Federal Home Loan Bank of Des Moines

11/07/2025 | Press release | Distributed by Public on 11/07/2025 09:57

Quarterly Report for Quarter Ending 2025-09-30 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Management's Discussion and Analysis (MD&A) of Financial Condition and Results of Operations should be read in conjunction with our financial statements and condensed notes at the beginning of this Form 10-Q and in conjunction with our MD&A and Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission (SEC) on March 7, 2025. Our MD&A is designed to provide information that will help the reader develop a better understanding of our financial statements, key financial statement changes from quarter to quarter, and the primary factors driving those changes. Throughout this Form 10-Q, acronyms and terms used are defined in the Glossary of Terms. Unless the context otherwise requires, the terms "we," "us," and "our" refer to the Federal Home Loan Bank of Des Moines or its management. Our MD&A is organized as follows:
CONTENTS
Forward-Looking Information
38
Executive Overview
39
Conditions in the Financial Markets
40
Selected Financial Data
41
Results of Operations
42
Net Interest Income
42
Other Income (Loss)
45
Hedging Activities
45
Other Expense
50
Statements of Condition
51
Financial Highlights
51
Advances
51
Mortgage Loans
52
Investments
53
Consolidated Obligations
54
Capital
55
Derivatives
55
Liquidity and Capital Resources
55
Critical Accounting Estimates
59
Legislative and Regulatory Developments
59
Risk Management
59
FORWARD-LOOKING INFORMATION
Statements contained in this report, including statements describing the objectives, projections, estimates, or future predictions in our operations, may be forward-looking statements. These statements may be identified by the use of forward-looking terminology, such as believes, projects, expects, anticipates, estimates, intends, strategy, plan, could, should, may, and will or their negatives or other variations on these terms. By their nature, forward-looking statements involve risk or uncertainty, and actual results could differ materially from those expressed or implied or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, you are cautioned not to place undue reliance on such statements. These risks and uncertainties include, but are not limited to, the following:
•political or economic events, including legislative, regulatory, monetary, judicial, or other developments that affect us, our members, our counterparties, and/or our investors in the consolidated obligations of the 11 FHLBanks;
•the ability to meet capital and other regulatory requirements;
•competitive forces, including without limitation, other sources of funding available to our borrowers that could impact the demand for our advances, other entities purchasing mortgage loans in the secondary mortgage market, and other entities borrowing funds in the capital markets;
•reliance on a relatively small number of member institutions for a large portion of our advance business;
•member consolidations and failures;
•disruptions in the credit and debt markets and the effect on future funding costs, sources, and availability;
•general economic and market conditions that could impact the business we do with our members, including, but not limited to, the timing and volatility of market activity, inflation/deflation, employment rates, geopolitical instability or conflicts, housing market activity and housing prices, the level of mortgage prepayments, the valuation of pledged collateral, and the condition of the capital markets and the impact it has on our consolidated obligations;
•ineffective use of hedging strategies or the availability of derivative instruments in the types and quantities needed for risk management purposes from acceptable counterparties;
•the volatility of reported results due to changes in the fair value of certain assets, liabilities, and derivative instruments;
•risks related to the other FHLBanks that could trigger our joint and several liability for debt issued by the other FHLBanks;
•changes in the relative attractiveness of consolidated obligations due to actual or perceived changes in the FHLBanks' credit ratings or ratings outlook as well as the U.S. Government's long-term credit rating or rating outlook;
•increases in delinquency or loss estimates on mortgage loans;
•the ability to develop and support internal controls, business processes, information systems, and other operating technologies that effectively manage the risks we face, including but not limited to, cyber-attacks, widespread health emergencies, and other business interruptions;
•significant business interruptions resulting from third-party failures;
•the volatility of credit quality, market prices, interest rates, and other factors that could affect the value of collateral held by us as security for borrower and counterparty obligations;
•the ability to attract and retain key personnel; and
•natural disasters.
For additional information regarding these and other risks and uncertainties that could cause our actual results to differ materially from the expectations reflected in our forward-looking statements, see "Item 1A. Risk Factors" in this quarterly report and in our 2024 Form 10-K. Forward-looking statements apply only as of the date they are made, and we undertake no obligation to update or revise any forward-looking statement.
EXECUTIVE OVERVIEW
Our Bank is a member-owned cooperative serving shareholder members in our district. Our mission is to be a reliable provider of funding, liquidity, and services for our members so that they can meet the housing, business, and economic development needs of the communities they serve. In addition, we help to meet the economic and housing needs of our communities through our affordable housing and community investment initiatives. Our operating model balances the trade-off between attractively priced products, reasonable returns on capital stock, maintaining an adequate level of capital to meet regulatory capital requirements, and maintaining adequate retained earnings to preserve the par value of member-owned capital stock. Our members include commercial banks, savings institutions, credit unions, insurance companies, and CDFIs.
Liquidity Mission
We provide liquidity to our members to support the housing, business, and economic development needs of their communities. Members pledge mortgage loans and other collateral to access our core liquidity products of advances, letters of credit, and mortgage loans held for portfolio under the MPF program. During the nine months ended September 30, 2025, advance balances averaged $108.7 billion, letters of credit averaged $18.6 billion, mortgage loan balances averaged $12.8 billion, and we held an average of $29.5 billion of short-term assets as a ready source of liquidity for our members.
Affordable Housing and Community Impact
Our housing and community development programs are central to our mission. We contribute 10 percent of our net income each year to our AHP, a grant program that supports the creation, preservation, or purchase of affordable housing. This program includes a competitive AHP and two down payment assistance products called Home$tart and the Native American Homeownership Initiative. During the three and nine months ended September 30, 2025, we accrued statutory AHP assessments of $29 million and $73 million and voluntarily accrued $1 million and $7 million, to be awarded in 2026 through this program.
In addition to our AHP, we offer our members voluntary programs to further our housing mission. During the three and nine months ended September 30, 2025, we recorded a total of $13 million and $68 million in voluntary community and housing contributions, including the voluntary AHP contribution. Through our voluntary programs during the first nine months of 2025, we:
•provided $23 million in 0% rate advances to members that originated or purchased mortgage loans from a Habitat for Humanity®affiliate and recorded $5 million in subsidy expense, including $1 million during the third quarter;
•funded $344 million of home mortgages with an interest rate lower than the current market rate under the Mortgage Rate Relief program, which provided $30 million in grants to those seeking affordable homeownership, including $11 million during the third quarter; and
•recorded contributions of $26 million to our Member Impact Fund to match member donations to local housing and community development organizations.
Financial Results
Our financial condition and results of operations are influenced by global and national economies, local economies within our district, and the conditions in the financial, housing, and credit markets, all of which impact the interest rate environment. The interest rate environment significantly impacts our profitability. FOMC actions in response to inflation, as well as trade disruptions, such as those arising from tariffs imposed or proposed by the U.S. or its trading partners, impact the interest rate environment, and in turn, our net interest income. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Conditions in the Financial Markets" for additional discussion on economic conditions, including interest rates, impacting our financial results.
For the three and nine months ended September 30, 2025, we recorded net income of $259 million and $658 million compared to $204 million and $708 million for the same periods in 2024.
Net interest income increased $8 million and decreased $123 million during the three and nine months ended September 30, 2025, when compared to the same periods last year. The increase during the three months ended September 30, 2025 was due to advance, mortgage loan, and MBS portfolio growth. The increase was offset in part by the yield on our interest-earning assets declining quicker than the cost of our interest-bearing liabilities, driven primarily by changes in interest rates, which also reduced earnings on invested capital.
Net interest income during the nine months ended September 30, 2025 decreased due to the yield on interest-earning assets declining quicker than the cost of interest-bearing liabilities driven primarily by changes in interest rates, which also reduced earnings on invested capital, and a decrease in longer-term advances. The decline in net interest income was offset in part by MBS and mortgage loan portfolio growth, as well as the call of higher-costing consolidated obligation bonds.
Other income (loss) increased $26 million and $88 million during the three and nine months ended September 30, 2025, when compared to the same periods last year, primarily due to the net changes in fair value on our trading securities, fair value option instruments, and economic derivatives.
Other expense decreased $27 million and increased $19 million during the three and nine months ended September 30, 2025, when compared to the same periods last year, primarily driven by the timing of our voluntary community and housing contributions.
Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations" for additional discussion on our results of operations.
Our total assets increased to $189.3 billion at September 30, 2025, from $165.3 billion at December 31, 2024, driven primarily by an increase in advances and investments. Advances increased $10.0 billion mainly due to an increase in borrowings by large depository institution members and insurance companies. Investments increased $12.3 billion due in part to an increase in short-term investments, mainly securities purchased under agreements to resell and federal funds sold, as well as the purchase of agency MBS and U.S. Treasury obligations.
Total capital increased to $10.2 billion at September 30, 2025, from $9.5 billion at December 31, 2024, primarily due to an increase in activity-based capital stock resulting from an increase in advance balances. Our regulatory capital ratio decreased to 5.41 percent at September 30, 2025, from 5.74 percent at December 31, 2024, but remained above the required regulatory limit at each period end. Regulatory capital includes capital stock, MRCS, and retained earnings.
Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Statements of Condition" for additional discussion on our financial condition.
