Federal Home Loan Bank of Des Moines

03/10/2026 | Press release | Distributed by Public on 03/10/2026 11:23

Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our MD&A is designed to provide information that will help the reader develop a better understanding of our financial statements, changes in our financial statements from year to year, and the primary factors driving those changes. Readers also should carefully review "Forward-Looking Information" and "Item 1A. Risk Factors" for a description of the forward-looking statements contained in this annual report on Form 10-K and a discussion of the factors that might cause our actual results to differ, perhaps materially, from these forward-looking statements. Unless expressly stated otherwise, the comparisons presented in this MD&A refer to the year-over-year comparison of changes in our financial condition and results of operations as of and for the years ended December 31, 2025 and December 31, 2024. Discussion of 2023 items and the year-over-year comparison of changes in our financial condition and results of operations as of and for the years ended December 31, 2024 and December 31, 2023 can be found in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2024 Form 10-K, filed with the SEC on March 7, 2025.
Our MD&A is organized as follows:
CONTENTS
Executive Overview
26
Conditions in the Financial Markets
27
Selected Financial Data
28
Results of Operations
29
Net Interest Income
29
Other Income (Loss)
31
Hedging Activities
31
Other Expense
34
Supporting Housing and Community Investment
34
Affordable Housing Program Assessments
35
Statements of Condition
37
Advances
37
Mortgage Loans
39
Investments
40
Consolidated Obligations
42
Deposits
43
Capital
44
Derivatives
44
Liquidity and Capital Resources
44
Critical Accounting Estimates
48
Legislative and Regulatory Developments
50
Off-Balance Sheet Arrangements
50
Risk Management
51
EXECUTIVE OVERVIEW
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 year ended December 31, 2025, advance balances averaged $108.1 billion, letters of credit averaged $18.4 billion, mortgage loan balances averaged $13.2 billion, and we held an average of $29.9 billion of short-term assets as a ready source of liquidity for our members.
Affordable Housing and Community Impact
Our housing and community development programs are central to our mission. We contribute 10 percent of our net income each year to our AHP, a grant program that supports the creation, rehabilitation, or purchase of affordable housing. This program includes a competitive AHP and two down payment assistance products called Home$tart and the Native American Homeownership Initiative. During the year ended December 31, 2025, we accrued statutory AHP assessments of $98 million and voluntarily accrued $15 million, to be awarded through this program.
In addition to our AHP, we offer our members voluntary programs to further our housing mission. During the year ended December 31, 2025, we recorded a total of $78 million in voluntary community and housing contributions, including the voluntary AHP contribution. Through our voluntary programs during 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;
•funded $346 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 for those seeking affordable homeownership;
•recorded contributions of $26 million to our Member Impact Fund to match member donations to local housing and community development organizations; and
•provided $2 million in support of communities impacted by floods in Alaska.
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 7. 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.
In 2025, we reported net income of $881 million compared to $914 million in the prior year.
Net interest income decreased $86 million when compared to the prior year primarily 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 certain longer-term advances. The decline in net interest income was offset in part by mortgage loan and MBS portfolio growth, as well as the call of higher-costing consolidated obligation bonds.
Other income (loss) increased $63 million when compared to the prior year primarily due to the net changes in the fair value of our trading securities, fair value option instruments, and economic derivatives, including the related interest settlements.
Other expense increased $12 million when compared to the prior year primarily due to an increase in voluntary community and housing contributions.
Refer to "Item 7. 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 $186.5 billion at December 31, 2025, from $165.3 billion at December 31, 2024, driven primarily by an increase in advances and investments. Advances increased $10.3 billion due mainly to an increase in borrowings by large depository institution members and insurance companies. Investments increased $9.0 billion due in part to an increase in securities purchased under agreements to resell, as well as the purchase of agency MBS and U.S. Treasury obligations.
Total capital increased to $10.5 billion at December 31, 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 5.54 percent at December 31, 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 7. 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 late 2024 and continuing into 2025, the FOMC began reducing the target range for the federal funds rate, in light of the progress on inflation. The FOMC reduced the target range for the federal funds rate by 0.25 percent in October 2025, and an additional 0.25 percent in December 2025, to a range of 3.50 to 3.75 percent. In December 2025, the FOMC stated that 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. In addition, inflation has moved up and remains somewhat elevated. More recently, in January 2026, the FOMC maintained the target range for the federal funds rate and stated that the unemployment rate has shown some signs of stabilization.
The following table shows information on key market interest rates1:
12-Month Average
Period End
December 31, 2025 December 31, 2024 December 31, 2025 December 31, 2024
Federal funds 4.21 % 5.15 % 3.64 % 4.33 %
SOFR 4.24 5.15 3.87 4.49
2-year U.S. Treasury 3.81 4.37 3.47 4.25
10-year U.S. Treasury 4.29 4.21 4.18 4.58
30-year residential mortgage note 6.60 6.72 6.15 6.85
1 Source: Bloomberg.
Mortgage Markets
During 2025, mortgage rates were lower compared to 2024; however, remained elevated. The primary driver of activity within the mortgage markets during 2025 was home purchases. New and existing home sales increased relative to the prior year, as well as home prices and prepayment activity.
SELECTED FINANCIAL DATA
The following tables present selected financial data for the periods indicated (dollars in millions):
December 31,
Statements of Condition 2025 2024 2023 2022 2021
Cash and due from banks $ 44 $ 41 $ 31 $ 89 $ 295
Investments1
61,015 52,032 49,828 43,381 33,442
Advances 110,230 99,951 122,530 111,202 44,111
Mortgage loans held for portfolio, net2
14,540 11,896 9,967 8,348 7,578
Total assets 186,499 165,253 184,406 164,169 85,852
Consolidated obligations
Discount notes 84,620 64,680 54,537 69,170 22,348
Bonds 89,249 88,571 116,961 84,337 55,205
Total consolidated obligations3
173,869 153,251 171,498 153,507 77,553
Mandatorily redeemable capital stock 30 9 12 15 29
Total liabilities 176,012 155,802 174,575 155,418 80,014
Capital stock - Class B putable 6,509 5,989 6,873 6,250 3,364
Retained earnings 3,797 3,491 3,138 2,618 2,390
Accumulated other comprehensive income (loss) 181 (29) (180) (117) 84
Total capital 10,487 9,451 9,831 8,751 5,838
Regulatory capital ratio4
5.54 5.74 5.44 5.41 6.74
For the Years Ended December 31,
Statements of Income 2025 2024 2023 2022 2021
Net interest income $ 1,150 $ 1,236 $ 1,306 $ 683 $ 381
Provision (reversal) for credit losses on mortgage loans 1 (1) 1 4 -
Other income (loss)5
100 37 (15) (40) 4
Voluntary community and housing contributions
78 68 47 3 -
All other expense6
192 190 174 158 156
AHP assessments 98 102 107 48 23
Net income 881 914 962 430 206
Selected Financial Ratios
Net interest spread7
0.37 % 0.41 % 0.43 % 0.48 % 0.39 %
Net interest margin8
0.62 0.70 0.72 0.61 0.44
Return on average equity 8.71 9.52 10.30 6.33 3.48
Return on average capital stock 13.84 14.56 14.41 9.78 5.92
Return on average assets 0.47 0.51 0.52 0.38 0.23
Average equity to average assets 5.41 5.36 5.02 6.02 6.73
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 $6 million, $5 million, $6 million, $5 million, and $1 million at December 31, 2025, 2024, 2023, 2022, and 2021.
3 The total par value of outstanding consolidated obligations of the 11 FHLBanks was $1,151.8 billion, $1,193.0 billion,$1,204.3 billion, $1,181.7 billion, and $652.9 billion at December 31, 2025, 2024, 2023, 2022, and 2021.
