Federal Home Loan Bank of Pittsburgh

08/04/2026 | Press release | Distributed by Public on 08/04/2026 08:03

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information
This Form 10-Q includes "forward-looking statements". Such statements may include descriptions of the objectives, projections, estimates, or predictions of the future of the Federal Home Loan Bank of Pittsburgh (the Bank). Such statements do not relate strictly to historical or current facts. They often use words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," "likely," and similar expressions.
Forward-looking statements involve risks and uncertainties, and as such, actual results could differ materially from those that the statements express or imply due to factors such as:
▪economic and market conditions, including, but not limited to, conditions in real estate, credit and mortgage markets;
▪volatility of market prices, rates, and indices related to financial instruments;
▪natural or man-made disasters, pandemics, climate change, conflicts or terrorist attacks or other geopolitical events, such as ongoing hostilities between Russia and Ukraine and in the Middle East;
▪political uncertainties related to global trade policies, supply chain disruptions and tariff tensions;
▪executive, legislative, regulatory, and judicial events and actions that affect the Bank, its members, counterparties, other Federal Home Loan Banks (FHLBanks) or investors in FHLBank debt;
▪risks related to the Bank's investments, including investments in mortgage-backed securities (MBS);
▪changes in the assumptions used to estimate credit losses;
▪changes in the Bank's ability to introduce new products and services to meet market demand;
▪changes in the Bank's: credit rating, capital structure, capital requirements, membership composition, membership's demand for advances and other products, and competitive environment;
▪changes in expectations regarding the Bank's payment of dividends;
▪increases or decreases in advances prepayments;
▪changes in investor demand for FHLBank debt or in the ratings of FHLBank System debt;
▪the Bank's ability to enter into financial instruments to meet its investment, balance sheet and risk management goals;
▪disruptions in the capital markets;
▪the ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which the Bank has joint and several liability; and
▪technology and cybersecurity risks (including cybersecurity risk driven by artificial intelligence).
Readers of this report should not rely solely on the forward-looking statements and should consider all risks and uncertainties addressed throughout this report, as well as those discussed in the Bank's 2025 Form 10-K filed with the Securities and Exchange Commission (the SEC) on March 4, 2026 (2025 Form 10-K), including Risk Factors included in Part I, Item 1A of that report. Information on the Bank's website referred to in this Form 10-Q is not incorporated in, or a part of, this Form 10-Q. Forward-looking statements in this Form 10-Q should not be relied on as representing the Bank's expectations or assumptions as of any time subsequent to the time this Form 10-Q is filed with the SEC. Forward-looking statements speak only as of the date made, and the Bank has no obligation, and does not undertake publicly, to update or revise any forward-looking statement for any reason.
This Management's Discussion and Analysis should be read in conjunction with the Bank's unaudited interim financial statements and notes and any Risk Factors included in Part II, Item 1A of this Form 10-Q and all risks and uncertainties addressed throughout this report, as well as those discussed in the Bank's 2025 Form 10-K, including Risk Factors included in Part I, Item 1A of that report.
Executive Summary
Overview. The Bank's financial condition and results of operations are influenced by global and national economies, local economies within its three-state district, and the conditions in the financial, housing and credit markets, including factors which impact the interest rate environment.
The interest rate environment significantly impacts the Bank's profitability. Net interest income is affected by several external factors, including market interest rate levels and volatility, credit spreads and the general state of the economy. To manage interest rate risk in connection with advances and debt, the Bank executes interest-rate derivatives. Short-term interest rates also directly affect the Bank's earnings on invested capital. Finally, the Bank's mortgage-related assets make it sensitive to changes in mortgage rates. The Bank earns relatively narrow spreads between yields on assets (particularly advances, its largest asset) and the rates paid on corresponding liabilities.
The Bank's earnings are affected not only by rising or falling interest rates but also by the particular path and volatility of changes in market interest rates and the prevailing shape of the yield curve. The flattening of the yield curve tends to compress the Bank's net interest margin, while steepening of the curve offers better opportunities to purchase assets with wider net interest spreads. The performance of the Bank's mortgage asset portfolios is particularly affected by shifts in the 10-year maturity range of the yield curve, which is the point that heavily influences mortgage rates and potential refinancings. Yield curve shape can also influence the pace at which borrowers refinance or prepay their existing loans, as borrowers may select shorter-duration mortgage products.
Treasury yields rose sharply as rate hike expectations strengthened during the second quarter of 2026. Focal points from last quarter included the ongoing conflicts in the Middle East, resulting inflation concerns and communications at the June Federal Open Markets Committee (FOMC) meeting, the first chaired by Kevin Warsh. The FOMC held the federal funds target range at 3.50-3.75% at the April, June and July meetings. Despite increased FHLBank debt outstanding, FHLBank debt spreads relative to U.S. Treasuries tightened quarter-over-quarter due, in part, to decreased market volatility.
Results of Operations. The Bank's net income for the second quarter of 2026 totaled $102.2 million, compared to $111.7 million for the second quarter of 2025. The $9.5 million decrease was driven primarily by lower net interest income. The decrease in interest income was the result of lower short-term interest rates partially offset by higher average assets. The net interest margin was 60 basis points in the second quarter of 2026 compared to 71 basis points in the second quarter of 2025. The decrease was due to lower net interest spreads, driven by lower yields on advances and investment securities, and reduced earnings on capital due, in part, to lower short term interest rates.
For the six months ended June 30, 2026, the Bank's net income totaled $191.7 million, compared to $231.8 million for the same prior year period. The $40.1 million decrease was driven by lower net interest income. The decrease in interest income was the result of lower average advance balances and lower short-term interest rates. The decrease in noninterest income was due primarily to valuation changes in the Bank's economic derivative portfolio. The net interest margin was 64 basis points for the first six months of 2026 compared to 70 basis points for the first six months of 2025. The decrease was due to reduced earnings on capital due, in part, to lower short term interest rates.
Statutory Affordable Housing Program (AHP) assessments were $11.4 million as a result of second quarter 2026 earnings, compared to $12.4 million in the same prior year period. Statutory AHP assessments were $21.4 million based on earnings for the six months ended June 30, 2026, compared to $25.8 million in the same prior year period.
In addition to statutory AHP assessments under the Federal Home Loan Bank Act (FHLBank Act), the Bank anticipates making voluntary contributions of at least 5% of the prior year's pre-assessment net income to voluntary community products, a committed target of $25.8 million for 2026. In addition, the Bank intends to continue to make a supplemental voluntary contribution to AHP to increase the pool of available AHP funds to the amount that would have been statutorily required, absent the Bank's voluntary contributions.
Financial Condition. Advances. Advances totaled $77.7 billion at June 30, 2026, an increase of $40.9 billion compared to $36.8 billion at December 31, 2025. In addition, the par value of advances that had a remaining maturity of more than one year was 36% at June 30, 2026 compared to 37% at December 31, 2025. Member demand for advances continues to be driven by members' liquidity management practices, which are influenced by their loan demand, deposit balances and investment activities. Although advance levels increased, it is not uncommon for the Bank to experience fluctuations in the overall advance portfolio driven primarily by changes in member needs.
The ability to grow and/or maintain the advance portfolio is affected by, among other things, the following: (1) the liquidity demands of the Bank's borrowers; (2) the composition of the Bank's membership; (3) members' regulatory requirements; (4) current and future credit market conditions; (5) housing market trends; (6) the shape of the yield curve; and (7) advance pricing.
Liquidity Investments. The Bank maintains liquidity to meet member borrowing needs and regulatory standards. The liquidity investment portfolio is comprised of cash, interest-bearing deposits, Federal funds sold, securities purchased under agreements to resell, and U.S. Treasury obligations classified as trading or available-for-sale (AFS). At June 30, 2026, the Bank
held $17.9 billion of liquid assets compared to $16.0 billion at December 31, 2025. Liquid assets increased due to routine portfolio management practices.
Investments. The Bank's investment portfolio, excluding those investments included in the liquidity portfolio, is comprised of trading, AFS and held-to-maturity (HTM) investments. The investments are subject to the Bank's risk guidelines and certain other requirements, such as yield. The Bank's investment portfolio increased to $16.6 billion at June 30, 2026 compared to $14.5 billion at December 31, 2025. During the first six months of 2026, the MBS portfolio increased as the Bank used its increased regulatory capacity to invest in MBS as the Bank's regulatory capital grew during that period. For information on this growth, see Note 7 - Capital in this Form 10-Q. Federal Housing Finance Agency (Finance Agency) regulations prohibit the Bank from investing in MBS in an amount greater than 300% of the Bank's previous month-end regulatory capital on the day of purchase of additional MBS.
Consolidated Obligations. The Bank's consolidated obligations totaled $110.8 billion at June 30, 2026, an increase of $43.3 billion from December 31, 2025. At June 30, 2026, bonds represented 73% of the Bank's consolidated obligations, compared with 75% at December 31, 2025. Discount notes represented 27% of the Bank's consolidated obligations at June 30, 2026 compared with 25% at year-end 2025. The overall increase in consolidated obligations outstanding is consistent with the increase in advance balances. The Bank's funding mix shifted towards floating rate bonds as investor preferences evolved.
Capital Position and Regulatory Requirements. Total capital at June 30, 2026 was $6.3 billion, compared to $4.6 billion at December 31, 2025. Total capital increased due to an increase in capital stock as a result of higher advances. Total retained earnings at June 30, 2026 were $2.3 billion, compared with $2.2 billion at December 31, 2025.
In July 2026, the Bank paid quarterly dividends of 9.75% annualized on activity stock and 5.50% annualized on membership stock. These dividends are calculated on stockholders' average balances for the second quarter of 2026. For additional information on quarterly dividends, see Note 7 - Capital in this Form 10-Q.
Earnings Performance
The following is the Bank's earnings performance for the three and six months ended June 30, 2026, which should be read in conjunction with the Bank's unaudited interim financial statements included in this Form 10-Q as well as the audited financial statements included in Item 8. Financial Statements and Supplementary Data in the Bank's 2025 Form 10-K.
Net Interest Income
Average Balances and Interest Yields/Rates Paid. The following table summarizes the average balances, yields or rates paid, and net interest margin on interest-earning assets and interest-bearing liabilities for the three and six months ended June 30, 2026 and 2025.
Three months ended June 30,
2026 2025
(dollars in millions) Average
Balance 		Interest
Income/
Expense 		Avg.