CONDITIONS IN THE FINANCIAL MARKETS
Economy and Financial Markets
In September 2025, the FOMC reduced the target range for the federal funds rate by 0.25 percent, and an additional 0.25 percent in October 2025, to a range of 3.75 to 4.00 percent. Recent indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remains low. In addition, inflation has moved up and remains somewhat elevated. The FOMC stated that it will conclude the reduction of its aggregate securities holdings in December 2025.
The following table shows information on key market interest rates1:
3-Month Average
9-Month Average
Period End
September 30,
2025 		September 30,
2024 		September 30,
2025 		September 30,
2024 		September 30,
2025 		December 31,
2024
Federal funds 4.30 % 5.27 % 4.32 % 5.31 % 4.09 % 4.33 %
SOFR 4.33 5.28 4.33 5.30 4.24 4.49
2-year U.S. Treasury 3.72 4.05 3.91 4.45 3.60 4.25
10-year U.S. Treasury 4.26 3.96 4.36 4.19 4.16 4.58
30-year residential mortgage note 6.58 6.54 6.73 6.76 6.30 6.85
1 Source: Bloomberg.
Mortgage Markets
During the first nine months of 2025, mortgage rates were relatively stable, on average, when compared to the same period last year, and lower when compared to the prior year-end. The primary driver of activity within the mortgage markets during 2025 was home purchases, as mortgage rates remained elevated. New and existing home sales decreased relative to the prior year. Home prices and prepayment activity increased relative to the same period last year.
SELECTED FINANCIAL DATA
The following tables present selected financial data for the periods indicated (dollars in millions):
Statements of Condition September 30,
2025 		June 30,
2025 		March 31,
2025 		December 31,
2024 		September 30,
2024
Cash and due from banks $ 73 $ 30 $ 71 $ 41 $ 36
Investments1
64,360 61,353 60,775 52,032 49,649
Advances 109,981 114,845 93,790 99,951 98,923
Mortgage loans held for portfolio, net2
13,948 13,197 12,263 11,896 11,398
Total assets 189,291 190,022 167,471 165,253 161,979
Consolidated obligations
Discount notes 68,220 55,977 50,350 64,680 59,465
Bonds 108,134 120,793 105,488 88,571 91,067
Total consolidated obligations3
176,354 176,770 155,838 153,251 150,532
Mandatorily redeemable capital stock 31 34 9 9 9
Total liabilities 179,050 179,797 158,142 155,802 152,695
Capital stock - Class B putable 6,474 6,660 5,730 5,989 5,892
Retained earnings 3,731 3,617 3,558 3,491 3,422
Accumulated other comprehensive income (loss) 36 (52) 41 (29) (30)
Total capital 10,241 10,225 9,329 9,451 9,284
Regulatory capital ratio4
5.41 5.43 5.55 5.74 5.76
For the Three Months Ended
Statements of Income September 30,
2025 		June 30,
2025 		March 31,
2025 		December 31,
2024 		September 30,
2024
Net interest income $ 335 $ 289 $ 248 $ 241 $ 327
Provision (reversal) for credit losses on mortgage loans - - - 1 -
Other income (loss)5
12 16 41 56 (14)
Voluntary community and housing contributions 13 43 12 19 40
All other expense6
46 47 49 48 46
AHP assessments 29 21 23 23 23
Net income 259 194 205 206 204
Selected Financial Ratios
Net interest spread7
0.43 % 0.38 % 0.32 % 0.26 % 0.48 %
Net interest margin8
0.67 0.64 0.59 0.56 0.77
Return on average equity (annualized) 9.71 7.86 8.56 8.76 8.40
Return on average capital stock (annualized) 15.07 12.27 13.87 13.64 13.31
Return on average assets (annualized) 0.51 0.42 0.48 0.47 0.47
Average equity to average assets 5.27 5.37 5.57 5.38 5.58
1 Investments include interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, trading securities, AFS securities, and HTM securities.
2 Includes an allowance for credit losses of $5 million, $5 million, $5 million, $5 million, and $4 million at September 30, 2025, June 30, 2025, March 31, 2025, December 31, 2024, and September 30, 2024.
3 The total par value of outstanding consolidated obligations of the 11 FHLBanks was $1,184.1 billion, $1,232.1 billion, $1,154.9 billion, $1,193.0 billion, and $1,172.8 billion at September 30, 2025, June 30, 2025, March 31, 2025, December 31, 2024, and September 30, 2024.
4 Represents period-end regulatory capital expressed as a percentage of period-end total assets. Regulatory capital includes Class B capital stock (including MRCS) and retained earnings.
5 Other income (loss) includes, among other things, net gains (losses) on investment securities, net gains (losses) on derivatives, net gains (losses) on financial instruments held under fair value option, and standby letter of credit fees.
6 All other expense includes, among other things, compensation and benefits, professional fees, and contractual services.
7 Represents annualized yield on total interest-earning assets minus annualized cost of total interest-bearing liabilities.
8 Represents net interest income expressed as a percentage of average interest-earning assets.
RESULTS OF OPERATIONS
Net Interest Income
Our net interest income is impacted by changes in average interest-earning asset and interest-bearing liability balances, and the related yields and costs. The following table presents average balances and annualized yields/costs of major asset and liability categories (dollars in millions):
For the Three Months Ended September 30,
2025 2024
Average
Balance1
Yield/Cost2
Interest
Income/
Expense3
Average
Balance1
Yield/Cost2
Interest
Income/
Expense3
Interest-earning assets
Interest-bearing deposits $ 4,397 4.38 % $ 49 $ 5,222 5.25 % $ 69
Securities purchased under agreements to resell 14,183 4.40 157 8,544 5.41 116
Federal funds sold 14,307 4.36 157 12,708 5.35 172
MBS4,5,6
27,056 5.31 362 23,524 6.49 384
Other investments4,5,6,7
7,673 3.94 76 5,338 3.73 50
Advances5,8
117,921 4.77 1,417 102,813 5.71 1,476
Mortgage loans9
13,630 4.61 158 11,133 4.20 117
Loans to other FHLBanks 20 4.35 - 7 5.43 -
Total interest-earning assets 199,187 4.73 2,376 169,289 5.60 2,384
Non-interest-earning assets 1,860 - - 3,781 - -
Total assets $ 201,047 4.69 % $ 2,376 $ 173,070 5.48 % $ 2,384
Interest-bearing liabilities
Deposits $ 1,418 3.47 % $ 12 $ 1,219 4.47 % $ 14
Consolidated obligations
Discount notes5
69,930 4.25 748 70,697 5.10 905
Bonds5
116,807 4.35 1,280 87,910 5.14 1,137
Other interest-bearing liabilities10
33 9.76 1 21 7.51 1
Total interest-bearing liabilities 188,188 4.30 2,041 159,847 5.12 2,057
Non-interest-bearing liabilities 2,272 - - 3,572 - -
Total liabilities 190,460 4.25 2,041 163,419 5.01 2,057
Capital 10,587 - - 9,651 - -
Total liabilities and capital $ 201,047 4.03 % $ 2,041 $ 173,070 4.73 % $ 2,057
Net interest income and spread11
0.43 % $ 335 0.48 % $ 327
Net interest margin12
0.67 % 0.77 %
Average interest-earning assets to interest-bearing liabilities 105.84 % 105.91 %
1 Average balances are calculated on a daily weighted average basis and do not reflect the effect of derivative master netting arrangements with counterparties and/or clearing agents.
2 In instances where the average balance and/or related income/expense is less than $1 million, the yield/cost will continue to be presented, based on numbers in actuals.
3 Interest income and expense amounts reported for advances, MBS, other investments, and consolidated obligation bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.
4 The average balance of AFS and HTM securities is reflected at amortized cost.
5 Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.
6 Interest income on investment securities includes prepayment fees, net of related amortization, of less than $1 million for both the three months ended September 30, 2025 and 2024.
7 Other investments primarily include U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, and taxable municipal bonds.
8 Interest income includes net prepayment fees on advances.
9 Non-accrual loans are included in the average balance used to determine the average yield.
10 Other interest-bearing liabilities consist primarily of MRCS and/or borrowings from other FHLBanks.
11 Represents annualized yield on total interest-earning assets minus annualized yield on total interest-bearing liabilities.