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 yield on total interest-earning assets minus 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 yields/costs of major asset and liability categories (dollars in millions):
For the Years Ended December 31,
2025 2024 2023
Average
Balance1
Yield/Cost2
Interest
Income/
Expense3
Average
Balance1
Yield/Cost2
Interest
Income/
Expense3
Average
Balance1
Yield/Cost2
Interest
Income/
Expense3
Interest-earning assets
Interest-bearing deposits $ 4,466 4.34 % $ 194 $ 5,189 5.21 % $ 270 $ 4,342 5.01 % $ 217
Securities purchased under agreements to resell 13,178 4.29 565 10,029 5.29 530 10,589 5.12 542
Federal funds sold 12,211 4.30 526 12,875 5.21 671 14,911 5.07 757
MBS4,5,6
26,491 5.13 1,360 23,854 6.03 1,438 18,957 5.95 1,128
Other investments4,5,6,7
7,223 3.86 278 5,094 3.83 195 4,322 3.70 160
Advances5,8
108,091 4.70 5,080 107,422 5.60 6,013 120,027 5.44 6,533
Mortgage loans9
13,181 4.57 602 10,893 4.14 452 9,019 3.54 319
Loans to other FHLBanks 7 4.35 - 2 5.44 - 23 5.08 1
Total interest-earning assets 184,848 4.65 8,605 175,358 5.46 9,569 182,190 5.30 9,657
Non-interest-earning assets 2,060 - - 3,623 - - 3,703 - -
Total assets $ 186,908 4.60 % $ 8,605 $ 178,981 5.35 % $ 9,569 $ 185,893 5.20 % $ 9,657
Interest-bearing liabilities
Deposits $ 1,292 3.38 % $ 44 $ 1,244 4.34 % $ 54 $ 1,127 4.21 % $ 47
Consolidated obligations
Discount notes5
66,953 4.22 2,829 68,202 5.07 3,456 60,662 4.80 2,910
Bonds5
105,870 4.33 4,578 95,527 5.05 4,821 109,589 4.92 5,392
Other interest-bearing liabilities10
44 7.87 4 28 6.93 2 23 6.98 2
Total interest-bearing liabilities 174,159 4.28 7,455 165,001 5.05 8,333 171,401 4.87 8,351
Non-interest-bearing liabilities 2,637 - - 4,385 - - 5,159 - -
Total liabilities 176,796 4.22 7,455 169,386 4.92 8,333 176,560 4.73 8,351
Capital 10,112 - - 9,595 - - 9,333 - -
Total liabilities and capital $ 186,908 3.99 % $ 7,455 $ 178,981 4.66 % $ 8,333 $ 185,893 4.49 % $ 8,351
Net interest income and spread11
0.37 % $ 1,150 0.41 % $ 1,236 0.43 % $ 1,306
Net interest margin12
0.62 % 0.70 % 0.72 %
Average interest-earning assets to interest-bearing liabilities 106.14 % 106.28 % 106.29 %
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, $7 million, and $11 million for the years ended December 31, 2025, 2024, and 2023.
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 consists of MRCS and/or borrowings from other FHLBanks.
11 Represents yield on total interest-earning assets minus cost of total interest-bearing liabilities. Amounts used to calculate net interest spread are based on numbers in actuals. Accordingly, recalculations using numbers in millions may not produce the same results.
12 Represents net interest income expressed as a percentage of average interest-earning assets. Amounts used to calculate net interest margin are based on numbers in actuals. Accordingly, recalculations using numbers in millions may not produce the same results.
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).
2025 vs. 2024 2024 vs. 2023
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 $ (35) $ (41) $ (76) $ 44 $ 9 53
Securities purchased under agreements to resell 147 (112) 35 (29) 17 (12)
Federal funds sold (33) (112) (145) (106) 20 (86)
MBS 150 (228) (78) 295 15 310
Other investments 82 1 83 29 6 35
Advances 37 (970) (933) (706) 186 (520)
Mortgage loans 100 50 150 73 60 133
Loans to other FHLBanks - - - (1) - (1)
Total interest income 448 (1,412) (964) (401) 313 (88)
Interest expense
Deposits 2 (12) (10) 5 2 7
Consolidated obligations
Discount notes (62) (565) (627) 376 170 546
Bonds 489 (732) (243) (710) 139 (571)
Other interest-bearing liabilities 1 1 2 - - -
Total interest expense 430 (1,308) (878) (329) 311 (18)
Net interest income $ 18 $ (104) $ (86) $ (72) $ 2 $ (70)
NET INTEREST SPREAD AND MARGIN
Net interest spread represents the yield on total interest-earning assets minus the cost of total interest-bearing liabilities. Net interest margin equals net interest income expressed as a percentage of average interest-earning assets. Our net interest spread decreased during 2025, when compared to 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 certain longer-term advances. The decline in net interest spread was offset in part by mortgage loan and MBS portfolio growth, as well as the call of higher-costing consolidated obligation bonds. Our net interest income 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 2025, when compared to 2024 due primarily to lower net interest spread and lower interest rates, which reduced our earnings on invested capital.
ADVANCE PREPAYMENT FEES
The following table summarizes our advance prepayment fees (dollars in millions):
For the Years Ended
December 31,
2025 2024 2023
Prepayment fees on advances, gross1
$ 12 $ 2 $ (4)
Basis adjustment amortization
(1) 3 31
Deferred prepayment fees on modified advances
(1) (1) -
Prepayment fees on advances, net
$ 10 $ 4 $ 27
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.
Other Income (Loss)
The following table summarizes the components of other income (loss) (dollars in millions):
For the Years Ended
December 31,
2025 2024
Net gains (losses) on trading securities $ 97 $ 18
Net gains (losses) on financial instruments held under fair value option 12 (31)
Net gains (losses) on derivatives (51) 8
Other, net 42 42
Total other income (loss) $ 100 $ 37
Other income (loss) increased $63 million during 2025 when compared to 2024, primarily due to the net change 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 2025, we recorded net combined gains of $58 million on our trading securities, fair value option instruments, and the related economic derivatives, compared to net combined losses of $5 million in 2024. The net increase was primarily driven by changes in interest rates. Refer to "Item 7. 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 table categorizes the net effect of hedging activities on net income by product (dollars in millions):
For the Year Ended December 31, 2025
Net Effect of Hedging Activities Advances Investments Mortgage
Loans 		Discount Notes Bonds
Other
Total
Net interest income:
Net amortization/accretion1
$ 21 $ 4 $ 1 $ - $ - $ - $ 26
Net gains (losses) on derivatives and hedged items
1 (15) - (1) (5) - (20)
Price alignment amount on derivatives (9) (17) - - (3) - (29)
Net interest settlements on derivatives2
440 222 - (9) (13) - 640
Total impact to net interest income 453 194 1 (10) (21) - 617
Other income (loss):
Net gains (losses) on derivatives
Gains (losses) related to derivatives not designated as hedging instruments3
- (29) - (23) - - (52)
Price alignment amount on derivatives - - - - - 1 1
Total net gains (losses) on derivatives - (29) - (23) - 1 (51)
Net gains (losses) on trading securities4
- 97 - - - - 97
Net gains (losses) on financial instruments held under fair value option4
- - - 12 - - 12
Total impact to other income (loss) - 68 - (11) - 1 58
Total net effect of hedging activities5
$ 453 $ 262 $ 1 $ (21) $ (21) $ 1 $ 675
1 Represents the amortization/accretion of basis adjustments on closed hedge relationships.
2 Represents the interest component on derivatives that qualify for fair value hedge accounting.
3 Represents net gains (losses) on economic derivatives and the related interest settlements.
4 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.
5 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.
The following table categorizes the net effect of hedging activities on net income by product (dollars in millions):
For the Year Ended December 31, 2024
Net Effect of Hedging Activities Advances Investments Mortgage
Loans 		Discount Notes Bonds Other Total
Net interest income:
Net amortization/accretion1
$ 39 $ 13 $ 1 $ - $ (8) $ - $ 45
Net gains (losses) on derivatives and hedged items 1 (14) - - 19 - 6
Price alignment amount on derivatives (42) (32) - - (1) - (75)
Net interest settlements on derivatives2
858 378 - - (195) - 1,041
Total impact to net interest income 856 345 1 - (185) - 1,017
Other income (loss):
Net gains (losses) on derivatives
Gains (losses) related to derivatives not designated as hedging instruments3
- 71 (1) (64) - - 6
Price alignment amount on derivatives - - - - - 2 2
Total net gains (losses) on derivatives - 71 (1) (64) - 2 8
Net gains (losses) on trading securities4
- 18 - - - - 18
Net gains (losses) on financial instruments held under fair value option4
- - - (31) - - (31)
Total impact to other income (loss) - 89 (1) (95) - 2 (5)
Total net effect of hedging activities5
$ 856 $ 434 $ - $ (95) $ (185) $ 2 $ 1,012
1 Represents the amortization/accretion of basis adjustments on closed hedge relationships.
2 Represents the interest component on derivatives that qualify for fair value hedge accounting.
3 Represents net gains (losses) on economic derivatives and the related interest settlements.
4 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.
