Federal Home Loan Bank of Indianapolis
11/12/2025 | Press release | Distributed by Public on 11/12/2025 12:29
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Presentation
This discussion and analysis by management of the Bank's financial condition and results of operations should be read in conjunction with our 2024 Form 10-K and the interim Financial Statements and relatedNotes to Financial Statementscontained in Item 1. Financial Statements.
Unless otherwise stated, amounts disclosed in this Item are rounded to the nearest million; therefore, dollar amounts of less than one million may not be reflected or, due to rounding, may not appear to agree to the amounts presented in thousands in the Financial Statements and relatedNotes to Financial Statements. Amounts used to calculate dollar and percentage changes are based on numbers in the thousands. Accordingly, calculations based upon the disclosed amounts (millions) may not produce the same results.
Executive Summary
Overview. As an FHLBank,we are a regional wholesale bank that serves as a financial intermediary between the capital markets and our members. The Bank is structured as a financial cooperative, which allows our business to be scalable and self-capitalizing without taking undue risks, diminishing capital adequacy or jeopardizing profitability. Therefore, the Bank is generally designed to expand and contract in asset size as the needs of our members and their communities change.
We primarily make secured loans in the form of advances to our members and purchase whole mortgage loans from our members. Additionally, we purchase other investments and provide other financial services to our members.
Our principal source of funding is the proceeds from the sale to the public of FHLBank debt instruments, called consolidated obligations, which are the joint and several obligation of all FHLBanks. We obtain additional funds from deposits, other borrowings, and by issuing capital stock to our members.
In May 2025, Moody's downgraded the long-term credit ratings of the United States and in turn, the long-term rating of consolidated obligations and our long-term bank deposit ratings were also downgraded from Aaa to Aa1 with outlooks changing from negative to stable. As discussed in our Form 10-K, rating agency actions could adversely affect our cost of funds, our ability to access the capital markets, and/or our ability to enter into derivative instrument transactions on acceptable terms. The downgrade did not impact any current obligations of the Bank or our members, nor did it have an impact on our cost of funding, access to liquidity or our financial condition and results of operations.
Our primary source of revenue is interest earned on advances, mortgage loans, and investments, including MBS.
Our net interest income is primarily determined by the size of our balance sheet and the spread between the interest rate earned on our assets and the interest rate paid on our share of the consolidated obligations. A significant portion of net interest income may also be derived from deploying our capital which produces an asset yield but has no associated interest cost, i.e., interest-free capital. We use funding and hedging strategies to manage the interest-rate risk that arises from our lending and investing activities.
Due to our cooperative ownership structure and wholesale nature, we typically earn a narrow interest spread. Accordingly, our earnings are relatively low compared to our total assets and capital.
In addition, as a cooperative, some members utilize our products more heavily and own more capital stock than others. As a result, we must achieve a balance in generating membership value from rates we charge on advances or prices we pay to purchase mortgage loans and paying a sufficient dividend rate.
Business Environment. The Bank's financial performance is influenced by several key national economic and market factors, including fiscal and monetary policies, the conditions in the housing markets and the level and volatility of market interest rates.
Economy and Financial Markets. Despite elevated economic uncertainty caused by escalating trade wars, a prolonged federal government shutdown and a stagnant job market, consumer spending remained strong in the third quarter and continues to outpace inflation. The estimated unemployment rate for September 2025 was slightly higher than the second quarter's rate but still low by historical measures.
U.S. inflation, as measured by the Consumer Price Index published by the U.S. Labor Department, rose in September 2025 to an annual rate of 3.0%, the fastest pace since January 2025. The associated measure of core prices, which excludes volatile food and energy prices, also rose 3.0% compared to a year earlier.
The federal government shutdown commenced October 1, 2025 and has resulted in an interruption of certain federal government services. It remains unknown what impact, if any, the federal government shutdown will have on economic activity, including economic growth and labor market conditions, although there are indications that, among other things, the shutdown may have adversely impacted economic growth. For additional discussion of the risks that may result from the shutdown, see Item 1A. Risk Factors - Business Risk - Economic - Economic Conditions and Policy, or Global Political or Economic Events Could Have an Adverse Effect on Our Business, Liquidity, Financial Condition, and Results of Operationsin our 2024 Form 10-K.
