Federal Home Loan Bank of Des Moines

08/07/2026 | Press release | Distributed by Public on 08/07/2026 11:33

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

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Management's Discussion and Analysis (MD&A) of Financial Condition and Results of Operations should be read in conjunction with our financial statements and condensed notes at the beginning of this Form 10-Q and in conjunction with our MD&A and Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the Securities and Exchange Commission (SEC) on March 10, 2026. Our MD&A is designed to provide information that will help the reader develop a better understanding of our financial statements, key financial statement changes from quarter to quarter, and the primary factors driving those changes. Throughout this Form 10-Q, acronyms and terms used are defined in the Glossary of Terms. Unless the context otherwise requires, the terms "we," "us," and "our" refer to the Federal Home Loan Bank of Des Moines or its management. Our MD&A is organized as follows:
CONTENTS
Forward-Looking Information
30
Executive Overview
31
Conditions in the Financial Markets
32
Selected Financial Data
33
Results of Operations
34
Net Interest Income
34
Other Income (Loss)
37
Hedging Activities
38
Other Expense
40
Statements of Condition
41
Advances
41
Mortgage Loans
42
Investments
42
Consolidated Obligations
43
Capital
43
Derivatives
44
Liquidity and Capital Resources
44
Critical Accounting Estimates
47
Legislative and Regulatory Developments
47
Risk Management
48
FORWARD-LOOKING INFORMATION
Statements contained in this report, including statements describing the objectives, projections, estimates, or future predictions in our operations, may be forward-looking statements. These statements may be identified by the use of forward-looking terminology, such as believes, projects, expects, anticipates, estimates, intends, strategy, plan, could, should, may, and will or their negatives or other variations on these terms. By their nature, forward-looking statements involve risk or uncertainty, and actual results could differ materially from those expressed or implied or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, you are cautioned not to place undue reliance on such statements. These risks and uncertainties include, but are not limited to, the following:
•political or economic events, including legislative, regulatory, monetary, judicial, or other developments that affect us, our members, our counterparties, and/or our investors in the consolidated obligations of the 11 FHLBanks;
•the ability to meet capital and other regulatory requirements;
•competitive forces, including without limitation, other sources of funding available to our borrowers that could impact the demand for our advances, other entities purchasing mortgage loans in the secondary mortgage market, and other entities borrowing funds in the capital markets;
•reliance on a relatively small number of member institutions for a large portion of our advance business;
•member consolidations and failures;
•disruptions in the credit and debt markets and the effect on future funding costs, sources, and availability;
•general economic and market conditions that could impact the business we do with our members, including, but not limited to, the timing and volatility of market activity, inflation/deflation, employment rates, geopolitical instability or conflicts, housing market activity and housing prices, the level of mortgage prepayments, the valuation of pledged collateral, and the condition of the capital markets and the impact it has on our consolidated obligations;
•ineffective use of hedging strategies or the availability of derivative instruments in the types and quantities needed for risk management purposes from acceptable counterparties;
•the volatility of reported results due to changes in the fair value of certain assets, liabilities, and derivative instruments;
•risks related to the other FHLBanks that could trigger our joint and several liability for debt issued by the other FHLBanks;
•changes in the relative attractiveness of consolidated obligations due to actual or perceived changes in the FHLBanks' credit ratings or ratings outlook as well as the U.S. Government's long-term credit rating or rating outlook;
•increases in delinquency or loss estimates on mortgage loans;
•the ability to develop and support internal controls, business processes, information systems, and other operating technologies that effectively manage the risks we face, including but not limited to, cyber-attacks, widespread health emergencies, and other business interruptions;
•significant business interruptions resulting from third-party failures;
•the volatility of credit quality, market prices, interest rates, and other factors that could affect the value of collateral held by us as security for borrower and counterparty obligations;
•the ability to attract and retain key personnel; and
•natural disasters.
For additional information regarding these and other risks and uncertainties that could cause our actual results to differ materially from the expectations reflected in our forward-looking statements, see "Item 1A. Risk Factors" in this quarterly report and in our 2025 Form 10-K. Forward-looking statements apply only as of the date they are made, and we undertake no obligation to update or revise any forward-looking statement.
EXECUTIVE OVERVIEW
Liquidity Mission
We provide liquidity to our members to support the housing, business, and economic development needs of their communities. Members pledge mortgage loans and other collateral to access our core liquidity products of advances, letters of credit, and mortgage loans held for portfolio under the MPF program. During the six months ended June 30, 2026, advance balances averaged $133.5 billion, letters of credit averaged $18.8 billion, mortgage loan balances averaged $15.0 billion, and we held an average of $29.7 billion of short-term assets as a ready source of liquidity for our members.
Affordable Housing and Community Impact
Our housing and community development programs are central to our mission. We contribute 10 percent of our net income each year to our AHP, a grant program that supports the creation, rehabilitation, or purchase of affordable housing. This program includes a competitive AHP and two down payment assistance products called Home$tart and the Native American Homeownership Initiative. During the three and six months ended June 30, 2026, we accrued statutory AHP assessments of $28 million and $54 million and voluntarily accrued $3 million and $5 million, to be awarded through this program.
In addition to our AHP, we offer our members voluntary programs to further our housing mission. During the three and six months ended June 30, 2026, we recorded a total of $30 million and $55 million in voluntary housing and community contributions, including the voluntary AHP contribution. Through our voluntary programs during the three and six months ended June 30, 2026, we:
•provided $43 million in 0% rate Housing Affordability Advances to members that originated or purchased mortgage loans from a Habitat for Humanity® affiliate or a non-depository CDFI and recorded $9 million in subsidy expense, including $1 million during the second quarter;
•funded $275 million of home mortgages with an interest rate lower than the current market rate under the Mortgage Rate Relief program, which provided $24 million in grants, including $22 million during the second quarter, to those seeking affordable homeownership; and
•recorded contributions of $17 million, including $4 million during the second quarter, to our Member Impact Fund to match member donations to local housing and community development organizations.
Financial Results
Our financial condition and results of operations are influenced by global and national economies, local economies within our district, member demand, FOMC actions, and the conditions in the financial, housing, and credit markets. These factors impact the interest rate environment and in turn, our net interest income. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Conditions in the Financial Markets" for additional discussion on economic conditions, including interest rates, impacting our financial results.
For the three and six months ended June 30, 2026, we recorded net income of $251 million and $487 million compared to $194 million and $399 million for the same periods in 2025.
Net interest income increased $50 million and $127 million during the three and six months ended June 30, 2026, when compared to the same periods last year. The increases during the three and six months ended June 30, 2026 were primarily due to advance portfolio growth.
Other income (loss) increased $1 million and decreased $29 million during the three and six months ended June 30, 2026, when compared to the same periods last year, primarily due to the net changes in fair value on our trading securities, fair value option instruments, and economic derivatives, including the related interest settlements.
Other expense decreased $13 million during the three months ended June 30, 2026, when compared to the same period last year, primarily due to the timing of our voluntary housing and community contributions. Other expense remained relatively stable during the six months ended June 30, 2026, when compared to the same period last year.
Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations" for additional discussion on our results of operations.
Our total assets increased to $212.6 billion at June 30, 2026, from $186.5 billion at December 31, 2025, driven primarily by an increase in advances and investments. Advances increased $14.3 billion mainly due to an increase in borrowings by insurance company and certain depository institution members. Investments increased $10.8 billion due primarily to an increase in short-term investments.
Total capital increased to $11.5 billion at June 30, 2026, from $10.5 billion at December 31, 2025, primarily due to an increase in activity-based capital stock resulting from an increase in advance balances. Our regulatory capital ratio decreased to 5.29 percent at June 30, 2026, from 5.54 percent at December 31, 2025, above the required regulatory limit at each period end. Regulatory capital includes capital stock, MRCS, and retained earnings.
Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Statements of Condition" for additional discussion on our financial condition.
CONDITIONS IN THE FINANCIAL MARKETS
Economy and Financial Markets
Throughout 2026, the FOMC has maintained the target for the federal funds rate at a range of 3.50 to 3.75 percent. During its July 2026 meeting, the FOMC stated recent indicators suggest that economic activity has been expanding at a solid pace, despite elevated uncertainty that stems, in part, to the conflict in the Middle East. Productivity growth and capital investment were strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little. In addition, inflation remains elevated, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. As a result, the FOMC is focused on delivering price stability.
The following table shows information on key market interest rates1:
3-Month Average
6-Month Average
Period End
June 30,
2026 		June 30,
2025 		June 30,
2026 		June 30,
2025 		June 30,
2026 		December 31,
2025
Federal funds 3.63 % 4.33 % 3.64 % 4.33 % 3.63 % 3.64 %
SOFR 3.62 4.32 3.64 4.33 3.68 3.87
2-year U.S. Treasury 3.97 3.86 3.78 4.00 4.14 3.47
10-year U.S. Treasury 4.42 4.36 4.31 4.41 4.44 4.18
30-year residential mortgage note 6.41 6.78 6.26 6.81 6.49 6.15
1 Source: Bloomberg.
Mortgage Markets
During the first half of 2026, mortgage rates were lower, on average, when compared to the same period last year, and higher when compared to the prior year-end. Purchase activity was the primary driver of activity within the mortgage markets during the six months ended June 30, 2026. New home sales decreased relative to the prior year, while existing home sales, home prices, and prepayment activity increased.
SELECTED FINANCIAL DATA
The following tables present selected financial data for the periods indicated (dollars in millions):
Statements of Condition June 30,
2026 		March 31,
2026 		December 31,
2025 		September 30,
2025 		June 30,
2025
Cash and due from banks $ 58 $ 58 $ 44 $ 73 $ 30
Investments1
71,818 59,599 61,015 64,360 61,353
Advances 124,489 127,032 110,230 109,981 114,845
Mortgage loans held for portfolio, net2
15,518 14,910 14,540 13,948 13,197
Total assets 212,619 202,213 186,499 189,291 190,022
Consolidated obligations
Discount notes 97,342 84,642 84,620 68,220 55,977
Bonds 100,762 103,417 89,249 108,134 120,793
Total consolidated obligations3
198,104 188,059 173,869 176,354 176,770
Mandatorily redeemable capital stock 59 72 30 31 34
Total liabilities 201,128 190,829 176,012 179,050 179,797
Capital stock - Class B putable 7,223 7,286 6,509 6,474 6,660
Retained earnings 3,973 3,887 3,797 3,731 3,617
Accumulated other comprehensive income (loss) 295 211 181 36 (52)
Total capital 11,491 11,384 10,487 10,241 10,225
Regulatory capital ratio4
5.29 5.56 5.54 5.41 5.43
For the Three Months Ended
Statements of Income June 30,
2026 		March 31,
2026 		December 31,
2025 		September 30,
2025 		June 30,
2025
Net interest income $ 339 $ 325 $ 278 $ 335 $ 289
Provision (reversal) for credit losses on mortgage loans - - 1 - -
Other income (loss)5
17 11 31 12 16
Voluntary housing and community contributions 30 25 10 13 43
All other expense6
47 49 50 46 47
AHP assessments 28 26 25 29 21
Net income 251 236 223 259 194
Selected Financial Ratios
Net interest spread7
0.40 % 0.43 % 0.36 % 0.43 % 0.38 %
Net interest margin8
0.63 0.64 0.59 0.67 0.64
Return on average equity (annualized) 8.11 8.42 8.64 9.71 7.86
Return on average capital stock (annualized) 12.82 13.18 14.04 15.07 12.27
Return on average assets (annualized) 0.46 0.46 0.47 0.51 0.42
Average equity to average assets 5.67 5.43 5.46 5.27 5.37
1 Investments include interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, trading securities, AFS securities, and HTM securities.
2 Includes an allowance for credit losses of $6 million, $6 million, $6 million, $5 million, and $5 million at June 30, 2026, March 31, 2026, December 31, 2025, September 30, 2025, and June 30, 2025.
3 The total par value of outstanding consolidated obligations of the 11 FHLBanks was $1,330.8 billion, $1,204.4 billion, $1,151.8 billion, $1,184.1 billion, and $1,232.1 billion at June 30, 2026, March 31, 2026, December 31, 2025, September 30, 2025, and June 30, 2025.
4 Represents period-end regulatory capital expressed as a percentage of period-end total assets. Regulatory capital includes Class B capital stock (including MRCS) and retained earnings.
5 Other income (loss) includes, among other things, net gains (losses) on investment securities, net gains (losses) on derivatives, net gains (losses) on financial instruments held under fair value option, and standby letter of credit fees.
6 All other expense includes, among other things, compensation and benefits, professional fees, and contractual services.
7 Represents annualized yield on total interest-earning assets minus annualized cost of total interest-bearing liabilities.
8 Represents net interest income expressed as a percentage of average interest-earning assets.
RESULTS OF OPERATIONS
Net Interest Income
Our net interest income is impacted by changes in average interest-earning asset and interest-bearing liability balances, and the related yields and costs. The following table presents average balances and annualized yields/costs of major asset and liability categories (dollars in millions):
For the Three Months Ended June 30,
2026 2025
Average
Balance1
Yield/Cost
Interest
Income/
Expense2
Average
Balance1
Yield/Cost
Interest
Income/
Expense2
Interest-earning assets
Interest-bearing deposits $ 5,025 3.72 % $ 46 $ 4,337 4.43 % $ 48
Securities purchased under agreements to resell 16,009 3.70 148 10,728 4.42 118
Federal funds sold 7,212 3.68 67 12,469 4.39 137
MBS3,4,5
27,327 4.47 304 26,350 5.12 336
Other investments3,4,6
6,962 4.06 70 7,615 3.81 72
Advances4,7
139,085 4.05 1,406 107,831 4.78 1,286
Mortgage loans8
15,223 4.73 179 12,746 4.53 144
Total interest-earning assets 216,843 4.11 2,220 182,076 4.72 2,141
Non-interest-earning assets 2,182 - - 1,841 - -
Total assets $ 219,025 4.07 % $ 2,220 $ 183,917 4.67 % $ 2,141
Interest-bearing liabilities
Deposits $ 1,228 2.74 % $ 9 $ 1,306 3.51 % $ 12
Consolidated obligations
Discount notes4
101,804 3.66 930 56,120 4.25 595
Bonds4
100,640 3.75 941 113,654 4.39 1,244
Other interest-bearing liabilities9
82 8.08 1 50 9.00 1
Total interest-bearing liabilities 203,754 3.71 1,881 171,130 4.34 1,852
Non-interest-bearing liabilities 2,860 - - 2,903 - -
Total liabilities 206,614 3.65 1,881 174,033 4.27 1,852
Capital 12,411 - - 9,884 - -
Total liabilities and capital $ 219,025 3.45 % $ 1,881 $ 183,917 4.04 % $ 1,852
Net interest income and spread10
0.40 % $ 339 0.38 % $ 289
Net interest margin11
0.63 % 0.64 %
Average interest-earning assets to interest-bearing liabilities 106.42 % 106.40 %
1 Average balances are calculated on a daily weighted average basis and do not reflect the effect of derivative master netting arrangements with counterparties and/or clearing agents.