5 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.
PRICE ALIGNMENT AMOUNT ON DERIVATIVES
The price alignment amount on derivatives for which variation margin is characterized as a daily settled contract 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 our Statements of Income.
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 Years Ended
December 31,
2025 2024
Compensation and benefits $ 82 $ 78
Contractual services 27 26
Professional fees 14 19
Other operating expenses 24 21
Total operating expenses 147 144
Voluntary community and housing contributions 78 68
Federal Housing Finance Agency 14 14
Office of Finance 10 10
Other, net 21 22
Total other expense $ 270 $ 258
Other expense increased $12 million during 2025 when compared to 2024, primarily due to an increase in voluntary community and housing contributions and compensation and benefits. This increase was offset in part by a decline in professional fees, driven primarily by lower contract labor costs.
Supporting Housing and Community Investment
In addition to providing a readily available, competitively-priced source of funds to members, one of our core missions is to support affordable housing and community investment. To help fulfill that mission, we administer a number of programs, some of which are statutory while others are voluntary. These include grants through AHP to support low-to-moderate income households, as well as Community Investment Advances, which are discounted advances to support economical development and housing in the communities our members serve. In addition, we offer voluntary programs that provide grants and/or discounted advances to further support our mission.
We recognize statutory AHP assessment expense equal to 10 percent of our annual income subject to assessment (GAAP net income before interest expense related to MRCS and the assessment for AHP) and these funds are required to be granted in the subsequent year. AHP grants include performance-based criteria, which can result in the awards being disbursed over a period of several years or recaptured if performance under the award is not achieved. Refer to "Item 8. Financial Statements and Supplementary Data - Note 10 - Affordable Housing Program" for additional information about the statutory AHP expenses and related liability.
In addition to statutory AHP assessments, the FHLBanks are committed to making voluntary contributions representing five percent or more of their earnings in support of affordable housing and community investment initiatives, collectively referred to as voluntary contributions.
The following table provides the calculation of our voluntary contribution targets (dollars in millions):
For the Years Ended
December 31,
2025 2024
Prior year net income before assessment
$ 1,016 $ 1,069
Adjustment:
Prior year interest expense on MRCS
1 1
Prior year net income subject to assessment
$ 1,017 $ 1,070
Unadjusted voluntary contribution commitment (5%)
$ 51 $ 54
Adjustment:
Adjustment for prior year voluntary contributions1
3 2
Voluntary contribution commitment target
$ 54 $ 56
1 The income statement effects of our voluntary contributions reduce net income before assessments which, in turn, reduces the voluntary contributions in the subsequent year. In order to restore our voluntary contributions to the dollar amount it would be in the absence of these effects, we voluntarily contributed an additional amount to our voluntary affordable housing and community investment initiatives.
We provided voluntary initiatives that support affordable housing and community investments, which are recorded within "Other expense" on our Statements of Income. The following table provides the components of how we fulfilled our voluntary contribution commitment (dollars in millions):
For the Years Ended
December 31,
2025 2024
Voluntary contributions
Affordable housing
$ 35 $ 51
Voluntary AHP1
7 6
Community investment
26 4
Disaster relief and climate resiliency
2 -
Voluntary contribution fulfillment
$ 70 $ 61
Fulfillment, as a percent of prior year net income subject to assessment, as adjusted
6.5 % 5.5 %
1 Excludes $8 million and $7 million of supplemental voluntary contributions to AHP for the years ended December 31, 2025 and 2024. The income statement effects of the voluntary programs reduce net income before assessments which, in turn, reduces the statutory AHP assessment each year. We have committed to make supplemental voluntary contributions to AHP by an amount that equals what the statutory AHP assessment would be in the absence of these effects.
Based on the amount of net income subject to assessment in 2025, our five percent voluntary contribution commitment target for 2026 will be $53 million (excluding supplemental voluntary AHP contributions). In 2026, we also expect to award 2025 statutory AHP assessments of $98 million.
Affordable Housing Program Assessments
Annually, we must set aside for the AHP the greater of 10 percent of our annual income subject to assessment, or our prorated portion of the sum required to ensure the aggregate contribution by the FHLBanks is no less than $100 million for each year. For purposes of the required AHP assessment, income subject to assessments is defined as net income before assessments, plus interest expense related to mandatorily redeemable capital stock. The exclusion of interest expense related to mandatorily redeemable capital stock is a regulatory interpretation of the Finance Agency.
The following table provides a calculation of the net income subject to assessment, adjusted for voluntary contribution fulfillment, to show how our supplemental voluntary AHP contribution restores the AHP amounts to 10 percent of earnings absent the five percent voluntary commitment fulfillment (dollars in millions):
For the Years Ended
December 31,
2025 2024
Net income subject to statutory assessment
$ 979 $ 1,016
Adjustment:
Voluntary commitment fulfillment, recognized in net income1
70 61
Supplemental AHP contributions for the current year2
8 7
Net income subject to assessment, as adjusted
$ 1,057 $ 1,084
10% of net income subject to assessment, as adjusted3
$ 106 $ 109
Statutory AHP assessments
$ 98 102
Supplemental voluntary AHP contributions for the current year2
8 7
Total statutory AHP assessment and supplemental voluntary AHP contributions for the current year
$ 106 $ 109
1 Refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Supporting Housing and Community Investment" for the composition of this amount.
2 Included in "Voluntary community and housing contributions" expense on the Statements of Income.
3 Represents the calculated amount of earnings that would be available for AHP assessment if we had not made voluntary contributions to other initiatives, which reduce net income before assessment which, in turn, reduces the statutory AHP assessment.
The AHP helps members to provide grants or subsidized advances to support the acquisition, development, or rehabilitation of affordable rental or owner-occupied housing. All operating and administrative costs for the AHP are included in our operating expenses, so all AHP contributions go directly to support affordable housing projects and eligible households. For the years ended December 31, 2025 and 2024, AHP contributions were used to award $107 million and $103 million in grants that funded 58 projects and 59 projects that provided approximately 1,927 and 2,100 units of affordable housing. In addition, during the years ended December 31, 2025 and 2024, a portion of AHP was allocated to our down payment products, which support homeownership for households with incomes at or below 80 percent of the area median, adjusted for family size. During the years ended December 31, 2025 and 2024, $15 million and $11 million of grants were disbursed to 944 and 800 eligible households, the majority of whom were first-time homebuyers.
STATEMENTS OF CONDITION
Advances
The following table summarizes our advances by type of institution (dollars in millions):
December 31,
2025 2024
Commercial banks $ 47,532 $ 43,653
Savings institutions 1,008 1,770
Credit unions 10,266 12,941
Insurance companies 50,861 42,235
CDFIs 14 8
Total member advances 109,681 100,607
Housing associates - 108
Non-member borrowers 497 15
Total par value $ 110,178 $ 100,730
Our total advance par value increased $9.4 billion, or nine percent, at December 31, 2025, when compared to December 31, 2024. The increase was primarily due to an increase in borrowings by large depository institution members and insurance companies.
INTEREST RATE PAYMENT AND REDEMPTION TERMS
The following table summarizes advances by interest rate payment and redemption terms (dollars in millions):
December 31, 2025 December 31, 2024
Amount % of Total Amount % of Total
Fixed rate
Due in one year or less $ 33,370 30 $ 39,832 40
Due after one year through three years 23,042 21 20,417 20
Due after three years through five years 12,483 12 13,869 14
Due after five years through 15 years 4,550 4 4,096 4
Thereafter 12 - 14 -
Total par value 73,457 67 78,228 78
Variable rate
Due in one year or less 19,527 18 4,566 4
Due after one year through three years 3,330 3 3,970 4
Due after three years through five years 1,675 1 1,916 2
Due after five years through 15 years 750 1 750 1
Total par value 25,282 23 11,202 11
Variable rate, callable1
Due in one year or less 743 1 1,149 1
Due after one year through three years 3,620 3 4,083 4
Due after three years through five years 6,019 5 4,911 5
Total par value 10,382 9 10,143 10
Other2
Due in one year or less 255 - 192 -
Due after one year through three years 352 1 387 -
Due after three years through five years 347 - 418 1
Due after five years through 15 years 100 - 155 -
Thereafter 3 - 4 -
Total par value 1,057 1 1,156 1
Overdrawn demand deposit accounts - - 1 -
Total advance par value 110,178 100 100,730 100
Premiums 2 3
Discounts (22) (21)
Fair value hedging adjustments 72 (761)
Total $ 110,230 $ 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.