Yield/
Rate
(%) 		Average
Balance 		Interest
Income/
Expense 		Avg.
Yield/
Rate
(%)
Assets:
Securities purchased under agreements to resell $ 2,220.8 $ 20.2 3.65 $ 2,760.9 $ 30.0 4.36
Federal funds sold 9,941.1 90.8 3.66 8,353.4 91.3 4.38
Interest-bearing deposits (1)
3,224.4 30.0 3.73 3,321.2 36.6 4.42
Investment securities (2)
20,480.0 222.5 4.36 19,946.4 249.0 5.01
Advances (3)
57,051.1 571.7 4.02 55,164.8 661.0 4.81
Mortgage loans held for portfolio (4)
5,384.4 55.8 4.16 4,986.7 47.9 3.86
Total interest-earning assets 98,301.8 991.0 4.04 94,533.4 1,115.8 4.73
Other assets 1,593.3 1,061.1
Total assets $ 99,895.1 $ 95,594.5
Liabilities and capital:
Deposits (1)
$ 668.9 $ 5.9 3.51 $ 638.5 $ 6.8 4.30
Consolidated obligation discount notes 28,266.2 258.4 3.67 7,271.5 78.1 4.31
Consolidated obligation bonds 63,777.5 578.7 3.64 80,988.5 862.9 4.27
Other borrowings 13.8 0.3 9.68 6.3 0.2 9.21
Total interest-bearing liabilities 92,726.4 843.3 3.65 88,904.8 948.0 4.28
Other liabilities 1,732.9 1,569.9
Total capital 5,435.8 5,119.8
Total liabilities and capital $ 99,895.1 $ 95,594.5
Net interest spread 0.39 0.45
Impact of noninterest-bearing funds 0.21 0.26
Net interest income/net interest margin (5)
$ 147.7 0.60 $ 167.8 0.71
Notes:
(1) Average balances of deposits (assets and liabilities) include cash collateral received from/paid to counterparties which is reflected in the Statements of Condition as derivative assets/liabilities.
(2) Investment securities include trading, AFS and HTM securities. The average balances of AFS and HTM are reflected at amortized cost.
(3) Interest on advances includes prepayment fees, net of $0.4 million and $0.0 million in 2026 and 2025, respectively.
(4) Nonaccrual mortgage loans are included in average balances in determining the average rate.
(5) Net interest margin is net interest income before provision (reversal) for credit losses as a percentage of average interest-earning assets.
Six months ended June 30,
2026 2025
(dollars in millions) Average
Balance 		Interest
Income/
Expense 		Avg.
Yield/
Rate
(%) 		Average
Balance 		Interest
Income/
Expense 		Avg.
Yield/
Rate
(%)
Assets:
Securities purchased under agreements to resell $ 2,190.7 $ 39.8 3.66 $ 4,837.8 $ 104.1 4.34
Federal funds sold 9,640.6 175.2 3.67 6,838.7 148.6 4.38
Interest-bearing deposits (1)
3,033.1 56.1 3.73 3,467.6 75.6 4.40
Investment securities (2)
19,953.3 435.5 4.40 19,735.3 492.3 5.03
Advances (3)
48,316.6 973.8 4.06 58,628.5 1,399.4 4.81
Mortgage loans held for portfolio (4)
5,335.8 109.5 4.14 4,930.1 93.9 3.84
Total interest-earning assets 88,470.1 1,789.9 4.08 98,438.0 2,313.9 4.74
Other assets
1,317.6 1,154.9
Total assets $ 89,787.7 $ 99,592.9
Liabilities and capital:
Deposits (1)
$ 666.0 $ 11.6 3.50 $ 657.6 $ 14.1 4.30
Consolidated obligation discount notes 24,755.7 449.9 3.66 8,743.6 187.2 4.32
Consolidated obligation bonds 57,777.2 1,046.9 3.65 83,256.4 1,772.3 4.29
Other borrowings 13.2 0.6 9.53 6.6 0.3 8.93
Total interest-bearing liabilities 83,212.1 1,509.0 3.66 92,664.2 1,973.9 4.30
Other liabilities 1,498.4 1,665.7
Total capital 5,077.2 5,263.0
Total liabilities and capital $ 89,787.7 $ 99,592.9
Net interest spread 0.42 0.44
Impact of noninterest-bearing funds 0.22 0.26
Net interest income/net interest margin (5)
$ 280.9 0.64 $ 340.0 0.70
Notes:
(1) Average balances of deposits (assets and liabilities) include cash collateral received from/paid to counterparties which is reflected in the Statements of Condition as derivative assets/liabilities.
(2) Investment securities include trading, AFS and HTM securities. The average balances of AFS and HTM are reflected at amortized cost.
(3) Interest on advances includes prepayment fees, net of $1.1 million and $0.8 million in 2026 and 2025, respectively.
(4) Nonaccrual mortgage loans are included in average balances in determining the average rate.
(5) Net interest margin is net interest income before provision (reversal) for credit losses as a percentage of average interest-earning assets.
The Bank's business model is intended to protect the net interest spread earned by the Bank and withstand fluctuations in both the level of interest rates and volume of business. Net interest spread decreased in the second quarter of 2026 to 39 basis points compared to 45 basis points over the same prior year period. This was driven by lower yields on advances and investment securities.
Net interest spread in the first six months of 2026 was 42 basis points compared to 44 basis points over the same prior year period.
Net interest margin decreased to 60 basis points for the second quarter of 2026, compared to 71 basis points in the second quarter of 2025. The Bank's net interest margin decreased by 6 basis points to 64 basis points during the first six months of 2026, compared to 70 basis points during first six months of 2025. The decreases in both periods are due to lower net interest spread and a reduction in earnings on capital from lower short-term interest rates.
Rate/Volume Analysis. Changes in both volume and interest rates influence changes in net interest income and net interest margin. The following table summarizes changes in interest income and interest expense between the three and six months ended June 30, 2026 and 2025.
Increase (Decrease) in Interest Income/Expense Due to Changes in Rate/Volume 2026 compared to 2025
Three months ended June 30, Six months ended June 30,
(in millions)
Volume (1) (3)
Rate (2) (3)
Total
Volume (1) (3)
Rate (2) (3)
Total
Securities purchased under agreements to resell $ (5.4) $ (4.4) $ (9.8) $ (50.0) $ (14.3) $ (64.3)
Federal funds sold 15.8 (16.3) (0.5) 53.7 (27.1) 26.6
Interest-bearing deposits (1.0) (5.6) (6.6) (8.8) (10.7) (19.5)
Investment securities 6.5 (33.0) (26.5) 5.4 (62.2) (56.8)
Advances 22.0 (111.3) (89.3) (225.8) (199.8) (425.6)
Mortgage loans held for portfolio 4.0 3.9 7.9 8.0 7.6 15.6
Total interest-earning assets
$ 41.9 $ (166.7) $ (124.8) $ (217.5) $ (306.5) $ (524.0)
Deposits $ 0.4 $ (1.3) $ (0.9) $ 0.1 $ (2.6) $ (2.5)
Consolidated obligation discount notes 193.6 (13.3) 180.3 295.0 (32.3) 262.7
Consolidated obligation bonds (167.3) (116.9) (284.2) (488.1) (237.3) (725.4)
Other borrowings 0.1 - 0.1 0.3 - 0.3
Total interest-bearing liabilities
$ 26.8 $ (131.5) $ (104.7) $ (192.7) $ (272.2) $ (464.9)
Total increase (decrease) in net interest income $ 15.1 $ (35.2) $ (20.1) $ (24.8) $ (34.3) $ (59.1)
Notes:
(1) Volume changes are calculated as the change in volume multiplied by the prior year rate.
(2) Rate changes are calculated as the change in rate multiplied by the prior year average balance.
(3) Changes that are not identifiable as either volume-related or rate-related, but rather are equally attributable to both volumes and rates, have been allocated to the volume and rate categories based upon the proportion of the absolute value of the volume and rate changes.
Interest income decreased in the quarter-over-quarter comparison. The decrease was driven by lower yields due to a decrease in short-term interest rates, partially offset by growth in the Bank's average assets.
Interest expense decreased in the quarter-over-quarter comparison. The decrease was driven by lower rates paid on consolidated obligations due to decreases in short-term interest rates, partially offset by higher average consolidated obligations.
Interest income decreased in the year-over-year comparison. The decrease was driven by lower yields due to a decrease in short-term interest rates and lower average advances.
Interest expense decreased in the year-over-year comparison. The decrease was driven by lower rates paid on consolidated obligations due to decreases in short-term interest rates and lower average consolidated obligations.
Advance Prepayment Fees. When a borrower elects to prepay an advance, the Bank charges the borrower a prepayment fee, which makes the Bank financially indifferent to a borrower's decision to prepay an advance. The Bank records prepayment fees net of basis adjustments, if applicable, which are primarily related to hedging activities included in the carrying value of the advance, as interest income on advances on the Statements of Income. The following table summarizes the
advance prepayment fees for the three and six months ended June 30, 2026 and 2025.
Three months ended June 30, Six months ended June 30,
(in millions) 2026 2025 2026 2025
Gross amount of prepayment fees received from advance borrowers
$ 0.3 $ - $ 1.2 $ 0.3
Hedging fair value adjustments 0.1 - (0.1) 0.5
Total advance prepayment fees, net $ 0.4 $ - $ 1.1 $ 0.8
Derivative Effects on Net Interest Income. The following tables quantify the effects of the Bank's derivative activities on net interest income for the three and six months ended June 30, 2026 and 2025. The effect on earnings from derivatives not receiving fair value hedge accounting is included in noninterest income on the Statements of Income.
