Federal Home Loan Bank of Cincinnati

03/19/2026 | Press release | Distributed by Public on 03/19/2026 11:57

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

Management's Discussion and Analysis of Financial Condition and Results of Operations.
This discussion and analysis of the FHLB's financial condition and results of operations should be read in conjunction with the Financial Statements and related Notes to Financial Statements contained in this Form 10-K.
EXECUTIVE OVERVIEW
During 2025, we delivered on our dual mission of providing access to ongoing liquidity funding to member financial institutions and supporting affordable housing and community investment. We maintained strong profitability, which enabled us to bolster capital adequacy by increasing retained earnings, to pay a competitive dividend rate to stockholders, and to make meaningful contributions to affordable housing. We exceeded all minimum regulatory capital and liquidity requirements, and we were able to fund operations through the issuance of Consolidated Obligations at acceptable interest costs. Additionally, overall residual credit risk exposure from our Credit Services, mortgage loan portfolio, investments, and derivative transactions remained de minimis. Likewise, our market risk measures continued to be within our risk appetite.
Mission Assets and Activities
Primary Mission Assets (i.e., principal balances of Advances and mortgage loans held for portfolio) and Supplemental Mission Activities (i.e., Letters of Credit and Mandatory Delivery Contracts) are the principal business activities by which we fulfill our mission with direct connections to members and what we refer to as Mission Assets and Activities. We regularly monitor our level of Mission Assets and Activities. One measure we use to assess mission achievement is our Primary Mission Asset ratio, which measures the sum of average Advances and mortgage loans as a percentage of average Consolidated Obligations (adjusted for certain high-quality liquid assets, as permitted by regulation). In 2025, the Primary Mission Asset ratio averaged 72 percent, above the Finance Agency's preferred ratio of 70 percent. In assessing overall mission achievement, we also consider supplemental sources of Mission Assets and Activities, the most significant of which is Letters of Credit issued for the benefit of members.
The following table summarizes our Mission Assets and Activities.
Year Ended December 31,
Ending Balances Average Balances
(In millions) 2025 2024 2025 2024
Primary Mission Assets (1):
Advances $ 70,104 $ 79,545 $ 79,082 $ 74,669
Mortgage loans held for portfolio 8,490 7,093 7,554 7,032
Total Primary Mission Assets $ 78,594 $ 86,638 $ 86,636 $ 81,701
Supplemental Mission Activities (2):
Letters of Credit (notional) $ 46,532 $ 48,915 $ 46,389 $ 47,458
Mandatory Delivery Contracts (notional) 159 26 207 60
Total Supplemental Mission Activities $ 46,691 $ 48,941 $ 46,596 $ 47,518
(1)Amounts represent principal balances.
(2)Amounts represent off-balance sheet commitments.
Advance principal balances at December 31, 2025 decreased $9.4 billion (12 percent) from year-end 2024 primarily driven by modest reductions in Advance borrowings from a few large-asset members. However, average principal Advance balances for
2025 increased $4.4 billion (six percent) compared to 2024 as depository members continued to have a strong demand for liquidity.
We believe that the benefit of membership comes from our business model as a wholesale lender GSE, which provides members a reliable and flexible source of funding in order to support their asset-liability management needs. As such, Advance balances are often volatile given our members' ability to quickly, normally on the same day, increase or decrease the amount of their Advances. Our business model is designed to support significant changes in asset levels without having to undergo material changes in staffing, operations, risk practices, or general resource needs. A key reason for this scalability is that our Capital Plan provides for additional capital when Advances grow and the opportunity for us to retire capital when Advances decline, thereby acting to preserve competitive profitability.
MPP principal balances increased $1.4 billion (20 percent) from the year-end 2024 balance. During 2025, we purchased $2.2 billion of mortgage loans, while principal reductions were $0.8 billion. The higher MPP purchases reflected market conditions that supported members' greater utilization of the program. Principal reductions in 2025 were limited due in large part to the elevated mortgage rate environment keeping mortgage refinance activity low.
Letters of Credit decreased $2.4 billion (five percent) from year-end 2024. Letters of Credit balances are primarily used by members to secure public unit deposits. We normally earn fees on Letters of Credit based on the actual average amount of the Letters utilized, which generally is less than the notional amount issued.
Affordable Housing and Community Investment
In addition to providing readily-available, competitively-priced sources of funds to members, one of our core missions is to support affordable housing and community investment. We are statutorily required to set aside a portion of our profits to support affordable housing each year. These funds assist members in serving very low-, low-, and moderate-income households and community economic development. Our net income for 2025 resulted in a statutory assessment of $64 million to the AHP pool of funds available to members in 2026.
Beyond the statutory AHP assessment, the Board of Directors may elect to make voluntary contributions to the AHP or other housing and community investment activities. In 2025, we made voluntary contributions of $36 million, representing five percent of our 2024 earnings, to various voluntary housing and community investment programs. These contributions are recorded in non-interest expense on the Statements of Income, which reduces net income before assessments, and, in turn, reduces the statutory AHP assessment each year. As such, in 2025, we made supplemental voluntary contributions to the AHP of approximately $4 million to make the total AHP contributions equal to what the statutory AHP assessment would have been in the absence of these effects. The table below provides a summary of our voluntary contribution commitment and fulfillment for the years ended December 31, 2025 and 2024.
Year Ended December 31,
(Dollars in millions)
2025 2024
Voluntary contribution commitment
$ 36 $ 38
Voluntary contribution fulfillment
36 38
Fulfillment excess (shortfall)
$ - $ -
Fulfillment, as a percentage of prior year net income subject to assessment, as adjusted 5 % 5 %
Voluntary contribution fulfillment
$ 36 $ 38
Supplemental voluntary contributions to AHP
4 4
Total voluntary contributions, including supplemental contributions to AHP assessment $ 40 $ 42
Results of Operations
Our earnings over time reflect the combination of a stable business model and conservative management of risk. Key market driven factors that can cause significant periodic volatility in our profitability include changes in Mission Assets and Activities, the level of interest rates, changes in spreads between benchmark interest rates and our short-term funding costs, recognition of net amortization from accelerated prepayments of mortgage assets, fair value adjustments related to the use of derivatives and the associated hedged items, and general economic conditions. The table below summarizes our results of operations.
Year Ended December 31,
(Dollars in millions) 2025 2024 2023
Net income $ 575 $ 608 $ 668
Return on average equity (ROE) 8.45 % 9.48 % 9.63 %
Return on average assets 0.42 0.49 0.49
Weighted average dividend rate 8.62 9.00 7.60
Dividend payout ratio (1)
72.9 70.2 61.5
Average Secured Overnight Financing Rate (SOFR)
4.24 5.14 5.01
ROE spread to average SOFR
4.21 4.34 4.62
Dividend rate spread to average SOFR
4.38 3.86 2.59
(1)Dividend payout ratio is dividends declared in the period as a percentage of net income.
Our profitability was strong in 2025, which enabled us to pay a competitive return to stockholders, make meaningful contributions to support affordable housing and community investment and strengthen capital by increasing retained earnings. Net income decreased $33 million in 2025 compared to 2024. The decrease in net income was primarily due to lower average interest rates, which decreased the earnings generated from investing the FHLB's capital in interest-earning assets, and lower spreads earned on mortgage loans held for portfolio. The factors decreasing net income were partially offset by the benefit of higher average interest-earning assets.
We strive to provide a competitive return on members' capital investment in our company through quarterly dividend payments. In 2025, we paid stockholders a weighted average dividend rate of 8.62 percent on their capital investment in our company, which was 4.38 percentage points above average SOFR. After we paid our dividends, retained earnings totaled $2.0 billion on December 31, 2025, an increase of eight percent from year-end 2024. We believe the amount of retained earnings is sufficient to protect against members' impairment risk of their capital stock investment in the FHLB and to provide the opportunity to stabilize future dividends.
Effect of Interest Rate Environment
Trends in market interest rates and the resulting shapes of the market yield curves strongly influence our results of operations and profitability because of how they affect members' demand for Mission Assets and Activities, spreads on assets, funding costs and decisions in managing the tradeoffs in our market risk/return profile. The following tables present key market interest rates (obtained from Bloomberg L.P.).
Year 2025
Year 2024
Year 2023
Ending Average Ending Average Ending Average
Federal funds effective
3.64 % 4.21 % 4.33 % 5.14 % 5.33 % 5.03 %
SOFR 3.87 4.24 4.49 5.14 5.38 5.01
2-year U.S. Treasury 3.48 3.82 4.24 4.38 4.25 4.60
10-year U.S. Treasury
4.17 4.29 4.57 4.21 3.88 3.96
15-year mortgage current coupon (1)
4.40 4.74 5.11 4.95 4.62 5.11
30-year mortgage current coupon (1)
5.04 5.48 5.83 5.59 5.25 5.62
Year 2025 by Quarter - Average
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Federal funds effective 4.33 % 4.33 % 4.30 % 3.90 %
SOFR 4.33 4.32 4.33 3.99
2-year U.S. Treasury 4.16 3.88 3.73 3.53
10-year U.S. Treasury 4.46 4.36 4.26 4.09
15-year mortgage current coupon (1)
4.97 4.91 4.63 4.45
30-year mortgage current coupon (1)
5.71 5.70 5.40 5.10
(1) Current coupon rate of par uniform mortgage-backed securities(UMBS) indications.
Average overnight rates were approximately 90 basis points lower in 2025 compared to 2024 due to several rate cuts by the Federal Reserve in 2025. Our earnings from capital decreased $36 million in 2025 compared to 2024 because of the lower average short-term rates. However, this decrease was partially offset by higher average capital balances in 2025.
During both 2025 and 2024, the market risk exposure to changing interest rates was low and within policy limits. We believe that longer-term profitability will be competitive, unless interest rates were to increase significantly for a sustained period of time.
Legislative and Regulatory Developments
Significant regulatory actions and developments for the period covered by this report not previously disclosed are summarized below.
We are subject to various legal and regulatory requirements and priorities. Certain actions, regulatory priorities, and areas of focus, such as deregulation, by the federal executive administration have changed and continue to change the regulatory environment. For example, the Finance Agency repealed the Fair Lending, Fair Housing, and Equitable Housing Finance Plus regulation applicable to the FHLBanks, effective March 9, 2026, citing the federal executive administration's deregulatory priorities. Furthermore, during 2025, withdrawals and rescissions of certain rules, proposed rules, and advisory, regulatory, or technical guidance have affected, and likely will continue to affect, certain aspects of our business operations. These changes could have an impact on our financial condition, results of operations and reputation.
On January 20, 2026, the federal executive administration issued an executive order that seeks to restrict acquisitions by large institutional investors of single-family homes. Among other things, the executive order directs certain agencies, including the Finance Agency, to issue guidance to (i) prevent agencies and government-sponsored enterprises from providing for, approving, insuring, guaranteeing, securitizing, or facilitating the acquisition by a large institutional investor of a single-family home that could otherwise be purchased by an individual owner-occupant, or disposing of federal assets in a manner that transfers a single-family home to a large institutional investor; and (ii) promote sales to individual owner-occupants, including through anti-circumvention provisions, first-look policies, and disclosure requirements. The executive order also calls for legislative recommendations to codify related policies and directs certain agencies to conduct reviews and consider additional measures to
combat speculation by large institutional investors in single-family housing markets. We are unable to predict the nature of the guidance, measures, or recommendations, or how each may impact our business.
On March 13, 2026, the federal executive administration issued two executive orders addressing mortgage credit availability and housing affordability. One executive order directs the Finance Agency and certain other financial regulators to consider:
1.revising capital regulations to tailor risk weights for all banks, including community banks, for portfolio mortgages, servicing rights, and warehouse lines of credit;
2.modernizing collateral valuation and transfer systems between Federal Reserve Banks and FHLBanks;
3.expanding access to longer-dated FHLBank Advances tied to residential mortgage assets;
4.creating targeted FHLBank liquidity programs for entry-level housing, owner-occupied purchase loans, and small residential builders;
5.accelerating collateral boarding and valuation processes through standardized data and digital documentation; and
6.refocusing FHLBanks' Affordable Housing Programs to facilitate faster-cycle execution and greater financial leverage for small-scale and owner-occupied housing projects.
The executive order also instructs the Finance Agency and the Vice Chairman for Supervision of the Federal Reserve to consider authorizing FHLBanks' intermediate access to the Federal Reserve's discount window for FHLBanks' depository institution members. Additionally, among other actions, the executive order directs the Finance Agency to consider facilitating the acceptance of e-notes and promotion of digital mortgage standards. Under the executive order, the Finance Agency, in consultation with other relevant federal agencies, is required to submit a report identifying recommendations for regulatory or legislative changes necessary to address any regulatory or oversight gaps.
The second executive order, together with other actions, directs the Finance Agency and other federal agencies to consider eliminating unduly burdensome rules and reforming programs that constrain residential development and impede housing affordability, especially the construction of affordable single-family homes as well as suburban and exurban neighborhoods.