12 Represents net interest income expressed as a percentage of average interest-earning assets.
For the Nine Months Ended September 30,
2025 2024
Average
Balance1
Yield/Cost2
Interest
Income/
Expense3
Average
Balance1
Yield/Cost2
Interest
Income/
Expense3
Interest-earning assets
Interest-bearing deposits $ 4,492 4.46 % $ 150 $ 5,230 5.34 % $ 209
Securities purchased under agreements to resell 11,725 4.41 386 10,512 5.43 427
Federal funds sold 13,234 4.38 434 12,373 5.39 500
Mortgage-backed securities,4,5,6
26,274 5.23 1,029 23,543 6.29 1,108
Other investments4,5,6,7
7,140 3.81 203 4,845 3.85 140
Advances5,8
108,709 4.78 3,890 109,670 5.73 4,708
Mortgage loans9
12,812 4.55 436 10,629 4.10 326
Loans to other FHLBanks 10 4.36 - 2 5.44 -
Total interest-earning assets 184,396 4.73 6,528 176,804 5.60 7,418
Non-interest-earning assets 2,172 - - 3,907 - -
Total assets $ 186,568 4.68 % $ 6,528 $ 180,711 5.48 % $ 7,418
Interest-bearing liabilities
Deposits $ 1,314 3.46 % $ 34 $ 1,250 4.52 % $ 42
Consolidated obligations
Discount notes5
63,173 4.32 2,039 68,189 5.15 2,630
Bonds5
109,129 4.39 3,581 97,138 5.15 3,749
Other interest-bearing liabilities10
36 8.62 2 34 6.70 2
Total interest-bearing liabilities 173,652 4.35 5,656 166,611 5.15 6,423
Non-interest-bearing liabilities 2,853 - - 4,421 - -
Total liabilities 176,505 4.29 5,656 171,032 5.02 6,423
Capital 10,063 - - 9,679 - -
Total liabilities and capital $ 186,568 4.05 % $ 5,656 $ 180,711 4.75 % $ 6,423
Net interest income and spread11
0.38 % $ 872 0.45 % $ 995
Net interest margin12
0.63 % 0.75 %
Average interest-earning assets to interest-bearing liabilities 106.19 % 106.12 %
1 Average balances are calculated on a daily weighted average basis and do not reflect the effect of derivative master netting arrangements with counterparties and/or clearing agents.
2 In instances where the average balance and/or related income/expense is less than $1 million, the yield/cost will continue to be presented, based on numbers in actuals.
3 Interest income and expense amounts reported for advances, MBS, other investments, and consolidated obligation bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.
4 The average balance of AFS and HTM securities is reflected at amortized cost.
5 Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.
6 Interest income on investment securities includes prepayment fees, net of related amortization, of less than $1 million and $6 million for the nine months ended September 30, 2025 and 2024.
7 Other investments primarily include U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, and taxable municipal bonds.
8 Interest income includes net prepayment fees on advances.
9 Non-accrual loans are included in the average balance used to determine the average yield.
10 Other interest-bearing liabilities consist primarily of MRCS and/or borrowings from other FHLBanks.
11 Represents annualized yield on total interest-earning assets minus annualized yield on total interest-bearing liabilities.
12 Represents net interest income expressed as a percentage of average interest-earning assets.
The following table presents changes in interest income and interest expense. Changes in interest income and interest expense that are not identifiable as either volume-related or rate-related, but rather attributable to both volume and rate changes, are allocated to the volume and rate categories based on the proportion of the absolute value of the volume and rate changes (dollars in millions).
Three Months Ended Nine Months Ended
September 30, 2025 vs. September 30, 2024
September 30, 2025 vs. September 30, 2024
Total Increase
(Decrease) Due to 		Total Increase
(Decrease) 		Total Increase
(Decrease) Due to 		Total Increase
(Decrease)
Volume Rate Volume Rate
Interest income
Interest-bearing deposits $ (10) $ (10) $ (20) $ (27) $ (32) $ (59)
Securities purchased under agreements to resell 66 (25) 41 45 (86) (41)
Federal funds sold 20 (35) (15) 33 (99) (66)
MBS 53 (75) (22) 120 (199) (79)
Other investments 23 3 26 64 (1) 63
Advances 202 (261) (59) (41) (777) (818)
Mortgage loans 29 12 41 72 38 110
Total interest income 383 (391) (8) 266 (1,156) (890)
Interest expense
Deposits 2 (4) (2) 2 (10) (8)
Consolidated obligations
Discount notes (10) (147) (157) (185) (406) (591)
Bonds 336 (193) 143 431 (599) (168)
Total interest expense 328 (344) (16) 248 (1,015) (767)
Net interest income $ 55 $ (47) $ 8 $ 18 $ (141) $ (123)
NET INTEREST SPREAD AND MARGIN
Net interest spread represents the annualized yield on total interest-earning assets minus the annualized cost of total interest-bearing liabilities. Our net interest spread decreased during the three and nine months ended September 30, 2025, when compared to the same periods in 2024 due to the yield on our interest-earning assets declining quicker than the cost of our interest-bearing liabilities, driven primarily by changes in interest rates and a decline in longer-term advances. The decline in net interest spread was offset in part by mortgage loan and mortgage-backed security portfolio growth, as well as the call of higher-costing consolidated obligation bonds. Our cost of funds does not include net interest settlements on economic hedges, which are recorded in other income (loss). As a result, our net interest spread does not reflect the full impact of our funding and hedging strategies and may experience volatility as interest rates change.
Net interest margin equals net interest income expressed as a percentage of average interest-earning assets. Our net interest margin decreased during the three and nine months ended September 30, 2025, when compared to the same periods in 2024 due primarily to lower net interest spread and lower interest rates, which reduced our earnings on invested capital. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Executive Overview - Financial Results" for additional discussion on our net interest income.
ADVANCE PREPAYMENT FEES
The following table summarizes our advance prepayment fees (dollars in millions):
For the Three Months Ended
For the Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Prepayment fees on advances, gross1,2
$ 6 $ - $ 9 $ 1
Basis adjustment amortization2
(2) - (1) -
Deferred prepayment fees on modified advances2
- - (1) -
Prepayment fees on advances, net
$ 4 $ - $ 7 $ 1
1 Includes symmetrical fees on advances for which we may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates.
2 Prepayment fees on advances, gross were less than $1 million during the three months ended September 30, 2024. Basis adjustment amortization was less than $1 million during the three and nine months ended September 30, 2024. Deferred prepayment fees on modified advances were less than $1 million during the three months ended September 30, 2025 and three and nine months ended September 30, 2024.
Other Income (Loss)
The following table summarizes the components of other income (loss) (dollars in millions):
For the Three Months Ended
For the Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Net gains (losses) on trading securities $ 17 $ 87 $ 86 $ 70
Net gains (losses) on financial instruments held under fair value option (20) (110) 7 (63)
Net gains (losses) on derivatives 3 (2) (56) (58)
Other, net 12 11 32 32
Total other income (loss) $ 12 $ (14) $ 69 $ (19)
Other income (loss) increased $26 million and $88 million during the three and nine months ended September 30, 2025, when compared to the same periods in 2024, primarily due to the net changes in fair value on our trading securities, fair value option instruments, and economic derivatives, including the related interest settlements. We utilize economic derivatives to hedge certain instruments held at fair value that do not qualify for fair value hedge accounting. These fair value elections are made primarily in an effort to mitigate the potential income statement volatility that can arise when an economic derivative is adjusted for changes in fair value but the related hedged item is not. As a result, we review the related gains (losses) on these items on a net basis. During the three and nine months ended September 30, 2025, we recorded net combined gains of less than $1 million and $37 million on our trading securities, fair value option instruments, and the related economic derivatives, compared to net combined losses of $25 million and $51 million for the same periods in 2024. The net increase during the three and nine months ended September 30, 2025 was primarily driven by changes in interest rates. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Hedging Activities" for additional discussion on our economic derivatives.
Hedging Activities
We use derivatives to manage interest rate risk. Accounting rules affect the timing and recognition of income and expense on derivatives and therefore we may be subject to income statement volatility. If a hedging activity qualifies for hedge accounting treatment (fair value hedge), the net interest settlements of interest receivables or payables related to the derivative are recognized as interest income or expense in the relevant income statement line item consistent with the hedged asset or liability. The net fair value gains and losses of derivatives and hedged items designated in fair value hedge relationships are also recognized as interest income or expense. Amortization of basis adjustments from terminated hedges is also recorded in interest income or expense.
If a hedging activity does not qualify for hedge accounting treatment (economic hedge), the net interest settlements of interest receivables or payables related to the derivative as well as the fair value gains and losses on the derivative are recorded as a component of other income (loss) in "Net gains (losses) on derivatives;" however, there is no fair value adjustment for the corresponding asset or liability being hedged unless changes in the fair value of the asset or liability are normally marked to fair value through earnings (i.e., trading securities and fair value option instruments).
The following tables categorize the net effect of hedging activities on net income by product (dollars in millions):
For the Three Months Ended September 30, 2025
Net Effect of Hedging Activities Advances Investments Mortgage
Loans 		Discount Notes Bonds Other Total
Net interest income:
Net amortization/accretion1
$ 2 $ 1 $ 1 $ - $ - $ - $ 4
Net gains (losses) on derivatives and hedged items (1) 2 - (1) 10 - 10
Price alignment amount on derivatives2
(1) (3) - - - - (4)
Net interest settlements on derivatives3
125 61 - (5) (14) - 167
Total impact to net interest income 125 61 1 (6) (4) - 177
Other income (loss):
Net gains (losses) on derivatives
Gains (losses) related to derivatives not designated as hedging instruments4
- 5 (1) (2) - - 2
Price alignment amount on derivatives2
- - - - - 1 1
Total net gains (losses) on derivatives
- 5 (1) (2) - 1 3
Net gains (losses) on trading securities5
- 17 - - - - 17
Net gains (losses) on financial instruments held under fair value option5
- - - (20) - - (20)
Total impact to other income (loss) - 22 (1) (22) - 1 -
Total net effect of hedging activities6
$ 125 $ 83 $ - $ (28) $ (4) $ 1 $ 177
1 Represents the amortization/accretion of basis adjustments on closed hedge relationships.
2 Represents the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract, which fluctuates with changes in the interest rate environment. The price alignment amount on derivatives that qualify for fair value hedge accounting is recorded in net interest income. The price alignment amount on economic derivatives is recorded in other income (loss) as "Net gains (losses) on derivatives" on the Statements of Income.