2 Interest income and expense amounts reported for advances, MBS, other investments, and consolidated obligation bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.
3 The average balance of AFS and HTM securities is reflected at amortized cost.
4 Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.
5 Interest income on investment securities includes prepayment fees, net of related amortization, of $3 million and less than $1 million for the three months ended June 30, 2026 and 2025.
6 Other investments primarily include U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, and taxable municipal bonds.
7 Interest income includes net prepayment fees on advances.
8 Non-accrual loans are included in the average balance used to determine the average yield.
9 Other interest-bearing liabilities consist primarily of MRCS and/or borrowings from other FHLBanks.
10 Represents annualized yield on total interest-earning assets minus annualized yield on total interest-bearing liabilities. Amounts used to calculate net interest spread are based on unrounded numbers. Accordingly, recalculations using rounded numbers in millions may not produce the same results.
11 Represents net interest income expressed as a percentage of average interest-earning assets. Amounts used to calculate net interest margin are based on unrounded numbers. Accordingly, recalculations using rounded numbers in millions may not produce the same results.
For the Six Months Ended June 30,
2026 2025
Average
Balance1
Yield/Cost2
Interest
Income/
Expense3
Average
Balance1
Yield/Cost2
Interest
Income/
Expense3
Interest-earning assets
Interest-bearing deposits $ 4,742 3.71 % $ 87 $ 4,540 4.50 % $ 101
Securities purchased under agreements to resell 17,080 3.71 314 10,476 4.42 229
Federal funds sold 7,910 3.69 145 12,689 4.39 277
MBS4,5,6
27,081 4.62 621 25,877 5.19 667
Other investments4,5,7
6,991 4.03 139 6,870 3.74 127
Advances5,8
133,538 4.08 2,699 104,026 4.79 2,473
Mortgage loans9
14,957 4.75 352 12,395 4.52 278
Loans to other FHLBanks 2 3.73 - 4 4.40 -
Total interest-earning assets 212,301 4.14 4,357 176,877 4.73 4,152
Non-interest-earning assets 1,965 - - 2,331 - -
Total assets $ 214,266 4.10 % $ 4,357 $ 179,208 4.67 % $ 4,152
Interest-bearing liabilities
Deposits $ 1,226 2.72 % $ 17 $ 1,261 3.46 % $ 22
Consolidated obligations
Discount notes5
99,808 3.67 1,818 59,738 4.36 1,291
Bonds5
98,819 3.79 1,855 105,226 4.41 2,301
Other interest-bearing liabilities10
77 8.65 3 38 8.11 1
Total interest-bearing liabilities 199,930 3.73 3,693 166,263 4.38 3,615
Non-interest-bearing liabilities 2,437 - - 3,148 - -
Total liabilities 202,367 3.68 3,693 169,411 4.30 3,615
Capital 11,899 - - 9,797 - -
Total liabilities and capital $ 214,266 3.48 % $ 3,693 $ 179,208 4.07 % $ 3,615
Net interest income and spread11
0.41 % $ 664 0.35 % $ 537
Net interest margin12
0.63 % 0.61 %
Average interest-earning assets to interest-bearing liabilities 106.19 % 106.38 %
1 Average balances are calculated on a daily weighted average basis and do not reflect the effect of derivative master netting arrangements with counterparties and/or clearing agents.
2 In instances where the average balance and/or related income/expense is less than $1 million, the yield/cost will continue to be presented, based on numbers in actuals.
3 Interest income and expense amounts reported for advances, MBS, other investments, and consolidated obligation bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.
4 The average balance of AFS and HTM securities is reflected at amortized cost.
5 Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.
6 Interest income on investment securities includes prepayment fees, net of related amortization, of $10 million and less than $1 million for the six months ended June 30, 2026 and 2025.
7 Other investments primarily include U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, and taxable municipal bonds.
8 Interest income includes net prepayment fees on advances.
9 Non-accrual loans are included in the average balance used to determine the average yield.
10 Other interest-bearing liabilities consist primarily of MRCS and/or borrowings from other FHLBanks.
11 Represents annualized yield on total interest-earning assets minus annualized yield on total interest-bearing liabilities. Amounts used to calculate net interest spread are based on unrounded numbers. Accordingly, recalculations using rounded numbers in millions may not produce the same results.
12 Represents net interest income expressed as a percentage of average interest-earning assets. Amounts used to calculate net interest margin are based on unrounded numbers. Accordingly, recalculations using rounded numbers in millions may not produce the same results.
The following table presents changes in interest income and interest expense. Changes in interest income and interest expense that are not identifiable as either volume-related or rate-related, but rather attributable to both volume and rate changes, are allocated to the volume and rate categories based on the proportion of the absolute value of the volume and rate changes (dollars in millions).
Three Months Ended Six Months Ended
June 30, 2026 vs. June 30, 2025
June 30, 2026 vs. June 30, 2025
Total Increase
(Decrease) Due to 		Total Increase
(Decrease) 		Total Increase
(Decrease) Due to 		Total Increase
(Decrease)
Volume Rate Volume Rate
Interest income
Interest-bearing deposits $ 7 $ (9) $ (2) $ 4 $ (18) $ (14)
Securities purchased under agreements to resell 51 (21) 30 127 (42) 85
Federal funds sold (51) (19) (70) (93) (39) (132)
MBS 12 (44) (32) 30 (76) (46)
Other investments (7) 5 (2) 2 10 12
Advances 336 (216) 120 630 (404) 226
Mortgage loans 29 6 35 59 15 74
Total interest income 377 (298) 79 759 (554) 205
Interest expense
Deposits (1) (2) (3) (1) (4) (5)
Consolidated obligations
Discount notes 427 (92) 335 757 (230) 527
Bonds (133) (170) (303) (135) (311) (446)
Other interest-bearing liabilities - - - 2 - 2
Total interest expense 293 (264) 29 623 (545) 78
Net interest income $ 84 $ (34) $ 50 $ 136 $ (9) $ 127
NET INTEREST SPREAD AND MARGIN
Net interest spread represents the annualized yield on total interest-earning assets minus the annualized cost of total interest-bearing liabilities. Our net interest spread increased during the three and six months ended June 30, 2026, when compared to the same periods in 2025. The increase during the three and six months ended June 30, 2026 was primarily due to advance portfolio growth. Our cost of funds does not include net interest settlements on economic hedges, which are recorded in other income (loss). As a result, our net interest spread does not reflect the full impact of our funding and hedging strategies and may experience volatility as interest rates change. Net interest margin equals net interest income expressed as a percentage of average interest-earning assets and remained relatively stable during the three and six months ended June 30, 2026, when compared to the same periods in 2025.
ADVANCE PREPAYMENT FEES
The following table summarizes our advance prepayment fees (dollars in millions):
For the Three Months Ended
For the Six Months Ended
June 30, June 30,
2026 2025 2026 2025
Prepayment fees on advances, gross1,2
$ - $ 2 $ 5 $ 3
Basis adjustment amortization 1 1 (2) 1
Deferred prepayment fees on modified advances2
- (1) - (1)
Prepayment fees on advances, net
$ 1 $ 2 $ 3 $ 3
1 Includes symmetrical fees on advances for which we may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates.
2 Prepayment fees on advances, gross were less than $1 million during the three months ended June 30, 2026. Deferred prepayment fees on modified advances were less than $1 million during the three and six months ended June 30, 2026.