While we note that the executive orders could potentially affect our liquidity products, collateral and operational requirements, capital deployment, and housing-related initiatives, they do not, by themselves, change existing regulations or program requirements applicable to us or the FHLBank System. The nature, timing, and scope of any regulatory or programmatic changes resulting from these executive orders remain uncertain and would be subject to further agency action, including rulemaking or guidance, as applicable. We will continue to monitor developments related to these executive orders and assess their potential impact on us, the FHLBank System, and our members.
Considering the changes in the regulatory environment, there is uncertainty with respect to the ultimate result of future regulatory actions and the impact they may have on us and the FHLBank System. We continue to monitor these actions as they evolve and evaluate their potential impact on us. See Part I, Item 1A. "Risk Factors" for more discussion of related risks.
ANALYSIS OF FINANCIAL CONDITION
Credit Services
Credit Activity and Advance Composition
The table below shows trends in Advance balances by major programs and in the notional amount of Letters of Credit.
(Dollars in millions) December 31, 2025 December 31, 2024
Balance
Percent(1)
Balance
Percent(1)
Adjustable/Variable-Rate Indexed:
SOFR $ 26,112 37 % $ 27,745 35 %
Other 1,653 3 2,461 3
Total 27,765 40 30,206 38
Fixed-Rate:
Repurchase based (REPO) 6,060 9 7,384 9
Regular Fixed-Rate 33,188 47 39,637 50
Putable (2)
623 1 615 1
Amortizing/Mortgage Matched
799 1 1,015 1
Other 1,669 2 688 1
Total 42,339 60 49,339 62
Total Advances Principal $ 70,104 100 % $ 79,545 100 %
Letters of Credit (notional) (3)
$ 46,532 $ 48,915
(1)As a percentage of total Advances principal.
(2)Excludes Putable Advances where the related put options have expired or where the Advance is indexed to a variable-rate. These Advances are classified based on their current terms.
(3)Represents the amount of an off-balance sheet commitment.
The Advance principal balance as of December 31, 2025 decreased $9.4 billion compared to year-end 2024, primarily driven by modest reductions in Advance borrowings from a few large-asset members. However, average Advance principal balances increased $4.4 billion in 2025 compared to 2024 indicating that depository members continued to have a strong demand for liquidity. The future levels of Advance balances are difficult to predict and depend on many factors, including changes in the level of liquidity in the financial markets, changes in our members' deposit levels compared to loan growth and the general health of the economy.
Letters of Credit are issued on behalf of members to support certain obligations of members (or members' customers) to third-party beneficiaries. Letters of Credit decreased $2.4 billion (five percent) in 2025. Letters of Credit usually expire without being drawn upon.
The following table shows Advance usage of members by charter type.
(Dollars in millions) December 31, 2025 December 31, 2024
Principal Amount of Advances Percent of Total Principal Amount of Advances Principal Amount of Advances Percent of Total Principal Amount of Advances
Commercial Banks $ 46,054 66 % $ 55,198 69 %
Savings Institutions 6,771 10 7,144 9
Credit Unions 2,918 4 3,509 5
Insurance Companies 14,340 20 13,686 17
Community Development Financial Institutions 20 - - -
Total member Advances 70,103 100 79,537 100
Former member borrowings 1 - 8 -
Total principal amount of Advances $ 70,104 100 % $ 79,545 100 %
The following tables present principal balances for the five members with the largest Advance borrowings.
(Dollars in millions)
December 31, 2025 December 31, 2024
Name Principal Amount of Advances Percent of Total Principal Amount of Advances Name Principal Amount of Advances Percent of Total Principal Amount of Advances
JPMorgan Chase Bank, N.A. $ 16,500 24 % JPMorgan Chase Bank, N.A. $ 20,000 25 %
U.S. Bank, N.A. 13,000 19 U.S. Bank, N.A. 14,500 18
The Huntington National Bank 5,506 8 Fifth Third Bank 5,601 7
Third Federal Savings and Loan Association 4,774 7 Third Federal Savings and Loan Association 4,637 6
Protective Life Insurance Company 3,000 4 The Huntington National Bank 4,501 6
Total of Top 5 $ 42,780 62 % Total of Top 5 $ 49,239 62 %
Mortgage Loans Held for Portfolio (Mortgage Purchase Program, or MPP)
MPP balances are influenced by conditions in the housing and mortgage markets, the competitiveness of prices we offer to purchase loans, as well as program features and activity from our largest sellers. We manage purchases and balances at a prudent level relative to capital and total assets to effectively manage market and credit risks consistent with our risk appetite.
The table below shows principal purchases and collections of loans in the MPP for each of the last two years. All loans acquired in 2025 and 2024 were conventional loans. The higher MPP purchases in 2025 reflected market conditions that supported members' greater utilization of the program.
(In millions) 2025 2024
Balance, beginning of year
$ 7,093 $ 6,960
Principal purchases 2,230 809
Principal collections
(833) (676)
Balance, end of year
$ 8,490 $ 7,093
We closely model and analyze the refinancing incentives of our mortgage assets (including loans in the MPP and MBS) because the option for homeowners to change their principal payments normally represents the largest portion of our market risk exposure and can affect MPP balances. MPP principal paydowns in 2025 equated to a seven percent annual constant prepayment rate, which was a slight increase from the six percent rate in 2024. Although mortgage rates have eased slightly, mortgage prepayment activity remains low because current mortgage rates are still high relative to most borrowers' existing rates.
The following tables show the percentage of principal balances from Participating Financial Institutions (PFIs) supplying five percent or more of total principal and the percentage of principal balances from all other PFIs. As shown below, MPP activity is concentrated amongst a few members.
(Dollars in millions) December 31, 2025 December 31, 2024
Principal % of Total Principal % of Total
Union Savings Bank $ 1,762 21 % Union Savings Bank $ 1,472 21 %
FirstBank 676 8 FirstBank 688 10
Guardian Savings Bank FSB
477 6
LCNB National Bank
441 6
First Financial Bank
465 5 Guardian Savings Bank FSB 402 6
LCNB National Bank
439 5
The Huntington National Bank
389 5
All others 4,671 55 All others 3,701 52
Total $ 8,490 100 % Total $ 7,093 100 %
Housing and Community Investment
Our Housing and Community Investment programs include the AHP and various housing and community economic development-related Advance and grant programs. The AHP, which is required by the FHLBank Act, includes funding with an accrual equal to 10 percent of our previous year's net earnings.
In 2025, we accrued $64 million of earnings for the AHP pool of funds available to members in 2026. The AHP consists of a Competitive Program and a homeownership program called Welcome Home, which assists homebuyers with down payments and closing costs.
Including funds available in 2025 from previous years, we had $52 million available for the Competitive Program in 2025, which we awarded to 56 projects through a single competitive offering. In addition, we disbursed $27 million to 166 members on behalf of 1,364 homebuyers through the Welcome Home Program, which assists homebuyers with down payments and closing costs.
Our activities to support affordable housing and economic development also include offering Advances and loans through the AHP, Community Investment Program, Economic Development Program and Zero Interest Fund with below-market interest rates and, in some cases, rates as low as zero percent. At the end of 2025, Advance balances under these programs totaled $287 million.
In addition to the statutory AHP assessment, we made voluntary contributions representing five percent of our earnings in support of a variety of housing and community investment programs. However, our voluntary contributions reduce net income before assessments which, in turn, reduces the statutory AHP assessment each year. As such, we made supplemental voluntary contributions to the AHP by an amount that equals what the statutory AHP assessment would be in the absence of these effects. The table below provides a calculation of the net income subject to assessment, adjusted for voluntary contributions recognized in net income to show how our supplemental voluntary AHP contribution restores the AHP amounts to 10 percent of our earnings absent the voluntary contributions.
Year Ended December 31,
(Dollars in millions) 2025 2024
Net income subject to statutory assessment $ 641 $ 677
Adjustments:
Voluntary commitment fulfillment, recognized in net income 36 38
Supplemental voluntary AHP contributions for the current year (1)
4 4
Net income subject to assessment, as adjusted (2)
$ 681 $ 719
10% of net income subject to assessment, as adjusted $ 68 $ 72
Statutory AHP assessments $ 64 $ 68
Supplemental voluntary AHP contributions for the current year (1)
4 4
Total statutory AHP assessment and supplemental voluntary AHP contributions for the current year $ 68 $ 72
(1) Included in voluntary housing and community investment expense on the Statements of Income.
(2) Represents the calculated amount of earnings that would be available for AHP assessment if we had not made the voluntary contributions to other initiatives, which reduce net income before assessments and, in turn, reduces the statutory AHP assessment.
The following table provides the calculation of the five percent voluntary contribution commitment target for the years ended December 31, 2025 and 2024.
Year Ended December 31,
(Dollars in millions) 2025 2024
Prior year's net income before assessment $ 676 $ 742
Adjustment for prior year's interest expense on mandatorily redeemable capital stock 1 3
Prior year's net income subject to statutory assessment $ 677 $ 745
Unadjusted voluntary contribution commitment (5%) $ 34 $ 37
Adjustment for prior year voluntary contributions (1)
2 1
Voluntary contribution commitment target $ 36 $ 38
(1) Our voluntary contributions reduce net income before assessments which, in turn, reduces the voluntarily contributions in the subsequent year. In order to restore the voluntary contributions to the dollar amount it would be in the absence of these effects, we voluntarily contributed an additional amount to our voluntary affordable housing and community investment initiatives.
Collectively, our voluntary contributions in 2025 supported a variety of housing and community investment programs. For example, the MPP Affordable Rate Program provided $13 million in subsidies to reduce note rates on MPP loans by up to two percent for borrowers with incomes at or below 80 percent of the area median income. The Carol M. Peterson (CMP) Housing Fund disbursed over $9 million in 2025 to provide grants to cover rehabilitation and repairs for special needs and elderly homeowners within the Fifth District. The Community Development Financial Institutions Loan Investment Fund contributed over $7 million in subsidies to provide zero interest Advances to expand economic opportunity in low-income and distressed communities. The Rise Up program received $4 million in contributions during 2025 to fund grants of $25,000 for down-payment, closing-cost, and principal-reduction assistance for first-generation homebuyers purchasing homes in Kentucky or Tennessee. The Disaster Reconstruction Program disbursed over $1 million for the replacement or repair of homes damaged or destroyed by natural disasters within the Fifth District.
For 2026, the Board has committed to $34 million, or approximately five percent of 2025's adjusted income before assessments, in contributions to support a variety of voluntary housing and community investment programs, along with a supplemental voluntary AHP contribution of $4 million. In January 2026, our Board approved a $10 million contribution to the CMP Housing Fund. Additional contributions will be announced over the course of 2026.
Investments
The table below presents the ending and average balances of our investment portfolio.
(In millions) 2025 2024
Ending Balance Average Balance Ending Balance Average Balance
Liquidity investments $ 30,065 $ 28,554 $ 26,363 $ 23,998
MBS 20,014 20,121 18,776 18,973
Other investments (1)
- 23 - 67
Total investments $ 50,079 $ 48,698 $ 45,139 $ 43,038
(1)The average balance includes the rights or obligations to cash collateral, which are included in the fair value of derivative assets or derivative liabilities on the Statements of Condition at period end.
Liquidity investments are either short-term (primarily overnight), or longer-term investments that consist of U.S. Treasury and GSE obligations. These longer-term investments may be pledged or sold and converted to cash. It is normal for liquidity investments to vary by up to several billion dollars on a daily basis. Liquidity investment levels can vary significantly based on changes in the amount of actual Advances, anticipated demand for Advances, regulatory liquidity requirements, the availability of acceptable net spreads, and the number of eligible counterparties that meet our unsecured credit risk criteria.
Our overarching strategy for balances of MBS is to keep holdings as close as possible to the regulatory maximum. Finance Agency regulations prohibit us from purchasing MBS if our investment in these securities exceeds three times regulatory capital on the day we intend to purchase the securities. The ratio of MBS to regulatory capital was 3.07 on December 31, 2025, which exceeded the current regulatory limit due to stock repurchases that occurred during the fourth quarter. New MBS purchases will be postponed until the ratio falls below the regulatory limit. The balance of MBS at December 31, 2025 consisted of $19.1 billion of securities issued by Fannie Mae or Freddie Mac (of which $10.3 billion were floating-rate securities), and $0.9 billion of securities issued by Ginnie Mae (which are fixed rate).
The table below shows principal purchases and paydowns of our MBS for the last two years.
(In millions) MBS Principal
2025 2024
Balance, beginning of year
$ 19,020 $ 19,409
Principal purchases 3,672 2,544
Principal paydowns (2,621) (2,933)
Balance, end of year
$ 20,071 $ 19,020
MBS principal paydowns decreased to a 12 percent annual constant prepayment rate in 2025 from the 14 percent rate experienced in all of 2024.
Consolidated Obligations
We generally fund variable-rate assets with Discount Notes (a portion of which may be swapped), adjustable-rate Bonds, and fixed-rate Bonds that have been swapped to a variable rate because they give us the ability to effectively match the underlying rate reset periods embedded in these assets. Total Consolidated Obligations on December 31, 2025 were $120.8 billion, a decrease of $2.6 billion (two percent) compared to the balance at year-end 2024. The balances and composition of our Consolidated Obligations tend to fluctuate with changes in the balances and composition of our assets. In addition, changes in the amount and composition of our funding may be necessary from time to time to meet the days of positive liquidity and asset/liability maturity funding gap requirements discussed in the "Liquidity Risk" section of "Quantitative and Qualitative Disclosures About Risk Management."
