee shall have the authority, to the extent it deems necessary or appropriate, to retain independent legal, accounting or other advisors. The Bank shall provide for appropriate funding, as determined by the audit committee, for payment of: compensation to the independent auditor for the purpose of rendering or issuing an audit report; compensation to any advisors employed by the audit committee; and ordinary administrative expenses of the audit committee that are necessary or appropriate in carrying out its duties.

The audit committee and the board of directors shall:

§   Review, assess the adequacy of and, where appropriate, amend the Bank’s Audit Committee Charter on an annual basis;

§   Amend the Audit Committee Charter as appropriate; and

§   Re-adopt and re-approve, respectively, the Bank’s Audit Committee Charter not less often than every three years.

The audit committee shall make regular reports to the board.

The audit committee shall, as required or to the extent it otherwise deems necessary or appropriate:

Accounting, Financial Statement and Disclosure Matters

1.   Direct senior management to maintain the reliability and integrity of the accounting policies and financial reporting and disclosure practices of the Bank.

2.   Review the basis for the Bank’s financial statements and the independent auditor’s opinion rendered with respect to such financial statements (including the nature and extent of any significant changes in accounting principles or the application therein) and provide reasonable assurance that policies are in place that are reasonably designed to achieve disclosure and transparency regarding the Bank’s true financial performance and governance practices.

3.   Review and discuss with management and the independent auditor the annual audited financial statements, including disclosures made in management’s discussion and analysis, and recommend to the board whether the audited financial statements should be included in the Bank’s Annual Report on Form 10-K. The audit committee shall prepare the disclosure report, as required by Regulatory Interpretation 2000-RI-24 promulgated by the Finance Agency, to be included in the Bank’s Annual Report.

4.   Discuss with management and the independent auditor the Bank’s quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent auditor’s review of the quarterly financial statements.

5.   Discuss with management and the independent auditor the Bank’s earnings releases.

6.   Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Bank’s financial statements, including any significant changes in the Bank’s selection or application of accounting principles, any major issues as to the adequacy of the Bank’s internal controls and any special steps adopted in light of material control deficiencies.

7.   Review and discuss annually reports from the independent auditors on:

a.   All critical accounting policies and practices to be used;

b.   All alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; and

c.   Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.

8.   Discuss with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Bank’s financial statements.

9.   Discuss with the independent auditors the matters required to be discussed by SAS No. 61, Communication with Audit Committees, as may be modified or supplemented, and SAS No. 90, Audit Committee Communications, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.

10.   Review disclosures made to the audit committee by the Bank’s principal executive officer(s) and principal financial officer(s) during their certification process for the Form 10-K and Form 10-Q about any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting and any fraud involving management or other employees who have a significant role in the Bank’s internal control over financial reporting.

11.   Review and approve all related party transactions made outside the ordinary course of business.

12.   Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports, which raise material issues regarding the Bank’s financial statements or accounting policies.

13.   Assure that the Bank has policies in place to notify the Finance Agency of any accounting treatments or policies identified as having significant legal, reputation or safety and soundness risk with focus on accounting treatments or policies that do not employ generally accepted accounting principles or preferred methods.

14.   No less frequently than every two years, assess the need for an independent consultant or accounting firm to conduct an evaluation of one or more accounting policy areas, and report its findings to the board, senior management and the Finance Agency.

Oversight of the Bank’s Relationship with the Independent Auditor

15.   Approve the independent auditor’s annual engagement letter.

16.   Pre-approve all audit, audit-related and permitted non-audit services to be performed for the Bank by the independent auditor, subject to de minimis exceptions for permitted non-audit services which are approved by the audit committee prior to the completion of the audit.

17.   Review the performance of the independent auditor.

18.   Assure the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law.

19.   Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.

20.   Review the written disclosures and the letter from the independent auditor required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, as may be modified or supplemented, and discuss with the auditors the auditor’s independence.

21.   Recommend policies to the board regarding the Bank’s hiring of employees or former employees of the independent auditor who participated in any capacity in the audit of the Bank.

22.   Review the internal quality control procedures of the independent auditor.

Oversight of the Bank’s Internal Audit Function

23.   Review and approve the internal audit charter.

24.   Assess the performance and determine the compensation of the Chief Internal Audit Officer.

25.   Review the scope of audit services required, significant accounting policies, significant risks and exposures, audit activities and findings.

26.   Review and approve the internal audit work plan.

27.   Review the significant reports to management prepared by the internal audit department together with management’s responses and follow-up to these reports.

28.   Review the sufficiency of staffing and budgeted funds for the internal audit function and ensure the internal audit department includes personnel who are appropriately trained and competent to oversee the internal audit function.

29.   Establish and monitor the accomplishment of internal audit goals and objectives.

Governance Oversight Responsibilities

30.   Provide reasonable assurance that senior management has established and is maintaining an adequate internal control system within the Bank by:

a.   Reviewing the Bank’s internal control system and the resolution of identified material weaknesses and reportable conditions in the internal control system, including the prevention or detection of management override or compromise of the internal control system; and

b.   Reviewing the programs and policies of the Bank designed to provide reasonable assurance of compliance with applicable laws, regulations and policies and monitoring the results of these compliance efforts.

31.   Review the policies and procedures established by senior management with respect to risk assessment and risk management.

32.   Review the policies and procedures established by senior management to assess and monitor implementation of the Bank’s strategic business plan and the operating goals and objectives contained therein.

33.   Determine the extent to which internal and external auditors review the security for computer systems, facilities and backup systems.

34.   Establish procedures for (1) the receipt, retention and treatment of complaints and concerns regarding accounting, internal accounting controls, auditing matters, fraud concerns, potential wrongdoing, conflict of interest breaches or violations of applicable securities laws and regulations (Reportable Matters) and (2) the confidential, anonymous submission by employees of complaints and concerns regarding questionable Reportable Matters.

35.   Monitor compliance with the Bank’s Code of Ethics and oversee the investigations of conflicts of interest and unethical conduct.

36.   Discuss with the Bank’s General Counsel legal matters that may have a material impact on the financial statements or the Bank’s compliance policies.

37.   Assess the performance and effectiveness of the audit committee by providing for an annual evaluation, which shall include a self-evaluation and an evaluation by senior management and the board.

38.   Review the requirements of laws, rules, regulations and guidelines that are applicable to the audit committee. The materials and procedures employed in such review shall be provided to the Finance Agency.

39.   Review the annual report prepared by senior management summarizing the Bank’s consistency with accounting examination guidance and recommend the report to the board for submission to the Finance Agency.

EX-99.2

Exhibit 99.2

Federal Home Loan Bank of Topeka

Audit Committee Report

March 15, 2013

The Audit Committee of the board of directors of the Federal Home Loan Bank of Topeka (FHLBank) is currently comprised of seven directors, three independent directors and four member directors. The board of directors has determined that the Audit Committee members are independent, as defined by Federal Housing Finance Agency regulations and Nasdaq Independence Standards. The Audit Committee operates under a written charter adopted by the board of directors that is available on the FHLBank’s Web site at http://www.fhlbtopeka.com. The Audit Committee reviews its charter on an annual basis.

The Audit Committee has:

·   reviewed and discussed with management and the independent registered public accounting firm, PricewaterhouseCoopers LLP (PwC), the audited financial statements, management’s report on internal control over financial reporting and PwC’s related opinions;

·   discussed with PwC the matters required to be discussed by Statement on Auditing Standards (SAS) No. 61, Communications with Audit Committees, as amended (AICPA, Professional Standards, Vol. 1, AU Section 380), as adopted by thePublic Company Accounting Oversight Board (PCAOB) in Rule 3200T; and

·   received the written disclosures and the letter from PwC required by applicable PCAOB rules regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with PwC their independence.

Based on the review and discussions referred to above, the Audit Committee recommends to the board of directors that the audited financial statements be included in the FHLBank’s Annual Report on Form 10-K for 2012 for filing with the Securities and Exchange Commission.

Mark W. Schifferdecker, Chairman

James R. Hamby

Thomas E. Henning

Andrew C. Hove, Jr.

Michael B. Jacobson

Neil F.M. McKay

Thomas H. Olson, Jr.

XML

Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2012

Accumulated Other Comprehensive Income [Abstract]

Summary Of Changes In Accumulated Other Comprehensive Income

The following table summarizes the changes in AOCI for the years ended December 31, 2012, 2011 and 2010(in thousands):

	Net Non-credit Portion of OTTI Losses on Held-to-maturity Securities		Defined Benefit Pension Plan		Total Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2009	$	(9,719)	$	(2,142)	$	(11,861)
Other comprehensive income (loss)		(9,572)		(1,239)		(10,811)
Balance, December 31, 2010		(19,291)		(3,381)		(22,672)
Other comprehensive income (loss)		(4,468)		(701)		(5,169)
Balance, December 31, 2011		(23,759)		(4,082)		(27,841)
Other comprehensive income (loss)		2,913		(329)		2,584
Balance, December 31, 2012	$	(20,846)	$	(4,411)	$	(25,257)

XML

Investment Securities (Weighted Average Dollar Rates Of Mortgage-Backed Securities Investments) (Details) (Weighted Average [Member])	12 Months Ended
	Dec. 31, 2012
Private-Label Residential MBS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Prepayment Rate	10.60%
Default Rate	20.60%
Loss Severity	38.60%
Current Credit Enhancements	5.90%
Prime [Member] | Securitization In 2004 And Earlier [Member]
Schedule of Held-to-maturity Securities [Line Items]
Prepayment Rate	7.10%
Default Rate	11.90%
Loss Severity	28.20%
Current Credit Enhancements	8.80%
Prime [Member] | Securitization In 2005 [Member]
Schedule of Held-to-maturity Securities [Line Items]
Prepayment Rate	15.00%
Default Rate	13.70%
Loss Severity	37.00%
Current Credit Enhancements	3.30%
Prime [Member] | Securitization In 2006 [Member]
Schedule of Held-to-maturity Securities [Line Items]
Prepayment Rate	9.00%
Default Rate	20.00%
Loss Severity	40.70%
Current Credit Enhancements	3.60%
Prime [Member] | Private-Label Residential MBS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Prepayment Rate	11.10%
Default Rate	15.40%
Loss Severity	36.10%
Current Credit Enhancements	4.70%
Subprime [Member] | Private-label Home Equity Loan ABS [Member] | Securitization In 2004 And Earlier [Member]
Schedule of Held-to-maturity Securities [Line Items]
Prepayment Rate	2.80%
Default Rate	6.60%
Loss Severity	98.80%
Current Credit Enhancements	3.80%
Alt-A [Member] | Securitization In 2004 And Earlier [Member]
Schedule of Held-to-maturity Securities [Line Items]
Prepayment Rate	9.50%
Default Rate	24.30%
Loss Severity	35.90%
Current Credit Enhancements	10.90%
Alt-A [Member] | Securitization In 2005 [Member]
Schedule of Held-to-maturity Securities [Line Items]
Prepayment Rate	10.70%
Default Rate	22.60%
Loss Severity	41.80%
Current Credit Enhancements	4.20%
Alt-A [Member] | Private-Label Residential MBS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Prepayment Rate	10.30%
Default Rate	23.10%
Loss Severity	39.80%
Current Credit Enhancements	6.40%

XML

Investment Securities (Summary Of Trading And Held-To-Maturity Securities) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010	Dec. 31, 2009
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value	$ 2,764,918		$ 4,559,163
Held-to-maturity securities, Carrying Value	5,159,750	[1]	4,977,332	[1]
Held-to-maturity securities, OTTI Recognized in OCI	20,846		23,759		19,291	9,719
Held-to-maturity securities, Amortized Cost	5,180,596		5,001,091
Held-to-maturity securities, Gross Unrecognized Gains	46,979		45,696
Held-to-maturity securities, Gross Unrecognized Losses	35,245		79,202
Held-to-maturity securities, Fair Value	5,192,330		4,967,585
Non-mortgage-backed Securities [Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value	2,511,329		4,212,082
Held-to-maturity securities, Carrying Value	69,442		84,548
Held-to-maturity securities, OTTI Recognized in OCI	0		0
Held-to-maturity securities, Amortized Cost	69,442		84,548
Held-to-maturity securities, Gross Unrecognized Gains	170		78
Held-to-maturity securities, Gross Unrecognized Losses	8,686		10,121
Held-to-maturity securities, Fair Value	60,926		74,505
Commercial Paper [Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value	59,996		599,482
Held-to-maturity securities, Carrying Value	0		0
Held-to-maturity securities, OTTI Recognized in OCI	0		0
Held-to-maturity securities, Amortized Cost	0		0
Held-to-maturity securities, Gross Unrecognized Gains	0		0
Held-to-maturity securities, Gross Unrecognized Losses	0		0
Held-to-maturity securities, Fair Value	0		0
Certificates Of Deposit [Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value	325,006		1,019,520
Held-to-maturity securities, Carrying Value	0		0
Held-to-maturity securities, OTTI Recognized in OCI	0		0
Held-to-maturity securities, Amortized Cost	0		0
Held-to-maturity securities, Gross Unrecognized Gains	0		0
Held-to-maturity securities, Gross Unrecognized Losses	0		0
Held-to-maturity securities, Fair Value	0		0
TLGP Obligations[Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value			494,236	[2]
Held-to-maturity securities, Carrying Value			0	[2]
Held-to-maturity securities, OTTI Recognized in OCI			0	[2]
Held-to-maturity securities, Amortized Cost			0	[2]
Held-to-maturity securities, Gross Unrecognized Gains			0	[2]
Held-to-maturity securities, Gross Unrecognized Losses			0	[2]
Held-to-maturity securities, Fair Value			0	[2]
Government-Sponsored Enterprise Obligations [Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value	2,126,327	[3],[4]	2,098,844	[3],[5]
Held-to-maturity securities, Carrying Value	0	[3],[4]	0	[3],[5]
Held-to-maturity securities, OTTI Recognized in OCI	0	[3],[4]	0	[3],[5]
Held-to-maturity securities, Amortized Cost	0	[3],[4]	0	[3],[5]
Held-to-maturity securities, Gross Unrecognized Gains	0	[3],[4]	0	[3],[5]
Held-to-maturity securities, Gross Unrecognized Losses	0	[3],[4]	0	[3],[5]
Held-to-maturity securities, Fair Value	0	[3],[4]	0	[3],[5]
State Or Local Housing Agency Obligations [Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value	0		0
Held-to-maturity securities, Carrying Value	69,442		84,548
Held-to-maturity securities, OTTI Recognized in OCI	0		0
Held-to-maturity securities, Amortized Cost	69,442		84,548
Held-to-maturity securities, Gross Unrecognized Gains	170		78
Held-to-maturity securities, Gross Unrecognized Losses	8,686		10,121
Held-to-maturity securities, Fair Value	60,926		74,505
Mortgage-Backed Securities [Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value	253,589		347,081
Held-to-maturity securities, Carrying Value	5,090,308		4,892,784
Held-to-maturity securities, OTTI Recognized in OCI	20,846		23,759
Held-to-maturity securities, Amortized Cost	5,111,154		4,916,543
Held-to-maturity securities, Gross Unrecognized Gains	46,809		45,618
Held-to-maturity securities, Gross Unrecognized Losses	26,559		69,081
Held-to-maturity securities, Fair Value	5,131,404		4,893,080
U.S. Obligation Residential [Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value	1,277	[6]	1,380	[7]
Held-to-maturity securities, Carrying Value	85,484	[6]	18,167	[7]
Held-to-maturity securities, OTTI Recognized in OCI	0	[6]	0	[7]
Held-to-maturity securities, Amortized Cost	85,484	[6]	18,167	[7]
Held-to-maturity securities, Gross Unrecognized Gains	650	[6]	760	[7]
Held-to-maturity securities, Gross Unrecognized Losses	0	[6]	0	[7]
Held-to-maturity securities, Fair Value	86,134	[6]	18,927	[7]
Government-sponsored Enterprise Residential [Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value	252,312	[8]	345,701	[8]
Held-to-maturity securities, Carrying Value	4,509,121	[8]	4,064,679	[8]
Held-to-maturity securities, OTTI Recognized in OCI	0	[8]	0	[8]
Held-to-maturity securities, Amortized Cost	4,509,121	[8]	4,064,679	[8]
Held-to-maturity securities, Gross Unrecognized Gains	39,571	[8]	39,197	[8]
Held-to-maturity securities, Gross Unrecognized Losses	1,034	[8]	1,976	[8]
Held-to-maturity securities, Fair Value	4,547,658	[8]	4,101,900	[8]
Private-Label Residential MBS [Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value	0		0
Held-to-maturity securities, Carrying Value	494,631		771,478
Held-to-maturity securities, OTTI Recognized in OCI	20,649		23,402
Held-to-maturity securities, Amortized Cost	515,280		794,880
Held-to-maturity securities, Gross Unrecognized Gains	5,433		4,585
Held-to-maturity securities, Gross Unrecognized Losses	25,522		67,023
Held-to-maturity securities, Fair Value	495,191		732,442
Private-label Commercial MBS [Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value			0
Held-to-maturity securities, Carrying Value			37,077
Held-to-maturity securities, OTTI Recognized in OCI			0
Held-to-maturity securities, Amortized Cost			37,077
Held-to-maturity securities, Gross Unrecognized Gains			573
Held-to-maturity securities, Gross Unrecognized Losses			0
Held-to-maturity securities, Fair Value			37,650
Private-label Home Equity Loan ABS [Member]
Schedule Of Trading And Held-To-Maturity Securities [Line Items]
Trading securities, Fair Value	0		0
Held-to-maturity securities, Carrying Value	1,072		1,383
Held-to-maturity securities, OTTI Recognized in OCI	197		357
Held-to-maturity securities, Amortized Cost	1,269		1,740
Held-to-maturity securities, Gross Unrecognized Gains	1,155		503
Held-to-maturity securities, Gross Unrecognized Losses	3		82
Held-to-maturity securities, Fair Value	$ 2,421		$ 2,161

[1] Fair value: $5,192,330 and $4,967,585 as of December 31, 2012 and 2011, respectively.

[2] Represents corporate debentures guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program (TLGP).

[3] See Note 19 for transactions with other FHLBanks.

[4] Represents debentures issued by other FHLBanks, Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal Farm Credit Bank (Farm Credit), and Federal Agricultural Mortgage Corporation (Farmer Mac). GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

[5] Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit, and Farmer Mac. GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

[6] Represents MBS issued by Government National Mortgage Association (Ginnie Mae), which are guaranteed by the U.S. government.

[7] Represents MBS issued by Ginnie Mae, which are guaranteed by the U.S. government.

[8] Represents MBS issued by Fannie Mae and Freddie Mac.

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Derivatives And Hedging Activities (Net Gains Or Losses On Derivatives And Hedging Activities) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Derivative Instruments, Gain (Loss) [Line Items]
Net gain (loss) related to fair value hedge ineffectiveness	$ 2,792	$ 2,064	$ (1,224)
Net gain (loss) related to derivatives not designated as hedging instruments	(24,270)	(110,807)	(173,450)
Net gains (losses) on derivatives and hedging activities	(21,478)	(108,743)	(174,674)
Interest Rate Swaps [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Net gain (loss) related to fair value hedge ineffectiveness	2,792	2,122	(1,160)
Net gain (loss) related to derivatives not designated as hedging instruments	27,428	(9,870)	(40,634)
Interest Rate Caps And Floors [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Net gain (loss) related to fair value hedge ineffectiveness	0	(58)	(64)
Net gain (loss) related to derivatives not designated as hedging instruments	(24,032)	(70,577)	(83,746)
Net Interest Settlements [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Net gain (loss) related to derivatives not designated as hedging instruments	(35,174)	(40,489)	(53,171)
Mortgage Delivery Commitments [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Net gain (loss) related to derivatives not designated as hedging instruments	7,509	10,146	4,138
Intermediary Transactions Interest Rate Swaps [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Net gain (loss) related to derivatives not designated as hedging instruments	(1)	(29)	(42)
Intermediary Transactions Interest Rate Caps And Floors [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Net gain (loss) related to derivatives not designated as hedging instruments	$ 0	$ 12	$ 5

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Investment Securities (Other Than Temporary Impairment, Charges Recognized In Income) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Schedule of Held-to-maturity Securities [Line Items]
Other Than Temporarily Impaired Securities, Unpaid Principal Balance	$ 139,538
Other Than Temporarily Impaired Securities, Amortized Cost	128,394
Other Than Temporarily Impaired Securities, Carrying Value	107,548
Other Than Temporarily Impaired Securities, Fair Value	120,995
Private-Label Residential MBS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Other Than Temporarily Impaired Securities, Unpaid Principal Balance	135,853
Other Than Temporarily Impaired Securities, Amortized Cost	127,125
Other Than Temporarily Impaired Securities, Carrying Value	106,476
Other Than Temporarily Impaired Securities, Fair Value	118,574
Prime [Member] | Private-Label Residential MBS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Other Than Temporarily Impaired Securities, Unpaid Principal Balance	43,400
Other Than Temporarily Impaired Securities, Amortized Cost	42,050
Other Than Temporarily Impaired Securities, Carrying Value	39,967
Other Than Temporarily Impaired Securities, Fair Value	41,871
Subprime [Member] | Private-label Home Equity Loan ABS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Other Than Temporarily Impaired Securities, Unpaid Principal Balance	3,685
Other Than Temporarily Impaired Securities, Amortized Cost	1,269
Other Than Temporarily Impaired Securities, Carrying Value	1,072
Other Than Temporarily Impaired Securities, Fair Value	2,421
Alt-A [Member] | Private-Label Residential MBS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Other Than Temporarily Impaired Securities, Unpaid Principal Balance	92,453
Other Than Temporarily Impaired Securities, Amortized Cost	85,075
Other Than Temporarily Impaired Securities, Carrying Value	66,509
Other Than Temporarily Impaired Securities, Fair Value	$ 76,703

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Consolidated Obligations (Schedule Of Consolidated Obligations, Current Portion) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Consolidated Obligations [Abstract]
Book Value	$ 8,669,059	$ 10,251,108
Par Value	$ 8,670,442	$ 10,251,723
Weighted Average Interest Rate	0.12%	0.03%

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Cash And Due From Banks (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Cash and Cash Equivalents [Abstract]
Federal Reserve Bank deposits	$ 360	$ 348

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Allowance For Credit Losses (Tables)

12 Months Ended

Dec. 31, 2012

Allowance For Credit Losses [Abstract]

Schedule Of Net Credit Enhancement Fees Paid To Participating Members

	2012		2011		2010
Gross CE fees paid to PFIs	$	4,396	$	3,744	$	2,989
Performance-based CE fees recovered from PFIs		(179)		(199)		(193)
Net CE fees paid	$	4,217	$	3,545	$	2,796

Allowance For Credit Losses On Financing Receivables

	Conventional Loans		Government Loans		Credit Products		Direct Financing Lease Receivable		Total
Allowance for credit losses:
Balance, beginning of period	$	3,473	$	-	$	-	$	-	$	3,473
Charge-offs		(553)		-		-		-		(553)
Provision for credit losses		2,496		-		-		-		2,496
Balance, end of period	$	5,416	$	-	$	-	$	-	$	5,416
Allowance for Credit Losses, end of period:
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Collectively evaluated for impairment	$	5,416	$	-	$	-	$	-	$	5,416
Recorded investment1, end of period:
Individually evaluated for impairment2	$	-	$	-	$	16,597,209	$	25,527	$	16,622,736
Collectively evaluated for impairment	$	5,270,183	$	705,209	$	-	$	-	$	5,975,392

__________

1	The recorded investment in a financing receivable is the UPB, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedge adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	No financing receivables individually evaluated for impairment were determined to be impaired.

The following table presents a roll-forward of the allowance for credit losses for the year ended December 31, 2011 as well as the method used to evaluate impairment relating to all portfolio segments regardless of whether or not an estimated credit loss has been recorded as of December 31, 2011 (in thousands):

	Conventional Loans		Government Loans		Credit Products		Direct Financing Lease Receivable		Total
Allowance for credit losses:
Balance, beginning of period	$	2,911	$	-	$	-	$	-	$	2,911
Charge-offs		(496)		-		-		-		(496)
Provision for credit losses		1,058		-		-		-		1,058
Balance, end of period	$	3,473	$	-	$	-	$	-	$	3,473
Allowance for Credit Losses, end of period:
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Collectively evaluated for impairment	$	3,473	$	-	$	-	$	-	$	3,473
Recorded investment1, end of period:
Individually evaluated for impairment2	$	-	$	-	$	17,422,926	$	27,385	$	17,450,311
Collectively evaluated for impairment	$	4,346,603	$	618,161	$	-	$	-	$	4,964,764

___________

1	The recorded investment in a financing receivable is the UPB, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedge adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	No financing receivables individually evaluated for impairment were determined to be impaired.

Summary Of Delinquency Aging And Key Quality Indicators Of Federal Home Loan Bank's Portfolio Segments

The following table summarizes the delinquency aging and key credit quality indicators for all of the FHLBank’s portfolio segments as of December 31, 2012 (dollar amounts in thousands):

	Conventional Loans			Government Loans			Credit Products			Direct Financing Lease Receivable			Total
Recorded investment1:
Past due 30-59 days delinquent	$	24,954		$	16,990		$	-		$	-		$	41,944
Past due 60-89 days delinquent		8,016			5,787			-			-			13,803
Past due 90 days or more delinquent		21,576			8,177			-			-			29,753
Total Past Due		54,546			30,954			-			-			85,500
Total current loans		5,215,637			674,255			16,597,209			25,527			22,512,628
Total recorded investment	$	5,270,183		$	705,209		$	16,597,209		$	25,527		$	22,598,128
Other delinquency statistics:
In process of foreclosure, included above2	$	11,593		$	3,085		$	-		$	-		$	14,678
Serious delinquency rate3		0.4	%		1.2	%		-	%		-	%		0.1	%
Past due 90 days or more and still accruing interest	$	-		$	8,176		$	-		$	-		$	8,176
Loans on non-accrual status4	$	25,300		$	-		$	-		$	-		$	25,300

__________

1	The recorded investment in a loan is the UPB of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedging adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.
3	Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment for the portfolio class.
4	Loans on non-accrual status include $1,286,000of troubled debt restructurings. Troubled debt restructurings are restructurings in which the FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

The following table summarizes the key credit quality indicators for the FHLBank’s mortgage loans as of December 31, 2011 (dollar amounts in thousands):

	Conventional Loans			Government Loans			Credit Products			Direct Financing Lease Receivable			Total
Recorded investment1:
Past due 30-59 days delinquent	$	30,473		$	15,811		$	-		$	-		$	46,284
Past due 60-89 days delinquent		8,926			5,809			-			-			14,735
Past due 90 days or more delinquent		23,383			11,876			-			-			35,259
Total Past Due		62,782			33,496			-			-			96,278
Total current loans		4,283,821			584,665			17,422,926			27,385			22,318,797
Total recorded investment	$	4,346,603		$	618,161		$	17,422,926		$	27,385		$	22,415,075
Other delinquency statistics:
In process of foreclosure, included above2	$	13,267		$	4,375		$	-		$	-		$	17,642
Serious delinquency rate3		0.5	%		2.0	%		-	%		-	%		0.2	%
Past due 90 days or more and still accruing interest	$	-		$	11,876		$	-		$	-		$	11,876
Loans on non-accrual status4	$	25,849		$	-		$	-		$	-		$	25,849

__________

1	The recorded investment in a loan is the UPB of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedging adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.
3	Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment for the portfolio class.
4	Loans on non-accrual status include $496,000of troubled debt restructurings. Troubled debt restructurings are restructurings in which the FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

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Affordable Housing Program (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012 item	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Affordable Housing Program [Line Items]
Number of district FHLBanks	12
Portion of net earnings set aside after assessment for the Resolution Funding Corporation	$ 100,000,000
Percentage of current year's net earnings set aside after assessment for Resolution Funding Corporation	10.00%
Affordable Housing Program Obligation	31,198,000	31,392,000	39,226,000	44,117,000
Affordable Housing Program, Next Year, Uncommitted And Prior Years Recaptured And Reallocated [Member]
Affordable Housing Program [Line Items]
Affordable Housing Program Obligation	15,916,000
Affordable Housing Program, Prior Years, Committed And Undisbursed [Member]
Affordable Housing Program [Line Items]
Affordable Housing Program Obligation	$ 15,282,000

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Deposits (Types Of Deposits) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Deposits [Abstract]
Interest-bearing, Demand	$ 253,527	$ 156,345
Interest-bearing, Overnight	824,200	799,400
Interest-bearing, Term	39,900	2,700
Total interest-bearing	1,117,627	958,445
Non-interest-bearing, Demand	360	348
Non-interest-bearing, Other	63,970	38,578
Total non-interest-bearing	64,330	38,926
Total deposits	$ 1,181,957	$ 997,371

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Pension And Postretirement Benefit Plans (Schedule Of Benefit Obligations In Excess Of Fair Value Of Plan Assets) (Details) (Supplemental Employee Retirement Plans, Defined Benefit [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Supplemental Employee Retirement Plans, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Projected benefit obligation at beginning of year	$ 10,603	$ 8,988
Service cost	433	373	344
Interest cost	439	451	472
Benefits paid	(225)	(229)
Actuarial (gain) loss	661	1,020
Projected benefit obligation at end of year	11,911	10,603	8,988
Fair value of plan assets at beginning of year	0	0
Employer contributions	225	229
Benefits paid	(225)	(229)
Fair value of plan assets at end of year	0	0	0
FUNDED STATUS	$ 11,911	$ 10,603

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Advances (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 customer	Dec. 31, 2011 customer	Dec. 31, 2010
Federal Home Loan Bank Advance Line [Items]
Callable Federal Home Loan Bank advances	$ 5,429,171	$ 5,864,707
Convertible Federal Home Loan Bank advances	2,079,092	2,693,292
Concentration Risk, Count	2	2
Income from advances	148,032	154,536	194,878
Advances	16,573,348	17,394,399
Advances [Member]
Federal Home Loan Bank Advance Line [Items]
Concentration Risk, Percentage	10.00%	10.00%
Credit Concentration Risk [Member] | Advances [Member]
Federal Home Loan Bank Advance Line [Items]
Concentration Risk, Percentage	33.80%	28.20%
Advances	5,448,000	4,745,000
Credit Concentration Risk [Member] | Advances [Member] | Commercial Banks [Member]
Federal Home Loan Bank Advance Line [Items]
Concentration Risk, Percentage	37.20%
Credit Concentration Risk [Member] | Advances [Member] | Thrifts [Member]
Federal Home Loan Bank Advance Line [Items]
Concentration Risk, Percentage	36.70%
Credit Concentration Risk [Member] | Advances [Member] | Insurance Companies [Member]
Federal Home Loan Bank Advance Line [Items]
Concentration Risk, Percentage	21.00%
Customer Concentration Risk [Member] | Interest Income, Federal Home Loan Bank Advances [Member]
Federal Home Loan Bank Advance Line [Items]
Income from advances	77,517	89,163
Federal Home Loan Bank, Advances, Variable Rate [Member]
Federal Home Loan Bank Advance Line [Items]
Callable Federal Home Loan Bank advances	$ 5,300,793	$ 5,811,473
Minimum [Member]
Federal Home Loan Bank Advance Line [Items]
FHLB advances, outstanding interest rate	0.12%	0.00%
Minimum [Member] | Federal Home Loan Bank, Advances, Fixed Rate [Member]
Federal Home Loan Bank Advance Line [Items]
Advances to member banks, maturity perio	3 days
Minimum [Member] | Federal Home Loan Bank, Advances, Variable Rate [Member]
Federal Home Loan Bank Advance Line [Items]
Advances to member banks, maturity perio	1 day
Maximum [Member]
Federal Home Loan Bank Advance Line [Items]
FHLB advances, outstanding interest rate	8.01%	8.01%
Maximum [Member] | Federal Home Loan Bank, Advances, Fixed Rate [Member]
Federal Home Loan Bank Advance Line [Items]
Advances to member banks, maturity perio	15 years
Maximum [Member] | Federal Home Loan Bank, Advances, Variable Rate [Member]
Federal Home Loan Bank Advance Line [Items]
Advances to member banks, maturity perio	15 years

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Consolidated Obligations (Schedule Of Consolidated Obligations, By Maturity Or Next Call Date) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Consolidated Obligations [Abstract]
Due in one year or less	$ 14,900,000	$ 11,615,300
Due after one year through two years	3,847,700	4,946,000
Due after two years through three years	1,024,000	1,191,200
Due after three years through four years	809,650	350,500
Due after four years through five years	688,000	567,500
Thereafter	517,900	974,900
Total par value	$ 21,787,250	$ 19,645,400

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Accumulated Other Comprehensive Income (Summary Of Changes In Accumulated Other Comprehensive Income) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Accumulated Other Comprehensive Income [Abstract]
Net Non-credit Portion of OTTI Losses on Held-to-maturity Securities, Balance at beginning of period	$ (23,759)	$ (19,291)	$ (9,719)
Other comprehensive income (loss), Net Non-credit Portion of OTTI Losses on Held-to-maturity Securities	2,913	(4,468)	(9,572)
Net Non-credit Portion of OTTI Losses on Held-to-maturity Securities, Balance at end of period	(20,846)	(23,759)	(19,291)
Accumulated Other Comprehensive Income (Loss), Defined Benefit Pension Plans, Balance at beginning of period	(4,082)	(3,381)	(2,142)
Other comprehensive income (loss), Defined Benefit Pension Plan	(329)	(701)	(1,239)
Accumulated Other Comprehensive Income (Loss), Defined Benefit Pension Plans, Balance at end of period	(4,411)	(4,082)	(3,381)
Accumulated Other Comprehensive Income (Loss), Balance at beginning of period	(27,841)	(22,672)	(11,861)
Other comprehensive income (loss), Accumulated other comprehensive income (Loss)	2,584	(5,169)	(10,811)
Accumulated Other Comprehensive Income (Loss), Balance at end of period	$ (25,257)	$ (27,841)	$ (22,672)

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Resolution Funding Corporation (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012
Resolution Funding Corporation [Abstract]
Percentage of income allocated to separate restricted retained earnings account	20.00%
Percentage of income required to pay in accordance with GAAP	20.00%
Annual payment for FHLB Assessments	$ 300,000,000
Quarterly payment for FHLB Assessments	$ 75,000,000

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Pension And Postretirement Benefit Plans (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Defined Benefit Plan Disclosure [Line Items]
Employer contributions expensed	$ 840,000	$ 739,000	$ 717,000
Multiemployer Plan Number	333
Estimated actuarial (gain) loss that will be amortized from AOCI into net periodic benefits costs over the next fiscal year	402,000
Supplemental Employee Retirement Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Defined benefit pension costs	1,214,000	1,150,000	1,176,000
Supplemental Employee Retirement Plans, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Estimated employer contributions in next fiscal year	307,000
Deferred compensation	305,000	250,000	263,000
Defined benefit pension costs	$ 1,204,000	$ 1,143,000	$ 1,163,000

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Consolidated Obligations (Schedule Of Consolidated Obligations, By Interest Rate Terms) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Debt Instrument [Line Items]
Total par value	$ 21,787,250	$ 19,645,400
Fixed Interest Rate [Member]
Debt Instrument [Line Items]
Total par value	13,507,250	13,697,400
Adjustable Interest Rate [Member]
Debt Instrument [Line Items]
Total par value	6,010,000	3,780,000
Step Ups Step Downs [Member]
Debt Instrument [Line Items]
Total par value	2,270,000	1,920,000
Range Bonds [Member]
Debt Instrument [Line Items]
Total par value	$ 0	$ 248,000

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Derivatives And Hedging Activities (Net Gains Or Losses On Derivatives And Other Hedge Items And Impact Of These To Net Interest Income) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) on Derivatives	$ (19,753)		$ (93,359)		$ (77,027)
Gain (Loss) on Hedged Items	22,545		95,423		75,803
Net Fair Value Hedge Ineffectiveness	2,792		2,064		(1,224)
Effect of Derivatives on Net Interest Income	(43,993)	[1]	(21,320)	[1]	2,105	[1]
Advances [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) on Derivatives	44,010		(113,640)		(106,531)
Gain (Loss) on Hedged Items	(45,836)		111,609		105,102
Net Fair Value Hedge Ineffectiveness	(1,826)		(2,031)		(1,429)
Effect of Derivatives on Net Interest Income	(186,360)	[1]	(234,817)	[1]	(290,214)	[1]
Consolidated Obligations, Bonds [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) on Derivatives	(63,877)		21,401		28,540
Gain (Loss) on Hedged Items	68,515		(16,970)		(28,656)
Net Fair Value Hedge Ineffectiveness	4,638		4,431		(116)
Effect of Derivatives on Net Interest Income	142,355	[1]	212,243	[1]	290,416	[1]
Consolidated Obligations, Discount Notes [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) on Derivatives	114		(1,120)		964
Gain (Loss) on Hedged Items	(134)		784		(643)
Net Fair Value Hedge Ineffectiveness	(20)		(336)		321
Effect of Derivatives on Net Interest Income	$ 12	[1]	$ 1,254	[1]	$ 1,903	[1]

[1] The differentials between accruals of interest receivables and payables on derivatives designated as fair value hedges as well as the amortization/accretion of hedging activities are recognized as adjustments to the interest income or expense of the designated underlying hedged item.

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Fair Values

12 Months Ended

Dec. 31, 2012

Fair Values [Abstract]

Fair Values

NOTE 16 – FAIR VALUES

The fair value amounts recorded on the Statements of Condition and presented in the note disclosures have been determined by the FHLBank using available market and other pertinent information and reflect the FHLBank’s best judgment of appropriate valuation methods. Although the FHLBank uses its best judgment in estimating the fair value of its financial instruments, there are inherent limitations in any valuation technique. Therefore, the fair values may not be indicative of the amounts that would have been realized in market transactions as of December 31, 2012 and 2011.

Subjectivity of Estimates: Estimates of the fair value of advances with options, mortgage instruments, derivatives with embedded options and consolidated obligation bonds with 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. The use of different assumptions could have a material effect on the fair value estimates.

Fair Value Hierarchy: The FHLBank records trading securities, derivative assets and derivative liabilities at fair value on a recurring basis and on occasion, certain private-label MBS/ABS and non-financial assets on a non-recurring basis. The fair value hierarchy requires the FHLBank to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The inputs are evaluated and an overall level for the fair value measurement is determined. This overall level is an indication of the market observability of the fair value measurement for the asset or liability. The FHLBank must disclose the level within the fair value hierarchy in which the measurements are classified for all assets and liabilities.

The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels:

§ Level 1 Inputs –  Quoted prices (unadjusted) for identical assets or liabilities in active markets that the FHLBank can access on the measurement date.

§ Level 2 Inputs –  Inputs other than quoted prices within Level 1 that are observable inputs for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following: (1) quoted prices for similar assets and liabilities in active markets; (2) quoted prices for similar assets and liabilities in markets that are not active; (3) inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates and yield curves that are observable at commonly quoted intervals and implied volatilities); and (4) inputs that are derived principally from or corroborated by observable market data by correlation or other means.

§ Level 3 Inputs –  Unobservable inputs for the asset or liability.

The FHLBank reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation inputs may result in a reclassification of certain assets or liabilities. These reclassifications, if any, are reported as transfers in/out as of the beginning of the quarter in which the changes occur. There were no such transfers during the years ended December 31, 2012 and 2011.

The carrying value and fair value of the FHLBank’s financial assets and liabilities as of December 31, 2012 and 2011 are summarized in the following tables (in thousands). These values do not represent an estimate of the overall market value of the FHLBank as a going concern, which would take into account future business opportunities and the net profitability of assets and liabilities.

	12/31/2012
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral
Assets:
Cash and due from banks	$	369,997	$	369,997	$	369,997	$	-	$	-	$	-
Interest-bearing deposits		455		455		-		455		-		-
Federal funds sold and securities purchased under agreements to resell		2,849,288		2,849,288		-		2,849,288		-		-
Trading securities		2,764,918		2,764,918		-		2,764,918		-		-
Held-to-maturity securities		5,159,750		5,192,330		-		4,633,792		558,538		-
Advances		16,573,348		16,714,319		-		16,714,319		-		-
Mortgage loans held for portfolio, net of allowance		5,940,517		6,256,905		-		6,256,905		-		-
Accrued interest receivable		77,445		77,445		-		77,445		-		-
Derivative assets		25,166		25,166		-		256,379		-		(231,213)
Liabilities:
Deposits		1,181,957		1,181,957		-		1,181,957		-		-
Consolidated obligation discount notes		8,669,059		8,669,327		-		8,669,327		-		-
Consolidated obligation bonds		21,973,902		22,189,631		-		22,189,631		-		-
Mandatorily redeemable capital stock		5,665		5,665		5,665		-		-		-
Accrued interest payable		81,801		81,801		-		81,801		-		-
Derivative liabilities		123,414		123,414		-		664,992		-		(541,578)
Other Asset (Liability):
Standby letters of credit		(1,039)		(1,039)		-		(1,039)		-		-
Standby bond purchase agreements		588		4,922		-		4,922		-		-

	12/31/2011
	Carrying Value		Fair Value
Assets:
Cash and due from banks	$	116,041	$	116,041
Interest-bearing deposits		42		42
Federal funds sold		1,040,000		1,040,000
Trading securities		4,559,163		4,559,163
Held-to-maturity securities		4,977,332		4,967,585
Advances		17,394,399		17,564,068
Mortgage loans held for portfolio, net of allowance		4,933,332		5,184,775
Accrued interest receivable		85,666		85,666
Derivative assets		14,038		14,038
Liabilities:
Deposits		997,371		997,371
Consolidated obligation discount notes		10,251,108		10,250,885
Consolidated obligation bonds		19,894,483		20,195,131
Overnight loans from other FHLBanks		35,000		35,000
Mandatorily redeemable capital stock		8,369		8,369
Accrued interest payable		96,237		96,237
Derivative liabilities		140,213		140,213
Other Asset (Liability):
Standby letters of credit		(1,401)		(1,401)
Standby bond purchase agreements		384		2,788

Fair Value Methodologies and Techniques and Significant Inputs:

Cash and Due From Banks: The fair values approximate the carrying values.

Interest-bearing Deposits: The balance is comprised of interest-bearing deposits in banks. Based on the nature of the accounts, the carrying value approximates the fair value.

Federal Funds Sold: The carrying value of overnight Federal funds approximates fair value, and term Federal funds are valued using projected future cash flows discounted at the current replacement rate.

Securities PurchasedUnder Agreements to Resell:The balance is comprised of overnight collateralized borrowings. The carrying value approximates fair value.

Investment Securities – non-MBS: The fair values of short-term non-MBS investments are determined using an income approach based on the LIBOR swap interest rate curve, adjusted for a spread, which may be based on unobservable information. Differing spreads may be applied to distinct term points along the discount curve in determining the fair values of instruments with varying maturities.

For non-MBS long-term (as determined by original issuance date) securities, the FHLBank obtains prices from up to four designated third-party pricing vendors when available. The pricing vendors use various proprietary models to price investments. The inputs to those models are derived from various sources including, but not limited to: benchmark yields, reported trades, dealer estimates, issuer spreads, benchmark securities, bids, offers and other market-related data. Each pricing vendor has an established challenge process in place for all valuations, which facilitates resolution of potentially erroneous prices identified by the FHLBank. The use of multiple pricing vendors provides the FHLBank with additional data points regarding levels of inputs and final prices that are used to validate final pricing of investment securities.The utilization of the average of available vendor prices within a cluster tolerance and the evaluation of reasonableness of outlier prices described below does not discard available information.

Periodically, the FHLBank conducts reviews of the four pricing vendors to confirm and further augment its understanding of the vendors’ pricing processes, methodologies and control procedures. The FHLBank’s review process includes obtaining available vendors’ independent auditors’ reports regarding the internal controls over their valuation process, although the availability of pertinent reports varies by vendor.

The FHLBank utilizes a valuation technique for estimating the fair values of non-MBS long-term securities as follows:

§ The FHLBank’s valuation technique first requires the establishment of a median price for each security. If four prices are received, the average of the middle two 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 some type of validation.

§ All prices that are within a specified tolerance threshold of the median price are included in the cluster of prices that are averaged to compute a default price.

§ Prices that are outside the threshold (outliers) are subject to further analysis (including, but not limited to, comparison to prices provided by an additional third-party valuation service, prices for similar securities, and/or non-binding dealer estimates) to determine if an outlier is a better estimate of fair value.

§ If an outlier (or some other price identified in the analysis) is determined to be a better estimate of fair value, then the outlier (or the other price as appropriate) is used as the final price rather than the default price.

§ If, on the other hand, the analysis confirms that an outlier (or outliers) is (are) in fact not representative of fair value and the default price is the best estimate, then the default price is used as the final price. In all cases, the final price is used to determine the fair value of the security.

§ If all prices received for a security are outside the tolerance threshold level of the median price, then there is no default price, and the final price is determined by an evaluation of all outlier prices as described above.

As of December 31, 2012, four prices were received for substantially all of the FHLBank’s non-MBS long-term holdings with most vendor prices falling within the tolerances so the final prices for those securities were computed by averaging the prices received. Based on the FHLBank’s reviews of the pricing methods and controls employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or, in those instances in which there were outliers, the FHLBank’s additional analyses), the FHLBank has concluded thatits final prices result in reasonable estimates of fair value and that the fair value measurements are classified appropriately in the fair value hierarchy. Based on the significant lack of market activity for state or local housing agency obligations, the fair value measurements for those securities were classified as Level 3 within the fair value hierarchy as of December 31, 2012.  

Investment Securities – MBS/ABS: For MBS/ABS securities, the FHLBank obtains prices from up to four designated third-party pricing vendors when available. These pricing vendors use various proprietary models to price investments. The inputs to those models are derived from various sources including, but not limited to: benchmark yields, reported trades, dealer estimates, issuer spreads, benchmark securities, bids, offers and other market-related data (certaininputs are actively quoted and can be validated to external sources). Since many MBS/ABSare not traded on a daily basis, the pricing vendors use available information as applicable such as benchmark curves, benchmarking of like securities, sector groupings and matrix pricing to determine the prices for individual securities.Each pricing vendor has an established challenge process in place for all valuations, which facilitates resolution of potentially erroneous prices identified by the FHLBank. The use of multiple pricing vendors provides the FHLBank with additional data points regarding levels of inputs and final prices that are used to validate final pricing of investment securities. The utilization of the average of available vendor prices within a cluster tolerance and the evaluation of reasonableness of outlier prices does not discard available information.