During the year ended December 31, 2025, the composition of our advance portfolio shifted to a higher concentration of variable rate advances due in part to increased usage of short-term non-callable variable rate advances and the maturity of short-term fixed rate advances. Fair value hedging adjustments changed $833 million at December 31, 2025 when compared to December 31, 2024, due primarily to the interest rate environment.
At December 31, 2025 and 2024, advances outstanding to our five largest member borrowers totaled $51.6 billion and $31.3 billion, representing 47 percent and 31 percent of our total advances outstanding. The following table summarizes advances outstanding to our five largest member borrowers at December 31, 2025 (dollars in millions):
Amount % of Total Advances
Athene Annuity and Life Company $ 23,271 21
Wells Fargo Bank, N.A. 16,000 15
EquiTrust Life Insurance Company 4,250 4
UBS Bank USA 4,101 4
Symetra Life Insurance Company 3,986 3
Total par value $ 51,608 47
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 7. 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):
December 31,
2025 2024
Fixed rate conventional loans $ 14,097 $ 11,452
Fixed rate government-insured loans 356 365
Total unpaid principal balance 14,453 11,817
Premiums 156 130
Discounts (54) (33)
Basis adjustments from mortgage loan purchase commitments (9) (13)
Total mortgage loans held for portfolio 14,546 11,901
Allowance for credit losses (6) (5)
Total mortgage loans held for portfolio, net $ 14,540 $ 11,896
Our total mortgage loans increased $2.6 billion, or 22 percent, at December 31, 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.
REDEMPTION TERMS
The following table summarizes our fixed rate mortgage loans held for portfolio by redemption terms (dollars in millions):
December 31,
Redemption Term 2025 2024
Due in one year or less $ 412 $ 364
Due after one year through five years 1,748 1,525
Due after five years through fifteen years 4,799 4,021
Thereafter 7,494 5,907
Total unpaid principal balance $ 14,453 $ 11,817
We evaluate mortgage loans for credit losses on a quarterly basis. For additional discussion on our mortgage loan credit risk, refer to "Item 7. 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):
December 31, 2025 December 31, 2024
Amount % of Total Amount % of Total
Short-term investments1
Interest-bearing deposits $ 3,726 6 $ 4,096 8
Securities purchased under agreements to resell 17,090 28 11,950 23
Federal funds sold 5,930 10 5,175 10
Total short-term investments 26,746 44 21,221 41
Long-term investments2
MBS
GSE single-family 516 1 564 1
GSE multifamily 20,882 34 18,984 36
U.S. obligations single-family3
5,708 9 5,202 10
Private-label residential 2 - 2 -
Total MBS 27,108 44 24,752 47
Non-MBS
U.S. Treasury obligations3
6,104 10 4,508 9
Other U.S. obligations3
71 - 161 -
GSE and TVA obligations 482 1 714 1
State or local housing agency obligations 391 1 528 1
Other4
113 - 148 1
Total non-MBS 7,161 12 6,059 12
Total long-term investments 34,269 56 30,811 59
Total investments $ 61,015 100 $ 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 $9.0 billion, or 17 percent, at December 31, 2025, when compared to December 31, 2024, due in part to an increase in securities purchased under agreements to resell, as well as the purchase of agency MBS and U.S. Treasury obligations. At December 31, 2025, we had no investment purchases that were traded but not yet settled. At December 31, 2024, we had agency MBS purchases with a total par value of $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. At December 31, 2025, our ratio of MBS to regulatory capital was 2.64 compared to 2.71 at December 31, 2024.
REDEMPTION TERMS AND YIELDS
The following table summarizes the carrying value and yield characteristics of our AFS and HTM investment portfolios on the basis of remaining terms to contractual maturity. Expected maturities of some securities may differ from contractual maturities, as borrowers may have the right to call or prepay obligations with or without call or prepayment fees (dollars in millions):
December 31,
2025 2024
Due in one year or less Due after one year through five years Due after five years through 10 years Due after 10 years Carrying Value Carrying Value
AFS securities
Non-MBS
Other U.S. obligations1
$ 11 $ 3 $ - $ - $ 14 $ 102
GSE and TVA obligations - 27 11 272 310 309
State or local housing agency obligations - - 216 154 370 499
Other2
- 19 - - 19 42
Total non-MBS 11 49 227 426 713 952
MBS
U.S. obligations
single-family1
- - - 5,707 5,707 5,200
GSE single-family - - 6 211 217 195
GSE multifamily 250 4,331 16,018 283 20,882 18,984
Total MBS 250 4,331 16,024 6,201 26,806 24,379
Total AFS securities 261 4,380 16,251 6,627 27,519 25,331
HTM securities
Non-MBS
GSE and TVA obligations - 25 64 35 124 358
State or local housing agency obligations 3 2 5 11 21 29
Total non-MBS 3 27 69 46 145 387
MBS
U.S. obligations
single-family1
- - - 1 1 2
GSE single-family - 7 40 252 299 369
Private-label - - 2 - 2 2
Total MBS - 7 42 253 302 373
Total HTM securities $ 3 $ 34 $ 111 $ 299 $ 447 $ 760
Weighted-average yields on:
AFS securities3
3.96 % 3.78 % 4.30 % 4.79 %
HTM securities3
4.86 % 3.63 % 4.88 % 4.51 %
1 Represents investment securities backed by the full faith and credit of the U.S. Government.
2 Consists of taxable municipal bonds.
3 The weighted average yields on AFS and HTM securities are calculated as the sum of each debt security using the period end balances multiplied by the coupon rate, divided by the total debt securities in the applicable HTM or AFS portfolio. The result is then multiplied by 100 to express it as a percentage.
INTEREST RATE PAYMENT TERMS
The following table summarizes the interest rate payment terms of investment securities (dollars in millions):
December 31,
2025 2024
Trading securities at fair value
Fixed rate $ 6,303 $ 4,720
Total trading securities $ 6,303 $ 4,720
AFS securities at amortized cost
Fixed rate $ 20,840 $ 18,474
Variable rate 6,496 6,884
Total AFS securities $ 27,336 $ 25,358
HTM securities at amortized cost
Fixed rate $ 183 $ 431
Variable rate 264 329
Total HTM securities $ 447 $ 760
We evaluate investments for credit losses on a quarterly basis. For additional discussion on our investment credit risk, refer to "Item 7. 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 December 31, 2025 and 2024, the carrying value of consolidated obligations for which we are primarily liable totaled $173.9 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):
December 31,
2025 2024
Par value $ 85,186 $ 65,250
Discounts and concession fees1
(586) (586)
Fair value hedging adjustments 17 -
Fair value option adjustments 3 16
Total $ 84,620 $ 64,680
1 Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation discount notes.
Our discount notes increased $19.9 billion, or 31 percent, at December 31, 2025, when compared to December 31, 2024. During the year ended December 31, 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. Fair value option adjustments changed $13 million at December 31, 2025, when compared to December 31, 2024, driven primarily by the reversal of historic gains and losses on instruments as they approach maturity and the impact of new trades, offset in part by changes in the interest rate environment.
BONDS
The following table summarizes information on our bonds (dollars in millions):
December 31,
2025 2024
Par value $ 89,188 $ 88,588
Premiums 28 30
Discounts and concession fees1
(23) (25)
Fair value hedging adjustments 56 (22)
Total $ 89,249 $ 88,571
1 Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation bonds.
Our bondsremained relatively stableat December 31, 2025, when compared to December 31, 2024. Fair value hedging adjustments changed $78 million at December 31, 2025, when compared to December 31, 2024, driven primarily by the interest rate environment.
INTEREST RATE PAYMENT TERMS
Bonds are issued with either a fixed or variable rate, such as SOFR. The following table summarizes our bonds by interest rate payment terms (dollars in millions):
December 31,
2025 2024
Fixed rate $ 34,962 $ 34,935
Simple variable rate 54,226 53,653
Total par value $ 89,188 $ 88,588
For additional information on our consolidated obligations, refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Liquidity - Sources of Liquidity."
Deposits
Deposits represent a small portion of our funding, totaling $1.1 billion at December 31, 2025, a decrease of $167 million, or 13 percent, from December 31, 2024. All of our deposits are uninsured and the balance of deposits varies depending on market factors, such as the attractiveness of our deposit pricing relative to rates available on alternative money market instruments, our members' investment preferences and the availability of alternative short-term investments, and our members' liquidity levels.