Three months ended June 30, 2026
(in millions) Advances Investments Mortgage Loans Bonds Discount Notes Total
Amortization/accretion of hedging activities
$ - $ - $ 0.6 $ - $ - $ 0.6
Gains (losses) on designated fair value hedges - 0.1 - (0.3) (0.8) (1)
Net interest settlements on designated fair value hedges
6.8 18.5 - (28.5) 1.8 (1.4)
Other - price alignment amount on cleared derivatives
(0.9) (2.0) - - - (2.9)
Total effect on net interest income $ 5.9 $ 16.6 $ 0.6 $ (28.8) $ 1.0 $ (4.7)
Six months ended June 30, 2026
(in millions) Advances Investments Mortgage Loans Bonds Discount Notes Total
Amortization/accretion of hedging activities
$ - $ - $ 0.9 $ - $ - $ 0.9
Gains (losses) on designated fair value hedges - (0.2) - (0.1) 0.3 -
Net interest settlements on designated fair value hedges
14.5 37.8 - (62.6) 3.2 (7.1)
Other - price alignment amount on cleared derivatives
(1.3) (3.3) - (0.2) - (4.8)
Total effect on net interest income $ 13.2 $ 34.3 $ 0.9 $ (62.9) $ 3.5 $ (11.0)
Three months ended June 30, 2025
(in millions) Advances Investments Mortgage Loans Bonds Discount Notes Total
Amortization/accretion of hedging activities
$ 0.1 $ - $ 0.1 $ - $ - $ 0.2
Gains (losses) on designated fair value hedges - 0.4 - 0.1 0.4 0.9
Net interest settlements on designated fair value hedges
27.0 38.6 - (55.9) (0.6) 9.1
Other - price alignment amount on cleared derivatives (0.8) (2.7) - (0.2) - (3.7)
Total effect on net interest income $ 26.3 $ 36.3 $ 0.1 $ (56.0) $ (0.2) $ 6.5
Six months ended June 30, 2025
(in millions) Advances Investments Mortgage Loans Bonds Discount Notes Total
Amortization/accretion of hedging activities
$ 0.2 $ - $ 0.2 $ - $ - $ 0.4
Gains (losses) on designated fair value hedges - 0.1 - 0.1 1.2 1.4
Net interest settlements on designated fair value hedges
56.7 77.4 - (110.1) (0.2) 23.8
Other - price alignment amount on cleared derivatives (2.4) (6.7) - (0.3) - (9.4)
Total effect on net interest income $ 54.5 $ 70.8 $ 0.2 $ (110.3) $ 1.0 $ 16.2
The Bank's primary hedging strategy uses derivatives to hedge the fair market value changes attributable to changes in the benchmark interest rates. The purpose of this strategy is to protect the net interest spread against adverse interest rate changes. Using derivatives to convert interest rates from fixed to variable can increase or decrease net interest income. The variances in the derivative impacts from period to period are driven by the change in the average variable rate, the timing of interest rate resets and the average hedged portfolio balances outstanding during any given period.
In addition, the Bank uses many different funding and hedging strategies. These strategies involve closely match-funding bullet advances with bullet debt. This is designed in part to avoid the use of derivatives where prudent and reduce the Bank's reliance on short-term funding.
Noninterest Income
Three months ended June 30, Six months ended June 30,
(in millions) 2026 2025 2026 2025
Net gains (losses) on investment securities $ (0.5) $ 0.7 $ (1.1) $ 3.1
Net gains (losses) on derivatives 0.9 (7.7) (6.5) (19.6)
Standby letters of credit fees 7.5 8.9 15.4 17.6
Other, net 0.2 (0.4) 1.5 0.3
Total noninterest income (loss) $ 8.1 $ 1.5 $ 9.3 $ 1.4
The changes in the Bank's noninterest income for the three and six months ended June 30, 2026 compared to the same prior year periods were due primarily to valuation changes in the Bank's economic derivative portfolio.
Derivatives and Economic Hedging Activities. The following tables detail the net effect of economic derivatives on noninterest income for the three and six months ended June 30, 2026 and 2025. For information on derivatives utilizing hedge accounting reported in net interest income, see Derivative Effects on Net Interest Income within Earnings Performance - Net Interest Income in this Item.
Three months ended June 30, 2026
(in millions) Advances Investments Mortgage Loans Bonds Discount Notes Other Total
Net gains (losses) on derivatives:
Gains (losses) on derivatives not receiving hedge accounting, including net interest settlements $ 0.6 $ 3.4 $ 0.5 $ (3.5) $ - $ - $ 1.0
Other - price alignment amount on cleared derivatives
- - - - - (0.1) (0.1)
Total net gains (losses) on derivatives $ 0.6 $ 3.4 $ 0.5 $ (3.5) $ - $ (0.1) $ 0.9
Six months ended June 30, 2026
(in millions) Advances Investments Mortgage Loans Bonds Discount Notes Other Total
Net gains (losses) on derivatives:
Gains (losses) on derivatives not receiving hedge accounting, including net interest settlements $ 1.5 $ 6.6 $ (1.2) $ (13.4) $ - $ - $ (6.5)
Other - price alignment amount on cleared derivatives
- - - - - - -
Total net gains (losses) on derivatives $ 1.5 $ 6.6 $ (1.2) $ (13.4) $ - $ - $ (6.5)
Three months ended June 30, 2025
(in millions) Advances Investments Mortgage Loans Bonds Discount Notes Other Total
Net gains (losses) on derivatives:
Gains (losses) on derivatives not receiving hedge accounting, including net interest settlements $ - $ (3.6) $ (6.2) $ 2.1 $ - $ - $ (7.7)
Other - price alignment amount on cleared derivatives
- - - - - - -
Total net gains (losses) on derivatives $ - $ (3.6) $ (6.2) $ 2.1 $ - $ - $ (7.7)
Six months ended June 30, 2025
(in millions) Advances Investments Mortgage Loans Bonds Discount Notes Other Total
Net gains (losses) on derivatives:
Gains (losses) on derivatives not receiving hedge accounting, including net interest settlements $ (1.4) $ (10.2) $ (15.7) $ 7.9 $ - $ - $ (19.4)
Other - price alignment amount on cleared derivatives
- - - - - (0.2) (0.2)
Total net gains (losses) on derivatives $ (1.4) $ (10.2) $ (15.7) $ 7.9 $ - $ (0.2) $ (19.6)
Derivatives not receiving hedge accounting. For derivatives not receiving hedge accounting (i.e., economic hedges and mortgage delivery commitments), the Bank includes the net interest settlements and the fair value changes in the "Net gains (losses) on derivatives" financial statement line item. For economic hedges, the Bank recorded net gains of $1.0 million in the second quarter of 2026 compared to net losses of $7.7 million for the second quarter of 2025. The net gains observed for the second quarter of 2026 were primarily due to gains on asset swaps, partially offset by losses in liability swaps, resulting from rate increases over the quarter. In contrast, the losses observed in the second quarter of 2025 were primarily due to losses on asset swaps, resulting from rate decreases over the quarter. For the six months ended June 30, 2026, the Bank recorded net losses of $6.5 million compared to net losses of $19.4 million for the six months ended June 30, 2025. Volatile rate movements during the first six months of 2026 (sizable rate decreases occurring early in the year followed by rate increases), resulted in overall net losses in the first six months of 2026 compared to the larger loss amounts observed during the first six months of 2025. The total notional amount of economic hedges, which includes mortgage delivery commitments, was $7.6 billion at June 30, 2026 and $8.6 billion at December 31, 2025.
Other Expense
Three months ended June 30, Six months ended June 30,
(in millions) 2026 2025 2026 2025
Compensation and benefits
$ 16.0 $ 15.6 $ 31.2 $ 31.9
Other operating
13.0 13.1 23.1 23.4
Finance Agency 1.5 2.5 3.0 5.0
Office of Finance (OF) 1.7 1.4 3.0 3.2
Voluntary contributions
8.9 11.8 14.4 18.8
Total other expense
$ 41.1 $ 44.4 $ 74.7 $ 82.3
The Bank's total other expense decreased $3.3 million for the second quarter of 2026 compared with the same prior year period. The decrease was primarily driven by lower voluntary contributions. Voluntary contributions to community products were $8.9 million, including a supplemental voluntary contribution to AHP of $1.0 million, for the second quarter of 2026, a decrease of $2.9 million compared to $11.8 million in the same prior year period.
The Bank's total other expense was $74.7 million for the six months ended June 30, 2026, compared to $82.3 million in the same prior year period. The $7.6 million decrease was due primarily to lower assessments from the Finance Agency and the OF as well as lower voluntary contributions. Voluntary contributions to community products were $14.4 million, including a supplemental voluntary contribution to AHP of $1.5 million, for the six months ended June 30, 2026, a decrease of $4.4 million compared to $18.8 million in the same prior year period.
The Bank anticipates making voluntary contributions of at least 5% of the prior year's pre-assessment net income to voluntary community products, a commitment target of at least $25.8 million.
Financial Condition
The following should be read in conjunction with the Bank's unaudited interim financial statements in this Form 10-Q and the audited financial statements included in Item 8. Financial Statements and Supplementary Data in the Bank's 2025 Form 10-K.
Assets
Total assets were $118.5 billion at June 30, 2026, compared with $73.3 billion at December 31, 2025. The increase of $45.2 billion was primarily due to an increase in advances, MBS, and liquidity investments. Advances totaled $77.7 billion at June 30, 2026, compared to $36.8 billion at December 31, 2025. The MBS portfolio increased to $15.6 billion at June 30, 2026 compared to $13.4 billion at December 31, 2025. During the first six months of 2026, the MBS portfolio increased as the Bank used its increased regulatory capacity to invest in MBS as the Bank's regulatory capital grew during that period. In addition, liquidity investments increased $1.9 billion to $17.9 billion at June 30, 2026 compared to $16.0 billion at December 31, 2025. Liquid assets increased due to routine portfolio management practices.
The Bank's return on average assets for the three months ended June 30, 2026 and June 30, 2025 was 0.41% and 0.47%, respectively. The Bank's return on average assets for the six months ended June 30, 2026 and June 30, 2025 was 0.43% and 0.47%, respectively.
"Mortgage Partnership Finance", "MPF", "MPF Xtra", and "MPF 35" are registered trademarks of the FHLBank of Chicago.
Advances. Advances (par) totaled $77.8 billion at June 30, 2026 compared to $36.8 billion at December 31, 2025. Advance demand continues to be driven by members' liquidity management practices, which are influenced by their loan demand, deposit balances and investment activities. Although advance demand increased, it is not uncommon for the Bank to experience fluctuations in the overall advance portfolio driven by changes in member needs. At June 30, 2026, the Bank had advances to 126 borrowing members, compared to 128 borrowing members at December 31, 2025. Advances outstanding to the Bank's five largest borrowers totaled 82.1% of total advances as of June 30, 2026, and 70.6% at December 31, 2025. Fixed rate advances with a balance of $23.2 billion comprised 29.9% of the total par value of advances outstanding at June 30, 2026 compared to $21.2 billion comprising 57.6% at December 31, 2025.