Conditions in U.S. Housing Markets. Elevated mortgage interest rates continue to keep buyers out of the market as many homeowners are reluctant to sell and give up their existing low mortgage rates, reducing the available inventory of homes for sale.
Lower demand and lower, but rising, supply has resulted in declining existing-home sales and stubbornly high prices. However, existing-home sales, which comprise most of the housing market, rose in September to a seven-month high according to the National Association of Realtors ("NAR"), coinciding with declining mortgage rates.
Housing affordability, particularly for first-time home buyers, remains well below historic norms according to the most recent NAR affordability index.
Interest Rate Levels and Volatility. The Federal Reserve seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. In support of these goals and in light of the shift in balance of these risks, at its meeting on September 17, 2025, the FOMC decided to lower the target range by 1/4 percentage point to 4.00 to 4.25 percent, stating that "uncertainty about the economic outlook remains elevated and downside risks to unemployment have risen."
The following table presents certain key interest rates.
| Average for Three Months Ended | Average for Nine Months Ended | Period End | ||||||||||||||||||||||||||||||||||||
| September 30, | September 30, | September 30, | December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||
| Federal Funds Effective | 4.30 | % | 5.27 | % | 4.32 | % | 5.31 | % | 4.09 | % | 4.33 | % | ||||||||||||||||||||||||||
| SOFR | 4.33 | % | 5.28 | % | 4.33 | % | 5.30 | % | 4.24 | % | 4.49 | % | ||||||||||||||||||||||||||
| 1-week Overnight-Indexed Swap | 4.28 | % | 5.24 | % | 4.31 | % | 5.30 | % | 4.09 | % | 4.33 | % | ||||||||||||||||||||||||||
| 3-month U.S. Treasury yield | 4.19 | % | 5.13 | % | 4.27 | % | 5.30 | % | 3.94 | % | 4.32 | % | ||||||||||||||||||||||||||
| 2-year U.S Treasury yield | 3.73 | % | 4.06 | % | 3.92 | % | 4.46 | % | 3.61 | % | 4.24 | % | ||||||||||||||||||||||||||
| 10-year U.S. Treasury yield | 4.26 | % | 3.96 | % | 4.36 | % | 4.18 | % | 4.15 | % | 4.57 | % | ||||||||||||||||||||||||||
Source: Bloomberg
The level and volatility of interest rates, including the shape of the yield curve, were affected by several factors, principally efforts by the Federal Reserve beginning in late March 2022 to raise interest rates and tighten monetary policy to combat high inflation.
As the FOMC raised short-term rates, portions of the Treasury yield curve became inverted. The 2-year rate was consistently higher than the 10-year rate. Investors use the 10-year Treasury yield as an indicator of investor confidence. The 2-year rate fell below the 10-year rate during the latter part of 2024, as that portion of the yield curve steepened, and has remained that way in 2025.
At its meeting on October 29, 2025, the FOMC decided to lower the target range by 1/4 percentage point to 3.75 to 4.00 percent, stating that "uncertainty about the economic outlook remains elevated and downside risks to employment rose in recent months." Additionally, the FOMC decided to conclude the reduction of its aggregate securities holdings on December 1, 2025, signaling the end of its quantitative tightening program.
Impact on Operating Results. Lending and investing activity by our member institutions are key drivers for our balance sheet and income growth. Such activity is a function of both prevailing interest rates and economic activity, including local economic factors, particularly relating to the housing and mortgage markets.
Positive economic trends may increase demand by our members for advances to support their funding needs but can drive market interest rates higher, which can impair activity in the mortgage market. A less active mortgage market can adversely affect demand for advances and activity levels in our Advantage MPP. However, member demand for liquidity, particularly during stressed market conditions, can also lead to advances growth. Negative economic trends may decrease demand by our members for advances but can drive market interest rates lower, which can spur activity in the mortgage market. A more active mortgage market can positively affect demand for advances and our Advantage MPP.