Similar to the description above for non-MBS long-term securities, the FHLBank has conducted reviews of the four pricing vendors and has established a price for each MBS/ABS using a formula that was based upon the number of prices received, subject to review of outliers. As an additional step, the FHLBank reviewed the final fair value estimates of its private-label MBS/ABS holdings as of December 31, 2012 for reasonableness using an implied yield test. The FHLBank calculated an implied yield for each of its private-label MBS/ABS using the estimated fair value derived from the process described above and the security’s projected cash flows from the FHLBank’s OTTI process and compared such yield to the yield for comparable securities according to dealers and other third-party sources to the extent comparable yield data was available. This analysis did not indicate that any adjustments to the fair value estimates were necessary.

As of December 31, 2012, four vendor prices were received for substantially all of the FHLBank’s MBS/ABS holdings with most vendor prices falling within the tolerances so the final prices for those securities were computed by averaging the prices received. Based on the FHLBank’s reviews of the pricing methods and controls employed by the third-party pricing vendors and the relative lack of dispersion among the vendor prices (or, in those instances in which there were outliers or significant yield variances, the FHLBank’s additional analyses), the FHLBank has concluded thatits final prices result in reasonable estimates of fair value and that the fair value measurements are classified appropriately in the fair value hierarchy. Based on the significant lack of market activity for private-label MBS/ABS, the fair value measurements for those securities were classified as Level 3 within the fair value hierarchy as of December 31, 2012 and 2011.

Advances: The fair values of advances are determined by calculating the present values of the expected future cash flows from the advances, excluding the amount of accrued interest receivable. The discount rates used in these calculations are equivalent to the replacement advance rates for advances with similar terms.

The inputs used to determine the fair values of advances are as follows:

§ CO Curve and LIBOR Curve. The Office of Finance constructs an internal curve, referred to as the CO Curve, using the U.S. Treasury Curve as a base curve that is then adjusted by adding indicative spreads obtained from market observable sources. These market indications are generally derived from pricing indications from dealers, historical pricing relationships, recent GSE trades and secondary market activity. The CO Curve is used for fixed rate callable and non-callable advances. The LIBOR Curve is used for variable rate advances and certain fixed rate advances with other optionality.

§ Volatility assumption. To estimate the fair values of advances with optionality, the FHLBank uses market-based expectations of future interest rate volatility implied from current market prices for similar options.

§ Spread adjustment. Represents an adjustment to the CO Curve or LIBOR Curve.

In accordance with Finance Agency regulations, an advance with a maturity or repricing period greater than six months requires a prepayment fee sufficient to make the FHLBank financially indifferent to the borrower’s decision to prepay the advance. Therefore, the fair value of an advance does not assume prepayment risk. The FHLBank did not adjust the fair value measurement for creditworthiness primarily because advances were fully collateralized.

Mortgage Loans Held for Portfolio:The fair values of mortgage loans are determined based on quoted market prices of similar mortgage loans. These prices, however, can change rapidly based upon market conditions and are highly dependent upon the underlying prepayment assumptions.

Accrued Interest Receivable and Payable:The fair values approximate the carrying values.

Derivative Assets/Liabilities: The FHLBank bases the fair values of derivatives on instruments with similar terms or available market prices, when available. However, active markets do not exist for many of the FHLBank’s derivatives. Consequently, fair values for these instruments are generally estimated using standard valuation techniques such as discounted cash flow analysis and comparisons to similar instruments. The FHLBank is subject to credit risk in derivative transactions because of the potential nonperformance by the derivative counterparties, which are generally highly-rated institutions. To mitigate this risk, the FHLBank enters into master netting agreements for derivative agreements with its derivative counterparties. In addition, the FHLBank has entered into bilateral security agreements with all active derivative dealer counterparties. These agreements provide for delivery of collateral at specified levels tied to counterparty credit ratings to limit the FHLBank’s net unsecured credit exposure to these counterparties. The FHLBank has evaluated the potential for the fair value of the instruments to be impacted by counterparty credit risk and its own credit risk and has determined that no adjustments were significant or necessary to the overall fair value measurements of derivatives.

The fair values of the FHLBank’s derivative assets and liabilities include accrued interest receivable/payable and cash collateral remitted to/received from counterparties. The estimated fair values of the accrued interest receivable/payable and cash collateral approximate their carrying values due to their short-term nature. The derivative fair values are netted by counterparty pursuant to the provisions of the master netting agreements. If these netted amounts are positive, they are classified as an asset and, if negative, a liability.

The discounted cash flow model uses market-observable inputs. Inputs by class of derivative are as follows:

§ Interest-rate related:

· Prior to December 31, 2012, the FHLBank utilized the LIBOR Swap Curve to estimate the fair value of its interest-related derivatives. During the fourth quarter of 2012, the FHLBank observed an increasing trend in the use of the Overnight-index Swap (OIS) Curve by other market participants to value collateralized derivative contracts. The FHLBank performed an assessment of market participants and determined the OIS Curve was the appropriate curve to be used for valuation of its collateralized interest rate derivatives. As such, effective December 31, 2012, the FHLBank utilized the OIS Curve to estimate the fair value of its interest-related derivatives, which did not have a material impact on the fair values;

· Volatility assumptions - market-based expectations of future interest rate volatility implied from current market prices for similar options; and

· Prepayment assumptions.

§ Mortgage delivery commitments:

· To be announced (TBA) price - market-based prices of TBAs by coupon class and expected term until settlement.

Deposits: The fair values of deposits are determined by calculating the present values of the expected future cash flows from the deposits. The calculated present values are reduced by the accrued interest payable. The discount rates used in these calculations are the cost of deposits with similar terms.

Consolidated Obligations: The fair values for consolidated obligation bonds and discount notes are determined by using standard valuation techniques and inputs based on the cost of raising comparable term debt.

The inputs used to determine the fair values of consolidated obligations are as follows:

§ CO Curve and LIBOR Curve.Fixed rate consolidated obligations that do not contain options are discounted using a replacement rate based on the CO Curve. Variable rate consolidated obligations that do not contain options are discounted using LIBOR. Consolidated obligations that contain optionality are discounted using LIBOR.

§ Volatility assumption. To estimate the fair values of consolidated obligations with optionality, the FHLBank uses market-based expectations of future interest rate volatility implied from current market prices for similar options.

Overnight Loans from Other FHLBanks: The carrying value approximates fair value.

Mandatorily Redeemable Capital Stock: The fair value of capital stock subject to mandatory redemption is generally at par value. Fair value also includes estimated dividends earned at the time of reclassification from equity to liabilities, until such amount is paid, and any subsequently declared stock dividend. The FHLBank’s dividends are declared and paid at each quarter end; therefore, fair value equaled par value as of the end of the periods presented. Stock can only be acquired by members at par value and redeemed or repurchased at par value. Stock is not traded and no market mechanism exists for the exchange of stock outside the cooperative structure.

Standby Letters of Credit: The fair values of standby letters of credit are based on the present value of fees currently charged for similar agreements. The value of these guarantees is recognized and recorded in other liabilities.

Standby Bond Purchase Agreements: The fair values of the standby bond purchase agreements are estimated using the present value of the future fees on existing agreements with fees determined using rates currently charged for similar agreements.

Fair Value Measurements: The following table presents, for each hierarchy level, the FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of December 31, 2012 (in thousands). The FHLBank measures certain held-to-maturity securities at fair value on a nonrecurring basis due to the recognition of a credit loss. For held-to-maturity securities that had credit impairment recorded at period end for which no total impairment was recorded (the full amount of additional credit impairment was a reclassification from non-credit impairment previously recorded in AOCI), these securities were recorded at their carrying values and not fair value. Real estate owned is measured at fair value when the asset’s fair value less costs to sell is lower than its carrying amount.

	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
Commercial paper	$	59,996	$	-	$	59,996	$	-	$	-
Certificates of deposit		325,006		-		325,006		-		-
Government-sponsored enterprise obligations2,3		2,126,327		-		2,126,327		-		-
U.S. obligation residential MBS4		1,277		-		1,277		-		-
Government-sponsored enterprise residential MBS5		252,312		-		252,312		-		-
Total trading securities		2,764,918		-		2,764,918		-		-
Derivative assets:
Interest-rate related		25,064		-		256,277		-		(231,213)
Mortgage delivery commitments		102		-		102		-		-
Total derivative assets		25,166		-		256,379		-		(231,213)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	2,790,084	$	-	$	3,021,297	$	-	$	(231,213)
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	123,318	$	-	$	664,896	$	-	$	(541,578)
Mortgage delivery commitments		96		-		96		-		-
Total derivative liabilities		123,414		-		664,992		-		(541,578)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	123,414	$	-	$	664,992	$	-	$	(541,578)
Nonrecurring fair value measurements - Assets:
Real estate owned6		540		-		-		540		-
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	540	$	-	$	-	$	540	$	-

¹Represents the effect of legally enforceable master netting agreements that allow the FHLBank to net settle positive and negative positions and also cash collateral and         related accrued interest held or placed with the same counterparties.

²Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit, and Farmer Mac. GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

³See Note 19 for transactions with other FHLBanks.

⁴Represents MBS issued by Ginnie Mae, which are guaranteed by the U.S. government.

⁵Represents MBS issued by Fannie Mae and Freddie Mac.

⁶Includes real estate owned written down to fair value during the quarter ended December 31, 2012 and still outstanding as of December 31, 2012.

The following table presents, for each hierarchy level, the FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of December 31, 2011 (in thousands):

	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
Commercial paper	$	599,482	$	-	$	599,482	$	-	$	-
Certificates of deposit		1,019,520		-		1,019,520		-		-
TLGP obligations2		494,236		-		494,236		-		-
Government-sponsored enterprise obligations3,4		2,098,844		-		2,098,844		-		-
U.S. obligation residential MBS5		1,380		-		1,380		-		-
Government-sponsored enterprise residential MBS6		345,701		-		345,701		-		-
Total trading securities		4,559,163		-		4,559,163		-		-
Derivative assets:
Interest-rate related		13,195		-		343,162		-		(329,967)
Mortgage delivery commitments		843		-		843		-		-
Total derivative assets		14,038		-		344,005		-		(329,967)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	4,573,201	$	-	$	4,903,168	$	-	$	(329,967)
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	140,213	$	-	$	769,004	$	-	$	(628,791)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	140,213	$	-	$	769,004	$	-	$	(628,791)
Nonrecurring fair value measurements - Assets:
Held-to-maturity securities7:
Private-label residential MBS	$	10,453	$	-	$	-	$	10,453	$	-
Real estate owned8		1,067		-		-		1,067		-
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	11,520	$	-	$	-	$	11,520	$	-

¹Represents the effect of legally enforceable master netting agreements that allow the FHLBank to net settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same counterparties.

²Represents corporate debentures guaranteed by FDIC under the TLGP.

³Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit, and Farmer Mac. GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

⁴See Note 19 for transactions with other FHLBanks.

⁵Represents MBS issued by Ginnie Mae, which are guaranteed by the U.S. government.

⁶Represents MBS issued by Fannie Mae and Freddie Mac.

⁷Excludes impaired securities with carrying values less than their fair values at date of impairment.

⁸ Includes real estate owned written down to fair value during the quarter ended December 31, 2011 and still outstanding as of December 31, 2011.

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Investment Securities (Held-To-Maturity Securities Classified By Contractual Maturity Date) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Amortized Cost	$ 5,180,596	$ 5,001,091
Held-to-maturity securities, Carrying Value	5,159,750	4,977,332
Held-to-maturity securities, Fair Value	5,192,330	4,967,585
Non-mortgage-backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Due in one year or less, Amortized Cost	0	0
Held-to-maturity securities, Due after one year through five years, Amortized Cost	0	0
Held-to-maturity securities, Due after five years through 10 years, Amortized Cost	22,780	5,095
Held-to-maturity securities, Due after 10 years, Amortized Cost	46,662	79,453
Held-to-maturity securities, Amortized Cost	69,442	84,548
Held-to-maturity securities, Due in one year or less, Carrying Value	0	0
Held-to-maturity securities, Due after one year through five years, Carrying Value	0	0
Held-to-maturity securities, Due after five years through 10 years, Carrying Value	22,780	5,095
Held-to-maturity securities, Due after 10 years, Carrying Value	46,662	79,453
Held-to-maturity securities, Carrying Value	69,442	84,548
Held-to-maturity securities, Due in one year or less, Fair Value	0	0
Held-to-maturity securities, Due after one year through five years, Fair Value	0	0
Held-to-maturity securities, Due after five years through 10 years, Fair Value	20,741	5,095
Held-to-maturity securities, Due after 10 years, Fair Value	40,185	69,410
Held-to-maturity securities, Fair Value	60,926	74,505
Mortgage-Backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Amortized Cost	5,111,154	4,916,543
Held-to-maturity securities, Carrying Value	5,090,308	4,892,784
Held-to-maturity securities, Fair Value	$ 5,131,404	$ 4,893,080

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Commitments And Contingencies (Tables)

12 Months Ended

Dec. 31, 2012

Commitments And Contingencies [Abstract]

Schedule Of Off Balance Sheet Commitments

	12/31/2012						12/31/2011
Notional Amount	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	$	2,533,506	$	21,332	$	2,554,838	$	2,728,450	$	29,777	$	2,758,227
Commitments for standby bond purchases		532,028		1,065,176		1,597,204		99,737		1,438,939		1,538,676
Commitments to fund or purchase mortgage loans		106,355		-		106,355		119,945		-		119,945
Commitments to issue consolidated bonds, at par		165,000		-		165,000		160,000		-		160,000

Contractual Obligation, Fiscal Year Maturity Schedule

Year	Premises		Equipment		Total
2013	$	50	$	63	$	113
2014		45		63		108
2015		45		10		55
2016		45		2		47
2017		19		-		19
Thereafter		-		-		-
TOTAL	$	204	$	138	$	342

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Consolidated Obligations (Schedule Of Maturities Of Consolidated Obligations) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011
Consolidated Obligations [Abstract]
Due in one year or less	$ 6,989,000		$ 5,211,300
Due after one year through two years	3,774,700		4,151,000
Due after two years through three years	1,553,000		1,757,200
Due after three years through four years	1,244,650		1,172,500
Due after four years through five years	1,476,000		1,302,500
Thereafter	6,749,900		6,050,900
Total par value	21,787,250		19,645,400
Premium	54,585		51,199
Discounts	(5,479)		(7,272)
Hedging adjustments	137,546	[1]	205,156	[1]
TOTAL	$ 21,973,902		$ 19,894,483
Due in one year or less, Weighted Average Interest Rate	1.14%		1.23%
Due after one years through two years, Weighted Average Interest Rate	1.18%		1.76%
Due after two years through three years, Weighted Average Interest Rate	1.32%		2.48%
Due after three years through four years, Weighted Average Interest Rate	2.21%		2.00%
Due after four years through five years, Weighted Average Interest Rate	2.74%		2.73%
Thereafter, Weighted Average Interest Rate	2.45%		3.47%
Total par value, Weighted Average Interest Rate	1.74%		2.29%

[1] See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

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Commitments And Contingencies (Contractual Obligation, Fiscal Year Maturity Schedule) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Operating Leased Assets [Line Items]
2013	$ 113
2014	108
2015	55
2016	47
2017	19
Thereafter	0
TOTAL	342
Premises [Member]
Operating Leased Assets [Line Items]
2013	50
2014	45
2015	45
2016	45
2017	19
Thereafter	0
TOTAL	204
Equipment [Member]
Operating Leased Assets [Line Items]
2013	63
2014	63
2015	10
2016	2
2017	0
Thereafter	0
TOTAL	$ 138

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Affordable Housing Program (Tables)

12 Months Ended

Dec. 31, 2012

Affordable Housing Program [Abstract]

Schedule Of Change In AHP Liability

	2012		2011		2010
Appropriated and reserved AHP funds as of the beginning of the period	$	31,392	$	39,226	$	44,117
AHP set aside based on current year income		12,261		8,611		3,766
Direct grants disbursed		(13,210)		(16,984)		(8,908)
Recaptured funds1		755		539		251
Appropriated and reserved AHP funds as of the end of the period	$	31,198	$	31,392	$	39,226

__________ 

¹    Recaptured funds are direct grants returned to the FHLBank in those instances where the commitments associated with the approved use of funds are not met and repayment to the FHLBank is required by regulation. Recaptured funds are returned as a result of: (1) AHP-assisted homeowner’s transfer or sale of property within the five-year retention period that the assisted homeowner is required to occupy the property; (2) homeowner’s failure to acquire sufficient loan funding (funds previously approved and disbursed cannot be used); or (3) unused grants.

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Investment Securities (Summary Of Net Gains (Losses) On Trading Securities) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Investment Securities [Abstract]
Net unrealized gains (losses) on trading securities held as of December 31, 2012	$ (19,164)	$ 35,875	$ 42,830
Net unrealized and realized gains (losses) on trading securities sold or matured prior to current period end	(8,884)	(15,103)	(28,405)
NET GAINS (LOSSES) ON TRADING SECURITIES	$ (28,048)	$ 20,772	$ 14,425

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Allowance For Credit Losses (Summary Of Delinquency Aging And Key Quality Indicators Of Federal Home Loan Bank's Portfolio Segments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011
Financing Receivable, Recorded Investment [Line Items]
Past due 30-59 days delinquent	$ 41,944	[1]	$ 46,284	[1]
Past due 60-89 days delinquent	13,803	[1]	14,735	[1]
Past due 90 days or more delinquent	29,753	[1]	35,259	[1]
Total past due	85,500	[1]	96,278	[1]
Total current loans	22,512,628	[1]	22,318,797	[1]
Total recorded investment	22,598,128	[1]	22,415,075	[1]
In process of foreclosure, included above	14,678	[2]	17,642	[2]
Serious delinquency rate	0.10%	[3]	0.20%	[3]
Past due 90 days or more still accruing interest	8,176		11,876
Loans on non-accrual status	25,300	[4]	25,849	[5]
Troubled debt restructurings included in non-accrual loans	1,286		496
Conventional Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Past due 30-59 days delinquent	24,954	[1]	30,473	[1]
Past due 60-89 days delinquent	8,016	[1]	8,926	[1]
Past due 90 days or more delinquent	21,576	[1]	23,383	[1]
Total past due	54,546	[1]	62,782	[1]
Total current loans	5,215,637	[1]	4,283,821	[1]
Total recorded investment	5,270,183	[1]	4,346,603	[1]
In process of foreclosure, included above	11,593	[2]	13,267	[2]
Serious delinquency rate	0.40%	[3]	0.50%	[3]
Past due 90 days or more still accruing interest	0		0
Loans on non-accrual status	25,300	[4]	25,849	[5]
Government-Guaranteed Or Insured Loans [Member]
Financing Receivable, Recorded Investment [Line Items]
Past due 30-59 days delinquent	16,990	[1]	15,811	[1]
Past due 60-89 days delinquent	5,787	[1]	5,809	[1]
Past due 90 days or more delinquent	8,177	[1]	11,876	[1]
Total past due	30,954	[1]	33,496	[1]
Total current loans	674,255	[1]	584,665	[1]
Total recorded investment	705,209	[1]	618,161	[1]
In process of foreclosure, included above	3,085	[2]	4,375	[2]
Serious delinquency rate	1.20%	[3]	2.00%	[3]
Past due 90 days or more still accruing interest	8,176		11,876
Loans on non-accrual status	0	[4]	0	[5]
Credit Products [Member]
Financing Receivable, Recorded Investment [Line Items]
Past due 30-59 days delinquent	0	[1]	0	[1]
Past due 60-89 days delinquent	0	[1]	0	[1]
Past due 90 days or more delinquent	0	[1]	0	[1]
Total past due	0	[1]	0	[1]
Total current loans	16,597,209	[1]	17,422,926	[1]
Total recorded investment	16,597,209	[1]	17,422,926	[1]
In process of foreclosure, included above	0	[2]	0	[2]
Serious delinquency rate	0.00%	[3]	0.00%	[3]
Past due 90 days or more still accruing interest	0		0
Loans on non-accrual status	0	[4]	0	[5]
Direct Financing Lease Receivable [Member]
Financing Receivable, Recorded Investment [Line Items]
Past due 30-59 days delinquent	0	[1]	0	[1]
Past due 60-89 days delinquent	0	[1]	0	[1]
Past due 90 days or more delinquent	0	[1]	0	[1]
Total past due	0	[1]	0	[1]
Total current loans	25,527	[1]	27,385	[1]
Total recorded investment	25,527	[1]	27,385	[1]
In process of foreclosure, included above	0	[2]	0	[2]
Serious delinquency rate	0.00%	[3]	0.00%	[3]
Past due 90 days or more still accruing interest	0		0
Loans on non-accrual status	$ 0	[4]	$ 0	[5]

[1] The recorded investment in a financing receivable is the UPB, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedge adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.

[2] Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.

[3] Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment for the portfolio class.

[4] Loans on non-accrual status include $1,286,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which the FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

[5] Loans on non-accrual status include $496,000 of troubled debt restructurings. Troubled debt restructurings are restructurings in which the FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

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Mortgage Loans (Schedule Of Mortgage Loans Sold) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Mortgage Loans [Abstract]
Net proceeds	$ 0	$ 111,444	$ 0
Cost basis		(107,019)
Net realized (gain) loss on sale of mortgage loans held for sale	$ 0	$ 4,425	$ 0

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Investment Securities (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Dec. 31, 2012 Minimum [Member]	Dec. 31, 2012 Maximum [Member]	Dec. 31, 2012 Mortgage-Backed Securities [Member] security	Dec. 31, 2011 Mortgage-Backed Securities [Member]
Investment [Line Items]
Home price percentage change	(2.00%)	2.00%
Held-to-Maturity Securities, Other Than Temporarily Impaired, Number of Securities, Life to Date			32
Premium (discounts), net			$ 6,547	$ 13,134

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Background Information

12 Months Ended

Dec. 31, 2012

Background Information [Abstract]

Background Information

BACKGROUND INFORMATION

The Federal Home Loan Bank of Topeka (FHLBank or FHLBank Topeka), a federally chartered corporation, is one of 12 district Federal Home Loan Banks (FHLBanks). The FHLBanks are government-sponsored enterprises (GSE) that serve the public by enhancing the availability of credit for residential mortgages and targeted community development and provide a readily available, competitively-priced source of funds to their members. The FHLBank is a cooperative whose member institutions own substantially all of the outstanding capital stock of the FHLBank and generally receive dividends on their stock investments. Regulated financial depositories and insurance companies engaged in residential housing finance are eligible to apply for membership. Additionally, qualified community development financial institutions are eligible for membership. State and local housing authorities that meet certain statutory requirements may become housing associates of the FHLBank and also be eligible to borrow from the FHLBank. While eligible to borrow, housing associates are not members of the FHLBank and, as such, are not permitted or required to hold capital stock.

All members are required to purchase stock in the FHLBank located in their district in accordance with the capital plan of that FHLBank. Under FHLBank Topeka’s capital plan, members must own capital stock in the FHLBank based on the amount of their total assets. Each member is also required to purchase activity-based capital stock as it engages in certain business activities with the FHLBank, including advances and Acquired Member Assets (AMA). Former members that still have outstanding business transactions with the FHLBank are also required to maintain their investments in FHLBank capital stock until the transactions mature or are paid off. As a result of these requirements, the FHLBank conducts business with members in the ordinary course of its business. For financial reporting purposes, the FHLBank defines related parties as those members: (1) with investments in excess of 10 percent of the FHLBank’s total capital stock outstanding, which includes mandatorily redeemable capital stock; or (2) with an officer or director serving on the FHLBank’s board of directors. See Note 18 for more information on related party transactions.

The FHLBanks are supervised and regulated by the Federal Housing Finance Agency (Finance Agency), an independent agency in the executive branch of the U.S. government. The Finance Agency’s mission with respect to the FHLBanks is to provide effective supervision, regulation and housing mission oversight of the FHLBanks to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market. Each FHLBank is operated as a separate entity and has its own management, employees and board of directors. The FHLBanks do not have any special purpose entities or any other type of off-balance sheet conduits.

The FHLBanks have established a joint office called the Office of Finance to facilitate the issuance and servicing of the debt instruments of the FHLBanks, known as consolidated obligation bonds and consolidated obligation discount notes (collectively referred to as consolidated obligations) and to prepare the combined quarterly and annual financial reports of the 12 FHLBanks. As provided by the Federal Home Loan Bank Act of 1932, as amended (Bank Act), and applicable regulations, consolidated obligations are backed only by the financial resources of the 12 FHLBanks. Consolidated obligations are the primary source of funds for the FHLBanks in addition to deposits, other borrowings and capital stock issued to members. The FHLBank primarily uses these funds to provide advances to members and to acquire mortgage loans from members through the Mortgage Partnership Finance^® (MPF^®) Program. In addition, the FHLBank also offers correspondent services such as wire transfer, security safekeeping and settlement services.

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Mortgage Loans (Schedule Of Mortgage Loans Held For Portfolio) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011
Mortgage Loans on Real Estate [Line Items]
Total unpaid principal balance	$ 5,837,746		$ 4,869,879
Premiums	98,887		62,223
Discounts	(4,483)		(6,694)
Deferred loan costs, net	1,549		2,327
Other deferred fees	(312)		(521)
Hedging adjustments	12,546	[1]	9,591	[1]
Total before Allowance for Credit Losses on Mortgage Loans	5,945,933		4,936,805
Allowance for Credit Losses on Mortgage Loans	(5,416)		(3,473)
Mortgage loans held for portfolio, net	5,940,517		4,933,332
Loans Receivable With Fixed Rates Of Interest Medium Term [Member]
Mortgage Loans on Real Estate [Line Items]
Total unpaid principal balance	1,711,275	[2]	1,362,379	[2]
Loans Receivable With Fixed Rates Of Interest Long Term [Member]
Mortgage Loans on Real Estate [Line Items]
Total unpaid principal balance	$ 4,126,471		$ 3,507,500

[1] See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

[2] Medium-term defined as a term of 15 years or less.

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Transactions With Stockholders And Housing Associates (Tables)

12 Months Ended

Dec. 31, 2012

Transactions With Stockholders And Housing Associates [Abstract]

Schedule of Related Party Transactions, By Party With Ten Percent Or More Of Capital Stock

Activity with Members that Exceed a 10 Percent Ownership in FHLBank Capital Stock: The following tables present information as of December 31, 2012 on members that owned more than 10 percent of outstanding FHLBank regulatory capital stock in 2012 (amounts in thousands). None of the officers or directors of these members currently serve on the FHLBank’s board of directors. As of December 31, 2011, no members owned more than 10 percent of FHLBank regulatory capital stock.

12/31/2012
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A			Total Class B Stock Par Value		Percent of Total Class B			Total Capital Stock Par Value		Percent of Total Capital Stock
MidFirst Bank	OK	$	500		0.1	%	$	145,727		16.9	%	$	146,227		11.5	%
Capitol Federal Savings Bank	KS		2,002		0.5			128,782		15.0			130,784		10.3
TOTAL		$	2,502		0.6	%	$	274,509		31.9	%	$	277,011		21.8	%

Advance and deposit balances with members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of December 31, 2012 are summarized in the following table (amounts in thousands).

	12/31/2012					12/31/2012
Member Name	Outstanding Advances		Percent of Total			Outstanding Deposits		Percent of Total
MidFirst Bank	$	2,898,000		18.0	%	$	13		0.0	%
Capitol Federal Savings Bank		2,550,000		15.8			1,247		0.1
TOTAL	$	5,448,000		33.8	%	$	1,260		0.1	%

Schedule Of Related Party Transactions, Capital Stock Disclosure

12/31/2012
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A			Total Class B Stock Par Value		Percent of Total Class B			Total Capital Stock Par Value		Percent of Total Capital Stock
FirstBank	CO	$	500		0.1	%	$	5,700		0.7	%	$	6,200		0.5	%
Girard National Bank	KS		623		0.2			3,728		0.4			4,351		0.3
Golden Belt Bank, FSA	KS		1,192		0.3			2,143		0.3			3,335		0.3
Vision Bank, NA	OK		2,000		0.5			956		0.1			2,956		0.2
First State Bank Nebraska	NE		510		0.1			1,715		0.2			2,225		0.2
Morgan Federal Bank	CO		907		0.2			1,162		0.1			2,069		0.2
NebraskaLand National Bank	NE		961		0.2			754		0.1			1,715		0.1
Citizens Bank & Trust Co.	OK		931		0.2			51		0.0			982		0.1
Bankers' Bank of Kansas, NA	KS		270		0.1			2		0.0			272		0.0
TOTAL		$	7,894		1.9	%	$	16,211		1.9	%	$	24,105		1.9	%

12/31/2011
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A			Total Class B Stock Par Value		Percent of Total Class B			Total Capital Stock Par Value		Percent of Total Capital Stock
Girard National Bank	KS	$	995		0.2	%	$	3,204		0.4	%	$	4,199		0.3	%
Vision Bank, NA	OK		3,757		0.7			53		0.0			3,810		0.3
FirstBank	CO		3,260		0.6			55		0.0			3,315		0.3
Golden Belt Bank, FSA	KS		1,376		0.2			1,886		0.3			3,262		0.2
First State Bank Nebraska	NE		955		0.2			1,228		0.2			2,183		0.2
Morgan Federal Bank	CO		896		0.2			1,130		0.1			2,026		0.1
Security State Bank	NE		279		0.0			1,663		0.2			1,942		0.1
Citizens Bank & Trust Co.	OK		927		0.2			51		0.0			978		0.1
Bankers' Bank of Kansas, NA	KS		270		0.0			1		0.0			271		0.0
TOTAL		$	12,715		2.3	%	$	9,271		1.2	%	$	21,986		1.6	%

Schedule Of Related Party Transactions, Advances And Deposits Disclosure

	12/31/2012					12/31/2011					12/31/2012					12/31/2011
Member Name	Outstanding Advances		Percent of Total			Outstanding Advances		Percent of Total			Outstanding Deposits		Percent of Total			Outstanding Deposits		Percent of Total
FirstBank	$	38,000		0.2	%	$	-		0.0	%	$	7,252		0.6	%	$	98		0.0	%
Girard National Bank		37,514		0.2			38,609		0.2			2,333		0.2			3,149		0.3
Golden Belt Bank, FSA		10,887		0.1			10,974		0.1			3,247		0.3			2,347		0.3
Vision Bank, NA		23,543		0.2			18,169		0.1			781		0.1			95		0.0
First State Bank Nebraska		33,867		0.2			30,914		0.2			866		0.1			117		0.0
Morgan Federal Bank		11,800		0.1			14,933		0.1			6,224		0.5			2,071		0.2
NebraskaLand National Bank		11,000		0.1								76		0.0
Citizens Bank & Trust Co.		1,000		0.0			2,000		0.0			110		0.0			127		0.0
Bankers' Bank of Kansas, NA		1,975		0.0			1,975		0.0			13		0.0			9		0.0
Security State Bank							5,792		0.0								2,134		0.2
TOTAL	$	169,586		1.1	%	$	123,366		0.7	%	$	20,902		1.8	%	$	10,147		1.0	%

Schedule Of Related Party Transactions, Mortgage Loans Disclosure

	12/31/2012					12/31/2011
Member Name	Total Mortgage Loans		Percent of Total			Total Mortgage Loans		Percent of Total
FirstBank	$	152,817		6.1	%	$	-		-	%
Girard National Bank		28,000		1.1			22,719		1.4
Golden Belt Bank, FSA		32,083		1.3			25,021		1.6
Vision Bank, NA		6,498		0.3			-		-
First State Bank Nebraska		15,569		0.6			5,434		0.4
Morgan Federal Bank		9,976		0.4			8,800		0.6
NebraskaLand National Bank		12,427		0.5
Citizens Bank & Trust Co		-		-			1,531		0.1
Bankers Bank of Kansas, NA		-		-			-		-
Security State Bank							23,886		1.5
TOTAL	$	257,370		10.3	%	$	87,391		5.6	%

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Summary Of Significant Accounting Policies (Policy)

12 Months Ended

Dec. 31, 2012

Summary Of Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation: The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

Reclassifications

Reclassifications: Certain amounts in the financial statements and related footnotes have been reclassified to conform to current period presentations. Such reclassifications have no impact on total assets, net income or capital.

Use Of Estimates

Use of Estimates: The preparation of financial statements under GAAP requires management to make estimates and assumptions as of the date of the financial statements in determining the reported amounts of assets, liabilities and estimated fair values and in determining the disclosure of any contingent assets or liabilities. Estimates and assumptions by management also affect the reported amounts of income and expense during the reporting period. The most significant of these estimates include the fair value of derivatives, the determination of other-than-temporary impairment (OTTI) on investments and the allowance for credit losses. Many of the estimates and assumptions, including those used in financial models, are based on financial market conditions as of the date of the financial statements. Because of the volatility of the financial markets, as well as other factors that affect management estimates, actual results may vary from these estimates.

Fair Values

Fair Values: The fair value amounts, recorded on the Statements of Condition and presented in the note disclosures for the periods presented, have been determined by the FHLBank using available market and other pertinent information and reflect the FHLBank’s best judgment of appropriate valuation methods. Although the FHLBank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any valuation technique. Therefore, these fair values may not be indicative of the amounts that would have been realized in market transactions at the reporting dates. See Note 16 for more information.

Cash Flows

Cash Flows: For purposes of the Statements of Cash Flows, the FHLBank considers cash on hand and non-interest-bearing deposits in banks as cash and cash equivalents.

Interest-Bearing Deposits, Securities Purchased Under Agreements To Resell And Federal Funds Sold

Interest-bearing Deposits, Securities Purchased Under Agreements to Resell and Federal Funds Sold: These investments provide short-term liquidity and are carried at cost. The FHLBank treats securities purchased under agreements to resell as short-term collateralized loans, which are classified as assets on the Statements of Condition. Securities purchased under agreements to resell are held in safekeeping in the FHLBank’s name by third-party custodians approved by the FHLBank. If the market value of the underlying securities decreases below the market value required as collateral, the counterparty has the option to: (1) place an equivalent amount of additional securities in safekeeping in the FHLBank’s name; or (2) remit an equivalent amount of cash; otherwise, the dollar value of the resale agreement will be decreased accordingly. Federal funds sold consist of short-term unsecured loans conducted with investment-grade counterparties.

Investment Securities

Investment Securities: The FHLBank classifies investments as trading, available-for-sale and held-to-maturity at the date of acquisition. Purchases and sales of securities are recorded on a trade date basis.

Trading: Securities classified as trading are held for liquidity purposes and/or to provide a fair value offset to interest rate swaps tied to securities or for securities acquired as asset liability management tools and carried at fair value. The FHLBank records changes in the fair value of thesesecurities through other income (loss) as net gains (losses) on trading securities. Finance Agency regulation and the FHLBank’s Risk Management Policy (RMP) prohibit trading in or the speculative use of these instruments and limits credit risk arising from these instruments. While the FHLBank classifies certain securities as trading for financial reporting purposes, it does not actively trade any of these securities with the intent of realizing gains and holds these investments indefinitely as management periodically evaluates its asset/liability and liquidity needs. Short-term money market investments with maturities of three months or less are acquired and classified as trading securities primarily for liquidity purposes. These short-term money market investments are periodically sold to meet the FHLBank’s cash flow needs.

Available-for-Sale: Securities that are not classified as trading or held-to-maturity are classified as available-for-sale and are carried at fair value. The change in fair value of available-for-sale securities is recorded in other comprehensive income (loss) (OCI) as a net unrealized gain or loss on available-for-sale securities.

Held-to-Maturity: Securities that the FHLBank has both the ability and intent to hold to maturity are classified as held-to-maturity and are carried at cost, adjusted for periodic principal repayments, amortization of premiums, accretion of discounts and OTTI recognized in net income and OCI.

The FHLBank may change its intent to hold to maturity a held-to-maturity investment without changing its intent to hold to maturity other held-to-maturity investments for the following circumstances: (1) evidence of a significant deterioration in the issuer’s creditworthiness; (2) a change in statutory or regulatory requirements significantly modifying either what constitutes a permissible investment or the maximum level of investments in certain kinds of investments, thereby causing the FHLBank to dispose of a held-to-maturity investment; (3) a significant increase by a regulator in the FHLBank’s capital requirements that causes the FHLBank to downsize by selling held-to-maturity investments; or (4) a significant increase in the risk weights of debt securities used for regulatory risk-based capital purposes. The FHLBank considers the following situations maturities for purposes of assessing ability and intent to hold to maturity: (1) the sale of the security is near enough to maturity (or call date if exercise of the call is probable) that interest rate risk is substantially eliminated as a pricing factor and the changes in market interest rates would not have a significant effect on the security’s fair value; or (2) the sale of a security occurs after the FHLBank has already collected a substantial portion (at least 85 percent) of the principal outstanding at acquisition either due to prepayments on the debt security or to scheduled payments on a debt security payable in equal installments (both principal and interest) over its term.

Premiums and Discounts: The FHLBank computes the amortization of purchased premiums and accretion of purchased discounts on mortgage-backed securities (MBS) using the level-yield method over the estimated cash flows of the securities. This method requires a retrospective adjustment of the effective yield each time the FHLBank receives a principal repayment or changes the estimated remaining cash flows as if the actual principal repayments and new estimated cash flows had been known since the original acquisition dates of the securities. The FHLBank uses nationally recognized, market-based third-party prepayment models to estimate future cash flows. The FHLBank computes the amortization of premiums and accretion of discounts on other investments using the level-yield method to the contractual maturities of the securities.

Gains and Losses on Sales: Gains and losses on the sales of investment securities are computed using the specific identification method and are included in other income (loss).

Investment Securities – Other-than-temporary Impairment: The FHLBank evaluates its individual held-to-maturity investment securities holdings in an unrealized loss position for OTTI at least quarterly, or more frequently if events or changes in circumstances indicate that these investments may be other-than-temporarily impaired. An investment is considered impaired when its fair value is less than its amortized cost basis. The FHLBank considers an OTTI to have occurred under any of the following circumstances:

§ If the FHLBank has the intent to sell the impaired debt security;

§ If, based on available evidence, the FHLBank believes it is more likely than not that it will be required to sell the debt security before the recovery of its amortized cost basis; or

§ If the FHLBank does not expect to recover the entire amortized cost basis of the impaired debt security.

Recognition of OTTI: If either of the first two conditions above is met, the FHLBank recognizes an OTTI charge in earnings equal to the entire difference between the security’s amortized cost basis and its fair value as of the Statement of Condition date. For securities in an unrealized loss position that meet neither of the first two conditions, the entire loss position, or total OTTI, is evaluated to determine the extent and amount of credit loss.

To determine whether a credit loss exists, the FHLBank performs an analysis, which includes a cash flow analysis for private-label MBS/ABS, to determine if it will recover the entire amortized cost basis of each of these securities. The present value of the cash flows expected to be collected is compared to the amortized cost basis of the security to determine if a credit loss exists. If there is a credit loss, the carrying value of the security is adjusted to its fair value. However, rather than recognizing the entire difference between the amortized cost basis and the fair value in earnings, only the amount of the impairment representing the credit loss (i.e., the credit component) is recognized in earnings, while the amount related to all other factors (i.e., the non-credit component) is recognized in Accumulated OCI (AOCI), which is a component of capital. The credit loss on a debt security is limited to the amount of that security’s unrealized losses.

The total OTTI is presented in the Statements of Income with an offset for the amount of the non-credit potion of OTTI that is recognized in AOCI. The remaining amount in the Statements of Income represents the credit loss for the period.

Accounting for OTTI Recognized in AOCI: For subsequent accounting of other-than-temporarily impaired securities, the FHLBank records an additional OTTI if the present value of cash flows expected to be collected is less than the amortized cost basis. The total amount of this additional OTTI is determined as the difference between its carrying amount prior to the determination of this additional OTTI and its fair value. Additional credit losses related to previously other-than-temporarily impaired securities are reclassified out of AOCI into the Statements of Income, but only to the extent of a security’s unrealized losses (i.e., difference between the security’s amortized cost and its fair value). The OTTI recognized in AOCI is accreted to the carrying value of each security on a prospective basis, based on the amount and timing of future estimated cash flows (with no effect on earnings unless the security is subsequently sold or there are additional decreases in cash flows expected to be collected).

Interest Income Recognition: The FHLBank recognizes subsequent interest income in accordance with the method described in accounting guidance for beneficial interests in securitized financial assets. As of the impairment measurement date, a new accretable yield is calculated for the impaired investment security. This adjusted yield is used to calculate the amount to be recognized into income over the remaining life of the security so as to match the amount and timing of future cash flows expected to be collected. Subsequent changes in estimated cash flows change the accretable yield on a prospective basis. The estimated cash flows and accretable yield are re-evaluated on a quarterly basis.

Advances

Advances: The FHLBank presents advances (secured loans to members, former members or housing associates) net of unearned commitment fees, premiums, discounts and fair value basis adjustments. The FHLBank amortizes the premiums and accretes the discounts on advances to interest income using the level-yield method. The FHLBank records interest on advances to interest income as earned.

Advance Modifications:In cases in which the FHLBank funds a new advance concurrent with or within a short period of time before or after the prepayment of an existing advance, the FHLBank evaluates whether the new advance meets the accounting criteria to qualify as a modification of an existing advance or whether it constitutes a new advance. The FHLBank compares the present value of cash flows on the new advance to the present value of cash flows remaining on the existing advance. If there is at least a 10 percent difference in the cash flows or if the FHLBank concludes the differences between the advances are more than minor based on qualitative factors, the advance is accounted for as a new advance. In all other instances, the new advance is accounted for as a modification.

Prepayment Fees: The FHLBank charges prepayment fees to its borrowers when certain advances are repaid before their original maturities. The FHLBank records prepayment fees net of hedging fair value basis adjustments included in the book basis of the advance, as “Prepayment fees on terminated advances” in the interest income section of its Statements of Income.

If a new advance does not qualify as a modification of an existing advance, it is treated as an advance termination and any prepayment fee, net of hedging adjustments, is recorded to “Prepayment fees on terminated advances” in the interest income section of the Statements of Income.

If the new advance qualifies as a modification, the net prepayment fee received on the prepaid advance is deferred as a discount and included in the basis of the modified advance. The basis adjustment is amortized over the life of the modified advance to advance interest income. If the modified advance is hedged, the fair value gain or loss on the advance and the prepayment fee are included in the carrying amount of the modified advance, and any prior gains or losses and prepayment fees are amortized to interest income over the life of the modified advance using the level-yield method. Modified hedged advances are marked to benchmark fair value after the modification, and subsequent fair value changes are recorded in “Net gain (loss) on derivatives and hedging activities” in other income (loss).

Mortgage Loans Held for Portfolio

Mortgage Loans Held for Portfolio: The FHLBank carries mortgage loans classified as held for investment at their principal amount outstanding, net of unamortized premiums, unaccreted discounts, deferred loan fees associated with table funded loans, hedging adjustments, unrealized gains and losses from mortgage purchase commitments and other fees. The FHLBank has the intent and ability to hold these mortgage loans to maturity.

Premiums and Discounts: The FHLBank defers and amortizes/accretes mortgage loan origination fees (agent fees) and premiums and discounts paid to and received from FHLBank members as interest income using the contractual method. The contractual method uses the cash flows required by the loan contracts, as adjusted for actual prepayments, to apply the interest method. The contractual method does not utilize estimates of future prepayments of principal.

Credit Enhancement Fees: The credit enhancement (CE) obligation is an obligation on the part of the participating financial institution (PFI) that ensures the retention of credit risk on loans it originates on behalf of or sells to the FHLBank. The amount of the CE obligation is determined so that any losses in excess of the CE obligation for each pool of mortgage loans purchased approximate those experienced by an investor in a double-A rated MBS. As a part of our methodology to determine the amount of credit enhancement necessary, we analyze the risk characteristics of each mortgage loan using a model licensed from a Nationally Recognized Statistical Rating Organization (NRSRO). We use the model to evaluate loan data provided by the PFI as well as other relevant information.

The FHLBank pays the PFI a CE fee for managing this portion of the credit risk in the pool of loans. CE fees are paid monthly based on the remaining unpaid principal balance (UPB) of the loans in a master commitment. The required CE obligation amount may vary depending on the various product alternatives selected by the PFI. CE fees are recorded as an offset to mortgage loan interest income. To the extent the FHLBank experiences a loss in a master commitment, the FHLBank may be able to recapture CE fees paid to the PFIs to offset these losses.

Mortgage Loan Participations: The FHLBank has entered into an agreement with FHLBank of Indianapolis to sell participation interests in master commitments of FHLBank Topeka’s PFIs. The risk sharing and rights are allocated pro-ratably based upon each FHLBank’s percentage participation in the related master commitment.

Other Fees: The FHLBank may receive other non-origination fees, such as delivery commitment extension fees and pair-off fees as part of the mark-to-market on derivatives to which they related or as part of the loan basis, as applicable. Delivery commitment extension fees are received when a PFI requires an extension of the delivery commitment period beyond the original stated maturity. These fees compensate the FHLBank for lost interest as a result of late funding and represent the member purchasing a derivative from the FHLBank. Pair-off fees are received from the PFI when the amount funded is more than or less than a specific percentage range of the delivery commitment amount. These fees compensate the FHLBank for hedge costs associated with the under-delivery or over-delivery. To the extent that pair off fees relate to under-deliveries of loans, they are included in the mark-to-market of the related delivery commitment derivative. If they relate to over-deliveries, they represent purchase price adjustments to the related loans acquired and are recorded as a part of the loan basis.

Allowance for Credit Losses

Allowance for Credit Losses: An allowance for credit losses is a valuation allowance separately established for each identified portfolio segment, if necessary, to provide for probable losses inherent in the FHLBank’s portfolios as of the Statement of Condition date. To the extent necessary, an allowance for credit losses for off-balance sheet credit exposures is recorded as a liability. See Note 7 for details on each allowance methodology.

Portfolio Segments: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. The FHLBank has developed and documented a systematic methodology for determining an allowance for credit losses, where applicable, for: (1) credit products (advances, letters of credit and other extensions of credit to members); (2) government-guaranteed or insured mortgage loans held for portfolio; (3) conventional mortgage loans held for portfolio; (4) the direct financing lease receivable; and (5) term Federal funds sold.