Other Income (Loss)
The following table summarizes the components of other income (loss) (dollars in millions):
For the Three Months Ended
For the Six Months Ended
June 30, June 30,
2026 2025 2026 2025
Net gains (losses) on trading securities $ (42) $ 22 $ (91) $ 69
Net gains (losses) on financial instruments held under fair value option - 7 6 27
Net gains (losses) on derivatives 44 (24) 90 (59)
Other, net 15 11 23 20
Total other income (loss) $ 17 $ 16 $ 28 $ 57
Other income (loss) remained relatively stable during the three months ended June 30, 2026 and decreased $29 million during the six months ended June 30, 2026, when compared to the same periods in 2025. The decline during the six months ended June 30, 2026 was primarily due to the net change in fair value on our trading securities, fair value option instruments, and economic derivatives, including the related interest settlements. We utilize economic derivatives to hedge certain instruments held at fair value that do not qualify for fair value hedge accounting. These fair value elections are made primarily in an effort to mitigate the potential income statement volatility that can arise when an economic derivative is adjusted for changes in fair value but the related hedged item is not. As a result, we review the related gains (losses) on these items on a net basis.
During the six months ended June 30, 2026, we recorded net combined gains of $5 million on our trading securities, fair value option instruments, and the related economic derivatives, compared to net combined gains of $37 million for the same period in 2025. The net decrease during the six months ended June 30, 2026 was primarily driven by the reversal of historic gains and losses on trading securities as they approach maturity and changes in the interest rate environment. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Hedging Activities" for additional discussion on our economic derivatives.
Hedging Activities
We use derivatives to manage interest rate risk. Accounting rules affect the timing and recognition of income and expense on derivatives and therefore we may be subject to income statement volatility. For additional discussion on hedging activities, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Hedging Activities" in our 2025 Form 10-K.
The following tables categorize the net effect of hedging activities on net income by product (dollars in millions):
For the Three Months Ended June 30, 2026
Net Effect of Hedging Activities Advances Investments Discount Notes Bonds Total
Net interest income:
Net amortization/accretion
$ 2 $ 3 $ - $ - $ 5
Net gains (losses) on derivatives and hedged items - (9) (2) 3 (8)
Price alignment amount on derivatives
(3) (5) - - (8)
Net interest settlements on derivatives
38 24 4 13 79
Total impact to net interest income 37 13 2 16 68
Other income (loss):
Net gains (losses) on derivatives
Gains (losses) related to derivatives not designated as hedging instruments
- 45 (1) - 44
Total net gains (losses) on derivatives
- 45 (1) - 44
Net gains (losses) on trading securities
- (42) - - (42)
Total impact to other income (loss) - 3 (1) - 2
Total net effect of hedging activities1
$ 37 $ 16 $ 1 $ 16 $ 70
For the Three Months Ended June 30, 2025
Net Effect of Hedging Activities Advances Investments Discount Notes Bonds Total
Net interest income:
Net amortization/accretion
$ 6 $ 1 $ - $ - $ 7
Net gains (losses) on derivatives and hedged items 1 (5) - (2) (6)
Price alignment amount on derivatives
(2) (5) - (1) (8)
Net interest settlements on derivatives
120 59 - (5) 174
Total impact to net interest income 125 50 - (8) 167
Other income (loss):
Net gains (losses) on derivatives
Gains (losses) related to derivatives not designated as hedging instruments
- (12) (12) - (24)
Total net gains (losses) on derivatives
- (12) (12) - (24)
Net gains (losses) on trading securities
- 22 - - 22
Net gains (losses) on financial
instruments held under fair value option
- - 7 - 7
Total impact to other income (loss) - 10 (5) - 5
Total net effect of hedging activities1
$ 125 $ 60 $ (5) $ (8) $ 172
1 The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
For the Six Months Ended June 30, 2026
Net Effect of Hedging Activities Advances Investments Discount Notes Bonds Total
Net interest income:
Net amortization/accretion
$ 3 $ 9 $ - $ - $ 12
Net gains (losses) on derivatives and hedged items (1) (9) (2) 1 (11)
Price alignment amount on derivatives
(3) (7) - (1) (11)
Net interest settlements on derivatives
77 49 14 26 166
Total impact to net interest income 76 42 12 26 156
Other income (loss):
Net gains (losses) on derivatives
Gains (losses) related to derivatives not designated as hedging instruments
- 93 (3) - 90
Total net gains (losses) on derivatives
- 93 (3) - 90
Net gains (losses) on trading securities
- (91) - - (91)
Net gains (losses) on financial
instruments held under fair value option
- - 6 - 6
Total impact to other income (loss) - 2 3 - 5
Total net effect of hedging activities1
$ 76 $ 44 $ 15 $ 26 $ 161
For the Six Months Ended June 30, 2025
Net Effect of Hedging Activities Advances Investments Discount Notes Bonds Total
Net interest income:
Net amortization/accretion
$ 15 $ 2 $ - $ - $ 17
Net gains (losses) on derivatives and hedged items 2 (6) - (12) (16)
Price alignment amount on derivatives
(9) (13) - (2) (24)
Net interest settlements on derivatives
237 117 - 1 355
Total impact to net interest income 245 100 - (13) 332
Other income (loss):
Net gains (losses) on derivatives
Gains (losses) related to derivatives not designated as hedging instruments
- (40) (19) - (59)
Total net gains (losses) on derivatives
- (40) (19) - (59)
Net gains (losses) on trading securities
- 69 - - 69
Net gains (losses) on financial
instruments held under fair value option
- - 27 - 27
Total impact to other income (loss) - 29 8 - 37
Total net effect of hedging activities1
$ 245 $ 129 $ 8 $ (13) $ 369
1 The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.
NET AMORTIZATION/ACCRETION
Net amortization/accretion of basis adjustments varies from period to period depending on our hedge relationship termination activities and the maturity, call, or prepayment of assets or liabilities previously in hedge relationships.
NET GAINS (LOSSES) ON DERIVATIVES AND HEDGED ITEMS
Net gains and losses on derivatives and hedged items designated in fair value hedge relationships are recorded in net interest income. Gains (losses) on derivatives and hedged items fluctuate with changes in market conditions and are based on a range of factors, including current and projected levels of interest rates and volatility.
PRICE ALIGNMENT AMOUNT ON DERIVATIVES
The price alignment amount on derivatives for which variation margin is characterized as a daily settled contract fluctuates with changes in the interest rate environment. The price alignment amount on derivatives that qualify for fair value hedge accounting is recorded in net interest income. The price alignment amount on economic derivatives is recorded in other income (loss) as "Net gains (losses) on derivatives" on our Statements of Income.
NET INTEREST SETTLEMENTS ON DERIVATIVES
Net interest settlements represent the interest component on derivatives that qualify for fair value hedge accounting. These amounts vary from period to period depending on our hedging activities and interest rates and are partially offset by the interest component on the related hedged item within net interest income. The hedging activity tables do not include the impact of the interest component on the related hedged item.
NET GAINS (LOSSES) ON DERIVATIVES
We utilize economic derivatives to manage certain risks on our Statements of Condition. Gains and losses on economic derivatives include interest settlements and price alignment amounts. Interest settlements represent the interest component on economic derivatives. These amounts vary from period to period depending on our hedging activities and interest rates.
Other Expense
The following table shows the components of other expense (dollars in millions):
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2026 2025 2026 2025
Compensation and benefits $ 20 $ 20 $ 41 $ 42
Contractual services 7 6 14 13
Professional fees 3 4 6 7
Other operating expenses 6 6 12 11
Total operating expenses 36 36 73 73
Voluntary housing and community contributions 30 43 55 55
Federal Housing Finance Agency 4 4 7 8
Office of Finance 2 1 6 4
Other, net 5 6 10 11
Total other expense $ 77 $ 90 $ 151 $ 151
Other expense decreased $13 million during the three months ended June 30, 2026, and remained relatively stable during the six months ended June 30, 2026, when compared to the same periods last year. The decline during the three months ended June 30, 2026 was primarily due to the timing of our voluntary housing and community contributions.