The Bank has a diversified portfolio of advances to insurance company and depository members. Borrowing patterns between our insurance company and depository members can differ during various economic and market conditions, thereby easing the potential magnitude of core business fluctuations during business cycles.
The level and trends of market interest rates and the shape of the U.S. Treasury yield curve affect our yields and margins on earning assets, including advances, purchased mortgage loans, and our investment portfolio, which contribute to our overall profitability. Additionally, trends in market interest rates drive mortgage origination and prepayment activity, which can lead to net interest margin volatility in our MPP and MBS portfolios. A flat or inverted yield curve, in which the difference between short-term interest rates and long-term interest rates is low, or negative, respectively, may have an unfavorable impact on our net interest margins. A steep yield curve, in which the difference between short-term and long-term interest rates is high, may have a favorable impact on our net interest margins. The level of interest rates also directly affects our earnings on assets funded by our interest-free capital.
Supporting Housing and Community Investment.In addition to providing a readily available, competitively-priced source of funds to members, one of our core missions is to support affordable housing and community investment. A number of programs administered by the Bank are targeted to fulfill that mission, some of which are statutory and some are voluntary. The Bank is statutorily required to set aside 10% of earnings to support affordable housing each year. These funds assist members in serving very low- and low- or moderate-income households. In addition to statutory AHP assessments, we have committed to allocating voluntary funding to our AHP and various affordable housing and community investment programs in 2025 of 7.5% of our 2024 earnings. However, the timing of the recognition of such allocations as expense may vary due to the applicable accounting requirements.
Results of Operations and Changes in Financial Condition
Results of Operations for the Three and Nine Months Ended September 30, 2025 and 2024.The following table presents the comparative highlights of our results of operations ($ amounts in millions).
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||||||||||||||
| Condensed Statements of Comprehensive Income | 2025 | 2024 | $ Change | % Change | 2025 | 2024 |
$ Change |
% Change |
||||||||||||||||||||||||||||||||||||||||||
| Interest income | $ | 997 | $ | 1,090 | $ | (93) | (9) | % | $ | 2,923 | $ | 3,140 | $ | (217) | (7) | % | ||||||||||||||||||||||||||||||||||
| Interest expense | 864 | 960 | (96) | (10) | % | 2,537 | 2,756 | (219) | (8) | % | ||||||||||||||||||||||||||||||||||||||||
| Net interest income after provision for (reversal of) credit losses | 133 | 130 | 3 | 2 | % | 386 | 384 | 2 | 1 | % | ||||||||||||||||||||||||||||||||||||||||
| Other income | 8 | 9 | (1) | 17 | 26 | (9) | ||||||||||||||||||||||||||||||||||||||||||||
| Other expenses | 44 | 37 | 7 | 123 | 103 | 20 | ||||||||||||||||||||||||||||||||||||||||||||
| Income before assessments | 97 | 102 | (5) | (5) | % | 280 | 307 | (27) | (9) | % | ||||||||||||||||||||||||||||||||||||||||
| AHP assessments | 10 | 11 | (1) | 29 | 32 | (3) | ||||||||||||||||||||||||||||||||||||||||||||
| Net income | 87 | 91 | (4) | (5) | % | 251 | 275 | (24) | (9) | % | ||||||||||||||||||||||||||||||||||||||||
| Total other comprehensive income (loss) | 36 | (33) | 69 | (2) | 57 | (59) | ||||||||||||||||||||||||||||||||||||||||||||
| Total comprehensive income | $ | 123 | $ | 58 | $ | 65 | 113 | % | $ | 249 | $ | 332 | $ | (83) | (25) | % | ||||||||||||||||||||||||||||||||||
Net income for the three months ended September 30, 2025was $87 million, a net decreaseof $4 million compared to the corresponding period in the prior year. The decrease was primarily due to net unrealized losses on qualifying fair-value hedging relationships and an increase in voluntary contributions to affordable housing and community investment programs, partially offset by higher advance prepayment fees, net of swap termination fees.