Classes of Finance Receivables:Classes of finance receivables generally are a disaggregation of a portfolio segment to the extent that it is needed to understand the exposure to credit risk arising from these financing receivables. The FHLBank has determined that no further disaggregation of portfolio segments identified previously is needed as the credit risk arising from these financing receivables is assessed and measured at the portfolio segment level.

Non-accrual Loans: The FHLBank places a conventional mortgage loan on non-accrual status if it is determined that either: (1) the collection of interest or principal is doubtful; or (2) interest or principal is past due for 90 days or more, except when the loan is well-secured (e.g., through credit enhancements) and in the process of collection. The FHLBank does not place government-guaranteed or insured mortgage loans on non-accrual status due to the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met. For those mortgage loans placed on non-accrual status, accrued but uncollected interest is reversed against interest income. The FHLBank records cash payments received on non-accrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful. If the collection of the remaining principal amount due is considered doubtful then cash payments received would be applied first solely to principal until the remaining principal amount due is expected to be collected and then as a recovery of any charge-off, if applicable, followed by recording interest income. A loan on non-accrual status may be restored to accrual when: (1) none of its contractual principal and interest is due and unpaid, and the FHLBank expects repayment of the remaining contractual principal and interest; or (2) it otherwise becomes well secured and in the process of collection.

Impairment Methodology: A loan is considered impaired when, based on current information and events, it is probable that the FHLBank will be unable to collect all amounts due according to the contractual terms of the loan agreement.

Loans that are on non-accrual 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 balance on the loan. Interest income on impaired loans is recognized in the same manner as non-accrual loans.

Charge-off Policy: The FHLBank evaluates whether to record a charge-off on a conventional mortgage loan upon the occurrence of a confirming event. Confirming events include, but are not limited to, the occurrence of foreclosure or notification of a claim against any of the credit enhancements. A charge-off is recorded if the recorded investment in the loan will not be recovered.

Real Estate Owned

Real Estate Owned: Real estate owned (REO) includes assets that have been received in satisfaction of debt through foreclosures. REO is recorded at the lower of cost or fair value less estimated selling costs. The FHLBank recognizes a charge-off to the allowance for credit losses if the fair value of the REO less estimated selling costs is less than the recorded investment in the loan at the date of transfer from loans to REO. Any subsequent realized gains, realized or unrealized losses and carrying costs are included in other expense in the Statements of Income. REO is recorded in other assets in the Statements of Condition.

Derivatives

Derivatives: All derivatives are recognized on the Statements of Condition at their fair value and are reported as either derivative assets or derivative liabilities, net of cash collateral and accrued interest from counterparties. The fair values of derivatives are netted by counterparty pursuant to the provisions of the FHLBank’s master netting arrangements. If these netted amounts are positives, they are classified as an asset and, if negative, they are classified as a liability. Cash flows associated with derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be a financing derivative.

Derivative Designations: Each derivative is designated as one of the following:

§ a qualifying hedge of the fair value of: (1) a recognized asset or liability; or (2) an unrecognized firm commitment (a fair value hedge);

§ a qualifying hedge of: (1) a forecasted transaction; or (2) the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a cash flow hedge);

§ a non-qualifying hedge of an asset or liability (an economic hedge) for asset/liability management purposes; or

§ a non-qualifying hedge of another derivative (an intermediary hedge) that is offered as a product to members.

Accounting for Qualifying Hedges: If hedging relationships meet certain criteria, including, but not limited to, formal documentation of the hedging relationship and an expectation to be highly effective, they qualify for hedge accounting and the offsetting changes in fair value of the hedged items may be recorded in earnings (fair value hedges) or AOCI (cash flow hedges). Two approaches to hedge accounting include:

§ Long haul hedge accounting – The application of long haul hedge accounting generally requires the FHLBank to formally assess (both at the hedge's inception and at least quarterly) 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 or forecasted transactions and whether those derivatives may be expected to remain effective in future periods.

§ Shortcut hedge accounting – Transactions that meet more stringent criteria qualify for the shortcut method of hedge accounting in which an assumption can be made that the change in fair value of a hedged item exactly offsets the change in fair value of the related derivative. Under the shortcut method, the entire change in fair value of the interest rate swap is considered to be effective at achieving offsetting changes in fair values or cash flows of the hedged asset or liability.

Derivatives are typically executed at the same time as the hedged item, and the FHLBank designates the hedged item in a qualifying hedge relationship at the trade date. In many hedging relationships, the FHLBank may designate the hedging relationship upon its commitment to disburse an advance or trade a consolidated obligation in which settlement occurs within the shortest period of time possible for the type of instrument based on market settlement conventions. The FHLBank defines market settlement conventions for advances to be five business days or less and for consolidated obligations to be thirty calendar days or less, using a next business day convention. The FHLBank then records the changes in fair value of the derivative and the hedged item beginning on the trade date.

Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge, along with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk (including changes that reflect losses or gains on firm commitments), are recorded in current period earnings. Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge, to the extent that the hedge is effective, are recorded in AOCI, a component of capital, until earnings are affected by the variability of the cash flows of the hedged transaction (i.e., until the recognition of interest on a variable rate asset or liability is recorded in earnings). For both fair value and cash flow hedges, any hedge ineffectiveness (which represents the amount by which the change in the fair value of the derivative differs from the change in fair value of the hedged item or the variability in the cash flows of the forecasted transaction) is recorded in current period earnings.

Accounting for Non-Qualifying Hedges: An economic hedge is defined as a derivative hedging specific or non-specific underlying assets, liabilities or firm commitments that does not qualify for hedge accounting but is an acceptable hedging strategy under the FHLBank’s RMP. These economic hedging strategies also comply with Finance Agency regulatory requirements prohibiting speculative hedge transactions. An economic hedge by definition introduces the potential for earnings variability caused by changes in fair value on the derivatives that are recorded in the FHLBank’s income but not offset by corresponding changes in the fair value of the economically hedged asset, liability or firm commitment being recorded simultaneously in income. As a result, the FHLBank recognizes only the net interest and the change in fair value of these derivatives in other income (loss) as “Net gain (loss) on derivatives and hedging activities” with no offsetting fair value adjustments for the asset, liability or firm commitment.

The derivatives used in intermediary activities do not qualify for 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 FHLBank. These amounts are recorded in other income (loss) as “Net gains (losses) on derivatives and hedging activities.”

Accrued Interest Receivables and Payables: The differentials between accruals of interest receivables and payables on derivatives designated as fair value or cash flow hedges are recognized as an adjustment to the interest income or expense of the designated underlying investment securities, advances, consolidated obligations or other financial instruments, thereby affecting the reported amount of net interest income on the Statements of Income. Changes in the fair value of an economic or intermediary hedge are recorded in current period earnings. The differentials between accruals of interest receivables and payables on intermediated derivatives for members and other economic hedges are recognized as other income (loss). Therefore, both the net interest on the stand-alone derivatives and the fair value changes are recorded in other income (loss) as “Net gain (loss) on derivatives and hedging activities.”

Discontinuance of Hedge Accounting: The FHLBank discontinues hedge accounting prospectively when: (1) 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); (2) the derivative and/or the hedged item expires or is sold, terminated or exercised; (3) it is no longer probable that the forecasted transaction will occur in the originally expected period; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designating the derivative as a hedging instrument is no longer appropriate.

When hedge accounting is discontinued because the FHLBank determines that the derivative no longer qualifies as an effective fair value hedge of an existing hedged item, the FHLBank continues to carry the derivative on its Statements of Condition at fair value, ceases to adjust the hedged asset or liability for changes in fair value, and begins amortizing the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using the level-yield method. When hedge accounting is discontinued because the FHLBank determines that the derivative no longer qualifies as an effective cash flow hedge of an existing hedged item, the FHLBank continues to carry the derivative on its Statements of Condition at fair value and amortizes the cumulative OCI adjustment to earnings when earnings are affected by the original forecasted transaction. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the FHLBank carries the derivative at fair value on its Statements of Condition, recognizing changes in the fair value of the derivative in current-period earnings. When the FHLBank discontinues hedge accounting because it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses in AOCI will be recognized immediately in earnings. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the FHLBank continues to carry the derivative on its Statements of Condition at fair value, removing any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.

Embedded Derivatives: The FHLBanks may issue debt, make advances, or purchase financial instruments in which a derivative instrument is embedded. Upon execution of these transactions, the FHLBank assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance, debt or purchased financial instrument (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When the FHLBank determines that: (1) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (2) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and designated as a stand-alone derivative instrument pursuant to an economic hedge. However, if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current period earnings (such as an investment security classified as trading), or if the FHLBank cannot reliably identify and measure the embedded derivative for purposes of separating that derivative from its host contract, the entire contract is carried on the Statements of Condition at fair value and no portion of the contract is designated as a hedging instrument.

Premises, Software and Equipment

Premises, Software and Equipment: The FHLBank records premises, software and equipment at cost less accumulated depreciation and amortization. Depreciation is computed on the straight-line method over the estimated useful lives of the assets ranging from 3 to 20 years. Leasehold improvements are amortized on the straight-line basis over the shorter of the estimated useful life of the improvement or the remaining term of the lease. Improvements and major renewals are capitalized, and ordinary maintenance and repairs are expensed as incurred. As of December 31, 2012 and 2011, the accumulated depreciation and amortization related to premises, software and equipment was $24,187,000 and $22,662,000, respectively. Depreciation and amortization expense was $2,152,000, $2,866,000 and $3,655,000 for the years ended December 31, 2012, 2011 and 2010, respectively. Gains and losses on disposals are included in other income (loss). The net realized gain (loss) on disposal of premises, software and equipment was $(1,951,000), $6,000 and $(100,000) for the years ended December 31, 2012, 2011 and 2010, respectively. The loss on disposal of premises, software and equipment for 2012 includes the write-off of two software projects prior to implementation.

The cost of purchased software and certain costs incurred in developing computer software for internal use is capitalized and amortized over future periods. Amortization is computed on the straight-line method over three years for purchased software and five years for developed software. As of December 31, 2012 and 2011, the FHLBank had $1,309,000 and $2,935,000, respectively, in unamortized computer software costs included in premises, software and equipment on its Statements of Condition. Amortization of computer software costs charged to expense was $764,000, $1,378,000 and $2,162,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

Consolidated Obligations

Consolidated Obligations: Consolidated obligations are recorded at amortized cost.

Discounts and Premiums:The FHLBank expenses the discounts on consolidated obligation discount notes on the straight-line method over the terms of the related notes due to their short-term nature. Consolidated obligation bond discounts are accreted and premiums are amortized to interest expense using a level-yield methodology over the contractual maturities of the corresponding bonds.

Concessions: Amounts paid to dealers in connection with sales of consolidated obligations are deferred and amortized using the level-yield method over the contractual terms of the consolidated obligations. Concession amounts are prorated to the FHLBank by the Office of Finance based on the percentage of each consolidated obligation issued by the Office of Finance on behalf of the FHLBank. Unamortized concessions are included in “Other assets” and the amortization of such concessions is included in consolidated obligation interest expense.

Mandatorily Redeemable Capital Stock

Mandatorily Redeemable Capital Stock: The FHLBank reclassifies all stock subject to redemption from capital to liability once a member submits a written redemption request, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination or involuntary termination from membership, since the member shares will then meet the definition of a mandatorily redeemable financial instrument. There is no distinction as to treatment for reclassification from capital to liability between in-district redemption requests and those redemption requests triggered by out-of-district acquisitions. The FHLBank does not take into consideration its members’ right to cancel a redemption request in determining when shares of capital stock should be classified as a liability because such cancellation would be subject to a substantial cancellation fee. Member and non-member shares meeting the definition of mandatorily redeemable capital stock are reclassified to a liability at fair value, which has been determined to be par value ($100) plus any estimated accrued but unpaid dividends. The FHLBank’s dividends are declared and paid at each quarter-end; therefore, the fair value reclassified equals par value. Dividends declared on member shares for the time after classification as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repurchase of these mandatorily redeemable financial instruments by the FHLBank are reflected as financing cash outflows in the Statements of Cash Flows once settled.

If a member submits a written request to cancel a previously submitted written redemption request, the capital stock covered by the written cancellation request is reclassified from a liability to capital at fair value. After the reclassification, dividends on the capital stock are no longer classified as interest expense.

Restricted Retained Earnings

Restricted Retained Earnings: In 2011, the FHLBank entered into a Joint Capital Enhancement Agreement, as amended (JCE Agreement). Under the JCE Agreement, beginning in the third quarter of 2011, the FHLBank allocates 20 percent of its quarterly net income to a separate restricted retained earnings (RRE) account until the account balance equals at least 1 percent of its average balance of outstanding consolidated obligations for the previous quarter. These restricted retained earnings are not available to pay dividends and are presented separately on the Statements of Condition.

Finance Agency Expenses

Finance Agency Expenses: A portion of the Finance Agency’s expenses and working capital fund are allocated among the FHLBanks based on the pro rata share of the annual assessments based on the ratio between each FHLBank’s minimum required regulatory capital and the aggregate minimum required regulatory capital of every FHLBank.

Office Of Finance Expenses

Office of Finance Expenses: Effective January 1, 2011, each FHLBank’s proportionate share of Office of Finance operating and capital expenditures is calculated using a formula that is based upon the following components: (1) two-thirds based upon each FHLBank’s share of total consolidated obligations outstanding; and (2) one-third based upon an equal pro rata allocation. Prior to January 1, 2011, the FHLBanks were assessed for Office of Finance operating and capital expenditures based equally on each FHLBank’s percentage of the following components: (1) capital stock; (2) consolidated obligations issued; and (3) consolidated obligations outstanding.

Assessments

Assessments:

Affordable Housing Program (AHP):The FHLBank is required to establish, fund and administer an AHP. The AHP funds provide subsidies to members to assist in the purchase, construction or rehabilitation of housing for very low-, low- and moderate-income households. The required annual AHP funding is charged to earnings, and an offsetting liability is established.

Resolution Funding Corporation (REFCORP): Although the FHLBank is exempt from all federal, state and local taxation except for real property taxes, it was required to make quarterly payments to REFCORP through the second quarter of 2011 to be used to pay a portion of the interest on bonds issued by REFCORP. REFCORP is a corporation established by Congress in 1989 that provided funding for the resolution and disposition of insolvent savings institutions. Officers, employees and agents of the Office of Finance are authorized to act for and on behalf of REFCORP to carry out the functions of REFCORP.

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Transactions With Other Fhlbanks

12 Months Ended

Dec. 31, 2012

Transactions With Other FHLBanks [Abstract]

Transactions With Other FHLBanks

NOTE 19 – TRANSACTIONS WITH OTHER FHLBANKS

FHLBank Topeka had the following business transactions with other FHLBanks during the years ended December 31, 2012, 2011 and 2010(in thousands). All transactions occurred at market prices.

Business Activity	2012		2011		2010
Average overnight interbank loan balances to other FHLBanks1	$	2,242	$	1,432	$	507
Average overnight interbank loan balances from other FHLBanks1		3,907		4,963		4,000
Average deposit balance with FHLBank of Chicago for shared expense transactions2		108		65		47
Average deposit balance with FHLBank of Chicago for MPF transactions2		1,139		23		28
Transaction charges paid to FHLBank of Chicago for transaction service fees3		2,879		2,334		1,760
Par amount of purchases of consolidated obligations issued on behalf of other FHLBanks4		-		-		-

__________

¹Occasionally, the FHLBank loans (or borrows) short-term funds to (from) other FHLBanks. Interest income on loans to other FHLBanks is included in Other Interest Income and interest expense on borrowings from other FHLBanks is included in Other Interest Expense on the Statements of Income.

²Balance is interest bearing and is classified on the Statements of Condition as interest-bearing deposits.

³Fees are calculated monthly based on 5.5 basis points per annum of outstanding loans originated since January 1, 2010 and are recorded in other expense. For outstanding loans originated since January 1, 2004 and through December 31, 2009, fees are calculated monthly based on 5.0 basis points per annum.

⁴      Purchases of consolidated obligations issued on behalf of one FHLBank and purchased by the FHLBank occur at market prices with third parties and are accounted for in the same manner as similarly classified investments. Outstanding fair value balances totaling $126,828,000 and $127,389,000 as of December 31, 2012 and 2011, respectively, are included in the non-MBS GSE obligations totals presented in Note  4; all were purchased prior to 2009. Interest income earned on these securities totaled $5,582,000,$5,582,000, and $8,944,000for the years ended December 31, 2012, 2011 and 2010, respectively.

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Transactions With Stockholders And Housing Associates (Schedule Of Related Party Transactions, Capital Stock Disclosure) (Details) (Total Capital Stock [Member], USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Federal Home Loan Bank Member Banks Given Directorship [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	$ 24,105	$ 21,986
Regulatory Capital Stock, Percent Of Total	1.90%	1.60%
Federal Home Loan Bank Member Banks Given Directorship [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	7,894	12,715
Regulatory Capital Stock, Percent Of Total	1.90%	2.30%
Federal Home Loan Bank Member Banks Given Directorship [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	16,211	9,271
Regulatory Capital Stock, Percent Of Total	1.90%	1.20%
Girard National Bank [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	4,351	4,199
Regulatory Capital Stock, Percent Of Total	0.30%	0.30%
Girard National Bank [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	623	995
Regulatory Capital Stock, Percent Of Total	0.20%	0.20%
Girard National Bank [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	3,728	3,204
Regulatory Capital Stock, Percent Of Total	0.40%	0.40%
Golden Belt Bank, FSA [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	3,335	3,262
Regulatory Capital Stock, Percent Of Total	0.30%	0.20%
Golden Belt Bank, FSA [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	1,192	1,376
Regulatory Capital Stock, Percent Of Total	0.30%	0.20%
Golden Belt Bank, FSA [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	2,143	1,886
Regulatory Capital Stock, Percent Of Total	0.30%	0.30%
FirstBank [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	6,200	3,315
Regulatory Capital Stock, Percent Of Total	0.50%	0.30%
FirstBank [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	500	3,260
Regulatory Capital Stock, Percent Of Total	0.10%	0.60%
FirstBank [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	5,700	55
Regulatory Capital Stock, Percent Of Total	0.70%	0.00%
Vision Bank, NA [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	2,956	3,810
Regulatory Capital Stock, Percent Of Total	0.20%	0.30%
Vision Bank, NA [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	2,000	3,757
Regulatory Capital Stock, Percent Of Total	0.50%	0.70%
Vision Bank, NA [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	956	53
Regulatory Capital Stock, Percent Of Total	0.10%	0.00%
First State Bank Nebraska [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	2,225	2,183
Regulatory Capital Stock, Percent Of Total	0.20%	0.20%
First State Bank Nebraska [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	510	955
Regulatory Capital Stock, Percent Of Total	0.10%	0.20%
First State Bank Nebraska [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	1,715	1,228
Regulatory Capital Stock, Percent Of Total	0.20%	0.20%
Morgan Federal Bank [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	2,069	2,026
Regulatory Capital Stock, Percent Of Total	0.20%	0.10%
Morgan Federal Bank [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	907	896
Regulatory Capital Stock, Percent Of Total	0.20%	0.20%
Morgan Federal Bank [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	1,162	1,130
Regulatory Capital Stock, Percent Of Total	0.10%	0.10%
NebraskaLand National Bank [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	1,715
Regulatory Capital Stock, Percent Of Total	0.10%
NebraskaLand National Bank [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	961
Regulatory Capital Stock, Percent Of Total	0.20%
NebraskaLand National Bank [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	754
Regulatory Capital Stock, Percent Of Total	0.10%
Security State Bank [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value		1,942
Regulatory Capital Stock, Percent Of Total		0.10%
Security State Bank [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value		279
Regulatory Capital Stock, Percent Of Total		0.00%
Security State Bank [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value		1,663
Regulatory Capital Stock, Percent Of Total		0.20%
Citizens Bank & Trust Co. [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	982	978
Regulatory Capital Stock, Percent Of Total	0.10%	0.10%
Citizens Bank & Trust Co. [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	931	927
Regulatory Capital Stock, Percent Of Total	0.20%	0.20%
Citizens Bank & Trust Co. [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	51	51
Regulatory Capital Stock, Percent Of Total	0.00%	0.00%
Bankers Bank Of Kansas, NA [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	272	271
Regulatory Capital Stock, Percent Of Total	0.00%	0.00%
Bankers Bank Of Kansas, NA [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	270	270
Regulatory Capital Stock, Percent Of Total	0.10%	0.00%
Bankers Bank Of Kansas, NA [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	$ 2	$ 1
Regulatory Capital Stock, Percent Of Total	0.00%	0.00%

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Investment Securities (Roll-Forward Of OTTI, Credit Losses Recognized In Earnings, OTTI And Other Factors Recognized In OCI) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Investment Securities [Abstract]
Balance, beginning of period	$ 10,342		$ 5,938		$ 2,034
Additional charge on securities for which OTTI was not previously recognized	271	[1]	1,219	[1]	617	[1]
Additional charge on securities for which OTTI was previously recognized	1,389	[1]	3,492	[1]	3,417	[1]
Realized principal losses on securities paid down during the period	(323)		0		0
Amortization of credit component of OTTI	(711)	[2]	(307)	[2]	(130)	[2]
Balance, end of period	$ 10,968		$ 10,342		$ 5,938

[1] For the years ended December 31, 2012, 2011 and 2010, securities previously impaired represent all securities that were impaired prior to January 1, 2012, 2011 and 2010, respectively.

[2] The FHLBank amortizes the credit component based on estimated cash flows prospectively up to the amount of expected principal to be recovered. The discounted cash flows will move from the discounted loss value to the ultimate principal to be written off at the projected date of loss. If the expected cash flows improve, the amount of expected loss decreases which causes a corresponding decrease in the calculated amortization. Based on the level of improvement in the cash flows, the amortization could become a positive adjustment to income.

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Transactions With Other FHLBanks (Tables)

12 Months Ended

Dec. 31, 2012

Transactions With Other FHLBanks [Abstract]

Transactions With Other Federal Home Loan Banks

Business Activity	2012		2011		2010
Average overnight interbank loan balances to other FHLBanks1	$	2,242	$	1,432	$	507
Average overnight interbank loan balances from other FHLBanks1		3,907		4,963		4,000
Average deposit balance with FHLBank of Chicago for shared expense transactions2		108		65		47
Average deposit balance with FHLBank of Chicago for MPF transactions2		1,139		23		28
Transaction charges paid to FHLBank of Chicago for transaction service fees3		2,879		2,334		1,760
Par amount of purchases of consolidated obligations issued on behalf of other FHLBanks4		-		-		-

__________

¹Occasionally, the FHLBank loans (or borrows) short-term funds to (from) other FHLBanks. Interest income on loans to other FHLBanks is included in Other Interest Income and interest expense on borrowings from other FHLBanks is included in Other Interest Expense on the Statements of Income.

²Balance is interest bearing and is classified on the Statements of Condition as interest-bearing deposits.

³Fees are calculated monthly based on 5.5 basis points per annum of outstanding loans originated since January 1, 2010 and are recorded in other expense. For outstanding loans originated since January 1, 2004 and through December 31, 2009, fees are calculated monthly based on 5.0 basis points per annum.

⁴      Purchases of consolidated obligations issued on behalf of one FHLBank and purchased by the FHLBank occur at market prices with third parties and are accounted for in the same manner as similarly classified investments. Outstanding fair value balances totaling $126,828,000 and $127,389,000 as of December 31, 2012 and 2011, respectively, are included in the non-MBS GSE obligations totals presented in Note  4; all were purchased prior to 2009. Interest income earned on these securities totaled $5,582,000,$5,582,000, and $8,944,000for the years ended December 31, 2012, 2011 and 2010, respectively.

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Investment Securities (Tables)

12 Months Ended

Dec. 31, 2012

Investment Securities [Abstract]

Summary Of Trading And Held-To-Maturity Securities

Major Security Types: Trading and held-to-maturity securities as of December 31, 2012 are summarized in the following table (in thousands):

	Trading		Held-to-maturity
	Fair Value		Carrying Value		OTTI Recognized in OCI		Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
Commercial paper	$	59,996	$	-	$	-	$	-	$	-	$	-	$	-
Certificates of deposit		325,006		-		-		-		-		-		-
Government-sponsored enterprise obligations1.2		2,126,327		-		-		-		-		-		-
State or local housing agency obligations		-		69,442		-		69,442		170		8,686		60,926
Non-mortgage-backed securities		2,511,329		69,442		-		69,442		170		8,686		60,926
Mortgage-backed securities:
U.S. obligation residential3		1,277		85,484		-		85,484		650		-		86,134
Government-sponsored enterprise residential4		252,312		4,509,121		-		4,509,121		39,571		1,034		4,547,658
Private-label mortgage-backed securities:
Residential loans		-		494,631		20,649		515,280		5,433		25,522		495,191
Home equity loans		-		1,072		197		1,269		1,155		3		2,421
Mortgage-backed securities		253,589		5,090,308		20,846		5,111,154		46,809		26,559		5,131,404
TOTAL	$	2,764,918	$	5,159,750	$	20,846	$	5,180,596	$	46,979	$	35,245	$	5,192,330

¹Represents debentures issued by other FHLBanks, Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal Farm Credit Bank (Farm Credit), and Federal Agricultural Mortgage Corporation (Farmer Mac). GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

²See Note 19 for transactions with other FHLBanks.

³Represents MBS issued by Government National Mortgage Association (Ginnie Mae), which are guaranteed by the U.S. government.

⁴Represents MBS issued by Fannie Mae and Freddie Mac.

Trading and held-to-maturity securities as of December 31, 2011 are summarized in the following table (in thousands):

	Trading		Held-to-maturity
	Fair Value		Carrying Value		OTTI Recognized in OCI		Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
Commercial paper	$	599,482	$	-	$	-	$	-	$	-	$	-	$	-
Certificates of deposit		1,019,520		-		-		-		-		-		-
TLGP obligations1		494,236		-		-		-		-		-		-
Government-sponsored enterprise obligations2,3		2,098,844		-		-		-		-		-		-
State or local housing agency obligations		-		84,548		-		84,548		78		10,121		74,505
Non-mortgage-backed securities		4,212,082		84,548		-		84,548		78		10,121		74,505
Mortgage-backed securities:
U.S. obligation residential4		1,380		18,167		-		18,167		760		-		18,927
Government-sponsored enterprise residential5		345,701		4,064,679		-		4,064,679		39,197		1,976		4,101,900
Private-label mortgage-backed securities:
Residential loans		-		771,478		23,402		794,880		4,585		67,023		732,442
Commercial loans		-		37,077		-		37,077		573		-		37,650
Home equity loans		-		1,383		357		1,740		503		82		2,161
Mortgage-backed securities		347,081		4,892,784		23,759		4,916,543		45,618		69,081		4,893,080
TOTAL	$	4,559,163	$	4,977,332	$	23,759	$	5,001,091	$	45,696	$	79,202	$	4,967,585

¹Represents corporate debentures guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program (TLGP).

²Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit, and Farmer Mac. GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

³See Note 19 for transactions with other FHLBanks.

⁴Represents MBS issued by Ginnie Mae, which are guaranteed by the U.S. government.

⁵Represents MBS issued by Fannie Mae and Freddie Mac.

Held-To-Maturity Securities With Unrecognized Losses

The following table summarizes (in thousands) the held-to-maturity securities with unrecognized losses as of December 31, 2012. The unrecognized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrecognized loss position.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
Non-mortgage-backed securities:
State or local housing agency obligations	$	-	$	-	$	40,719	$	8,686	$	40,719	$	8,686
Non-mortgage-backed securities		-		-		40,719		8,686		40,719		8,686
Mortgage-backed securities:
Government-sponsored enterprise residential1		338,126		829		126,814		205		464,940		1,034
Private-label mortgage-backed securities:
Residential loans		5,830		8		246,641		25,514		252,471		25,522
Home equity loans		-		-		53		3		53		3
Mortgage-backed securities		343,956		837		373,508		25,722		717,464		26,559
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	343,956	$	837	$	414,227	$	34,408	$	758,183	$	35,245

__________

¹Represents MBS issued by Fannie Mae and Freddie Mac.

The following table summarizes (in thousands) the held-to-maturity securities with unrecognized losses as of December 31, 2011. The unrecognized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrecognized loss position.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
Non-mortgage-backed securities:
State or local housing agency obligations	$	29,215	$	2,970	$	24,610	$	7,151	$	53,825	$	10,121
Non-mortgage-backed securities		29,215		2,970		24,610		7,151		53,825		10,121
Mortgage-backed securities:
Government-sponsored enterprise residential1		122,180		96		579,599		1,880		701,779		1,976
Private-label mortgage-backed securities:
Residential loans		77,231		507		373,008		66,516		450,239		67,023
Home equity loans		-		-		442		82		442		82
Mortgage-backed securities		199,411		603		953,049		68,478		1,152,460		69,081
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	228,626	$	3,573	$	977,659	$	75,629	$	1,206,285	$	79,202

__________

¹Represents MBS issued by Fannie Mae and Freddie Mac.

Held-To-Maturity Securities Classified By Contractual Maturity Date

Redemption Terms:The amortized cost, carrying value and fair values of held-to-maturity securities by contractual maturity as of December 31, 2012 and 2011 are shown in the following table (in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

	12/31/2012						12/31/2011
	Amortized Cost		Carrying Value		Fair Value		Amortized Cost		Carrying Value		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	-	$	-	$	-	$	-	$	-	$	-
Due after one year through five years		-		-		-		-		-		-
Due after five years through 10 years		22,780		22,780		20,741		5,095		5,095		5,095
Due after 10 years		46,662		46,662		40,185		79,453		79,453		69,410
Non-mortgage-backed securities		69,442		69,442		60,926		84,548		84,548		74,505
Mortgage-backed securities		5,111,154		5,090,308		5,131,404		4,916,543		4,892,784		4,893,080
TOTAL	$	5,180,596	$	5,159,750	$	5,192,330	$	5,001,091	$	4,977,332	$	4,967,585

Summary Of Held-To-Maturity Securities At Amortized Cost By Interest Rate Payment Terms

Interest Rate Payment Terms: The following table details interest rate payment terms for the amortized cost of held-to-maturity securities as of December 31, 2012 and 2011 (in thousands):

	12/31/2012		12/31/2011
Non-mortgage-backed securities:
Fixed rate	$	16,662	$	21,088
Variable rate		52,780		63,460
Non-mortgage-backed securities		69,442		84,548
Mortgage-backed securities:
Pass-through securities:
Fixed rate		170		290
Variable rate		595,078		4,841
Collateralized mortgage obligations:
Fixed rate		687,770		684,040
Variable rate		3,828,136		4,227,372
Mortgage-backed securities		5,111,154		4,916,543
TOTAL	$	5,180,596	$	5,001,091

Summary Of Net Gains (Losses) On Trading Securities

Gains and Losses: Net gains (losses) on trading securities during the years ended December 31, 2012, 2011 and 2010were as follows (in thousands):

	2012		2011		2010
Net gains (losses) on trading securities held as of December 31, 2012	$	(19,164)	$	35,875	$	42,830
Net gains (losses) on trading securities sold or matured prior to December 31, 2012		(8,884)		(15,103)		(28,405)
NET GAIN (LOSS) ON TRADING SECURITIES	$	(28,048)	$	20,772	$	14,425

Schedule Of Projected Annualized Home Price Recovery Rates

	Recovery Range of Annualized Rates
Months	Low			High
1 - 6		-	%		2.8	%
7 - 18		-			3.0
19 - 24		1.0			3.0
25 - 30		2.0			4.0
31 - 42		2.8			5.0
43 - 66		2.8			6.0
Thereafter		2.8			5.6

Schedule Of Significant Inputs In Measuring Other Than Temporary Impairments Recognized In Earnings

Private-label residential MBS
Year of	Significant Inputs									Current Credit
Securitization	Prepayment Rates			Default Rates			Loss Severities			Enhancements
Prime:
2004 and prior		7.1	%		11.9	%		28.2	%		8.8	%
2005		15.0			13.7			37.0			3.3
2006		9.0			20.0			40.7			3.6
Total Prime		11.1			15.4			36.1			4.7
Alt-A:
2004 and prior		9.5			24.3			35.9			10.9
2005		10.7			22.6			41.8			4.2
Total Alt-A		10.3			23.1			39.8			6.4
TOTAL		10.6	%		20.6	%		38.6	%		5.9	%
Home Equity Loan ABS
Year of	Significant Inputs									Current Credit
Securitization	Prepayment Rates			Default Rates			Loss Severities			Enhancements
Subprime:
2004 and prior		2.8	%		6.6	%		98.8	%		3.8	%

Schedule Of Other Than Temporarily Impaired Charges Incurred During Life Of Securities

For the 32 private-label securities with OTTI during the lives of the securities, the FHLBank’s reported balances as of December 31, 2012 are as follows (in thousands):

	Unpaid Principal Balance		Amortized Cost		Carrying Value		Fair Value
Private-label residential MBS:
Prime	$	43,400	$	42,050	$	39,967	$	41,871
Alt-A		92,453		85,075		66,509		76,703
Total private-label residential MBS		135,853		127,125		106,476		118,574
Home equity loans:
Subprime		3,685		1,269		1,072		2,421
TOTAL	$	139,538	$	128,394	$	107,548	$	120,995

Roll-Forward Of OTTI Activity

The following table presents a roll-forward of OTTI activity for the periods ended December 31, 2012, 2011 and 2010related to credit losses recognized in earnings (in thousands):

	2012		2011		2010
Balance, beginning of period	$	10,342	$	5,938	$	2,034
Additional charge on securities for which OTTI was not previously recognized1		271		1,219		617
Additional charge on securities for which OTTI was previously recognized1		1,389		3,492		3,417
Realized principal losses on securities paid down during the period		(323)		-		-
Amortization of credit component of OTTI2		(711)		(307)		(130)
Balance, end of period	$	10,968	$	10,342	$	5,938

¹For the years ended December 31, 2012, 2011 and 2010, securities previously impaired represent all securities that were impaired prior to January 1, 2012, 2011 and 2010, respectively.

²The FHLBank amortizes the credit component based on estimated cash flows prospectively up to the amount of expected principal to be recovered. The discounted cash flows will move from the discounted loss value to the ultimate principal to be written off at the projected date of loss. If the expected cash flows improve, the amount of expected loss decreases which causes a corresponding decrease in the calculated amortization. Based on the level of improvement in the cash flows, the amortization could become a positive adjustment to income.

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Advances (Tables)

12 Months Ended

Dec. 31, 2012

Advances [Abstract]

Schedule Of Federal Home Loan Bank Advances By Year Of Contractual Maturity

	12/31/2012					12/31/2011
Year of Contractual Maturity	Amount		Weighted Average Interest Rate			Amount		Weighted Average Interest Rate
Due in one year or less	$	3,433,058		1.11	%	$	2,878,887		1.45	%
Due after one year through two years		1,454,725		2.39			1,891,670		2.46
Due after two years through three years		1,691,471		1.88			1,828,334		2.87
Due after three years through four years		1,757,905		1.99			1,594,565		1.94
Due after four years through five years		2,529,511		2.84			1,662,373		2.06
Thereafter		5,241,927		1.36			6,994,666		1.96
Total par value		16,108,597		1.76	%		16,850,495		2.03	%
Discounts		(29,767)					(29,099)
Hedging adjustments1		494,518					573,003
TOTAL	$	16,573,348				$	17,394,399

1 See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

Schedule Of Federal Home Loan Bank Advances By Contractual Maturity Or Next Call Date And By Contractual Maturity Or Next Conversion Date

	Year of Contractual Maturity or Next Call Date				Year of Contractual Maturity or Next Conversion Date
Redemption Term	12/31/2012		12/31/2011		12/31/2012		12/31/2011
Due in one year or less	$	8,483,653	$	8,476,239	$	5,430,875	$	4,983,229
Due after one year through two years		1,335,481		1,541,946		1,412,850		1,940,195
Due after two years through three years		1,346,362		1,637,945		1,593,371		1,786,459
Due after three years through four years		1,094,410		854,065		1,606,405		1,446,465
Due after four years through five years		2,033,422		882,386		1,534,569		1,510,873
Thereafter		1,815,269		3,457,914		4,530,527		5,183,274
TOTAL PAR VALUE	$	16,108,597	$	16,850,495	$	16,108,597	$	16,850,495

Schedule Of Federal Home Loan Bank Advances By Interest Rate Payment Terms

	12/31/2012		12/31/2011
Fixed rate:
Due in one year or less	$	1,301,041	$	1,572,998
Due after one year		7,495,446		8,254,635
Total fixed rate		8,796,487		9,827,633
Variable rate:
Due in one year or less		2,132,017		1,305,889
Due after one year		5,180,093		5,716,973
Total variable rate		7,312,110		7,022,862
TOTAL PAR VALUE	$	16,108,597	$	16,850,495

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Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 110,311	$ 77,326	$ 33,548
Adjustments to reconcile income (loss) to net cash provided by (used in) operating activities:
Premiums and discounts on consolidated obligations, net	(25,103)	(32,919)	(20,622)
Concessions on consolidated obligation	18,125	12,276	16,557
Premiums and discounts on investments, net	(1,665)	(2,210)	(2,748)
Premiums and discounts on advance, net	(12,829)	(19,915)	(13,988)
Premiums, discounts and deferred loan costs on mortgage loans, net	20,432	7,904	3,892
Fair value adjustments on hedged assets or liabilities	17,588	20,160	13,976
Premises, software and equipment	2,152	2,866	3,655
Other	332	319	347
Provision for credit losses on mortgage loans	2,496	1,058	1,582
Non-cash interest on mandatorily redeemable capital stock	38	169	279
Net other-than-temporary impairment losses on held-to-maturity securities	1,660	4,711	4,034
Net realized (gain) loss on sale of mortgage loans held for sale	0	(4,425)	0
Net realized (gain) loss on disposals of premises, software and equipment	1,951	(6)	100
Other (gains) losses	230	195	(210)
Net gain (loss) on trading securities	28,048	(20,772)	(14,425)
(Gain) loss due to change in net fair value adjustment on derivative and hedging activities	42,501	128,534	79,596
(Increase) decrease in accrued interest receivable	8,197	7,676	9,722
Change in net accrued interest included in derivative assets	(2,031)	7,551	7,574
(Increase) decrease in other assets	3,730	(751)	(4,388)
Increase (decrease) in accrued interest payable	(14,435)	(32,321)	(25,155)
Change in net accrued interest included in derivative liabilities	990	4,668	(3,343)
Increase (decrease) in Affordable Housing Program liability	(194)	(7,834)	(4,891)
Increase (decrease) in REFCORP liability	0	(8,014)	(3,542)
Increase (decrease) in other liabilities	141	2,510	4,318
Total adjustments	92,354	71,430	52,320
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	202,665	148,756	85,868
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits	5,947	(244,248)	(6,370)
Net (increase) decrease in Federal funds sold	190,000	715,000	(810,000)
Net (increase) decrease in securities purchased under resale agreements	(1,999,288)	0	0
Net (increase) decrease in short-term trading securities	1,234,706	2,241,242	1,685,054
Proceeds from sale of long-term trading securities	0	284,445	152,435
Proceeds from maturities of and principal repayments on long-term trading securities	931,454	836,675	154,253
Purchases of long-term trading securities	(399,975)	(1,566,397)	(299,531)
Proceeds from maturities of and principal repayments on long-term held-to-maturity securities	1,674,628	1,777,260	3,003,436
Purchases of long-term held-to-maturity securities	(1,849,115)	0	(2,375,111)
Principal collected on advances	38,133,313	33,427,385	42,109,928
Advances made	(37,377,918)	(31,353,692)	(39,177,843)
Proceeds from sale of mortgage loans held for sale	0	111,444	0
Principal collected on mortgage loans	1,521,806	845,353	834,466
Purchase or origination of mortgage loans	(2,555,771)	(1,600,648)	(1,802,231)
Proceeds from sale of foreclosed assets	7,938	6,960	8,099
Principal collected on other loans made	1,848	1,728	1,616
Proceeds from sale of premises, software and equipment	36	24	55
Purchases of premises, software and equipment	(1,634)	(1,654)	(1,844)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(482,025)	5,480,877	3,476,412
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	166,706	(231,781)	140,060
Net proceeds from issuance of consolidated obligations:
Discount notes	67,338,915	61,943,402	96,901,294
Bonds	19,854,295	13,010,952	18,400,033
Payments for maturing and retired consolidated obligations:
Discount notes	(68,922,319)	(65,392,039)	(94,786,419)
Bonds	(17,700,300)	(14,638,320)	(24,425,252)
Net increase (decrease) in overnight loans from other FHLBanks	(35,000)	35,000	0
Net increase (decrease) in other borrowings	(5,000)	(5,000)	(5,000)
Proceeds from financing derivatives	0	0	142
Net interest payments received (paid) for financing derivatives	(67,378)	(70,528)	(93,096)
Proceeds from issuance of capital stock	435,103	186,728	107,903
Payments for repurchase/redemption of capital stock	(146,996)	(39,206)	(13,720)
Payments for repurchase of mandatorily redeemable capital stock	(384,425)	(312,698)	(282,202)
Cash dividends paid	(285)	(362)	(316)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	533,316	(5,513,852)	(4,056,573)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	253,956	115,781	(494,293)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	116,041	260	494,553
CASH AND CASH EQUIVALENTS AT END OF PERIOD	369,997	116,041	260
Supplemental disclosures:
Interest paid	274,240	340,160	395,154
Affordable Housing Program payments	13,210	16,984	8,908
REFCORP payments	0	19,836	11,929
Net transfers of mortgage loans to real estate owned	6,597	6,799	7,188
Net transfers of mortgage loans held for portfolio to held for sale	$ 0	$ 0	$ 120,525

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Mortgage Loans (Tables)

12 Months Ended

Dec. 31, 2012

Mortgage Loans [Abstract]

Schedule Of Mortgage Loans Sold

		2011
Net proceeds	$	111,444
Cost basis		(107,019)
NET REALIZED GAIN (LOSS) ON SALE OF MORTGAGE LOANS HELD FOR SALE	$	4,425

Schedule Of Mortgage Loans Held For Portfolio

	12/31/2012		12/31/2011
Real estate:
Fixed rate, medium-term1, single-family mortgages	$	1,711,275	$	1,362,379
Fixed rate, long-term, single-family mortgages		4,126,471		3,507,500
Total unpaid principal balance		5,837,746		4,869,879
Premiums		98,887		62,223
Discounts		(4,483)		(6,694)
Deferred loan costs, net		1,549		2,327
Other deferred fees		(312)		(521)
Hedging adjustments2		12,546		9,591
Total before Allowance for Credit Losses on Mortgage Loans		5,945,933		4,936,805
Allowance for Credit Losses on Mortgage Loans		(5,416)		(3,473)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	5,940,517	$	4,933,332

1	Medium-term defined as a term of 15 years or less.
2	See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

Schedule Of Mortgage Loans Held For Portfolio By Collateral Or Guarantee Type

	12/31/2012		12/31/2011
Conventional loans	$	5,152,461	$	4,266,847
Government-guaranteed or insured loans		685,285		603,032
TOTAL UNPAID PRINCIPAL BALANCE	$	5,837,746	$	4,869,879

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Capital (Schedule Of Compliance With Regulatory Capital Requirements) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Capital [Abstract]
Risk-based capital, Required	$ 300,742	$ 227,407
Risk-based capital, Actual	1,340,740	1,193,058
Total regulatory capital-to-asset ratio, Required	4.00%	4.00%
Total regulatory capital-to-asset ratio, Actual	5.20%	5.20%
Total regulatory capital, Required	1,352,745	1,327,607
Total regulatory capital, Actual	1,751,403	1,737,657
Leverage capital ratio, Required	5.00%	5.00%
Leverage capital ratio, Actual	7.20%	7.00%
Leverage capital, Required	1,690,931	1,659,509
Leverage capital, Actual	$ 2,421,772	$ 2,334,185

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Pension And Postretirement Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2012

Pension And Postretirement Benefit Plans [Abstract]

Schedule Of Net Funded Status

	2012			2011			2010
Net pension cost charged to compensation and benefits expense	$	3,419		$	4,864		$	3,829
Pentegra Defined Benefit Plan funded status as of July 11		108.2	%		90.3	%		88.0	%
FHLBank's funded status as of July 1		112.4	%		92.5	%		90.0	%

¹The funded status as of July 1, 2012 using the MAP-21 discount rate is preliminary and may increase because the plan’s participants were permitted to make contributions for the plan year ended June 30, 2012 through March 15, 2013. Contributions made on or before March 15, 2013, and designated for the plan year ended June 30, 2012, will be included in the final valuation as of July 1, 2012. The final funded status as of July 1, 2012 will not be available until the Form 5500 for the plan year July 1, 2012 through June 30, 2013 is filed (this Form 5500 is due to be filed no later than April 2014). The funded status as of July 1, 2011 is preliminary and may increase because the plan’s participants were permitted to make contributions for the plan year ended June 30, 2011 through March 15, 2012. Contributions made on or before March 15, 2012, and designated for the plan year ended June 30, 2011, will be included in the final valuation as of July 1, 2011. The final funded status as of July 1, 2011 will not be available until the Form 5500 for the plan year July 1, 2011 through June 30, 2012 is filed (this Form 5500 is due to be filed no later than April 2013).