Interest-bearing demand and overnight deposits pay interest based on a daily interest rate. The average balances of demand and overnight deposits were $1.1 billion, $1.0 billion, and $1.0 billion, and the weighted-average interest rates paid on demand and overnight deposits were 3.21 percent, 4.15 percent, and 4.07 percent during the years ended December 31, 2025, 2024, and 2023.
The following table summarizes our uninsured term deposits (dollars in millions):
December 31,
2025 2024
Three months or less $ 6 $ 6
Over three months through six months - 1
Over six months through 12 months 4 2
Total $ 10 $ 9
Capital
The following table summarizes information on our capital (dollars in millions):
December 31,
2025 2024
Capital stock $ 6,509 $ 5,989
Retained earnings 3,797 3,491
Accumulated other comprehensive income (loss) 181 (29)
Total capital $ 10,487 $ 9,451
Our capital increased $1.0 billion, or 11 percent, at December 31, 2025, when compared to December 31, 2024. The increase was primarily due to an increase in activity-based capital stock resulting from an increase in advance balances and an increase in retained earnings. Refer to "Item 7. 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):
December 31,
2025 2024
Interest rate swaps
Noncallable $ 171,040 $ 146,567
Callable by counterparty 14,872 8,335
Callable by the Bank 33 -
Total interest rate swaps 185,945 154,902
Forward settlement agreements
111 91
Mortgage loan purchase commitments 106 101
Total notional amount $ 186,162 $ 155,094
The notional amount of our derivative contracts increased $31.1 billion, or 20 percent, at December 31, 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 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 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate 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 2025, proceeds from the issuance of bonds and discount notes were $122.9 billion and $1,476.1 billion compared to $55.9 billion and $1,688.5 billion in 2024. During 2025, although we increased our utilization of 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 (e.g., 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 8. Financial Statements and Supplementary Data" for additional information regarding the contractual maturities or redemption terms 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. For our current credit ratings and further discussion of how credit rating changes and our ability to access the capital markets may impact us in the future, refer to "Item 1. Business" and "Item 1A. Risk Factors."
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 December 31, 2025 and 2024, the total par value of outstanding consolidated obligations for which we are primarily liable was $174.4 billion and $153.8 billion. At December 31, 2025 and 2024, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which we are jointly and severally liable was $977.4 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 February 28, 2026, 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 2025, repayments of consolidated obligations totaled $1,578.0 billion compared to $1,763.1 billion in 2024.
During 2025, advance disbursements (excluding daily renewals) totaled $695.4 billion compared to $406.0 billion in 2024. Advance disbursements will 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 2025 was due primarily to member utilization of short-term advances, including overnight advances. During 2025, investment purchases (excluding overnight investments) totaled $5.7 billion compared to $7.9 billion in 2024, a decrease due primarily to fewer purchases of securities purchased under agreements to resell and agency MBS.
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, as further outlined below. We also 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.
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 December 31, 2025 and 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 maximum funding gap limits of negative 15 percent at the three-month horizon and negative 30 percent at the one-year horizon. At December 31, 2025 and 2024, we adhered to these funding gap requirements.
Liquidity Reserves for Deposits- We are required to have advances with maturities not to exceed five years, deposits in banks or trust companies, or obligations of the U.S. Treasury in an aggregate amount greater than or equal to members' current deposits available at all times. At December 31, 2025 and 2024, we were in compliance with this liquidity guidance.
Unpledged Qualifying Assets- We are required to maintain, in the aggregate, unpledged qualifying assets in an amount at least equal to the amount of our participation in total consolidated obligations outstanding. The following table shows our compliance with this requirement (dollars in billions):
December 31,
2025 2024
Qualifying assets free of lien or pledge $ 184.9 $ 163.8
Consolidated obligations outstanding 173.9 153.3
Excess liquidity $ 11.0 $ 10.5
Capital
CAPITAL REQUIREMENTS
We are subject to certain regulatory capital requirements. Refer to "Item 8. Financial Statements and Supplementary Data - Note 11 - 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. 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.
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.
Because membership is voluntary, a member can provide a notice of withdrawal from membership at any time. If a member provides a notice of withdrawal from membership, we will not repurchase or redeem any membership stock until five years from the date of receipt of a notice of withdrawal. To the extent membership is terminated involuntarily, we may elect to repurchase that institution's membership stock prior to the end of the five-year redemption period. If a member withdraws or is involuntarily terminated from membership and holds activity-based capital stock, we will repurchase any such stock that is not required to support remaining business activity with the institution.
A member may cancel any pending notice of redemption before the completion of the five-year redemption period by providing a written notice of cancellation. We charge a cancellation fee equal to a percentage of the par value of the shares of capital stock subject to redemption. This fee is currently set at a range of one to five percent depending on when we receive notice of cancellation from the member. Our Board of Directors retains the right to change the cancellation fee at any time. We will provide at least 15 days' written notice to each member of any adjustment or amendment to our cancellation fee.
We cannot repurchase or redeem any membership or activity-based capital stock if the repurchase or redemption would cause a member to be out of compliance with its required investment. In addition, there are statutory and regulatory restrictions on our obligation or right to redeem outstanding capital stock.
First, in no case may we redeem any capital stock if, following such redemption, we would fail to satisfy our minimum regulatory capital requirements. By law, all member holdings of our capital stock immediately become nonredeemable if we become undercapitalized.
Second, we are precluded by regulation from redeeming any capital stock without the prior approval of the Finance Agency if either our Board of Directors or the Finance Agency determines that we incurred or are likely to incur losses resulting in or likely to result in a charge against capital.
Third, we cannot redeem shares of capital stock from any member if the principal or interest on any consolidated obligation is not paid in full when due, or under certain circumstances if (i) we project, at any time, that we will fail to comply with statutory or regulatory liquidity requirements, or will be unable to timely and fully meet all of our current obligations, (ii) we actually fail to comply with statutory or regulatory liquidity requirements or to timely and fully meet all of our current obligations, or enter or negotiate to enter into an agreement with one or more other FHLBanks to obtain financial assistance to meet our current obligations, or (iii) the Finance Agency determines that we will cease to be in compliance with statutory or regulatory liquidity requirements, or will lack the capacity to timely or fully meet all of our current obligations.
If we are liquidated, after payment in full to our creditors, our stockholders will be entitled to receive the par value of their capital stock as well as any retained earnings, in an amount proportional to the stockholder's share of the total shares of capital stock. In the event of a merger or consolidation, our Board of Directors shall determine the rights and preferences of our stockholders, subject to applicable Finance Agency regulations, as well as any terms and conditions imposed by the Finance Agency.
Regulatory Capital Stock
The following table summarizes our regulatory capital stock by type of member (dollars in millions):
December 31,
2025 2024
Commercial banks $ 3,036 $ 2,804
Savings institutions 97 122
Credit unions 849 928
Insurance companies 2,526 2,134
CDFIs 1 1
Total GAAP capital stock 6,509 5,989
MRCS 30 9
Total regulatory capital stock $ 6,539 $ 5,998
The increase in regulatory capital stock at December 31, 2025, when compared to December 31, 2024, was primarily due 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 8. Financial Statements and Supplementary Data - Note 11 - 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 December 31, 2025 and 2024, our actual retained earnings exceeded our targeted level of retained earnings.
Under the JCE Agreement with all of the other FHLBanks, 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 December 31, 2025 and 2024, our restricted retained earnings account totaled $1.3 billion and $1.1 billion. One percent of our average balance of outstanding consolidated obligations for the three months ended December 31, 2025, was $1.7 billion.
DIVIDENDS
Our Board of Directors may declare and pay different dividends for each subclass of capital stock. Dividend payments may be made in the form of cash and/or additional shares of capital stock. Historically, we have only paid cash dividends. By regulation, we may only pay dividends from current earnings or unrestricted retained earnings. We are prohibited from paying a dividend in the form of additional shares of capital stock if, after the issuance, the outstanding excess capital stock would be greater than one percent of our total assets. Our Board of Directors may not declare or pay dividends if it would result in our non-compliance with regulatory capital requirements.