3 Represents the interest component on derivatives that qualify for fair value hedge accounting.
4 Represents net gains (losses) on economic derivatives and the related interest settlements.
5 Represents the net gains (losses) on those trading securities and fair value option instruments for which we are utilizing economic derivatives to hedge the risk of changes in fair value.
6 The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
For the Three Months Ended September 30, 2024
Net Effect of Hedging Activities Advances Investments Mortgage
Loans 		Discount Notes Bonds Other Total
Net interest income:
Net amortization/accretion1
$ 9 $ 7 $ 2 $ - $ (1) $ - $ 17
Net gains (losses) on derivatives and hedged items (1) 5 - - 5 - 9
Price alignment amount on derivatives2
(6) (4) - - (2) - (12)
Net interest settlements on derivatives3
238 100 - - (55) - 283
Total impact to net interest income 240 108 2 - (53) - 297
Other income (loss):
Net gains (losses) on derivatives
Gains (losses) related to derivatives not designated as hedging instruments4
- (66) - 62 - - (4)
Price alignment amount on derivatives2
- - - - - 1 1
Total net gains (losses) on derivatives
- (66) - 62 - 1 (3)
Net gains (losses) on trading securities5
- 87 - - - - 87
Net gains (losses) on financial instruments held under fair value option5
- - - (110) - - (110)
Total impact to other income (loss) - 21 - (48) - 1 (26)
Total net effect of hedging activities6
$ 240 $ 129 $ 2 $ (48) $ (53) $ 1 $ 271
1 Represents the amortization/accretion of basis adjustments on closed hedge relationships.
2 Represents the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract, which fluctuates with changes in the interest rate environment. The price alignment amount on derivatives that qualify for fair value hedge accounting is recorded in net interest income. The price alignment amount on economic derivatives is recorded in other income (loss) as "Net gains (losses) on derivatives" on the Statements of Income.
3 Represents the interest component on derivatives that qualify for fair value hedge accounting.
4 Represents net gains (losses) on economic derivatives and the related interest settlements.
5 Represents the net gains (losses) on those trading securities and fair value option instruments for which we are utilizing economic derivatives to hedge the risk of changes in fair value.
6 The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
For the Nine Months Ended September 30, 2025
Net Effect of Hedging Activities Advances Investments Mortgage
Loans 		Discount Notes Bonds Other Total
Net interest income:
Net amortization/accretion1
$ 17 $ 3 $ 1 $ - $ - $ - $ 21
Net gains (losses) on derivatives and hedged items 1 (4) - (1) (2) - (6)
Price alignment amount on derivatives2
(10) (16) - - (2) - (28)
Net interest settlements on derivatives3
362 178 - (5) (13) - 522
Total impact to net interest income 370 161 1 (6) (17) - 509
Other income (loss):
Net gains (losses) on derivatives
Gains (losses) related to derivatives not designated as hedging instruments4
- (35) (1) (21) - - (57)
Price alignment amount on derivatives2
- - - - - 1 1
Total net gains (losses) on derivatives
- (35) (1) (21) - 1 (56)
Net gains (losses) on trading securities5
- 86 - - - - 86
Net gains (losses) on financial
instruments held under fair value option5
- - - 7 - - 7
Total impact to other income (loss) - 51 (1) (14) - 1 37
Total net effect of hedging activities6
$ 370 $ 212 $ - $ (20) $ (17) $ 1 $ 546
1 Represents the amortization/accretion of basis adjustments on closed hedge relationships.
2 Represents the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract, which fluctuates with changes in the interest rate environment. The price alignment amount on derivatives that qualify for fair value hedge accounting is recorded in net interest income. The price alignment amount on economic derivatives is recorded in other income (loss) as "Net gains (losses) on derivatives" on the Statements of Income.
3 Represents the interest component on derivatives that qualify for fair value hedge accounting.
4 Represents net gains (losses) on economic derivatives and the related interest settlements.
5 Represents the net gains (losses) on those trading securities and fair value option instruments for which we are utilizing economic derivatives to hedge the risk of changes in fair value.
6 The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
For the Nine Months Ended September 30, 2024
Net Effect of Hedging Activities Advances Investments Mortgage
Loans 		Discount Notes Bonds Other Total
Net interest income:
Net amortization/accretion1
$ 28 $ 11 $ 1 $ - $ (7) $ - $ 33
Net gains (losses) on derivatives and hedged items (1) 2 - - 20 - 21
Price alignment amount on derivatives2
(36) (25) - - (1) - (62)
Net interest settlements on derivatives3
695 304 - - (179) - 820
Total impact to net interest income 686 292 1 - (167) - 812
Other income (loss):
Net gains (losses) on derivatives
Gains (losses) related to derivatives not designated as hedging instruments4
- (8) (1) (51) - - (60)
Price alignment amount on derivatives2
- - - - - 2 2
Total net gains (losses) on derivatives
- (8) (1) (51) - 2 (58)
Net gains (losses) on trading securities5
- 70 - - - - 70
Net gains (losses) on financial
instruments held under fair value option5
- - - (63) - - (63)
Total impact to other income (loss) - 62 (1) (114) - 2 (51)
Total net effect of hedging activities6
$ 686 $ 354 $ - $ (114) $ (167) $ 2 $ 761
1 Represents the amortization/accretion of basis adjustments on closed hedge relationships.
2 Represents the price alignment amount on derivatives for which variation margin is characterized as a daily settled contract, which fluctuates with changes in the interest rate environment. The price alignment amount on derivatives that qualify for fair value hedge accounting is recorded in net interest income. The price alignment amount on economic derivatives is recorded in other income (loss) as "Net gains (losses) on derivatives" on the Statements of Income.
3 Represents the interest component on derivatives that qualify for fair value hedge accounting.
4 Represents net gains (losses) on economic derivatives and the related interest settlements.
5 Represents the net gains (losses) on those trading securities and fair value option instruments for which we are utilizing economic derivatives to hedge the risk of changes in fair value.
6 The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
NET AMORTIZATION/ACCRETION
Net amortization/accretion varies from period to period depending on our hedge relationship termination activities and the maturity, call, or prepayment of assets or liabilities previously in hedge relationships.
NET GAINS (LOSSES) ON DERIVATIVES AND HEDGED ITEMS
Net gains and losses on derivatives and hedged items designated in fair value hedge relationships are recorded in net interest income. Gains (losses) on derivatives and hedged items fluctuate with changes in market conditions and are based on a range of factors, including current and projected levels of interest rates and volatility.
NET INTEREST SETTLEMENTS ON DERIVATIVES
Net interest settlements represent the interest component on derivatives that qualify for fair value hedge accounting. These amounts vary from period to period depending on our hedging activities and interest rates and are partially offset by the interest component on the related hedged item within net interest income. The hedging activity tables do not include the impact of the interest component on the related hedged item.
NET GAINS (LOSSES) ON DERIVATIVES
We utilize economic derivatives to manage certain risks on our Statements of Condition. Gains and losses on economic derivatives include interest settlements and price alignment amounts. Interest settlements represent the interest component on economic derivatives. These amounts vary from period to period depending on our hedging activities and interest rates.
Other Expense
The following table shows the components of other expense (dollars in millions):
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
2025 2024 2025 2024
Compensation and benefits $ 20 $ 18 $ 62 $ 58
Contractual services 7 7 20 20
Professional fees 3 5 10 14
Other operating expenses 6 6 17 16
Total operating expenses 36 36 109 108
Voluntary community and housing contributions 13 40 68 49
Federal Housing Finance Agency 3 3 11 10
Office of Finance 3 2 7 7
Other, net 4 5 15 17
Total other expense $ 59 $ 86 $ 210 $ 191
Other expense decreased $27 million and increased $19 million during the three and nine months ended September 30, 2025, when compared to the same periods last year. The changes during the three and nine months ended September 30, 2025, were primarily due to the timing of our voluntary community and housing contributions.
STATEMENTS OF CONDITION
Financial Highlights
Our total assets increased to $189.3 billion at September 30, 2025, from $165.3 billion at December 31, 2024. Our total liabilities increased to $179.1 billion at September 30, 2025, from $155.8 billion at December 31, 2024. Total capital increased to $10.2 billion at September 30, 2025, from $9.5 billion at December 31, 2024. See further discussion of changes in our financial condition in the appropriate sections that follow.
Advances
The following table summarizes our advances by type of institution (dollars in millions):
September 30,
2025 		December 31,
2024
Commercial banks $ 47,880 $ 43,653
Savings institutions 1,013 1,770
Credit unions 10,671 12,941
Insurance companies 49,805 42,235
CDFIs 14 8
Total member advances 109,383 100,607
Housing associates 16 108
Non-member borrowers 523 15
Total par value $ 109,922 $ 100,730
Our total advance par value increased $9.2 billion or nine percent at September 30, 2025, when compared to December 31, 2024, primarily due to an increase in borrowings by large depository institution members and insurance companies.