Schedule Of Benefit Obligations In Excess Of Fair Value Of Plan Assets

	2012		2011
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	10,603	$	8,988
Service cost		433		373
Interest cost		439		451
Benefits paid		(225)		(229)
Actuarial (gain) loss		661		1,020
Projected benefit obligation at end of year		11,911		10,603
Change in plan assets:
Fair value of plan assets at beginning of year		-		-
Employer contributions		225		229
Benefits paid		(225)		(229)
Fair value of plan assets at end of year		-		-
FUNDED STATUS	$	11,911	$	10,603

Components Of The Net Periodic Pension Cost For The Defined Benefit Portion

	2012		2011		2010
Service cost	$	433	$	373	$	344
Interest cost		439		451		472
Amortization of prior service cost		-		-		(6)
Amortization of net loss		332		319		353
NET PERIODIC POSTRETIREMENT BENEFIT COST	$	1,204	$	1,143	$	1,163

Schedule Of Assumptions Used

	2012			2011			2010
Discount rate - benefit obligation		3.75	%		4.20	%		5.25	%
Discount rate - net periodic benefit cost		4.20	%		5.25	%		5.75	%
Salary increases		5.06	%		4.92	%		4.97	%
Amortization period (years)		9			7			8
Accumulated benefit obligation	$	9,904		$	8,517		$	7,232

Schedule Of Expected Benefit Payments

Year ending December 31,	Estimated Benefit Payments
2013	$	307
2014		343
2015		382
2016		429
2017		491
2018 through 2022		3,901

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Investment Securities (Schedule Of Projected Home Price Recovery By Year) (Details)	Dec. 31, 2012
Minimum [Member]
Schedule Of Housing Market Value Recovery Rates [Line Items]
1 - 6	0.00%
7 - 18	0.00%
19 - 24	1.00%
25 - 30	2.00%
31 - 42	2.80%
43 - 66	2.80%
Thereafter	2.80%
Maximum [Member]
Schedule Of Housing Market Value Recovery Rates [Line Items]
1 - 6	2.80%
7 - 18	3.00%
19 - 24	3.00%
25 - 30	4.00%
31 - 42	5.00%
43 - 66	6.00%
Thereafter	5.60%

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Derivatives And Hedging Activities (Credit Risk Exposure On Derivative Instruments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011
Derivative [Line Items]
Total net exposure at fair value	$ 52,170	[1]	$ 40,619	[1]
Cash collateral held	(27,004)		(26,581)
Net positive exposure after cash collateral	25,166		14,038
Other collateral	(278)	[2]	(1,825)	[2]
NET EXPOSURE AFTER COLLATERAL	24,888		12,213
Accrued interest receivable included in derivative assets	5,731		3,700
Derivative Assets [Member]
Derivative [Line Items]
Cash collateral held	$ (27,004)		$ (26,581)	[3]

[1] Includes net accrued interest receivable of $5,731,000 and $3,700,000 as of December 31, 2012 and 2011, respectively.

[2] Collateral held with respect to derivatives with members which represents either collateral physically held by or on behalf of the FHLBank or collateral assigned to the FHLBank as evidenced by a written security agreement and held by the member for the benefit of the FHLBank.

[3] The FHLBank held cash with a fair value of $44,882,000 as collateral as of December 31, 2011. Exposure can change on a daily basis; and thus, there is often a short lag time between the date the exposure is identified, collateral is requested and when the collateral is actually received. Likewise, there is a lag time for excess collateral to be returned. Excess collateral held by the FHLBank as of December 31, 2011 resulted in positive exposure (fair value plus accrued interest) with one counterparty being recorded as a derivative liability.

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Statements Of Condition (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011
ASSETS
Cash and due from banks (Note 3)	$ 369,997		$ 116,041
Interest-bearing deposits	455		42
Securities purchased under agreements to resell	1,999,288		0
Federal funds sold	850,000		1,040,000
Investment securities:
Trading securities (Note 4)	2,764,918		4,559,163
Held-to-maturity securities (Note 4)	5,159,750	[1]	4,977,332	[1]
Total investment securities	7,924,668		9,536,495
Advances (Notes 5, 7, 18)	16,573,348		17,394,399
Mortgage loans held for portfolio:
Mortgage loans held for portfolio (Note 6, 7, 18)	5,945,933		4,936,805
Less allowance for credit losses on mortgage loans (Note 7)	(5,416)		(3,473)
Mortgage loans held for portfolio, net	5,940,517		4,933,332
Accrued interest receivable	77,445		85,666
Premises, software and equipment, net	8,874		11,379
Derivative assets (Note 8)	25,166		14,038
Other assets (Note 17)	48,869		58,790
TOTAL ASSETS	33,818,627		33,190,182
LIABILITIES AND CAPITAL
Interest-bearing (Note 9, 18)	1,117,627		958,445
Non-interest-bearing (Note 9, 18)	64,330		38,926
Total deposits	1,181,957		997,371
Consolidated obligations, net:
Discount notes (Note 10, 17)	8,669,059		10,251,108
Bonds (Note 10, 17)	21,973,902		19,894,483
Total consolidated obligations, net	30,642,961		30,145,591
Overnight loans from other FHLBanks	0		35,000
Mandatorily redeemable capital stock (Note 13)	5,665		8,369
Accrued interest payable	81,801		96,237
Affordable Housing Program (Note 11)	31,198		31,392
Derivative liabilities (Note 8)	123,414		140,213
Other liabilities (Notes 15, 17)	31,150		34,562
TOTAL LIABILITIES	32,098,146		31,488,735
Commitments and contingencies (Note 1, 5, 6, 7, 8, 10, 11, 13, 15, 17)
Capital:
Total capital stock	1,264,456	[2]	1,327,827	[2]
Retained earnings:
Unrestricted	453,346		395,588
Restricted (Note 13)	27,936		5,873
Total retained earnings	481,282		401,461
Accumulated other comprehensive income (loss) (Note 14)	(25,257)		(27,841)
TOTAL CAPITAL	1,720,481		1,701,447
TOTAL LIABILITIES AND CAPITAL	33,818,627		33,190,182
Capital Stock Class A [Member]
Capital:
Total capital stock	405,304	[2]	537,304	[2]
Capital Stock Class B [Member]
Capital:
Total capital stock	$ 859,152	[2]	$ 790,523	[2]

[1] Fair value: $5,192,330 and $4,967,585 as of December 31, 2012 and 2011, respectively.

[2] Putable

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Summary Of Significant Accounting Policies (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Property, Plant and Equipment [Line Items]
Accumulated depreciation and amortization related to premises, software and equipment	$ 24,187	$ 22,662
Depreciation and amortization expense	2,152	2,866	3,655
Net realized gain (loss) on disposal of premises, software and equipment	(1,951)	6	(100)
Premises, software and equipment, net	8,874	11,379
Percentage of income allocated to separate restricted retained earnings account	20.00%
Retained earnings as a percentage of average outstanding consolidated obligations during previous quarter, required	1.00%
Software [Member]
Property, Plant and Equipment [Line Items]
Depreciation and amortization expense	764	1,378	2,162
Premises, software and equipment, net	$ 1,309	$ 2,935
Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Minimum [Member] | Software [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	20 years
Maximum [Member] | Software [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years

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Commitments And Contingencies (Schedule Of Off-Balance Sheet Commitments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Standby Letters of Credit [Member]
Loss Contingencies [Line Items]
Off-balance Sheet Commitments, Expiring Within One Year	$ 2,533,506	$ 2,728,450
Off-balance Sheet Commitments, Expiring After One Year	21,332	29,777
Off-balance Sheet Commitments	2,554,838	2,758,227
Commitments For Standby Bond Purchases [Member]
Loss Contingencies [Line Items]
Off-balance Sheet Commitments, Expiring Within One Year	532,028	99,737
Off-balance Sheet Commitments, Expiring After One Year	1,065,176	1,438,939
Off-balance Sheet Commitments	1,597,204	1,538,676
Commitments To Invest In Mortgage Loans [Member]
Loss Contingencies [Line Items]
Off-balance Sheet Commitments, Expiring Within One Year	106,355	119,945
Off-balance Sheet Commitments, Expiring After One Year	0	0
Off-balance Sheet Commitments	106,355	119,945
Commitments To Issue Consolidated Bonds, At Par [Member]
Loss Contingencies [Line Items]
Off-balance Sheet Commitments, Expiring Within One Year	165,000	160,000
Off-balance Sheet Commitments, Expiring After One Year	0	0
Off-balance Sheet Commitments	$ 165,000	$ 160,000

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Statements Of Capital (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Stockholders' Equity Attributable to Parent, Beginning Balance	$ 1,701,447		$ 1,783,478		$ 1,945,910
Proceeds from issuance of capital stock	435,103		186,728		107,903
Repurchase/redemption of capital stock	(146,996)		(39,206)		(13,720)
Comprehensive income (loss)	112,895		72,157		22,737
Net reclassification of shares to mandatorily redeemable capital stock	(381,683)		(301,348)		(279,036)
Net transfer between Class A and Class B	0		0		0
Dividends on capital stock
Cash payment	(285)		(362)		(316)
Stock issued	0		0		0
Stockholders' Equity Attributable to Parent, Ending Balance	1,720,481		1,701,447		1,783,478
Total Capital Stock [Member]
BALANCE, shares	13,278	[1]	14,544	[1]	16,027	[1]
Stockholders' Equity Attributable to Parent, Beginning Balance	1,327,827	[1]	1,454,396	[1]	1,602,696	[1]
Proceeds from issuance of capital stock, shares	4,351	[1]	1,868	[1]	1,079	[1]
Proceeds from issuance of capital stock	435,103	[1]	186,728	[1]	107,903	[1]
Repurchase/redemption of capital stock, shares	(1,469)	[1]	(392)	[1]	(137)	[1]
Repurchase/redemption of capital stock	(146,996)	[1]	(39,206)	[1]	(13,720)	[1]
Net reclassification of shares to mandatorily redeemable capital stock, shares	(3,817)	[1]	(3,014)	[1]	(2,791)	[1]
Net reclassification of shares to mandatorily redeemable capital stock	(381,683)	[1]	(301,348)	[1]	(279,036)	[1]
Net transfer between Class A and Class B, shares			0	[1]	0	[1]
Net transfer between Class A and Class B	0	[1]	0	[1]	0	[1]
Dividends on capital stock
Stock issued, shares	302	[1]	272	[1]	366	[1]
Stock issued	30,205	[1]	27,257	[1]	36,553	[1]
BALANCE, shares	12,645	[1]	13,278	[1]	14,544	[1]
Stockholders' Equity Attributable to Parent, Ending Balance	1,264,456	[1]	1,327,827	[1]	1,454,396	[1]
Total Retained Earnings [Member]
Stockholders' Equity Attributable to Parent, Beginning Balance	401,461		351,754		355,075
Comprehensive income (loss)	110,311		77,326		33,548
Dividends on capital stock
Cash payment	(285)		(362)		(316)
Stock issued	(30,205)		(27,257)		(36,553)
Stockholders' Equity Attributable to Parent, Ending Balance	481,282		401,461		351,754
Unrestricted Retained Earnings [Member]
Stockholders' Equity Attributable to Parent, Beginning Balance	395,588		351,754		355,075
Comprehensive income (loss)	88,248		71,453		33,548
Dividends on capital stock
Cash payment	(285)		(362)		(316)
Stock issued	(30,205)		(27,257)		(36,553)
Stockholders' Equity Attributable to Parent, Ending Balance	453,346		395,588		351,754
Restricted Retained Earnings [Member]
Stockholders' Equity Attributable to Parent, Beginning Balance	5,873		0		0
Comprehensive income (loss)	22,063		5,873		0
Dividends on capital stock
Stockholders' Equity Attributable to Parent, Ending Balance	27,936		5,873		0
Accumulated Other Comprehensive Income (Loss) [Member]
Stockholders' Equity Attributable to Parent, Beginning Balance	(27,841)		(22,672)		(11,861)
Comprehensive income (loss)	2,584		(5,169)		(10,811)
Dividends on capital stock
Stockholders' Equity Attributable to Parent, Ending Balance	(25,257)		(27,841)		(22,672)
Capital Stock Class A [Member] | Total Capital Stock [Member]
BALANCE, shares	5,373	[1]	5,934	[1]	2,936	[1]
Stockholders' Equity Attributable to Parent, Beginning Balance	537,304	[1]	593,386	[1]	293,554	[1]
Proceeds from issuance of capital stock, shares	44	[1]	65	[1]	48	[1]
Proceeds from issuance of capital stock	4,421	[1]	6,468	[1]	4,797	[1]
Repurchase/redemption of capital stock, shares	(1,283)	[1]	(343)	[1]	0	[1]
Repurchase/redemption of capital stock	(128,329)	[1]	(34,272)	[1]	0	[1]
Net reclassification of shares to mandatorily redeemable capital stock, shares	(660)	[1]	(1,747)	[1]	(1,224)	[1]
Net reclassification of shares to mandatorily redeemable capital stock	(65,986)	[1]	(174,660)	[1]	(122,362)	[1]
Net transfer between Class A and Class B, shares	579	[1]	1,464	[1]	4,174	[1]
Net transfer between Class A and Class B	57,894	[1]	146,382	[1]	417,397	[1]
Dividends on capital stock
BALANCE, shares	4,053	[1]	5,373	[1]	5,934	[1]
Stockholders' Equity Attributable to Parent, Ending Balance	405,304	[1]	537,304	[1]	593,386	[1]
Capital Stock Class B [Member] | Total Capital Stock [Member]
BALANCE, shares	7,905	[1]	8,610	[1]	13,091	[1]
Stockholders' Equity Attributable to Parent, Beginning Balance	790,523	[1]	861,010	[1]	1,309,142	[1]
Proceeds from issuance of capital stock, shares	4,307	[1]	1,803	[1]	1,031	[1]
Proceeds from issuance of capital stock	430,682	[1]	180,260	[1]	103,106	[1]
Repurchase/redemption of capital stock, shares	(186)	[1]	(49)	[1]	(137)	[1]
Repurchase/redemption of capital stock	(18,667)	[1]	(4,934)	[1]	(13,720)	[1]
Net reclassification of shares to mandatorily redeemable capital stock, shares	(3,157)	[1]	(1,267)	[1]	(1,567)	[1]
Net reclassification of shares to mandatorily redeemable capital stock	(315,697)	[1]	(126,688)	[1]	(156,674)	[1]
Net transfer between Class A and Class B, shares	(579)	[1]	(1,464)	[1]	(4,174)	[1]
Net transfer between Class A and Class B	(57,894)	[1]	(146,382)	[1]	(417,397)	[1]
Dividends on capital stock
Stock issued, shares	302	[1]	272	[1]	366	[1]
Stock issued	30,205	[1]	27,257	[1]	36,553	[1]
BALANCE, shares	8,592	[1]	7,905	[1]	8,610	[1]
Stockholders' Equity Attributable to Parent, Ending Balance	$ 859,152	[1]	$ 790,523	[1]	$ 861,010	[1]

[1] Putable

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Fair Values (Fair Value, Assets And Liabilities Measured On Recurring And Nonrecurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	$ 25,166		$ 14,038
Recurring Fair Value Measurements [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	2,764,918		4,559,163
Derivative assets	256,379		344,005
TOTAL ASSETS MEASURED AT FAIR VALUE	3,021,297		4,903,168
Derivative liabilities	664,992
TOTAL LIABILITIES MEASURED AT FAIR VALUE	664,992		769,004
Recurring Fair Value Measurements [Member] | Netting Adjustment And Cash Collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	(231,213)	[1]	(329,967)	[1]
TOTAL ASSETS MEASURED AT FAIR VALUE	(231,213)	[1]	(329,967)	[1]
Derivative liabilities	(541,578)	[1]
TOTAL LIABILITIES MEASURED AT FAIR VALUE	(541,578)	[1]	(628,791)	[1]
Nonrecurring Fair Value Measurements [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate owned	540	[2]	1,067	[3]
TOTAL ASSETS MEASURED AT FAIR VALUE	540		11,520
Interest Rate Contract [Member] | Recurring Fair Value Measurements [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	256,277		343,162
Derivative liabilities	664,896		769,004
Interest Rate Contract [Member] | Recurring Fair Value Measurements [Member] | Netting Adjustment And Cash Collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	(231,213)	[1]	(329,967)	[1]
Derivative liabilities	(541,578)	[1]	(628,791)	[1]
Mortgage Delivery Commitments [Member] | Recurring Fair Value Measurements [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	102		843
Derivative liabilities	96
Commercial Paper [Member] | Recurring Fair Value Measurements [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	59,996		599,482
Certificates Of Deposit [Member] | Recurring Fair Value Measurements [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	325,006		1,019,520
TLGP Obligations[Member] | Recurring Fair Value Measurements [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities			494,236	[4]
Government-Sponsored Enterprise Obligations [Member] | Recurring Fair Value Measurements [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	2,126,327	[5],[6]	2,098,844	[5],[6]
U.S. Obligation Residential [Member] | Recurring Fair Value Measurements [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	1,277	[7]	1,380	[7]
Government-sponsored Enterprise Residential [Member] | Recurring Fair Value Measurements [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	252,312	[8]	345,701	[8]
Private-Label Residential MBS [Member] | Nonrecurring Fair Value Measurements [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Held-to-maturity securities			10,453	[9]
Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	2,764,918		4,559,163
Derivative assets	25,166		14,038
Held-to-maturity securities	5,192,330		4,967,585
Derivative liabilities	123,414		140,213
Fair Value [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0
Derivative assets	0
Held-to-maturity securities	0
Derivative liabilities	0
Fair Value [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	2,764,918
Derivative assets	256,379
Held-to-maturity securities	4,633,792
Derivative liabilities	664,992
Fair Value [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0
Derivative assets	0
Held-to-maturity securities	558,538
Derivative liabilities	0
Fair Value [Member] | Netting Adjustment And Cash Collateral [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	0
Derivative assets	(231,213)
Held-to-maturity securities	0
Derivative liabilities	(541,578)
Fair Value [Member] | Recurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	2,764,918		4,559,163
Derivative assets	25,166		14,038
TOTAL ASSETS MEASURED AT FAIR VALUE	2,790,084		4,573,201
Derivative liabilities	123,414
TOTAL LIABILITIES MEASURED AT FAIR VALUE	123,414		140,213
Fair Value [Member] | Nonrecurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Real estate owned	540	[2]	1,067	[3]
TOTAL ASSETS MEASURED AT FAIR VALUE	540		11,520
Fair Value [Member] | Interest Rate Contract [Member] | Recurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	25,064		13,195
Derivative liabilities	123,318		140,213
Fair Value [Member] | Mortgage Delivery Commitments [Member] | Recurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative assets	102		843
Derivative liabilities	96
Fair Value [Member] | Commercial Paper [Member] | Recurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	59,996		599,482
Fair Value [Member] | Certificates Of Deposit [Member] | Recurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	325,006		1,019,520
Fair Value [Member] | TLGP Obligations[Member] | Recurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities			494,236	[4]
Fair Value [Member] | Government-Sponsored Enterprise Obligations [Member] | Recurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	2,126,327	[5],[6]	2,098,844	[5],[6]
Fair Value [Member] | U.S. Obligation Residential [Member] | Recurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	1,277	[7]	1,380	[7]
Fair Value [Member] | Government-sponsored Enterprise Residential [Member] | Recurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Trading securities	252,312	[8]	345,701	[8]
Fair Value [Member] | Private-Label Residential MBS [Member] | Nonrecurring Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Held-to-maturity securities			$ 10,453	[9]

[1] Represents the effect of legally enforceable master netting agreements that allow the FHLBank to net settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same counterparties.

[2] Includes real estate owned written down to fair value during the quarter ended December 31, 2012 and still outstanding as of December 31, 2012.

[3] Includes real estate owned written down to fair value during the quarter ended December 31, 2011 and still outstanding as of December 31, 2011.

[4] Represents corporate debentures guaranteed by FDIC under the TLGP.

[5] Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit, and Farmer Mac. GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

[6] See Note 19 for transactions with other FHLBanks.

[7] Represents MBS issued by Ginnie Mae, which are guaranteed by the U.S. government.

[8] Represents MBS issued by Fannie Mae and Freddie Mac.

[9] Excludes impaired securities with carrying values less than their fair values at date of impairment.

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Advances (Schedule Of Federal Home Loan Bank Advances By Contractual Maturity Or Next Call Date And By Contractual Maturity Or Next Conversion Date) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Advances [Abstract]
Due in one year or less, Callable	$ 8,483,653	$ 8,476,239
Due after one year through two years, Callable	1,335,481	1,541,946
Due after two years through three years, Callable	1,346,362	1,637,945
Due after three years through four years, Callable	1,094,410	854,065
Due after four years through five years, Callable	2,033,422	882,386
Thereafter, Callable	1,815,269	3,457,914
Due in one year or less, Convertible	5,430,875	4,983,229
Due after one year through two years, Convertible	1,412,850	1,940,195
Due after two years through three years, Convertible	1,593,371	1,786,459
Due after three years through four years, Convertible	1,606,405	1,446,465
Due after four years through five years, Convertible	1,534,569	1,510,873
Thereafter, Convertible	4,530,527	5,183,274
TOTAL PAR VALUE	$ 16,108,597	$ 16,850,495

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Transactions With Stockholders And Housing Associates (Schedule Of Related Parties With Ten Percent Or More Of Capital Stock) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Related Party Transaction [Line Items]
Advances	$ 16,573,348	$ 17,394,399
Deposits	1,181,957	997,371
Ten Percent Owner [Member]
Related Party Transaction [Line Items]
Advances	5,448,000
Outstanding Advances, Percent of Total	33.80%
Deposits	1,260
Outstanding Deposits, Percent of Total	0.10%
MidFirst Bank [Member]
Related Party Transaction [Line Items]
Advances	2,898,000
Outstanding Advances, Percent of Total	18.00%
Deposits	13
Outstanding Deposits, Percent of Total	0.00%
Capitol Federal Savings Bank [Member]
Related Party Transaction [Line Items]
Advances	2,550,000
Outstanding Advances, Percent of Total	15.80%
Deposits	1,247
Outstanding Deposits, Percent of Total	0.10%
Total Capital Stock [Member] | Ten Percent Owner [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	277,011
Regulatory Capital Stock, Percent Of Total	21.80%
Total Capital Stock [Member] | Ten Percent Owner [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	2,502
Regulatory Capital Stock, Percent Of Total	0.60%
Total Capital Stock [Member] | Ten Percent Owner [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	274,509
Regulatory Capital Stock, Percent Of Total	31.90%
Total Capital Stock [Member] | MidFirst Bank [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	146,227
Regulatory Capital Stock, Percent Of Total	11.50%
Total Capital Stock [Member] | MidFirst Bank [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	500
Regulatory Capital Stock, Percent Of Total	0.10%
Total Capital Stock [Member] | MidFirst Bank [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	145,727
Regulatory Capital Stock, Percent Of Total	16.90%
Total Capital Stock [Member] | Capitol Federal Savings Bank [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	130,784
Regulatory Capital Stock, Percent Of Total	10.30%
Total Capital Stock [Member] | Capitol Federal Savings Bank [Member] | Capital Stock Class A [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	2,002
Regulatory Capital Stock, Percent Of Total	0.50%
Total Capital Stock [Member] | Capitol Federal Savings Bank [Member] | Capital Stock Class B [Member]
Related Party Transaction [Line Items]
Regulatory Capital Stock, Value	$ 128,782
Regulatory Capital Stock, Percent Of Total	15.00%

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Deposits (Tables)

12 Months Ended

Dec. 31, 2012

Deposits [Abstract]

Schedule Of Deposit Liabilities By Component

	12/31/2012		12/31/2011
Interest-bearing:
Demand	$	253,527	$	156,345
Overnight		824,200		799,400
Term		39,900		2,700
Total interest-bearing		1,117,627		958,445
Non-interest-bearing:
Demand		360		348
Other		63,970		38,578
Total non-interest-bearing		64,330		38,926
TOTAL DEPOSITS	$	1,181,957	$	997,371

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Allowance For Credit Losses (Schedule Of Net Credit Enhancement Fees Paid To Participating Members) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Allowance For Credit Losses [Abstract]
Gross CE fees paid to PFIs	$ 4,396	$ 3,744	$ 2,989
Performance-based CE fees recovered from PFIs	(179)	(199)	(193)
Net CE fees paid	$ 4,217	$ 3,545	$ 2,796

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Capital

12 Months Ended

Dec. 31, 2012

Capital [Abstract]

Capital

NOTE 13 – CAPITAL

The FHLBank is subject to three capital requirements under the provisions of the Gramm-Leach-Bliley Act (GLB Act) and the Finance Agency’s capital structure regulation. Regulatory capital does not include AOCI but does include mandatorily redeemable capital stock.

▪ Risk-based capital. The FHLBank must maintain at all times permanent capital in an amount at least equal to the sum of its credit risk, market risk and operations risk capital requirements. The risk-based capital requirements are all calculated in accordance with the rules and regulations of the Finance Agency.Only permanent capital, defined as Class B Common Stock and retained earnings, can be used by the FHLBank to satisfy its risk-based capital requirement. The Finance Agency may require the FHLBank to maintain a greater amount of permanent capital than is required by the risk-based capital requirement as defined, but the Finance Agency has not placed any such requirement on the FHLBank to date.

▪ Total regulatory capital. The GLB Act requires the FHLBank to maintain at all times at least a 4.0 percent total capital-to-asset ratio. Total regulatory capital is defined as the sum of permanent capital, Class A stock, any general loss allowance, if consistent with GAAP and not established for specific assets, and other amounts from sources determined by the Finance Agency as available to absorb losses.

▪ Leverage capital. The FHLBank is required to maintain at all times a leverage capital-to-assets ratio of at least 5.0 percent, with the leverage capital ratio defined as the sum of permanent capital weighted 1.5 times and non-permanent capital (currently only Class A Common Stock) weighted 1.0 times divided by total assets.

The following table illustrates that the FHLBank was in compliance with its regulatory capital requirements as of December 31, 2012 and 2011 (in thousands):

	12/31/2012						12/31/2011
	Required			Actual			Required			Actual
Regulatory capital requirements:
Risk-based capital	$	300,742		$	1,340,740		$	227,407		$	1,193,058
Total regulatory capital-to-asset ratio		4.0	%		5.2	%		4.0	%		5.2	%
Total regulatory capital	$	1,352,745		$	1,751,403		$	1,327,607		$	1,737,657
Leverage capital ratio		5.0	%		7.2	%		5.0	%		7.0	%
Leverage capital	$	1,690,931		$	2,421,772		$	1,659,509		$	2,334,185

The FHLBank offers two classes of stock, Class A Common Stock and Class B Common Stock. Each member is required to hold capital stock to become and remain a member of the FHLBank (Asset-based Stock Purchase Requirement; Class A Common Stock) and enter into specified activities with the FHLBank including, but not limited to, access to the FHLBank’s credit products and selling AMA to the FHLBank (Activity-based Stock Purchase Requirement; Class A Common Stock to the extent of a member’s Asset-based Stock Purchase Requirement, then Class B Common Stock for the remainder). The amount of Class A Common Stock a member must acquire and maintain is the Asset-based Stock Purchase Requirement, which is currently equal to 0.1 percent of a member’s total assets as of December 31 of the preceding calendar year, with a minimum requirement of $1,000, and a maximum requirement of $500,000. The amount of Class B Common Stock a member must acquire and maintain is the Activity-based Stock Purchase Requirement, which is currently equal to the sum of the following less the member’s Asset-based Stock Purchase Requirement:

§ 5.0 percent of the principal amount of advances outstanding to the member; plus

§ 2.0 percent of the current outstanding principal balance of AMA originated by or through the member and acquired by the FHLBank subject to a maximum AMA requirement of 1.5 percent of the member’s total assets as of December 31 of the preceding calendar year; plus

§ 0.0 percent of the principal amount of letters of credit outstanding at the request of the member; plus

§ 0.0 percent of the notional principal of any outstanding derivatives with the member.

The percentages listed above are subject to change by the FHLBank within ranges established in its capital plan. Changes to the percentages outside of the capital plan percentages require the FHLBank to request Finance Agency approval of an amended capital plan. See Note 18 for detailed information on transactions with related parties.

Any member may make a written request not in connection with a notice of withdrawal or attaining nonmember status for the redemption of a part of its Class A Common Stock or all or part of its Class B Common Stock (i.e., excess stock redemption request). Within five business days of receipt of a member’s written redemption request, the FHLBank may notify the member that it declines to repurchase the excess stock before the end of that five business day period, at which time the applicable redemption period shall commence. Otherwise, the FHLBank will repurchase any excess stock within the five business day period. The redemption periods are six months for Class A Common Stock and five years for Class B Common Stock. Subject to certain limitations, the FHLBank may choose to repurchase a member’s excess stock on or before the end of the applicable redemption period.

The GLB Act made membership voluntary for all members. As outlined in the FHLBank’s capital plan, members that withdraw from membership must wait five years from the divestiture date for all capital stock that is held as a condition of membership (Class A Common Stock up to member’s Asset-based Stock Purchase Requirement), unless the member cancels its notice of withdrawal prior to that date, before being readmitted to membership in any FHLBank.

The FHLBank’s board of directors may declare and pay non-cumulative dividends, expressed as a percentage rate per annum based upon the par value of capital stock on shares of Class A Common Stock outstanding and on shares of Class B Common Stock outstanding, out of previously unrestricted retained earnings and current earnings in either cash or Class B Common Stock. There is no dividend preference between Class A Common Stockholders and Class B Common Stockholders up to the Dividend Parity Threshold (DPT). Dividend rates in excess of the DPT may be paid on Class A Common Stock or Class B Common Stock at the discretion of the board of directors, provided, however, that the dividend rate paid per annum on the Class B Common Stock equals or exceeds the dividend rate per annum paid on the Class A Common Stock for any dividend period. The DPT can be changed at any time by the board of directors but will only be effective for dividends paid at least 90days after the date members are notified by the FHLBank. The DPT effective for dividends paid during 2012, 2011 and 2010 was equal to the average overnight Federal funds effective rate minus 100basis points. This DPT will continue to be effective until such time as it may be changed by the FHLBank’s board of directors. When the overnight Federal funds effective rate is below 1.00 percent, the DPT is zero percent for that dividend period (DPT is floored at zero).

The board of directors cannot declare a dividend if: (1) the FHLBank’s capital position is below its minimum regulatory capital requirements; (2) the FHLBank’s capital position will be below its minimum regulatory capital requirements after paying the dividend; (3) the principal or interest due on any consolidated obligation of the FHLBank has not been paid in full; (4) the FHLBank fails to provide the Finance Agency the quarterly certification prior to declaring or paying dividends for a quarter; or (5) the FHLBank fails to provide notification upon its inability to provide such certification or upon a projection that it will fail to comply with statutory or regulatory liquidity requirements or will be unable to timely and fully meet all of its current obligations.

Restricted Retained Earnings: Effective February 28, 2011, the FHLBank entered into a JCE Agreement with the other 11 FHLBanks. The JCE Agreement is intended to enhance the capital position of each FHLBank and allocates that portion of each FHLBank’s earnings historically paid to satisfy its REFCORP obligation to a separate retained earnings account at that FHLBank. See Note 12 for a discussion of the calculation of the REFCORP assessment and satisfaction of that liability.

The JCE Agreement provides that, upon satisfaction of the FHLBanks’ obligations to REFCORP, each FHLBank will, on a quarterly basis, allocate at least 20 percent of its net income to a separate restricted retained earnings account (RRE Account) until the balance of that account equals at least one percent of that FHLBank’s average balance of outstanding consolidated obligations for the previous quarter. These restricted retained earnings are not available to pay dividends.

Mandatorily Redeemable Capital Stock: The FHLBank is a cooperative whose members and former members own all of the FHLBank’s capital stock. Member shares cannot be purchased or sold except between the FHLBank and its members at its $100 per share par value. If a member cancels its written notice of redemption or notice of withdrawal, the FHLBank will reclassify mandatorily redeemable capital stock from a liability to equity. After the reclassification, dividends on the capital stock would no longer be classified as interest expense.

The following table provides the related dollar amounts for activities recorded in “Mandatorily redeemable capital stock” during the years ended December 31, 2012, 2011 and 2010(in thousands):

	2012		2011		2010
Balance at beginning of period	$	8,369	$	19,550	$	22,437
Capital stock subject to mandatory redemption reclassified from equity during the period		381,687		301,438		279,036
Capital stock previously subject to mandatory redemption reclassified to equity		(4)		(90)		-
Redemption or repurchase of mandatorily redeemable capital stock during the period		(384,425)		(312,698)		(282,202)
Stock dividend classified as mandatorily redeemable capital stock during the period		38		169		279
Balance at end of period	$	5,665	$	8,369	$	19,550

The Finance Agency issued a regulatory interpretation confirming that the mandatorily redeemable capital stock accounting treatment for certain shares of FHLBank capital stock does not affect the definition of regulatory capital for purposes of determining the FHLBank’s compliance with its regulatory capital requirements, calculating its mortgage securities investment authority (various percentages of total FHLBank capital depending on the date acquired), calculating its unsecured credit exposure to other GSEs (100 percent of total FHLBank capital) or calculating its unsecured credit limits to other counterparties (various percentages of total FHLBank capital depending on the rating of the counterparty).

The following table shows the amount of mandatorily redeemable capital stock by contractual year of redemption as of December 31, 2012 and 2011 (in thousands). The year of redemption in the table is the end of the redemption period in accordance with the FHLBank’s capital plan. The FHLBank is not required to redeem or repurchase membership stock until six months (Class A Common Stock) or five years (Class B Common Stock) after the FHLBank receives notice for withdrawal. Additionally, the FHLBank is not required to redeem or repurchase activity-based stock until any activity-based stock becomes excess stock as a result of an activity no longer remaining outstanding. However, the FHLBank intends to repurchase the excess activity-based stock of non-members to the extent that it can do so and still meet its regulatory capital requirements.

Contractual Year of Repurchase	12/31/2012		12/31/2011
Year 1	$	-	$	-
Year 2		1		-
Year 3		303		769
Year 4		-		303
Year 5		-		-
Past contractual redemption date due to remaining activity1		5,361		7,297
TOTAL	$	5,665	$	8,369

__________

¹Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because there is activity outstanding to which the mandatorily redeemable capital stock relates.

A member may cancel or revoke its written redemption request prior to the end of the redemption period (six months for Class A Common Stock and five years for Class B Common Stock) or its written notice of withdrawal from membership prior to the end of a six-month period starting on the date the FHLBank received the member’s written notice of withdrawal from membership. At the end of the six-month period, the member’s membership is terminated and the Class A Common Stock held to meet its Asset-based Stock Purchase Requirement will be redeemed by the FHLBank, as long as the FHLBank will continue to meet its regulatory capital requirements and as long as the Class A Common Stock is not needed to meet the former member’s Activity-based Stock Purchase Requirements. The FHLBank’s capital plan provides that the FHLBank will charge the member a cancellation fee in accordance with a schedule where the amount of the fee increases with the passage of time, the fee being 1.0 percent for any Class A Common Stock cancellation and starting at 1.0 percent in year one for Class B Common Stock and increasing by 1.0 percent each year to a maximum of 5.0 percent for cancellations in the fifth year for Class B Common Stock. During 2012, the FHLBank’s Board of Directors terminated the memberships of two members after their placement into Federal Deposit Insurance Corporation (FDIC) receivership. During 2011, the FHLBank’s Board of Directors terminated the memberships of eight members after their placement into FDIC receivership. During 2010, the FHLBank’s Board of Directors terminated the memberships of four members after their placement into FDIC receivership and one member after it was closed by the National Credit Union Administration. As of December 31, 2012, the balance of mandatorily redeemable capital stock represented two former members in FDIC receivership and eight out-of-district mergers.

Excess Capital Stock: Excess capital stock is defined as the amount of stock held by a member (or former member) in excess of that institution’s minimum stock purchase requirement. Finance Agency rules limit the ability of the FHLBank to create member excess stock under certain circumstances. The FHLBank may not pay dividends in the form of capital stock or issue new excess stock to members if the FHLBank’s excess stock exceeds one percent of its total assets or if the issuance of excess stock would cause the FHLBank’s excess stock to exceed one percent of its total assets. As of December 31, 2012, the FHLBank’s excess stock was less than one percent of total assets.

Capital Classification Determination:The Finance Agency implemented the prompt corrective action (PCA) provisions of the Housing and Economic Recovery Act of 2008. The rule established four capital classifications (i.e., adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized) for FHLBanks and implemented the PCA provisions that apply to FHLBanks that are not deemed to be adequately capitalized. The Finance Agency determines each FHLBank’s capital classification on at least a quarterly basis. If an FHLBank is determined to be other than adequately capitalized, the FHLBank becomes subject to additional supervisory authority by the Finance Agency. Before implementing a reclassification, the Director of the Finance Agency is required to provide the FHLBank with written notice of the proposed action and an opportunity to submit a response. As of the most recent review by the Finance Agency, the FHLBank has been classified as adequately capitalized.

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Consolidated Obligations (Tables)

12 Months Ended

Dec. 31, 2012

Consolidated Obligations [Abstract]

Schedule Of Maturities Of Consolidated Obligations

	12/31/2012					12/31/2011
Year of Contractual Maturity	Amount		Weighted Average Interest Rate			Amount		Weighted Average Interest Rate
Due in one year or less	$	6,989,000		1.14	%	$	5,211,300		1.23	%
Due after one year through two years		3,774,700		1.18			4,151,000		1.76
Due after two years through three years		1,553,000		1.32			1,757,200		2.48
Due after three years through four years		1,244,650		2.21			1,172,500		2.00
Due after four years through five years		1,476,000		2.74			1,302,500		2.73
Thereafter		6,749,900		2.45			6,050,900		3.47
Total par value		21,787,250		1.74	%		19,645,400		2.29	%
Premium		54,585					51,199
Discounts		(5,479)					(7,272)
Hedging adjustments1		137,546					205,156
TOTAL	$	21,973,902				$	19,894,483

1See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

Schedule Of Consolidated Obligations, By Maturity Or Next Call Date

Year of Maturity or Next Call Date	12/31/2012		12/31/2011
Due in one year or less	$	14,900,000	$	11,615,300
Due after one year through two years		3,847,700		4,946,000
Due after two years through three years		1,024,000		1,191,200
Due after three years through four years		809,650		350,500
Due after four years through five years		688,000		567,500
Thereafter		517,900		974,900
TOTAL PAR VALUE	$	21,787,250	$	19,645,400

Schedule Of Consolidated Obligations, By Interest Rate Terms

	12/31/2012		12/31/2011
Fixed rate	$	13,507,250	$	13,697,400
Variable rate		6,010,000		3,780,000
Step up		2,270,000		1,920,000
Range bonds		-		248,000
TOTAL PAR VALUE	$	21,787,250	$	19,645,400

Schedule Of Consolidated Obligations, Current Portion

	Book Value		Par Value		Weighted Average Interest Rate
December 31, 2012	$	8,669,059	$	8,670,442		0.12	%
December 31, 2011	$	10,251,108	$	10,251,723		0.03	%

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Transactions With Stockholders And Housing Associates (Narrative) (Details) (Investor [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012
Related Party Transaction [Line Items]
Lease inception year	2002
Lease term	20 years
Option term	15 years
Upfront Payment Portion Of Building Complex [Member]
Related Party Transaction [Line Items]
Property, Plant and Equipment, Other, Gross	7,896

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Pension And Postretirement Benefit Plans

12 Months Ended

Dec. 31, 2012

Pension And Postretirement Benefit Plans [Abstract]

Pension And Postretirement Benefit Plans

NOTE 15 – PENSION AND POSTRETIREMENT BENEFIT PLANS

Qualified Defined Benefit Multiemployer Plan: The FHLBank participates in the Pentegra Defined Benefit Plan for Financial Institutions (Pentegra Defined Benefit Plan), a tax-qualified defined-benefit pension plan. The Pentegra Defined Benefit Plan is treated as a multiemployer plan for accounting purposes but operates as a multiple-employer plan under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. As a result, certain multiemployer plan disclosures, including certified zone status, are not applicable to the Pentegra Defined Benefit Plan. Under the Pentegra Defined Benefit Plan, contributions made by a participating employer may be used to provide benefits to employees of other participating employers because assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees of that employer. Also, in the event a participating employer is unable to meet its contribution requirements, the required contributions for the other participating employers could increase proportionately.

The Pentegra Defined Benefit Plan covers substantially all officers and employees of the FHLBank who began employment prior to January 1, 2009.

The Pentegra Defined Benefit Plan operates on a fiscal year from July 1 through June 30 and files one Form 5500 on behalf of all employers who participate in the plan. The Employer Identification Number is 13-5645888 and the three-digit plan number is 333. There are no collective bargaining agreements in place at the FHLBank.

The Pentegra Defined Benefit Plan’s annual valuation process includes calculating the plan’s funded status and separately calculating the funded status of each participating employer. The funded status is defined as the market value of assets divided by the funding target (100 percent of the present value of all benefit liabilities accrued at that date). As permitted by ERISA, the Pentegra Defined Benefit Plan accepts contributions for the prior plan year up to eight and a half months after the asset valuation date. As a result, the market value of assets at the valuation date (July 1) will increase by any subsequent contributions designated for the immediately preceding plan year ended June 30.

The most recent Form 5500 available for the Pentegra Defined Benefit Plan is for the year ended June 30, 2011. For the Pentegra Defined Benefit Plan years ended June 30, 2011 and 2010, the FHLBank’s contributions did not represent more than five percent of the total contributions to the Pentegra Defined Benefit Plan. The pension provisions under Moving Ahead for Progress in the 21^st Century  (MAP-21), enacted July 6, 2012, changed the discount rate to be used in the valuation of future benefits. The increased rates will decrease the valuation as well as the minimum required contributions. By maintaining a level of funding comparative to prior periods (contributing more than the minimum required contribution), the FHLBank is effectively increasing its funded status in the short-term. The following table presents the net pension cost and funded status of the FHLBank relating to the Pentegra Defined Benefit Plan (amounts in thousands):

	2012			2011			2010
Net pension cost charged to compensation and benefits expense	$	3,419		$	4,864		$	3,829
Pentegra Defined Benefit Plan funded status as of July 11		108.2	%		90.3	%		88.0	%
FHLBank's funded status as of July 1		112.4	%		92.5	%		90.0	%

¹The funded status as of July 1, 2012 using the MAP-21 discount rate is preliminary and may increase because the plan’s participants were permitted to make contributions for the plan year ended June 30, 2012 through March 15, 2013. Contributions made on or before March 15, 2013, and designated for the plan year ended June 30, 2012, will be included in the final valuation as of July 1, 2012. The final funded status as of July 1, 2012 will not be available until the Form 5500 for the plan year July 1, 2012 through June 30, 2013 is filed (this Form 5500 is due to be filed no later than April 2014). The funded status as of July 1, 2011 is preliminary and may increase because the plan’s participants were permitted to make contributions for the plan year ended June 30, 2011 through March 15, 2012. Contributions made on or before March 15, 2012, and designated for the plan year ended June 30, 2011, will be included in the final valuation as of July 1, 2011. The final funded status as of July 1, 2011 will not be available until the Form 5500 for the plan year July 1, 2011 through June 30, 2012 is filed (this Form 5500 is due to be filed no later than April 2013).

Qualified Defined Contribution Plans: The FHLBank also participates in the Pentegra Defined Contribution Plan for Financial Institutions, a tax-qualified, defined contribution pension plan. Substantially all officers and employees of the FHLBank are covered by the plan. The FHLBank contributes a matching amount equal to a percentage of voluntary employee contributions, subject to certain limitations. The FHLBank’s contributions of $840,000, $739,000 and $717,000 to the Pentegra Defined Contribution Plan in 2012, 2011 and 2010, respectively, were charged to compensation and benefits expense.

Nonqualified Supplemental Retirement Plan: The FHLBank maintains a benefit equalization plan (BEP) covering certain senior officers. This non-qualified plan contains provisions for a deferred compensation component and a defined benefit pension component. The BEP is, in substance, an unfunded supplemental retirement plan. The cost of the defined benefit pension component of the BEP charged to compensation and benefits expense was $1,214,000, $1,150,000 and $1,176,000 in 2012, 2011 and 2010, respectively. Compensation and benefits expense and other interest expense include deferred compensation and accrued earnings under the BEP of $305,000, $250,000 and $263,000 in 2012, 2011 and 2010, respectively.

As indicated, the BEP is a supplemental retirement plan for covered retirees. There are no funded plan assets that have been designated to provide for the deferred compensation component or defined benefit pension component of the BEP. The obligations and funding status of the defined benefit portion of the FHLBank’s BEP as of December 31, 2012 and 2011 were as follows (in thousands):

	2012		2011
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	10,603	$	8,988
Service cost		433		373
Interest cost		439		451
Benefits paid		(225)		(229)
Actuarial (gain) loss		661		1,020
Projected benefit obligation at end of year		11,911		10,603
Change in plan assets:
Fair value of plan assets at beginning of year		-		-
Employer contributions		225		229
Benefits paid		(225)		(229)
Fair value of plan assets at end of year		-		-
FUNDED STATUS	$	11,911	$	10,603

Components of the net periodic pension cost for the defined benefit portion of the FHLBank’s BEP for the years ended December 31, 2012, 2011 and 2010were (in thousands):

	2012		2011		2010
Service cost	$	433	$	373	$	344
Interest cost		439		451		472
Amortization of prior service cost		-		-		(6)
Amortization of net loss		332		319		353
NET PERIODIC POSTRETIREMENT BENEFIT COST	$	1,204	$	1,143	$	1,163

The estimated actuarial (gain) loss that will be amortized from AOCI into net periodic benefits costs over the next fiscal year is $402,000.

The measurement date used to determine the current year’s benefit obligation was December 31, 2012.

Key assumptions and other information for the actuarial calculations for the defined benefit portion of the FHLBank’s BEP for the years ended December 31, 2012, 2011 and 2010 were (dollar amounts in thousands):

	2012			2011			2010
Discount rate - benefit obligation		3.75	%		4.20	%		5.25	%
Discount rate - net periodic benefit cost		4.20	%		5.25	%		5.75	%
Salary increases		5.06	%		4.92	%		4.97	%
Amortization period (years)		9			7			8
Accumulated benefit obligation	$	9,904		$	8,517		$	7,232

The FHLBank estimates that its required contributions to the defined benefit portion of the FHLBank’s BEP for the year ended December 31, 2013 will be $307,000.