The following table provides information on advances at par by redemption terms at June 30, 2026 and December 31, 2025.
June 30, 2026
(in millions)
Due in 1 year or less (1)
Due after 1 year through 3 years Due after 3 years through 5 years Due after 5 years through 15 years Thereafter Total par value
Fixed-rate $ 15,756.3 $ 6,963.5 $ 120.6 $ 66.5 $ 74.8 $ 22,981.7
Variable-rate 34,082.0 19,026.5 5.0 - - 53,113.5
Variable-rate, callable or prepayable (2)
10.0 355.0 1,080.0 - - 1,445.0
Other (3)
199.7 39.9 8.8 4.2 - 252.6
Total par balance
$ 50,048.0 $ 26,384.9 $ 1,214.4 $ 70.7 $ 74.8 $ 77,792.8
December 31, 2025
(in millions)
Due in 1 year or less (1)
Due after 1 year through 3 years Due after 3 years through 5 years Due after 5 years through 15 years Thereafter Total par value
Fixed-rate $ 13,108.0 $ 7,361.8 $ 248.7 $ 70.0 $ 74.8 $ 20,863.3
Variable-rate 9,990.9 5,010.0 - - - 15,000.9
Variable-rate, callable or prepayable (2)
15.0 595.0 - - - 610.0
Other (3)
219.0 128.5 14.6 7.4 - 369.5
Total par balance $ 23,332.9 $ 13,095.3 $ 263.3 $ 77.4 $ 74.8 $ 36,843.7
Notes:
(1) Includes overnight advances.
(2) Prepayable advances are those advances that may be contractually prepaid by the borrower on specified dates without incurring prepayment or termination fees.
(3) Includes fixed-rate amortizing/mortgage matched, convertible, and other advances.
The Bank had no putable advances at June 30, 2026 or December 31, 2025.
The following table provides a distribution of the number of members, categorized by individual member asset size (as reported quarterly), that had an outstanding advance balance during the six months ended June 30, 2026 and 2025. Commercial bank and savings institution members are classified by asset size as follows: Super-Regional (over $150 billion), Regional ($25 billion to $150 billion), Mid-size ($1.54 billion to $25 billion) and Community Financial Institutions (CFIs) (under $1.54 billion). Credit union and insurance members are classified separately.
Member Classification June 30, 2026 June 30, 2025
Super-Regional 3 3
Regional 7 6
Mid-size 28 32
CFI 89 103
Credit Union 23 26
Insurance 15 18
Total borrowing members during the period 165 188
Total membership 277 285
Percentage of members borrowing during the period 59.6 % 66.0 %
The following table provides information at par on advances by member classification at June 30, 2026 and December 31, 2025.
(in millions) June 30, 2026 December 31, 2025
Member Classification
Super-Regional $ 58,700.0 $ 21,350.0
Regional 7,794.6 4,312.8
Mid-size 4,436.6 5,798.4
CFI 2,464.9 2,265.8
Credit Union 1,373.0 1,388.6
Insurance 3,003.0 1,692.8
Non-member 20.7 35.3
Total $ 77,792.8 $ 36,843.7
Allowance for Credit Losses (ACL) - Advances. The Bank evaluates its advances for an allowance for credit losses on a collective, or pooled, basis unless an individual assessment is deemed necessary because the instruments do not possess similar risk characteristics. The Bank pools advances by member type. Based on the collateral held as security, the Bank's credit extension and collateral policies and repayment history on advances, including that the Bank has not incurred any credit losses since inception, the Bank has not recorded an ACL at June 30, 2026 or December 31, 2025.
Mortgage Loans Held for Portfolio, Net. Mortgage loans held for portfolio, net of ACL, was $5.5 billion and $5.2 billion at June 30, 2026 and December 31, 2025, respectively.
The Bank places conventional mortgage loans that are 90 days or more delinquent on nonaccrual status. In addition, the Bank records cash payments received as a reduction of principal until the remaining principal amount due is expected to be collected and then as a recovery of any charge-off, if applicable, followed by the recording of interest income. However, government mortgage loans that are 90 days or more delinquent remain in accrual status due to government guarantees or insurance. The Bank may provide a loan modification to borrowers experiencing financial difficulty. Performing loan modifications are not placed on nonaccrual status.
Foregone interest represents income the Bank would have recorded if the loan was paying according to its contractual terms. Foregone interest was immaterial for the Bank's mortgage loans for each of the six months ended June 30, 2026 and June 30, 2025.
The Bank continues to accrue interest on its government-insured or -guaranteed mortgage loans after becoming 90 days or more delinquent. The amount of mortgage loans 90 days or more delinquent and still accruing interest was $1.7 million at both June 30, 2026 and December 31, 2025.
The performance of the mortgage loans in the Bank's MPF Program remained stable compared to December 31, 2025, and the MPF Original portfolio continues to outperform the market based on national delinquency statistics. As of June 30, 2026, the Bank's seriously delinquent mortgage loans (90 days or more delinquent or in the process of foreclosure) represented 0.2% of the MPF Original portfolio, 0.8% of the MPF Plus portfolio, and 0.5% of the MPF 35 portfolio, compared with 0.2%, 0.9%, and 0.5%, respectively, at December 31, 2025.
The following table presents certain metrics and ratios related to the Bank's mortgage loans held for portfolio. The ratios in the table below are reported after the application of credit enhancements (CE).
Six months ended June 30,
(dollars in millions) 2026 2025
Average mortgage loans outstanding during the period (unpaid principal balance (UPB))
$ 5,289.3 $ 4,881.8
(Charge-offs) Recoveries, net (1)
$ (0.4) $ (0.2)
Net charge-offs (recoveries) to average loans outstanding during the period
0.01 % - %
(dollars in millions) June 30, 2026 December 31, 2025
Mortgage loans held for portfolio (UPB) $ 5,433.9 $ 5,175.2
Nonaccrual loans (UPB) $ 25.7 $ 23.8
ACL on mortgage loans held for portfolio $ 2.2 $ 2.5
ACL to mortgage loans held for portfolio
0.04 % 0.05 %
Nonaccrual loans to mortgage loans held for portfolio
0.47 % 0.46 %
ACL to nonaccrual loans
8.42 % 10.38 %
Note:
(1) Net charge-offs that the Bank does not expect to recover through withheld performance CE fees. See Note 4 - Mortgage Loans Held for Portfolio - Conventional MPF Loans - Credit Enhancements (CE).
Cash and Investments. The Bank's strategy is to maintain its short-term liquidity position in part to be able to meet members' advance demand and Bank regulatory liquidity requirements. Excess cash is typically invested in overnight investments. The Bank also maintains an investment portfolio to enhance earnings. These investments may be classified as trading, AFS or HTM.
The Bank maintains a liquidity portfolio comprised of cash, interest-bearing deposits, Federal funds sold, securities purchased under agreements to resell, and U.S. Treasury obligations classified as trading or AFS. The liquidity portfolio totaled $17.9 billion at June 30, 2026 and $16.0 billion at December 31, 2025. Liquid assets increased due to routine portfolio management practices.
The Bank's investment portfolio, excluding those investments included in the liquidity portfolio, is comprised of trading, AFS and HTM investments. The investments are subject to the Bank's risk guidelines and certain other requirements, such as yield. The Bank's investment portfolio increased to $16.6 billion at June 30, 2026 compared to $14.5 billion at December 31, 2025. The MBS portfolio increased to $15.6 billion at June 30, 2026 compared to $13.4 billion at December 31, 2025. During the first six months of 2026, the MBS portfolio increased as the Bank gained MBS capacity due to growth in advance balances.
Investment securities, defined as all trading, AFS, and HTM securities, totaled $21.7 billion at June 30, 2026, compared to $19.5 billion at December 31, 2025. Details of the investment securities portfolio follow.
Carrying Value
(in millions) June 30, 2026 December 31, 2025
Trading securities:
Non-MBS:
GSE
$ 113.6 $ 119.7
Total trading securities $ 113.6 $ 119.7
Yield on trading securities 3.11 % 3.13 %
AFS securities:
Non-MBS:
U.S. Treasury obligations $ 5,105.5 $ 4,912.3
GSE and Tennessee Valley Authority (TVA) obligations 775.6 834.1
State or local agency obligations 175.9 174.8
MBS:
U.S. obligations single-family 1,447.4 1,303.9
GSE single-family 5,852.6 4,547.8
GSE multifamily 7,143.4 6,314.3
Private label 95.6 102.1
Total AFS securities $ 20,596.0 $ 18,189.3
Yield on AFS securities (1) (2)
3.88 % 3.94 %
HTM securities:
MBS:
U.S. obligations single-family $ 389.7 $ 470.2
GSE single-family 358.9 405.2
GSE multifamily 238.1 238.8
Private label 27.0 29.5
Total HTM securities $ 1,013.7 $ 1,143.7
Yield on HTM securities (1) (2)
4.10 % 4.23 %
Total investment securities $ 21,723.3 $ 19,452.7
Yield on investment securities (1) (2)
3.89 % 3.95 %
Notes:
(1) Yield excludes the impact of derivatives in a hedging relationship.
(2) The yields on AFS and HTM securities represent weighted averages of the coupon rates adjusted by the impact of amortization and accretion of premiums and discounts for the debt securities in the applicable portfolio.
Liabilities and Capital
Consolidated Obligations. Consolidated obligations consist of bonds and discount notes. The Bank's consolidated obligations totaled $110.8 billion at June 30, 2026, an increase of $43.3 billion from December 31, 2025. The overall increase in consolidated obligations outstanding is consistent with the increase in advance balances. At June 30, 2026, the Bank's bonds outstanding increased to $81.4 billion compared to $50.8 billion at December 31, 2025. Discount notes outstanding at June 30, 2026 increased to $29.4 billion from $16.7 billion at December 31, 2025. The Bank's funding mix shifted towards floating rate bonds as investor preferences evolved.
The following table provides information on consolidated obligations by product type and contractual maturity at June 30, 2026 and December 31, 2025.