The following table summarizes our advances by interest rate payment terms (dollars in millions):
September 30, 2025 December 31, 2024
Amount % of Total Amount % of Total
Fixed rate $ 74,196 68 $ 78,228 78
Variable rate 24,333 22 11,202 11
Variable rate, callable1
10,300 9 10,143 10
Other2
1,093 1 1,156 1
Overdrawn demand deposit accounts3
- - 1 -
Total advance par value 109,922 100 100,730 100
Premiums 2 3
Discounts (24) (21)
Fair value hedging adjustments4
81 (761)
Total $ 109,981 $ 99,951
1 Callable advances are those advances that may be contractually prepaid by the borrower on predetermined dates without incurring prepayment or termination fees.
2 Includes fixed rate amortizing and fixed rate callable advances.
3 The Bank's overdrawn demand deposit accounts were less than $1 million at September 30, 2025.
4 Primarily represents fair value hedging adjustments on active hedging relationships driven by changes in interest rates.
At September 30, 2025 and December 31, 2024, advances outstanding to our top five borrowers totaled $48.6 billion and $31.3 billion, which represented 44 percent and 31 percent of our total advances outstanding. The following table summarizes our top five borrowers based on advances outstanding at September 30, 2025 (dollars in millions):
Amount % of Total Advances
Athene Annuity and Life Company $ 20,971 19
Wells Fargo Bank, N.A. 15,000 14
EquiTrust Life Insurance Company 4,600 4
UBS Bank USA 4,101 4
Symetra Life Insurance Company 3,952 3
Total par value $ 48,624 44
We evaluate advances for credit losses on a quarterly basis and have never experienced a credit loss on our advances. For additional discussion on our advance credit risk, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Advances."
Mortgage Loans
The following table summarizes information on our mortgage loans held for portfolio (dollars in millions):
September 30,
2025 		December 31,
2024
Fixed rate conventional loans $ 13,510 $ 11,452
Fixed rate government-insured loans 357 365
Total unpaid principal balance 13,867 11,817
Premiums 151 130
Discounts (55) (33)
Basis adjustments from mortgage loan purchase commitments (10) (13)
Total mortgage loans held for portfolio 13,953 11,901
Allowance for credit losses (5) (5)
Total mortgage loans held for portfolio, net $ 13,948 $ 11,896
Our total mortgage loans increased $2.1 billion or 17 percent at September 30, 2025, when compared to December 31, 2024. The increase was primarily due to new loan purchases exceeding principal paydowns, driven in part by low prepayment activity as mortgage rates remain elevated.
We evaluate mortgage loans for credit losses on a quarterly basis. For additional discussion on our mortgage loan credit risk, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Mortgage Loans."
Investments
The following table summarizes the carrying value of our investments (dollars in millions):
September 30, 2025 December 31, 2024
Amount % of Total Amount % of Total
Short-term investments1
Interest-bearing deposits $ 4,391 7 $ 4,096 8
Securities purchased under agreements to resell 16,100 25 11,950 23
Federal funds sold 8,790 14 5,175 10
Total short-term investments 29,281 46 21,221 41
Long-term investments2
MBS
GSE single-family 539 1 564 1
GSE multifamily 20,905 32 18,984 36
U.S. obligations single-family3
5,718 9 5,202 10
Private-label residential 2 - 2 -
Total MBS 27,164 42 24,752 47
Non-MBS
U.S. Treasury obligations3
6,592 10 4,508 9
Other U.S. obligations3
86 - 161 -
GSE and TVA obligations 711 1 714 1
State or local housing agency obligations 394 1 528 1
Other4
132 - 148 1
Total non-MBS 7,915 12 6,059 12
Total long-term investments 35,079 54 30,811 59
Total investments $ 64,360 100 $ 52,032 100
1 Short-term investments have original maturities equal to or less than one year.
2 Long-term investments have original maturities of greater than one year.
3 Represents investment securities backed by the full faith and credit of the U.S. Government.
4 Consists of taxable municipal bonds.
Our investments increased $12.3 billion, or 24 percent at September 30, 2025, when compared to December 31, 2024, due in part to an increase in short-term investments, mainly securities purchased under agreements to resell and federal funds sold, as well as the purchase of agency MBS and U.S. Treasury obligations. At September 30, 2025 and December 31, 2024, we had GSE and/or other U.S. obligation MBS purchases with a total par value of $132 million and $162 million that were traded but not yet settled. These investments were recorded as "Available-for-sale" on our Statements of Condition with a corresponding payable recorded in "Other liabilities."
The Finance Agency limits our investments in MBS by requiring that the balance of our MBS not exceed three times regulatory capital at the time of purchase. Our ratio of MBS to regulatory capital was 2.67 and 2.71 at September 30, 2025 and December 31, 2024.
We evaluate investments for credit losses on a quarterly basis. For additional discussion on our investment credit risk, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Investments."
Consolidated Obligations
Consolidated obligations, which include bonds and discount notes, are the primary source of funds to support our advances, mortgage loans, and investments. At September 30, 2025 and December 31, 2024, the carrying value of consolidated obligations for which we are primarily liable totaled $176.4 billion and $153.3 billion.
DISCOUNT NOTES
The following table summarizes our discount notes, all of which are due within one year (dollars in millions):
September 30,
2025 		December 31,
2024
Par value $ 68,868 $ 65,250
Discounts and concession fees1
(666) (586)
Fair value hedging adjustments
10 -
Fair value option adjustments
8 16
Total $ 68,220 $ 64,680
1 Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation discount notes.
Our discount notes increased $3.5 billion or five percent at September 30, 2025, when compared to December 31, 2024. During the nine months ended September 30, 2025, we continued to utilize discount notes in an effort to capture attractive funding and/or meet our liquidity requirements and began electing fair value hedge accounting for certain discount notes.
BONDS
The following table summarizes information on our bonds (dollars in millions):
September 30,
2025 		December 31,
2024
Par value $ 108,060 $ 88,588
Premiums 29 30
Discounts and concession fees1
(23) (25)
Fair value hedging adjustments
68 (22)
Total $ 108,134 $ 88,571
1 Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation bonds.
Our bonds increased $19.6 billion or 22 percent at September 30, 2025, when compared to December 31, 2024. We increased our utilization of callable bonds in an effort to capture attractive funding and/or meet our liquidity requirements. Fair value hedging adjustments changed $90 million at September 30, 2025, when compared to December 31, 2024, driven primarily by volume and the interest rate environment.
For additional information on our consolidated obligations, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Liquidity - Sources of Liquidity."
Capital
The following table summarizes information on our capital (dollars in millions):
September 30,
2025 		December 31,
2024
Capital stock $ 6,474 $ 5,989
Retained earnings 3,731 3,491
Accumulated other comprehensive income (loss) 36 (29)
Total capital $ 10,241 $ 9,451
Our capital increased $0.8 billion, or eight percent at September 30, 2025, when compared to December 31, 2024, primarily due to an increase in activity-based capital stock resulting from an increase in advance balances. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital" for additional information on our capital.
Derivatives
We use derivatives to manage interest rate risk. The notional amount of derivatives serves as a factor in determining periodic interest payments and cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor our overall exposure to credit and market risk.
The following table categorizes the notional amount of our derivatives by type (dollars in millions):
September 30,
2025 		December 31,
2024
Interest rate swaps
Non-callable $ 168,404 $ 146,567
Callable by counterparty 14,429 8,335
Callable by the Bank 17 -
Total interest rate swaps 182,850 154,902
Forward settlement agreements 152 91
Mortgage loan purchase commitments 165 101
Total notional amount $ 183,167 $ 155,094
The notional amount of our derivative contracts increased $28.1 billion, or eighteen percent, at September 30, 2025, when compared to December 31, 2024. The increase was primarily due to the utilization of interest rate swaps to hedge the growth in our consolidated obligations. During 2025, we increased our utilization of non-callable swaps on discount notes and advances, and callable swaps on consolidated obligation bonds in an effort to capture attractive funding and/or meet our liquidity requirements. For additional discussion regarding our use of derivatives, see "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Derivatives."
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital positions are actively managed in an effort to preserve stable, reliable, and cost-effective sources of funds to meet current and projected operating financial commitments, as well as regulatory, liquidity, and capital requirements.
Liquidity
SOURCES OF LIQUIDITY
We utilize several sources of liquidity to carry out our business activities. These include, but are not limited to, proceeds from the issuance of consolidated obligations, payments collected on advances and mortgage loans, proceeds from investment securities, member deposits, the issuance of capital stock, and current period earnings.
Our primary source of liquidity is proceeds from the issuance of consolidated obligations (bonds and discount notes) in the capital markets. During the nine months ended September 30, 2025, proceeds from the issuance of bonds and discount notes were $86.9 billion and $1,175.7 billion compared to $35.5 billion and $1,352.2 billion for the same period in 2024. During the nine months ended September 30, 2025, although we increased our utilization of callable consolidated obligation bonds, we continued to issue discount notes in an effort to capture attractive funding and/or meet our liquidity requirements.
Access to debt markets has been reliable because investors, driven by increased liquidity preference and our GSE status, have sought the FHLBanks' debt as an asset of choice. However, due to the short-term maturity of the debt, we may be exposed to additional risks associated with refinancing and our ability to access the capital markets.