The estimated benefits to be paid by the FHLBank under the defined benefit portion of the BEP for the next five fiscal years and the combined five fiscal years thereafter are provided in the following table (in thousands):

Year ending December 31,	Estimated Benefit Payments
2013	$	307
2014		343
2015		382
2016		429
2017		491
2018 through 2022		3,901

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Derivatives And Hedging Activities (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Derivative [Line Items]
Derivative instruments with credit-risk-related contingent features, aggregate fair value	$ 460,626	$ 483,294
Derivative instruments with credit-risk-related contingent features, collateral already posted	337,369	343,706
Derivative instruments with credit-risk-related contingent features, collateral to be posted if credit rating is lowered one level	93,770	112,037
Counterparty One [Member]
Derivative [Line Items]
Maximum credit risk applicable to a single counterparty	$ 28,512	$ 30,135

XML

Statements Of Capital (Parenthetical)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Capital Stock Class A [Member]
Stock dividend rate percentage	0.30%	0.30%	0.60%
Capital Stock Class B [Member]
Stock dividend rate percentage	3.50%	3.20%	3.00%

XML

Statements Of Condition (Parenthetical) (USD $) In Thousands, except Per Share data, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Held-to-maturity Securities, Fair value	$ 5,192,330	$ 4,967,585
Capital Stock Class A [Member]
Common Stock, Par Value	$ 100	$ 100
Common Stock, Shares Issued	4,053	5,373
Common Stock, Shares Outstanding	4,053	5,373
Capital Stock Class B [Member]
Common Stock, Par Value	$ 100	$ 100
Common Stock, Shares Issued	8,592	7,905
Common Stock, Shares Outstanding	8,592	7,905

XML

Derivatives And Hedging Activities

12 Months Ended

Dec. 31, 2012

Derivatives And Hedging Activities [Abstract]

Derivatives And Hedging Activities

NOTE 8 – DERIVATIVES AND HEDGING ACTIVITIES

Nature of Business Activity: The FHLBank is exposed to interest rate risk primarily from the effect of interest rate changes on its interest-earning assets and its funding sources that finance these assets. The goal of the FHLBank’s interest-rate risk management strategy is not to eliminate interest-rate risk, but to manage it within appropriate limits. To mitigate the risk of loss, the FHLBank has established policies and procedures, which include guidelines on the amount of exposure to interest rate changes it is willing to accept. In addition, the FHLBank monitors the risk to its revenue, net interest margin and average maturity of interest-earning assets and funding sources.

Consistent with Finance Agency regulation, the FHLBank enters into derivatives only to: (1) reduce the interest rate risk exposures inherent in otherwise unhedged assets and funding positions; (2) achieve risk management objectives; and (3) act as an intermediary between its members and counterparties. Finance Agency regulation and the FHLBank’s Risk Management Policy (RMP) prohibit trading in or the speculative use of these derivative instruments and limit credit risk arising from these instruments. The use of derivatives is an integral part of the FHLBank’s financial management strategy.

The FHLBank uses derivatives to:

§ Reduce funding costs by combining an interest rate swap with a consolidated obligation because the cost of a combined funding structure can be lower than the cost of a comparable consolidated obligation;

§ Reduce the interest rate sensitivity and repricing gaps of assets and liabilities;

§ Preserve a favorable interest rate spread between the yield of an asset (e.g., an advance) and the cost of the related liability (e.g., the consolidated obligation used to fund the advance). Without the use of derivatives, this interest rate spread could be reduced or eliminated when a change in the interest rate on the advance does not match a change in the interest rate on the consolidated obligation;

§ Mitigate the adverse earnings effects of the shortening or extension of certain assets (e.g., advances or mortgage assets) and liabilities;

§ Manage embedded options in assets and liabilities; and

§ Manage its overall asset-liability management.

Application of Derivatives: Derivative financial instruments may be used by the FHLBank as follows:

§ As a fair value or cash flow hedge of an associated financial instrument, a firm commitment or an anticipated transaction;

§ As an economic hedge to manage certain defined risks in its statement of condition. These hedges are primarily used to manage mismatches between the coupon features of its assets and liabilities. For example, the FHLBank may use derivatives in its overall interest rate risk management activities to adjust the interest rate sensitivity of consolidated obligations to approximate more closely the interest rate sensitivity of its assets (both advances and investments) and to adjust the interest rate sensitivity of advances or investments to approximate more closely the interest rate sensitivity of its liabilities; and

§ As an intermediary hedge to meet the asset/liability management needs of its members. The FHLBank acts as an intermediary by entering into derivatives with its members and offsetting derivatives with other counterparties. This intermediation grants smaller members indirect access to the derivatives market. The 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 FHLBank.

Derivative financial instruments are used by the FHLBank when they are considered to be the most cost-effective alternative to achieve the FHLBank’s financial and risk management objectives. The FHLBank reevaluates its hedging strategies from time to time and may change the hedging techniques it uses or adopt new strategies.

The FHLBank transacts a significant portion of its derivatives with major banks and primary broker/dealers. Some of these banks and broker/dealers or their affiliates buy, sell and distribute consolidated obligations. No single entity dominates the FHLBank’s derivatives business. The FHLBank is not a derivatives dealer and thus does not trade derivatives for short-term profit.

Types of Derivatives: The FHLBank commonly enters into interest rate swaps (including callable and putable swaps), swaptions, and interest rate cap and floor agreements (collectively, derivatives) to reduce funding costs and to manage its exposure to interest rate risks inherent in the normal course of business. These instruments are recorded at fair value and reported in derivative assets or derivative liabilities on the Statements of Condition. Premiums paid at acquisition are accounted for as the basis of the derivative at inception of the hedge.

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 time. In return for this promise, this party receives cash flows equivalent to the interest on the same notional principal amount at a variable interest rate index for the same period of time. The variable interest rate received by the FHLBank in most derivative agreements is 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 FHLBank against future interest rate changes. The FHLBank purchases both payer swaptions and receiver swaptions to decrease its interest rate risk exposure related to the prepayment of certain assets. A payer swaption is the option to make fixed interest payments at a later date and a receiver swaption is the option to receive fixed interest payments at a later date.

Interest Rate Caps and Floors – In an interest rate 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 or interest rate. In an interest rate 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 or interest rate. 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 or falling below a certain level. The FHLBank purchases interest rate caps and floors to hedge option risk on the MBS held in the FHLBank’s held-to-maturity portfolio and to hedge embedded caps or floors in the FHLBank’s advances.

Types of Hedged Items: At the inception of every hedge transaction, the FHLBank documents all hedging relationships between derivatives designated as hedging instruments and the 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: (1) assets and/or liabilities on the Statements of Condition; (2) firm commitments; or (3) forecasted transactions. The FHLBank formally assesses (both at the hedge’s inception and at least quarterly on an ongoing basis) whether the derivatives that are used 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 FHLBank typically uses regression analyses or similar statistical analyses to assess the effectiveness of its hedging relationships.

Consolidated Obligations – While consolidated obligations are the joint and several obligations of the 12 FHLBanks, each FHLBank enters into derivatives to hedge the interest rate risk associated with its specific debt issuances. The FHLBank manages the risk arising from changing market prices and volatility of a consolidated obligation by matching the cash inflow on the derivative with the cash outflow on the consolidated obligation.

For instance, in a typical transaction involving more than one FHLBank, fixed rate consolidated obligation bonds are issued for one or more FHLBanks, including FHLBank Topeka. In connection with its share of the bond issuance, FHLBank Topeka simultaneously enters into a matching derivative in which the counterparty pays fixed cash flows to FHLBank Topeka designed to mirror in timing and amount the cash outflows FHLBank Topeka pays on the consolidated obligation. In this type of transaction, FHLBank Topeka typically pays the derivative counterparty a variable cash flow that closely matches the interest payments it receives on short-term or variable rate advances (typically one- or three-month LIBOR). These transactions are designated as fair value hedges. Note, though, that most of the FHLBank’s swapped consolidated obligation bonds are fixed rate, callable bonds where the FHLBank is the sole issuer of the particular debt issue. The swap transaction with a counterparty for debt upon which the FHLBank is the sole issuer follows the same process reflected above (simultaneous, matching terms, etc.).

This strategy of issuing bonds while simultaneously entering into derivatives enables the FHLBank to offer a wider range of attractively priced advances to its members and may allow the FHLBank to reduce its funding costs. The continued attractiveness of such debt depends on yield relationships between the bond and derivative markets. If conditions in these markets change, the FHLBank may alter the types or terms of the bonds that it issues. By acting in both the capital and derivatives markets, the FHLBank can raise funds at lower costs than through the issuance of simple fixed or variable rate consolidated obligations in the capital markets alone.

Advances  – With the issuance of a convertible advance, the FHLBank purchases from the member an option that enables the FHLBank to convert an advance from fixed rate to variable rate if interest rates increase. Once the FHLBank exercises its option to convert an advance to an at-the-market variable rate, the member then owns the option to terminate the converted advance without fee or penalty on the conversion date and each interest rate reset date thereafter. The FHLBank hedges a convertible advance by entering into a cancelable derivative with a non-member counterparty where the FHLBank pays a fixed rate and receives a variable rate. The derivative counterparty may cancel the derivative on a put date. This type of hedge is designated as a fair value hedge. The counterparty’s decision to cancel the derivative would normally occur in a rising rate environment. If the option is in-the-money, the derivative is cancelled by the derivative counterparty at par (i.e., without any premium or other payment to the FHLBank). When the derivative is cancelled, the FHLBank exercises its option to convert the advance to a variable rate. If a convertible advance is not prepaid by the member upon conversion to an at-the-market variable rate advance (i.e., callable variable rate advance), any hedge-related unamortized basis adjustment is amortized as a yield adjustment.

When fixed rate advances are issued to one or more borrowers, the FHLBank can either fund the advances with fixed rate consolidated obligations with the same tenor or simultaneously enter into a matching derivative in which the counterparty receives fixed cash flows from the FHLBank designed to mirror in timing and amount the cash inflows the FHLBank receives on the advance. Such transactions are designated as fair value hedges. In this type of transaction, the FHLBank typically receives from the derivative counterparty a variable cash flow that closely matches the interest payments on short-term discount notes or swapped consolidated obligation bonds.

The optionality embedded in certain financial instruments held by the FHLBank can create interest rate risk. For example, when a member prepays an advance, the FHLBank could suffer lower future income if the principal portion of the prepaid advance were invested in lower-yielding assets that continue to be funded by higher-cost debt. To protect against this risk, the FHLBank generally charges a prepayment fee on an advance that makes it financially indifferent to a member’s decision to prepay the advance. When the FHLBank offers advances (other than short-term advances) that a member may prepay without a prepayment fee, it usually finances such advances with callable debt or otherwise hedges the option being sold to the member.

Mortgage Loans – The FHLBank invests in fixed rate mortgage loans through the MPF Program. The prepayment options embedded in these mortgage loans can result in extensions or contractions in the expected lives of these investments, depending on changes in estimated future cash flows, which usually occur as a result of interest rate changes. The FHLBank may manage the interest rate and prepayment risk associated with mortgages through a combination of debt issuance and derivatives. The FHLBank issues both callable and non-callable debt to achieve cash flow patterns and liability durations similar to those expected on the mortgage loans. The FHLBank may use derivatives in conjunction with debt issuance to better match the expected prepayment characteristics of its mortgage loan portfolio.

Interest rate caps and floors, swaptions and callable swaps may also be used to hedge prepayment risk on the mortgage loans. Although these derivatives are valid economic hedges against the prepayment risk of the portfolio of mortgage loans, they are not specifically linked to individual loans and, therefore, do not receive either fair value or cash flow hedge accounting. The derivatives are marked-to-market through earnings.

Firm Commitments – Commitments that obligate the FHLBank to purchase closed fixed rate mortgage loans from its members are considered derivatives. Accordingly, each mortgage purchase commitment is recorded as a derivative asset or derivative liability at fair value, with changes in fair value recognized in current period earnings. When a mortgage purchase commitment derivative settles, the current market value of the commitment is included with the basis of the mortgage loan and amortized accordingly.

The FHLBank may also hedge a firm commitment for a forward starting advance or consolidated obligation bond through the use of an interest rate swap. In this case, the swap functions as the hedging instrument for both the hedging relationship involving the firm commitment and the subsequent hedging relationship involving the advance or bond. The basis movement associated with the firm commitment is rolled into the basis of the advance or bond at the time the commitment is terminated and the advance or bond is issued. The basis adjustment is then amortized into interest income or expense over the life of the advance or bond.

Investments – The FHLBank invests in U.S. Treasury securities, U.S. Agency securities, government-guaranteed securities, GSE securities, MBS and the taxable portion of state or local housing finance agency securities. The interest rate and prepayment risk associated with these investment securities is managed through a combination of debt issuance and derivatives. The FHLBank may manage the prepayment and interest-rate risks by funding investment securities with consolidated obligations that have call features or by economically hedging the prepayment risk with caps or floors, callable swaps or swaptions. The FHLBank may manage against prepayment and duration risks by funding investment securities with consolidated obligations that have call features. The FHLBank may also manage the risk arising from changing market prices and volatility of investment securities by entering into derivatives (economic hedges) that offset the changes in fair value or cash flows of the securities. The FHLBank’s derivatives associated with investment securities (currently includes interest rate caps, floors and swaps) are designated as economic hedges with the changes in fair values of the derivatives being recorded as “Net gain (loss) on derivatives and hedging activities” in other income (loss) on the Statements of Income. The investment securities hedged with interest rate swaps are classified as trading securities with the changes in fair values recorded as “Net gain (loss) on trading securities” in other income (loss) on the Statements of Income.

Interest rate caps and floors, swaptions and callable swaps may also be used to hedge prepayment and option risk on the MBS held in the FHLBank’s trading and held-to-maturity portfolios. Most of these derivatives are purchased interest rate caps that hedge interest rate caps embedded in the FHLBank’s trading and held-to-maturity variable rate Agency MBS. Although these derivatives are valid economic hedges against the prepayment and option risk of the portfolio of MBS, they are not specifically linked to individual investment securities and, therefore, do not receive either fair value or cash flow hedge accounting. The derivatives are marked-to-market through earnings.

Anticipated Debt Issuance – The FHLBank enters into interest rate swaps for the anticipated issuance of fixed rate consolidated obligation bonds to hedge the variability in forecasted interest payments associated with fixed rate debt that has not yet been issued. The interest rate swap is terminated upon issuance of the fixed rate bond, with the realized gain or loss on the interest rate swap recorded in OCI. 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.

Financial Statement Impact and Additional Financial Information: The notional amount in derivative contracts serves as a factor in determining periodic interest payments or cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor the overall exposure of the FHLBank to credit and market risk. The risks of derivatives can be measured meaningfully on a portfolio basis that takes into account the counterparties, the types of derivatives, the items being hedged and any offsets between the derivatives and the items being hedged.

The FHLBank considers accrued interest receivables and payables and the legal right to offset derivative assets and liabilities by counterparty. Consequently, derivative assets and liabilities reported on the Statements of Condition include the net cash collateral and accrued interest from counterparties. Therefore, an individual derivative may be in an asset position (counterparty would owe the FHLBank the current fair value, which includes net accrued interest receivable or payable on the derivative, if the derivative was settled as of the Statement of Condition date) but when the derivative fair value and cash collateral fair value (includes accrued interest on the collateral) are netted by counterparty, the derivative may be recorded on the Statements of Condition as a derivative liability. Conversely, a derivative may be in a liability position (FHLBank would owe the counterparty the fair value if settled as of the Statement of Condition date) but may be recorded on the Statements of Condition as a derivative asset after netting.

The following table represents outstanding notional balances and fair values (includes net accrued interest receivable or payable on the derivatives) of the derivatives outstanding by type of derivative and by hedge designation as of December 31, 2012 (in thousands):

	12/31/2012
	Gross Asset Positions				Gross Liability Positions				Net Derivative Assets				Net Derivative Liabilities
	Notional		Fair Value		Notional		Fair Value		Notional		Fair Value		Notional		Fair Value
Fair value hedges:
Interest rate swaps	$	5,337,000	$	218,909	$	7,023,157	$	(493,515)	$	2,574,325	$	33,707	$	9,785,832	$	(308,313)
Interest rate caps/floors		-		-		247,000		(4,429)		100,000		(1,420)		147,000		(3,009)
Total fair value hedges		5,337,000		218,909		7,270,157		(497,944)		2,674,325		32,287		9,932,832		(311,322)
Economic hedges:
Interest rate swaps		4,710,000		7,607		1,096,320		(166,890)		3,170,000		5,190		2,636,320		(164,473)
Interest rate caps/floors		4,528,800		29,761		1,344,000		(62)		1,482,500		14,591		4,390,300		15,108
Mortgage delivery commitments		62,378		102		43,977		(96)		62,378		102		43,977		(96)
Total economic hedges		9,301,178		37,470		2,484,297		(167,048)		4,714,878		19,883		7,070,597		(149,461)
TOTAL	$	14,638,178	$	256,379	$	9,754,454	$	(664,992)	$	7,389,203		52,170	$	17,003,429		(460,783)
Fair value of cash collateral delivered to counterparties												-				337,369
Fair value of cash collateral received from counterparties												(27,004)				-
NET DERIVATIVE FAIR VALUE											$	25,166			$	(123,414)

The following table represents outstanding notional balances and fair values (includes net accrued interest receivable or payable on the derivatives) of the derivatives outstanding by type of derivative and by hedge designation as of December 31, 2011 (in thousands):

	12/31/2011
	Gross Asset Positions				Gross Liability Positions				Net Derivative Assets				Net Derivative Liabilities
	Notional		Fair Value		Notional		Fair Value		Notional		Fair Value		Notional		Fair Value
Fair value hedges:
Interest rate swaps	$	6,446,000	$	287,805	$	8,192,887	$	(571,776)	$	4,175,367	$	71,605	$	10,463,520	$	(355,576)
Interest rate caps/floors		-		-		247,000		(5,075)		90,000		(1,759)		157,000		(3,316)
Total fair value hedges		6,446,000		287,805		8,439,887		(576,851)		4,265,367		69,846		10,620,520		(358,892)
Economic hedges:
Interest rate swaps		375,000		2,353		2,941,320		(191,864)		520,000		(40,149)		2,796,320		(149,362)
Interest rate caps/floors		6,372,533		53,004		639,000		(289)		1,435,300		10,079		5,576,233		42,636
Mortgage delivery commitments		119,945		843		-		-		119,945		843		-		-
Total economic hedges		6,867,478		56,200		3,580,320		(192,153)		2,075,245		(29,227)		8,372,553		(106,726)
TOTAL	$	13,313,478	$	344,005	$	12,020,207	$	(769,004)	$	6,340,612		40,619	$	18,993,073		(465,618)
Fair value of cash collateral delivered to counterparties												-				343,706
Fair value of cash collateral received from counterparties1												(26,581)				(18,301)
NET DERIVATIVE FAIR VALUE											$	14,038			$	(140,213)

¹The FHLBank held cash with a fair value of $44,882,000 as collateral as of December 31, 2011. Exposure can change on a daily basis; and thus, there is often a short lag time between the date the exposure is identified, collateral is requested and when the collateral is actually received. Likewise, there is a lag time for excess collateral to be returned. Excess collateral held by the FHLBank as of December 31, 2011 resulted in positive exposure (fair value plus accrued interest) with one counterparty being recorded as a derivative liability.

The following tables provide information regarding gains and losses on derivatives and hedging activities by type of hedge and type of derivative and gains and losses by hedged item for fair value hedges.

For the years ended December 31, 2012, 2011 and 2010, the FHLBank recorded net gain (loss) on derivatives and hedging activities as follows (in thousands):

	2012		2011		2010
Derivatives and hedge items in fair value hedging relationships:
Interest rate swaps	$	2,792	$	2,122	$	(1,160)
Interest rate caps/floors		-		(58)		(64)
Total net gain (loss) related to fair value hedge ineffectiveness		2,792		2,064		(1,224)
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps		27,428		(9,870)		(40,634)
Interest rate caps/floors		(24,032)		(70,577)		(83,746)
Net interest settlements		(35,174)		(40,489)		(53,171)
Mortgage delivery commitments		7,509		10,146		4,138
Intermediary transactions:
Interest rate swaps		(1)		(29)		(42)
Interest rate caps/floors		-		12		5
Total net gain (loss) related to derivatives not designated as hedging instruments		(24,270)		(110,807)		(173,450)
NET GAIN (LOSS) ON DERIVATIVES AND HEDGING ACTIVITIES	$	(21,478)	$	(108,743)	$	(174,674)

The FHLBank carries derivative instruments at fair value on its Statements of Condition. Any change in the fair value of derivatives designated under a fair value hedging relationship is recorded each period in current period earnings. Fair value hedge accounting allows for the offsetting fair value of the hedged risk in the hedged item to also be recorded in current period earnings. For the years ended December 31, 2012, 2011 and 2010, the FHLBank recorded net gain (loss) on derivatives and the related hedged items in fair value hedging relationships and the impact of those derivatives on the FHLBank’s net interest income as follows (in thousands):

	2012
	Gain (Loss) on Derivatives		Gain (Loss) on Hedged Items		Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on Net Interest Income1
Advances	$	44,010	$	(45,836)	$	(1,826)	$	(186,360)
Consolidated obligation bonds		(63,877)		68,515		4,638		142,355
Consolidated obligation discount notes		114		(134)		(20)		12
TOTAL	$	(19,753)	$	22,545	$	2,792	$	(43,993)
	2011
	Gain (Loss) on Derivatives		Gain (Loss) on Hedged Items		Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on Net Interest Income1
Advances	$	(113,640)	$	111,609	$	(2,031)	$	(234,817)
Consolidated obligation bonds		21,401		(16,970)		4,431		212,243
Consolidated obligation discount notes		(1,120)		784		(336)		1,254
TOTAL	$	(93,359)	$	95,423	$	2,064	$	(21,320)
	2010
	Gain (Loss) on Derivatives		Gain (Loss) on Hedged Items		Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on Net Interest Income1
Advances	$	(106,531)	$	105,102	$	(1,429)	$	(290,214)
Consolidated obligation bonds		28,540		(28,656)		(116)		290,416
Consolidated obligation discount notes		964		(643)		321		1,903
TOTAL	$	(77,027)	$	75,803	$	(1,224)	$	2,105

¹The differentials between accruals of interest receivables and payables on derivatives designated as fair value hedges as well as the amortization/accretion of hedging activities are recognized as adjustments to the interest income or expense of the designated underlying hedged item.

There were no amounts for the years ended December 31, 2012, 2011 and 2010that were reclassified into earnings as a result of the discontinuance of cash flow hedges because it became probable that the original forecasted transactions would not occur by the end of the originally specified time period or within a two-month period thereafter. As of December 31, 2012, no amounts relating to hedging activities remain in AOCI.

Managing Credit Risk on Derivatives: The FHLBank is subject to credit risk due to nonperformance by counterparties to the derivative agreements. The degree of counterparty risk on derivative agreements depends on the extent to which master netting arrangements are included in such contracts to mitigate the risk. The FHLBank manages counterparty credit risk through credit analyses, collateral requirements and adherence to the requirements set forth in its RMP. The FHLBank requires collateral agreements on all derivatives that establish collateral delivery thresholds. Additionally, collateral related to derivatives with member institutions includes collateral assigned to the FHLBank, as evidenced by a written security agreement and held by the member institution for the benefit of the FHLBank. Based on credit analyses and collateral requirements, FHLBank management does not anticipate any credit losses on its derivative agreements. The maximum credit risk applicable to a single counterparty was $28,512,000 and $30,135,000 as of December 31, 2012 and 2011, respectively. The counterparty was the same each period.

The following table presents credit risk exposure on derivative instruments as of December 31, 2012 and 2011, excluding circumstances where the FHLBank’s pledged collateral exceeds the FHLBank’s net position (in thousands):

	12/31/2012		12/31/2011
Total net exposure at fair value1	$	52,170	$	40,619
Cash collateral held		(27,004)		(26,581)
Net positive exposure after cash collateral		25,166		14,038
Other collateral2		(278)		(1,825)
NET EXPOSURE AFTER COLLATERAL	$	24,888	$	12,213

¹Includes net accrued interest receivable of $5,731,000 and $3,700,000 as of December 31, 2012 and 2011, respectively.

²Collateral held with respect to derivatives with members which represents either collateral physically held by or on behalf of the FHLBank or collateral assigned to the FHLBank as evidenced by a written security agreement and held by the member for the benefit of the FHLBank.

Certain of the FHLBank’s derivative instruments contain provisions that require the FHLBank to post additional collateral with its counterparties if there is deterioration in the FHLBank’s credit rating. If the FHLBank’s credit rating is lowered by an NRSRO, the FHLBank may be required to deliver additional collateral on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with derivative counterparties containing credit-risk-related contingent features that were in a net derivative liability position as of December 31, 2012 and 2011 was $460,626,000 and $483,294,000, respectively, for which the FHLBank has posted collateral with a fair value of $337,369,000 and $343,706,000, respectively, in the normal course of business. If the FHLBank’s credit rating had been lowered one level (e.g., from double-A to single-A), the FHLBank would have been required to deliver an additional $93,770,000 and $112,037,000 of collateral to its derivative counterparties as of December 31, 2012 and 2011.

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Transactions With Other FHLBanks (Details) (USD $)	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Transactions With Other Federal Home Loan Banks [Line Items]
Average overnight interbank loan balances to other FHLBanks	$ 2,242,000	[1]	$ 1,432,000	[1]	$ 507,000	[1]
Average overnight interbank loan balances from other FHLBanks	3,907,000	[1]	4,963,000	[1]	4,000,000	[1]
Average deposit balance with FHLBank of Chicago for shared expense transactions	108,000	[2]	65,000	[2]	47,000	[2]
Average deposit balance with FHLBank of Chicago for MPF transactions	1,139,000	[2]	23,000	[2]	28,000	[2]
Transaction charges paid to FHLBank of Chicago for transaction service fees	2,879,000	[3]	2,334,000	[3]	1,760,000	[3]
Par amount of purchases of consolidated obligations issued on behalf of other FHLBanks	0	[4]	0	[4]	0	[4]
Investment In Consolidated Obligations Of Other Federal Home Loan Banks Fair Value	126,828,000		127,389,000
Interest Income On Investments In Consolidated Obligations Of Other Federal Home Loan Banks	$ 5,582,000		$ 5,582,000		$ 8,944,000
Loans Originated After January 1, 2010 [Member]
Transactions With Other Federal Home Loan Banks [Line Items]
Basis points per annum to calculate fees on outstanding loans	0.055%		0.055%		0.055%
Loans Originated After January 4, 2004 and Before December 31, 2009 [Member]
Transactions With Other Federal Home Loan Banks [Line Items]
Basis points per annum to calculate fees on outstanding loans	0.05%		0.05%		0.05%

[1] Occasionally, the FHLBank loans (or borrows) short-term funds to (from) other FHLBanks. Interest income on loans to other FHLBanks is included in Other Interest Income and interest expense on borrowings from other FHLBanks is included in Other Interest Expense on the Statements of Income.

[2] Balance is interest bearing and is classified on the Statements of Condition as interest-bearing deposits.

[3] Fees are calculated monthly based on 5.5 basis points per annum of outstanding loans originated since January 1, 2010 and are recorded in other expense. For outstanding loans originated since January 1, 2004 and through December 31, 2009, fees are calculated monthly based on 5.0 basis points per annum.

[4] Purchases of consolidated obligations issued on behalf of one FHLBank and purchased by the FHLBank occur at market prices with third parties and are accounted for in the same manner as similarly classified investments. Outstanding fair value balances totaling $126,828,000 and $127,389,000 as of December 31, 2012 and 2011, respectively, are included in the non-MBS GSE obligations totals presented in Note 4; all were purchased prior to 2009. Interest income earned on these securities totaled $5,582,000, $5,582,000, and $8,944,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

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Fair Values (Fair Value, By Balance Sheet Grouping) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Derivative assets	$ 25,166	$ 14,038
Carrying Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	369,997	116,041
Interest-bearing deposits	455	42
Federal funds sold and securities purchased under agreements to resell	2,849,288	1,040,000
Trading securities	2,764,918	4,559,163
Held-to-maturity securities	5,159,750	4,977,332
Advances	16,573,348	17,394,399
Mortgage loans held for portfolio, net of allowance	5,940,517	4,933,332
Accrued interest receivable	77,445	85,666
Derivative assets	25,166	14,038
Deposits	1,181,957	997,371
Consolidated obligation discount notes	8,669,059	10,251,108
Consolidated obligation bonds	21,973,902	19,894,483
Overnight loans from other FHLBanks		35,000
Mandatorily redeemable capital stock	5,665	8,369
Accrued interest payable	81,801	96,237
Derivative liabilities	123,414	140,213
Standby letters of credit	(1,039)	(1,401)
Standby bond purchase agreements	588	384
Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	369,997	116,041
Interest-bearing deposits	455	42
Federal funds sold and securities purchased under agreements to resell	2,849,288	1,040,000
Trading securities	2,764,918	4,559,163
Held-to-maturity securities	5,192,330	4,967,585
Advances	16,714,319	17,564,068
Mortgage loans held for portfolio, net of allowance	6,256,905	5,184,775
Accrued interest receivable	77,445	85,666
Derivative assets	25,166	14,038
Deposits	1,181,957	997,371
Consolidated obligation discount notes	8,669,327	10,250,885
Consolidated obligation bonds	22,189,631	20,195,131
Overnight loans from other FHLBanks		35,000
Mandatorily redeemable capital stock	5,665	8,369
Accrued interest payable	81,801	96,237
Derivative liabilities	123,414	140,213
Standby letters of credit	(1,039)	(1,401)
Standby bond purchase agreements	4,922	2,788
Fair Value [Member] | Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	369,997
Interest-bearing deposits	0
Federal funds sold and securities purchased under agreements to resell	0
Trading securities	0
Held-to-maturity securities	0
Advances	0
Mortgage loans held for portfolio, net of allowance	0
Accrued interest receivable	0
Derivative assets	0
Deposits	0
Consolidated obligation discount notes	0
Consolidated obligation bonds	0
Mandatorily redeemable capital stock	5,665
Accrued interest payable	0
Derivative liabilities	0
Standby letters of credit	0
Standby bond purchase agreements	0
Fair Value [Member] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	0
Interest-bearing deposits	455
Federal funds sold and securities purchased under agreements to resell	2,849,288
Trading securities	2,764,918
Held-to-maturity securities	4,633,792
Advances	16,714,319
Mortgage loans held for portfolio, net of allowance	6,256,905
Accrued interest receivable	77,445
Derivative assets	256,379
Deposits	1,181,957
Consolidated obligation discount notes	8,669,327
Consolidated obligation bonds	22,189,631
Mandatorily redeemable capital stock	0
Accrued interest payable	81,801
Derivative liabilities	664,992
Standby letters of credit	(1,039)
Standby bond purchase agreements	4,922
Fair Value [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	0
Interest-bearing deposits	0
Federal funds sold and securities purchased under agreements to resell	0
Trading securities	0
Held-to-maturity securities	558,538
Advances	0
Mortgage loans held for portfolio, net of allowance	0
Accrued interest receivable	0
Derivative assets	0
Deposits	0
Consolidated obligation discount notes	0
Consolidated obligation bonds	0
Mandatorily redeemable capital stock	0
Accrued interest payable	0
Derivative liabilities	0
Standby letters of credit	0
Standby bond purchase agreements	0
Fair Value [Member] | Netting Adjustment And Cash Collateral [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Cash and due from banks	0
Interest-bearing deposits	0
Federal funds sold and securities purchased under agreements to resell	0
Trading securities	0
Held-to-maturity securities	0
Advances	0
Mortgage loans held for portfolio, net of allowance	0
Accrued interest receivable	0
Derivative assets	(231,213)
Deposits	0
Consolidated obligation discount notes	0
Consolidated obligation bonds	0
Mandatorily redeemable capital stock	0
Accrued interest payable	0
Derivative liabilities	(541,578)
Standby letters of credit	0
Standby bond purchase agreements	$ 0

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Pension And Postretirement Benefit Plans (Schedule Of Assumptions Used) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Pension And Postretirement Benefit Plans [Abstract]
Discount rate - benefit obligation	3.75%	4.20%	5.25%
Discount rate - net periodic benefit cost	4.20%	5.25%	5.75%
Salary increases	5.06%	4.92%	4.97%
Amortization period (years)	9 years	7 years	8 years
Accumulated benefit obligation	$ 9,904	$ 8,517	$ 7,232

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Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2012	Mar. 13, 2013 Capital Stock Class A [Member]	Mar. 13, 2013 Capital Stock Class B [Member]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY
Entity Registrant Name	Federal Home Loan Bank of Topeka
Entity Central Index Key	0001325878
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		5,188,471	8,394,691
Entity Public Float	$ 0
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No

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Deposits

12 Months Ended

Dec. 31, 2012

Deposits [Abstract]

Deposits

NOTE 9 – DEPOSITS

The FHLBank offers demand and overnight deposit programs to its members and to other qualifying non-members. In addition, the FHLBank offers short-term deposit programs to members. A member that services mortgage loans may deposit with the FHLBank funds collected in connection with the mortgage loans, pending disbursement of such funds to owners of the mortgage loans. The FHLBank classifies these items as “Non-interest-bearing other deposits.” The following table details the types of deposits held by the FHLBank as of December 31, 2012 and 2011 (in thousands):

	12/31/2012		12/31/2011
Interest-bearing:
Demand	$	253,527	$	156,345
Overnight		824,200		799,400
Term		39,900		2,700
Total interest-bearing		1,117,627		958,445
Non-interest-bearing:
Demand		360		348
Other		63,970		38,578
Total non-interest-bearing		64,330		38,926
TOTAL DEPOSITS	$	1,181,957	$	997,371

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Affordable Housing Program (Schedule Of Change In AHP Liability) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Affordable Housing Program [Abstract]
Appropriated and reserved AHP funds as of the beginning of the period	$ 31,392		$ 39,226		$ 44,117
AHP set aside based on current year income	12,261		8,611		3,766
Direct grants disbursed	(13,210)		(16,984)		(8,908)
Recaptured funds	755	[1]	539	[1]	251	[1]
Appropriated and reserved AHP funds as of the end of the period	$ 31,198		$ 31,392		$ 39,226

[1] Recaptured funds are direct grants returned to the FHLBank in those instances where the commitments associated with the approved use of funds are not met and repayment to the FHLBank is required by regulation. Recaptured funds are returned as a result of: (1) AHP-assisted homeowner’s transfer or sale of property within the five-year retention period that the assisted homeowner is required to occupy the property; (2) homeowner’s failure to acquire sufficient loan funding (funds previously approved and disbursed cannot be used); or (3) unused grants.

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Pension And Postretirement Benefit Plans (Components Of The Net Periodic Pension Cost For The Defined Benefit Portion) (Details) (Supplemental Employee Retirement Plans, Defined Benefit [Member], USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Supplemental Employee Retirement Plans, Defined Benefit [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 433,000	$ 373,000	$ 344,000
Interest cost	439,000	451,000	472,000
Amortization of prior service cost			(6,000)
Amortization of net loss	332,000	319,000	353,000
NET PERIODIC POSTRETIREMENT BENEFIT COST	$ 1,204,000	$ 1,143,000	$ 1,163,000

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Statements Of Income (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
INTEREST INCOME:
Interest-bearing deposits	$ 513	$ 204	$ 230
Federal funds sold and securities purchased under agreements to resell	4,027	2,219	4,826
Trading securities (Note 4)	69,244	81,388	90,884
Held-to-maturity securities (Note 4)	70,244	99,094	148,223
Advances (Notes 5)	148,032	154,536	194,878
Prepayment fees on terminated advances (Notes 5)	6,528	10,978	14,575
Mortgage loans held for sale (Note 6)	0	2,142	0
Mortgage loans held for portfolio (Note 6)	194,363	193,686	173,756
Other	1,832	2,240	2,639
Total interest income	494,783	546,487	630,011
INTEREST EXPENSE:
Deposits (Note 9)	1,511	2,594	2,805
Consolidated obligations:
Discount notes (Note 10)	9,237	9,591	21,017
Bonds (Note 10)	264,134	302,765	355,164
Securities sold under agreements to repurchase	0	0	3
Mandatorily redeemable capital stock (Note 13)	41	174	346
Other	180	437	800
Total interest expense	275,103	315,561	380,135
NET INTEREST INCOME	219,680	230,926	249,876
Provision for credit losses on mortgage loans (Note 7)	2,496	1,058	1,582
NET INTEREST INCOME AFTER MORTGAGE LOAN LOSS PROVISION	217,184	229,868	248,294
OTHER INCOME (LOSS):
Total other-than-temporary impairment losses on held-to-maturity securities (Note 4)	(5,105)	(13,686)	(17,778)
Portion of other-than-temporary impairment losses on held-to-maturity securities recognized in other comprehensive income (loss)	3,445	8,975	13,744
Net other-than-temporary impairment losses on held-to-maturity securities	(1,660)	(4,711)	(4,034)
Net gain (loss) on trading securities (Note 4)	(28,048)	20,772	14,425
Net gain (loss) on derivatives and hedging activities (Note 8)	(21,478)	(108,743)	(174,674)
Net gain (loss) on mortgage loans held for sale (Note 6)	0	4,425	0
Standby bond purchase agreement commitment fees	4,687	4,064	3,219
Letters of credit fees	3,079	3,347	3,406
Other	504	2,518	2,964
Total other income (loss)	(42,916)	(78,328)	(154,694)
OTHER EXPENSES:
Compensation and benefits (Note 15)	29,231	28,604	26,365
Other operating (Note 17)	12,866	13,857	13,844
Finance Agency	3,117	4,039	1,866
Office of Finance	2,287	2,236	1,922
Other	4,195	5,045	3,902
Total other expenses	51,696	53,781	47,899
INCOME (LOSS) BEFORE ASSESSMENTS	122,572	97,759	45,701
Affordable Housing Program (Note 11)	12,261	8,611	3,766
REFCORP (Note 12)	0	11,822	8,387
Total assessments	12,261	20,433	12,153
NET INCOME	$ 110,311	$ 77,326	$ 33,548

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Cash And Due From Banks

12 Months Ended

Dec. 31, 2012

Cash and Cash Equivalents [Abstract]

Cash And Due From Banks

NOTE 3 – CASH AND DUE FROM BANKS

Balances represent non-interest bearing deposits in banks.

Pass-through Deposit Reserves: The FHLBank acts as a pass-through correspondent for members required to deposit reserves with the Federal Reserve Banks (FRB). The amount shown as cash and due from banks includes $360,000 and $348,000 of reserve deposits with the FRB as of December 31, 2012 and 2011, respectively.

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Recently Issued Accounting Standards And Interpretations And Changes In And Adoptions Of Accounting Principles

12 Months Ended

Dec. 31, 2012

Recently Issued Accounting Standards And Interpretations And Changes In And Adoptions Of Accounting Principles [Abstract]

Recently Issued Accounting Standards And Interpretations And Changes In And Adoptions Of Accounting Principles

NOTE 2 – RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS AND CHANGES IN AND ADOPTIONS OF ACCOUNTING PRINCIPLES

Joint and Several Liability:In February 2013, the Financial Accounting Standards Board (FASB) issued guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. This guidance requires an entity to measure these obligations as the sum of: (1) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors; and (2) any additional amount the reporting entity expects to pay on behalf of its co-obligors. In addition, this guidance requires an entity to disclose the nature and amount of the obligation as well as other information about these obligations. This guidance is effective for interim and annual periods beginning on or after December 15, 2013 and should be applied retrospectively. The FHLBank does not expect this new guidance to have a material effect on its financial condition, results of operations or cash flows.

Offsetting Assets and Liabilities: In December 2011, the FASB and the International Accounting Standards Board (IASB) issued common disclosure requirements intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on anentity’s financial position, regardless of whether anentity’s financial statements are prepared on the basis of GAAP or International Financial Reporting Standards (IFRS). This guidance will require the FHLBank to disclose both gross and net information about financial instruments, including derivative instruments, which are either offset on itsStatements of Condition or subject to an enforceable master netting arrangement or similar agreement. This guidance will be effective for the FHLBank for interim and annual periods beginning on January 1, 2013 and will be applied retrospectively for all comparative periods presented. The adoption of this guidance will result in increased interim and annual financial statement disclosures, but will not affect the FHLBank’s financial condition, results of operations or cash flows.

Comprehensive Income – Presentation of Comprehensive Income: In June 2011, FASB issued guidance which requires all non-owner changes in stockholders’ equity to be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The option to present the components of OCI as part of the statement of changes in stockholders’ equity has been eliminated by this new guidance. The FHLBank decided to present non-owner changes using the two-statement approach. The two-statement approach requires the first statement to present total net income and its components followed, consecutively, by a second statement that presents total OCI, the components of OCI, and total comprehensive income. The guidance was effective for interim and annual periods beginning after December 15, 2011, including retrospective application for all periods presented. The FHLBank adopted this guidance as of January 1, 2012. The adoption of this guidance resulted in new presentation within the Statements of Income and the Statements of Capital, but did not impact the FHLBank’s financial condition, results of operations or cash flows.

Comprehensive Income – Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income: In February 2013, the FASB issued guidance which requires entities to provide information about significant reclassifications of items out of AOCI by component. Entities are required to report the effect of significant reclassifications out of AOCI on the respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety. For other amounts not required to be reclassified in their entirety, the entity is required to cross-reference to other disclosures that provide additional detail about these amounts. This guidance will be effective prospectively for the FHLBank for interim and annual periods beginning on January 1, 2013. The adoption of this guidance will result in increased interim and annual financial statement disclosures, but will not impact the FHLBank’s financial condition, results of operations or cash flows.

Fair Value Measurement – Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs: In May 2011, the FASB issued guidance which represents the converged guidance of FASB and the IASB on fair value measurement and disclosures. In particular, the new guidance: (1) requires the disclosure of the level within the fair value hierarchy level for financial instruments that are not measured at fair value but for which the fair value is required to be disclosed; (2) expands level 3 fair value disclosures about valuation process and sensitivity of the fair value measurement to changes in unobservable inputs; (3) permits an exception to measure fair value of a net position for financial assets and financial liabilities managed on a net position basis; and (4) clarifies that the highest and best use measurement is only applicable to nonfinancial assets. The guidance was effective for interim and annual periods beginning after December 15, 2011with early application not permitted. The FHLBank adopted this guidance as of January 1, 2012. The adoption of this guidance resulted in increased financial statement disclosures, but did not impact the FHLBank’s financial condition, results of operations or cash flows.

Transfers and Servicing – Reconsideration of Effective Control for Repurchase Agreements: In April 2011, the FASB issued guidance that removed the criterion which required the transferor of financial assets to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee to preclude sales accounting for the transfer. In addition, the new guidance removed the collateral maintenance implementation guidance from the determination of maintaining effective control over the transferred financial assets. This guidance became effective for interim and annual periods beginning on or after December 15, 2011 and was required to be applied prospectively to transactions or modifications occurring on or after the effective date. The FHLBank adopted this guidance as of January 1, 2012. The adoption of this guidance did not have a material impact on the FHLBank’s financial condition, results of operations or cash flows.

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Accumulated Other Comprehensive Income

12 Months Ended

Dec. 31, 2012

Accumulated Other Comprehensive Income [Abstract]

Accumulated Other Comprehensive Income

NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table summarizes the changes in AOCI for the years ended December 31, 2012, 2011 and 2010(in thousands):

	Net Non-credit Portion of OTTI Losses on Held-to-maturity Securities		Defined Benefit Pension Plan		Total Accumulated Other Comprehensive Income (Loss)
Balance, December 31, 2009	$	(9,719)	$	(2,142)	$	(11,861)
Other comprehensive income (loss)		(9,572)		(1,239)		(10,811)
Balance, December 31, 2010		(19,291)		(3,381)		(22,672)
Other comprehensive income (loss)		(4,468)		(701)		(5,169)
Balance, December 31, 2011		(23,759)		(4,082)		(27,841)
Other comprehensive income (loss)		2,913		(329)		2,584
Balance, December 31, 2012	$	(20,846)	$	(4,411)	$	(25,257)

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Consolidated Obligations

12 Months Ended

Dec. 31, 2012

Consolidated Obligations [Abstract]

Consolidated Obligations

NOTE 10 – CONSOLIDATED OBLIGATIONS

Consolidated obligations consist of consolidated bonds and discount notes and, as provided by the Bank Act or Finance Agency regulation, are backed only by the financial resources of the FHLBanks. The FHLBanks jointly issue consolidated obligations with the Office of Finance acting as their agent. The Office of Finance tracks the amounts of debt issued on behalf of each FHLBank. In addition, the FHLBank separately tracks and records as a liability its specific portion of consolidated obligations for which it is the primary obligor. The FHLBank utilizes a debt issuance process to provide a scheduled monthly issuance of global bullet consolidated obligation bonds. As part of this process, management from each of the FHLBanks determine and communicate a firm commitment to the Office of Finance for an amount of scheduled global debt to be issued on its behalf. If the FHLBanks’ commitments do not meet the minimum debt issue size, the proceeds are allocated to all FHLBanks based on the larger of the FHLBank’s commitment or allocated proceeds based on the individual FHLBank’s regulatory capital to total system regulatory capital. If the FHLBanks’ commitments exceed the minimum debt issue size, the proceeds are allocated based on relative regulatory capital of the FHLBanks with the allocation limited to the lesser of the allocation amount or actual commitment amount.

The Finance Agency and the U.S. Secretary of the Treasury have oversight over the issuance of FHLBank debt through the Office of Finance. The FHLBanks can, however, pass on any scheduled calendar slot and not issue any global bullet consolidated obligation bonds upon agreement of 8 of the 12 FHLBanks. Consolidated obligation bonds are issued primarily to raise intermediate- and long-term funds for the FHLBanks and are not subject to any statutory or regulatory limits as to maturities. Consolidated obligation discount notes, which are issued to raise short-term funds, are issued at less than their face amounts and redeemed at par when they mature.

Although the FHLBank is primarily liable for its portion of consolidated obligations (i.e., those issued on its behalf), the FHLBank is also jointly and severally liable with the other 11 FHLBanks for the payment of principal and interest on all consolidated obligations of each of the FHLBanks. The Finance Agency, at its discretion, may require any FHLBank to make principal or interest payments due on any consolidated obligations for which the FHLBank is not the primary obligor. Although it has never occurred, to the extent that an FHLBank would be required to make a payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank would be entitled to reimbursement from the non-complying FHLBank. However, if the Finance Agency determines that the non-complying FHLBank is unable to satisfy its obligations, then the Finance Agency may allocate the non-complying FHLBank’s outstanding consolidated obligation debt among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis the Finance Agency may determine to ensure that the FHLBanks operate in a safe and sound manner.