Deposits
Total deposits with us are normally a relatively minor source of funding. Deposits with us are not insured, but are subject to statutory deposit reserve requirements. Total interest-bearing deposits as of December 31, 2025 were $1.1 billion, a decrease of three percent compared to year-end 2024. Interest-bearing deposits may have overnight or shorter-term maturities. The table below presents the maturities for uninsured term deposits:
(In millions)
By remaining maturity at December 31, 2025
3 months or less Over 3 months but within 6 months Over 6 months but within 12 months Over 12 months but within 24 months Total
Uninsured term deposits $ 82 $ 9 $ 35 $ 2 $ 128
Derivatives Hedging Activity and Liquidity
Our use of derivatives is discussed in the "Effect of the Use of Derivatives on Net Interest Income" and "Non-Interest Income (Loss)" sections in "Results of Operations." Liquidity is discussed in the "Liquidity Risk" section in "Quantitative and Qualitative Disclosures About Risk Management."
Capital Resources
The following tables present capital amounts and capital-to-assets ratios, on both a GAAP and regulatory basis. We consider the regulatory ratio to be a better representation of financial leverage than the GAAP ratio because, although the GAAP ratio treats mandatorily redeemable capital stock as a liability, it protects investors in our debt in the same manner as GAAP capital stock and retained earnings.
Year Ended December 31,
(In millions) 2025 2024
Period End Average Period End Average
GAAP and Regulatory Capital
GAAP Capital Stock $ 4,539 $ 4,887 $ 4,936 $ 4,676
Mandatorily Redeemable Capital Stock 20 25 14 16
Regulatory Capital Stock 4,559 4,912 4,950 4,692
Retained Earnings 1,995 1,960 1,839 1,784
Regulatory Capital $ 6,554 $ 6,872 $ 6,789 $ 6,476
2025 2024
Period End Average Period End Average
GAAP and Regulatory Capital-to-Assets Ratio
GAAP 5.05 % 5.00 % 5.09 % 5.12 %
Regulatory (1)
5.06 5.05 5.13 5.17
(1) At all times, the FHLB must maintain at least a four percent minimum regulatory capital-to-assets ratio.
The following table presents the sources of change in regulatory capital stock balances in 2025 and 2024.
(In millions) 2025 2024
Regulatory stock balance at beginning of year $ 4,950 $ 4,863
Stock purchases:
Membership stock 13 11
Activity stock 4,444 2,722
Stock repurchases/redemptions:
Redemption of member excess (4) (1)
Repurchase of member excess (4,809) (2,636)
Withdrawals (35) (9)
Regulatory stock balance at the end of the year $ 4,559 $ 4,950
Our business model is structured to be able to absorb sharp changes in assets because we can execute commensurate changes in liability and capital stock balances. For example, in 2025, we issued $4.5 billion of capital stock to members primarily in support of Advance borrowings, while repurchasing $4.8 billion of excess capital stock no longer supporting Mission Assets and Activities. Excess capital stock is the amount of stock held by a member (or former member) in excess of that institution's minimum stock ownership requirement and may be used by a member to capitalize additional Mission Assets and Activities, before purchasing activity stock.
See the "Capital Adequacy" section in "Quantitative and Qualitative Disclosures About Risk Management" for discussion of our retained earnings.
Membership and Stockholders
In 2025, we added six new member stockholders and lost 12 member stockholders, ending the year at 599 member stockholders. Of the 12 members lost, eight merged with other Fifth District members and four merged out of district.
In 2025, there were no material changes in the allocation of membership by state, charter type, or asset size. At the end of 2025, the composition of membership by state was Ohio with 295, Kentucky with 155, and Tennessee with 149.
The following table provides the number of member stockholders by charter type.
December 31,
2025 2024
Commercial Banks 315 323
Savings Institutions 70 72
Credit Unions 149 148
Insurance Companies 58 55
Community Development Financial Institutions 7 7
Total 599 605
The following table provides the ownership of capital stock by charter type.
(In millions) December 31,
2025 2024
Commercial Banks $ 2,875 $ 3,303
Savings Institutions 459 472
Credit Unions 327 324
Insurance Companies 876 836
Community Development Financial Institutions 2 1
Total GAAP Capital Stock 4,539 4,936
Mandatorily Redeemable Capital Stock 20 14
Total Regulatory Capital Stock $ 4,559 $ 4,950
Credit union members hold relatively less stock than their membership proportion because they tend to be smaller than the average member and borrow less. Insurance company members hold relatively more stock than their membership proportion because they tend to be larger than the average member and borrow more.
The following table provides a summary of member stockholders by asset size.
December 31,
Member Asset Size (1)
2025 2024
Up to $100 million 95 99
> $100 up to $500 million 280 290
> $500 million up to $1 billion 88 82
> $1 billion 136 134
Total Member Stockholders 599 605
(1) The December 31 membership composition reflects members' assets as of the most-recently available figures for total assets.
Most members are smaller community financial institutions, with 63 percent having assets up to $500 million. Having larger members is important to help achieve our mission objectives, including providing valuable products and services to all members.
RESULTS OF OPERATIONS
The following sections provide tabular information for the years ended December 31, 2025, 2024 and 2023 and a discussion of the results between 2025 and 2024. For a discussion of the results between 2024 and 2023, see Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our 2024 Annual Report on Form 10-K.
Components of Earnings and Return on Equity
The following table is a summary income statement for the last three years. Each ROE percentage is computed by dividing income or expense for the category by the average amount of stockholders' equity for the period.
(Dollars in millions) 2025 2024 2023
Amount
ROE (1)
Amount
ROE (1)
Amount
ROE (1)
Net interest income $ 768 11.29 % $ 800 12.46 % $ 864 12.47 %
Non-interest income (loss):
Net gains (losses) on trading securities
74 1.09 (25) (0.39) 16 0.23
Net gains (losses) on sales of available-for-sale securities 1 0.01 1 0.02 - -
Net gains (losses) on derivatives (67) (0.99) 54 0.84 (2) (0.03)
Net gains (losses) on financial instruments held under fair value option (7) (0.10) (26) (0.41) (40) (0.57)
Other non-interest income, net 32 0.47 32 0.50 30 0.43
Total non-interest income (loss)
33 0.48 36 0.56 4 0.06
Total income 801 11.77 836 13.02 868 12.53
Non-interest expense 162 2.38 160 2.49 126 1.82
Affordable Housing Program assessments
64 0.94 68 1.05 74 1.08
Net income $ 575 8.45 % $ 608 9.48 % $ 668 9.63 %
(1)The ROE amounts have been computed using dollars in thousands. Accordingly, recalculations based upon the disclosed amounts in millions may produce nominally different results.
Details on the individual factors contributing to the level and changes in profitability are explained in the sections below.
Net Interest Income
The largest component of net income is net interest income. Our principal goal in managing net interest income is to maintain a low to moderate market risk profile while also ensuring profitability remains competitive. Effective risk/return management requires us to focus principally on the relationships among assets and liabilities that affect net interest income, rather than individual balance sheet and income statement accounts in isolation.
Our ROE normally is lower than that of many other financial institutions because of the cooperative wholesale business model that results in narrow spreads earned on our assets, the moderate overall risk profile, and the strategic objective to have a positive correlation of earnings to short-term interest rates.
Components of Net Interest Income
We generate net interest income from the following two components:
â–ªNet interest rate spread.This component equals the balance of total earning assets multiplied by the difference between the book yield on interest-earning assets and the book cost of interest-bearing liabilities. It is composed of net (amortization)/accretion, prepayment fees on Advances, and all other earnings from interest-earning assets net of funding costs.
â–ªEarnings from funding assets with capital (or earnings from capital).Because of our relatively low net interest rate spread compared to other financial institutions, we have historically derived a substantial portion of net interest income from deploying interest-free capital in interest-earning assets. We deploy much of the capital in short-term and adjustable-rate assets in order to help ensure that ROE moves in the same direction as short-term interest rates and to help control market risk exposure.
The following table shows selected components of net interest income. Reasons for the variance in net interest income between the 2025 and 2024 periods are discussed below.
(Dollars in millions) 2025 2024 2023
Amount % of Earning Assets Amount % of Earning Assets Amount % of Earning Assets
Components of net interest rate spread:
Net (amortization)/accretion (1) (2)
$ (35) (0.03) % $ (29) (0.02) % $ (24) (0.02) %
Prepayment fees on Advances, net (2)
- - 1 - 3 -
Other components of net interest rate spread
483 0.36 472 0.38 533 0.40
Total net interest rate spread 448 0.33 444 0.36 512 0.38
Earnings from funding assets with interest-free capital
320 0.24 356 0.28 352 0.26
Total net interest income/net interest margin (3)
$ 768 0.57 % $ 800 0.64 % $ 864 0.64 %
(1)Includes monthly recognition of premiums and discounts paid on purchases of mortgage assets, premiums, discounts and concessions paid on Consolidated Obligations and other hedging basis adjustments.
(2)This component of net interest rate spread has been segregated to display its relative impact.
(3)Net interest margin is net interest income as a percentage of average total interest-earning assets.
Net Amortization/Accretion (generally referred to as amortization):Net amortization can become substantial and volatile with changes in interest rates, especially for mortgage assets. For example, when mortgage rates decrease, premium amortization of mortgage assets generally increases, which reduces net interest income. In 2025 and 2024, mortgage rates remained at elevated levels relative to most borrowers' existing rates, keeping mortgage refinance activity low and amortization relatively modest.
Prepayment Fees on Advances:Fees received from members for their early repayment of certain Advances, which are included in net interest income, are designed to make us economically indifferent to whether members hold Advances to maturity or repay them before maturity. We record prepayment fees net of basis adjustments, which are primarily related to hedging activities included in the carrying value of the Advance. Both gross and net Advance prepayment fees were minimal in 2025 and 2024.
Other Components of Net Interest Rate Spread:The total other components of net interest rate spread increased $11 million in 2025 compared to 2024. The net increase was primarily due to the factors below.
2025 Versus 2024
â–ªHigher average interest-earning assets-Favorable:An increase of average interest-earning assets of $10.8 billion improved net interest income by an estimated $52 million. The higher average interest-earning assets were partially driven by an increase of $4.6 billion in average Advance balances as depository members continued to have a strong demand for liquidity.
â–ªHigher net interest rate spreads earned on MBS-Favorable:Higher spreads earned on MBS increased net interest income by an estimated $12 million. The higher spreads primarily reflect replacing lower-yielding, floating-rate MBS with purchases of higher-yielding, fixed-rate MBS, along with modest benefits from lower funding costs.
â–ªLower net interest rate spreads earned on mortgage loans held for portfolio-Unfavorable: Lower spreads on mortgage loans held for portfolio decreased net interest income by an estimated $30 million. Spreads reverted toward their long-term averages due to the maturity of lower-cost debt and the issuance of longer-term debt aimed at reducing market risk exposure to higher interest rates.
â–ªLower net interest rate spreads earned on Advances-Unfavorable:Lower spreads earned on Advances decreased net interest income by an estimated $23 million. This unfavorable impact was partially offset by lower net interest settlements paid on related interest rate swaps that do not receive hedge accounting and are therefore recognized in non-interest income (loss).
Earnings from Capital:Earnings from capital decreased $36 million in 2025 compared to 2024 because of lower average short-term rates. The effects of the lower average short-term rates were partially offset by higher average capital balances in 2025.
Average Balance Sheet and Rates
The following table provides average balances and rates for major balance sheet accounts, which determine the changes in net interest rate spreads. Interest amounts and average rates are affected by our use of derivatives and the related accounting elections we make. Interest amounts reported for Advances, MBS, Other investments and Swapped Bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.
In addition, the net interest settlements of interest receivables or payables and the price alignment amount associated with derivatives in a fair value hedge relationship are included in net interest income and interest rate spread. The price alignment amount approximates the amount of interest that we would receive or pay if the variation margin payments were characterized as collateral pledged to secure outstanding credit exposure on the derivative contracts. However, if the derivatives do not qualify for fair value hedge accounting, the related net interest settlements of interest receivables or payables and the price alignment amount are recorded in "Non-interest income (loss)" as "Net gains (losses) on derivatives" and therefore are excluded from the calculation of net interest rate spread. Amortization associated with some hedging-related basis adjustments is also reflected in net interest income, which affects interest rate spread.