June 30, 2026
(in millions) Due in 1 year or less Due after 1 year through 3 years Due after 3 years through 5 years Thereafter
Total par value
Discount Notes $ 29,777.8 $ - $ - $ - $ 29,777.8
Fixed-rate, non-callable 7,274.2 2,526.2 929.5 619.0 11,348.9
Fixed-rate, callable 9,699.0 2,341.0 1,825.5 2,628.0 16,493.5
Variable- rate, non-callable 42,211.5 5,800.0 50.0 - 48,061.5
Variable- rate, callable 4,700.0 - - - 4,700.0
Step-up, non-callable 560.0 50.0 - - 610.0
Step-up, callable 50.0 20.0 75.0 60.0 205.0
Total par balance $ 94,272.5 $ 10,737.2 $ 2,880.0 $ 3,307.0 $ 111,196.7
Other Adjustments (1)
$ (418.4)
Total consolidated obligations $ 110,778.3
December 31, 2025
(in millions) Due in 1 year or less Due after 1 year through 3 years Due after 3 years through 5 years Thereafter
Total par value
Discount Notes $ 16,813.6 $ - $ - $ - $ 16,813.6
Fixed-rate, non-callable 4,374.0 2,813.6 943.7 663.0 8,794.3
Fixed-rate, callable 12,379.5 2,894.0 1,614.0 2,530.0 19,417.5
Variable- rate, non-callable 17,075.5 315.0 - - 17,390.5
Variable- rate, callable 4,210.0 - - - 4,210.0
Step-up, non-callable 520.0 80.0 - - 600.0
Step-up, callable 345.0 - 20.0 110.0 475.0
Total par balance $ 55,717.6 $ 6,102.6 $ 2,577.7 $ 3,303.0 $ 67,700.9
Other Adjustments (1)
$ (208.6)
Total consolidated obligations $ 67,492.3
Note:
(1) Consists of premiums, discounts, and hedging and other adjustments.
Capital and Retained Earnings. The Bank's return on average equity for the three and six months ended June 30, 2026 was 7.46% and 7.57%. The Bank's return on average equity for the three and six months ended June 30, 2025 was 8.75% and 8.88%. Capital adequacy, including the level of retained earnings, is monitored through the evaluation of market value of equity to par value of capital stock (MV/CS) as well as other risk metrics. Details regarding these metrics are discussed under Risk Management in this Item.
The Bank's capital stock is owned by its members and former members. The concentration of the Bank's capital stock by institution type is presented below.
(dollars in millions) June 30, 2026 December 31, 2025
Commercial banks 111 $ 3,461.6 114 $ 1,931.7
Savings institutions 45 152.7 46 138.0
Insurance companies 48 195.8 48 131.1
Credit unions 70 92.6 71 91.1
Community Development Financial Institutions
3 0.4 3 0.3
Total member institutions / total GAAP capital stock 277 $ 3,903.1 282 $ 2,292.2
Mandatorily redeemable capital stock 13.4 12.3
Total capital stock $ 3,916.5 $ 2,304.5
The following tables present member holdings of 10% or more of the Bank's total capital stock, including mandatorily redeemable capital stock, outstanding as of June 30, 2026 and December 31, 2025.
(dollars in millions) June 30, 2026 (dollars in millions) December 31, 2025
Member Capital Stock % of Total Member Capital Stock % of Total
PNC Bank, N.A., Wilmington, DE (1)
$ 1,587.7 40.5 %
PNC Bank, N.A., Wilmington, DE (1)
$ 547.9 23.8 %
TD Bank U.S. Holding Company(2)
$ 551.6 14.1 %
Ally Bank
$ 359.0 15.6 %
Ally Bank
$ 393.0 10.0 %
Notes:
(1) For Bank membership purposes, the principal place of business is Pittsburgh, PA.
(2) Member affiliates aggregated at the U.S. holding company level.
The Finance Agency has issued regulatory guidance to the FHLBanks relating to capital management and retained earnings. The guidance directs each FHLBank to assess, at least annually, the adequacy of its retained earnings with consideration given to future possible financial and economic scenarios. The guidance also outlines the considerations that each FHLBank should undertake in assessing the adequacy of its retained earnings.
The Bank uses a framework for evaluating retained earnings adequacy, consistent with regulatory guidance and requirements. Retained earnings are intended to cover unexpected losses and protect members' par value of capital stock. The framework also assists management in its overall analysis of the level of future dividends. The framework includes four risk elements that comprise the Bank's total retained earnings target: (1) market risk; (2) credit risk; (3) operational risk; and (4) accounting risk. The retained earnings target generated from this framework is sensitive to changes in the Bank's risk profile, whether favorable or unfavorable. The framework generated a retained earnings target of $911 million as of June 30, 2026.
In addition to the retained earnings target, the Bank considers the amount of retained earnings needed for compliance with the regulatory minimum capital-to-asset ratio of 4% to determine an overall retained earnings need. The Bank's overall retained earnings need is $1,902 million as of June 30, 2026.
The following table presents retained earnings information for the current and prior year.
(in millions)
June 30, 2026 December 31, 2025
Unrestricted Retained Earnings $ 1,530.9 $ 1,462.3
Restricted Retained Earnings
803.8 783.4
Total Retained Earnings $ 2,334.7 $ 2,245.7
The Bank's restricted retained earnings contribution requirement is discussed in Note 7 - Capital in this Form 10-Q.
Retained earnings increased $89.0 million compared to December 31, 2025. The increase reflected net income that was partially offset by dividends paid. For additional information, see Note 7 in this Form 10-Q.
Dividends. The Bank declares dividends based on an annualized yield and differentiates between membership and activity capital stock. The dividend received by the member is calculated based on the average capital stock owned by the member for the previous quarter. Historically, the Bank has paid cash dividends although dividends may be paid in capital stock. Details regarding the Bank's payment of dividends, including annual yields, for current and prior year periods are provided in Note 7 - Capital in this Form 10-Q. The following table presents dividend information for the three and six months ended June 30, 2026 and 2025.
Three months ended June 30, Six months ended June 30,
2026 2025 2026 2025
Dividends (in millions) $ 52.0 $ 69.3 $ 102.7 $ 149.8
Dividends per share $ 1.68 $ 2.29 $ 3.74 $ 4.75
Dividend payout ratio (1)
50.87 % 61.98 % 53.54 % 64.61 %
Weighted average dividend rate (2)
8.84 % 8.55 % 8.83 % 8.62 %
Average Fed Funds rate 3.63 % 4.33 % 3.64 % 4.33 %
Dividend spread to Fed Funds 5.21 % 4.22 % 5.19 % 4.29 %
Notes:
(1) Represents dividends paid as a percentage of net income for the respective periods presented.
(2) Weighted average dividend rate is the dividend amount paid during the period divided by the average daily balance of prior period capital stock for the eligible dividends.
Capital Resources
The following should be read in conjunction with the unaudited interim financial statements included in this Form 10-Q and the audited financial statements included in Item 8. Financial Statements and Supplementary Data and the Capital Resources section of Item 1. Business in the Bank's 2025 Form 10-K.
Risk-Based Capital (RBC)
The Finance Agency's RBC regulatory framework requires the Bank to maintain sufficient permanent capital, defined as retained earnings plus capital stock, to meet its combined credit risk, market risk and operations risk. Each of these components is computed as specified in regulations and directives issued by the Finance Agency.
(in millions) June 30, 2026 December 31, 2025
Permanent capital:
Capital stock (1)
$ 3,916.5 $ 2,304.5
Retained earnings
2,334.7 2,245.7
Total permanent capital $ 6,251.2 $ 4,550.2
RBC requirement:
Credit risk capital
$ 236.3 $ 199.9
Market risk capital
529.5 459.6
Operations risk capital
229.8 197.9
Total RBC requirement $ 995.6 $ 857.4
Excess permanent capital over RBC requirement $ 5,255.6 $ 3,692.8
Note:
(1) Capital stock includes mandatorily redeemable capital stock.
The increase in the total RBC requirement as of June 30, 2026 was primarily due to higher credit, market, and operations risk capital requirements. The increase was primarily driven by growth in advance balances and the MBS portfolio during the first six months of 2026. The Bank continues to maintain significant excess permanent capital over the RBC requirement. The increase in permanent capital and excess permanent capital was driven by the increase in capital stock associated with higher advance levels.
Based on the financial information as of March 31, 2026, the Finance Agency determined the Bank was adequately capitalized under the capital rule.
Critical Accounting Estimates
The Bank's financial statements are prepared by applying certain accounting policies. Note 1 - Summary of Significant Accounting Policies in Item 8. Financial Statements and Supplementary Data in the Bank's 2025 Form 10-K describes the most significant accounting policies used by the Bank. In addition, the Bank's critical accounting estimates are presented in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in the Bank's 2025 Form 10-K. Certain of these policies require management to make estimates or economic assumptions that may prove inaccurate or be subject to variations that may significantly affect the Bank's reported results and financial position for the period or in future periods. Management views these policies as critical accounting estimates.
The Bank made no changes to its critical accounting estimates during the six months ended June 30, 2026.
See Note 1 - Changes in Accounting Principle and Recently Issued Accounting Standards and Interpretations in this Form 10-Q for information on new accounting pronouncements impacting the financial statements or becoming effective for the Bank in future periods.
Legislative and Regulatory Developments
Certain significant legislative and regulatory actions and developments are summarized below. See Management's Discussion and Analysis of Financial Condition and Results of Operations - Legislative and Regulatory Developments in the Bank's 2025 Form 10-K and in the Bank's quarterly report on Form 10-Q for the period ended March 31, 2026 filed with the SEC on May 5, 2026 for a description of certain legislative and regulatory developments that occurred prior to the publication of those reports.
The Bank is subject to various legal and regulatory requirements and priorities. Certain actions, regulatory priorities, and areas of focus, such as deregulation, by the current administration have changed and continue to change the regulatory environment. These changes have affected, and likely will continue to affect, certain aspects of the Bank's business operations, and could affect the financial condition and results of operations of the Bank. For example, the Finance Agency rescinded guidance related to establishing the Bank's target ratio of advances and mortgage assets compared to its consolidated obligations, providing the Bank more discretion for developing its strategic business plan with respect to core mission assets. Additionally, the Finance Agency proposed to repeal the new business activity rule, which currently requires the Finance Agency's nonobjection before the Bank undertakes certain new business activities.