We are focused on maintaining an adequate liquidity balance and a funding balance between our financial assets and financial liabilities and work collectively with the other FHLBanks to manage the system-wide liquidity and funding needs. We monitor our debt refinancing risk and liquidity position primarily by tracking the maturities of financial assets and financial liabilities. In managing and monitoring the amounts of assets that require refunding, we consider contractual maturities of our financial assets and liabilities, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments). External factors, including member borrowing needs, supply and demand in the debt markets, and other factors may affect liquidity balances and the funding balances between financial assets and financial liabilities. Refer to "Item 1. Financial Statements - Condensed Notes to the Unaudited Financial Statements" for additional information regarding the contractual maturities of certain of our financial assets and liabilities.
Our ability to raise funds in the capital markets as well as our cost of borrowing may be affected by our credit ratings. As of October 31, 2025, our consolidated obligations were rated AA+/A-1+ with a stable outlook by S&P. In May 2025, Moody's downgraded the long-term U.S. sovereign rating to Aa1 with a stable outlook. Following this action, Moody's also downgraded our long-term rating to Aa1 with a stable outlook and affirmed our P-1 short-term issuer rating. For further discussion of how credit rating changes and our ability to access the capital markets may impact us in the future, refer to "Item 1A. Risk Factors" in our 2024 Form 10-K.
Although we are primarily liable for the portion of consolidated obligations that are issued on our behalf, we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations issued by the FHLBank System. At September 30, 2025 and December 31, 2024, the total par value of outstanding consolidated obligations for which we are primarily liable was $176.9 billion and $153.8 billion. At September 30, 2025 and December 31, 2024, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which we are jointly and severally liable was $1,007.2 billion and $1,039.2 billion.
The Office of Finance and FHLBanks have contingency plans in place that prioritize the allocation of proceeds from the issuance of consolidated obligations during periods of financial distress if consolidated obligations cannot be issued in sufficient amounts to satisfy all FHLBank demand. In the event of significant market disruptions or local disasters, our President and CEO or designee is authorized to establish interim borrowing relationships with other FHLBanks. To provide further access to funding, the FHLBank Act also authorizes the U.S. Treasury to directly purchase new issue consolidated obligations of the GSEs, including FHLBanks, up to an aggregate principal amount of $4.0 billion. As of October 31, 2025, no purchases had been made by the U.S. Treasury under this authorization.
USES OF LIQUIDITY
We use our available liquidity, including proceeds from the issuance of consolidated obligations, primarily to repay consolidated obligations, fund advances, and purchase investments. During the nine months ended September 30, 2025, repayments of consolidated obligations totaled $1,239.0 billion compared to $1,409.2 billion for the same period in 2024.
During the nine months ended September 30, 2025, advance disbursements (excluding daily reset advances) totaled $557.5 billion compared to $311.4 billion for the same period in 2024. Advance disbursements vary from period to period depending on member needs. In addition, during the second quarter of 2024, we began offering an overnight advance with a one day maturity. The increase during the nine months ended September 30, 2025 was primarily due to member utilization of overnight advances. During both the nine months ended September 30, 2025 and 2024, investment purchases (excluding overnight investments) totaled $5.5 billion.
We also use liquidity to purchase mortgage loans, redeem member deposits, pledge collateral to derivative counterparties, redeem or repurchase capital stock, pay expenses, and pay dividends.
LIQUIDITY REQUIREMENTS
We are subject to certain liquidity requirements set forth by the Finance Agency and maintain a liquidity contingency funding plan designed to enable us to meet our obligations and the liquidity needs of our members in the event of short-term capital market disruptions, or operational disruptions at our Bank and/or the Office of Finance. For additional details on these liquidity requirements, refer to our 2024 Form 10-K. Our primary liquidity requirement is discussed further below.
Liquidity Guidance AB- This guidance requires us to maintain sufficient liquidity for a period of 10 to 30 calendar days. The base case scenario requires 20 days of positive daily cash balances and assumes that we cannot access the capital markets to issue debt, and during that time we will automatically renew maturing and called advances for all members, including large, highly-rated members, and we hold additional liquid assets equal to one percent of our letters of credit balances. At September 30, 2025 and December 31, 2024, we were in compliance with this base case liquidity guidance.
The Liquidity Guidance AB also specifies appropriate funding gap limits to address the risks associated with an FHLBank having too large a mismatch between the contractual maturities of its assets and liabilities. A funding gap measures the difference between assets and liabilities that are scheduled to mature during a specified period and is expressed as a percentage of total assets. The guidance provides recommended funding gap maximums of negative 15 percent at the three-month horizon and negative 30 percent at the one-year horizon. At September 30, 2025 and December 31, 2024, we adhered to these funding gap requirements.
Capital
CAPITAL REQUIREMENTS
We are subject to certain regulatory capital requirements. First, the FHLBank Act requires that we maintain at all times permanent capital greater than or equal to the sum of our credit, market, and operational risk capital requirements, all calculated in accordance with Finance Agency regulations. Only permanent capital, defined as the amounts paid-in for Class B capital stock (including MRCS), and retained earnings, can satisfy this risk-based capital requirement. Second, the FHLBank Act requires a minimum four percent capital-to-asset ratio, which is defined as total regulatory capital divided by total assets. Total regulatory capital includes Class B capital stock (including MRCS) and retained earnings. Third, the FHLBank Act imposes a five percent minimum leverage ratio, which is defined as the sum of permanent capital weighted 1.5 times and nonpermanent capital weighted 1.0 times, divided by total assets. At September 30, 2025 and December 31, 2024, we did not hold any nonpermanent capital. At September 30, 2025 and December 31, 2024, we were in compliance with all three of the Finance Agency's regulatory capital requirements.
In addition to the requirements previously discussed, the Capital Stock AB requires each FHLBank to maintain at all times a ratio of at least two percent of capital stock to total assets. For purposes of the Capital Stock AB, capital stock includes MRCS. The capital stock to total assets ratio is measured on a daily average basis at month end. At September 30, 2025 and December 31, 2024, we were in compliance with the Capital Stock AB.
Refer to "Item 1. Financial Statements - Note 8 - Capital" for additional information on our regulatory capital requirements.
CAPITAL STOCK
Our capital stock has a par value of $100 per share, and all shares are issued, redeemed, and repurchased only at the stated par value. We issue a single class of capital stock (Class B capital stock) and have two subclasses of Class B capital stock: membership and activity-based. Each member must purchase and hold membership capital stock in an amount equal to 0.06 percent of its total assets as of the preceding December 31st, subject to a cap of $10.0 million and a floor of $10,000. Each member is also required to purchase activity-based capital stock equal to 4.50 percent of its advances, 4.00 percent of mortgage loans outstanding, and 0.10 percent of its standby letters of credit. All Class B capital stock issued is subject to a notice of redemption period of five years.
The capital stock requirements established in our Capital Plan are designed so that we can remain adequately capitalized as member activity changes. Our Board of Directors may make adjustments to the capital stock requirements within ranges established in our Capital Plan.
The following table summarizes our regulatory capital stock by type of member (dollars in millions):
September 30,
2025 		December 31,
2024
Commercial banks $ 3,041 $ 2,804
Savings institutions 95 122
Credit unions 858 928
Insurance companies 2,479 2,134
CDFIs 1 1
Total GAAP capital stock 6,474 5,989
MRCS 31 9
Total regulatory capital stock $ 6,505 $ 5,998
The increase in regulatory capital stock held at September 30, 2025, when compared to December 31, 2024, was due primarily to an increase in activity-based capital stock resulting from an increase in advance balances. For additional information on our capital stock, refer to "Item 1. Financial Statements - Note 8 - Capital."
Retained Earnings
Our risk management policies outline a targeted level of retained earnings based on the amount we believe necessary to help protect the redemption value of capital stock, facilitate safe and sound operations, maintain regulatory capital ratios, and support our ability to pay a relatively stable dividend. We monitor our achievement of this targeted level and may utilize tools such as restructuring our balance sheet, generating additional income, reducing our risk exposures, increasing capital stock requirements, or reducing our dividends to achieve this level of retained earnings. At September 30, 2025 and December 31, 2024, our actual retained earnings exceeded our targeted level of retained earnings.
We entered into a JCE Agreement with all of the other Federal Home Loan Banks in 2011. Under the JCE Agreement, we are required to allocate 20 percent of our quarterly net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least one percent of our average balance of outstanding consolidated obligations for the calendar quarter. The restricted retained earnings are not available to pay dividends and are presented separately on our Statements of Condition. At September 30, 2025 and December 31, 2024, our restricted retained earnings balance totaled $1.2 billion and $1.1 billion. One percent of our average balance of outstanding consolidated obligations for the three months ended September 30, 2025, was $1.9 billion.
Dividends
Our dividend philosophy is to pay a consistent dividend equal to or greater than the current market rate for a highly-rated investment (i.e. SOFR), and at a rate that the Board of Directors believes is sustainable under current and projected earnings to maintain an appropriate level of capital and retained earnings. Our dividend is determined quarterly by our Board of Directors, based on policies, regulatory requirements, actual performance, and other considerations that the Board of Directors determines to be appropriate.