(Dollars in millions) 2025 2024 2023
Average Balance Interest
Average Rate (1)
Average Balance Interest
Average Rate (1)
Average Balance Interest
Average Rate (1)
Assets:
Advances (2)
$ 79,061 $ 3,688 4.66 % $ 74,456 $ 4,165 5.59 % $ 83,237 $ 4,450 5.35 %
Mortgage loans held for portfolio (3)
7,721 280 3.63 7,181 238 3.31 7,067 214 3.02
Securities purchased under agreements to resell 2,974 126 4.25 2,065 107 5.20 2,898 147 5.08
Federal funds sold
14,548 621 4.27 10,811 557 5.15 12,193 627 5.14
Interest-bearing deposits in banks (4)
2,495 108 4.31 2,117 111 5.23 2,414 121 5.00
MBS (5)
20,162 956 4.74 19,013 1,024 5.39 18,160 923 5.08
Other investments (5)
8,561 384 4.49 9,073 473 5.21 9,369 475 5.07
Loans to other FHLBanks 9 1 4.15 7 - 4.97 22 1 4.93
Total interest-earning assets 135,531 6,164 4.55 124,723 6,675 5.36 135,360 6,958 5.14
Other assets 547 652 1,226
Total assets $ 136,078 $ 125,375 $ 136,586
Liabilities and Capital:
Term deposits $ 136 6 4.34 $ 136 7 5.19 $ 91 4 4.31
Other interest-bearing deposits (4)
891 33 3.72 997 47 4.72 1,100 50 4.57
Discount Notes 22,847 959 4.20 19,134 987 5.16 43,050 2,105 4.89
Unswapped fixed-rate Bonds 12,732 426 3.35 11,789 326 2.77 12,162 271 2.23
Unswapped adjustable-rate Bonds 79,139 3,469 4.38 73,707 3,916 5.31 54,973 2,847 5.18
Swapped Bonds 12,165 501 4.11 11,826 591 4.99 16,554 814 4.92
Mandatorily redeemable capital stock 25 2 8.41 16 1 9.01 34 3 8.31
Loans from other FHLBanks
3 - 4.39 - - - - - -
Total interest-bearing liabilities 127,938 5,396 4.22 117,605 5,875 5.00 127,964 6,094 4.76
Other liabilities 1,334 1,352 1,691
Total capital 6,806 6,418 6,931
Total liabilities and capital $ 136,078 $ 125,375 $ 136,586
Net interest rate spread 0.33 % 0.36 % 0.38 %
Net interest income and net interest margin (6)
$ 768 0.57 % $ 800 0.64 % $ 864 0.64 %
Average interest-earning assets to interest-bearing liabilities 105.94 % 106.05 % 105.78 %
(1)Amounts used to calculate average rates are based on dollars in thousands. Accordingly, recalculations based upon the disclosed amounts in millions may not produce the same results.
(2)Advance prepayment fees for the year ended December 31, 2025 totaled less than one million. Interest on Advances includes prepayment fees of (in millions) $1 and $3 for the years ended December 31, 2024, and 2023, respectively.
(3)Non-accrual loans are included in average balances used to determine average rate.
(4)The average balance amounts include the rights or obligations to cash collateral, which are included in the fair value of derivative assets or derivative liabilities on the Statements of Condition at period end.
(5)Includes available-for-sale securities based on their amortized costs. The yield information does not give effect to changes in fair value that are reflected as a component of stockholders' equity for available-for-sale securities.
(6)Net interest margin is net interest income as a percentage of average total interest-earning assets.
Rates on our interest-bearing assets and liabilities generally decreased in 2025 compared to 2024, as these assets and liabilities have repriced to the lower interest rates.
Volume/Rate Analysis
Changes in both average balances (volume) and interest rates influence changes in net interest income, as shown in the following table.
(In millions)
2025 over 2024
2024 over 2023
Volume (1)(3)
Rate (2)(3)
Total
Volume (1)(3)
Rate (2)(3)
Total
Increase (decrease) in interest income
Advances $ 246 $ (723) $ (477) $ (485) $ 200 $ (285)
Mortgage loans held for portfolio 19 23 42 3 21 24
Securities purchased under agreements to resell 41 (22) 19 (43) 3 (40)
Federal funds sold 170 (106) 64 (71) 1 (70)
Interest-bearing deposits in banks 18 (21) (3) (15) 5 (10)
MBS 59 (127) (68) 44 57 101
Other investments (26) (63) (89) (15) 13 (2)
Loans to other FHLBanks 1 - 1 (1) - (1)
Total 528 (1,039) (511) (583) 300 (283)
Increase (decrease) in interest expense
Term deposits - (1) (1) 2 1 3
Other interest-bearing deposits (5) (9) (14) (5) 2 (3)
Discount Notes 173 (201) (28) (1,227) 109 (1,118)
Unswapped fixed-rate Bonds
28 72 100 (9) 64 55
Unswapped adjustable-rate Bonds
274 (721) (447) 994 75 1,069
Swapped Bonds 17 (107) (90) (236) 13 (223)
Mandatorily redeemable capital stock
1 - 1 (2) - (2)
Total 488 (967) (479) (483) 264 (219)
Increase (decrease) in net interest income
$ 40 $ (72) $ (32) $ (100) $ 36 $ (64)
(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 volume and rate changes, have been allocated to the volume and rate categories based upon the proportion of the absolute value of the volume and rate changes.
Effect of the Use of Derivatives on Net Interest Income
The following tables show the impact on net interest income from the effect of derivatives and hedging activities. As noted above, gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships are recorded in interest income or expense. In addition, for derivatives designated as a fair value hedge, the net interest settlements of interest receivables or payables and the price alignment amount related to such derivatives are recognized as adjustments to the interest income or expense of the designated hedged item. As such, all the effects on earnings of derivatives qualifying for fair value hedge accounting are reflected in net interest income. The effect on earnings from derivatives not receiving fair value hedge accounting is provided in the "Non-Interest Income (Loss)" section below.
(In millions) Advances Investment Securities Mortgage Loans Bonds Total
For the Year Ended December 31, 2025
(Amortization)/accretion of hedging activities in net interest income
$ (1) $ 1 $ (1) $ - $ (1)
Gains (losses) on designated fair value hedges 1 - - - 1
Net interest settlements included in net interest income 119 236 - (4) 351
Price alignment amount(1)
(2) (24) - (1) (27)
Increase (decrease) to net interest income $ 117 $ 213 $ (1) $ (5) $ 324
For the Year Ended December 31, 2024
(Amortization)/accretion of hedging activities in net interest income $ - $ (2) $ (1) $ - $ (3)
Gains (losses) on designated fair value hedges 1 6 - - 7
Net interest settlements included in net interest income 395 342 - (29) 708
Price alignment amount(1)
(15) (45) - - (60)
Increase (decrease) to net interest income $ 381 $ 301 $ (1) $ (29) $ 652
For the Year Ended December 31, 2023
(Amortization)/accretion of hedging activities in net interest income $ - $ (2) $ (1) $ - $ (3)
Gains (losses) on designated fair value hedges - 8 - - 8
Net interest settlements included in net interest income 344 351 - (33) 662
Price alignment amount(1)
(23) (53) - - (76)
Increase (decrease) to net interest income $ 321 $ 304 $ (1) $ (33) $ 591
(1)This amount is for derivatives for which variation margin is characterized as a daily settled contract.
We primarily use derivatives to more closely match actual cash flows between assets and liabilities by synthetically converting the fixed interest rates on certain Advances, investments and Consolidated Obligations to adjustable rates tied to an eligible benchmark rate (e.g., the Federal funds effective rate or SOFR). The use of derivatives in 2025 compared to 2024 lowered net interest income primarily due to a decline in average short-term interest rates. The decrease in average short-term interest rates resulted in a lower amount of net interest settlements being received on derivatives related to certain Advances and investment securities. The fluctuation in net interest income from the use of derivatives was acceptable because it enabled us to lower market risk exposure.
Non-Interest Income (Loss)
Non-interest income (loss) consists of certain gains (losses) on investment securities, derivatives activities, financial instruments held under the fair value option, and other non-interest earning activities. The following tables present the net effect of derivatives and hedging activities on non-interest income (loss). The effects of derivatives and hedging activities on non-interest income (loss) relate only to derivatives not qualifying for fair value hedge accounting.
2025
(In millions) Advances Investment Securities Mortgage Loans Bonds Discount Notes Other Total
Net effect of derivatives and hedging activities
Gains (losses) on derivatives not receiving hedge accounting
$ (3) $ (78) $ (7) $ 6 $ 1 $ - $ (81)
Net interest settlements on derivatives not receiving hedge accounting
3 33 - (18) (2) - 16
Price alignment amount(1)
- - - - - (2) (2)
Net gains (losses) on derivatives - (45) (7) (12) (1) (2) (67)
Gains (losses) on trading securities (2)
- 74 - - - - 74
Gains (losses) on financial instruments held under fair value option (3)
3 - - (7) (3) - (7)
Total net effect on non-interest income (loss)
$ 3 $ 29 $ (7) $ (19) $ (4) $ (2) $ -
2024
(In millions) Advances Investment Securities Mortgage Loans Bonds Discount Notes Other Total
Net effect of derivatives and hedging activities
Gains (losses) on derivatives not receiving hedge accounting
$ 4 $ 10 $ 1 $ 14 $ 2 $ - $ 31
Net interest settlements on derivatives not receiving hedge accounting
5 56 - (25) (8) - 28
Price alignment amount (1)
- - - - - (5) (5)
Net gains (losses) on derivatives 9 66 1 (11) (6) (5) 54
Gains (losses) on trading securities (2)
- (25) - - - - (25)
Gains (losses) on financial instruments held under fair value option (3)
(3) - - (23) - - (26)
Total net effect on non-interest income (loss)
$ 6 $ 41 $ 1 $ (34) $ (6) $ (5) $ 3
2023
(In millions) Advances Investment Securities Mortgage Loans Bonds Discount Notes Other Total
Net effect of derivatives and hedging activities
Gains (losses) on derivatives not receiving hedge accounting
$ (2) $ (34) $ (6) $ 35 $ 14 $ - $ 7
Net interest settlements on derivatives not receiving hedge accounting
2 51 - (32) (24) - (3)
Price alignment amount (1)
- - - - - (6) (6)
Net gains (losses) on derivatives - 17 (6) 3 (10) (6) (2)
Gains (losses) on trading securities (2)
- 16 - - - - 16
Gains (losses) on financial instruments held under fair value option (3)
4 - - (32) (12) - (40)
Total net effect on non-interest income (loss)
$ 4 $ 33 $ (6) $ (29) $ (22) $ (6) $ (26)
(1)This amount is for derivatives for which variation margin is characterized as a daily settled contract.
(2)Includes only those gains (losses) on trading securities that have an assigned economic derivative; therefore, this line item may not agree to the Statements of Income.
(3)Includes only those gains or losses on financial instruments held at fair value that have an economic derivative "assigned."
The impact on earnings from the net effect of derivatives and hedging activities in 2025 was similar to 2024. The decline in short-term average interest rates reduced the net interest settlements received on derivatives related to investment securities where the fixed interest rates were converted to adjustable-coupon rates. This negative impact on earnings was partially offset by lower net interest settlements paid on derivatives related to Consolidated Obligations.
We elect to use the fair value option for certain financial instruments that either do not qualify for hedge accounting or may be at risk for not meeting hedge effectiveness requirements. Because we intend to hold these derivatives and the related financial instruments to maturity, any unrealized gains or losses are expected to reverse in future periods.
In the tables above, "Gains (losses) on trading securities" consist of fixed-rate U.S. Treasury and GSE obligations that have been swapped to a variable rate. Trading securities are recorded at fair value, with changes in fair value reported in non-interest income (loss). There are a number of factors that affect the fair value of these securities, such as changes in interest rates, the passage of time, and volatility. By hedging these trading securities, the gains or losses on these trading securities will generally be offset by the gains or losses on the associated interest rate swaps.
As noted above, the fluctuation in earnings from the use of derivatives was acceptable because it enabled us to lower market risk exposure.
Non-Interest Expense
The following table presents non-interest expense for each of the last three years.
(In millions) 2025 2024 2023
Non-interest expense
Compensation and benefits $ 58 $ 56 $ 54
Other operating expense 40 38 33
Voluntary housing and community investment 40 42 15
Finance Agency 11 11 11
Office of Finance 7 7 6
Other 6 6 7
Total non-interest expense $ 162 $ 160 $ 126
Total non-interest expense in 2025 was consistent with 2024. Our business is designed to support significant changes in asset levels without having to undergo material changes in staffing, operations, risk practices, or overall resource needs.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK MANAGEMENT
Overview
We face various risks that could affect the ability to achieve our mission and corporate objectives. We generally categorize risks as: 1) business/strategic risk, 2) compliance, 3) market risk (also referred to as interest rate or prepayment risk), 4) credit risk, 5) funding/liquidity risk, and 6) operational risk (which includes technology and information security risks). Our Board of Directors establishes objectives regarding risk philosophy, risk appetite, risk tolerances, and financial performance expectations. Market, capital adequacy, credit, liquidity, concentration, and operational risks are discussed below. Other risks are discussed throughout this report.
We strive to maintain a risk profile that ensures we operate safely and soundly, promotes prudent growth in Mission Assets and Activities, consistently generates competitive earnings, and protects the par value of members' capital stock investment. We believe our business is financially sound and adequately capitalized on a risk-adjusted basis.