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 actual 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 Years Ended
December 31,
2025 2024
Aggregate cash dividends paid1
$ 575 $ 561
Effective combined annualized dividend rate paid on capital stock2
9.16 % 8.64 %
Annualized dividend rate paid on membership capital stock 6.00 % 5.39 %
Annualized dividend rate paid on activity-based capital stock 9.75 % 9.31 %
Average SOFR 4.24 % 5.15 %
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
The preparation of our financial statements in accordance with GAAP requires management to make a number of judgments, estimates, and assumptions that affect our reported results and disclosures. Given the assumptions and judgment used, we have identified fair value measurements as our critical accounting estimate.
For a discussion of recently adopted or issued accounting standards, refer to "Item 8. Financial Statements and Supplementary Data - Note 2 - Recently Adopted and Issued Accounting Guidance." For additional information on our fair value estimates, refer to "Item 8. Financial Statements and Supplementary Data - Note 1 - Summary of Significant Accounting Policies."
Fair Value Measurements
Fair values play an important role in our valuation of certain assets, liabilities, and hedging instruments. They are inherently subjective and may require the use of significant assumptions, adjustments, and judgment including, among others, discount rates, forward interest rates, and volatility assumptions. We evaluate our fair value measurements on an ongoing basis. While management believes our estimates and assumptions are reasonable based on historical experience and other factors, actual results could differ from those estimates and differences could be material to the financial statements.
We categorize our financial instruments carried at fair value into a three-level hierarchy. The hierarchy is based upon the observability of inputs used to value the asset or liability as of the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. At December 31, 2025 and 2024, we did not carry any financial assets or liabilities, measured on a recurring basis, at fair value on our Statements of Condition based on unobservable inputs.
While all fair value measurements inherently have a significant level of estimation uncertainty, the following items are those most likely to have a material impact on our financial statements:
•Trading and AFS Investment Securities. Our valuation technique incorporates prices from third-party pricing vendors, that generally use various proprietary models to price investment securities. The inputs to those models are derived from various sources including, but not limited to, benchmark securities and yields, reported trades, dealer estimates, issuer spreads, bids, offers, and other market-related data. Since many investment securities do not trade 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 process in place to challenge investment valuations, which facilitates resolution of questionable prices we may identify. Periodically, we conduct reviews of our pricing vendors to confirm and further augment our understanding of the vendors' pricing processes, methodologies, and control procedures. In limited instances, when no prices are available from the designated pricing services, we obtain prices from dealers or use the purchase price if the investment security is unsettled.
•Derivative Assets and Liabilities and Related Hedged Items. The fair value of our derivatives is generally estimated using standard valuation techniques such as a discounted cash flow analysis and includes variation margin payments for daily settled contracts. Our cash flow model utilizes market-observable inputs (inputs that are actively quoted and can be validated to external sources). These inputs include assumptions on discount rates, forward interest rates, and volatility. In limited instances, fair value estimates for derivatives may be obtained using an external pricing model that utilizes observable market data. For the related hedged items, the fair value is estimated using a discounted cash flow analysis which also considers assumptions on discount rates and volatility.
Throughout 2025, there were no material changes in our valuation techniques or primary inputs used to develop fair value measurements for investment securities or derivatives and the related hedged items. Further, the risk profile and composition of these instruments did not materially change when compared to prior year. Refer to "Item 8. Financial Statements and Supplementary Data - Note 12 - Fair Value" for additional discussion on our fair value measurements, including the quantitative impact these fair value estimates had on our financial statements and disclosures at December 31, 2025 and 2024.
LEGISLATIVE AND REGULATORY DEVELOPMENTS
Regulatory Environment
Certain significant regulatory actions and developments are summarized below.
We are subject to various legal and regulatory requirements and priorities. Certain actions, regulatory priorities, and areas of focus, such as deregulation, by the federal executive administration have changed and continue to change the regulatory environment. For example, the Finance Agency repealed the Fair Lending, Fair Housing, and Equitable Housing Finance Plans regulation applicable to the FHLBanks, effective March 9, 2026, citing the federal executive administration's deregulatory priorities. Furthermore, during 2025, withdrawals and rescissions of certain rules, proposed rules, and advisory, regulatory, or technical guidance, have affected, and likely will continue to affect, certain aspects of our business operations. These changes could have impact on our financial condition, results of operations, and reputation.
On January 20, 2026, the federal executive administration issued an executive order that seeks to restrict acquisitions by large institutional investors of single-family homes. Among other things, the executive order directs certain agencies, including the Finance Agency, to issue guidance to (i) prevent agencies and government-sponsored enterprises from providing for, approving, insuring, guaranteeing, securitizing, or facilitating the acquisition by a large institutional investor of a single-family home that could otherwise be purchased by an individual owner-occupant, or disposing of federal assets in a manner that transfers a single-family home to a large institutional investor; and (ii) promote sales to individual owner-occupants, including through anti-circumvention provisions, first-look policies, and disclosure requirements. The executive order also calls for legislative recommendations to codify related policies and directs certain agencies to conduct reviews and consider additional measures to combat speculation by large institutional investors in single-family housing markets. We are unable to predict the nature of the guidance, measures, or recommendations, or how any such measure may impact our business.
Considering the changes in the regulatory environment, there is uncertainty with respect to the ultimate result of future regulatory actions and the impact they may have on us and the FHLBank System. We also cannot predict the federal executive administration's actions on U.S. housing finance and GSEs, including relating to the revision or end of conservatorships of Fannie Mae and Freddie Mac or potential reforms or enhancements to their capital structure, the imposition of new requirements or limitations on their existing authorities or changes in the nature of their government-backed guarantees. Similarly, we cannot predict any corresponding impacts of GSE reform on the FHLBank System, the secondary mortgage and MBS markets, or the mortgage industry. We continue to monitor these actions as they evolve and to evaluate their potential impact on us. For a discussion of related risks, please refer to "Item 1A Risk Factors."
OFF-BALANCE SHEET ARRANGEMENTS
In the ordinary course of business, we engage in financial transactions that, in accordance with GAAP, are not recorded on our Statements of Condition or may be recorded on our Statements of Condition in amounts that are different from the full contract or notional amount of the transactions. For additional information on our off-balance sheet arrangements, refer to "Item 8 - Financial Statements and Supplementary Data - Note 13 - Commitments and Contingencies."
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.
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.
The MVE calculation is derived by a model that uses market prices which are computed using interest rates. This model allows for items such as spreads, volatilities, and prepayment speeds, and assumes a run-off balance sheet. To ensure the accuracy of the MVE calculation, we benchmark the computed market prices of complex instruments, such as derivatives and mortgage assets, to market observed prices or dealers' quotes.
Interest rate risk stress tests of MVE involve instantaneous parallel and non-parallel changes in interest rates. The resulting percentage change in MVE from the base case value is an indication of longer-term repricing risk and option risk embedded in the balance sheet.
In an effort to protect MVE from large interest rate swings, we manage the interest rate risk of our balance sheet by using hedging transactions, such as issuing consolidated obligation bonds, including floating rate, simple bullet, callable, or other structured features, and entering into or canceling interest rate swaps, caps, floors, and swaptions.
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 December 31, 2025 and 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.
The following tables show our base case and change from base case MVE in percent change, MVE policy limits, and MVCS, assuming instantaneous parallel changes in interest rates at December 31, 2025 and 2024:
MVE Assuming Parallel Changes (dollars in millions)
Down 200 Down 100 Base Case Up 100 Up 200
2025 $ 10,858 $ 10,784 $ 10,669 $ 10,488 $ 10,310
2024 $ 9,553 $ 9,498 $ 9,400 $ 9,280 $ 9,148
% Change from Base Case
Down 200 Down 100 Base Case Up 100 Up 200
2025 1.8 % 1.1 % - % (1.7) % (3.4) %
2024 1.6 % 1.0 % - % (1.3) % (2.7) %
Policy Limits (declines from base case)
Down 2001
Down 100 Base Case Up 100 Up 200
2025 and 2024
(7.5) % (4.0) % - % (4.0) % (7.5) %
MVCS Assuming Parallel Changes (dollars per share)
Down 200 Down 100 Base Case Up 100 Up 200
2025 $ 166.0 $ 164.9 $ 163.1 $ 160.4 $ 157.7
2024 $ 159.3 $ 158.4 $ 156.7 $ 154.7 $ 152.5
1 The down 200 basis point policy limit is suspended when the 10-year swap rate falls below a threshold for five consecutive days. At December 31, 2025 and 2024, the threshold was 1.50 percent and the 10-year swap rate was above this level; as such, the associated policy limits were in effect.