STATEMENTS OF CONDITION
Advances
The following table summarizes our advances by type of institution (dollars in millions):
June 30,
2026 		December 31,
2025
Commercial banks $ 56,700 $ 47,532
Savings institutions 1,182 1,008
Credit unions 9,011 10,266
Insurance companies 57,136 50,861
CDFIs 32 14
Total member advances 124,061 109,681
Housing associates 90 -
Non-member borrowers 865 497
Total par value $ 125,016 $ 110,178
Our total advance par value increased $14.8 billion or 13 percent at June 30, 2026, when compared to December 31, 2025, primarily due to an increase in borrowings by insurance company and certain depository institution members.
The following table summarizes our advances by interest rate payment terms (dollars in millions):
June 30, 2026 December 31, 2025
Amount % of Total Amount % of Total
Fixed rate $ 80,699 64 $ 73,457 67
Variable rate 31,979 26 25,282 23
Variable rate, callable1
11,291 9 10,382 9
Other2
1,047 1 1,057 1
Total advance par value 125,016 100 110,178 100
Premiums 1 2
Discounts (27) (22)
Fair value hedging adjustments3
(501) 72
Total $ 124,489 $ 110,230
1 Callable advances are those advances that may be contractually prepaid by the borrower on predetermined dates without incurring prepayment or termination fees.
2 Includes fixed rate amortizing and fixed rate callable advances.
3 Primarily represents fair value hedging adjustments on active hedging relationships driven by changes in interest rates.
At June 30, 2026 and December 31, 2025, advances outstanding to our top five borrowers totaled $63.4 billion and $51.6 billion, which represented 51 percent and 47 percent of our total advances outstanding. The following table summarizes our top five borrowers based on advances outstanding at June 30, 2026 (dollars in millions):
Amount % of Total Advances
Athene Annuity and Life Company $ 27,695 22
Wells Fargo Bank, N.A. 22,000 18
Symetra Life Insurance Company 4,896 4
EquiTrust Life Insurance Company 4,550 4
Columbia Bank 4,250 3
Total par value $ 63,391 51
Mortgage Loans
The following table summarizes information on our mortgage loans held for portfolio (dollars in millions):
June 30,
2026 		December 31,
2025
Fixed rate conventional loans $ 15,109 $ 14,097
Fixed rate government-insured loans 343 356
Total unpaid principal balance 15,452 14,453
Premiums 157 156
Discounts (73) (54)
Basis adjustments from mortgage loan purchase commitments (12) (9)
Total mortgage loans held for portfolio 15,524 14,546
Allowance for credit losses (6) (6)
Total mortgage loans held for portfolio, net $ 15,518 $ 14,540
Our total mortgage loans increased $1.0 billion or seven percent at June 30, 2026, when compared to December 31, 2025. The increase was due to new loan purchases exceeding principal paydowns.
Investments
The following table summarizes the carrying value of our investments (dollars in millions):
June 30, 2026 December 31, 2025
Amount % of Total Amount % of Total
Short-term investments1
Interest-bearing deposits $ 5,213 7 $ 3,726 6
Securities purchased under agreements to resell 19,300 27 17,090 28
Federal funds sold 12,050 17 5,930 10
Total short-term investments 36,563 51 26,746 44
Long-term investments2
MBS
GSE single-family 469 1 516 1
GSE multifamily 20,987 29 20,882 34
U.S. obligations single-family3
6,808 9 5,708 9
Private-label residential 2 - 2 -
Total MBS 28,266 39 27,108 44
Non-MBS
U.S. Treasury obligations3
5,874 8 6,104 10
Other U.S. obligations3
58 - 71 -
GSE and TVA obligations 474 1 482 1
State or local housing agency obligations 471 1 391 1
Other4
112 - 113 -
Total non-MBS 6,989 10 7,161 12
Total long-term investments 35,255 49 34,269 56
Total investments $ 71,818 100 $ 61,015 100
1 Short-term investments have original maturities equal to or less than one year.
2 Long-term investments have original maturities of greater than one year.
3 Represents investment securities backed by the full faith and credit of the U.S. Government.
4 Consists of taxable municipal bonds.
Our investments increased $10.8 billion, or 18 percent at June 30, 2026, when compared to December 31, 2025, due primarily to an increase in short-term investments. At June 30, 2026, we had agency MBS and/or state or local housing agency obligation purchases with a total par value of $564 million that were traded but not yet settled. These investments were recorded as "Available-for-sale" on our Statements of Condition with a corresponding payable recorded in "Other liabilities." At December 31, 2025, we had no investment purchases that were traded but not yet settled.
The Finance Agency limits our investments in MBS by requiring that the balance of our MBS not exceed three times regulatory capital at the time of purchase. Our ratio of MBS to regulatory capital was 2.54 and 2.64 at June 30, 2026 and December 31, 2025.
Consolidated Obligations
Consolidated obligations, which include bonds and discount notes, are the primary source of funds to support our advances, mortgage loans, and investments.
DISCOUNT NOTES
The following table summarizes our discount notes, all of which are due within one year (dollars in millions):
June 30,
2026 		December 31,
2025
Par value $ 98,284 $ 85,186
Discounts and concession fees1
(914) (586)
Fair value hedging adjustments
(26) 17
Fair value option adjustments
(2) 3
Total $ 97,342 $ 84,620
1 Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation discount notes.
Our discount notes increased $12.7 billion or 15 percent at June 30, 2026, when compared to December 31, 2025. We continued to utilize discount notes to support our growth in assets and to capture attractive funding and/or meet our liquidity requirements. Fair value hedging adjustments changed $43 million at June 30, 2026, when compared to December 31, 2025, driven primarily by the reversal of historic gains and losses on instruments as they approach maturity and changes in the interest rate environment.
BONDS
The following table summarizes information on our bonds (dollars in millions):
June 30,
2026 		December 31,
2025
Par value $ 100,826 $ 89,188
Premiums 27 28
Discounts and concession fees1
(21) (23)
Fair value hedging adjustments
(70) 56
Total $ 100,762 $ 89,249
1 Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation bonds.
Our bonds increased $11.5 billion or 13 percent at June 30, 2026, when compared to December 31, 2025. We continued to utilize bonds to support our growth in assets and to capture attractive funding and/or meet our liquidity requirements. Fair value hedging adjustments changed $126 million at June 30, 2026, when compared to December 31, 2025, driven primarily by the interest rate environment.
For additional information on our consolidated obligations, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Liquidity - Sources of Liquidity."
Capital
The following table summarizes information on our capital (dollars in millions):
June 30,
2026 		December 31,
2025
Capital stock $ 7,223 $ 6,509
Retained earnings 3,973 3,797
Accumulated other comprehensive income (loss) 295 181
Total capital $ 11,491 $ 10,487
Our capital increased $1.0 billion, or 10 percent at June 30, 2026, when compared to December 31, 2025, primarily due to an increase in activity-based capital stock resulting from an increase in advance balances. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Capital" for additional information on our capital.
Derivatives
We use derivatives to manage interest rate risk. The notional amount of derivatives serves as a factor in determining periodic interest payments and cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor our overall exposure to credit and market risk.