Net income for the nine months ended September 30, 2025 was $251 million, a net decrease of $24 million compared to the corresponding period in the prior year. The decrease was primarily due to net unrealized losses on qualifying fair-value and economic hedging relationships and a substantial increase in voluntary contributions to affordable housing and community investment programs, partially offset by higher advance prepayment fees, net of swap termination fees.
The net change in total OCI for the three months ended September 30, 2025 consisted substantially of net unrealized gains on AFS securities compared to net unrealized losses for the corresponding period in the prior year. The net change in total OCI for the nine months ended September 30, 2025 consisted substantially of net unrealized losses on AFS securities compared to net unrealized gains for the corresponding period in the prior year.
The following table presents the returns on average assets and returns on average equity.
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| Ratios (annualized) | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Return on average assets | 0.41 | % | 0.46 | % | 0.40 | % | 0.49 | % | ||||||||||||||||||
| Return on average equity | 7.88 | % | 9.11 | % | 7.82 | % | 9.37 | % | ||||||||||||||||||
The decline in the returns for the three and nine months ended September 30, 2025 compared to the corresponding periods in the prior year was due to lower net income and higher average balances.
Changes in Financial Condition for the Nine Months Ended September 30, 2025.
The following table presents the comparative highlights of our changes in financial condition ($ amounts in millions).
| Condensed Statements of Condition | September 30, 2025 | December 31, 2024 | $ Change | % Change | ||||||||||||||||||||||
| Advances | $ | 39,058 | $ | 39,833 | $ | (775) | (2) | % | ||||||||||||||||||
| Mortgage loans held for portfolio, net | 12,389 | 10,796 | 1,593 | 15 | % | |||||||||||||||||||||
|
Liquidity investments1
|
13,487 | 12,911 | 576 | 4 | % | |||||||||||||||||||||
|
Other investment securities2
|
21,083 | 20,189 | 894 | 4 | % | |||||||||||||||||||||
| Other assets | 774 | 806 | (32) | (4) | % | |||||||||||||||||||||
| Total assets | $ | 86,791 | $ | 84,535 | $ | 2,256 | 3 | % | ||||||||||||||||||
| Consolidated obligations | $ | 80,198 | $ | 78,085 | $ | 2,113 | 3 | % | ||||||||||||||||||
| MRCS | 282 | 363 | (81) | (22) | % | |||||||||||||||||||||
| Other liabilities | 1,874 | 1,852 | 22 | 1 | % | |||||||||||||||||||||
| Total liabilities | 82,354 | 80,300 | 2,054 | 3 | % | |||||||||||||||||||||
| Capital stock | 2,665 | 2,555 | 110 | 4 | % | |||||||||||||||||||||
|
Retained earnings3
|
1,779 | 1,684 | 95 | 6 | % | |||||||||||||||||||||
| Accumulated other comprehensive income (loss) | (7) | (4) | (3) | (44) | % | |||||||||||||||||||||
| Total capital | 4,437 | 4,235 | 202 | 5 | % | |||||||||||||||||||||
| Total liabilities and capital | $ | 86,791 | $ | 84,535 | $ | 2,256 | 3 | % | ||||||||||||||||||
|
Total regulatory capital4
|
$ | 4,726 | $ | 4,602 | $ | 124 | 3 | % | ||||||||||||||||||
1Includes cash, interest-bearing deposits, securities purchased under agreements to resell, federal funds sold and U.S. Treasury obligations classified as trading securities.
2Includes AFS and HTM securities.
3Includes restricted retained earnings at September 30, 2025 and December 31, 2024of $517 millionand $466 million, respectively.
4 Total capital less AOCI plus MRCS.
Total assets at September 30, 2025, were $86.8 billion, a net increase of $2.3 billion, or 3%, from December 31, 2024, primarily due to the increase in mortgage loans held for portfolio.