The following tables show our base case and change from base case MVE in percent change, MVE policy limits, and MVCS, assuming instantaneous non-parallel changes in interest rates at December 31, 2025 and 2024:
MVE Assuming Non-Parallel Changes (dollars in millions)
Down 200 Down 100 Base Case Up 100 Up 200
2025 $ 10,838 $ 10,780 $ 10,669 $ 10,500 $ 10,340
2024 $ 9,549 $ 9,490 $ 9,400 $ 9,279 $ 9,141
% Change from Base Case
Down 200 Down 100 Base Case Up 100 Up 200
2025 1.6 % 1.0 % - % (1.6) % (3.1) %
2024 1.6 % 1.0 % - % (1.3) % (2.8) %
Policy Limits (declines from base case)
Down 2001
Down 100 Base Case Up 100 Up 200
2025 and 2024
(7.5) % (4.0) % - % (4.0) % (7.5) %
MVCS Assuming Non-Parallel Changes (dollars per share)
Down 200 Down 100 Base Case Up 100 Up 200
2025 $ 165.7 $ 164.8 $ 163.1 $ 160.6 $ 158.1
2024 $ 159.2 $ 158.2 $ 156.7 $ 154.7 $ 152.4
1 The down 200 basis point policy limit is suspended when the 10-year swap rate falls below a threshold for five consecutive days. At December 31, 2025 and 2024, the threshold was 1.50 percent and the 10-year swap rate was above this level; as such, the associated policy limits were in effect.
Our base case MVE and MVCS increased at December 31, 2025, when compared to December 31, 2024, and the increase between periods was primarily attributable to an increase in retained earnings and improved valuations of multifamily MBS and our mortgage loan portfolio. In addition, our base case MVE improved primarily due to higher asset balances and increased invested capital, specifically activity-based capital stock.
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, such as market value adjustments, prepayment fee income, and other non-routine items.
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. We were in compliance with all projected 24-month income policy limits at December 31, 2025 and 2024.
The following tables show our projected 24-month AROCS spread to average SOFR and associated policy limits, assuming instantaneous parallel shifts in interest rates at December 31, 2025 and 2024:
Projected AROCS Spread to SOFR
Down 200 Down 100 Base Case Up 100 Up 200
2025 8.77 % 9.31 % 9.83 % 10.07 % 10.22 %
2024 7.60 % 8.27 % 8.60 % 8.81 % 9.00 %
Policy Limits1
Down 2001
Down 100 Base Case Up 100 Up 200
2025 and 2024
1.75 % 1.75 % - % 1.75 % 1.75 %
1 The down 200 basis point policy limit is suspended when the 10-year swap rate falls below a threshold for five consecutive days. At December 31, 2025 and 2024, the threshold was 1.50 percent and the 10-year swap rate was above this level; as such, the associated policy was in effect.
The following tables show our projected 24-month AROCS spread to average SOFR and associated policy limits, assuming instantaneous non-parallel shifts in interest rates at December 31, 2025 and 2024:
Projected AROCS Spread to SOFR
Down 100 Base Case Up 100
2025 9.80 % 9.83 % 9.89 %
2024 8.41 % 8.60 % 8.60 %
Policy Limits
Down 100 Base Case Up 100
2025 and 2024
1.75 % - % 1.75 %
The following tables show our change from base projected 24-month AROCS for index specific shock scenarios and our associated policy limits at December 31, 2025 and 2024:
Projected AROCS
% Change from Base Case
2025 (0.11) %
2024 (0.19) %
Policy Limit
Base Case
2025 (1.00) %
2024 (1.75) %
DERIVATIVES
We use derivatives to manage interest rate risk. Finance Agency regulations and our risk management policies establish guidelines for derivatives, prohibit the speculative use of derivatives, and limit credit risk arising from derivatives. Our hedging strategies include hedges of specific assets and liabilities that qualify for fair value hedge accounting and economic hedges that are used to reduce overall market risk exposure. All new hedging strategies are approved by our Asset-Liability Committee. See additional discussion regarding our derivative contracts in "Item 8. Financial Statements and Supplementary Data - Note 7 - Derivatives and Hedging Activities."
The following table summarizes our interest rate exchange agreements by type of hedged item, hedging instrument, associated hedging strategy, hedge accounting designation, and notional amount (dollars in millions):
December 31,
Hedged Item / Hedging Instrument Hedging Strategy Hedge Accounting Designation
2025
Notional Amount
2024
Notional Amount
Advances
Pay-fixed, receive floating interest rate swap (without options) Converts the advance's fixed rate to a variable rate index. Fair Value $ 58,443 $ 58,344
Economic 35 -
Pay-fixed, receive floating interest rate swap (with options) Converts the advance's fixed rate to a variable rate index and offsets option risk in the advance. Fair Value 33 -
Investments
Pay-fixed, receive floating interest rate swap Converts the investment's fixed rate to a variable rate index. Fair Value 20,490 18,741
Economic 6,246 4,814
Mortgage Loans
Mortgage loan purchase commitment Represents a stand-alone derivative that exposes us to fair value risk due to the fixed rate purchase commitment. Economic 106 101
Forward settlement agreement Protects against changes in market value of fixed rate mortgage loan purchase commitments resulting from changes in interest rates. Economic 111 91
Bonds
Receive-fixed or structured, pay floating interest rate swap (without options) Converts the bond's fixed or structured rate to a variable rate index. Fair Value 5,536 13,750
Receive-fixed or structured, pay floating interest rate swap (with options) Converts the bond's fixed or structured rate to a variable rate index and offsets option risk in the bond. Fair Value 14,872 8,335
Discount Notes
Receive-fixed, pay-float interest rate swap Converts the discount note's fixed rate to a variable rate index. Fair Value 63,394 -
Economic 16,896 50,918
Total $ 186,162 $ 155,094
For more information on our hedging strategies, refer to "Item 8. Financial Statements and Supplementary Data - Note 7 - Derivatives and Hedging Activities."
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 7. 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 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate Risk - Market Value of Equity."
Liquidity Risk
We define liquidity risk as the risk that we will be unable to meet our financial obligations as they come due or meet the credit needs of our members in a timely and cost-efficient manner. To manage this risk, we maintain liquidity in accordance with Finance Agency regulations. For additional information on our compliance with these requirements, refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Liquidity - Liquidity Requirements."
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 December 31, 2025 and 2024, borrowers pledged $442.4 billion and $388.8 billion of collateral (net of applicable discounts) to support activity with us, including advances. At December 31, 2025 and 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.
The following table shows the amount of collateral pledged to us (net of applicable discounts) (dollars in billions):
December 31, 2025
Collateral Type
Discount Range1
Amount % of Total
Single-family loans 20-31 $ 238.6 54
Multi-family loans 31 33.7 8
Other real estate 26-53 117.2 26
Securities
Cash, agency securities and residential MBS
0-28
40.1 9
Commercial MBS 15 8.4 2
Government-insured loans
15-25
0.9 -
Secured small business and agri-business loans
40 3.5 1
Total $ 442.4 100
1 Represents the discount or the range of discounts applied to the unpaid principal balance or market value of collateral pledged.
We evaluate advances for credit losses on a quarterly basis and 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 December 31, 2025 and 2024. Refer to "Item 8. Financial Statements and Supplementary Data - Note 5 - Advances" for additional information on our eligible collateral types, collateral practices, and 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):
December 31,
Product Type 2025 2024
Conventional $ 14,097 $ 11,452
Government 356 365
Total unpaid principal balance $ 14,453 $ 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 December 31, 2025 and 2024, the allowance for credit losses on our conventional mortgage loans was $6 million and $5 million. At December 31, 2025, over 99 percent of our conventional loan portfolio was performing (i.e. current payment status) and charge-offs recorded during the year ended December 31, 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 December 31, 2025 and 2024, we determined no allowance for credit losses was necessary on our government-insured mortgage loans.
Refer to "Item 8. Financial Statements and Supplementary Data - Note 6 - Mortgage Loans Held for Portfolio" for additional information on our allowance for credit losses and the payment status of our conventional mortgage loans.