The following table summarizes dividend-related information (dollars in millions):
For the Three Months Ended
For the Nine Months Ended
September 30, September 30,
2025 2024 2025 2024
Aggregate cash dividends paid1
$ 145 $ 141 $ 418 $ 424
Effective combined annualized dividend rate paid on capital stock2
9.16 % 8.96 % 9.15 % 8.55 %
Annualized dividend rate paid on membership capital stock 6.00 % 6.00 % 6.00 % 5.19 %
Annualized dividend rate paid on activity-based capital stock 9.75 % 9.50 % 9.75 % 9.25 %
Average SOFR 4.33 % 5.28 % 4.33 % 5.30 %
1 Includes aggregate cash dividends paid during the period. Amount excludes cash dividends paid on MRCS. For financial reporting purposes, these dividends were recorded as interest expense on our Statements of Income.
2 Effective combined annualized dividend rate is paid on total capital stock, including MRCS.
CRITICAL ACCOUNTING ESTIMATES
For a discussion of our critical accounting estimates, refer to our 2024 Form 10-K. There have been no material changes to our critical accounting estimates during the nine months ended September 30, 2025.
For a discussion of recently adopted or issued accounting standards, refer to "Item 1. Financial Statements - Note 2 - Recently Adopted and Issued Accounting Guidance."
LEGISLATIVE AND REGULATORY DEVELOPMENTS
Regulatory Environment
We are subject to various legal and regulatory requirements and priorities. Certain actions by the current federal executive administration are changing the regulatory environment, including regulatory priorities and areas of focus, such as deregulation, which have affected, and will likely continue to affect, certain aspects of our business operations, and could impact our financial condition, results of operations, and reputation.
As of the third quarter of 2025, the Finance Agency has rescinded the regulatory interpretation that had imposed detailed criteria on FHLBank acceptance of municipal securities as eligible collateral and outlined how to determine and verify eligibility of municipal bonds. We are reviewing this rescission and assessing the potential impact on our collateral eligibility policies. In addition, the Finance Agency has withdrawn two proposed rules published in 2024: (i) the proposed rule published in November 2024 that would have amended regulations addressing boards of directors and overall corporate governance of the FHLBanks and the Office of Finance and (ii) the proposed rule published in October 2024 that would have amended our capital requirements by modifying limits on our extensions of unsecured credit. In October 2025, the Finance Agency rescinded several ABs and certain technical guidance documents. We are reviewing these rescissions and assessing any potential impact they may have on us and our policies and procedures.
Considering the changes in the regulatory environment, there is uncertainty with respect to the ultimate result of future regulatory actions and the ultimate impact they may have on us and the FHLBank System. For a discussion of related risks, see "Item 1A. Risk Factors" in our 2024 Form 10-K.
RISK MANAGEMENT
We have risk management policies, established by our Board of Directors, that allow us to monitor and control our exposure to various risks, including interest rate, liquidity, credit, operational, model, information security, legal, regulatory and compliance, strategic, and reputational, as well as capital adequacy. Our primary risk management objective is to manage our assets and liabilities in ways that ensure liquidity is available to our members and protect the par redemption value of our capital stock. We periodically evaluate our risk management policies in order to respond to changes in our financial position and general market conditions. The following sections outline our interest rate and credit risks. For additional details on all other risks noted above, please refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management" in our 2024 Form 10-K.
Interest Rate Risk
We define interest rate risk as the risk that changes in interest rates or spreads will adversely affect our financial condition (market value) or performance (income). Interest rate risk is the principal type of risk to which we are exposed, as our cash flows, and therefore earnings and equity value, can change significantly as interest rates change. Our general approach toward managing interest rate risk is to acquire and maintain a portfolio of assets, liabilities, and derivatives which, taken together, limit our expected exposure to interest rate risk. Our key interest rate risk measures are MVE and Projected 24-Month Income. Management regularly monitors these key measures, as discussed further in the sections below.
MARKET VALUE OF EQUITY
MVE measures the net present value of the Bank by either marking positions to market or discounting all future cash flows using market discount rates. MVE is measured as the market value of our assets minus the market value of our liabilities (excluding MRCS). MVE is an estimate of the Bank's value and takes into account short-term market price fluctuations.
We monitor and manage to MVE policy limits in an effort to ensure the stability of the Bank's value. Our policy limits are based on declines from the base case in parallel and non-parallel interest rate change scenarios. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner. At September 30, 2025 and December 31, 2024, our base case MVE was $10.3 billion and $9.4 billion, and the increase between periods was primarily due to an increase in activity-based capital stock. At September 30, 2025 and December 31, 2024, we were in compliance with all MVE policy limits.
MVCS represents our MVE divided by the total outstanding shares of our capital stock (including MRCS). To ensure we remain adequately capitalized, we must ensure our MVCS remains at or above our $100 par value. Our base case MVCS was $159.0 at September 30, 2025, compared to $156.7 at December 31, 2024. The increase in our base case MVCS was primarily attributable to the increase in retained earnings and improved valuations of multifamily MBS.
For more information on this risk measure, including policy limits, refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate Risk - Market Value of Equity" in our 2024 Form 10-K.
PROJECTED 24-MONTH INCOME
The projected 24-month income simulation measures our short-term earnings forecast over a two-year horizon based on forward interest rates and business assumptions. Our primary measure of profitability is the spread between projected AROCS and average SOFR. In this measure, AROCS adjusts GAAP net income for certain non-routine or unpredictable items, including, but not limited to, market adjustments relating to derivative and hedging activities and instruments held at fair value, net asset prepayment fee income, MRCS interest expense, and other non-routine items, if applicable.
We monitor and manage to policy limits, which are based on the spread between our projected AROCS and average SOFR in parallel and non-parallel interest rate change scenarios. Additionally, there is a limit on the decline in projected AROCS from base case AROCS for certain basis shock scenarios to limit basis risk exposure. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner.
Effective January 1, 2025, our policy limit for the decline in projected AROCS from base case AROCS for the basis shock scenarios was updated from 175 to 100 basis points over a 24-month horizon. We were in compliance with all projected 24-month income policy limits at September 30, 2025 and December 31, 2024.
For more information on this risk measure, refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate Risk - Projected 24-Month Income" in our 2024 Form 10-K.
CAPITAL ADEQUACY
An adequate capital position is necessary for facilitating safe and sound business operations, protecting the redemption value of our capital stock, maintaining regulatory capital ratios, and supporting our ability to pay dividends and redeem excess capital stock. To ensure capital adequacy, we maintain a targeted level of retained earnings to achieve business imperatives and cover unexpected losses. Our key capital adequacy measures are regulatory capital and targeted retained earnings in order to maintain capital levels in accordance with Finance Agency regulations. In addition, our risk management policies require that we maintain MVCS at or above our $100 par value.
For additional information on our compliance with regulatory capital requirements as well as our targeted retained earnings, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital."
For additional information on MVCS, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate Risk - Market Value of Equity."
Credit Risk
We define credit risk as the risk that a member or counterparty will fail to meet its financial obligations. Our primary credit risks arise from our ongoing lending, investing, and hedging activities. Our overall objective in managing credit risk is to operate a sound credit granting process and to maintain appropriate credit administration, measurement, and monitoring practices.
ADVANCES
We manage our credit exposure to advances through a lending policy that provides for an established credit limit for each borrower, ongoing reviews of each borrower's financial condition and ability to repay, and detailed collateral and lending policies to limit risk of loss while balancing borrowers' needs for a reliable source of funding. In addition, we lend to our borrowers in accordance with the FHLBank Act, Finance Agency regulations, and other applicable laws.
We are required by regulation to evaluate our members' creditworthiness and ability to repay, and to obtain sufficient collateral to fully secure our advances, standby letters of credit, and other extensions of credit to borrowers (collectively, credit products). The estimated value of the collateral required to secure each borrower's credit products is calculated by applying loan-to-value discounts, or haircuts, to the unpaid principal or market value, as applicable, of the collateral. We also have policies and procedures for validating the reasonableness of our collateral valuations. In addition, we perform collateral verifications and on-site reviews based on the risk profile of the borrower. Management believes that these policies effectively manage our credit risk from advances.
At September 30, 2025 and December 31, 2024, borrowers pledged $408.2 billion and $388.8 billion of collateral (net of applicable discounts) to support activity with us, including advances. At September 30, 2025 and December 31, 2024, all of our advances met the requirement to be collateralized at a minimum of 100 percent, net of applicable discounts. Borrowers pledge collateral in excess of their collateral requirement mainly to demonstrate available liquidity and to borrow additional amounts in the future.
We evaluate advances for credit losses on a quarterly basis. We have never experienced a credit loss on our advances. Based upon our collateral and lending policies, the collateral held as security, and the repayment history on advances, management has determined that there were no expected credit losses on our advances as of September 30, 2025 and December 31, 2024. Refer to "Item 1. Financial Statements - Note 4 - Advances" for additional information on our allowance for credit losses.
MORTGAGE LOANS
Mortgage loan credit risk is the risk that we will not receive timely payments of principal and interest due from mortgage borrowers because of borrower defaults. Credit risk on mortgage loans is affected by a number of factors, including loan type, borrower's credit history, and other factors such as home price fluctuations, unemployment levels, and other economic factors in the local market or nationwide.