Advances outstanding at September 30, 2025, at carrying value, totaled $39.1 billion, a net decrease of $775 million, or 2%, from December 31, 2024.
Mortgage loans held for portfolio at September 30, 2025 totaled $12.4 billion, a net increase of $1.6 billion, or 15%, from December 31, 2024, as the Bank's purchases from its members exceeded principal repayments by borrowers. Purchases of mortgage loans from members for the nine months ended September 30, 2025 totaled $2.5 billion.
Liquidity investments at September 30, 2025 totaled $13.5 billion, a net increase of $576 million, or 4%, from December 31, 2024. Cash and short-term investments represented 92% of the total liquidity investments at September 30, 2025, while U.S. Treasury obligations represented 8%.
Other investment securities, which consist substantially of MBS and U.S. Treasury obligations classified as HTM or AFS, at September 30, 2025, totaled $21.1 billion, a net increase of $894 million, or 4%, from December 31, 2024.
The Bank's consolidated obligations outstandingat September 30, 2025 totaled $80.2 billion, a net increaseof $2.1 billion, or 3%, from December 31, 2024, which reflected increased funding needs associated with the net increase in the Bank's total assets.
Total capital at September 30, 2025 was $4.4 billion, a net increase of $202 million, or 5%, from December 31, 2024. The net increase resulted primarily from members' purchases of capital stock to support their advance activity and the growth in retained earnings, offset by the Bank's repurchases of capital stock in the first quarter.
The Bank's regulatory capital-to-assets ratio at September 30, 2025 was 5.45%, which exceeds all applicable regulatory capital requirements.
Outlook. We believe that our financial performance will continue to provide sufficient, risk-adjusted returns for our members across a wide range of business, financial and economic environments.
Our board of directors seeks to reward our members with a sufficient, risk-adjusted return on their investment, particularly those who actively utilize our products and services. On October 28, 2025, our board of directors declared a cash dividend on Class B-2 activity-based stock at an annualized rate of 9.50% and on Class B-1 non-activity-based stock at an annualized rate of 4.50%, resulting in a spread between the rates of 5.0 percentage points. The overall weighted-average annualized rate paid on member capital stock was 8.16%. The dividends were paid in cash on October 29, 2025.
The ultimate effects of economic and financial markets activity, including fiscal and monetary policies, the conditions in the housing markets and the level and volatility of market interest rates, as well as legislative and regulatory actions, continue to evolve and are highly uncertain and, therefore, the future impact on our business is difficult to predict.
Analysis of Results of Operations for the Three and Nine Months Ended September 30, 2025 and 2024.
Interest Income.Interest income on advances, mortgage loans held for portfolio, and investment securities is our primary source of revenue. Interest income for the three months ended September 30, 2025 totaled $997 million, a decrease of $93 million compared to the corresponding period in the prior year, primarily driven by a decrease in yields resulting from lower short-term market interest rates, partially offset by an increase in the average balances of interest-earning assets and advance prepayment fees, net of swap termination fees.
Interest income for the nine months ended September 30, 2025 totaled $2.9 billion, a decrease of $217 million compared to the corresponding period in the prior year,primarily driven by a decrease in yields resulting from lower short-term market interest rates, partially offset by an increase in the average balances of interest-earning assets and advance prepayment fees, net of swap termination fees.