The par value of outstanding consolidated obligations of all FHLBanks, including outstanding consolidated obligations issued on behalf of the FHLBank, was approximately $687,902,143,000 and $691,867,651,000 as of December 31, 2012 and 2011 respectively. See Note 19 for FHLBank obligations acquired by FHLBank Topeka as investments. Finance Agency regulations require that each FHLBank maintain unpledged qualifying assets equal to its participation in the total consolidated obligations outstanding. Qualifying assets are defined as cash; secured advances; assets with an assessment or rating at least equivalent to the current assessment or rating of the consolidated obligations; obligations of or fully guaranteed by the United States; obligations, participations or other instruments of or issued by Fannie Mae or Ginnie Mae; mortgages, obligations or other securities, which are or have ever been sold by Freddie Mac under the Bank Act; and such securities as fiduciary and trust funds may invest in under the laws of the state in which the FHLBank is located.

Consolidated Obligation Bonds: The following table presents the FHLBank’s participation in consolidated obligation bonds outstanding as of December 31, 2012 and 2011 (in thousands):

	12/31/2012					12/31/2011
Year of Contractual Maturity	Amount		Weighted Average Interest Rate			Amount		Weighted Average Interest Rate
Due in one year or less	$	6,989,000		1.14	%	$	5,211,300		1.23	%
Due after one year through two years		3,774,700		1.18			4,151,000		1.76
Due after two years through three years		1,553,000		1.32			1,757,200		2.48
Due after three years through four years		1,244,650		2.21			1,172,500		2.00
Due after four years through five years		1,476,000		2.74			1,302,500		2.73
Thereafter		6,749,900		2.45			6,050,900		3.47
Total par value		21,787,250		1.74	%		19,645,400		2.29	%
Premium		54,585					51,199
Discounts		(5,479)					(7,272)
Hedging adjustments1		137,546					205,156
TOTAL	$	21,973,902				$	19,894,483

1See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

Consolidated obligation bonds are issued with either fixed rate coupon or variable rate coupon payment terms. Variable rate coupon bonds use a variety of indices for interest rate resets including LIBOR, U.S. Treasury bills, Prime, Constant Maturity Treasuries (CMT) and Eleventh District Cost of Funds Index (COFI). In addition, to meet the specific needs of certain investors in consolidated obligation bonds, fixed rate and variable rate bonds may contain certain features that may result in complex coupon payment terms and call features. When the FHLBank issues such structured bonds that present interest rate or other risks that are unacceptable to the FHLBank, it will simultaneously enter into derivatives containing offsetting features that effectively alter the terms of the complex bonds to the equivalent of simple fixed rate coupon bonds or variable rate coupon bonds tied to indices such as those detailed above.

The FHLBank’s participation in consolidated obligation bonds outstanding as of December 31, 2012 and 2011 includes callable bonds totaling $8,461,000,000 and $7,599,000,000, respectively. The FHLBank uses the unswapped callable bonds for financing its callable advances (Note 5), MBS (Note 4) and mortgage loans (Note 6). Contemporaneous with a portion of its fixed rate callable bond issues, the FHLBank will also enter into interest rate swap agreements (in which the FHLBank generally pays a variable rate and receives a fixed rate) with call features that mirror the options in the callable bonds (a sold callable swap). The combined sold callable swap and callable debt transaction allows the FHLBank to obtain attractively priced variable rate financing. The following table summarizes the FHLBank’s participation in consolidated obligation bonds outstanding by year of maturity, or by the next call date for callable bonds as of December 31, 2012 and 2011 (in thousands):

Year of Maturity or Next Call Date	12/31/2012		12/31/2011
Due in one year or less	$	14,900,000	$	11,615,300
Due after one year through two years		3,847,700		4,946,000
Due after two years through three years		1,024,000		1,191,200
Due after three years through four years		809,650		350,500
Due after four years through five years		688,000		567,500
Thereafter		517,900		974,900
TOTAL PAR VALUE	$	21,787,250	$	19,645,400

In addition to having fixed rate or simple variable rate coupon payment terms, consolidated obligation bonds may also have the following broad terms, regarding either the principal repayment or coupon payment:

§ Optional principal redemption bonds (callable bonds) that may be redeemed in whole or in part at the discretion of the FHLBank on predetermined call dates in accordance with terms of bond offerings;

§ Range bonds that have coupons at fixed or variable rates and pay the fixed or variable rate as long as the index rate is within the established range, but generally pay zero percent or a minimal interest rate if the specified index rate is outside the established range;

§ Conversion bonds that have coupons that convert from fixed to variable, or variable to fixed, or from one index to another, on predetermined dates according to the terms of the bond offerings; and

§ Step bonds that have coupons at fixed or variable rates for specified intervals over the lives of the bonds. At the end of each specified interval, the coupon rate or variable rate spread increases (decreases) or steps up (steps down). These bond issues generally contain call provisions enabling the bonds to be called at the FHLBank’s discretion on the step dates.

The following table summarizes interest rate payment terms for consolidated obligation bonds as of December 31, 2012 and 2011 (in thousands):

	12/31/2012		12/31/2011
Fixed rate	$	13,507,250	$	13,697,400
Variable rate		6,010,000		3,780,000
Step up		2,270,000		1,920,000
Range bonds		-		248,000
TOTAL PAR VALUE	$	21,787,250	$	19,645,400

Consolidated Discount Notes: Consolidated discount notes are issued to raise short-term funds. Consolidated discount notes are consolidated obligations with original maturities of up to one year. These consolidated discount notes are issued at less than their face amount and redeemed at par value when they mature.

The following table summarizes the FHLBank’s participation in consolidated obligation discount notes, all of which are due within one year (in thousands):

	Book Value		Par Value		Weighted Average Interest Rate
December 31, 2012	$	8,669,059	$	8,670,442		0.12	%
December 31, 2011	$	10,251,108	$	10,251,723		0.03	%

Concessions on Consolidated Obligations: Unamortized concessions were $12,392,000 and $11,160,000 as of December 31, 2012 and 2011, respectively, and are included in other assets. Amortization of such concessions is included in consolidated obligation interest expense. Amortization of concessions on bonds totaled $17,948,000, $12,276,000 and $16,557,000 in 2012, 2011 and 2010, respectively. Concessions on discount notes totaled $177,000, $210,000 and $932,000 in 2012, 2011 and 2010, respectively.

Information about the fair value of the consolidated obligations is included in Note 16.

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Capital (Schedule Of Mandatorily Redeemable Capital Stock) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Capital [Abstract]
Balance as at beginning of period	$ 8,369	$ 19,550	$ 22,437
Capital stock subject to mandatory redemption reclassified from equity during the period	381,687	301,438	279,036
Capital stock previously subject to mandatory redemption reclassified to equity	(4)	(90)	0
Redemption or repurchase of mandatorily redeemable capital stock during the period	(384,425)	(312,698)	(282,202)
Stock dividend classified as mandatorily redeemable capital stock during the period	38	169	279
Balance at end of period	$ 5,665	$ 8,369	$ 19,550

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Mortgage Loans

12 Months Ended

Dec. 31, 2012

Mortgage Loans [Abstract]

Mortgage Loans

NOTE6–  MORTGAGE LOANS

The MPF Program involves the FHLBank investing in mortgage loans, which have been funded by the FHLBank through or purchased from its participating members. These mortgage loans are government-insured or guaranteed (by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the Rural Housing Service of the Department of Agriculture (RHS) and/or the Department of Housing and Urban Development (HUD)) loans and conventional residential loans credit-enhanced by PFIs. Depending upon a member’s product selection, the servicing rights can be retained or sold by the participating member. The FHLBank does not buy or own any mortgage servicing rights.

Mortgage Loans Held for Sale: On December 31, 2010, the FHLBank transferred mortgage loans held for portfolio to held for sale based on its intent to sell specifically identified mortgage loans. All of these loans were classified as conventional mortgage loans. On May 6, 2011, all mortgage loans held for sale were sold at a net gain, which is included in other income (loss) on the Statements of Income. Following are details of the sale (in thousands):

		2011
Net proceeds	$	111,444
Cost basis		(107,019)
NET REALIZED GAIN (LOSS) ON SALE OF MORTGAGE LOANS HELD FOR SALE	$	4,425

Mortgage Loans Held for Portfolio: The following table presents information as of December 31, 2012 and 2011 on mortgage loans held for portfolio (in thousands):

	12/31/2012		12/31/2011
Real estate:
Fixed rate, medium-term1, single-family mortgages	$	1,711,275	$	1,362,379
Fixed rate, long-term, single-family mortgages		4,126,471		3,507,500
Total unpaid principal balance		5,837,746		4,869,879
Premiums		98,887		62,223
Discounts		(4,483)		(6,694)
Deferred loan costs, net		1,549		2,327
Other deferred fees		(312)		(521)
Hedging adjustments2		12,546		9,591
Total before Allowance for Credit Losses on Mortgage Loans		5,945,933		4,936,805
Allowance for Credit Losses on Mortgage Loans		(5,416)		(3,473)
MORTGAGE LOANS HELD FOR PORTFOLIO, NET	$	5,940,517	$	4,933,332

1	Medium-term defined as a term of 15 years or less.
2	See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

The following table presents information as of December 31, 2012 and 2011 on the outstanding UPB of mortgage loans held for portfolio (in thousands):

	12/31/2012		12/31/2011
Conventional loans	$	5,152,461	$	4,266,847
Government-guaranteed or insured loans		685,285		603,032
TOTAL UNPAID PRINCIPAL BALANCE	$	5,837,746	$	4,869,879

See Note 7 for information related to the FHLBank’s credit risk on mortgage loans and allowance for credit losses.

See Note 18 for detailed information on transactions with related parties.

Information about the fair value of mortgage loans held for portfolio is included in Note 16.

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Advances (Schedule Of Federal Home Loan Bank Advances By Interest Rate Payment Terms) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Advances [Abstract]
Due in one year or less, Fixed Rate	$ 1,301,041	$ 1,572,998
Due after one year, Fixed Rate	7,495,446	8,254,635
Total fixed rate	8,796,487	9,827,633
Due in one year or less, Variable Rate	2,132,017	1,305,889
Due after one year, Variable Rate	5,180,093	5,716,973
Total variable rate	7,312,110	7,022,862
TOTAL PAR VALUE	$ 16,108,597	$ 16,850,495

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Investment Securities

12 Months Ended

Dec. 31, 2012

Investment Securities [Abstract]

Investment Securities

NOTE 4 – INVESTMENT SECURITIES

Major Security Types: Trading and held-to-maturity securities as of December 31, 2012 are summarized in the following table (in thousands):

	Trading		Held-to-maturity
	Fair Value		Carrying Value		OTTI Recognized in OCI		Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
Commercial paper	$	59,996	$	-	$	-	$	-	$	-	$	-	$	-
Certificates of deposit		325,006		-		-		-		-		-		-
Government-sponsored enterprise obligations1.2		2,126,327		-		-		-		-		-		-
State or local housing agency obligations		-		69,442		-		69,442		170		8,686		60,926
Non-mortgage-backed securities		2,511,329		69,442		-		69,442		170		8,686		60,926
Mortgage-backed securities:
U.S. obligation residential3		1,277		85,484		-		85,484		650		-		86,134
Government-sponsored enterprise residential4		252,312		4,509,121		-		4,509,121		39,571		1,034		4,547,658
Private-label mortgage-backed securities:
Residential loans		-		494,631		20,649		515,280		5,433		25,522		495,191
Home equity loans		-		1,072		197		1,269		1,155		3		2,421
Mortgage-backed securities		253,589		5,090,308		20,846		5,111,154		46,809		26,559		5,131,404
TOTAL	$	2,764,918	$	5,159,750	$	20,846	$	5,180,596	$	46,979	$	35,245	$	5,192,330

¹Represents debentures issued by other FHLBanks, Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal Farm Credit Bank (Farm Credit), and Federal Agricultural Mortgage Corporation (Farmer Mac). GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

²See Note 19 for transactions with other FHLBanks.

³Represents MBS issued by Government National Mortgage Association (Ginnie Mae), which are guaranteed by the U.S. government.

⁴Represents MBS issued by Fannie Mae and Freddie Mac.

Trading and held-to-maturity securities as of December 31, 2011 are summarized in the following table (in thousands):

	Trading		Held-to-maturity
	Fair Value		Carrying Value		OTTI Recognized in OCI		Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses		Fair Value
Non-mortgage-backed securities:
Commercial paper	$	599,482	$	-	$	-	$	-	$	-	$	-	$	-
Certificates of deposit		1,019,520		-		-		-		-		-		-
TLGP obligations1		494,236		-		-		-		-		-		-
Government-sponsored enterprise obligations2,3		2,098,844		-		-		-		-		-		-
State or local housing agency obligations		-		84,548		-		84,548		78		10,121		74,505
Non-mortgage-backed securities		4,212,082		84,548		-		84,548		78		10,121		74,505
Mortgage-backed securities:
U.S. obligation residential4		1,380		18,167		-		18,167		760		-		18,927
Government-sponsored enterprise residential5		345,701		4,064,679		-		4,064,679		39,197		1,976		4,101,900
Private-label mortgage-backed securities:
Residential loans		-		771,478		23,402		794,880		4,585		67,023		732,442
Commercial loans		-		37,077		-		37,077		573		-		37,650
Home equity loans		-		1,383		357		1,740		503		82		2,161
Mortgage-backed securities		347,081		4,892,784		23,759		4,916,543		45,618		69,081		4,893,080
TOTAL	$	4,559,163	$	4,977,332	$	23,759	$	5,001,091	$	45,696	$	79,202	$	4,967,585

¹Represents corporate debentures guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program (TLGP).

²Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit, and Farmer Mac. GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

³See Note 19 for transactions with other FHLBanks.

⁴Represents MBS issued by Ginnie Mae, which are guaranteed by the U.S. government.

⁵Represents MBS issued by Fannie Mae and Freddie Mac.

The amortized cost of the FHLBank’s MBS/asset-backed securities (ABS) included credit losses, OTTI-related accretion adjustments and purchase premiums and discounts netting to discount amounts of $6,547,000 and $13,134,000as of December 31, 2012and 2011, respectively.

The following table summarizes (in thousands) the held-to-maturity securities with unrecognized losses as of December 31, 2012. The unrecognized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrecognized loss position.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
Non-mortgage-backed securities:
State or local housing agency obligations	$	-	$	-	$	40,719	$	8,686	$	40,719	$	8,686
Non-mortgage-backed securities		-		-		40,719		8,686		40,719		8,686
Mortgage-backed securities:
Government-sponsored enterprise residential1		338,126		829		126,814		205		464,940		1,034
Private-label mortgage-backed securities:
Residential loans		5,830		8		246,641		25,514		252,471		25,522
Home equity loans		-		-		53		3		53		3
Mortgage-backed securities		343,956		837		373,508		25,722		717,464		26,559
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	343,956	$	837	$	414,227	$	34,408	$	758,183	$	35,245

__________

¹Represents MBS issued by Fannie Mae and Freddie Mac.

The following table summarizes (in thousands) the held-to-maturity securities with unrecognized losses as of December 31, 2011. The unrecognized losses are aggregated by major security type and length of time that individual securities have been in a continuous unrecognized loss position.

	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses		Fair Value		Unrecognized Losses
Non-mortgage-backed securities:
State or local housing agency obligations	$	29,215	$	2,970	$	24,610	$	7,151	$	53,825	$	10,121
Non-mortgage-backed securities		29,215		2,970		24,610		7,151		53,825		10,121
Mortgage-backed securities:
Government-sponsored enterprise residential1		122,180		96		579,599		1,880		701,779		1,976
Private-label mortgage-backed securities:
Residential loans		77,231		507		373,008		66,516		450,239		67,023
Home equity loans		-		-		442		82		442		82
Mortgage-backed securities		199,411		603		953,049		68,478		1,152,460		69,081
TOTAL TEMPORARILY IMPAIRED SECURITIES	$	228,626	$	3,573	$	977,659	$	75,629	$	1,206,285	$	79,202

__________

¹Represents MBS issued by Fannie Mae and Freddie Mac.

Redemption Terms:The amortized cost, carrying value and fair values of held-to-maturity securities by contractual maturity as of December 31, 2012 and 2011 are shown in the following table (in thousands). Expected maturities of certain securities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment fees.

	12/31/2012						12/31/2011
	Amortized Cost		Carrying Value		Fair Value		Amortized Cost		Carrying Value		Fair Value
Non-mortgage-backed securities:
Due in one year or less	$	-	$	-	$	-	$	-	$	-	$	-
Due after one year through five years		-		-		-		-		-		-
Due after five years through 10 years		22,780		22,780		20,741		5,095		5,095		5,095
Due after 10 years		46,662		46,662		40,185		79,453		79,453		69,410
Non-mortgage-backed securities		69,442		69,442		60,926		84,548		84,548		74,505
Mortgage-backed securities		5,111,154		5,090,308		5,131,404		4,916,543		4,892,784		4,893,080
TOTAL	$	5,180,596	$	5,159,750	$	5,192,330	$	5,001,091	$	4,977,332	$	4,967,585

Interest Rate Payment Terms: The following table details interest rate payment terms for the amortized cost of held-to-maturity securities as of December 31, 2012 and 2011 (in thousands):

	12/31/2012		12/31/2011
Non-mortgage-backed securities:
Fixed rate	$	16,662	$	21,088
Variable rate		52,780		63,460
Non-mortgage-backed securities		69,442		84,548
Mortgage-backed securities:
Pass-through securities:
Fixed rate		170		290
Variable rate		595,078		4,841
Collateralized mortgage obligations:
Fixed rate		687,770		684,040
Variable rate		3,828,136		4,227,372
Mortgage-backed securities		5,111,154		4,916,543
TOTAL	$	5,180,596	$	5,001,091

Gains and Losses: Net gains (losses) on trading securities during the years ended December 31, 2012, 2011 and 2010were as follows (in thousands):

	2012		2011		2010
Net gains (losses) on trading securities held as of December 31, 2012	$	(19,164)	$	35,875	$	42,830
Net gains (losses) on trading securities sold or matured prior to December 31, 2012		(8,884)		(15,103)		(28,405)
NET GAIN (LOSS) ON TRADING SECURITIES	$	(28,048)	$	20,772	$	14,425

Other-than-temporary Impairment: The FHLBank has established processes for evaluating its individual held-to-maturity investment securities holdings in an unrealized loss position for OTTI.  The FHLBanks’ OTTI Governance Committee, which is comprised of representation from all 12 FHLBanks, has responsibility for reviewing and approving the key modeling assumptions, inputs and methodologies to be used by the FHLBanks to generate cash flow projections used in analyzing credit losses and determining OTTI for private-label MBS/ABS. To support consistency among the FHLBanks, FHLBank Topeka completed its OTTI analysis primarily based upon cash flow analysis prepared by FHLBank of San Francisco on behalf of FHLBank Topeka using key modeling assumptions provided by the FHLBanks’ OTTI Governance Committee for the majority of its private-label residential MBS and home equity loan ABS. Certain private-label MBS backed by multi-family and commercial real estate loans, home equity lines of credit and manufactured housing loans were outside of the scope of the OTTI Governance Committee and were analyzed for OTTI by the FHLBank utilizing other methodologies.

An OTTI cash flow analysis is run by FHLBank of San Francisco for each of the FHLBank’s remaining private-label MBS/ABS using the FHLBank System’s common platform and agreed-upon assumptions. For certain private-label MBS/ABS where underlying collateral data is not available, alternative procedures as determined by each FHLBank are used to assess these securities for OTTI.

The evaluation includes estimating projected cash flows that are likely to be collected based on assessments of all available information about each individual security, including the structure of the security and certain assumptions as determined by the FHLBanks’ OTTI Governance Committee such as:(1) the remaining payment terms for the security; (2) prepayment speeds; (3) default rates; (4) loss severity on the collateral supporting the FHLBank’s security based on underlying loan-level borrower and loan characteristics; (5) expected housing price changes;  and (6) interest rate assumptions. In performing a detailed cash flow analysis, the FHLBank 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 a security (that is, a credit loss exists), an OTTI is considered to have occurred.

To assess whether the entire amortized cost basis of securities will be recovered, the FHLBank of San Francisco, on behalf of the FHLBank, performed a cash flow analysis using two third-party models. The first third-party model considers borrower characteristics and the particular attributes of the loans underlying the FHLBank’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 upon 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 of 10,000 or more people. For the vast majority of housing markets, the FHLBank’s housing price forecast as of December 31, 2012 assumed home price changes for the fourth quarter of 2012 ranging from declines of 2 percent to increases of 2 percent. Beginning January 1, 2013, home prices in these markets were projected to recover (or continue to recover) using one of four different recovery paths that vary by housing market. The following table presents projected home price recovery by months as of December 31, 2012:

	Recovery Range of Annualized Rates
Months	Low			High
1 - 6		-	%		2.8	%
7 - 18		-			3.0
19 - 24		1.0			3.0
25 - 30		2.0			4.0
31 - 42		2.8			5.0
43 - 66		2.8			6.0
Thereafter		2.8			5.6

The month-by-month projections of future loan performance derived from the first model, which reflect projected prepayments, defaults 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 the securitization structure in accordance with its prescribed cash flow and loss allocation rules. In a securitization in which the credit enhancement for the senior securities is derived from the presence of subordinate securities, losses are generally allocated first to the subordinate securities until their principal balances are 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 model approach reflects a best estimate scenario and includes a base case current-to-trough housing price forecast and a base case housing price recovery path.

For those securities for which an OTTI was determined to have occurred during the year endedDecember 31, 2012 (that is, securities for which the FHLBank determined that it was more likely than not that the amortized cost basis would not be recovered), the following tables present a summary of the significant inputs used to measure the amount of credit loss recognized in earnings during this period as well as related current credit enhancement. Credit enhancement is defined as the percentage of subordinated tranches and over-collateralization, if any, in a security structure that will generally absorb losses before the FHLBank will experience a loss on the security. The calculated averages represent the dollar-weighted averages of all the private-label MBS/ABS investments in each category shown and represent significant inputs associated with the most recent OTTI charge in 2012.Private-label MBS/ABS are classified as prime, Alt-A and subprime based on the originator’s classification at the time of origination or based on classification by an  NRSRO upon issuance of the MBS/ABS.

Private-label residential MBS
Year of	Significant Inputs									Current Credit
Securitization	Prepayment Rates			Default Rates			Loss Severities			Enhancements
Prime:
2004 and prior		7.1	%		11.9	%		28.2	%		8.8	%
2005		15.0			13.7			37.0			3.3
2006		9.0			20.0			40.7			3.6
Total Prime		11.1			15.4			36.1			4.7
Alt-A:
2004 and prior		9.5			24.3			35.9			10.9
2005		10.7			22.6			41.8			4.2
Total Alt-A		10.3			23.1			39.8			6.4
TOTAL		10.6	%		20.6	%		38.6	%		5.9	%
Home Equity Loan ABS
Year of	Significant Inputs									Current Credit
Securitization	Prepayment Rates			Default Rates			Loss Severities			Enhancements
Subprime:
2004 and prior		2.8	%		6.6	%		98.8	%		3.8	%

For the 32 private-label securities with OTTI during the lives of the securities, the FHLBank’s reported balances as of December 31, 2012 are as follows (in thousands):

	Unpaid Principal Balance		Amortized Cost		Carrying Value		Fair Value
Private-label residential MBS:
Prime	$	43,400	$	42,050	$	39,967	$	41,871
Alt-A		92,453		85,075		66,509		76,703
Total private-label residential MBS		135,853		127,125		106,476		118,574
Home equity loans:
Subprime		3,685		1,269		1,072		2,421
TOTAL	$	139,538	$	128,394	$	107,548	$	120,995

The following table presents a roll-forward of OTTI activity for the periods ended December 31, 2012, 2011 and 2010related to credit losses recognized in earnings (in thousands):

	2012		2011		2010
Balance, beginning of period	$	10,342	$	5,938	$	2,034
Additional charge on securities for which OTTI was not previously recognized1		271		1,219		617
Additional charge on securities for which OTTI was previously recognized1		1,389		3,492		3,417
Realized principal losses on securities paid down during the period		(323)		-		-
Amortization of credit component of OTTI2		(711)		(307)		(130)
Balance, end of period	$	10,968	$	10,342	$	5,938

¹For the years ended December 31, 2012, 2011 and 2010, securities previously impaired represent all securities that were impaired prior to January 1, 2012, 2011 and 2010, respectively.

²The FHLBank amortizes the credit component based on estimated cash flows prospectively up to the amount of expected principal to be recovered. The discounted cash flows will move from the discounted loss value to the ultimate principal to be written off at the projected date of loss. If the expected cash flows improve, the amount of expected loss decreases which causes a corresponding decrease in the calculated amortization. Based on the level of improvement in the cash flows, the amortization could become a positive adjustment to income.

Although there has been improvement in the fair value of the FHLBank’s held-to-maturity securities portfolio during 2012, the fair value of a portion of this portfolio remains below the amortized cost of the securities due to interest rate volatility, illiquidity in the marketplace and credit deterioration in the U.S. mortgage markets since early 2008. However, the decline in fair value of these securities is considered temporary as the FHLBank expects to recover the entire amortized cost basis on the remaining held-to-maturity securities in unrecognized loss positions and neither intends to sell these securities nor is it more likely than not that the FHLBank will be required to sell these securities before its anticipated recovery of the remaining amortized cost basis.

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Advances

12 Months Ended

Dec. 31, 2012

Advances [Abstract]

Advances

NOTE5 – ADVANCES

General Terms: The FHLBank offers a wide range of fixed and variable rate advance products with different maturities, interest rates, payment characteristics and optionality. Fixed rate advances generally have maturities ranging from 3 days to 15 years. Variable rate advances generally have maturities ranging from overnight to 15 years, where the interest rates reset periodically at a fixed spread to the London Interbank Offered Rate (LIBOR) or other specified index. As of December 31, 2012 and 2011, the FHLBank had advances outstanding at interest rates ranging from 0.12 percent to 8.01 percent and 0 percent (AHP advances) to 8.01 percent, respectively. The following table presents advances summarized by year of contractual maturity as of December 31, 2012 and 2011 (in thousands):

	12/31/2012					12/31/2011
Year of Contractual Maturity	Amount		Weighted Average Interest Rate			Amount		Weighted Average Interest Rate
Due in one year or less	$	3,433,058		1.11	%	$	2,878,887		1.45	%
Due after one year through two years		1,454,725		2.39			1,891,670		2.46
Due after two years through three years		1,691,471		1.88			1,828,334		2.87
Due after three years through four years		1,757,905		1.99			1,594,565		1.94
Due after four years through five years		2,529,511		2.84			1,662,373		2.06
Thereafter		5,241,927		1.36			6,994,666		1.96
Total par value		16,108,597		1.76	%		16,850,495		2.03	%
Discounts		(29,767)					(29,099)
Hedging adjustments1		494,518					573,003
TOTAL	$	16,573,348				$	17,394,399

1 See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

The FHLBank’s advances outstanding include advances that contain call options that may be exercised with or without prepayment fees at the borrower’s discretion on specific dates (call dates) before the stated advance maturities (callable advances). In exchange for receiving the right to call the advance on a predetermined call schedule, the borrower may pay a higher fixed rate for the advance relative to an equivalent maturity, non-callable, fixed rate advance. The borrower normally exercises its call options on these advances when interest rates decline (fixed rate advances) or spreads change (adjustable rate advances). The FHLBank’s advances as of December 31, 2012 and 2011 include callable advances totaling $5,429,171,000 and $5,864,707,000, respectively. Of these callable advances, there were $5,300,793,000 and $5,811,473,000 of variable rate advances as of December 31, 2012 and 2011, respectively.

Convertible advances allow the FHLBank to convert an advance from one interest payment term structure to another. When issuing convertible advances, the FHLBank may purchase put options from a member that allow the FHLBank to convert the fixed rate advance to a variable rate advance at the current market rate or another structure after an agreed-upon lockout period. A convertible advance carries a lower interest rate than a comparable-maturity fixed rate advance without the conversion feature. As of December 31, 2012 and 2011, the FHLBank had convertible advances outstanding totaling $2,079,092,000 and $2,693,292,000, respectively.

The following table presents advances summarized by contractual maturity or next call date (for callable advances) and by contractual maturity or next conversion date (for convertible advances) as of December 31, 2012 and 2011 (in thousands):

	Year of Contractual Maturity or Next Call Date				Year of Contractual Maturity or Next Conversion Date
Redemption Term	12/31/2012		12/31/2011		12/31/2012		12/31/2011
Due in one year or less	$	8,483,653	$	8,476,239	$	5,430,875	$	4,983,229
Due after one year through two years		1,335,481		1,541,946		1,412,850		1,940,195
Due after two years through three years		1,346,362		1,637,945		1,593,371		1,786,459
Due after three years through four years		1,094,410		854,065		1,606,405		1,446,465
Due after four years through five years		2,033,422		882,386		1,534,569		1,510,873
Thereafter		1,815,269		3,457,914		4,530,527		5,183,274
TOTAL PAR VALUE	$	16,108,597	$	16,850,495	$	16,108,597	$	16,850,495

Interest Rate Payment Terms: The following table details additional interest rate payment terms for advances as of December 31, 2012 and 2011 (in thousands):

	12/31/2012		12/31/2011
Fixed rate:
Due in one year or less	$	1,301,041	$	1,572,998
Due after one year		7,495,446		8,254,635
Total fixed rate		8,796,487		9,827,633
Variable rate:
Due in one year or less		2,132,017		1,305,889
Due after one year		5,180,093		5,716,973
Total variable rate		7,312,110		7,022,862
TOTAL PAR VALUE	$	16,108,597	$	16,850,495

Credit Risk Exposure and Security Terms: The FHLBank’s potential credit risk from advances is concentrated in thrifts (37.2 percent of total advances), commercial banks (36.7 percent of total advances) and insurance companies (21.0 percent of total advances). As of December 31, 2012 and 2011, the FHLBank had outstanding advances of $5,448,000,000 and $4,745,000,000, respectively,  to two members that individually held 10 percent or more of the FHLBank’s advances, which represents 33.8 percent and 28.2 percent, respectively, of total outstanding advances. The income from advances to these members during 2012 and 2011 totaled $77,517,000 and $89,163,000, respectively. Both of the members were the same each year.

See Note 7 for information related to the FHLBank’s credit risk on advances and allowance for credit losses.

See Note 18 for detailed information on transactions with related parties.

Information about the fair value of advances is included in Note 16.

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Allowance For Credit Losses

12 Months Ended

Dec. 31, 2012

Allowance For Credit Losses [Abstract]

Allowance For Credit Losses

NOTE 7 – ALLOWANCE FOR CREDIT LOSSES

The FHLBank has established an allowance methodology for each of its portfolio segments: credit products (advances, letters of credit and other extensions of credit to borrowers); government mortgage loans held for portfolio; conventional mortgage loans held for portfolio; and the direct financing lease receivable.

Credit products: The FHLBank 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/lending policies to limit risk of loss while balancing borrowers’ needs for a reliable source of funding. In addition, the FHLBank lends to its members in accordance with Federal statutes and Finance Agency regulations. Specifically, the FHLBank complies with the Bank Act, which requires the FHLBank to obtain sufficient collateral to fully secure credit products. The estimated value of the collateral required to secure each member’s credit products is calculated by applying collateral discounts, or haircuts, to the par value or market value of the collateral. The FHLBank accepts certain investment securities, residential mortgage loans, deposits, and other real estate related assets as collateral. In addition, community financial institutions are eligible to utilize expanded statutory collateral provisions for small business loans, agriculture loans and community development loans. The FHLBank’s capital stock owned by borrowing members is held by the FHLBank as further collateral security for all indebtedness of the member to the FHLBank. Collateral arrangements may vary depending upon borrower credit quality, financial condition and performance; borrowing capacity; and overall credit exposure to the borrower. The FHLBank can call for additional or substitute collateral to protect its security interest. The FHLBank’s management believes that these policies effectively manage the FHLBank’s credit risk from credit products.

Based upon the financial condition of the member, the FHLBank either allows a member to retain physical possession of the collateral assigned to it, or requires the member to specifically assign or place physical possession of the collateral with the FHLBank or its safekeeping agent. The FHLBank perfects its security interest in all pledged collateral. The Bank Act affords any security interest granted to the FHLBank by a member priority over the claims or rights of any other party except for claims or rights of a third party that would be entitled to priority under otherwise applicable law and are held by a bona fide purchaser for value or by a secured party holding a prior perfected security interest.

Using a risk-based approach and taking into consideration each borrower’s financial strength, the FHLBank considers the type and level of collateral to be the primary indicator of credit quality on its credit products. As of December 31, 2012 and 2011, the FHLBank had rights to collateral on a member-by-member basis with an estimated value in excess of its outstanding extensions of credit.

The FHLBank continues to evaluate and make changes to its collateral guidelines, as necessary, based on current market conditions. As of December 31, 2012 and 2011, the FHLBank did not have any advances that were past due, on nonaccrual status or considered impaired. In addition, there have been no troubled debt restructurings related to credit products during 2012 and 2011.

Based upon the collateral held as security, management’s credit extension and collateral policies, management’s credit analysis and the repayment history on credit products, the FHLBank currently does not anticipate any credit losses on its credit products. Accordingly, as of December 31, 2012 and 2011, the FHLBank has not recorded any allowance for credit losses on credit products, nor has it recorded any liability to reflect an allowance for credit losses for off-balance sheet credit exposures. For additional information on the FHLBank’s off-balance sheet credit exposure see Note 17.

Government Mortgage Loans Held For Portfolio: The FHLBank invests in government-guaranteed or insured (by FHA, VA, RHA and/or HUD) fixed rate mortgage loans secured by one-to-four family residential properties. The servicer provides and maintains insurance or a guarantee from the applicable government agency. The servicer is responsible for compliance with all government agency requirements and for obtaining the benefit of the applicable insurance or guarantee with respect to defaulted government mortgage loans. Any losses on such loans that are not recovered from the issuer or guarantor are absorbed by the servicers. Therefore, the FHLBank only has credit risk for these loans if the servicer fails to pay for losses not covered by the insurance or guarantee. Based on the FHLBank’s assessment of its servicers, the FHLBank has not established an allowance for credit losses on government mortgage loans. Further, none of these mortgage loans have been placed on non-accrual status because of the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met.

Conventional Mortgage Loans Held For Portfolio: The allowances for conventional loans are determined by performing migration analysis to determine the probability of default and loss severity rates. This is done through analyses that include consideration of various data observations such as past performance, current performance, loan portfolio characteristics, collateral-related characteristics, industry data and prevailing economic conditions. The measurement of the allowance for loan losses may consist of: (1) reviewing all residential mortgage loans at the individual master commitment level; (2) reviewing specifically identified collateral-dependent loans for impairment; (3) reviewing homogeneous pools of residential mortgage loans; and/or (4) estimating credit losses in the remaining portfolio.

The FHLBank’s management of credit risk in the MPF Program involves several layers of loss protection that are defined in agreements among the FHLBank and its PFIs. The availability of loss protection may differ slightly among MPF products. The FHLBank’s loss protection consists of the following loss layers, in order of priority:

§ Homeowner Equity.

§ Primary Mortgage Insurance (PMI). PMI is on all loans with homeowner equity of less than 20 percent of the original purchase price or appraised value.

§ First Loss Account (FLA). The FLA functions as a tracking mechanism for determining the FHLBank’s potential loss exposure under each master commitment prior to the PFI’s CE obligation. If the FHLBank experiences losses in a master commitment, these losses will either be: (1) recovered through the withholding of future performance-based CE fees from the PFI; or (2) absorbed by the FHLBank. As of December 31, 2012 and 2011, the FHLBank’s exposure under the FLA was $30,313,000 and $23,792,000, respectively.

§ CE Obligation. PFIs have a CE obligation to absorb losses in excess of the FLA in order to limit the FHLBank’s loss exposure to that of an investor in an MBS that is rated the equivalent of double-A by an NRSRO. PFIs must either fully collateralize their CE obligation with assets considered acceptable by the FHLBank’s Member Products Policy (MPP) or purchase supplemental mortgage insurance (SMI) from mortgage insurers. Any incurred losses that would be absorbed by the CE obligation are not reserved as part of the FHLBank’s allowance for loan losses. Accordingly, the calculated allowance was reduced by $2,113,000 and $804,000 as of December 31, 2012 and 2011, respectively, for the amount in excess of the FLA to be covered by PFIs’ CE obligations. As ofDecember 31, 2012 and2011, CE obligations available to cover losses in excess of the FLA (excluding SMI) were $301,346,000 and $213,972,000, respectively.

The FHLBank pays the participating member a fee, a portion of which may be based on the credit performance of the mortgage loans, in exchange for absorbing the CE obligation loss layer up to an agreed-upon amount. Performance-based fees may be withheld to cover losses allocated to the FHLBank. The FHLBank records CE fees paid to the participating members as a reduction to mortgage interest income. The following table presents net CE fees paid to participating members for the years ended December 31, 2012, 2011 and 2010(in thousands):

	2012		2011		2010
Gross CE fees paid to PFIs	$	4,396	$	3,744	$	2,989
Performance-based CE fees recovered from PFIs		(179)		(199)		(193)
Net CE fees paid	$	4,217	$	3,545	$	2,796

Mortgage Loans Evaluated at the Individual Master Commitment Level:The credit risk analysis of all conventional loans is performed at the individual master commitment level to properly determine the credit enhancements available to recover losses on mortgage loans under each individual master commitment.

Collectively Evaluated Mortgage Loans: The credit risk analysis of conventional loans evaluated collectively for impairment considers loan pool specific attribute data, applies estimated loss severities and incorporates the associated credit enhancements in order to determine the FHLBank’s best estimate of probable incurred losses. Migration analysis is a methodology for determining, through the FHLBank’s experience over a historical period, the rate of default on pools of similar loans. The FHLBank applies migration analysis to loans based on the following categories: (1) loans in foreclosure; (2) nonaccrual loans; (3) delinquent loans; and (4) all other remaining loans. The FHLBank then estimates how many loans in these categories may migrate to a realized loss position and applies a loss severity factor to estimate losses incurred as of the Statement of Condition date.

Individually Evaluated Mortgage Loans:Certain conventional mortgage loans, primarily impaired mortgage loans that are considered collateral-dependent, may be specifically identified for purposes of calculating the allowance for credit losses. A mortgage loan is considered collateral-dependent if repayment is only expected to be provided by the sale of the underlying property, that is, if it is considered likely that the borrower will default and there is no CE obligation from a PFI to offset losses under the master commitment. The estimated credit losses on impaired collateral-dependent loans may be separately determined because sufficient information exists to make a reasonable estimate of the inherent loss for such loans on an individual loan basis. The FHLBank applies an appropriate loss severity rate, which is used to estimate the fair value of the collateral. The resulting incurred loss is equal to the difference between the carrying value of the loan and the estimated fair value of the collateral less estimated selling costs.

Direct Financing Lease Receivable: The FHLBank has a recorded investment in a direct financing lease receivable with a member for a building complex and property. Under the office complex agreement, the FHLBank has all rights and remedies under the lease agreement as well as all rights and remedies available under the member’s Advance, Pledge and Security Agreement. Consequently, the FHLBank can apply any excess collateral securing credit products to any shortfall in the leasing arrangement.

Rollforward of Allowance for Credit Losses: As of December 31, 2012, the FHLBank determined that an allowance for credit losses was only necessary on conventional mortgage loans held for portfolio. The following table presents a roll-forward of the allowance for credit losses for the year ended December 31, 2012 as well as the method used to evaluate impairment relating to all portfolio segments regardless of whether or not an estimated credit loss has been recorded as of December 31, 2012 (in thousands):

	Conventional Loans		Government Loans		Credit Products		Direct Financing Lease Receivable		Total
Allowance for credit losses:
Balance, beginning of period	$	3,473	$	-	$	-	$	-	$	3,473
Charge-offs		(553)		-		-		-		(553)
Provision for credit losses		2,496		-		-		-		2,496
Balance, end of period	$	5,416	$	-	$	-	$	-	$	5,416
Allowance for Credit Losses, end of period:
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Collectively evaluated for impairment	$	5,416	$	-	$	-	$	-	$	5,416
Recorded investment1, end of period:
Individually evaluated for impairment2	$	-	$	-	$	16,597,209	$	25,527	$	16,622,736
Collectively evaluated for impairment	$	5,270,183	$	705,209	$	-	$	-	$	5,975,392

__________

1	The recorded investment in a financing receivable is the UPB, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedge adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	No financing receivables individually evaluated for impairment were determined to be impaired.

The following table presents a roll-forward of the allowance for credit losses for the year ended December 31, 2011 as well as the method used to evaluate impairment relating to all portfolio segments regardless of whether or not an estimated credit loss has been recorded as of December 31, 2011 (in thousands):

	Conventional Loans		Government Loans		Credit Products		Direct Financing Lease Receivable		Total
Allowance for credit losses:
Balance, beginning of period	$	2,911	$	-	$	-	$	-	$	2,911
Charge-offs		(496)		-		-		-		(496)
Provision for credit losses		1,058		-		-		-		1,058
Balance, end of period	$	3,473	$	-	$	-	$	-	$	3,473
Allowance for Credit Losses, end of period:
Individually evaluated for impairment	$	-	$	-	$	-	$	-	$	-
Collectively evaluated for impairment	$	3,473	$	-	$	-	$	-	$	3,473
Recorded investment1, end of period:
Individually evaluated for impairment2	$	-	$	-	$	17,422,926	$	27,385	$	17,450,311
Collectively evaluated for impairment	$	4,346,603	$	618,161	$	-	$	-	$	4,964,764

___________

1	The recorded investment in a financing receivable is the UPB, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedge adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	No financing receivables individually evaluated for impairment were determined to be impaired.

Credit Quality Indicators: The FHLBank’s key credit quality indicators include the migration of: (1) past due loans; (2) non-accrual loans; (3) loans in process of foreclosure; and (4) impaired loans, all of which are used either on an individual or pool basis to determine the allowance for credit losses.

The following table summarizes the delinquency aging and key credit quality indicators for all of the FHLBank’s portfolio segments as of December 31, 2012 (dollar amounts in thousands):

	Conventional Loans			Government Loans			Credit Products			Direct Financing Lease Receivable			Total
Recorded investment1:
Past due 30-59 days delinquent	$	24,954		$	16,990		$	-		$	-		$	41,944
Past due 60-89 days delinquent		8,016			5,787			-			-			13,803
Past due 90 days or more delinquent		21,576			8,177			-			-			29,753
Total Past Due		54,546			30,954			-			-			85,500
Total current loans		5,215,637			674,255			16,597,209			25,527			22,512,628
Total recorded investment	$	5,270,183		$	705,209		$	16,597,209		$	25,527		$	22,598,128
Other delinquency statistics:
In process of foreclosure, included above2	$	11,593		$	3,085		$	-		$	-		$	14,678
Serious delinquency rate3		0.4	%		1.2	%		-	%		-	%		0.1	%
Past due 90 days or more and still accruing interest	$	-		$	8,176		$	-		$	-		$	8,176
Loans on non-accrual status4	$	25,300		$	-		$	-		$	-		$	25,300

__________

1	The recorded investment in a loan is the UPB of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedging adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.
3	Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment for the portfolio class.
4	Loans on non-accrual status include $1,286,000of troubled debt restructurings. Troubled debt restructurings are restructurings in which the FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

The following table summarizes the key credit quality indicators for the FHLBank’s mortgage loans as of December 31, 2011 (dollar amounts in thousands):

	Conventional Loans			Government Loans			Credit Products			Direct Financing Lease Receivable			Total
Recorded investment1:
Past due 30-59 days delinquent	$	30,473		$	15,811		$	-		$	-		$	46,284
Past due 60-89 days delinquent		8,926			5,809			-			-			14,735
Past due 90 days or more delinquent		23,383			11,876			-			-			35,259
Total Past Due		62,782			33,496			-			-			96,278
Total current loans		4,283,821			584,665			17,422,926			27,385			22,318,797
Total recorded investment	$	4,346,603		$	618,161		$	17,422,926		$	27,385		$	22,415,075
Other delinquency statistics:
In process of foreclosure, included above2	$	13,267		$	4,375		$	-		$	-		$	17,642
Serious delinquency rate3		0.5	%		2.0	%		-	%		-	%		0.2	%
Past due 90 days or more and still accruing interest	$	-		$	11,876		$	-		$	-		$	11,876
Loans on non-accrual status4	$	25,849		$	-		$	-		$	-		$	25,849

__________

1	The recorded investment in a loan is the UPB of the loan, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedging adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.
2	Includes loans where the decision of foreclosure or similar alternative such as pursuit of deed-in-lieu has been reported. Loans in process of foreclosure are included in past due or current loans dependent on their delinquency status.
3	Loans that are 90 days or more past due or in the process of foreclosure expressed as a percentage of the total recorded investment for the portfolio class.
4	Loans on non-accrual status include $496,000of troubled debt restructurings. Troubled debt restructurings are restructurings in which the FHLBank, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider.

The FHLBank had $3,915,000 and $4,489,000 classified as real estate owned recorded in other assets as of December 31, 2012 and 2011, respectively.

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Allowance For Credit Losses (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Allowance For Credit Losses [Abstract]
FHLBank's exposure under the FLA	$ 30,313	$ 23,792
CE obligations available to cover losses	301,346	213,972
Allowance reduction in FLA	2,113	804
Real estate owned	$ 3,915	$ 4,489

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Capital (Schedule Of Amount Of Mandatorily Redeemable Capital Stock By Contractual Year Of Redemption) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010	Dec. 31, 2009
Capital [Abstract]
Year 1	$ 0		$ 0
Year 2	1		0
Year 3	303		769
Year 4	0		303
Year 5	0		0
Past contractual redemption date due to remaining activity	5,361	[1]	7,297	[1]
Mandatorily redeemable capital stock, TOTAL	$ 5,665		$ 8,369		$ 19,550	$ 22,437

[1] Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because there is activity outstanding to which the mandatorily redeemable capital stock relates.