The following table presents the unpaid principal balance of our mortgage loans by product type (dollars in millions):
Product Type September 30,
2025 		December 31,
2024
Conventional $ 13,510 $ 11,452
Government 357 365
Total unpaid principal balance $ 13,867 $ 11,817
We manage the credit risk on mortgage loans by (i) adhering to our underwriting standards, (ii) using agreements to establish credit risk sharing responsibilities with our PFIs, and (iii) monitoring the performance of the mortgage loan portfolio and creditworthiness of PFIs.
We evaluate mortgage loans for credit losses on a quarterly basis and establish an allowance for credit losses to reflect management's estimate of expected credit losses inherent in the portfolio. At both September 30, 2025 and December 31, 2024, we had an allowance for credit losses of $5 million on our conventional mortgage loans. At September 30, 2025, over 99 percent of our conventional loan portfolio was performing (i.e. current payment status) and charge-offs recorded during the nine months ended September 30, 2025, were less than one percent of the total conventional portfolio.
We have never experienced a credit loss on our government-insured mortgage loans. At September 30, 2025 and December 31, 2024, we determined no allowance for credit losses was necessary on our government-insured mortgage loans. Refer to "Item 1. Financial Statements - Note 5 - Mortgage Loans Held for Portfolio" for additional information on our allowance for credit losses and the payment status of our conventional mortgage loans.
INVESTMENTS
We maintain an investment portfolio primarily to provide liquidity as well as investment income. Our primary credit risk on investments is the counterparties' ability to meet repayment terms. We mitigate this credit risk by purchasing investment quality securities. We define investment quality as a security with adequate financial backing so that full and timely payment of principal and interest on such security is expected and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security. We consider a variety of credit quality factors when analyzing potential investments, including collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, NRSRO credit ratings, and/or the financial health of the underlying issuer. We limit our purchases of MBS to those guaranteed by the U.S. Government or issued by a GSE. We perform ongoing analysis on these investments to determine potential credit issues.
Finance Agency regulations also limit the type of investments we may purchase. We are prohibited 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, unless otherwise approved by the Finance Agency. At September 30, 2025, we were in compliance with the regulation and did not own any financial instruments issued by non-U.S. entities, other than those issued by U.S. branches and agency offices of foreign commercial banks, and those approved by the Finance Agency.
In addition, Finance Agency regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties. These limits are based on a percentage of regulatory capital and the counterparty's overall credit rating. At September 30, 2025, we were in compliance with the regulatory limits established for unsecured credit.
Refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk" in our 2024 Form 10-K for additional information on these regulatory limits.
Our short-term portfolio may include, but is not limited to, interest-bearing deposits, federal funds sold, securities purchased under agreements to resell, certificates of deposit, commercial paper, and U.S. Treasury obligations. Our long-term portfolio may include, but is not limited to, U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, taxable municipal bonds, and agency MBS. We consider our long-term investments issued or guaranteed by the U.S. Government, an agency or instrumentality of the U.S. Government, or the Federal Deposit Insurance Corporation to be of the highest credit quality and therefore those exposures are not monitored with other unsecured investments. Given the credit quality of our unsecured long-term investments, our unsecured credit risk is primarily in the short-term portfolio.
We limit short-term unsecured credit exposure primarily to the following overnight investment 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.
At September 30, 2025, our unsecured short-term investment exposure consisted of overnight interest-bearing deposits and federal funds sold. The following table presents our unsecured short-term investment exposure by counterparty credit rating and domicile (dollars in millions):
September 30, 2025
Credit Rating1,2
Domicile of Counterparty AA A Total
Domestic $ 1,200 $ 3,190 $ 4,390
U.S. branches and agency offices of foreign commercial banks
Australia 1,390 - 1,390
Canada - 2,200 2,200
Finland 850 - 850
France - 300 300
Germany 1,500 - 1,500
Netherlands - 750 750
Norway 600 - 600
Sweden 600 - 600
United Kingdom - 600 600
Total U.S. branches and agency offices of foreign commercial banks 4,940 3,850 8,790
Total unsecured short-term investment exposure $ 6,140 $ 7,040 $ 13,180
1 Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.
2 Table excludes investments issued or guaranteed by the U.S. Government, U.S. government agencies, government instrumentalities, GSEs, and supranational entities, and does not include related accrued interest.
Investment Ratings
The following table summarizes the carrying value of our investments by credit rating (dollars in millions):
September 30, 2025
Credit Rating1
AAA AA A Unrated Total
Interest-bearing deposits2
$ - $ 1,201 $ 3,190 $ - $ 4,391
Securities purchased under agreements to resell - - 4,700 11,400 16,100
Federal funds sold - 4,940 3,850 - 8,790
Investment securities:
MBS
GSE single-family - 539 - - 539
GSE multifamily - 20,905 - - 20,905
U.S. obligations single-family3
- 5,718 - - 5,718
Private-label residential - - - 2 2
Total MBS - 27,162 - 2 27,164
Non-MBS
U.S. Treasury obligations3
- 6,592 - - 6,592
Other U.S. obligations3
- 86 - - 86
GSE and TVA obligations - 711 - - 711
State or local housing agency obligations 260 134 - - 394
Other4
113 19 - - 132
Total non-MBS 373 7,542 - - 7,915
Total investments $ 373 $ 40,845 $ 11,740 $ 11,402 $ 64,360
1 Represents either the lowest credit rating available for each investment based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.
2 Balance includes $1 million of interest-bearing deposits with another FHLBank. These investments are rated AA, based on the credit rating of the FHLBank System.
3 Represents investment securities backed by the full faith and credit of the U.S. Government.
4 Consists of taxable municipal bonds.
We evaluate investments for credit losses on a quarterly basis. At September 30, 2025 and December 31, 2024, we determined no allowance for credit losses was necessary on our investments. Refer to "Item 1. Financial Statements - Note 3 - Investments" for additional information on our allowance for credit losses.
DERIVATIVES
We execute most of our derivative transactions with large banks and major broker-dealers. Over-the-counter derivative transactions may be either executed directly with a counterparty, referred to as uncleared derivatives, or cleared through a clearing agent with a clearinghouse, referred to as cleared derivatives.
We are subject to credit risk due to the risk of nonperformance by counterparties to our derivative agreements. The amount of credit risk on derivatives depends on the extent to which netting procedures and collateral requirements are used and are effective in mitigating the risk. We manage credit risk through credit analysis of derivative counterparties, collateral requirements, and adherence to the requirements set forth in our policies, CFTC regulations, and Finance Agency regulations.
Uncleared derivative transactions executed on or after September 1, 2022 are subject to two-way initial margin requirements as mandated by the Dodd-Frank Act, if our aggregate uncleared derivative transactions exposure to a counterparty exceeds a specified threshold. The initial margin is required to be held at a third-party custodian and does not change ownership. Rather, the party in respect of which the initial margin has been posted to the third-party custodian will have a security interest in the amount of initial margin required under the uncleared margin rules and can only take ownership upon the occurrence of certain events, including an event of default due to bankruptcy, insolvency, or similar proceeding. As of October 31, 2025, we were not required to post initial margin on our uncleared derivative transactions in accordance with the noted regulations.
For uncleared transactions, the derivative agreements are fully collateralized with a zero unsecured threshold in accordance with variation margin requirements issued by the U.S. federal bank regulatory agencies and the CFTC.
The contractual or notional amount of derivatives reflects our involvement in the various classes of financial instruments. Our maximum credit risk is the estimated cost of replacing derivatives if there is a default, minus the value of any related collateral. In determining maximum credit risk, we consider accrued interest receivables and payables as well as our ability to net settle positive and negative positions with the same counterparty and/or clearing agent when netting requirements are met.
The following table shows our derivative counterparty credit exposure (dollars in millions):
September 30, 2025
Credit Rating1
Notional Amount Net Derivatives
Fair Value Before Collateral 		Cash Collateral Pledged
To (From) Counterparty
Non-cash Collateral Pledged To (From) Counterparty
Net Credit Exposure
to Counterparties
Non-member counterparties:
Asset positions with credit exposure
Uncleared derivatives
AA2
$ 172 $ 11 $ (11) $ - $ -
A
2,873 28 (27) - 1
BBB2
4,452 19 (19) - -
Liability positions with credit exposure
Cleared derivatives3
159,613 (37) 1 1,442 1,406
Total derivative positions with credit exposure to non-member counterparties 167,110 21 (56) 1,442 1,407
Member institutions2,4
62 - - - -
Total 167,172 $ 21 $ (56) $ 1,442 $ 1,407
Derivative positions without credit exposure 15,995
Total notional $ 183,167
1 Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable.
2 Net credit exposure is less than $1 million.
3 Represents derivative transactions cleared with CME Clearing and LCH Ltd., our clearinghouses. CME Clearing is not rated, but its parent, CME Group Inc. was rated Aa3 by Moody's and AA- by S&P at September 30, 2025. LCH Ltd. was rated AA- by S&P at September 30, 2025.
4 Represents mortgage loan purchase commitments with our member institutions.
Refer to "Item 1. Financial Statements - Note 6 - Derivatives and Hedging Activities" for additional information on our derivatives and hedging activities.
Federal Home Loan Bank of Des Moines published this content on November 07, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 07, 2025 at 15:58 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]