Prudential Banking Regulators' Proposed Capital Rules. On March 27, 2026, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System published two joint notices of proposed rulemakings, and the Board of Governors of the Federal Reserve System separately published a third proposed rulemaking applicable only to global systemically important banking organizations ("GSIBs"), that would revise the regulatory capital requirements for certain depository and banking institutions, generally consistent with the final global recommendations by the Basel Committee on Banking Supervision adopted in December 2017, known as the "Basel III Endgame". Among other changes, the proposed rules revise risk-based capital calculations, reducing capital requirements for certain mortgage assets (including relating to those acquired member asset loans sold to the FHLBanks), and collateral eligible to be pledged as security for FHLBank advances. Conversely, the proposed rules would modify the standardized approach for risk-based capital treatment with respect to collateralized transactions by modifying the market price volatility haircuts assigned to collateral in such transactions, including by reducing haircuts to certain forms of collateral relative to GSE debt (including FHLBank debt securities), which may adversely affect market liquidity and demand for FHLBank debt securities and result in increased funding costs for the Bank. Finally, the proposed rules would revise the capital surcharge calculation for GSIBs and make material changes to the GSIB short-term wholesale funding reliance methodology, which may increase the capital surcharge attributable to a GSIB's use of Bank advances and may disincentivize a GSIB's use of Bank advances. The Bank continues to evaluate the potential impact of these proposed rules on its financial condition and results of operation.
21st Century ROAD to Housing Act. On July 11, 2026, the 21st Century ROAD to Housing Act (the "Act") became law. The Act contains a series of reforms designed to impact affordable housing which include a statutory prohibition barring large institutional investors from purchasing single-family homes, subject to certain specific exceptions, allowing community banks with under $10 billion in assets to exempt custodial deposits of up to 20 percent of total liabilities from brokered deposits regulations, and exempting a higher portion of reciprocal deposits of such community banks from the brokered deposit classification. The Bank is reviewing how the various reforms brought by the Act could impact collateral held by large institutional investors that is eligible to be pledged to the Bank, demand for and use of Bank advances due to more relaxed regulation around brokered deposits, and the Bank's business, operations and financial condition overall.
Considering the changes in the regulatory environment, there is uncertainty with respect to the ultimate result of future regulatory actions and their ultimate impact on the housing market, the Bank and the FHLBank System. The Bank continues to monitor these actions as they evolve and to evaluate their potential impact on the Bank. For a discussion of related risks, please refer to Part I, Item 1A. Risk Factors starting on page 14 in the 2025 Form 10-K.
Risk Management
The following should be read in conjunction with the Risk Factors in Item 1A and the Risk Governance discussion in Risk Management in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, each in the Bank's 2025 Form 10-K. The Bank employs a corporate governance and internal control framework intended to support the effective management of the Bank's business activities and the related inherent risks. As part of this framework, the Bank's board of directors (Board) has approved a Risk Governance Policy and a Member Products Policy, both of which are reviewed regularly and re-approved at least annually. The Risk Governance Policy establishes risk guidelines, limits (if applicable), and standards for credit risk, market risk, liquidity risk, business risk and various forms of operational and technology risk, in accordance with Finance Agency regulations and consistent with the Bank's risk appetite. The Member Products Policy establishes the eligibility and authorization requirements, policy limits and restrictions, and the terms applicable to each type of Bank product or service, as well as collateral requirements. The risk appetite is established by the Board, as are other applicable guidelines in connection with the Bank's Capital Plan and overall risk management.
Risk Governance
The Bank's lending, investment and funding and hedging activities expose the Bank to a number of risks that include market and interest rate risk, credit and counterparty risk, liquidity and funding risk, and operational and business risks. These include risks such as use and reliance on models and end-user computing tools, technology and information security risk, among others. In addition, the Bank's risks are affected by current and projected financial and residential mortgage market trends.
Capital Adequacy Measures. The MV/CS ratio provides a current assessment of the liquidation value of the balance sheet and measures the Bank's current ability to honor the par put redemption feature of its capital stock. This is one of the risk metrics used to evaluate the adequacy of retained earnings, which is used to develop dividend payment recommendations and support the repurchase of excess capital stock.
The current Board-approved floor for the MV/CS ratio is 90.0%. The MV/CS ratio is measured against the floor monthly. When the MV/CS ratio is below the established floor, excess capital stock repurchases and dividend payouts are restricted. See the Capital and Retained Earnings discussion in Financial Condition in this Item 2 for details regarding the Bank's retained earnings policy.
The MV/CS ratio was 160.0% at June 30, 2026 and 198.7% at December 31, 2025. The decrease was primarily due to an increase in capital stock outstanding resulting from increases in advance balances.
Qualitative and Quantitative Disclosures Regarding Market Risk
Managing Market Risk. The Bank's market risk management objective is to protect member/shareholder and bondholder value consistent with the Bank's housing mission and safe and sound operations across a wide range of interest rate environments. Management believes that a disciplined approach to market risk management is essential to maintaining a strong capital base and uninterrupted access to the capital markets.
The Bank's Market Risk Model. Significant resources are devoted to ensuring that the level of market risk in the balance sheet is accurately measured, thus allowing management to monitor the risk against policy and regulatory limits. The Bank uses externally developed models to evaluate its financial position and market risk. One of the most critical market-based models relates to the prepayment of principal on mortgage-related instruments. Management regularly reviews the major assumptions and methodologies used in its models, as well as the performance of the models relative to empirical results, so that appropriate changes to the models can be made. Economic conditions, such as market liquidity and Federal Reserve actions to adjust short-term interest rates, may impact the performance of the Bank's models used to measure market risk. Management considers the impact of current economic conditions on key market risk measures and makes changes as deemed appropriate.
The Bank regularly validates the models used to measure market risk. Such model validations are performed by the Bank's model risk management department, which is separate from the model owner. The model validations are supplemented by performance monitoring by the model owner which is reported to the Bank's model risk management department. In addition, the Bank benchmarks model-derived fair values to those provided by third-party services or alternative internal valuation models. The benchmarking analysis is performed by a group that is separate from the model owner. Results of the model
validations and benchmarking analysis, as well as changes to the valuation methodologies and inputs, are reported to the Bank's Asset and Liability Committee (ALCO) (or subcommittee of), which is responsible for overseeing market risk.
Duration of Equity. One key risk metric used by the Bank is duration. Duration is a measure of the sensitivity of a financial instrument's value, or the value of a portfolio of instruments, to a 100 basis point parallel shift in interest rates. Duration (typically expressed in years) is commonly used by investors throughout the fixed income securities market as a measure of financial instrument price sensitivity.
The Bank's asset/liability management policy approved by the Board calls for actual duration of equity to be maintained within a + 4.5 year range in the base case. In addition, the duration of equity exposure limit in an instantaneous parallel interest rate shock of + 200 basis points is + 7 years. Management analyzes the duration of equity exposure against this policy limit on a daily basis and regularly evaluates its market risk management strategies.
The following table presents the Bank's duration of equity exposure at June 30, 2026 and December 31, 2025.
(in years) Down 200 basis points Down 100 basis points Base
Case 		Up 100
basis points 		Up 200
basis points
Duration of Equity:
June 30, 2026 0.4 1.0 1.4 2.0 2.7
December 31, 2025 0.3 1.1 1.7 2.1 2.7
The change in the base case duration of equity exposure in the first six months of 2026 was primarily driven by higher equity due to activity-based stock investments in connection with increases in advance balances. Exposure in the other scenarios was comparable to year end. The Bank regularly monitors the mortgage and related fixed-income markets, including the impact that changes in the market or anticipated modeling changes may have on duration of equity and other market risk measures and may take actions to reduce market risk exposures as needed.
Return on Equity (ROE) Spread Volatility. Interest rate risk is also measured based on the volatility in the Bank's projected return on capital in excess of the return of an established benchmark market index. ROE spread is defined as the Bank's return on average equity, including capital stock and retained earnings, in excess of the average of the projected Federal funds rate.
ROE spread volatility is a measure of the variability of the Bank's projected ROE spread in response to shifts in interest rates and represents the change in ROE spread compared to an ROE spread that is generated by the Bank in its base forecasting scenario. ROE spread volatility is measured over a rolling forward 12 month period for selected interest rate scenarios and excludes the income sensitivity resulting from mark-to-market changes, which are separately described below.
Management uses both parallel and non-parallel rate scenarios to assess interest rate risk. The steeper and flatter yield curve shift scenarios are represented by appropriate increases and decreases in short-term and long-term interest rates using the three-year point on the yield curve as the pivot point.
ROE Spread Volatility Increase/(Decline)
(in basis points) Down 200 bps Parallel Shock Down 100 bps
Longer Term Rate Shock 		100 bps Steeper 100 bps Flatter Up 200 bps
Parallel Shock
June 30, 2026 42 (10) 20 (15) (30)
December 31, 2025 47 2 48 (3) (12)
The changes in ROE spread volatility at June 30, 2026 as compared with December 31, 2025 mostly reflect the impact of higher expected long-term interest rates. For each scenario, the Board's limit on the decline in ROE spread is set at no greater than 100 basis points. The Bank was in compliance with the ROE spread volatility limit across all selected interest rate shock scenarios at June 30, 2026 and December 31, 2025.
Mark-to-Market Risk. The Bank measures earnings risk associated with certain mark-to-market positions, including economic hedges. This framework measures forward-looking, scenario-based exposure based on interest rate and volatility shocks that are applied to any existing transaction that is marked to market through the income statement without an offsetting mark arising from a qualifying hedging relationship. In addition, the Bank's Capital Markets and Corporate Risk Management
departments monitor the actual profit/loss change on a daily, monthly cumulative, and quarterly cumulative basis. The Bank's ALCO monitors mark-to-market risk through a daily exposure guideline and quarterly profit/loss reporting trigger.
Credit and Counterparty Risk - Total Credit Exposure (TCE) and Collateral
TCE. The Bank manages the credit risk of each member on the basis of the member's TCE to the Bank, which includes advances and related accrued interest, fees, basis adjustments and estimated prepayment fees; letters of credit; forward-dated advance commitments; and MPF CE and related obligations. This credit risk is managed by monitoring the financial condition of borrowers and by requiring all borrowers (and, where applicable in connection with member affiliate pledge arrangements approved by the Bank, their affiliates) to pledge sufficient eligible collateral for all borrower obligations to the Bank as the Bank seeks to cover all potential forms of credit-related exposure with sufficient eligible collateral. At June 30, 2026, aggregate TCE was $105.9 billion, comprised of approximately $77.8 billion in advance principal outstanding, $27.6 billion in letters of credit (including forward commitments), and $0.5 billion in accrued interest, prepayment fees, MPF CE obligations and other fees.