The following table categorizes the notional amount of our derivatives by type (dollars in millions):
June 30,
2026 		December 31,
2025
Interest rate swaps
Non-callable $ 191,571 $ 171,040
Callable by counterparty 20,873 14,872
Callable by the Bank 74 33
Total interest rate swaps 212,518 185,945
Forward settlement agreements 130 111
Mortgage loan purchase commitments 127 106
Interest rate caps or floors
1 -
Total notional amount $ 212,776 $ 186,162
The notional amount of our derivative contracts increased $26.6 billion, or 14 percent, at June 30, 2026, when compared to December 31, 2025. The increase was primarily due to the utilization of interest rate swaps to hedge increased assets and liabilities as our balance sheet has grown. During 2026, we increased our utilization of non-callable swaps on consolidated obligations and advances, and callable swaps on consolidated obligation bonds in an effort to capture attractive funding and/or meet our liquidity requirements. For additional discussion regarding our use of derivatives, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Derivatives" in our 2025 Form 10-K.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity position is actively managed in an effort to preserve stable, reliable, and cost-effective sources of funds to meet current and projected operating financial commitments. In addition, capital levels are managed to ensure compliance with regulatory and capital requirements.
Liquidity
SOURCES OF LIQUIDITY
We utilize several sources of liquidity to carry out our business activities. These include, but are not limited to, proceeds from the issuance of consolidated obligations, payments collected on advances and mortgage loans, proceeds from investment securities, member deposits, the issuance of capital stock, and current period earnings.
Our primary source of liquidity is proceeds from the issuance of consolidated obligations (bonds and discount notes) in the capital markets. During the six months ended June 30, 2026, proceeds from the issuance of bonds and discount notes were $61.6 billion and $624.5 billion compared to $62.7 billion and $784.6 billion for the same period in 2025. Our funding needs vary from period to period depending on member demand for advances and other liquidity needs. During the six months ended June 30, 2026, we continued to utilize consolidated obligation bonds and discount notes in an effort to capture attractive funding and/or meet our liquidity requirements.
Access to debt markets has been reliable because investors, driven by increased liquidity preference, have sought the FHLBanks' debt as an asset of choice. However, due to the short-term maturity of the debt, we may be exposed to additional risks associated with refinancing and our ability to access the capital markets.
We are focused on maintaining an adequate liquidity balance and a funding balance between our financial assets and financial liabilities and work collectively with the other FHLBanks to manage the system-wide liquidity and funding needs. We monitor our debt refinancing risk and liquidity position primarily by tracking the maturities of financial assets and financial liabilities. In managing and monitoring the amounts of assets that require refunding, we consider contractual maturities of our financial assets and liabilities, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments). External factors, including member borrowing needs, supply and demand in the debt markets, and other factors may affect liquidity balances and the funding balances between financial assets and financial liabilities. Refer to "Item 1. Financial Statements - Condensed Notes to the Unaudited Financial Statements" for additional information regarding the contractual maturities of certain of our financial assets and liabilities.
Our ability to raise funds in the capital markets as well as our cost of borrowing may be affected by our credit ratings. As of July 31, 2026, our consolidated obligations were rated AA+/A-1+ by S&P and Aa1/P-1 by Moody's, with stable outlooks. For further discussion of how credit rating changes and our ability to access the capital markets may impact us in the future, refer to "Item 1A. Risk Factors" in our 2025 Form 10-K.
Although we are primarily liable for the portion of consolidated obligations that are issued on our behalf, we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations issued by the FHLBank System. At June 30, 2026 and December 31, 2025, the total par value of outstanding consolidated obligations for which we were primarily liable was $199.1 billion and $174.4 billion. At June 30, 2026 and December 31, 2025, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which we were jointly and severally liable was $1,131.7 billion and $977.4 billion.
The Office of Finance and FHLBanks have contingency plans in place that prioritize the allocation of proceeds from the issuance of consolidated obligations during periods of financial distress if consolidated obligations cannot be issued in sufficient amounts to satisfy all FHLBank demand. In the event of significant market disruptions or local disasters, our President and CEO or designee is authorized to establish interim borrowing relationships with other FHLBanks. To provide further access to funding, the FHLBank Act also authorizes the U.S. Treasury to directly purchase new issue consolidated obligations of the GSEs, including FHLBanks, up to an aggregate principal amount of $4.0 billion. As of July 31, 2026, no purchases had been made by the U.S. Treasury under this authorization.
USES OF LIQUIDITY
We use our available liquidity, including proceeds from the issuance of consolidated obligations, primarily to repay consolidated obligations, fund advances, and purchase investments. During the six months ended June 30, 2026, repayments of consolidated obligations totaled $661.8 billion compared to $823.0 billion for the same period in 2025.
During the six months ended June 30, 2026, advance disbursements (excluding daily reset advances) totaled $347.1 billion compared to $392.9 billion for the same period in 2025. Advance disbursements vary from period to period depending on member needs. During the six months ended June 30, 2026 and 2025, investment purchases (excluding overnight investments) totaled $2.9 billion and $4.7 billion, a decrease due primarily to fewer purchases of agency MBS.
We also use liquidity to purchase mortgage loans, redeem member deposits, pledge collateral to derivative counterparties, redeem or repurchase capital stock, pay expenses, and pay dividends.
LIQUIDITY REQUIREMENTS
We are subject to certain liquidity requirements set forth by the Finance Agency and maintain a liquidity contingency funding plan designed to enable us to meet our obligations and the liquidity needs of our members in the event of short-term capital market disruptions, or operational disruptions at our Bank and/or the Office of Finance. For additional details on these liquidity requirements, refer to our 2025 Form 10-K. Our primary liquidity requirement is discussed further below.
Liquidity Guidance AB - This guidance requires us to maintain sufficient liquidity for a period of 10 to 30 calendar days. The base case scenario requires 20 days of positive daily cash balances and assumes that we cannot access the capital markets to issue debt, and during that time we will automatically renew maturing and called advances for all members, including large, highly-rated members, and we hold additional liquid assets equal to one percent of our letters of credit balances. At June 30, 2026 and December 31, 2025, we were in compliance with this base case liquidity guidance.
The Liquidity Guidance AB also specifies appropriate funding gap limits to address the risks associated with an FHLBank having too large a mismatch between the contractual maturities of its assets and liabilities. A funding gap measures the difference between assets and liabilities that are scheduled to mature during a specified period and is expressed as a percentage of total assets. The guidance provides recommended maximum funding gap limits of negative 15 percent at the three-month horizon and negative 30 percent at the one-year horizon. At June 30, 2026 and December 31, 2025, we adhered to these funding gap requirements.
Capital
CAPITAL REQUIREMENTS
We are subject to certain regulatory capital requirements imposed by the Finance Agency. At June 30, 2026 and December 31, 2025, we were in compliance with all Finance Agency regulatory capital requirements. Refer to "Item 1. Financial Statements - Note 9 - Capital" for information on our regulatory capital requirements.
CAPITAL STOCK
The capital stock requirements established in our Capital Plan are designed so that we can remain adequately capitalized as member activity changes. Our Board of Directors may make adjustments to the capital stock requirements within ranges established in our Capital Plan.
The following table summarizes our regulatory capital stock by type of member (dollars in millions):
June 30,
2026 		December 31,
2025
Commercial banks $ 3,487 $ 3,036
Savings institutions 105 97
Credit unions 816 849
Insurance companies 2,813 2,526
CDFIs 2 1
Total GAAP capital stock 7,223 6,509
MRCS 59 30
Total regulatory capital stock $ 7,282 $ 6,539
The increase in regulatory capital stock held at June 30, 2026, when compared to December 31, 2025, was due primarily to an increase in activity-based capital stock resulting from an increase in advance balances. For additional information on our capital stock, refer to "Item 1. Financial Statements - Note 9 - Capital."