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Allowance For Credit Losses (Allowance For Credit Losses On Financing Receivables) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	$ 3,473		$ 2,911
Charge-offs	(553)		(496)
Provision for credit losses	2,496		1,058
Balance, end of period	5,416		3,473
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	5,416		3,473
Individually evaluated for impairment	16,622,736	[1],[2]	17,450,311	[1],[2]
Collectively evaluated for impairment	5,975,392	[1]	4,964,764	[1]
Conventional Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	3,473		2,911
Charge-offs	(553)		(496)
Provision for credit losses	2,496		1,058
Balance, end of period	5,416		3,473
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	5,416		3,473
Individually evaluated for impairment	0	[1],[2]	0	[1],[2]
Collectively evaluated for impairment	5,270,183	[1]	4,346,603	[1]
Government-Guaranteed Or Insured Loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	0		0
Charge-offs	0		0
Provision for credit losses	0		0
Balance, end of period	0		0
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	0		0
Individually evaluated for impairment	0	[1],[2]	0	[1],[2]
Collectively evaluated for impairment	705,209	[1]	618,161	[1]
Credit Products [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	0		0
Charge-offs	0		0
Provision for credit losses	0		0
Balance, end of period	0		0
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	0		0
Individually evaluated for impairment	16,597,209	[1],[2]	17,422,926	[1],[2]
Collectively evaluated for impairment	0	[1]	0	[1]
Direct Financing Lease Receivable [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Balance, beginning of period	0		0
Charge-offs	0		0
Provision for credit losses	0		0
Balance, end of period	0		0
Individually evaluated for impairment	0		0
Collectively evaluated for impairment	0		0
Individually evaluated for impairment	25,527	[1],[2]	27,385	[1],[2]
Collectively evaluated for impairment	$ 0	[1]	$ 0	[1]

[1] The recorded investment in a financing receivable is the UPB, adjusted for accrued interest, net deferred loan fees or costs, unamortized premiums or discounts, fair value hedge adjustments and direct write-downs. The recorded investment is not net of any valuation allowance.

[2] No financing receivables individually evaluated for impairment were determined to be impaired.

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Transactions With Stockholders And Housing Associates (Schedule Of Related Party Transactions, Mortgage Loans Disclosure) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Federal Home Loan Bank Member Banks Given Directorship [Member]
Related Party Transaction [Line Items]
Total Mortgage Loans	$ 257,370	$ 87,391
Total Mortgage Loans, Percent of Total	10.30%	5.60%
Girard National Bank [Member]
Related Party Transaction [Line Items]
Total Mortgage Loans	28,000	22,719
Total Mortgage Loans, Percent of Total	1.10%	1.40%
Golden Belt Bank, FSA [Member]
Related Party Transaction [Line Items]
Total Mortgage Loans	32,083	25,021
Total Mortgage Loans, Percent of Total	1.30%	1.60%
FirstBank [Member]
Related Party Transaction [Line Items]
Total Mortgage Loans	152,817	0
Total Mortgage Loans, Percent of Total	6.10%	0.00%
Vision Bank, NA [Member]
Related Party Transaction [Line Items]
Total Mortgage Loans	6,498	0
Total Mortgage Loans, Percent of Total	0.30%	0.00%
First State Bank Nebraska [Member]
Related Party Transaction [Line Items]
Total Mortgage Loans	15,569	5,434
Total Mortgage Loans, Percent of Total	0.60%	0.40%
Morgan Federal Bank [Member]
Related Party Transaction [Line Items]
Total Mortgage Loans	9,976	8,800
Total Mortgage Loans, Percent of Total	0.40%	0.60%
NebraskaLand National Bank [Member]
Related Party Transaction [Line Items]
Total Mortgage Loans	12,427
Total Mortgage Loans, Percent of Total	0.50%
Citizens Bank & Trust Co. [Member]
Related Party Transaction [Line Items]
Total Mortgage Loans	0	1,531
Total Mortgage Loans, Percent of Total	0.00%	0.10%
Bankers Bank Of Kansas, NA [Member]
Related Party Transaction [Line Items]
Total Mortgage Loans	0	0
Total Mortgage Loans, Percent of Total	0.00%	0.00%
Security State Bank [Member]
Related Party Transaction [Line Items]
Total Mortgage Loans		$ 23,886
Total Mortgage Loans, Percent of Total		1.50%

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Mortgage Loans (Schedule Of Outstanding Unpaid Principal Balance Of Mortgage Loans Held For Portfolio) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Mortgage Loans [Line Items]
Total unpaid principal balance	$ 5,837,746	$ 4,869,879
Conventional Loans [Member]
Mortgage Loans [Line Items]
Total unpaid principal balance	5,152,461	4,266,847
Government-Guaranteed Or Insured Loans [Member]
Mortgage Loans [Line Items]
Total unpaid principal balance	$ 685,285	$ 603,032

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Pension And Postretirement Benefit Plans (Schedule Of Expected Benefit Payments) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Pension And Postretirement Benefit Plans [Abstract]
2013	$ 307
2014	343
2015	382
2016	429
2017	491
2018 through 2022	$ 3,901

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Derivatives And Hedging Activities (Tables)

12 Months Ended

Dec. 31, 2012

Derivatives And Hedging Activities [Abstract]

Schedule Of Derivative Instruments

The following table represents outstanding notional balances and fair values (includes net accrued interest receivable or payable on the derivatives) of the derivatives outstanding by type of derivative and by hedge designation as of December 31, 2012 (in thousands):

	12/31/2012
	Gross Asset Positions				Gross Liability Positions				Net Derivative Assets				Net Derivative Liabilities
	Notional		Fair Value		Notional		Fair Value		Notional		Fair Value		Notional		Fair Value
Fair value hedges:
Interest rate swaps	$	5,337,000	$	218,909	$	7,023,157	$	(493,515)	$	2,574,325	$	33,707	$	9,785,832	$	(308,313)
Interest rate caps/floors		-		-		247,000		(4,429)		100,000		(1,420)		147,000		(3,009)
Total fair value hedges		5,337,000		218,909		7,270,157		(497,944)		2,674,325		32,287		9,932,832		(311,322)
Economic hedges:
Interest rate swaps		4,710,000		7,607		1,096,320		(166,890)		3,170,000		5,190		2,636,320		(164,473)
Interest rate caps/floors		4,528,800		29,761		1,344,000		(62)		1,482,500		14,591		4,390,300		15,108
Mortgage delivery commitments		62,378		102		43,977		(96)		62,378		102		43,977		(96)
Total economic hedges		9,301,178		37,470		2,484,297		(167,048)		4,714,878		19,883		7,070,597		(149,461)
TOTAL	$	14,638,178	$	256,379	$	9,754,454	$	(664,992)	$	7,389,203		52,170	$	17,003,429		(460,783)
Fair value of cash collateral delivered to counterparties												-				337,369
Fair value of cash collateral received from counterparties												(27,004)				-
NET DERIVATIVE FAIR VALUE											$	25,166			$	(123,414)

The following table represents outstanding notional balances and fair values (includes net accrued interest receivable or payable on the derivatives) of the derivatives outstanding by type of derivative and by hedge designation as of December 31, 2011 (in thousands):

	12/31/2011
	Gross Asset Positions				Gross Liability Positions				Net Derivative Assets				Net Derivative Liabilities
	Notional		Fair Value		Notional		Fair Value		Notional		Fair Value		Notional		Fair Value
Fair value hedges:
Interest rate swaps	$	6,446,000	$	287,805	$	8,192,887	$	(571,776)	$	4,175,367	$	71,605	$	10,463,520	$	(355,576)
Interest rate caps/floors		-		-		247,000		(5,075)		90,000		(1,759)		157,000		(3,316)
Total fair value hedges		6,446,000		287,805		8,439,887		(576,851)		4,265,367		69,846		10,620,520		(358,892)
Economic hedges:
Interest rate swaps		375,000		2,353		2,941,320		(191,864)		520,000		(40,149)		2,796,320		(149,362)
Interest rate caps/floors		6,372,533		53,004		639,000		(289)		1,435,300		10,079		5,576,233		42,636
Mortgage delivery commitments		119,945		843		-		-		119,945		843		-		-
Total economic hedges		6,867,478		56,200		3,580,320		(192,153)		2,075,245		(29,227)		8,372,553		(106,726)
TOTAL	$	13,313,478	$	344,005	$	12,020,207	$	(769,004)	$	6,340,612		40,619	$	18,993,073		(465,618)
Fair value of cash collateral delivered to counterparties												-				343,706
Fair value of cash collateral received from counterparties1												(26,581)				(18,301)
NET DERIVATIVE FAIR VALUE											$	14,038			$	(140,213)

¹The FHLBank held cash with a fair value of $44,882,000 as collateral as of December 31, 2011. Exposure can change on a daily basis; and thus, there is often a short lag time between the date the exposure is identified, collateral is requested and when the collateral is actually received. Likewise, there is a lag time for excess collateral to be returned. Excess collateral held by the FHLBank as of December 31, 2011 resulted in positive exposure (fair value plus accrued interest) with one counterparty being recorded as a derivative liability.

Schedule Of Derivative Instruments, Gain (Loss) In Statement Of Financial Performance

	2012		2011		2010
Derivatives and hedge items in fair value hedging relationships:
Interest rate swaps	$	2,792	$	2,122	$	(1,160)
Interest rate caps/floors		-		(58)		(64)
Total net gain (loss) related to fair value hedge ineffectiveness		2,792		2,064		(1,224)
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps		27,428		(9,870)		(40,634)
Interest rate caps/floors		(24,032)		(70,577)		(83,746)
Net interest settlements		(35,174)		(40,489)		(53,171)
Mortgage delivery commitments		7,509		10,146		4,138
Intermediary transactions:
Interest rate swaps		(1)		(29)		(42)
Interest rate caps/floors		-		12		5
Total net gain (loss) related to derivatives not designated as hedging instruments		(24,270)		(110,807)		(173,450)
NET GAIN (LOSS) ON DERIVATIVES AND HEDGING ACTIVITIES	$	(21,478)	$	(108,743)	$	(174,674)

Summary Of Derivatives And Related Hedged Items In Fair Value Hedging Relationships

	2012
	Gain (Loss) on Derivatives		Gain (Loss) on Hedged Items		Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on Net Interest Income1
Advances	$	44,010	$	(45,836)	$	(1,826)	$	(186,360)
Consolidated obligation bonds		(63,877)		68,515		4,638		142,355
Consolidated obligation discount notes		114		(134)		(20)		12
TOTAL	$	(19,753)	$	22,545	$	2,792	$	(43,993)
	2011
	Gain (Loss) on Derivatives		Gain (Loss) on Hedged Items		Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on Net Interest Income1
Advances	$	(113,640)	$	111,609	$	(2,031)	$	(234,817)
Consolidated obligation bonds		21,401		(16,970)		4,431		212,243
Consolidated obligation discount notes		(1,120)		784		(336)		1,254
TOTAL	$	(93,359)	$	95,423	$	2,064	$	(21,320)
	2010
	Gain (Loss) on Derivatives		Gain (Loss) on Hedged Items		Net Fair Value Hedge Ineffectiveness		Effect of Derivatives on Net Interest Income1
Advances	$	(106,531)	$	105,102	$	(1,429)	$	(290,214)
Consolidated obligation bonds		28,540		(28,656)		(116)		290,416
Consolidated obligation discount notes		964		(643)		321		1,903
TOTAL	$	(77,027)	$	75,803	$	(1,224)	$	2,105

¹The differentials between accruals of interest receivables and payables on derivatives designated as fair value hedges as well as the amortization/accretion of hedging activities are recognized as adjustments to the interest income or expense of the designated underlying hedged item.

Summary Of Credit Risk Exposure On Derivative Instruments

	12/31/2012		12/31/2011
Total net exposure at fair value1	$	52,170	$	40,619
Cash collateral held		(27,004)		(26,581)
Net positive exposure after cash collateral		25,166		14,038
Other collateral2		(278)		(1,825)
NET EXPOSURE AFTER COLLATERAL	$	24,888	$	12,213

¹Includes net accrued interest receivable of $5,731,000 and $3,700,000 as of December 31, 2012 and 2011, respectively.

²Collateral held with respect to derivatives with members which represents either collateral physically held by or on behalf of the FHLBank or collateral assigned to the FHLBank as evidenced by a written security agreement and held by the member for the benefit of the FHLBank.

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Investment Securities (Summary Of Held-To-Maturity Securities At Amortized Cost By Interest Rate Payment Terms) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Amortized Cost	$ 5,180,596	$ 5,001,091
Non-mortgage-backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Amortized Cost	69,442	84,548
Non-mortgage-backed Securities [Member] | Fixed Interest Rate [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Amortized Cost	16,662	21,088
Non-mortgage-backed Securities [Member] | Adjustable Interest Rate [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Amortized Cost	52,780	63,460
Mortgage-Backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Amortized Cost	5,111,154	4,916,543
Mortgage Passthrough Securities [Member] | Fixed Interest Rate [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Amortized Cost	170	290
Mortgage Passthrough Securities [Member] | Adjustable Interest Rate [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Amortized Cost	595,078	4,841
Collateralized Mortgage Obligations [Member] | Fixed Interest Rate [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Amortized Cost	687,770	684,040
Collateralized Mortgage Obligations [Member] | Adjustable Interest Rate [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Amortized Cost	$ 3,828,136	$ 4,227,372

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Resolution Funding Corporation (REFCORP)

12 Months Ended

Dec. 31, 2012

Resolution Funding Corporation [Abstract]

Resolution Funding Corporation (REFCORP)

NOTE 12 – RESOLUTION FUNDING CORPORATION (REFCORP)

On August 5, 2011, the Finance Agency certified that the FHLBanks had fully satisfied their REFCORP obligation with their payments made on July 15, 2011, which were accrued as applicable in each FHLBank’s June 30, 2011 financial statements. The FHLBanks entered into a Joint Capital Enhancement (JCE) Agreement, as amended, which requires each FHLBank to allocate 20 percent of its net income to a separate restricted retained earnings account, beginning in the third quarter of 2011. See Note 13 for further discussion regarding establishment of a separate restricted retained earnings account and the JCE Agreement.

Prior to the satisfaction of the FHLBanks’ REFCORP obligation, each FHLBank had been required to pay 20 percent of income calculated in accordance with GAAP after the assessment for AHP, but before the assessment for REFCORP. The FHLBanks expensed these amounts until the aggregate amount actually paid by all 12 FHLBanks was equivalent to a $300,000,000 annual annuity (or a scheduled payment of $75,000,000 per quarter) whose final maturity date was April 15, 2030. The Finance Agency in consultation with the Secretary of the Treasury selected the appropriate discounting factors to be used in this annuity calculation.

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Commitments And Contingencies

12 Months Ended

Dec. 31, 2012

Commitments And Contingencies [Abstract]

Commitments And Contingencies

NOTE 17 – COMMITMENTS AND CONTINGENCIES

Joint and Several Liability: As provided by the Bank Act or Finance Agency regulation and as described in Note 10, consolidated obligations are backed only by the financial resources of the FHLBanks. FHLBank Topeka is jointly and severally liable with the other 11 FHLBanks for the payment of principal and interest on all of the consolidated obligations issued by the FHLBanks. The par amounts for which FHLBank Topeka is jointly and severally liable were approximately $657,444,451,000 and $661,970,528,000 as of December 31, 2012 and 2011, respectively. To the extent that an FHLBank makes any consolidated obligation payment on behalf of another FHLBank, the paying FHLBank is entitled to reimbursement from the FHLBank with primary liability. However, if the Finance Agency determines that the primary obligor is unable to satisfy its obligations, then the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis that the Finance Agency may determine. No FHLBank has ever failed to make any payment on a consolidated obligation for which it was the primary obligor. As a result, the regulatory provisions for directing other FHLBanks to make payments on behalf of another FHLBank or allocating the liability among other FHLBanks have never been invoked.

The joint and several obligations are mandated by Finance Agency regulations and are not the result of arms-length transactions among the FHLBanks. As described above, the FHLBanks have no control over the amount of the guaranty or the determination of how each FHLBank would perform under the joint and several liability. Because the FHLBanks are subject to the authority of the Finance Agency as it relates to decisions involving the allocation of the joint and several liability for the FHLBank’s consolidated obligations, FHLBank Topeka regularly monitors the financial condition of the other 11 FHLBanks to determine whether it should expect a loss to arise from its joint and several obligations. If the FHLBank were to determine that a loss was probable and the amount of such loss could be reasonably estimated, the FHLBank would charge to income the amount of the expected loss. Based upon the creditworthiness of the other 11 FHLBanks as of December 31, 2012, FHLBank Topeka has concluded that a loss accrual is not necessary at this time.

Off-balance Sheet Commitments: As of December 31, 2012 and 2011, off-balance sheet commitments were as follows (in thousands):

	12/31/2012						12/31/2011
Notional Amount	Expire Within One Year		Expire After One Year		Total		Expire Within One Year		Expire After One Year		Total
Standby letters of credit outstanding	$	2,533,506	$	21,332	$	2,554,838	$	2,728,450	$	29,777	$	2,758,227
Commitments for standby bond purchases		532,028		1,065,176		1,597,204		99,737		1,438,939		1,538,676
Commitments to fund or purchase mortgage loans		106,355		-		106,355		119,945		-		119,945
Commitments to issue consolidated bonds, at par		165,000		-		165,000		160,000		-		160,000

Commitments to Extend Credit: Standby letters of credit are executed for members for a fee. A standby letter of credit is a short-term financing arrangement between the FHLBank and its member or non-member housing associate. If the FHLBank is required to make payment for a beneficiary’s draw, these amounts are converted into a collateralized advance to the member. As of December 31, 2012, outstanding standby letters of credit had original terms of 3 days to 10 years with a final expiration in 2020. As of December 31, 2011, outstanding standby letters of credit had original terms of 5 days to 10 years with a final expiration in 2020. Unearned fees as well as the value of the guarantees related to standby letters of credit are recorded in other liabilities and amounted to $1,039,000 and $1,401,000 as of December 31, 2012 and 2011, respectively. The standby letters of credit are fully collateralized with assets allowed by the FHLBank’s MPP. Based upon management’s credit analysis of members and collateral requirements under the MPP, the FHLBank does not expect to incur any credit losses on the letters of credit. The fair values of standby letters of credit as of December 31, 2012 and 2011 are reported in Note 16.

Standby Bond-Purchase Agreements: The FHLBank has entered into standby bond purchase agreements with state housing authorities whereby the FHLBank, for a fee, agrees to purchase and hold the authorities’ bonds until the designated marketing agent can find a suitable investor or the housing authority repurchases the bond according to a schedule established by the standby agreement. Each standby agreement dictates the specific terms that would require the FHLBank to purchase the bond. The bond purchase commitments entered into by the FHLBank expire no later than 2015, though some are renewable at the option of the FHLBank.  As of December 31, 2012, the total commitments for bond purchases were with two in-district and one out-of-district state housing authorities. As of December 31, 2011, the total commitments for bond purchases were with the same two in-district state housing authorities. The FHLBank was not required to purchase any bonds under these agreements during the years ended December 31, 2012 and 2011. The fair values of standby bond purchase agreements as of December 31, 2012 and 2011 are reported in Note 16.

Commitments to Fund or Purchase Mortgage Loans: These commitments that unconditionally obligate the FHLBank to fund/purchase mortgage loans from participating FHLBank Topeka members in the MPF Program are generally for periods not to exceed 60 calendar days. Certain commitments are recorded as derivatives at their fair values on the Statements of Condition. The FHLBank recorded mortgage delivery commitment net derivative asset balances of $6,000 and $843,000 as of December 31, 2012 and 2011, respectively.

Lease Commitments: Net rental costs under operating leases of approximately $110,000, $116,000 and $104,000 in 2012, 2011 and 2010, respectively, for premises and equipment have been charged to other operating expenses. Future minimum net rentals are summarized in the following table (in thousands):

Year	Premises		Equipment		Total
2013	$	50	$	63	$	113
2014		45		63		108
2015		45		10		55
2016		45		2		47
2017		19		-		19
Thereafter		-		-		-
TOTAL	$	204	$	138	$	342

Safekeeping Custodial Arrangements: The FHLBank acts as a securities safekeeping custodian on behalf of participating members. Actual securities are held by a third-party custodian acting as agent for the FHLBank. As of December 31, 2012, the total original par value of customer securities held by the FHLBank under this arrangement was $31,164,412,000.

Other commitments and contingencies are discussed in Notes 1, 5, 6, 7, 8, 10, 11, 13, 14 and 15.

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Commitments And Contingencies (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012 entity	Dec. 31, 2011 entity	Dec. 31, 2010
Loss Contingencies [Line Items]
Commitments for payments of principal on consolidated obligations of other Federal Home Loan Banks	$ 657,444,451,000	$ 661,970,528,000
Unearned fees as well as the value of the guarantees of standby letters of credit	1,039,000	1,401,000
Number of in-district state housing authorities with standby bond purchase agreements	2	2
Number of out-of-district state housing authorities with standby bond purchase agreements	1
Mortgage delivery commitments, derivative asset (liability)	6,000	843,000
Commitments to fund or purchase mortgage loans, duration of commitment	60 days
Expiration year of standby bond purchase commitments	2015
Standby letters of credit, final expiration	2020	2020
Operating Leases, Rent Expense, Net	110,000	116,000	104,000
Original par value of customer securities held by a third-party on our behalf	$ 31,164,412,000
Minimum [Member]
Loss Contingencies [Line Items]
Standby letters of credit, original terms	3 days	5 days
Maximum [Member]
Loss Contingencies [Line Items]
Standby letters of credit, original terms	10 years	10 years

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Investment Securities (Held-To-Maturity Securities With Unrecognized Losses) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Less Than 12 Months, Fair Value	$ 343,956		$ 228,626
Held-to-maturity securities, Less Than 12 Months, Unrecognized Losses	837		3,573
Held-to-maturity securities, 12 Months or More, Fair Value	414,227		977,659
Held-to-maturity securities, 12 Months or More, Unrecognized Losses	34,408		75,629
Held-to-maturity securities, Total, Fair Value	758,183		1,206,285
Held-to-maturity securities, Total, Unrecognized Losses	35,245		79,202
Non-mortgage-backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Less Than 12 Months, Fair Value	0		29,215
Held-to-maturity securities, Less Than 12 Months, Unrecognized Losses	0		2,970
Held-to-maturity securities, 12 Months or More, Fair Value	40,719		24,610
Held-to-maturity securities, 12 Months or More, Unrecognized Losses	8,686		7,151
Held-to-maturity securities, Total, Fair Value	40,719		53,825
Held-to-maturity securities, Total, Unrecognized Losses	8,686		10,121
State Or Local Housing Agency Obligations [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Less Than 12 Months, Fair Value	0		29,215
Held-to-maturity securities, Less Than 12 Months, Unrecognized Losses	0		2,970
Held-to-maturity securities, 12 Months or More, Fair Value	40,719		24,610
Held-to-maturity securities, 12 Months or More, Unrecognized Losses	8,686		7,151
Held-to-maturity securities, Total, Fair Value	40,719		53,825
Held-to-maturity securities, Total, Unrecognized Losses	8,686		10,121
Mortgage-Backed Securities [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Less Than 12 Months, Fair Value	343,956		199,411
Held-to-maturity securities, Less Than 12 Months, Unrecognized Losses	837		603
Held-to-maturity securities, 12 Months or More, Fair Value	373,508		953,049
Held-to-maturity securities, 12 Months or More, Unrecognized Losses	25,722		68,478
Held-to-maturity securities, Total, Fair Value	717,464		1,152,460
Held-to-maturity securities, Total, Unrecognized Losses	26,559		69,081
Government-sponsored Enterprise Residential [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Less Than 12 Months, Fair Value	338,126	[1]	122,180	[1]
Held-to-maturity securities, Less Than 12 Months, Unrecognized Losses	829	[1]	96	[1]
Held-to-maturity securities, 12 Months or More, Fair Value	126,814	[1]	579,599	[1]
Held-to-maturity securities, 12 Months or More, Unrecognized Losses	205	[1]	1,880	[1]
Held-to-maturity securities, Total, Fair Value	464,940	[1]	701,779	[1]
Held-to-maturity securities, Total, Unrecognized Losses	1,034	[1]	1,976	[1]
Private-Label Residential MBS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Less Than 12 Months, Fair Value	5,830		77,231
Held-to-maturity securities, Less Than 12 Months, Unrecognized Losses	8		507
Held-to-maturity securities, 12 Months or More, Fair Value	246,641		373,008
Held-to-maturity securities, 12 Months or More, Unrecognized Losses	25,514		66,516
Held-to-maturity securities, Total, Fair Value	252,471		450,239
Held-to-maturity securities, Total, Unrecognized Losses	25,522		67,023
Private-label Home Equity Loan ABS [Member]
Schedule of Held-to-maturity Securities [Line Items]
Held-to-maturity securities, Less Than 12 Months, Fair Value	0		0
Held-to-maturity securities, Less Than 12 Months, Unrecognized Losses	0		0
Held-to-maturity securities, 12 Months or More, Fair Value	53		442
Held-to-maturity securities, 12 Months or More, Unrecognized Losses	3		82
Held-to-maturity securities, Total, Fair Value	53		442
Held-to-maturity securities, Total, Unrecognized Losses	$ 3		$ 82

[1] Represents MBS issued by Fannie Mae and Freddie Mac.

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Fair Values (Tables)

12 Months Ended

Dec. 31, 2012

Fair Values [Abstract]

Fair Value, By Balance Sheet Grouping

	12/31/2012
	Carrying Value		Total Fair Value		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral
Assets:
Cash and due from banks	$	369,997	$	369,997	$	369,997	$	-	$	-	$	-
Interest-bearing deposits		455		455		-		455		-		-
Federal funds sold and securities purchased under agreements to resell		2,849,288		2,849,288		-		2,849,288		-		-
Trading securities		2,764,918		2,764,918		-		2,764,918		-		-
Held-to-maturity securities		5,159,750		5,192,330		-		4,633,792		558,538		-
Advances		16,573,348		16,714,319		-		16,714,319		-		-
Mortgage loans held for portfolio, net of allowance		5,940,517		6,256,905		-		6,256,905		-		-
Accrued interest receivable		77,445		77,445		-		77,445		-		-
Derivative assets		25,166		25,166		-		256,379		-		(231,213)
Liabilities:
Deposits		1,181,957		1,181,957		-		1,181,957		-		-
Consolidated obligation discount notes		8,669,059		8,669,327		-		8,669,327		-		-
Consolidated obligation bonds		21,973,902		22,189,631		-		22,189,631		-		-
Mandatorily redeemable capital stock		5,665		5,665		5,665		-		-		-
Accrued interest payable		81,801		81,801		-		81,801		-		-
Derivative liabilities		123,414		123,414		-		664,992		-		(541,578)
Other Asset (Liability):
Standby letters of credit		(1,039)		(1,039)		-		(1,039)		-		-
Standby bond purchase agreements		588		4,922		-		4,922		-		-

	12/31/2011
	Carrying Value		Fair Value
Assets:
Cash and due from banks	$	116,041	$	116,041
Interest-bearing deposits		42		42
Federal funds sold		1,040,000		1,040,000
Trading securities		4,559,163		4,559,163
Held-to-maturity securities		4,977,332		4,967,585
Advances		17,394,399		17,564,068
Mortgage loans held for portfolio, net of allowance		4,933,332		5,184,775
Accrued interest receivable		85,666		85,666
Derivative assets		14,038		14,038
Liabilities:
Deposits		997,371		997,371
Consolidated obligation discount notes		10,251,108		10,250,885
Consolidated obligation bonds		19,894,483		20,195,131
Overnight loans from other FHLBanks		35,000		35,000
Mandatorily redeemable capital stock		8,369		8,369
Accrued interest payable		96,237		96,237
Derivative liabilities		140,213		140,213
Other Asset (Liability):
Standby letters of credit		(1,401)		(1,401)
Standby bond purchase agreements		384		2,788

Fair Value, Assets And Liabilities Measured On Recurring And Nonrecurring Basis

Fair Value Measurements: The following table presents, for each hierarchy level, the FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of December 31, 2012 (in thousands). The FHLBank measures certain held-to-maturity securities at fair value on a nonrecurring basis due to the recognition of a credit loss. For held-to-maturity securities that had credit impairment recorded at period end for which no total impairment was recorded (the full amount of additional credit impairment was a reclassification from non-credit impairment previously recorded in AOCI), these securities were recorded at their carrying values and not fair value. Real estate owned is measured at fair value when the asset’s fair value less costs to sell is lower than its carrying amount.

	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
Commercial paper	$	59,996	$	-	$	59,996	$	-	$	-
Certificates of deposit		325,006		-		325,006		-		-
Government-sponsored enterprise obligations2,3		2,126,327		-		2,126,327		-		-
U.S. obligation residential MBS4		1,277		-		1,277		-		-
Government-sponsored enterprise residential MBS5		252,312		-		252,312		-		-
Total trading securities		2,764,918		-		2,764,918		-		-
Derivative assets:
Interest-rate related		25,064		-		256,277		-		(231,213)
Mortgage delivery commitments		102		-		102		-		-
Total derivative assets		25,166		-		256,379		-		(231,213)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	2,790,084	$	-	$	3,021,297	$	-	$	(231,213)
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	123,318	$	-	$	664,896	$	-	$	(541,578)
Mortgage delivery commitments		96		-		96		-		-
Total derivative liabilities		123,414		-		664,992		-		(541,578)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	123,414	$	-	$	664,992	$	-	$	(541,578)
Nonrecurring fair value measurements - Assets:
Real estate owned6		540		-		-		540		-
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	540	$	-	$	-	$	540	$	-

¹Represents the effect of legally enforceable master netting agreements that allow the FHLBank to net settle positive and negative positions and also cash collateral and         related accrued interest held or placed with the same counterparties.

²Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit, and Farmer Mac. GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

³See Note 19 for transactions with other FHLBanks.

⁴Represents MBS issued by Ginnie Mae, which are guaranteed by the U.S. government.

⁵Represents MBS issued by Fannie Mae and Freddie Mac.

⁶Includes real estate owned written down to fair value during the quarter ended December 31, 2012 and still outstanding as of December 31, 2012.

The following table presents, for each hierarchy level, the FHLBank’s assets and liabilities that are measured at fair value on a recurring or nonrecurring basis on the Statements of Condition as of December 31, 2011 (in thousands):

	Total		Level 1		Level 2		Level 3		Netting Adjustment and Cash Collateral1
Recurring fair value measurements - Assets:
Trading securities:
Commercial paper	$	599,482	$	-	$	599,482	$	-	$	-
Certificates of deposit		1,019,520		-		1,019,520		-		-
TLGP obligations2		494,236		-		494,236		-		-
Government-sponsored enterprise obligations3,4		2,098,844		-		2,098,844		-		-
U.S. obligation residential MBS5		1,380		-		1,380		-		-
Government-sponsored enterprise residential MBS6		345,701		-		345,701		-		-
Total trading securities		4,559,163		-		4,559,163		-		-
Derivative assets:
Interest-rate related		13,195		-		343,162		-		(329,967)
Mortgage delivery commitments		843		-		843		-		-
Total derivative assets		14,038		-		344,005		-		(329,967)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	4,573,201	$	-	$	4,903,168	$	-	$	(329,967)
Recurring fair value measurements - Liabilities:
Derivative liabilities:
Interest-rate related	$	140,213	$	-	$	769,004	$	-	$	(628,791)
TOTAL RECURRING FAIR VALUE MEASUREMENTS - LIABILITIES	$	140,213	$	-	$	769,004	$	-	$	(628,791)
Nonrecurring fair value measurements - Assets:
Held-to-maturity securities7:
Private-label residential MBS	$	10,453	$	-	$	-	$	10,453	$	-
Real estate owned8		1,067		-		-		1,067		-
TOTAL NONRECURRING FAIR VALUE MEASUREMENTS - ASSETS	$	11,520	$	-	$	-	$	11,520	$	-

¹Represents the effect of legally enforceable master netting agreements that allow the FHLBank to net settle positive and negative positions and also cash collateral and related accrued interest held or placed with the same counterparties.

²Represents corporate debentures guaranteed by FDIC under the TLGP.

³Represents debentures issued by other FHLBanks, Fannie Mae, Freddie Mac, Farm Credit, and Farmer Mac. GSE securities are not guaranteed by the U.S. government. Fannie Mae and Freddie Mac were placed into conservatorship by the Finance Agency on September 7, 2008 with the Finance Agency named as conservator.

⁴See Note 19 for transactions with other FHLBanks.

⁵Represents MBS issued by Ginnie Mae, which are guaranteed by the U.S. government.

⁶Represents MBS issued by Fannie Mae and Freddie Mac.

⁷Excludes impaired securities with carrying values less than their fair values at date of impairment.

⁸ Includes real estate owned written down to fair value during the quarter ended December 31, 2011 and still outstanding as of December 31, 2011.

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Statements Of Comprehensive Income (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Statements Of Comprehensive Income [Abstract]
Net income	$ 110,311	$ 77,326	$ 33,548
Other comprehensive income (loss):
Non-credit portion	(4,634)	(12,144)	(16,398)
Reclassification of non-credit portion included in net income	1,189	3,169	2,654
Accretion of non-credit portion	6,358	4,507	4,172
Total net non-credit potion of other-than-temporary impairment losses on held-to-maturity securities	2,913	(4,468)	(9,572)
Defined benefit pension plan:
Net gain (loss)	(661)	(1,020)	(1,586)
Amortization of net loss	332	319	353
Amortization of prior service cost	0	0	(6)
Total defined benefit pension plan	(329)	(701)	(1,239)
Total other comprehensive income (loss)	2,584	(5,169)	(10,811)
TOTAL COMPREHENSIVE INCOME	$ 112,895	$ 72,157	$ 22,737

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Pension And Postretirement Benefit Plans (Schedule Of Net Funded Status) (Details) (Multiemployer Plans, Pension [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Multiemployer Plans, Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Net pension cost charged to compensation and benefits expense	$ 3,419		$ 4,864		$ 3,829
Multiemployer plans, funded percentage	108.20%	[1]	90.30%	[1]	88.00%	[1]
Funded status, percentage	112.40%	[1]	92.50%	[1]	90.00%	[1]

[1] The funded status as of July 1, 2012 using the MAP-21 discount rate is preliminary and may increase because the plan’s participants were permitted to make contributions for the plan year ended June 30, 2012 through March 15, 2013. Contributions made on or before March 15, 2013, and designated for the plan year ended June 30, 2012, will be included in the final valuation as of July 1, 2012. The final funded status as of July 1, 2012 will not be available until the Form 5500 for the plan year July 1, 2012 through June 30, 2013 is filed (this Form 5500 is due to be filed no later than April 2014). The funded status as of July 1, 2011 is preliminary and may increase because the plan’s participants were permitted to make contributions for the plan year ended June 30, 2011 through March 15, 2012. Contributions made on or before March 15, 2012, and designated for the plan year ended June 30, 2011, will be included in the final valuation as of July 1, 2011. The final funded status as of July 1, 2011 will not be available until the Form 5500 for the plan year July 1, 2011 through June 30, 2012 is filed (this Form 5500 is due to be filed no later than April 2013).

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Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Summary Of Significant Accounting Policies [Abstract]

Summary Of Significant Accounting Policies

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).

Reclassifications: Certain amounts in the financial statements and related footnotes have been reclassified to conform to current period presentations. Such reclassifications have no impact on total assets, net income or capital.

Use of Estimates: The preparation of financial statements under GAAP requires management to make estimates and assumptions as of the date of the financial statements in determining the reported amounts of assets, liabilities and estimated fair values and in determining the disclosure of any contingent assets or liabilities. Estimates and assumptions by management also affect the reported amounts of income and expense during the reporting period. The most significant of these estimates include the fair value of derivatives, the determination of other-than-temporary impairment (OTTI) on investments and the allowance for credit losses. Many of the estimates and assumptions, including those used in financial models, are based on financial market conditions as of the date of the financial statements. Because of the volatility of the financial markets, as well as other factors that affect management estimates, actual results may vary from these estimates.

Fair Values: The fair value amounts, recorded on the Statements of Condition and presented in the note disclosures for the periods presented, have been determined by the FHLBank using available market and other pertinent information and reflect the FHLBank’s best judgment of appropriate valuation methods. Although the FHLBank uses its best judgment in estimating the fair value of these financial instruments, there are inherent limitations in any valuation technique. Therefore, these fair values may not be indicative of the amounts that would have been realized in market transactions at the reporting dates. See Note 16 for more information.

Cash Flows: For purposes of the Statements of Cash Flows, the FHLBank considers cash on hand and non-interest-bearing deposits in banks as cash and cash equivalents.

Interest-bearing Deposits, Securities Purchased Under Agreements to Resell and Federal Funds Sold: These investments provide short-term liquidity and are carried at cost. The FHLBank treats securities purchased under agreements to resell as short-term collateralized loans, which are classified as assets on the Statements of Condition. Securities purchased under agreements to resell are held in safekeeping in the FHLBank’s name by third-party custodians approved by the FHLBank. If the market value of the underlying securities decreases below the market value required as collateral, the counterparty has the option to: (1) place an equivalent amount of additional securities in safekeeping in the FHLBank’s name; or (2) remit an equivalent amount of cash; otherwise, the dollar value of the resale agreement will be decreased accordingly. Federal funds sold consist of short-term unsecured loans conducted with investment-grade counterparties.

Investment Securities: The FHLBank classifies investments as trading, available-for-sale and held-to-maturity at the date of acquisition. Purchases and sales of securities are recorded on a trade date basis.

Trading: Securities classified as trading are held for liquidity purposes and/or to provide a fair value offset to interest rate swaps tied to securities or for securities acquired as asset liability management tools and carried at fair value. The FHLBank records changes in the fair value of thesesecurities through other income (loss) as net gains (losses) on trading securities. Finance Agency regulation and the FHLBank’s Risk Management Policy (RMP) prohibit trading in or the speculative use of these instruments and limits credit risk arising from these instruments. While the FHLBank classifies certain securities as trading for financial reporting purposes, it does not actively trade any of these securities with the intent of realizing gains and holds these investments indefinitely as management periodically evaluates its asset/liability and liquidity needs. Short-term money market investments with maturities of three months or less are acquired and classified as trading securities primarily for liquidity purposes. These short-term money market investments are periodically sold to meet the FHLBank’s cash flow needs.

Available-for-Sale: Securities that are not classified as trading or held-to-maturity are classified as available-for-sale and are carried at fair value. The change in fair value of available-for-sale securities is recorded in other comprehensive income (loss) (OCI) as a net unrealized gain or loss on available-for-sale securities.

Held-to-Maturity: Securities that the FHLBank has both the ability and intent to hold to maturity are classified as held-to-maturity and are carried at cost, adjusted for periodic principal repayments, amortization of premiums, accretion of discounts and OTTI recognized in net income and OCI.

The FHLBank may change its intent to hold to maturity a held-to-maturity investment without changing its intent to hold to maturity other held-to-maturity investments for the following circumstances: (1) evidence of a significant deterioration in the issuer’s creditworthiness; (2) a change in statutory or regulatory requirements significantly modifying either what constitutes a permissible investment or the maximum level of investments in certain kinds of investments, thereby causing the FHLBank to dispose of a held-to-maturity investment; (3) a significant increase by a regulator in the FHLBank’s capital requirements that causes the FHLBank to downsize by selling held-to-maturity investments; or (4) a significant increase in the risk weights of debt securities used for regulatory risk-based capital purposes. The FHLBank considers the following situations maturities for purposes of assessing ability and intent to hold to maturity: (1) the sale of the security is near enough to maturity (or call date if exercise of the call is probable) that interest rate risk is substantially eliminated as a pricing factor and the changes in market interest rates would not have a significant effect on the security’s fair value; or (2) the sale of a security occurs after the FHLBank has already collected a substantial portion (at least 85 percent) of the principal outstanding at acquisition either due to prepayments on the debt security or to scheduled payments on a debt security payable in equal installments (both principal and interest) over its term.

Premiums and Discounts: The FHLBank computes the amortization of purchased premiums and accretion of purchased discounts on mortgage-backed securities (MBS) using the level-yield method over the estimated cash flows of the securities. This method requires a retrospective adjustment of the effective yield each time the FHLBank receives a principal repayment or changes the estimated remaining cash flows as if the actual principal repayments and new estimated cash flows had been known since the original acquisition dates of the securities. The FHLBank uses nationally recognized, market-based third-party prepayment models to estimate future cash flows. The FHLBank computes the amortization of premiums and accretion of discounts on other investments using the level-yield method to the contractual maturities of the securities.

Gains and Losses on Sales: Gains and losses on the sales of investment securities are computed using the specific identification method and are included in other income (loss).

Investment Securities – Other-than-temporary Impairment: The FHLBank evaluates its individual held-to-maturity investment securities holdings in an unrealized loss position for OTTI at least quarterly, or more frequently if events or changes in circumstances indicate that these investments may be other-than-temporarily impaired. An investment is considered impaired when its fair value is less than its amortized cost basis. The FHLBank considers an OTTI to have occurred under any of the following circumstances:

§ If the FHLBank has the intent to sell the impaired debt security;

§ If, based on available evidence, the FHLBank believes it is more likely than not that it will be required to sell the debt security before the recovery of its amortized cost basis; or

§ If the FHLBank does not expect to recover the entire amortized cost basis of the impaired debt security.

Recognition of OTTI: If either of the first two conditions above is met, the FHLBank recognizes an OTTI charge in earnings equal to the entire difference between the security’s amortized cost basis and its fair value as of the Statement of Condition date. For securities in an unrealized loss position that meet neither of the first two conditions, the entire loss position, or total OTTI, is evaluated to determine the extent and amount of credit loss.

To determine whether a credit loss exists, the FHLBank performs an analysis, which includes a cash flow analysis for private-label MBS/ABS, to determine if it will recover the entire amortized cost basis of each of these securities. The present value of the cash flows expected to be collected is compared to the amortized cost basis of the security to determine if a credit loss exists. If there is a credit loss, the carrying value of the security is adjusted to its fair value. However, rather than recognizing the entire difference between the amortized cost basis and the fair value in earnings, only the amount of the impairment representing the credit loss (i.e., the credit component) is recognized in earnings, while the amount related to all other factors (i.e., the non-credit component) is recognized in Accumulated OCI (AOCI), which is a component of capital. The credit loss on a debt security is limited to the amount of that security’s unrealized losses.

The total OTTI is presented in the Statements of Income with an offset for the amount of the non-credit potion of OTTI that is recognized in AOCI. The remaining amount in the Statements of Income represents the credit loss for the period.

Accounting for OTTI Recognized in AOCI: For subsequent accounting of other-than-temporarily impaired securities, the FHLBank records an additional OTTI if the present value of cash flows expected to be collected is less than the amortized cost basis. The total amount of this additional OTTI is determined as the difference between its carrying amount prior to the determination of this additional OTTI and its fair value. Additional credit losses related to previously other-than-temporarily impaired securities are reclassified out of AOCI into the Statements of Income, but only to the extent of a security’s unrealized losses (i.e., difference between the security’s amortized cost and its fair value). The OTTI recognized in AOCI is accreted to the carrying value of each security on a prospective basis, based on the amount and timing of future estimated cash flows (with no effect on earnings unless the security is subsequently sold or there are additional decreases in cash flows expected to be collected).

Interest Income Recognition: The FHLBank recognizes subsequent interest income in accordance with the method described in accounting guidance for beneficial interests in securitized financial assets. As of the impairment measurement date, a new accretable yield is calculated for the impaired investment security. This adjusted yield is used to calculate the amount to be recognized into income over the remaining life of the security so as to match the amount and timing of future cash flows expected to be collected. Subsequent changes in estimated cash flows change the accretable yield on a prospective basis. The estimated cash flows and accretable yield are re-evaluated on a quarterly basis.

Advances: The FHLBank presents advances (secured loans to members, former members or housing associates) net of unearned commitment fees, premiums, discounts and fair value basis adjustments. The FHLBank amortizes the premiums and accretes the discounts on advances to interest income using the level-yield method. The FHLBank records interest on advances to interest income as earned.

Advance Modifications:In cases in which the FHLBank funds a new advance concurrent with or within a short period of time before or after the prepayment of an existing advance, the FHLBank evaluates whether the new advance meets the accounting criteria to qualify as a modification of an existing advance or whether it constitutes a new advance. The FHLBank compares the present value of cash flows on the new advance to the present value of cash flows remaining on the existing advance. If there is at least a 10 percent difference in the cash flows or if the FHLBank concludes the differences between the advances are more than minor based on qualitative factors, the advance is accounted for as a new advance. In all other instances, the new advance is accounted for as a modification.

Prepayment Fees: The FHLBank charges prepayment fees to its borrowers when certain advances are repaid before their original maturities. The FHLBank records prepayment fees net of hedging fair value basis adjustments included in the book basis of the advance, as “Prepayment fees on terminated advances” in the interest income section of its Statements of Income.

If a new advance does not qualify as a modification of an existing advance, it is treated as an advance termination and any prepayment fee, net of hedging adjustments, is recorded to “Prepayment fees on terminated advances” in the interest income section of the Statements of Income.

If the new advance qualifies as a modification, the net prepayment fee received on the prepaid advance is deferred as a discount and included in the basis of the modified advance. The basis adjustment is amortized over the life of the modified advance to advance interest income. If the modified advance is hedged, the fair value gain or loss on the advance and the prepayment fee are included in the carrying amount of the modified advance, and any prior gains or losses and prepayment fees are amortized to interest income over the life of the modified advance using the level-yield method. Modified hedged advances are marked to benchmark fair value after the modification, and subsequent fair value changes are recorded in “Net gain (loss) on derivatives and hedging activities” in other income (loss).

Mortgage Loans Held for Portfolio: The FHLBank carries mortgage loans classified as held for investment at their principal amount outstanding, net of unamortized premiums, unaccreted discounts, deferred loan fees associated with table funded loans, hedging adjustments, unrealized gains and losses from mortgage purchase commitments and other fees. The FHLBank has the intent and ability to hold these mortgage loans to maturity.

Premiums and Discounts: The FHLBank defers and amortizes/accretes mortgage loan origination fees (agent fees) and premiums and discounts paid to and received from FHLBank members as interest income using the contractual method. The contractual method uses the cash flows required by the loan contracts, as adjusted for actual prepayments, to apply the interest method. The contractual method does not utilize estimates of future prepayments of principal.