Management believes that it has adequate policies and procedures in place to effectively manage credit risk exposure related to member TCE. There have been no significant changes to the Bank's credit monitoring and collateral practices from those described in the Bank's 2025 Form 10-K.
At June 30, 2026 and December 31, 2025, on a borrower-by-borrower basis, the Bank had a perfected security interest in eligible collateral with an estimated collateral value (after collateral weightings) in excess of the book value of all members' and nonmember housing associates' obligations to the Bank. The Bank has never experienced a loss on its advances.
The following table presents the Bank's top five financial entities by their TCE at June 30, 2026.
June 30, 2026
(dollars in millions) TCE % of Total
PNC Bank, National Association, DE (1)
$ 39,483.1 37.3 %
TD Bank U.S. Holding Company (2)
26,488.9 25.0
Ally Bank, UT (3)
9,224.6 8.7
Fulton Bank, N.A.
4,248.2 4.0
Customers Bank
3,984.0 3.8
$ 83,428.8 78.8 %
Other financial institutions 22,456.6 21.2
Total TCE outstanding $ 105,885.4 100.0 %
Notes:
(1) For Bank membership purposes, principal place of business is Pittsburgh, PA.
(2) Member affiliates aggregated at the U.S. holding company level.
(3) For Bank membership purposes, principal place of business is Horsham, PA.
Advance Concentration Risk. The following table lists the Bank's top five borrowers based on advances at par as of June 30, 2026.
June 30, 2026
(dollars in millions) Advance Balance % of Total
PNC Bank, National Association, DE (1)
$ 39,000.0 50.1 %
TD Bank U.S. Holding Company (3)
10,500.0 13.5
Ally Bank, UT (2)
9,200.0 11.8
First National Bank of Pennsylvania
3,100.0 4.0
Customers Bank
2,060.0 2.7
$ 63,860.0 82.1 %
Other borrowers 13,932.8 17.9
Total advances $ 77,792.8 100.0 %
Notes:
(1) For Bank membership purposes, principal place of business is Pittsburgh, PA.
(2) For Bank membership purposes, principal place of business is Horsham, PA.
(3 )Member affiliates aggregated at the U.S. holding company level.
Letters of Credit. The letter of credit product is collateralized under the same policies, procedures and guidelines that apply to advances. Outstanding letters of credit totaled $24.8 billion at June 30, 2026 and $27.5 billion at December 31, 2025, primarily related to public unit deposits. Not included in these totals are additional authorized but unused standby letters of credit of $2.8 billion at June 30, 2026 and $2.3 billion at December 31, 2025. The Bank had a concentration of letters of credit with two members, TD Bank N.A. of $14.2 billion or 57.4% and Fulton Bank of $3.1 billion or 12.4% of the total at June 30, 2026, and two members, TD Bank N.A. of $15.8 billion or 57.4% and Fulton Bank of $3.4 billion or 12.4% of the total at December 31, 2025.
Collateral Policies and Practices. Members are required to maintain eligible collateral to secure their TCE in accordance with the Member Products Policy.
Collateral Agreements and Valuation. The Bank provides members with two types of collateral agreements: a blanket lien collateral pledge agreement and a specific collateral pledge agreement.
For member borrowers, the following table presents information on a combined basis regarding the type of collateral securing their outstanding credit exposure and the collateral status as of June 30, 2026.
June 30, 2026
(dollars in millions) Blanket Lien Listing Delivery Total
Amount % Amount % Amount % Amount %
One-to-four single-family residential
mortgage loans 		$ 109,839.8 40.8 % $ 969.6 7.7 % $ 6.6 4.2 % $ 110,816.0 39.3 %
High quality investment securities 35,548.3 13.2 7,505.9 59.6 152.5 95.7 43,206.7 15.3
Other real estate-related collateral (ORERC)/CFI eligible collateral
96,956.0 36.0 2,044.1 16.2 0.2 0.1 99,000.3 35.1
Multi-family residential mortgage
loans 		26,983.4 10.0 2,081.5 16.5 - - 29,064.9 10.3
Total eligible collateral value $ 269,327.5 100.0 % $ 12,601.1 100.0 % $ 159.3 100.0 % $ 282,087.9 100.0 %
Total TCE $ 98,742.5 93.2 % $ 7,062.9 6.7 % $ 80.0 0.1 % $ 105,885.4 100.0 %
Number of members 145 85.8 % 18 10.7 % 6 3.5 % 169 100.0 %
Credit and Counterparty Risk - Investments
The Bank is also subject to credit risk on investments consisting of money market investments and investment securities. The Bank considers a variety of credit quality factors when analyzing potential investments, including collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, nationally recognized statistical organization (NRSRO) credit ratings and/or the financial health of the underlying issuer.
Investment Quality and External Credit Ratings. The following table presents the Bank's investment carrying values as of June 30, 2026 based on the lowest credit rating from the NRSROs (Moody's, S&P and Fitch).
June 30, 2026 (1)
Long-Term Rating
(in millions) AAA AA A BBB Below Investment Grade Unrated Total
Money market investments:
Interest-bearing deposits $ - $ 788.1 $ 2,670.1 $ - $ - $ - $ 3,458.2
Securities purchased under agreements to resell - - 2,200.0 - - - 2,200.0
Federal funds sold - 5,547.0 1,550.0 - - - 7,097.0
Total money market investments - 6,335.1 6,420.1 - - - 12,755.2
Investment securities:
U.S. Treasury obligations - 5,105.5 - - - - 5,105.5
GSE and TVA obligations - 889.1 - - - - 889.1
State or local agency obligations 12.5 163.4 - - - - 175.9
Total non-MBS 12.5 6,158.0 - - - - 6,170.5
U.S. obligations single-family MBS - 1,837.1 - - - - 1,837.1
GSE single-family MBS - 6,211.5 - - - - 6,211.5
GSE multifamily MBS - 7,381.5 - - - - 7,381.5
Private label MBS 3.1 2.3 4.5 0.4 26.6 85.7 122.6
Total MBS 3.1 15,432.4 4.5 0.4 26.6 85.7 15,552.7
Total investments $ 15.6 $ 27,925.5 $ 6,424.6 $ 0.4 $ 26.6 $ 85.7 $ 34,478.4
Note:
(1) Balances exclude $5.4 million of interest-bearing deposits with FHLBank of Chicago at June 30, 2026 and total accrued interest of $80.7 million at June 30, 2026.
The Bank also manages its investments' credit risks based on an internal credit rating system. For purposes of determining the internal credit rating, the Bank measures credit exposure through a process which includes internal credit review and various external factors, including NRSRO analysis. The Bank does not rely solely on any NRSRO rating in deriving its final internal credit rating.
Short-term Investments. Within the portfolio of short-term investments, the Bank faces credit risk from unsecured exposures. The Bank's unsecured investments have maturities generally ranging between overnight and six months.
Under the Bank's Risk Governance Policy, the Bank can place money market investments on an unsecured basis with large financial institutions with long-term credit ratings no lower than BBB. Management actively monitors the credit quality of these counterparties. The Bank also invests in securities purchased under agreements to resell which are secured investments.
As of June 30, 2026, the Bank had unsecured exposure to nineteen counterparties totaling $10.6 billion, with one counterparty exceeding 10% of the total exposure. The following table presents the Bank's unsecured credit exposure with non-governmental counterparties by investment type at June 30, 2026. The unsecured investment credit exposure presented may not reflect the average or maximum exposure during the period.
(in millions)
Carrying Value
June 30, 2026
Interest-bearing deposits (1)
$ 3,458.2
Federal funds sold 7,097.0
Total $ 10,555.2
Note:
(1) Excludes $5.4 million of Interest-bearing deposits with FHLBank of Chicago at June 30, 2026.
As of June 30, 2026, 60.0% of the Bank's unsecured investment credit exposures were to U.S. branches and agency offices of foreign commercial banks. The Bank actively monitors its credit exposures and the credit quality of its counterparties, including an assessment of each counterparty's financial performance, capital adequacy, sovereign support, and the current
market perceptions of the counterparties. General macro-economic, political and market conditions may also be considered when deciding on unsecured exposure. As a result, the Bank may limit or suspend existing counterparties.
Finance Agency regulations include limits on the amount of unsecured credit the Bank may extend to a counterparty or to a group of affiliated counterparties. This limit is based on a percentage of eligible regulatory capital and the counterparty's overall internal credit rating. Under these regulations, the level of eligible regulatory capital is determined as the lesser of the Bank's total regulatory capital or the eligible amount of regulatory capital of the counterparty. The eligible amount of regulatory capital is then multiplied by a stated percentage. This percentage is 1% to 15% and is based on the counterparty's internal credit rating. The calculation of term extensions of unsecured credit includes on-balance sheet transactions, off-balance sheet commitments, and derivative transactions.
Finance Agency regulation also permits the Bank to extend additional unsecured credit for overnight transactions and for sales of Federal funds subject to continuing contracts that renew automatically. For overnight exposures only, the Bank's total unsecured exposure to a counterparty may not exceed twice the applicable regulatory limit, or a total of 2% to 30% of the eligible amount of regulatory capital, based on the counterparty's internal credit rating. As of June 30, 2026, the Bank was in compliance with the regulatory limits established for unsecured credit.
The Bank's 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. The Bank's 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.
The following table presents the long-term credit ratings of the unsecured investment credit exposures by the domicile of the counterparty or the domicile of the counterparty's immediate parent for U.S. subsidiaries or branches and agency offices of foreign commercial banks based on the NRSROs used. This table does not reflect the foreign sovereign government's credit rating.
(in millions)
June 30, 2026 (1) (2)
Carrying Value
Domicile of Counterparty
Investment Grade (3) (4)
AA A Total
Domestic $ 1,270.1 $ 2,920.1 $ 4,190.2
U.S. branches and agency offices of foreign commercial banks:
Australia 725.0 - 725.0
Canada 900.0 700.0 1,600.0
Finland 165.0 - 165.0
Germany 300.0 250.0 550.0
Netherlands - 350.0 350.0
Norway 500.0 - 500.0
Sweden 2,475.0 - 2,475.0
Total U.S. branches and agency offices of foreign commercial banks $ 5,065.0 $ 1,300.0 $ 6,365.0
Total unsecured investment credit exposure $ 6,335.1 $ 4,220.1 $ 10,555.2
Notes:
(1) Ratings are as of the respective dates.