Retained Earnings
Our risk management policies outline a targeted level of retained earnings based on the amount we believe necessary to help protect the redemption value of capital stock, facilitate safe and sound operations, maintain regulatory capital ratios, and support our ability to pay a relatively stable dividend. We monitor our achievement of this targeted level and may utilize tools such as restructuring our balance sheet, generating additional income, reducing our risk exposures, increasing capital stock requirements, or reducing our dividends to achieve this level of retained earnings. At June 30, 2026 and December 31, 2025, our actual retained earnings exceeded our targeted level of retained earnings.
We entered into a JCE Agreement with all of the other Federal Home Loan Banks in 2011. Under the JCE Agreement, we are required to allocate 20 percent of our quarterly net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least one percent of our average balance of outstanding consolidated obligations for the calendar quarter. The restricted retained earnings are not available to pay dividends and are presented separately on our Statements of Condition. At June 30, 2026 and December 31, 2025, our restricted retained earnings balance totaled $1.4 billion and $1.3 billion. One percent of our average balance of outstanding consolidated obligations for the three months ended June 30, 2026, was $2.0 billion.
Dividends
Our dividend philosophy is to pay a consistent dividend equal to or greater than the current market rate for a highly-rated investment (i.e. SOFR), and at a rate that the Board of Directors believes is sustainable under current and projected earnings to maintain an appropriate level of capital and retained earnings. Our dividend is determined quarterly by our Board of Directors, based on policies, regulatory requirements, actual performance, and other considerations that the Board of Directors determines to be appropriate.
The following table summarizes dividend-related information (dollars in millions):
For the Three Months Ended
For the Six Months Ended
June 30, June 30,
2026 2025 2026 2025
Aggregate cash dividends paid1
$ 165 $ 135 $ 311 $ 273
Effective combined annualized dividend rate paid on capital stock2
9.25 % 9.14 % 9.21 % 9.14 %
Annualized dividend rate paid on membership capital stock 6.00 % 6.00 % 6.00 % 6.00 %
Annualized dividend rate paid on activity-based capital stock 9.75 % 9.75 % 9.75 % 9.75 %
Average SOFR 3.62 % 4.32 % 3.64 % 4.33 %
1 Includes aggregate cash dividends paid during the period. Amount excludes cash dividends paid on MRCS. For financial reporting purposes, these dividends were recorded as interest expense on our Statements of Income.
2 Effective combined annualized dividend rate is paid on total capital stock, including MRCS.
CRITICAL ACCOUNTING ESTIMATES
For a discussion of our critical accounting estimates, refer to our 2025 Form 10-K. There have been no material changes to our critical accounting estimates during the six months ended June 30, 2026.
For a discussion of recently adopted or issued accounting standards, refer to "Item 8. Financial Statements and Supplementary Data - Note 2 - Recently Adopted and Issued Accounting Guidance" in our 2025 Form 10-K.
LEGISLATIVE AND REGULATORY DEVELOPMENTS
Regulatory Environment
We are 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 our business operations, and could affect our financial condition, results of operations, and reputation. For example, the Finance Agency rescinded guidance related to establishing our target ratio of advances and mortgage assets compared to our consolidated obligations, providing us more discretion for developing our 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 non-objection before we undertake 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 to only 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 would revise risk-based capital calculations, resulting in reduced capital requirements for certain mortgage assets, including those eligible to be sold to us as acquired member assets, including those eligible for purchase under the MPF program, and collateral eligible to be pledged as security for 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 us. 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 our advances and may disincentive GSIBs' use of our advances. We continue to evaluate the potential impact of these proposed rules on our financial condition and results of operations.
21st Century ROAD to Housing Act. On July 11, 2026, the 21st Century ROAD to Housing Act (Housing Act) became law. The Housing 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. We are reviewing how the various reforms brought by the Housing Act could impact collateral held by large institutional investors that is eligible to be pledged to us, demand for and use of our advances due to more relaxed regulation around brokered deposits, and other aspects of our 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, our business and the FHLBank System. We continue to monitor these actions as they evolve and to evaluate their potential impact on us. For a discussion of related risks, please refer to "Item 1A. Risk Factors" in our 2025 Form 10-K.
RISK MANAGEMENT
We have risk management policies, established by our Board of Directors, that allow us to monitor and control our exposure to various risks, including interest rate, liquidity, credit, operational, model, information security, legal, regulatory and compliance, strategic, and reputational, as well as capital adequacy. Our primary risk management objective is to manage our assets and liabilities in ways that ensure liquidity is available to our members and protect the par redemption value of our capital stock. We periodically evaluate our risk management policies in order to respond to changes in our financial position and general market conditions. The following sections outline our interest rate and credit risks. For additional details on all other risks noted above, please refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management" in our 2025 Form 10-K.
Interest Rate Risk
We define interest rate risk as the risk that changes in interest rates or spreads will adversely affect our financial condition (market value) or performance (income). Interest rate risk is the principal type of risk to which we are exposed, as our cash flows, and therefore earnings and equity value, can change significantly as interest rates change. Our general approach toward managing interest rate risk is to acquire and maintain a portfolio of assets, liabilities, and derivatives which, taken together, limit our expected exposure to interest rate risk. Our key interest rate risk measures are MVE and Projected 24-Month Income. Management regularly monitors these key measures, as discussed further in the sections below.
MARKET VALUE OF EQUITY
MVE measures the net present value of the Bank by either marking positions to market or discounting all future cash flows using market discount rates. MVE is measured as the market value of our assets minus the market value of our liabilities (excluding MRCS). MVE is an estimate of the Bank's value and takes into account short-term market price fluctuations.
We monitor and manage to MVE policy limits in an effort to ensure the stability of the Bank's value. Our policy limits are based on declines from the base case in parallel and non-parallel interest rate change scenarios. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner. At June 30, 2026 and December 31, 2025, our base case MVE was $11.8 billion and $10.7 billion, and the increase between periods was primarily due to higher asset balances and increased invested capital, specifically activity-based capital stock. At June 30, 2026 and December 31, 2025, we were in compliance with all MVE policy limits.
MVCS represents our MVE divided by the total outstanding shares of our capital stock (including MRCS). To ensure we remain adequately capitalized, we must ensure our MVCS remains at or above our $100 par value. Our base case MVCS was $162.1 at June 30, 2026, compared to $163.1 at December 31, 2025. The decrease in our base case MVCS was primarily attributable to the issuance of activity-based capital stock at par value, as a result of an increase in advance balances, which was below the MVCS value at the time of issuance.
For more information on this risk measure, including policy limits, refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate Risk - Market Value of Equity" in our 2025 Form 10-K.
PROJECTED 24-MONTH INCOME
The projected 24-month income simulation measures our short-term earnings forecast over a two-year horizon based on forward interest rates and business assumptions. Our primary measure of profitability is the spread between projected AROCS and average SOFR. In this measure, AROCS adjusts GAAP net income for certain non-routine or unpredictable items, such as market value adjustments, prepayment fee income, and other non-routine items.
We monitor and manage to policy limits, which are based on the spread between our projected AROCS and average SOFR in parallel and non-parallel interest rate change scenarios. Additionally, there is a limit on the decline in projected AROCS from base case AROCS for certain basis shock scenarios to limit basis risk exposure. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner. We were in compliance with all projected 24-month income policy limits at June 30, 2026 and December 31, 2025.
For more information on this risk measure, refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate Risk - Projected 24-Month Income" in our 2025 Form 10-K.
CAPITAL ADEQUACY
An adequate capital position is necessary for facilitating safe and sound business operations, protecting the redemption value of our capital stock, maintaining regulatory capital ratios, and supporting our ability to pay dividends and redeem excess capital stock. To ensure capital adequacy, we maintain a targeted level of retained earnings to achieve business imperatives and cover unexpected losses. Our key capital adequacy measures are regulatory capital and targeted retained earnings in order to maintain capital levels in accordance with Finance Agency regulations. For additional information on our compliance with regulatory capital requirements, refer to "Item 1. Financial Statements - Note 9 - Capital." For additional information on our targeted retained earnings, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Retained Earnings."