Credit Enhancement Fees: The credit enhancement (CE) obligation is an obligation on the part of the participating financial institution (PFI) that ensures the retention of credit risk on loans it originates on behalf of or sells to the FHLBank. The amount of the CE obligation is determined so that any losses in excess of the CE obligation for each pool of mortgage loans purchased approximate those experienced by an investor in a double-A rated MBS. As a part of our methodology to determine the amount of credit enhancement necessary, we analyze the risk characteristics of each mortgage loan using a model licensed from a Nationally Recognized Statistical Rating Organization (NRSRO). We use the model to evaluate loan data provided by the PFI as well as other relevant information.

The FHLBank pays the PFI a CE fee for managing this portion of the credit risk in the pool of loans. CE fees are paid monthly based on the remaining unpaid principal balance (UPB) of the loans in a master commitment. The required CE obligation amount may vary depending on the various product alternatives selected by the PFI. CE fees are recorded as an offset to mortgage loan interest income. To the extent the FHLBank experiences a loss in a master commitment, the FHLBank may be able to recapture CE fees paid to the PFIs to offset these losses.

Mortgage Loan Participations: The FHLBank has entered into an agreement with FHLBank of Indianapolis to sell participation interests in master commitments of FHLBank Topeka’s PFIs. The risk sharing and rights are allocated pro-ratably based upon each FHLBank’s percentage participation in the related master commitment.

Other Fees: The FHLBank may receive other non-origination fees, such as delivery commitment extension fees and pair-off fees as part of the mark-to-market on derivatives to which they related or as part of the loan basis, as applicable. Delivery commitment extension fees are received when a PFI requires an extension of the delivery commitment period beyond the original stated maturity. These fees compensate the FHLBank for lost interest as a result of late funding and represent the member purchasing a derivative from the FHLBank. Pair-off fees are received from the PFI when the amount funded is more than or less than a specific percentage range of the delivery commitment amount. These fees compensate the FHLBank for hedge costs associated with the under-delivery or over-delivery. To the extent that pair off fees relate to under-deliveries of loans, they are included in the mark-to-market of the related delivery commitment derivative. If they relate to over-deliveries, they represent purchase price adjustments to the related loans acquired and are recorded as a part of the loan basis.

Allowance for Credit Losses: An allowance for credit losses is a valuation allowance separately established for each identified portfolio segment, if necessary, to provide for probable losses inherent in the FHLBank’s portfolios as of the Statement of Condition date. To the extent necessary, an allowance for credit losses for off-balance sheet credit exposures is recorded as a liability. See Note 7 for details on each allowance methodology.

Portfolio Segments: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. The FHLBank has developed and documented a systematic methodology for determining an allowance for credit losses, where applicable, for: (1) credit products (advances, letters of credit and other extensions of credit to members); (2) government-guaranteed or insured mortgage loans held for portfolio; (3) conventional mortgage loans held for portfolio; (4) the direct financing lease receivable; and (5) term Federal funds sold.

Classes of Finance Receivables:Classes of finance receivables generally are a disaggregation of a portfolio segment to the extent that it is needed to understand the exposure to credit risk arising from these financing receivables. The FHLBank has determined that no further disaggregation of portfolio segments identified previously is needed as the credit risk arising from these financing receivables is assessed and measured at the portfolio segment level.

Non-accrual Loans: The FHLBank places a conventional mortgage loan on non-accrual status if it is determined that either: (1) the collection of interest or principal is doubtful; or (2) interest or principal is past due for 90 days or more, except when the loan is well-secured (e.g., through credit enhancements) and in the process of collection. The FHLBank does not place government-guaranteed or insured mortgage loans on non-accrual status due to the U.S. government guarantee or insurance on these loans and the contractual obligation of the loan servicer to repurchase the loans when certain criteria are met. For those mortgage loans placed on non-accrual status, accrued but uncollected interest is reversed against interest income. The FHLBank records cash payments received on non-accrual loans first as interest income and then as a reduction of principal as specified in the contractual agreement, unless the collection of the remaining principal amount due is considered doubtful. If the collection of the remaining principal amount due is considered doubtful then cash payments received would be applied first solely to principal until the remaining principal amount due is expected to be collected and then as a recovery of any charge-off, if applicable, followed by recording interest income. A loan on non-accrual status may be restored to accrual when: (1) none of its contractual principal and interest is due and unpaid, and the FHLBank expects repayment of the remaining contractual principal and interest; or (2) it otherwise becomes well secured and in the process of collection.

Impairment Methodology: A loan is considered impaired when, based on current information and events, it is probable that the FHLBank will be unable to collect all amounts due according to the contractual terms of the loan agreement.

Loans that are on non-accrual 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 balance on the loan. Interest income on impaired loans is recognized in the same manner as non-accrual loans.

Charge-off Policy: The FHLBank evaluates whether to record a charge-off on a conventional mortgage loan upon the occurrence of a confirming event. Confirming events include, but are not limited to, the occurrence of foreclosure or notification of a claim against any of the credit enhancements. A charge-off is recorded if the recorded investment in the loan will not be recovered.

Real Estate Owned: Real estate owned (REO) includes assets that have been received in satisfaction of debt through foreclosures. REO is recorded at the lower of cost or fair value less estimated selling costs. The FHLBank recognizes a charge-off to the allowance for credit losses if the fair value of the REO less estimated selling costs is less than the recorded investment in the loan at the date of transfer from loans to REO. Any subsequent realized gains, realized or unrealized losses and carrying costs are included in other expense in the Statements of Income. REO is recorded in other assets in the Statements of Condition.

Derivatives: All derivatives are recognized on the Statements of Condition at their fair value and are reported as either derivative assets or derivative liabilities, net of cash collateral and accrued interest from counterparties. The fair values of derivatives are netted by counterparty pursuant to the provisions of the FHLBank’s master netting arrangements. If these netted amounts are positives, they are classified as an asset and, if negative, they are classified as a liability. Cash flows associated with derivatives are reflected as cash flows from operating activities in the Statements of Cash Flows unless the derivative meets the criteria to be a financing derivative.

Derivative Designations: Each derivative is designated as one of the following:

§ a qualifying hedge of the fair value of: (1) a recognized asset or liability; or (2) an unrecognized firm commitment (a fair value hedge);

§ a qualifying hedge of: (1) a forecasted transaction; or (2) the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a cash flow hedge);

§ a non-qualifying hedge of an asset or liability (an economic hedge) for asset/liability management purposes; or

§ a non-qualifying hedge of another derivative (an intermediary hedge) that is offered as a product to members.

Accounting for Qualifying Hedges: If hedging relationships meet certain criteria, including, but not limited to, formal documentation of the hedging relationship and an expectation to be highly effective, they qualify for hedge accounting and the offsetting changes in fair value of the hedged items may be recorded in earnings (fair value hedges) or AOCI (cash flow hedges). Two approaches to hedge accounting include:

§ Long haul hedge accounting – The application of long haul hedge accounting generally requires the FHLBank to formally assess (both at the hedge's inception and at least quarterly) 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 or forecasted transactions and whether those derivatives may be expected to remain effective in future periods.

§ Shortcut hedge accounting – Transactions that meet more stringent criteria qualify for the shortcut method of hedge accounting in which an assumption can be made that the change in fair value of a hedged item exactly offsets the change in fair value of the related derivative. Under the shortcut method, the entire change in fair value of the interest rate swap is considered to be effective at achieving offsetting changes in fair values or cash flows of the hedged asset or liability.

Derivatives are typically executed at the same time as the hedged item, and the FHLBank designates the hedged item in a qualifying hedge relationship at the trade date. In many hedging relationships, the FHLBank may designate the hedging relationship upon its commitment to disburse an advance or trade a consolidated obligation in which settlement occurs within the shortest period of time possible for the type of instrument based on market settlement conventions. The FHLBank defines market settlement conventions for advances to be five business days or less and for consolidated obligations to be thirty calendar days or less, using a next business day convention. The FHLBank then records the changes in fair value of the derivative and the hedged item beginning on the trade date.

Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge, along with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk (including changes that reflect losses or gains on firm commitments), are recorded in current period earnings. Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge, to the extent that the hedge is effective, are recorded in AOCI, a component of capital, until earnings are affected by the variability of the cash flows of the hedged transaction (i.e., until the recognition of interest on a variable rate asset or liability is recorded in earnings). For both fair value and cash flow hedges, any hedge ineffectiveness (which represents the amount by which the change in the fair value of the derivative differs from the change in fair value of the hedged item or the variability in the cash flows of the forecasted transaction) is recorded in current period earnings.

Accounting for Non-Qualifying Hedges: An economic hedge is defined as a derivative hedging specific or non-specific underlying assets, liabilities or firm commitments that does not qualify for hedge accounting but is an acceptable hedging strategy under the FHLBank’s RMP. These economic hedging strategies also comply with Finance Agency regulatory requirements prohibiting speculative hedge transactions. An economic hedge by definition introduces the potential for earnings variability caused by changes in fair value on the derivatives that are recorded in the FHLBank’s income but not offset by corresponding changes in the fair value of the economically hedged asset, liability or firm commitment being recorded simultaneously in income. As a result, the FHLBank recognizes only the net interest and the change in fair value of these derivatives in other income (loss) as “Net gain (loss) on derivatives and hedging activities” with no offsetting fair value adjustments for the asset, liability or firm commitment.

The derivatives used in intermediary activities do not qualify for 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 FHLBank. These amounts are recorded in other income (loss) as “Net gains (losses) on derivatives and hedging activities.”

Accrued Interest Receivables and Payables: The differentials between accruals of interest receivables and payables on derivatives designated as fair value or cash flow hedges are recognized as an adjustment to the interest income or expense of the designated underlying investment securities, advances, consolidated obligations or other financial instruments, thereby affecting the reported amount of net interest income on the Statements of Income. Changes in the fair value of an economic or intermediary hedge are recorded in current period earnings. The differentials between accruals of interest receivables and payables on intermediated derivatives for members and other economic hedges are recognized as other income (loss). Therefore, both the net interest on the stand-alone derivatives and the fair value changes are recorded in other income (loss) as “Net gain (loss) on derivatives and hedging activities.”

Discontinuance of Hedge Accounting: The FHLBank discontinues hedge accounting prospectively when: (1) 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); (2) the derivative and/or the hedged item expires or is sold, terminated or exercised; (3) it is no longer probable that the forecasted transaction will occur in the originally expected period; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designating the derivative as a hedging instrument is no longer appropriate.

When hedge accounting is discontinued because the FHLBank determines that the derivative no longer qualifies as an effective fair value hedge of an existing hedged item, the FHLBank continues to carry the derivative on its Statements of Condition at fair value, ceases to adjust the hedged asset or liability for changes in fair value, and begins amortizing the cumulative basis adjustment on the hedged item into earnings over the remaining life of the hedged item using the level-yield method. When hedge accounting is discontinued because the FHLBank determines that the derivative no longer qualifies as an effective cash flow hedge of an existing hedged item, the FHLBank continues to carry the derivative on its Statements of Condition at fair value and amortizes the cumulative OCI adjustment to earnings when earnings are affected by the original forecasted transaction. In all situations in which hedge accounting is discontinued and the derivative remains outstanding, the FHLBank carries the derivative at fair value on its Statements of Condition, recognizing changes in the fair value of the derivative in current-period earnings. When the FHLBank discontinues hedge accounting because it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses in AOCI will be recognized immediately in earnings. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the FHLBank continues to carry the derivative on its Statements of Condition at fair value, removing any asset or liability that was recorded to recognize the firm commitment and recording it as a gain or loss in current period earnings.

Embedded Derivatives: The FHLBanks may issue debt, make advances, or purchase financial instruments in which a derivative instrument is embedded. Upon execution of these transactions, the FHLBank assesses whether the economic characteristics of the embedded derivative are clearly and closely related to the economic characteristics of the remaining component of the advance, debt or purchased financial instrument (the host contract) and whether a separate, non-embedded instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument. When the FHLBank determines that: (1) the embedded derivative has economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (2) a separate, stand-alone instrument with the same terms would qualify as a derivative instrument, the embedded derivative is separated from the host contract, carried at fair value, and designated as a stand-alone derivative instrument pursuant to an economic hedge. However, if the entire contract (the host contract and the embedded derivative) is to be measured at fair value, with changes in fair value reported in current period earnings (such as an investment security classified as trading), or if the FHLBank cannot reliably identify and measure the embedded derivative for purposes of separating that derivative from its host contract, the entire contract is carried on the Statements of Condition at fair value and no portion of the contract is designated as a hedging instrument.

Premises, Software and Equipment: The FHLBank records premises, software and equipment at cost less accumulated depreciation and amortization. Depreciation is computed on the straight-line method over the estimated useful lives of the assets ranging from 3 to 20 years. Leasehold improvements are amortized on the straight-line basis over the shorter of the estimated useful life of the improvement or the remaining term of the lease. Improvements and major renewals are capitalized, and ordinary maintenance and repairs are expensed as incurred. As of December 31, 2012 and 2011, the accumulated depreciation and amortization related to premises, software and equipment was $24,187,000 and $22,662,000, respectively. Depreciation and amortization expense was $2,152,000, $2,866,000 and $3,655,000 for the years ended December 31, 2012, 2011 and 2010, respectively. Gains and losses on disposals are included in other income (loss). The net realized gain (loss) on disposal of premises, software and equipment was $(1,951,000), $6,000 and $(100,000) for the years ended December 31, 2012, 2011 and 2010, respectively. The loss on disposal of premises, software and equipment for 2012 includes the write-off of two software projects prior to implementation.

The cost of purchased software and certain costs incurred in developing computer software for internal use is capitalized and amortized over future periods. Amortization is computed on the straight-line method over three years for purchased software and five years for developed software. As of December 31, 2012 and 2011, the FHLBank had $1,309,000 and $2,935,000, respectively, in unamortized computer software costs included in premises, software and equipment on its Statements of Condition. Amortization of computer software costs charged to expense was $764,000, $1,378,000 and $2,162,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

Consolidated Obligations: Consolidated obligations are recorded at amortized cost.

Discounts and Premiums:The FHLBank expenses the discounts on consolidated obligation discount notes on the straight-line method over the terms of the related notes due to their short-term nature. Consolidated obligation bond discounts are accreted and premiums are amortized to interest expense using a level-yield methodology over the contractual maturities of the corresponding bonds.

Concessions: Amounts paid to dealers in connection with sales of consolidated obligations are deferred and amortized using the level-yield method over the contractual terms of the consolidated obligations. Concession amounts are prorated to the FHLBank by the Office of Finance based on the percentage of each consolidated obligation issued by the Office of Finance on behalf of the FHLBank. Unamortized concessions are included in “Other assets” and the amortization of such concessions is included in consolidated obligation interest expense.

Mandatorily Redeemable Capital Stock: The FHLBank reclassifies all stock subject to redemption from capital to liability once a member submits a written redemption request, gives notice of intent to withdraw from membership, or attains non-member status by merger or acquisition, charter termination or involuntary termination from membership, since the member shares will then meet the definition of a mandatorily redeemable financial instrument. There is no distinction as to treatment for reclassification from capital to liability between in-district redemption requests and those redemption requests triggered by out-of-district acquisitions. The FHLBank does not take into consideration its members’ right to cancel a redemption request in determining when shares of capital stock should be classified as a liability because such cancellation would be subject to a substantial cancellation fee. Member and non-member shares meeting the definition of mandatorily redeemable capital stock are reclassified to a liability at fair value, which has been determined to be par value ($100) plus any estimated accrued but unpaid dividends. The FHLBank’s dividends are declared and paid at each quarter-end; therefore, the fair value reclassified equals par value. Dividends declared on member shares for the time after classification as a liability are accrued at the expected dividend rate and reflected as interest expense in the Statements of Income. The repurchase of these mandatorily redeemable financial instruments by the FHLBank are reflected as financing cash outflows in the Statements of Cash Flows once settled.

If a member submits a written request to cancel a previously submitted written redemption request, the capital stock covered by the written cancellation request is reclassified from a liability to capital at fair value. After the reclassification, dividends on the capital stock are no longer classified as interest expense.

Restricted Retained Earnings: In 2011, the FHLBank entered into a Joint Capital Enhancement Agreement, as amended (JCE Agreement). Under the JCE Agreement, beginning in the third quarter of 2011, the FHLBank allocates 20 percent of its quarterly net income to a separate restricted retained earnings (RRE) account until the account balance equals at least 1 percent of its average balance of outstanding consolidated obligations for the previous quarter. These restricted retained earnings are not available to pay dividends and are presented separately on the Statements of Condition.

Finance Agency Expenses: A portion of the Finance Agency’s expenses and working capital fund are allocated among the FHLBanks based on the pro rata share of the annual assessments based on the ratio between each FHLBank’s minimum required regulatory capital and the aggregate minimum required regulatory capital of every FHLBank.

Office of Finance Expenses: Effective January 1, 2011, each FHLBank’s proportionate share of Office of Finance operating and capital expenditures is calculated using a formula that is based upon the following components: (1) two-thirds based upon each FHLBank’s share of total consolidated obligations outstanding; and (2) one-third based upon an equal pro rata allocation. Prior to January 1, 2011, the FHLBanks were assessed for Office of Finance operating and capital expenditures based equally on each FHLBank’s percentage of the following components: (1) capital stock; (2) consolidated obligations issued; and (3) consolidated obligations outstanding.

Assessments:

Affordable Housing Program (AHP):The FHLBank is required to establish, fund and administer an AHP. The AHP funds provide subsidies to members to assist in the purchase, construction or rehabilitation of housing for very low-, low- and moderate-income households. The required annual AHP funding is charged to earnings, and an offsetting liability is established.

Resolution Funding Corporation (REFCORP): Although the FHLBank is exempt from all federal, state and local taxation except for real property taxes, it was required to make quarterly payments to REFCORP through the second quarter of 2011 to be used to pay a portion of the interest on bonds issued by REFCORP. REFCORP is a corporation established by Congress in 1989 that provided funding for the resolution and disposition of insolvent savings institutions. Officers, employees and agents of the Office of Finance are authorized to act for and on behalf of REFCORP to carry out the functions of REFCORP.

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Advances (Schedule Of Federal Home Loan Bank Advances By Year Of Contractual Maturity) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011
Advances [Abstract]
Due in one year or less, Amount	$ 3,433,058		$ 2,878,887
Due after one year through two years, Amount	1,454,725		1,891,670
Due after two years through three years, Amount	1,691,471		1,828,334
Due after three years through four years, Amount	1,757,905		1,594,565
Due after four years through five years, Amount	2,529,511		1,662,373
Thereafter, Amount	5,241,927		6,994,666
TOTAL PAR VALUE	16,108,597		16,850,495
Discounts	(29,767)		(29,099)
Hedging adjustments	494,518	[1]	573,003	[1]
TOTAL	$ 16,573,348		$ 17,394,399
Due in one year or less, Weighted Average Interest Rate	1.11%		1.45%
Due after one year through two years, Weighted Average Interest Rate	2.39%		2.46%
Due after two years through three years, Weighted Average Interest Rate	1.88%		2.87%
Due after three years through four years, Weighted Average Interest Rate	1.99%		1.94%
Due after four years through five years, Weighted Average Interest Rate	2.84%		2.06%
Thereafter, Weighted Average Interest Rate	1.36%		1.96%
Total par value, Weighted Average Interest Rate	1.76%		2.03%

[1] See Note 8 for a discussion of: (1) the FHLBank’s objectives for using derivatives; (2) the types of assets and liabilities hedged; and (3) the accounting for derivatives and the related assets and liabilities hedged.

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Capital (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012 customer	Dec. 31, 2011 customer	Dec. 31, 2010 customer
Capital [Line Items]
Total regulatory capital-to-asset ratio, required	4.00%	4.00%
Leverage capital ratio, required	5.00%	5.00%
Leverage capital, permanent capital weight	1.5	1.5
Leverage capital, non-permanent capital weight	1.0	1.0
Percentage of income allocated to separate restricted retained earnings account	20.00%
Retained earnings as a percentage of average outstanding consolidated obligations during previous quarter, required	1.00%
Terminated members in F.D.I.C. receivership	2	8	4
Terminated members, closed by National Credit Union Administration			1
Terminated members with shares subject to mandatory redemption settlement terms	2
Number of out-of-district mergers with shares subject to mandatory redemption settlement terms	8
Capital Stock Class A [Member]
Capital [Line Items]
Common Stock, Par Value	100	100
Minimum period after which redemption is required	6 months
Asset-based stock purchase requirement, percentage	0.10%
Excess stock redemption or response period	5 days
Minimum period required to notify members prior to a change in the dividend parity threshold.	90 days
Dividend parity threshold adjustment	(1.00%)
Capital Stock Class B [Member]
Capital [Line Items]
Common Stock, Par Value	100	100
Minimum period after which redemption is required	5 years
Excess stock redemption or response period	5 days
Minimum period required to notify members prior to a change in the dividend parity threshold.	90 days
Dividend parity threshold adjustment	1.00%
Capital Stock Class B [Member] | Acquired Member Assets [Member]
Capital [Line Items]
Activity-based stock purchase requirement, percentage	2.00%
Capital Stock Class B [Member] | Advances [Member]
Capital [Line Items]
Activity-based stock purchase requirement, percentage	5.00%
Capital Stock Class B [Member] | Derivative, Notional Amount [Member]
Capital [Line Items]
Activity-based stock purchase requirement, percentage	0.00%
Capital Stock Class B [Member] | Standby Letters of Credit [Member]
Capital [Line Items]
Activity-based stock purchase requirement, percentage	0.00%
Minimum [Member]
Capital [Line Items]
Dividend parity threshold	0.00%
Minimum [Member] | Capital Stock Class A [Member]
Capital [Line Items]
Asset-based stock purchase requirement, value	1,000
Minimum [Member] | Capital Stock Class B [Member]
Capital [Line Items]
Cancellation fee multiplier	1.00%
Maximum [Member]
Capital [Line Items]
Regulatory stock dividend payment restriction threshold	1.00%
Maximum [Member] | Capital Stock Class A [Member]
Capital [Line Items]
Asset-based stock purchase requirement, value	500,000
Cancellation fee multiplier	1.00%
Maximum [Member] | Capital Stock Class B [Member]
Capital [Line Items]
Cancellation fee multiplier	5.00%
Maximum [Member] | Capital Stock Class B [Member] | Acquired Member Assets [Member]
Capital [Line Items]
Asset-based stock purchase requirement, percentage	1.50%

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Derivatives And Hedging Activities (Outstanding Notional Balances And Fair Values Of Derivatives Outstanding By Type Of Derivative And By Hedge Of Designation) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011
Derivatives, Fair Value [Line Items]
Notional Amount, Gross Asset Positions	$ 14,638,178		$ 13,313,478
Notional Amount, Gross Liability Positions	9,754,454		12,020,207
Notional Amount, Net Derivative Assets	7,389,203		6,340,612
Notional Amount, Net Derivative Liabilities	17,003,429		18,993,073
Fair Value, Gross Asset Positions	256,379		344,005
Fair Value, Gross Liability Positions	(664,992)		(769,004)
Fair Value, Net Derivative Assets	52,170	[1]	40,619	[1]
Fair Value, Net Derivative Liabilities	(460,783)		(465,618)
Fair value of cash collateral received from counterparties	(27,004)		(26,581)
NET DERIVATIVE FAIR VALUE, Net Derivative Assets	25,166		14,038
NET DERIVATIVE FAIR VALUE, Net Derivative Liabilities	(123,414)		(140,213)
Derivative Assets [Member]
Derivatives, Fair Value [Line Items]
Fair value of cash collateral delivered to counterparties	0		0
Fair value of cash collateral received from counterparties	(27,004)		(26,581)	[2]
Derivative Liabilities [Member]
Derivatives, Fair Value [Line Items]
Fair value of cash collateral delivered to counterparties	337,369		18,301	[2]
Fair value of cash collateral received from counterparties	0		(343,706)
Derivative [Member]
Derivatives, Fair Value [Line Items]
Fair value of cash collateral received from counterparties			44,882
Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Gross Asset Positions	5,337,000		6,446,000
Notional Amount, Gross Liability Positions	7,270,157		8,439,887
Notional Amount, Net Derivative Assets	2,674,325		4,265,367
Notional Amount, Net Derivative Liabilities	9,932,832		10,620,520
Fair Value, Gross Asset Positions	218,909		287,805
Fair Value, Gross Liability Positions	(497,944)		(576,851)
Fair Value, Net Derivative Assets	32,287		69,846
Fair Value, Net Derivative Liabilities	(311,322)		(358,892)
Designated as Hedging Instrument [Member] | Interest Rate Swaps [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Gross Asset Positions	5,337,000		6,446,000
Notional Amount, Gross Liability Positions	7,023,157		8,192,887
Notional Amount, Net Derivative Assets	2,574,325		4,175,367
Notional Amount, Net Derivative Liabilities	9,785,832		10,463,520
Fair Value, Gross Asset Positions	218,909		287,805
Fair Value, Gross Liability Positions	(493,515)		(571,776)
Fair Value, Net Derivative Assets	33,707		71,605
Fair Value, Net Derivative Liabilities	(308,313)		(355,576)
Designated as Hedging Instrument [Member] | Interest Rate Caps And Floors [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Gross Asset Positions	0		0
Notional Amount, Gross Liability Positions	247,000		247,000
Notional Amount, Net Derivative Assets	100,000		90,000
Notional Amount, Net Derivative Liabilities	147,000		157,000
Fair Value, Gross Asset Positions	0		0
Fair Value, Gross Liability Positions	(4,429)		(5,075)
Fair Value, Net Derivative Assets	(1,420)		(1,759)
Fair Value, Net Derivative Liabilities	(3,009)		(3,316)
Not Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Gross Asset Positions	9,301,178		6,867,478
Notional Amount, Gross Liability Positions	2,484,297		3,580,320
Notional Amount, Net Derivative Assets	4,714,878		2,075,245
Notional Amount, Net Derivative Liabilities	7,070,597		8,372,553
Fair Value, Gross Asset Positions	37,470		56,200
Fair Value, Gross Liability Positions	(167,048)		(192,153)
Fair Value, Net Derivative Assets	19,883		(29,227)
Fair Value, Net Derivative Liabilities	(149,461)		(106,726)
Not Designated as Hedging Instrument [Member] | Interest Rate Swaps [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Gross Asset Positions	4,710,000		375,000
Notional Amount, Gross Liability Positions	1,096,320		2,941,320
Notional Amount, Net Derivative Assets	3,170,000		520,000
Notional Amount, Net Derivative Liabilities	2,636,320		2,796,320
Fair Value, Gross Asset Positions	7,607		2,353
Fair Value, Gross Liability Positions	(166,890)		(191,864)
Fair Value, Net Derivative Assets	5,190		(40,149)
Fair Value, Net Derivative Liabilities	(164,473)		(149,362)
Not Designated as Hedging Instrument [Member] | Interest Rate Caps And Floors [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Gross Asset Positions	4,528,800		6,372,533
Notional Amount, Gross Liability Positions	1,344,000		639,000
Notional Amount, Net Derivative Assets	1,482,500		1,435,300
Notional Amount, Net Derivative Liabilities	4,390,300		5,576,233
Fair Value, Gross Asset Positions	29,761		53,004
Fair Value, Gross Liability Positions	(62)		(289)
Fair Value, Net Derivative Assets	14,591		10,079
Fair Value, Net Derivative Liabilities	15,108		42,636
Not Designated as Hedging Instrument [Member] | Mortgage Delivery Commitments [Member]
Derivatives, Fair Value [Line Items]
Notional Amount, Gross Asset Positions	62,378		119,945
Notional Amount, Gross Liability Positions	43,977		0
Notional Amount, Net Derivative Assets	62,378		119,945
Notional Amount, Net Derivative Liabilities	43,977		0
Fair Value, Gross Asset Positions	102		843
Fair Value, Gross Liability Positions	(96)		0
Fair Value, Net Derivative Assets	102		843
Fair Value, Net Derivative Liabilities	$ (96)		$ 0

[1] Includes net accrued interest receivable of $5,731,000 and $3,700,000 as of December 31, 2012 and 2011, respectively.

[2] The FHLBank held cash with a fair value of $44,882,000 as collateral as of December 31, 2011. Exposure can change on a daily basis; and thus, there is often a short lag time between the date the exposure is identified, collateral is requested and when the collateral is actually received. Likewise, there is a lag time for excess collateral to be returned. Excess collateral held by the FHLBank as of December 31, 2011 resulted in positive exposure (fair value plus accrued interest) with one counterparty being recorded as a derivative liability.

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Transactions With Stockholders And Housing Associates

12 Months Ended

Dec. 31, 2012

Transactions With Stockholders And Housing Associates [Abstract]

Transactions With Stockholders And Housing Associates

NOTE 18 – TRANSACTIONS WITH STOCKHOLDERS AND HOUSING ASSOCIATES

The FHLBank is a cooperative whose members own the capital stock of the FHLBank and generally receive dividends on their investments. In addition, certain former members that still have outstanding transactions are also required to maintain their investments in FHLBank capital stock until the transactions mature or are paid off. Nearly all outstanding advances are with current members, and the majority of outstanding mortgage loans held for portfolio were purchased from current or former members. The FHLBank also maintains demand deposit accounts for members primarily to facilitate settlement activities that are directly related to advances and mortgage loan purchases.

As provided by statute, the FHLBank’s members have the right to vote on the election of directors. In accordance with the Bank Act and Finance Agency regulations, members elect all of the FHLBank’s board of directors. Under the statute and regulations, each member directorship is designated to one of the four states in the FHLBank’s district, and a member is entitled to vote only for candidates for the state in which the member’s principal place of business is located. Each independent director is elected by the members at large from among individuals nominated by the FHLBank’s board of directors. A member is entitled to cast, for each applicable directorship, one vote for each share of capital stock that the member is required to hold as of the record date for voting, subject to a statutory limitation. Under this limitation, the total number of votes that a member may cast is limited to the average number of shares of the FHLBank’s capital stock that were required to be held by all members in that state as of the record date for voting. Non-member stockholders are not entitled to cast votes for the election of directors. As of December 31, 2012 and 2011, no member owned more than 10 percent of the voting interests of the FHLBank due to the statutory limitation on members’ voting rights as discussed above.

Transactions with members are entered into in the ordinary course of business. In instances where members also have officers or directors who are directors of the FHLBank, transactions with those members are subject to the same eligibility and credit criteria, as well as the same terms and conditions, as other transactions with members. For financial reporting and disclosure purposes, the FHLBank defines related parties as FHLBank directors’ financial institutions and members with capital stock investments in excess of 10 percent of the FHLBank’s total regulatory capital stock outstanding, which includes mandatorily redeemable capital stock.

Activity with Members that Exceed a 10 Percent Ownership in FHLBank Capital Stock: The following tables present information as of December 31, 2012 on members that owned more than 10 percent of outstanding FHLBank regulatory capital stock in 2012 (amounts in thousands). None of the officers or directors of these members currently serve on the FHLBank’s board of directors. As of December 31, 2011, no members owned more than 10 percent of FHLBank regulatory capital stock.

12/31/2012
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A			Total Class B Stock Par Value		Percent of Total Class B			Total Capital Stock Par Value		Percent of Total Capital Stock
MidFirst Bank	OK	$	500		0.1	%	$	145,727		16.9	%	$	146,227		11.5	%
Capitol Federal Savings Bank	KS		2,002		0.5			128,782		15.0			130,784		10.3
TOTAL		$	2,502		0.6	%	$	274,509		31.9	%	$	277,011		21.8	%

Advance and deposit balances with members that owned more than 10 percent of outstanding FHLBank regulatory capital stock as of December 31, 2012 are summarized in the following table (amounts in thousands).

	12/31/2012					12/31/2012
Member Name	Outstanding Advances		Percent of Total			Outstanding Deposits		Percent of Total
MidFirst Bank	$	2,898,000		18.0	%	$	13		0.0	%
Capitol Federal Savings Bank		2,550,000		15.8			1,247		0.1
TOTAL	$	5,448,000		33.8	%	$	1,260		0.1	%

MidFirst Bank and Capitol Federal Savings Bank did not originate any mortgage loans for or sell mortgage loans into the MPF Program during the year ended December 31, 2012.

Transactions with FHLBank Directors’ Financial Institutions: The following tables present information as of December 31, 2012 and 2011 for members that had an officer or director serving on the FHLBank’s board of directors in 2012 or 2011 (in thousands). Information is only listed for the year in which the officer or director served on the FHLBank’s board of directors. Capital stock listed is regulatory capital stock, which includes mandatorily redeemable capital stock.

12/31/2012
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A			Total Class B Stock Par Value		Percent of Total Class B			Total Capital Stock Par Value		Percent of Total Capital Stock
FirstBank	CO	$	500		0.1	%	$	5,700		0.7	%	$	6,200		0.5	%
Girard National Bank	KS		623		0.2			3,728		0.4			4,351		0.3
Golden Belt Bank, FSA	KS		1,192		0.3			2,143		0.3			3,335		0.3
Vision Bank, NA	OK		2,000		0.5			956		0.1			2,956		0.2
First State Bank Nebraska	NE		510		0.1			1,715		0.2			2,225		0.2
Morgan Federal Bank	CO		907		0.2			1,162		0.1			2,069		0.2
NebraskaLand National Bank	NE		961		0.2			754		0.1			1,715		0.1
Citizens Bank & Trust Co.	OK		931		0.2			51		0.0			982		0.1
Bankers' Bank of Kansas, NA	KS		270		0.1			2		0.0			272		0.0
TOTAL		$	7,894		1.9	%	$	16,211		1.9	%	$	24,105		1.9	%

12/31/2011
Member Name	State	Total Class A Stock Par Value		Percent of Total Class A			Total Class B Stock Par Value		Percent of Total Class B			Total Capital Stock Par Value		Percent of Total Capital Stock
Girard National Bank	KS	$	995		0.2	%	$	3,204		0.4	%	$	4,199		0.3	%
Vision Bank, NA	OK		3,757		0.7			53		0.0			3,810		0.3
FirstBank	CO		3,260		0.6			55		0.0			3,315		0.3
Golden Belt Bank, FSA	KS		1,376		0.2			1,886		0.3			3,262		0.2
First State Bank Nebraska	NE		955		0.2			1,228		0.2			2,183		0.2
Morgan Federal Bank	CO		896		0.2			1,130		0.1			2,026		0.1
Security State Bank	NE		279		0.0			1,663		0.2			1,942		0.1
Citizens Bank & Trust Co.	OK		927		0.2			51		0.0			978		0.1
Bankers' Bank of Kansas, NA	KS		270		0.0			1		0.0			271		0.0
TOTAL		$	12,715		2.3	%	$	9,271		1.2	%	$	21,986		1.6	%

Advance and deposit balances with members that had an officer or director serving on the FHLBank’s board of directors as of December 31, 2012 and 2011 are summarized in the following table (amounts in thousands). Information is only listed for the year in which the officer or director served on the FHLBank’s board of directors.

	12/31/2012					12/31/2011					12/31/2012					12/31/2011
Member Name	Outstanding Advances		Percent of Total			Outstanding Advances		Percent of Total			Outstanding Deposits		Percent of Total			Outstanding Deposits		Percent of Total
FirstBank	$	38,000		0.2	%	$	-		0.0	%	$	7,252		0.6	%	$	98		0.0	%
Girard National Bank		37,514		0.2			38,609		0.2			2,333		0.2			3,149		0.3
Golden Belt Bank, FSA		10,887		0.1			10,974		0.1			3,247		0.3			2,347		0.3
Vision Bank, NA		23,543		0.2			18,169		0.1			781		0.1			95		0.0
First State Bank Nebraska		33,867		0.2			30,914		0.2			866		0.1			117		0.0
Morgan Federal Bank		11,800		0.1			14,933		0.1			6,224		0.5			2,071		0.2
NebraskaLand National Bank		11,000		0.1								76		0.0
Citizens Bank & Trust Co.		1,000		0.0			2,000		0.0			110		0.0			127		0.0
Bankers' Bank of Kansas, NA		1,975		0.0			1,975		0.0			13		0.0			9		0.0
Security State Bank							5,792		0.0								2,134		0.2
TOTAL	$	169,586		1.1	%	$	123,366		0.7	%	$	20,902		1.8	%	$	10,147		1.0	%

The following table presents mortgage loans funded or acquired during the years ended December 31, 2012 and 2011for members that had an officer or director serving on the FHLBank’s board of directors in 2012 or 2011 (amounts in thousands). Information is only listed for the year in which the officer or director served on the FHLBank’s board of directors.

	12/31/2012					12/31/2011
Member Name	Total Mortgage Loans		Percent of Total			Total Mortgage Loans		Percent of Total
FirstBank	$	152,817		6.1	%	$	-		-	%
Girard National Bank		28,000		1.1			22,719		1.4
Golden Belt Bank, FSA		32,083		1.3			25,021		1.6
Vision Bank, NA		6,498		0.3			-		-
First State Bank Nebraska		15,569		0.6			5,434		0.4
Morgan Federal Bank		9,976		0.4			8,800		0.6
NebraskaLand National Bank		12,427		0.5
Citizens Bank & Trust Co		-		-			1,531		0.1
Bankers Bank of Kansas, NA		-		-			-		-
Security State Bank							23,886		1.5
TOTAL	$	257,370		10.3	%	$	87,391		5.6	%

Direct Financing Lease: During 2002, the FHLBank entered into a 20-year direct financing lease with a member for a building complex and property. Either party has the option to terminate this lease after 15 years. The net investment in the direct financing lease with the member is recorded in other assets. The FHLBank’s $7,896,000 up-front payment for its portion of the building complex is recorded in premises, software and equipment. On October 31, 2005, the FHLBank amended its lease to occupy additional building space, thereby reducing the portion of the property previously leased back to the member and decreasing the member’s future lease payments. All other provisions of the original lease remain in effect. The net reduction in the lease receivable is recorded in premises, software and equipment.

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Consolidated Obligations (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Debt Instrument [Line Items]
Commitments for payments of principal on all consolidated obligations	$ 687,902,143,000	$ 691,867,651,000
Callable bonds	8,461,000,000	7,599,000,000
Unamortized Concessions	12,392,000	11,160,000
Amortization of Financing Costs	18,125,000	12,276,000	16,557,000
Consolidated Obligations, Bonds [Member]
Debt Instrument [Line Items]
Amortization of Financing Costs	17,948,000	12,276,000	16,557,000
Consolidated Obligations, Discount Notes [Member]
Debt Instrument [Line Items]
Concessions on Discount Notes	$ 177,000	$ 210,000	$ 932,000

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Capital (Tables)

12 Months Ended

Dec. 31, 2012

Capital [Abstract]

Schedule Of Compliance With Regulatory Capital Requirements

	12/31/2012						12/31/2011
	Required			Actual			Required			Actual
Regulatory capital requirements:
Risk-based capital	$	300,742		$	1,340,740		$	227,407		$	1,193,058
Total regulatory capital-to-asset ratio		4.0	%		5.2	%		4.0	%		5.2	%
Total regulatory capital	$	1,352,745		$	1,751,403		$	1,327,607		$	1,737,657
Leverage capital ratio		5.0	%		7.2	%		5.0	%		7.0	%
Leverage capital	$	1,690,931		$	2,421,772		$	1,659,509		$	2,334,185

Schedule Of Mandatorily Redeemable Capital Stock

	2012		2011		2010
Balance at beginning of period	$	8,369	$	19,550	$	22,437
Capital stock subject to mandatory redemption reclassified from equity during the period		381,687		301,438		279,036
Capital stock previously subject to mandatory redemption reclassified to equity		(4)		(90)		-
Redemption or repurchase of mandatorily redeemable capital stock during the period		(384,425)		(312,698)		(282,202)
Stock dividend classified as mandatorily redeemable capital stock during the period		38		169		279
Balance at end of period	$	5,665	$	8,369	$	19,550

Schedule Of Mandatorily Redeemable Capital Stock, By Contractual Year Of Repurchase

Contractual Year of Repurchase	12/31/2012		12/31/2011
Year 1	$	-	$	-
Year 2		1		-
Year 3		303		769
Year 4		-		303
Year 5		-		-
Past contractual redemption date due to remaining activity1		5,361		7,297
TOTAL	$	5,665	$	8,369

__________

¹Represents mandatorily redeemable capital stock that is past the end of the contractual redemption period because there is activity outstanding to which the mandatorily redeemable capital stock relates.

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Affordable Housing Program

12 Months Ended

Dec. 31, 2012

Affordable Housing Program [Abstract]

Affordable Housing Program

NOTE 11 – AFFORDABLE HOUSING PROGRAM

The Bank Act, as amended by the Financial Institutions Reform, Recovery and Enforcement Act of 1989, requires each FHLBank to establish an AHP. As a part of its AHP, the FHLBank provides subsidies in the form of direct grants or below-market interest rate advances to members that use the funds to assist in the purchase, construction or rehabilitation of housing for very low-, low- and moderate-income households. By regulation, to fund the AHP, the 12 district FHLBanks as a group must annually set aside the greater of $100,000,000 or 10 percent of the current year’s net earnings after any assessment for REFCORP. For purposes of the AHP calculation, the term “net earnings” is defined as income before interest expense related to mandatorily redeemable capital stock and the assessment for AHP, but after the assessment to REFCORP. Prior to July 1, 2011, the AHP and REFCORP assessments were calculated simultaneously because of their interdependence on each other. The FHLBank accrues this expense monthly based on its net earnings. Calculation of the REFCORP assessment and satisfaction of that liability is discussed in Note 12.

The amount set aside for AHP is charged to expense and recognized as a liability. As subsidies are provided through the disbursement of grants or issuance of subsidized advances, the AHP liability is reduced accordingly. If the FHLBank’s net earnings before AHP and REFCORP would ever be zero or less, the amount of AHP liability would generally be equal to zero. However, if the result of the aggregate 10 percent calculation described above is less than the $100,000,000 minimum for all 12 FHLBanks, then the Bank Act requires the shortfall to be allocated among the FHLBanks based on the ratio of each FHLBank’s income for the previous year. If an FHLBank determines that its required AHP contributions are exacerbating any financial instability of that FHLBank, it may apply to the Finance Agency for a temporary suspension of its AHP contributions. The FHLBank has never applied to the Finance Agency for a temporary suspension of its AHP contributions.

As of December 31, 2012, the FHLBank’s AHP accrual on its Statements of Condition consisted of $15,916,000 for the 2013 AHP (uncommitted, including amounts recaptured and reallocated from prior years) and $15,282,000 for prior years’ AHP (committed but undisbursed).

The following table details the change in the AHP liability for the years ended December 31, 2012, 2011 and 2010(in thousands):

	2012		2011		2010
Appropriated and reserved AHP funds as of the beginning of the period	$	31,392	$	39,226	$	44,117
AHP set aside based on current year income		12,261		8,611		3,766
Direct grants disbursed		(13,210)		(16,984)		(8,908)
Recaptured funds1		755		539		251
Appropriated and reserved AHP funds as of the end of the period	$	31,198	$	31,392	$	39,226

__________ 

¹    Recaptured funds are direct grants returned to the FHLBank in those instances where the commitments associated with the approved use of funds are not met and repayment to the FHLBank is required by regulation. Recaptured funds are returned as a result of: (1) AHP-assisted homeowner’s transfer or sale of property within the five-year retention period that the assisted homeowner is required to occupy the property; (2) homeowner’s failure to acquire sufficient loan funding (funds previously approved and disbursed cannot be used); or (3) unused grants.

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Transactions With Stockholders And Housing Associates (Schedule Of Related Party Transactions, Advances And Deposits Disclosure) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Related Party Transaction [Line Items]
Advances	$ 16,573,348	$ 17,394,399
Deposits	1,181,957	997,371
Federal Home Loan Bank Member Banks Given Directorship [Member]
Related Party Transaction [Line Items]
Advances	169,586	123,366
Outstanding Advances, Percent of Total	1.10%	0.70%
Deposits	20,902	10,147
Outstanding Deposits, Percent of Total	1.80%	1.00%
Girard National Bank [Member]
Related Party Transaction [Line Items]
Advances	37,514	38,609
Outstanding Advances, Percent of Total	0.20%	0.20%
Deposits	2,333	3,149
Outstanding Deposits, Percent of Total	0.20%	0.30%
Golden Belt Bank, FSA [Member]
Related Party Transaction [Line Items]
Advances	10,887	10,974
Outstanding Advances, Percent of Total	0.10%	0.10%
Deposits	3,247	2,347
Outstanding Deposits, Percent of Total	0.30%	0.30%
FirstBank [Member]
Related Party Transaction [Line Items]
Advances	38,000	0
Outstanding Advances, Percent of Total	0.20%	0.00%
Deposits	7,252	98
Outstanding Deposits, Percent of Total	0.60%	0.00%
Vision Bank, NA [Member]
Related Party Transaction [Line Items]
Advances	23,543	18,169
Outstanding Advances, Percent of Total	0.20%	0.10%
Deposits	781	95
Outstanding Deposits, Percent of Total	0.10%	0.00%
First State Bank Nebraska [Member]
Related Party Transaction [Line Items]
Advances	33,867	30,914
Outstanding Advances, Percent of Total	0.20%	0.20%
Deposits	866	117
Outstanding Deposits, Percent of Total	0.10%	0.00%
Morgan Federal Bank [Member]
Related Party Transaction [Line Items]
Advances	11,800	14,933
Outstanding Advances, Percent of Total	0.10%	0.10%
Deposits	6,224	2,071
Outstanding Deposits, Percent of Total	0.50%	0.20%
NebraskaLand National Bank [Member]
Related Party Transaction [Line Items]
Advances	11,000
Outstanding Advances, Percent of Total	0.10%
Deposits	76
Outstanding Deposits, Percent of Total	0.00%
Citizens Bank & Trust Co. [Member]
Related Party Transaction [Line Items]
Advances	1,000	2,000
Outstanding Advances, Percent of Total	0.00%	0.00%
Deposits	110	127
Outstanding Deposits, Percent of Total	0.00%	0.00%
Bankers Bank Of Kansas, NA [Member]
Related Party Transaction [Line Items]
Advances	1,975	1,975
Outstanding Advances, Percent of Total	0.00%	0.00%
Deposits	13	9
Outstanding Deposits, Percent of Total	0.00%	0.00%
Security State Bank [Member]
Related Party Transaction [Line Items]
Advances		5,792
Outstanding Advances, Percent of Total		0.00%
Deposits		$ 2,134
Outstanding Deposits, Percent of Total		0.20%