(2) These ratings represent the lowest rating available for each security owned by the Bank based on the NRSROs used by the Bank. The Bank's internal ratings may differ from those obtained from the NRSROs.
(3) Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies and instrumentalities, GSEs, and supranational entities.
(4) Represents the NRSRO rating of the counterparty not the country. There were no AAA or BBB rated investments at June 30, 2026.
Credit and Counterparty Risk - Mortgage Loans and Derivatives
Mortgage Loans. The Finance Agency has authorized the Bank to hold mortgage loans under the MPF Program whereby the Bank acquires mortgage loans from participating members in a shared credit risk structure. Conventional mortgage loans carry CE requirements such that the Bank has a high degree of confidence that it will be paid principal and interest in all material respects, even under reasonably likely adverse changes to expected economic conditions. Loans are assessed by a third-party credit model at acquisition, and a CE requirement is calculated based on loan attributes and the Bank's risk tolerance with respect to its MPF portfolio. The Bank had net mortgage loans held for portfolio of $5.5 billion at June 30, 2026 and $5.2 billion at December 31, 2025, after an allowance for credit losses of $2.2 million at June 30, 2026 and $2.5 million at December 31, 2025.
Mortgage Insurers. The Bank's MPF Program currently has credit exposure to ten mortgage insurance companies which provide primary mortgage insurance (PMI) and/or supplemental mortgage insurance (SMI) for the Bank's various products. To be active, the mortgage insurance company must be approved as a qualified insurer in accordance with Finance Agency regulations. At least every two years, the Bank reviews the qualified insurers to determine if they continue to meet the financial and operational standards set by the Bank.
When a conventional mortgage loan requires PMI, the MPF Program modeling applied to the Bank's acquisitions requires additional CE from the Participating Financial Institution (PFI) to compensate for the mortgage insurer rating when it is below BBB+. The unpaid principal balance and maximum coverage outstanding for seriously delinquent loans with PMI as of June 30, 2026 was $13.1 million and $3.9 million, respectively. The corresponding amounts at December 31, 2025 were $10.8 million and $3.0 million.
The MPF Plus product required SMI under the MPF Program when each pool was established. At June 30, 2026, 5 of the 14 MPF Plus pools still have SMI policies in place. The Bank does not currently offer the MPF Plus product and has not purchased loans under MPF Plus Commitments since July 2006. Per MPF Program guidelines, the existing MPF Plus product exposure is required to be secured by the PFI once the SMI company is rated below AA-. As of June 30, 2026, all of the SMI exposure is fully collateralized.
Derivative Counterparties. The Bank does not anticipate credit losses on its uncleared or cleared derivatives as of June 30, 2026.
Liquidity and Funding Risk
As a wholesale bank, the Bank employs financial strategies which enable it to expand and contract its assets, liabilities and capital in response to changes in member credit demand, membership composition and other market factors. In addition, the Bank is required to maintain a level of liquidity in accordance with the FHLBank Act, Finance Agency regulations and policies established by its management and Board. The Bank's liquidity resources are intended to support these strategies and requirements through a focus on maintaining a liquidity and funding balance between its financial assets and financial liabilities.
Asset/Liability Maturity Profile. The Bank is focused on maintaining adequate liquidity and funding balances with its financial assets and financial liabilities, and the FHLBanks work collectively to manage system-wide liquidity and funding needs. The Bank monitors the funding balance between financial assets and financial liabilities and is committed to prudent risk management practices and complies with Finance Agency requirements regarding this funding balance. 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.
Sources of Liquidity. The Bank's primary sources of liquidity are proceeds from the issuance of consolidated obligations and a liquidity investment portfolio, as well as proceeds from the issuance of capital stock.
Consolidated Obligations. The Bank's ability to operate its business, meet its obligations and generate net interest income depends primarily on the ability to issue large amounts of various debt structures at attractive rates. Consolidated obligation bonds and discount notes, along with member deposits and capital, represent the primary funding sources used by the Bank to support its asset base. Consolidated obligations benefit from the Bank's GSE status; however, they are not obligations of the U.S., and the U.S. government does not guarantee them. Consolidated obligation bonds and discount notes are rated Aa1 with stable outlook/P-1 by Moody's and AA+ with stable outlook/A-1+ by S&P as of June 30, 2026. These ratings express these NRSRO's opinions of the likelihood of timely payment of principal and interest.
Liquidity Investment Portfolio. The following investments are eligible to be included in the Bank's liquidity investment portfolio for regulatory purposes: cash, interest-bearing deposits, Federal funds sold, securities purchased under agreements to resell, and U.S. Treasury obligations classified as trading or AFS.
Contingency Liquidity. The Bank's sources of contingency liquidity include maturing overnight and short-term investments, maturing advances, unencumbered repurchase-eligible assets, trading securities, AFS securities, and MBS repayments. Uses of contingency liquidity include net settlements of consolidated obligations, member loan commitments, mortgage loan purchase commitments, deposit outflows and maturing other borrowed funds. Excess contingency liquidity is calculated as the difference between sources and uses of contingency liquidity.
Funding and Debt Issuance. During the first six months of 2026, the Bank maintained continual access to funding. Access to short-term debt markets has been reliable because investors, driven by liquidity preferences and risk aversion, have sought the FHLBanks' short-term debt as an asset of choice. The FHLBanks have maintained comparatively stable access to funding through a diverse investor base at relatively favorable spreads to U.S. Treasury rates. Changes or disruptions in the capital markets could limit the Bank's ability to issue consolidated obligations, which could impact the Bank's liquidity and cost of funds.
The Bank was able to access liquidity to meet its members' needs during the period covered by this report.
Refinancing Risk. There are inherent risks in utilizing short-term funding to support longer-dated assets and the Bank may be exposed to refinancing and investor concentration risks (collectively, refinancing risk). Refinancing risk includes the risk the Bank could have difficulty in rolling over short-term obligations when market conditions change. In managing and monitoring the amounts of financial assets that require refinancing, the Bank considers their contractual maturities, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments, embedded call optionality, and scheduled amortizations). The Bank and the OF jointly monitor the combined refinancing risk of the FHLBank System. In managing and monitoring the amounts of assets that require refunding, the Bank may consider contractual maturities of the financial assets, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments and scheduled amortizations).
Interest Rate Risk. The Bank may use a portion of the short-term consolidated obligations issued to fund both short- and long-term variable rate-indexed assets. However, funding longer-term variable rate-indexed assets with shorter-term liabilities generally does not expose the Bank to interest rate risk because the rates on the variable rate-indexed assets reset similar to the
liabilities. The Bank measures and monitors interest rate-risk with commonly used methods and metrics, which include a calculation of market value of equity and duration of equity.
Regulatory Liquidity Requirements. The Bank is required to maintain a level of liquidity in accordance with certain Finance Agency guidance. Under these policies and guidelines, the Bank is required to maintain contingency liquidity to meet liquidity needs in an amount at least equal to its anticipated net cash outflows under certain scenarios. One scenario assumes that the Bank cannot access the capital markets for a period of 20 days and during that time members would renew any maturing, prepaid or called advances. In addition, the Bank is required to perform and report to the Finance Agency the results of an annual liquidity stress test. For the six months ended June 30, 2026, the Bank was in compliance with these liquidity requirements.
Joint and Several Liability. Although the Bank is primarily liable for its portion of consolidated obligations (i.e., those issued on its behalf), the Bank is also jointly and severally liable with the other 10 FHLBanks for the payment of principal and interest on consolidated obligations of all the FHLBanks. The Finance Agency, in its discretion and notwithstanding any other provisions, may at any time order any FHLBank to make principal or interest payments due on any consolidated obligation, even in the absence of default by the primary obligor. To the extent that an FHLBank makes any payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank shall be entitled to reimbursement from the non-paying FHLBank, which has a corresponding obligation to reimburse the FHLBank to the extent of such assistance and other associated costs. However, if the Finance Agency determines that the non-paying FHLBank is unable to satisfy its obligations, then the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank's participation in all consolidated obligations outstanding, or on any other basis the Finance Agency may determine. Finance Agency regulations govern the issuance of debt on behalf of the FHLBanks and authorize the FHLBanks to issue consolidated obligations, through the OF as its agent. The Bank is not permitted to issue individual debt without Finance Agency approval.
Operational and Business Risks
Operational Risk. Operational risk is defined as the potential for loss resulting from inadequate or failed internal processes, people, and systems, or from external events and encompasses risks related to housing mission-related activities, including the Bank's member products and services activities and those associated with affordable housing programs or goals and other Bank business activities. The Bank considers various sources of risk of unexpected loss, including human error, fraud, unenforceability of legal contracts, deficiencies in internal controls and/or information systems, and the impact of cyber-security attacks, artificial intelligence (AI) errors, vendor breakdown, or damage from fire, theft, natural disaster or acts of terrorism. Generally, the category of operational risk includes loss exposures of a physical or procedural nature. Specifically, operational risk includes compliance, fraud, information/transaction, legal, cyber, vendor, people, succession and model risk. The Bank has established policies and procedures to manage each of the specific operational risks. The Bank's approach to cybersecurity risk is discussed in Item 1C. Cybersecurity in the Bank's 2025 Form 10-K.
Business Risk. Business risk is the possibility of an adverse impact on the Bank's profitability or financial or business strategies resulting from external factors that may occur in the short-term and/or long-term. This risk includes the potential for strategic business constraints to be imposed through regulatory, legislative or political changes. Examples of external factors may include, but are not limited to: macroeconomic conditions, financial services industry consolidation, a declining membership base, concentration of borrowing among members, the introduction of new competing products and services, increased non-bank competition, weakening of the FHLBank System's GSE status, changes in the deposit and mortgage markets for the Bank's members, changes that occur as a result of legislation or new or changed regulatory guidance, geopolitical instability, AI and other factors that may have a significant direct or indirect impact on the ability of the Bank to achieve its dual mission and strategic objectives. The Bank's various Risk Management Committees monitor economic indicators and the external environment in which the Bank operates for alignment with the Bank's risk appetite. A discussion of various Bank risks was also included in Item 1A. Risk Factors in the Bank's 2025 Form 10-K.
Federal Home Loan Bank of Pittsburgh published this content on August 04, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 04, 2026 at 14:03 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]