The following table presents supplemental information on our mortgage loans (dollars in millions):
December 31,
Unpaid Principal Balance 2025 2024
Average mortgage loans outstanding during the period $ 13,098 $ 10,808
Mortgage loans held for portfolio 14,453 11,817
Non-accrual loans 62 48
Allowance for credit losses on mortgage loans held for portfolio (6) (5)
Net charge-offs (recoveries)1
- -
Ratio of net charge-offs (recoveries) to average mortgage loans outstanding during the period1
- % - %
Ratio of allowance for credit losses to mortgage loans held for portfolio 0.04 % 0.04 %
Ratio of non-accrual loans to mortgage loans held for portfolio 0.43 % 0.41 %
Ratio of allowance for credit losses to non-accrual loans 8.84 % 9.44 %
1 Net charge-offs and recoveries were less than $1 million at both December 31, 2025 and 2024.
The following table shows our conventional mortgage loans by FICO®score. All percentages are calculated based on unpaid principal balances as of the period end.
FICO®Score1
December 31, 2025
620 to < 660 4 %
660 to < 700 10
700 to < 740 20
>= 740 66
Total 100 %
Weighted average FICO score 752
1 Represents the lowest original FICO®score of the borrowers and co-borrowers.
The following table shows our conventional mortgage loans by loan-to-value ratio. All percentages are calculated based on unpaid principal balances as of the period end.
Loan-to-Value1
December 31, 2025
<= 60% 13 %
> 60% to 70% 11
> 70% to 80% 46
> 80% to 90%2
14
> 90%2
16
Total 100 %
Weighted average loan-to-value 77 %
1 Represents the loan-to-value at origination for the related loan.
2 These conventional loans were required to have PMI at origination.
The following table shows the five largest state concentrations of our conventional mortgage loan portfolio. All percentages are calculated based on unpaid principal balances as of the period end.
December 31, 2025
Minnesota 21 %
Missouri 20
Iowa 20
South Dakota 8
Idaho 6
All others 25
Total 100 %
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 backings 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 in an effort 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. 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. At December 31, 2025, we were in compliance with the above 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. Under these regulations, the level of regulatory capital is determined as the lesser of our total regulatory capital or the amount of regulatory capital of the counterparty. The amount of regulatory capital is then multiplied by a stated percentage. The percentage that we may offer for extensions of unsecured credit, excluding overnight federal funds sold, ranges from one to 15 percent based on the counterparty's credit rating. Our total unsecured exposure to a counterparty, including overnight federal funds sold, may not exceed twice that amount, or a total of two to 30 percent of the amount of regulatory capital, based on the counterparty's credit rating. At December 31, 2025, we were in compliance with the regulatory limits established for unsecured credit.
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 FDIC 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 December 31, 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 (excluding accrued interest receivable) (dollars in millions):
December 31, 2025
Credit Rating1,2
Domicile of Counterparty AA A Total
Domestic $ 535 $ 3,185 $ 3,720
U.S. branches and agency offices of foreign commercial banks
Australia 1,450 - 1,450
Belgium
- 500 500
Canada - 2,330 2,330
Finland 200 - 200
Germany 750 - 750
Netherlands - 400 400
United Kingdom - 300 300
Total U.S. branches and agency offices of foreign commercial banks 2,400 3,530 5,930
Total unsecured short-term investment exposure $ 2,935 $ 6,715 $ 9,650
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.
The following table summarizes the carrying value of our investments by credit rating (dollars in millions):
December 31, 2025
Credit Rating1
AAA AA A Unrated Total
Interest-bearing deposits2
$ - $ 541 $ 3,185 $ - $ 3,726
Securities purchased under agreements to resell3
- 1,500 4,900 10,690 17,090
Federal funds sold - 2,400 3,530 - 5,930
Investment securities:
MBS
GSE single-family - 516 - - 516
GSE multifamily - 20,882 - - 20,882
U.S. obligations single-family4
- 5,708 - - 5,708
Private-label residential - - - 2 2
Total MBS - 27,106 - 2 27,108
Non-MBS
U.S. Treasury obligations4
- 6,104 - - 6,104
Other U.S. obligations4
- 71 - - 71
GSE and TVA obligations - 482 - - 482
State or local housing agency obligations 259 132 - - 391
Other5
94 19 - - 113
Total non-MBS 353 6,808 - - 7,161
Total investments $ 353 $ 38,355 $ 11,615 $ 10,692 $ 61,015
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 $6 million of interest-bearing deposits with another FHLBank. These investments are rated AA, based on the credit rating of the FHLBank System.
3 Although a portion of the securities purchased under agreements to resell is with unrated counterparties, the underlying collateral supporting these investments is investment grade.
4 Represents investment securities backed by the full faith and credit of the U.S. Government.
5 Consists of taxable municipal bonds.
We evaluate investments for credit losses on a quarterly basis. At December 31, 2025 and 2024, we determined no allowance for credit losses was necessary on our investments. Refer to "Item 8. Financial Statements and Supplementary Data - Note 4 - Investments" for additional information 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 Derivatives. Uncleared derivative transactions executed on or after September 1, 2022 are subject to two-way initial margin requirements, 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. Uncleared derivative agreements are also 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. As a result of these risk mitigation initiatives, we do not anticipate any credit losses on our uncleared derivative agreements.
Cleared Derivatives. For cleared derivatives, the clearinghouse is our counterparty. We are subject to risk of nonperformance by the clearinghouse and clearing agent. The requirement that we post initial and variation margin through the clearing agent, to the clearinghouse, exposes us to institutional credit risk in the event that the clearing agent or the clearinghouse fails to meet its obligations. However, the use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral/payments are posted daily, through a clearing agent, for changes in the fair value of cleared derivatives. We do not anticipate any credit losses on our cleared derivatives.
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):
December 31, 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
A $ 3,946 $ 49 $ (48) $ - $ 1
Cleared derivative3
170,300 79 1 1,390 1,470
Liability positions with credit exposure
Uncleared derivatives
A2
2,661 (2) 2 - -
Total derivative positions with credit exposure to non-member counterparties 176,907 126 (45) 1,390 1,471
Member institutions2,4
87 - - - -
Total 176,994 $ 126 $ (45) $ 1,390 $ 1,471
Derivative positions without credit exposure 9,168
Total notional $ 186,162
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 December 31, 2025. LCH Ltd. was rated AA- by S&P at December 31, 2025.
4 Represents mortgage loan purchase commitments with our member institutions.
Refer to "Item 8. Financial Statements and Supplementary Data - Note 7 - Derivatives and Hedging Activities" for additional information on our derivatives and hedging activities.
Operational Risk
We define operational risk as the risk of loss arising from inadequate or failed processes, people, and/or systems, including those emanating from external sources. All of our activities and processes generate operational risk. Management has established policies, procedures, and controls to reduce the level of operational risk. We perform annual risk assessments to identify, assess, mitigate, and report on operational risks outside of the Board's risk appetite. Due to the manual nature of many of our processes, our operational risk exposure is closely monitored. Refer to "Item 1A. Risk Factors" for additional information.
Model Risk
We define model risk as the risk of adverse consequences from decisions due to model utilization. Throughout the course of our day-to-day activities, we utilize external and internal pricing and financial models as important inputs into business and risk management decision-making processes.
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. Refer to "Item 1A. Risk Factors" for additional information.
Information Security Risk
We define information security risk as the risk arising from unauthorized access, use, disclosure, disruption, modification, or destruction of information or information systems. Importantly, this definition includes the confidentiality, integrity, and availability of both digital and non-digital information managed within information systems and processes. Refer to "Item 1C. Cybersecurity" for additional information.
Legal, Regulatory, and Compliance Risk
We define legal, regulatory, and compliance risk as the risk of violations of laws, rules, regulations, regulatory and supervisory guidance, and internal enterprise governing documents. Our legal and compliance departments are responsible for coordinating with various business units in connection with the identification, evaluation, and mitigation of our legal, regulatory, and compliance risks. We manage compliance risk by the development of, and adherence to, appropriate policies, procedures, and controls.
Strategic Risk
We define strategic risk as the risk arising from adverse strategic business decisions, poor implementation of strategic plans, or a lack of responsiveness to changes in the industry and operating environment. Strategic risk includes legislative risk. From time to time, proposals are made, or legislative and regulatory changes are considered, which could affect our cost of doing business or other aspects of our business. To support our mission, we endeavor to manage and mitigate strategic risk through the business planning process and by monitoring the external environment.
Reputational Risk
We define reputational risk as the risk arising from negative publicity that could adversely affect our reputation and consequently our financial performance or ability to meet our key business objectives. We manage reputational risk by the identification of emerging risks, development of crisis response and contingency plans, and monitoring the effectiveness of the overall risk management processes.
For additional information on some of the more important risks we face, refer to "Item 1A. Risk Factors."
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