We practice this conservative risk philosophy in many ways:
â–ªWe operate with low to moderate market risk and limited residual credit risk, liquidity risk, operational risk, and capital impairment risk.
â–ªWe have a business objective to ensure competitive and relatively stable profitability.
â–ªWe make conservative investment choices in terms of the types of investments we purchase and counterparties with which we engage.
â–ªWe use derivatives to hedge assets and liabilities and to help reduce market risk exposure.
â–ªWe maintain a prudent amount of financial leverage.
â–ªWe are judicious in instituting regular, district-wide repurchases of excess stock.
â–ªWe hold an amount of retained earnings that we believe will protect the par value of capital stock and provide for dividend stabilization in a wide range of stressful scenarios.
â–ªWe create a working and operating environment that emphasizes a stable employee base.
We have numerous Board-adopted policies and processes that address risk management including risk appetite, tolerances, limits, guidelines, and regulatory compliance. Our cooperative business model, corporate objectives, capital structure, and regulatory oversight provide us clear incentives to minimize risk exposures. Our policies and operating practices are designed to limit risk exposures from ongoing operations in the following broad ways:
â–ªby anticipating potential business risks and developing appropriate responses;
â–ªby defining permissible lines of business;
â–ªby limiting the kinds of assets we are permitted to hold in terms of their credit risk exposure and the kinds of hedging and financing arrangements we are permitted to use;
â–ªby limiting the amount of market risk to which we are permitted to be exposed;
â–ªby specifying very conservative tolerances for credit risk posed by Advances;
â–ªby specifying capital adequacy minimums; and
â–ªby requiring strict adherence to internal controls and operating procedures, adequate insurance coverage, and comprehensive Human Resources policies, procedures, and strategies.
Market Risk
Overview
Market risk exposure is the risk that profitability and the value of stockholders' capital investment may decrease and that profitability may become uncompetitive for an extended period as a result of changes and volatility in the market environment and economy. Along with business/strategic risk, market risk is normally our largest residual risk.
Our risk appetite is to maintain market risk exposure in a low to moderate range while earning a competitive return on members' capital stock investment. There is normally a tradeoff between long-term market risk exposure and shorter-term exposure. Effective management of each component is important in order to attract and retain members and capital and to support Mission Assets and Activities.
The primary challenge in managing market risk exposure arises from owning fixed-rate mortgage assets. Mortgage assets grant homeowners prepayment options that could adversely affect our financial performance when interest rates increase or decrease. We mitigate the market risk of mortgage assets primarily by funding them principally with a portfolio of long-term fixed-rate callable and non-callable Bonds. We may also hedge a portion of our MBS by using interest rate swaps to effectively convert the fixed rate investments to adjustable-rate investments. Secondarily, we use swaption derivative transactions to a limited extent to mitigate the market risk of mortgage loans. The Bonds and use of derivatives can provide expected cash flows that are similar to the cash flows expected from mortgage assets under a wide range of interest rate and prepayment environments. Because it is normally cost-prohibitive to completely mitigate mortgage prepayment risk, a residual amount of market risk remains after funding and hedging activities.
We analyze market risk using numerous analytical measures under a variety of interest rate and business scenarios, including stressed scenarios, and perform sensitivity analyses on the many variables that can affect market risk, using several market risk models from third-party software companies. These models employ rigorous valuation techniques for the optionality that exists in mortgage prepayments, call and put options, and caps/floors. We regularly assess the effects of different assumptions, techniques and methodologies on the measurements of market risk exposure, including comparisons to alternative models and information from brokers/dealers.
Policy Limits on Market Risk Exposure
We have six sets of policy limits regarding market risk exposure, which primarily measure long-term market risk exposure. We determine compliance with our policy limits at every month end or more frequently if market or business conditions change significantly or are volatile.
â–ªMarket Value of Equity Sensitivity.The market value of equity for the entire balance sheet in two hypothetical interest rate scenarios (up 200 basis points and down 100 to 200 basis points from the applicable interest rate environment) must be between positive and negative 10 percent of the current balance sheet's market value of equity. The interest rate movements are "shocks," defined as instantaneous, permanent, and parallel changes in interest rates in which every point on the yield curve is changed by the same amount. The size of the down shock varies with the level of long-term interest rates observed when measuring the risk.
â–ªDuration of Equity.The duration of equity for the entire balance sheet in the current ("base case") interest rate environment must be between positive and negative five years and in the two interest rate shock scenarios (up 200 basis points and down 100 to 200 basis points from the applicable interest rate environment) must be between positive and negative six years.
â–ªMortgage Assets Portfolio. The change in net market value of the mortgage assets portfolio as a percentage of the book value of portfolio assets must be between positive and negative three percent in each of the two interest rate shock scenarios. Net market value is defined as the market value of assets minus the market value of liabilities, with no assumed capital allocation.
â–ªMarket Capitalization.The market capitalization ratio (defined as the ratio of the market value of equity to the par value of regulatory stock) must be above 100 percent in the current rate environment and must be above 95 percent in each of the two interest rate shock scenarios.
â–ªFixed-Rate Mortgage Assets as a Multiple of Regulatory Capital.The amount of fixed-rate mortgage assets must be less than five times the amount of regulatory capital.
â–ªMPP Assets as a Multiple of Regulatory Capital.The amount of MPP assets must be less than four times the amount of regulatory capital.
In addition, Finance Agency regulations and an internal policy provide controls on market risk exposure by restricting the types of mortgage loans, mortgage-backed securities and other investments we can hold. We also manage market risk exposure by charging members prepayment fees on many Advance programs where an early termination of an Advance would result in an economic loss to us.
In practice we carry a substantially smaller amount of market risk exposure by establishing a strategic management range that is well within policy limits.
Market Value of Equity and Duration of Equity
Two key measures of long-term market risk exposure are the sensitivities of the market value of equity and the duration of equity to changes in interest rates and other variables, as presented in the following tables for various instantaneous and permanent interest rate shocks (in basis points). Market value of equity represents the difference between the market value of total assets and the market value of total liabilities, including off-balance sheet items. The duration of equity provides an estimate of the change in market value of equity to further changes in interest rates. We compiled average results using data for each month end.
Market Value of Equity
Interest Rate Scenarios
(Dollars in millions) Down 300 Down 200 Down 100 Flat Rates Up 100 Up 200 Up 300
Average Results
2025 Full Year
Market Value of Equity $ 6,527 $ 6,576 $ 6,581 $ 6,528 $ 6,459 $ 6,401 $ 6,350
% Change from Flat Case - % 0.7 % 0.8 % - (1.1) % (2.0) % (2.7) %
2024 Full Year
Market Value of Equity $ 6,087 $ 6,117 $ 6,106 $ 6,055 $ 5,980 $ 5,896 $ 5,811
% Change from Flat Case 0.5 % 1.0 % 0.8 % - (1.2) % (2.6) % (4.0) %
Month-End Results
December 31, 2025
Market Value of Equity $ 6,159 $ 6,211 $ 6,220 $ 6,161 $ 6,102 $ 6,078 $ 6,064
% Change from Flat Case - % 0.8 % 1.0 % - (1.0) % (1.3) % (1.6) %
December 31, 2024
Market Value of Equity $ 6,261 $ 6,298 $ 6,289 $ 6,237 $ 6,168 $ 6,091 $ 6,014
% Change from Flat Case 0.4 % 1.0 % 0.8 % - (1.1) % (2.3) % (3.6) %
Duration of Equity
Interest Rate Scenarios
(In years) Down 300 Down 200 Down 100 Flat Rates Up 100 Up 200 Up 300
Average Results
2025 Full Year
(0.8) (0.4) 0.4 1.1 1.0 0.9 0.8
2024 Full Year
(0.6) - 0.7 1.2 1.4 1.5 1.5
Month-End Results
December 31, 2025 (0.8) (0.6) 0.4 1.3 0.6 0.3 0.2
December 31, 2024 (1.0) (0.2) 0.6 1.1 1.3 1.3 1.3
The mortgage assets portfolio normally accounts for the majority of our market risk exposure because of prepayment volatility that we cannot completely hedge while maintaining sufficient net spreads. The overall market risk exposure to changing interest rates was well within policy limits during the periods presented. At December 31, 2025, market risk exposure to falling and rising rate shocks remained stable.
Based on the totality of our risk analysis, we expect that overall profitability, defined as the level of ROE compared with short-term market rates, will be competitive over the long term unless interest rates increase by large amounts in a short period of time. Substantial declines in long-term interest rates could decrease income temporarily before reverting to average levels. This temporary reduction in income would be driven by additional recognition of mortgage asset premiums as the incentive for borrowers to refinance results in faster than anticipated repayments of those mortgage assets. However, we believe the mortgage assets portfolio will continue to provide an acceptable risk-adjusted return consistent with our risk appetite philosophy.
Use of Derivatives in Market Risk Management
The FHLB enters into derivatives to manage the market risk exposures inherent in otherwise unhedged assets and funding positions. Finance Agency regulations and the FHLB's financial management policy prohibit trading in, or the speculative use of, derivative instruments. The following table presents the notional amounts of the derivatives classified by how we designate the hedging relationship.
(In millions) December 31, 2025 December 31, 2024
Hedged Item/Hedging Instrument Hedging Objective Fair Value Hedge Economic Hedge Fair Value Hedge Economic Hedge
Advances:
Pay-fixed, receive-float interest rate swap (without options) Converts the Advance's fixed rate to a variable-rate index. $ 27,883 $ - $ 32,784 $ -
Pay-fixed, receive-float interest rate swap (with options) Converts the Advance's fixed rate to a variable-rate index and offsets option risk in the Advance. 366 303 370 280
Total Advances 28,249 303 33,154 280
Investment securities:
Pay-fixed, receive-float interest rate swap (without options) Converts the investment security's fixed rate to a variable-rate index. 11,250 2,667 9,828 2,685
Mortgage Loans:
Interest rate swaptions
Provides the option to enter into an interest rate swap to offset interest-rate or prepayment risk in a pooled mortgage portfolio hedge
- 1,055 - 350
Forward settlement agreement
Protects against changes in market value of fixed-rate Mortgage Delivery Commitments resulting from changes in interest rates.
- 64 - -
Total Mortgage Loans
- 1,119 - 350
Consolidated Obligations Bonds:
Receive-fixed, pay-float interest rate swap (without options) Converts the Bond's fixed rate to a variable-rate index. 1,300 1,450 1,351 -
Receive-fixed, pay-float interest rate swap (with options) Converts the Bond's fixed rate to a variable-rate index and offsets option risk in the Bond. 1,354 11,720 1,056 8,283
Total Consolidated Obligations
Bonds 		2,654 13,170 2,407 8,283
Consolidated Discount Notes:
Receive-fixed, pay-float interest rate swap (without options) Converts the Discount Note's fixed rate to a variable-rate index. - 16,824 - 8,718
Stand-Alone Derivatives:
Mortgage Delivery Commitments
Exposure to fair-value risk associated with fixed-rate mortgage purchase commitments.
- 159 - 26
Total $ 42,153 $ 34,242 $ 45,389 $ 20,342
See Note 7 of the Notes to Financial Statements for additional information on how we use derivatives and the types of assets and liabilities hedged with derivatives.
Capital Adequacy
Retained Earnings
We must hold sufficient capital to protect against exposure to various risks, including market, credit, and operational risks. We regularly conduct a variety of measurements and assessments for capital adequacy. At December 31, 2025, our capital management policy set forth approximately $685 million as the minimum amount of retained earnings we believe is necessary to mitigate impairment risk.
The following table presents retained earnings.
(In millions) December 31, 2025 December 31, 2024
Unrestricted retained earnings $ 1,065 $ 1,024
Restricted retained earnings (1)
930 815
Total retained earnings $ 1,995 $ 1,839
(1) Pursuant to the FHLBank System's Joint Capital Enhancement Agreement we are not permitted to distribute as dividends.
As indicated in the table above, our current balance of retained earnings exceeds the policy minimum, which we expect will continue to be the case as we bolster capital adequacy over time by allocating a portion of earnings to the restricted retained earnings account.
Risk-Based Capital
The following table shows the amount of risk-based capital required based on Finance Agency prescribed measurements. By regulation, we are required to hold permanent capital at least equal to the amount of risk-based capital.
(Dollars in millions) December 31, 2025 December 31, 2024
Market risk-based capital $ 488 $ 435
Credit risk-based capital 293 580
Operational risk-based capital 234 305
Total risk-based capital requirement 1,015 1,320
Total permanent capital 6,554 6,789
Excess permanent capital $ 5,539 $ 5,469
Risk-based capital as a percent of permanent capital 15 % 19 %
The risk-based capital requirement has historically not been a constraint on operations. It has normally ranged from 10 to 25 percent of permanent capital.
Market Capitalization Ratios
We measure two sets of market capitalization ratios. One measures the market value of equity (i.e., total capital) relative to the par value of regulatory capital stock (which is GAAP capital stock and mandatorily redeemable capital stock). The other measures the market value of total capital relative to the book value of total capital, which includes all components of capital, and mandatorily redeemable capital stock. The measures provide a point-in-time indication of the FHLB's liquidation or franchise value and can also serve as a measure of realized or potential market risk exposure.