In addition, our risk management policies require that we maintain MVCS at or above our $100 par value. For additional information on MVCS, refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Interest Rate Risk - Market Value of Equity."
Credit Risk
We define credit risk as the risk that a member or counterparty will fail to meet its financial obligations. Our primary credit risks arise from our ongoing lending, investing, and hedging activities. Our overall objective in managing credit risk is to operate a sound credit granting process and to maintain appropriate credit administration, measurement, and monitoring practices.
ADVANCES
We manage our credit exposure to advances through a lending policy that provides for an established credit limit for each borrower, ongoing reviews of each borrower's financial condition and ability to repay, and detailed collateral and lending policies. During the three months ended June 30, 2026, we did not incur any credit loss on any of our advances, and management believes that it has adequate policies and procedures in place to manage our credit risk on advances effectively.
At June 30, 2026 and December 31, 2025, borrowers pledged $453.8 billion and $442.4 billion of collateral (net of applicable discounts) to support activity with us, including advances. At June 30, 2026 and December 31, 2025, all of our advances met the requirement to be collateralized at a minimum of 100 percent, net of applicable discounts. Borrowers pledge collateral in excess of their collateral requirement mainly to demonstrate available liquidity and to borrow additional amounts in the future.
We evaluate advances for credit losses on a quarterly basis. We have never experienced a credit loss on our advances. Based upon our collateral and lending policies, the collateral held as security, and the repayment history on advances, management has determined that there were no expected credit losses on our advances as of June 30, 2026 and December 31, 2025. Refer to "Item 8. Financial Statements and Supplementary Data - Note 5 - Advances" in our 2025 Form 10-K for additional information on our collateral management and allowance for credit losses.
MORTGAGE LOANS
Mortgage loan credit risk is the risk that we will not receive timely payments of principal and interest due from mortgage borrowers because of borrower defaults. Credit risk on mortgage loans is affected by a number of factors, including loan type, borrower's credit history, and other factors such as home price fluctuations, unemployment levels, and other economic factors in the local market or nationwide.
We manage the credit risk on mortgage loans by (i) adhering to our underwriting standards, (ii) using agreements to establish credit risk sharing responsibilities with our PFIs, and (iii) monitoring the performance of the mortgage loan portfolio and creditworthiness of PFIs. Management believes that it has adequate policies and procedures in place to manage credit risk on mortgage loans effectively. Refer to "Item 1. Financial Statements - Note 5 - Mortgage Loans Held for Portfolio" for additional information on the payment status of our conventional mortgage loans and "Item 8. Financial Statements and Supplementary Data - Note 6 - Mortgage Loans Held for Portfolio" in our 2025 Form 10-K for more information on our allowance for credit losses.
INVESTMENTS
We are subject to credit risk on investments consisting of investment securities, interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold. To minimize credit risk on investments, we are prohibited by
Finance Agency regulations from investing in certain types of investments. We also seek to reduce the credit risk by investing in investment-quality securities.
In addition, Finance Agency regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties. Refer to "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management - Credit Risk - Investments" in our 2025 Form 10-K for additional information on these regulatory limits, risk mitigation efforts, and allowance for credit losses.
At June 30, 2026, our unsecured short-term investment exposure consisted of overnight interest-bearing deposits and federal funds sold. The following table presents our unsecured short-term investment exposure by counterparty credit rating and domicile (dollars in millions):
June 30, 2026
Credit Rating1,2
Domicile of Counterparty AA A Total
Domestic $ 1,035 $ 4,575 $ 5,610
U.S subsidiaries of foreign commercial banks - 1,100 1,100
Total domestic and U.S. subsidiaries of foreign commercial banks 1,035 5,675 6,710
U.S. branches and agency offices of foreign commercial banks
Australia 1,000 - 1,000
Belgium - 1,100 1,100
Canada - 2,450 2,450
Finland 600 - 600
France - 1,250 1,250
Germany 1,400 - 1,400
Japan - 1,100 1,100
Netherlands - 550 550
United Kingdom - 1,100 1,100
Total U.S. branches and agency offices of foreign commercial banks 3,000 7,550 10,550
Total unsecured short-term investment exposure $ 4,035 $ 13,225 $ 17,260
1 Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.
2 Table excludes investments issued or guaranteed by the U.S. Government, U.S. government agencies, government instrumentalities, GSEs, and supranational entities, and does not include related accrued interest.
Investment Ratings
The following table summarizes the carrying value of our investments by credit rating (dollars in millions):
June 30, 2026
Credit Rating1
AAA AA A Unrated Total
Interest-bearing deposits2
$ - $ 1,038 $ 4,175 $ - $ 5,213
Securities purchased under agreements to resell3
- 2,000 1,750 15,550 19,300
Federal funds sold - 3,000 9,050 - 12,050
Investment securities:
MBS
GSE single-family - 469 - - 469
GSE multifamily - 20,987 - - 20,987
U.S. obligations single-family4
- 6,808 - - 6,808
Private-label residential - - - 2 2
Total MBS - 28,264 - 2 28,266
Non-MBS
U.S. Treasury obligations4
- 5,874 - - 5,874
Other U.S. obligations4
- 58 - - 58
GSE and TVA obligations - 474 - - 474
State or local housing agency obligations 308 163 - - 471
Other5
93 19 - - 112
Total non-MBS 401 6,588 - - 6,989
Total investments $ 401 $ 40,890 $ 14,975 $ 15,552 $ 71,818
1 Represents either the lowest credit rating available for each investment based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.
2 Balance includes $3 million of interest-bearing deposits with another FHLBank. These investments are rated AA, based on the credit rating of the FHLBank System.
3 Although a portion of the securities purchased under agreements to resell is with unrated counterparties, the underlying collateral supporting these investments is investment grade.
4 Represents investment securities backed by the full faith and credit of the U.S. Government.
5 Consists of taxable municipal bonds.
DERIVATIVES
The following table shows our derivative counterparty credit exposure (dollars in millions):
June 30, 2026
Credit Rating1
Notional Amount Net Derivatives
Fair Value Before Collateral 		Cash Collateral Pledged
To (From) Counterparty
Non-cash Collateral Pledged To (From) Counterparty
Net Credit Exposure
to Counterparties
Non-member counterparties:
Asset positions with credit exposure
Uncleared derivatives
A2
$ 1,652 $ 60 $ (60) $ - $ -
Cleared derivatives3
189,353 87 1 1,515 1,603
Total derivative positions with credit exposure to non-member counterparties 191,005 147 (59) 1,515 1,603
Member institutions2,4
78 - - - -
Total 191,083 $ 147 $ (59) $ 1,515 $ 1,603
Derivative positions without credit exposure 21,693
Total notional $ 212,776
1 Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable.
2 Net credit exposure is less than $1 million.
3 Represents derivative transactions cleared with CME Clearing and LCH Ltd., our clearinghouses. CME Clearing is not rated, but its parent, CME Group Inc. was rated Aa3 by Moody's and AA- by S&P at June 30, 2026. LCH Ltd. was rated AA- by S&P at June 30, 2026.
4 Represents mortgage loan purchase commitments with our member institutions.
Refer to "Item 1. Financial Statements - Note 6 - Derivatives and Hedging Activities" for additional information on our derivatives and hedging activities.
Federal Home Loan Bank of Des Moines published this content on August 07, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 07, 2026 at 17:34 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]