The following table presents the market value of equity to regulatory capital stock (excluding retained earnings) for several interest rate environments.
December 31, 2025 December 31, 2024
Market Value of Equity to Par Value of Regulatory Capital Stock - Base Case (Flat Rates) Scenario
135 % 126 %
Market Value of Equity to Par Value of Regulatory Capital Stock - Down Shock (1)
136 127
Market Value of Equity to Par Value of Regulatory Capital Stock - Up Shock (2)
133 123
(1) Represents a down shock of 200 basis points.
(2) Represents an up shock of 200 basis points.
A base case value below 100 percent could indicate that, in the remote event of an immediate liquidation scenario involving redemption of all capital stock, capital stock may be returned to stockholders at a value below par. This could be due to experiencing risks that lower the market value of capital and/or to having an insufficient amount of retained earnings. In 2025, the market capitalization ratios in the scenarios presented continued to be above our policy requirements. The base case ratio at December 31, 2025 was still well above 100 percent because retained earnings were 44 percent of regulatory capital stock and we maintained stable market risk exposure.
The following table presents the market value of equity to the book value of total capital and mandatorily redeemable capital stock.
December 31, 2025 December 31, 2024
Market Value of Equity to Book Value of Capital - Base Case (Flat Rates) Scenario (1)
94 % 92 %
Market Value of Equity to Book Value of Capital - Down Shock (1)(2)
95 93
Market Value of Equity to Book Value of Capital - Up Shock (1)(3)
93 90
(1) Capital includes total capital and mandatorily redeemable capital stock.
(2) Represents a down shock of 200 basis points.
(3) Represents an up shock of 200 basis points.
A base-case value below 100 percent can indicate that we have realized or could realize risks (especially market risk), such that the market value of total capital owned by stockholders is below the book value of total capital. The base-case ratio at December 31, 2025 indicates that the market value of total capital is $399 million below the book value of total capital. This indicates that in a hypothetical liquidation scenario, stockholders would not receive the full sum of their total equity ownership in the FHLB.
Credit Risk
Overview
We believe our risk management practices, discussed below, minimize residual credit risk levels. At December 31, 2025, we had no loan loss reserves or impairment recorded for Credit Services, investments, or derivatives and had a minimal amount of credit risk exposure in the MPP.
Credit Services
Overview:We manage credit exposure to Advances and Letters of Credit through an integrated approach that includes establishing a credit limit for each borrower and ongoing review of each borrower's financial condition, coupled with collateral and lending policies to limit risk of loss. The objective of our credit risk management activities is to equalize risk exposure across members and counterparties to a zero level of expected losses related to Advances and Letters of Credit.
Internal Credit Ratings:We perform credit underwriting of our members and nonmember institutions and assign them an internal credit rating on a scale of one to seven, with a higher number representing a less favorable assessment of the institution's financial condition. These credit ratings are based on internal and third-party ratings models, credit analyses and consideration of credit ratings from independent credit rating organizations. Credit ratings are used in conjunction with other measures of credit risk in managing secured credit risk exposure.
The following tables show the distribution of internal credit ratings we assigned to member and nonmember institutions, which we use to help manage credit risk exposure.
(Dollars in billions)
December 31, 2025 December 31, 2024
Number Collateral-Based Number Collateral-Based
Credit of Borrowing Credit of Borrowing
Rating Institutions Capacity Rating Institutions Capacity
1-3 452 $ 341.9 1-3 440 $ 322.8
4 97 47.8 4 107 46.1
5 39 1.3 5 42 2.3
6 10 0.2 6 14 0.2
7 4 - 7 4 -
Total 602 $ 391.2 Total 607 $ 371.4
We consider institutions with credit ratings of "1" through "4" to be financially sound. At December 31, 2025, only 53 institutions (nine percent of the total) had credit ratings of "5" through "7." These institutions had $1.5 billion of borrowing capacity at December 31, 2025. A less favorable credit rating can cause us to 1) decrease the institution's borrowing capacity, 2) strengthen requirements related to collateral reporting and controls, 3) prompt us to more closely and/or frequently monitor the institution, and/or 4) limit the institution's exposure through borrowing restrictions (e.g., maturity restrictions on new Advances or restrictions on borrowing capacity from higher risk collateral sources). We believe the credit ratings distribution continues to show a financially sound membership base.
Collateral:We require each member to provide a security interest in eligible collateral before it can undertake any secured borrowing. Eligible loan collateral types include the following: single and multifamily residential, home equity, commercial real estate, government guaranteed and farm real estate. Eligible security types include those that are government or agency backed, highly-rated municipal securities, and highly-rated private-label residential and commercial mortgage-backed securities. We have conservative eligibility criteria within each of the above asset types. The estimated value of pledged collateral is discounted in order to offset market, credit, and liquidity risks that may affect the collateral's realizable value in the event it must be liquidated. At December 31, 2025, total eligible pledged collateral of $528.4 billion resulted in total borrowing capacity of $391.2 billion of which $116.6 billion was used to support outstanding Advances and Letters of Credit. Borrowers often pledge collateral in excess of their collateral requirement to demonstrate access to liquidity and to have the ability to borrow additional amounts in the future. Over-collateralization by one member is not applied to another member.
The table below shows total collateral pledged by type.
December 31, 2025 December 31, 2024
(Dollars in billions) Percent of Total Percent of Total
Eligible Collateral Pledged Collateral Eligible Collateral Pledged Collateral
Single-family loans $ 316.4 60 % $ 323.4 63 %
Multifamily loans 90.2 17 79.1 15
Commercial real estate loans 63.3 12 54.7 11
Bond Securities 31.0 6 33.2 6
Home equity loans/lines of credit 26.3 5 24.4 5
Farm real estate loans 1.2 - 1.3 -
Total $ 528.4 100 % $ 516.1 100 %
At December 31, 2025, 65 percent of collateral was related to residential mortgage lending in single-family loans and home equity loans/lines of credit.
Our management of credit risk related to Advances and Letters of Credit includes risk-based variations in collateral requirements, including discounts, eligibility criteria, form of valuation, custody arrangements, the level of detail in periodic reporting, and asset pledge requirements, as discussed below.
â–ªDiscounts.We discount collateral values for purposes of determining borrowing capacity. These discounts result in lendable values that are less than the amount of pledged collateral. In general, higher discounts are applied to more risky forms of collateral and to collateral pledged by higher risk members.
â–ªEligibility.The balances of loans and securities we lend against are subject to conservative eligibility criteria such that Advances and Letters of Credit are supported by high quality assets within each collateral type.
â–ªCustody.All pledged securities and loans pledged by higher risk members must be delivered into our custody or that of a third-party custodian that we have engaged.
â–ªSecurity Interest. Generally, we require members to grant us a security interest in approved assets by specific collateral type.
â–ªValuation.All members' securities collateral and individually listed loans are subject to a market valuation process to establish the borrowing base. For loan collateral, this involves submission of extensive loan level information, or Detailed (Listing) Reporting, to facilitate the valuation process. Any member allowed to make a specific asset pledge (non-depositories and certain highly-rated commercial banks) is required to submit this level of reporting.
We use third-party services and internally run models to regularly estimate market values of individually listed loan collateral. Third-party services use various proprietary models to estimate market values. Assumptions may be made on factors that affect collateral value, such as market liquidity, discount rates, prepayments, liquidation and servicing costs in the event of a default and economic and market conditions. We have policies and procedures for evaluating the reasonableness of collateral valuations.
Borrowing Capacity/Lendable Value:Lendable Value Rates (LVRs) represent the percent of collateral value net of the discount. LVRs are derived using scenario analysis, statistical analysis and management assumptions relating to historical price volatility, inherent credit risks, liquidation costs, and the current credit and economic environment. We apply LVR results to the estimated values of pledged assets. LVRs vary among pledged assets and members based on the member institution type, the financial strength of the member institution, the form of valuation, lien position, the issuer of bond collateral or the quality of securitized assets, the quality of the loan collateral as reflected in the manner in which it was underwritten, and the marketability of the pledged assets.
The table below indicates the range of LVRs applied at December 31, 2025 to each major collateral type.
Lendable Value Rates Applied to Collateral
Summary (Blanket) Reporting:
Prime 1-4 family loans 66-69%
Multifamily loans 66-74%
Prime home equity loans/lines of credit 61-69%
Commercial real estate loans 66-72%
Farm real estate loans 53-58%
Detailed (Listing) Reporting/Physical Delivery:
Cash/U.S. Government/U.S. Treasury/U.S. agency securities 89-100%
U.S. agency MBS/collateralized mortgage obligations
79-97%
Private-label MBS
47-90%
Municipal securities 78-96%
SBA certificates 89-94%
Prime 1-4 family loans 75-81%
Multifamily loans 65-79%
Prime home equity loans/lines of credit 70-81%
Commercial real estate loans 74-83%
Farm real estate loans 57-72%
The ranges of lendable values exclude subprime residential loan collateral. Loans pledged by lower risk members for which we require only high level, summary reporting of eligible balances are generally discounted more heavily than loans on which we have detailed loan structure and underwriting information. For any form of loan collateral, additional credit risk based
adjustments may be made to an individual member's collateral that results in a lower lendable value than that indicated in the above table.
Subprime Loan Collateral: We have policies and processes to identify subprime residential mortgage loans pledged by members. We perform collateral reviews to estimate the volume of subprime loans pledged by members. Depending on the quality of underwriting and administration, we may subject these loans to lower LVRs.
Member Failures, Closures, and Receiverships:There were no member failures in 2025.
MPP
Overview: The residual amount of credit risk exposure to loans in the MPP is minimal, based on the following factors:
â–ªvarious credit enhancements for conventional loans, which are designed to protect us against credit losses;
â–ªconservative underwriting and loan characteristics consistent with favorable expected credit performance;
â–ªa small overall amount of delinquencies and defaults when compared to national averages;
â–ªa de minimis amount of credit losses in 2025 and no credit losses in 2024.
Portfolio Loan Characteristics: The following table shows FICO®credit scores of homeowners at origination dates for the conventional loan portfolio.
FICO®Score (1)
December 31, 2025 December 31, 2024
< 620 - % - %
620 to < 660 - -
660 to < 700 7 7
700 to < 740 17 18
>= 740 76 75
Weighted Average 764 762
(1)Represents the FICO®score at origination.
The distribution of FICO® scores at origination as of December 31, 2025 was similar to that at year-end 2024. The distribution of FICO®scores at origination is one indication of the portfolio's overall favorable credit quality. At December 31, 2025, 76 percent of the portfolio had scores at an excellent level of 740 or above and 93 percent had scores above 700, which is a threshold generally considered indicative of homeowners with good credit quality.
The following tables show loan-to-value ratios for conventional loans based on values estimated at the origination dates and current values estimated at the noted periods. The estimated current ratios are based on original loan values, principal paydowns that have occurred since origination, and a third-party estimate of changes in historical home prices for the zip code in which each loan resides. Both measures are weighted by current unpaid principal.
Based on Estimated Origination Value Based On Estimated Current Value
Loan-to-Value December 31, 2025 December 31, 2024 Loan-to-Value December 31, 2025 December 31, 2024
<= 60% 17 % 16 % <= 60% 66 % 75 %
> 60% to 70% 16 17 > 60% to 70% 10 10
> 70% to 80% 56 55 > 70% to 80% 16 12
> 80% to 90% 8 8 > 80% to 90% 7 3
> 90% 3 4 > 90% to 100% 1 -
> 100% - -
Weighted Average 72 % 73 % Weighted Average 51 % 48 %
The levels of loan-to-value ratios are consistent with the portfolio's excellent credit quality. The percentage of loans with current loan-to-value ratios of 60 percent or less at December 31, 2025 decreased compared to year-end 2024, reflecting a less seasoned MPP portfolio due to increased purchases of new loans throughout 2025.
Based on the available data, we believe we have minimal exposure to loans in the MPP considered to have characteristics of "subprime" or "alternative/nontraditional" loans. Further, we do not knowingly purchase any loan that violates the terms of our Anti-Predatory Lending Policy.
The following table presents the geographical allocation based on the unpaid principal balance of conventional loans in the MPP.
December 31, 2025 December 31, 2024
Ohio 57 % Ohio 60 %
Kentucky 12 Kentucky 12
Indiana 8 Indiana 8
Tennessee 6 Tennessee 5
Florida 2 Alabama 2
All others 15 All others 13
Total 100 % Total 100 %
Credit Enhancements:Conventional mortgage loans are primarily supported against credit losses by some combination of credit enhancements (primary mortgage insurance (PMI) and the Lender Risk Account (LRA)). The LRA is a hold back of a portion of the initial purchase price to cover potential credit losses. Starting after five years from the loan purchase date, we may return the hold back to PFIs if they manage credit risk to predefined acceptable levels of exposure on the pools of loans they sell to us. As a result, some pools of loans may have sufficient credit enhancements to recapture all losses while other pools of loans may not. The LRA had balances of $262 million and $240 million at December 31, 2025 and 2024, respectively. For more information, see Note 6 of the Notes to Financial Statements.
Credit Performance:The table below provides an analysis of conventional loans that are seriously delinquent or in the process of foreclosure, along with the national average serious delinquency rate.
Conventional Loan Delinquencies
(Dollars in millions) December 31, 2025 December 31, 2024
Serious delinquencies - unpaid principal balance (1)
$ 10 $ 7
Serious delinquency rate(2)
0.1 % 0.1 %
National average serious delinquency rate (3)
1.0 % 1.1 %
(1)Includes conventional loans that are 90 days or more past due or where the decision of foreclosure or a similar alternative such as pursuit of deed-in-lieu has been reported.
(2)Serious delinquencies expressed as a percentage of the total conventional loan portfolio.
(3)National average number of fixed-rate prime and subprime conventional loans that are 90 days or more past due or in the process of foreclosure is based on the most recent national delinquency data available. The December 31, 2025 rate is based on September 30, 2025 data.
Overall, the MPP has experienced a minimal amount of delinquencies, with delinquency rates continuing to be well below national averages.
We consider a high risk loan as having a current loan-to-value ratio above 100 percent. At December 31, 2025, none of our loans had a current loan-to-value ratio above 100 percent. We believe these data further support our view that the overall portfolio is comprised of high-quality, well-performing loans.
Credit Losses:Residual credit risk exposure depends on the actual and potential credit performance of the loans compared to their equity (on individual loans) and available credit enhancements (primary mortgage insurance (PMI) and the Lender Risk Account (LRA)). Our available credit enhancements at December 31, 2025 were ample and able to cover nearly all of the estimated gross credit losses. As a result, estimated credit losses at December 31, 2025 were less than $1 million. Estimated credit losses, after credit enhancements, are accounted for in the allowance for credit losses or as a charge off (i.e., a reduction to the principal of mortgage loans held for portfolio).
Separate from our allowance for credit losses analysis, we regularly analyze potential adverse scenarios of lifetime credit risk exposure for the loans in the MPP. Even under severely adverse macroeconomic scenarios, we expect credit losses to remain low.
Investments
Liquidity Investments:We hold liquidity investments that can be converted to cash and may be unsecured, guaranteed or supported by the U.S. government, or secured (i.e., collateralized). For unsecured liquidity investments, we invest in the instruments of investment-grade rated institutions, have appropriate and conservative limits on dollar and maturity exposure to each institution, and have strong credit underwriting practices, including active monitoring of credit quality of our counterparties and of the environment in which they operate.
Our unsecured liquidity investments to a counterparty or group of affiliated counterparties are limited by Finance Agency regulations to a dollar amount based on a percentage of eligible regulatory capital (defined as the lessor of our regulatory capital or the eligible amount of a counterparty's Tier 1 capital). The permissible percentage ranges from 1 percent to 15 percent. The permissible range is solely based on consideration of the internal credit risk ratings of unsecured counterparties as required by Finance Agency regulations.
A portion of our total liquidity investments are with counterparties for which the investments are secured with collateral (secured resale agreements). We believe these investments present no credit risk exposure to us.
The following table presents the carrying value of liquidity investments outstanding in relation to the counterparties' lowest long-term credit ratings provided by Standard & Poor's, Moody's, and/or Fitch Advisory Services. Our internal ratings of these investments may differ from those obtained from Standard & Poor's, Moody's, and/or Fitch Advisory Services. The ratings displayed in this table should not be taken as an indication of future ratings.
(In millions) December 31, 2025
Long-Term Rating
AA A Total
Unsecured Liquidity Investments
Interest-bearing deposits $ - $ 2,400 $ 2,400
Federal funds sold 5,187 7,350 12,537
Total unsecured liquidity investments 5,187 9,750 14,937
Guaranteed/Secured Liquidity Investments
Securities purchased under agreements to resell 4,250 2,200 6,450
U.S. Treasury obligations 7,090 - 7,090
GSE obligations 1,588 - 1,588
Total guaranteed/secured liquidity investments 12,928 2,200 15,128
Total liquidity investments $ 18,115 $ 11,950 $ 30,065
Some counterparties used to transact our securities purchased under agreements to resell are not rated by an NRSRO because they are not issuers of debt or are otherwise not required to be rated by an NRSRO. However, each of the counterparties are considered to have the equivalent of at least an investment grade rating based on our internal ratings resulting from a fundamental credit analysis. Securities purchased under agreements to resell are generally secured by the following types of collateral: U.S. Treasury obligations, U.S. agency/GSE obligations, or U.S. agency/GSE MBS. At December 31, 2025, the collateral received had long-term credit ratings of AA, based on the lowest long-term credit ratings of the issuer as provided by Standard & Poor's, Moody's, and/or Fitch Advisory Services. The terms of our securities purchased under agreements to resell are structured such that if the fair value of the underlying securities decreases below the fair value required as collateral, the counterparty must place an equivalent amount of additional securities as collateral or remit an equivalent amount of cash. Additionally, these investments primarily mature overnight. All overnight investments in securities purchased under agreements to resell outstanding at December 31, 2025 were repaid according to their respective contractual terms.
The following table presents the lowest long-term credit ratings provided by Standard & Poor's, Moody's, and/or Fitch Advisory Services of our unsecured investment credit exposure by the domicile of the counterparty or the domicile of the counterparty's immediate parent for U.S. branches and agency offices of foreign commercial banks. Our internal ratings of these investments may differ from those obtained from Standard & Poor's, Moody's, and/or Fitch Advisory Services. The ratings displayed in this table should not be taken as an indication of future ratings.
(In millions) December 31, 2025
Counterparty Rating
Domicile of Counterparty AA A Total
Domestic $ 700 $ 2,750 $ 3,450
U.S. branches and agency offices of foreign commercial banks:
Canada 1,800 2,300 4,100
Germany - 1,800 1,800
Australia 1,700 - 1,700
France - 1,200 1,200
United Kingdom - 1,200 1,200
Finland 987 - 987
Netherlands - 500 500
Total U.S. branches and agency offices of foreign commercial banks
4,487 7,000 11,487
Total unsecured investment credit exposure $ 5,187 $ 9,750 $ 14,937
We restrict a significant portion of unsecured lending to overnight maturities, which further limits risk exposure to these counterparties. All counterparties exposed to non-U.S. countries are required to be domestic U.S. branches of foreign counterparties.
MBS:
GSE MBS
At December 31, 2025, $19.1 billion of MBS held were GSE securities issued by Fannie Mae and Freddie Mac, which provide credit safeguards by guaranteeing either timely or ultimate payments of principal and interest. We believe that the conservatorships of Fannie Mae and Freddie Mac lower the chance that they would not be able to fulfill their credit guarantees.
MBS Issued by Other Government Agencies
We also invest in MBS issued and guaranteed by Ginnie Mae. These investments totaled $0.9 billion at December 31, 2025. We believe that the strength of Ginnie Mae's guarantee and backing by the full faith and credit of the U.S. government is sufficient to protect us against credit losses on these securities.
Derivatives
Credit Risk Exposure:We mitigate most of the credit risk exposure resulting from derivative transactions through collateralization or use of daily settled contracts. The table below presents the lowest long-term counterparty credit ratings provided by Standard & Poor's, Moody's, and/or Fitch Advisory Services for derivative positions to which we had credit risk exposure at December 31, 2025. The ratings displayed in this table should not be taken as an indication of future ratings.
(In millions)
Total Notional Net Derivatives Fair Value Before Collateral Cash Collateral Pledged to (from) Counterparties Non-cash Collateral Pledged to (from) Counterparties Net Credit Exposure to Counterparties
Nonmember counterparties:
Asset positions with credit exposure:
Uncleared derivatives:
AA-rated $ 215 $ 1 $ (1) $ - $ -
A-rated 10,184 49 (46) - 3
BBB-rated
2,003 11 (9) - 2
Total uncleared derivatives
12,402 61 (56) - 5
Cleared derivatives (1)
61,288 26 - 882 908
Liability positions with credit exposure:
Uncleared derivatives:
A-rated 64 - 2 - 2
BBB-rated 1,006 (1) 1 - -
Total uncleared derivatives 1,070 (1) 3 - 2
Total derivative positions with credit exposure to nonmember counterparties
74,760 86 (53) 882 915
Member institutions(2)
145 - - - -
Total $ 74,905 $ 86 $ (53) $ 882 $ 915
(1)Represents derivative transactions cleared with LCH Ltd. and CME Clearing, the FHLB's clearinghouses. LCH Ltd. is rated AA- by Standard & Poor's, and CME Clearing is not rated, but its parent company, CME Group Inc., is rated AA- by Standard & Poor's and Fitch Ratings.
(2)Represents Mandatory Delivery Contracts.
Our exposure to cleared derivatives is primarily associated with the requirement to post initial margin through the clearing agent to the Derivatives Clearing Organizations. We may pledge both cash and non-cash (i.e., securities) as collateral to satisfy this initial margin requirement. However, the use of cleared derivatives mitigates credit risk exposure because a central counterparty is substituted for individual counterparties.
At December 31, 2025, the net exposure of uncleared derivatives with residual credit risk exposure was $7 million. If interest rates or the composition of our derivatives change resulting in an increase to our gross exposure to uncleared derivatives, the contractual collateral provisions in these derivatives would limit our net exposure to acceptable levels.
Although we cannot predict if we will realize credit risk losses from any of our derivatives counterparties, we believe that all of the counterparties will be able to continue making timely interest payments and, more generally, to continue to satisfy the terms and conditions of their derivative contracts with us.
Liquidity Risk
Liquidity Overview
We strive to be in a liquidity position at all times to meet the borrowing needs of our members and to meet all current and future financial commitments. This objective is achieved by managing liquidity positions to maintain stable, reliable, and cost-effective sources of funds while taking into account market conditions, member demand, and the maturity profile of assets and liabilities. At December 31, 2025, our liquidity position complied with the FHLBank Act, Finance Agency regulations, and internal policies.
The FHLBank System's primary source of funds is the sale of Consolidated Obligations in the capital markets. Our ability to obtain funds through the sale of Consolidated Obligations at acceptable interest costs depends on the financial market's perception of the riskiness of the Obligations and on prevailing conditions in the capital markets, particularly the short-term capital markets. The System's favorable debt ratings, which take into account our status as a GSE, and our effective risk management practices are instrumental in ensuring stable and satisfactory access to the capital markets.
We believe our liquidity position, as well as that of the System, continued to be strong during 2025. Our overall ability to effectively fund our operations through debt issuances remained sufficient. Investor demand for System debt was robust in 2025, as investors continued to prefer high-quality money market instruments. We believe there is a low probability of a liquidity or funding crisis in the System that would impair our ability to participate, on a cost-effective basis, in issuances of debt, service outstanding debt, maintain adequate capitalization, or pay competitive dividends.
The System works collectively to manage and monitor the System-wide liquidity and funding risks. Liquidity risk includes the risk that the System could have difficulty rolling over short-term Obligations when market conditions change, also called refinancing risk. The System has a large reliance on short-term funding; therefore, it has a sharp focus on managing liquidity risk to very low levels. Access to short-term debt markets has been reliable because investors, driven by liquidity preferences and risk aversion, have sought the System's short-term debt, which has resulted in strong demand for debt maturing in one year or less.
See the Notes to Financial Statements for more detailed information regarding maturities of certain financial assets and liabilities which are instrumental in determining the amount of liquidity risk. In addition to contractual maturities, other assumptions regarding cash flows such as estimated prepayments, embedded call optionality, and scheduled amortization are considered when managing liquidity risks.
Liquidity Management and Regulatory Requirements
We manage liquidity risk by ensuring compliance with our regulatory liquidity requirements and regularly monitoring other metrics.
The Finance Agency establishes the expectations with respect to the maintenance of sufficient liquidity without access to the capital markets for a specified number of days, which was set as a period of between 10 to 30 calendar days in the base case. The base case generally assumes that all Advance maturities are renewed. We were in compliance with these liquidity requirements at all times during 2025.
The Finance Agency also provides guidance related to asset/liability maturity funding gap limits. Funding gap metrics measure the difference between assets and liabilities that are scheduled to mature during a specified period of time and are expressed as a percentage of total assets. Although subject to change depending on conditions in the financial markets, the current regulatory requirement for funding gaps is between -10 percent to -20 percent for the three-month maturity horizon and is between -25 percent to -35 percent for the one-year maturity horizon. During 2025, we operated within those limits.
To support our member deposits, we also must meet a statutory deposit reserve requirement. The sum of our investments in obligations of the United States, deposits in eligible banks or trust companies, and Advances with a final maturity not exceeding five years must equal or exceed the current amount of member deposits. The following table presents the components of this liquidity requirement.
(In millions) December 31, 2025 December 31, 2024
Deposit Reserve Requirement
Total Eligible Deposit Reserves $ 91,989 $ 92,794
Total Member Deposits (1,064) (1,099)
Excess Deposit Reserves $ 90,925 $ 91,695
Member Concentration Risk
We regularly assess concentration risks from business activity. We believe the effect on credit risk exposure from borrower concentration is minimal because of our application of credit risk mitigations, specifically credit underwriting of our members and the over-collateralization of borrowings. Advance concentration has a minimal effect on market risk exposure because Advances are largely funded by Consolidated Obligations and interest rate swaps that have similar interest rate characteristics.
Furthermore, additional increases in Advance concentration would not materially affect capital adequacy because Advance growth is supported by new purchases of capital stock as required by the Capital Plan.
Operational Risks
Operational risk is defined as the risk of an unexpected loss resulting from human error, fraud, inability to enforce legal contracts, or deficiencies in internal controls or information systems. We mitigate operational risks through adherence to internal policies, conformance with entity level controls, and through an emphasis on the importance of risk management, as further discussed below. In addition, the Internal Audit Department, which reports directly to the Audit Committee of the Board of Directors, regularly monitors and tests compliance with our policies, procedures and applicable regulatory requirements.
Internal Department Procedures and Controls
Each of our departments maintains and regularly reviews and enhances, as needed, a system of internal procedures and controls, including those that address proper segregation of duties. Each system is designed to prevent any one individual from processing the entirety of a transaction that affects member accounts, correspondent FHLB accounts or third-party servicers providing support to us. We review daily and periodic transaction activity reports in a timely manner to detect erroneous or fraudulent activity. Procedures and controls also are assessed on an enterprise-wide basis, independently from the business unit departments. We also are in compliance with Sarbanes-Oxley Sections 302 and 404, which focus on the control environment over financial reporting.
Information Systems
We rely heavily upon internal and third-party information systems and other technology to conduct and manage our business. Our operations rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks. Our computer systems, software and networks may be subjected to cyberattacks (e.g., breaches, unauthorized access, misuse, computer viruses or other malicious code and other events) that could jeopardize the confidentiality or integrity of such information, or otherwise cause interruptions or malfunctions in our operations.
We mitigate the risk associated with cyberattacks through the implementation of multiple layers of security controls. Administrative, physical, and logical controls are in place for establishing, administering and actively monitoring system access, sensitive data, and system change. Additionally, separate groups within our organization and/or third parties test the strength of our security controls and responses, and recommend changes as needed to bolster resilience to security risks. See Item 1C. Cybersecurity for further discussion.
Disaster Recovery Provisions
We have a Business Resiliency Management Plan that provides us with the ability to maintain operations in various scenarios of business disruption. We review and update this plan periodically to ensure that it serves our changing operational needs and those of our members. In case of business disruptions, we have an off-site facility in a suburb of Cincinnati, Ohio, which is kept ready for use and tested at least annually, and employees are set up to work from home. We also have a back-up agreement in place with another FHLBank in the event that both of our Cincinnati-based facilities are inoperable.
Insurance Coverage
We have insurance coverage for cyber risks, employee fraud, forgery and wrongdoing, and Directors' and Officers' liability. This coverage primarily provides protection for claims alleging breach of duty, misappropriation of funds, neglect, acts of omission, employment practices, and fiduciary liability. We also have property, casualty, computer equipment, automobile, and various other types of coverage.
Human Resources Policies and Procedures
The risks associated with our Human Resources function are categorized as either Employment Practices Risk or Human Capital Risk. Employment Practices Risk is the potential failure to properly administer our policies regarding employment practices and compensation and benefit programs for eligible staff and retirees, and the potential failure to observe and properly comply with federal, state and municipal laws and regulations. Comprehensive policies and procedures are in place to limit Employment Practices Risk. These are supported by an established internal control system that is routinely monitored and audited.
Human Capital Risk is the potential inability to attract and retain appropriate levels of qualified human resources to maintain efficient operations. With respect to Human Capital Risk, we strive to maintain a competitive salary and benefit structure, which is regularly reviewed and updated as appropriate to attract and retain qualified staff. In addition, we have a management
succession plan that is reviewed and approved by our Board of Directors. See "Human Capital Resources" in Item 1. Business for further discussion.
CRITICAL ACCOUNTING ESTIMATES
Introduction
The preparation of financial statements in accordance with GAAP requires management to make a number of significant judgments, estimates, and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities (if applicable), and the reported amounts of income and expenses during the reported periods. Although management believes its judgments, estimates, and assumptions are reasonable, actual results may differ and other parties could arrive at different conclusions.
Given the assumptions and judgment used, we have identified the fair value measurement of interest rate derivatives and hedged items as our critical accounting estimate. Our financial condition and results of operations could be materially affected under different conditions or different assumptions related to this accounting estimate.
Fair Value Measurement of Interest Rate Derivatives and Hedged Items
In accordance with Finance Agency regulations, we execute all derivatives to manage market risk exposure, not for speculation or solely for earnings enhancement. We record derivative instruments at their fair values on the Statements of Condition, and we record changes in these fair values in current period earnings. We strive to ensure that our use of derivatives maximizes the probability that they are highly effective in offsetting changes in the market values of the designated balance sheet instruments, as applicable. The judgments and assumptions that are most critical to the application of this accounting policy are those affecting the estimation of fair values of derivative instruments and the related hedged items, which may have a significant impact on the results reported. At December 31, 2025, our derivatives portfolio included notional amounts of $42.2 billion accounted for as fair value hedges and $34.2 billion accounted for as economic hedges and the fair value of derivative assets and liabilities was $33.1 million and $0.1 million, respectively.
Our interest rate related derivatives (swaps and swaptions) are traded in the over-the-counter market. Therefore, we determine the fair value of each individual instrument using market value models that use readily observable market inputs as their basis (inputs that are actively quoted and can be validated to external sources). The fair value determination uses the standard valuation technique of discounted cash flow analysis, which uses observable market inputs, such as discount rate, forward interest rate, and volatility assumptions. Observable market inputs are those that are actively quoted and can be validated to external sources.
For derivatives accounted for as fair value hedges, the hedged risk is generally designated to be changes in the eligible benchmark interest rate. The result is that there has been a relatively small amount of unrealized earnings volatility from hedging market risk with derivatives. However, each month, we also compute fair values on all derivatives and related hedged instruments across a range of interest rate scenarios to understand the sensitivity to interest rate changes. For derivatives receiving long-haul fair value hedge accounting, the additional amount of earnings volatility under an assumption of stressed interest rate environments as of year-end 2025 was in a range of negative $8 million to positive $9 million.
In addition to fair value hedges, a portion of our derivatives are considered economic hedges. In order to help offset the derivative's fair market value with the market value of the hedged instrument, we hold related investments as trading securities or make an accounting election called "fair value option" for other instruments, as applicable. Under these elections, we record the fair market value of the hedged instruments (e.g., certain Advances, investment securities, Bonds and Discount Notes) at their full fair value instead of only the value related to the benchmark interest rate. See Note 14 of the Notes to Financial Statements for discussion of the valuation methodologies and primary inputs used to develop the fair value measurement for these instruments. The effect of electing full fair value is that the hedged instrument's market value includes the impact of changes in spreads between the designated benchmark interest rate and the interest rate index related to the hedged instrument, as well as other risk components, such as liquidity. Therefore, full fair value results in a different kind of unrealized earnings volatility, which could be higher or lower, compared to accounting under fair value hedge treatment. However, the estimated fair values of the derivatives and hedged items in the economic hedge category do not have any cumulative economic effect if the derivative and the hedged item are held to maturity, or contain mutual optional termination provisions at par. Since these fair values fluctuate throughout the hedge period and eventually return to zero (derivative) or par value (hedged item) on the
maturity or option exercise date, the earnings impact of fair value changes is only a timing issue for hedging relationships that remain outstanding to maturity or the call termination date.
RECENTLY ISSUED ACCOUNTING STANDARDS AND INTERPRETATIONS
See Note 2 of the Notes to Financial Statements for a discussion of recently issued accounting standards and interpretations.
OTHER FINANCIAL INFORMATION
Investments
Data on investments for the years ended December 31, 2025 and 2024 are provided in the table below.
December 31, 2025 December 31, 2024
(Dollars in millions) Due in one year or less Due after one year through five years Due after five through 10 years Due after 10 years Carrying Value Carrying Value
Interest-bearing deposits
$ 2,400 $ - $ - $ - $ 2,400 $ 2,360
Securities purchased under agreements to resell
6,450 - - - 6,450 10,739
Federal funds sold
12,537 - - - 12,537 4,900
Trading securities:
U.S. Treasury obligations
- 1,035 253 - 1,288 1,249
GSE obligations
401 895 179 - 1,475 1,457
Total trading securities 401 1,930 432 - 2,763 2,706
Available-for-sale securities:
U.S. Treasury obligations
- 5,751 - - 5,751 5,488
GSE obligations
67 36 10 - 113 120
MBS (1):
GSE multifamily - 1,388 3,679 - 5,067 3,454
Total available-for-sale securities
67 7,175 3,689 - 10,931 9,062
Held-to-maturity securities:
U.S. Treasury obligations
51 - - - 51 50
MBS (1):
U.S. obligation single-family - - - 892 892 998
GSE single-family - 1 578 3,304 3,883 3,627
GSE multifamily 149 3,894 6,129 - 10,172 10,697
Total held-to-maturity securities
200 3,895 6,707 4,196 14,998 15,372
Total investment securities 668 13,000 10,828 4,196 28,692 27,140
Total investments $ 22,055 $ 13,000 $ 10,828 $ 4,196 $ 50,079 $ 45,139
Weighted average yields (2)
Available-for-sale securities 2.84 % 2.26 % 3.81 % - %
Held-to-maturity securities 4.42 % 4.52 % 4.35 % 4.80 %
(1)MBS allocated based on contractual principal maturities assuming no prepayments.
(2)The weighted average yields on available-for-sale and held-to-maturity securities are calculated as the sum of each debt security's period end balance adjusted by the effect of amortization and accretion of premiums and discounts multiplied by the coupon rate, divided by the total debt securities. The result is then multiplied by 100 to express it as a percentage.
Advances
The following table presents Advances by product type and redemption term, including index-amortizing Advances, which are presented according to their predetermined amortization schedules.
(In millions) December 31,
Types of Advances by Redemption Term 2025 2024
Fixed-rate:
Due in 1 year or less $ 26,728 $ 20,878
Due after 1 year through 3 years 12,688 21,828
Due after 3 years through 5 years 1,388 4,278
Due after 5 years through 15 years 35 645
Thereafter 1 2
Total par value 40,840 47,631
Fixed-rate, callable or prepayable (1):
Due in 1 year or less - -
Due after 1 year through 3 years 37 9
Due after 3 years through 5 years 12 29
Due after 5 years through 15 years - -
Thereafter - -
Total par value 49 38
Fixed-rate, putable:
Due in 1 year or less 60 -
Due after 1 year through 3 years 156 110
Due after 3 years through 5 years 32 110
Due after 5 years through 15 years 375 395
Thereafter - -
Total par value 623 615
Variable-rate:
Due in 1 year or less 7,375 7,120
Due after 1 year through 3 years 8,218 1,626
Due after 3 years through 5 years - -
Due after 5 years through 15 years - -
Thereafter - -
Total par value 15,593 8,746
Variable-rate, callable or prepayable (1):
Due in 1 year or less 1,653 3,960
Due after 1 year through 3 years 10,500 13,500
Due after 3 years through 5 years 19 4,000
Due after 5 years through 15 years - -
Thereafter - -
Total par value 12,172 21,460
Other (2) :
Due in 1 year or less 178 260
Due after 1 year through 3 years 223 367
Due after 3 years through 5 years 134 197
Due after 5 years through 15 years 282 228
Thereafter 10 3
Total par value 827 1,055
Total par value Advances $ 70,104 $ 79,545
(1)Prepayable Advances are those Advances that may be contractually prepaid by the borrower on specified dates without incurring prepayment or termination fees.
(2)Includes fixed-rate amortizing/mortgage matched and other fixed-rate Advances.
Mortgage Loans
The following table presents mortgage loan redemptions according to their predetermined amortization schedules. All of our mortgage loans have fixed rates.
(In millions) December 31,
Redemption Term 2025 2024
Due in 1 year or less $ 290 $ 261
Due after 1 year through 5 years 1,201 1,061
Due after 5 years through 15 years 3,301 2,778
Thereafter 3,698 2,993
Total unpaid principal balance $ 8,490 $ 7,093
The following table presents certain credit risk related balances and ratios for mortgage loans.
(Dollars in millions) December 31, 2025 December 31, 2024
Unpaid Principal Balance
Mortgage loans held for portfolio $ 8,490 $ 7,093
Average loans outstanding during the period 7,554 7,032
Non-accrual loans 1 1
Allowance for credit losses on mortgage loans held for portfolio - -
Net charge-offs - -
Ratios (1)
Net charge-offs to average loans outstanding during the period - % - %
Allowance for credit losses to mortgage loans held for portfolio - % - %
Non-accrual loans to mortgage loans held for portfolio 0.01 % 0.02 %
Allowance for credit losses to non-accrual loans 27.88 % 23.81 %
(1)The ratios have been computed using dollars in thousands. Accordingly, recalculations based upon the disclosed amounts in millions may produce nominally different results.
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