The following table presents the components of advance prepayment fees included in interest income ($ amounts in millions):
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| Components | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Gross amount of prepayment fees received from advance borrowers | $ | 13 | $ | - | $ | 16 | $ | - | ||||||||||||||||||
| Gross amount of prepayment credits paid to advance borrowers | - | - | (2) | (1) | ||||||||||||||||||||||
| Gross advance prepayment fees received (paid) | 13 | - | 14 | (1) | ||||||||||||||||||||||
| Swap termination fees received (paid) | (7) | - | (1) | 1 | ||||||||||||||||||||||
| Total advance prepayment fees, net | $ | 6 | $ | - | $ | 13 | $ | - | ||||||||||||||||||
When an advance is prepaid, we could suffer lower future income if the principal portion of the prepaid advance is reinvested in lower-yielding assets. To protect against this risk, we charge a borrower a prepayment fee when the borrower prepays certain advances before their original maturity, which makes us financially indifferent to a borrower's decision to prepay an advance. Certain advances may contain symmetrical prepayment fee provisions for which we may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates, when the advance is prepaid. Advances with symmetrical prepayment provisions are generally hedged with derivatives containing offsetting terms. We record prepayment fees, net of swap termination fees, as interest income on advances.
Interest Expense.Interest expense on consolidated obligations is our primary expense. Interest expense for the three months ended September 30, 2025 totaled $864 million, a decrease of $96 million compared to the corresponding period in the prior year, primarily driven by a decrease in our cost of funds resulting from lower short-term market interest rates, partially offset by an increase in the average balances of interest-bearing liabilities.
Interest expense for the nine months ended September 30, 2025 totaled $2.5 billion, a decrease of $219 million compared to the corresponding period in the prior year, primarily driven by a decrease in our cost of funds resulting from lower short-term market interest rates, partially offset by an increase in the average balances of interest-bearing liabilities.
Net Interest Income. Net interest income is our primary source of earnings and is generated from the net interest spread on assets funded by liabilities and the yield on assets funded by interest-free capital as well as the average balances of interest-earning assets and interest-bearing liabilities.
The increase in net interest income for the three months ended September 30, 2025 compared to the corresponding period in the prior year was substantially due to higher interest spreads on interest-earnings assets, net of interest-bearing liabilities, partially offset by lower earnings on the portion of the Bank's assets funded by its capital and net unrealized losses on qualifying fair-value hedging relationships.
The increase in net interest income for the nine months ended September 30, 2025 compared to the corresponding period in the prior year was substantially due to higher interest spreads on interest-earnings assets, net of interest-bearing liabilities, partially offset by lower earnings on the portion of the Bank's assets funded by its capital and net unrealized losses on qualifying fair-value hedging relationships.
For our hedging relationships that qualified for hedge accounting, the differences between the changes in fair value of the hedged items and the associated derivatives(i.e., hedge ineffectiveness) are recorded in net interest income and resulted in net hedging losses for the three months ended September 30, 2025 of $(467) thousand, compared to net hedging gains for the corresponding period in the prior year of $5 million, and net hedging losses for the nine months ended September 30, 2025 of $(3) million, compared to net hedging gains for the corresponding period in the prior year of $10 million.
Our net gains (losses) on derivatives fluctuate due to volatility in the overall interest-rate environment as we hedge our asset and liability risk exposures. In general, we hold derivatives and associated hedged items to the maturity, call, or put date. Therefore, due to timing, nearly all of the cumulative net gains and losses for these financial instruments will generally reverse over the remaining contractual terms of the hedged item. However, there may be instances when we terminate these instruments prior to the maturity, call or put date, which may result in a realized gain or loss.
The following table presents average daily balances, interest income/expense, and average yields/cost of funds of our major categories of interest-earning assets and their funding sources ($ amounts in millions).
| Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
Average
Balance
|
Interest
Income/
Expense1
|
Average
Yield/ Cost of Funds1,2
|
Average
Balance
|
Interest
Income/
Expense1
|
Average
Yield/ Cost of Funds1,2
|
||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Securities purchased under agreements to resell | $ | 3,670 | $ | 40 | 4.35 | % | $ | 4,940 | $ | 67 | 5.36 | % | |||||||||||||||||||||||
| Federal funds sold | 4,717 | 52 | 4.38 | % | 2,617 | 35 | 5.37 | % | |||||||||||||||||||||||||||
|
MBS3,4
|
13,456 | 174 | 5.14 | % | 12,565 | 197 | 6.24 | % | |||||||||||||||||||||||||||
|
Other investment securities3,4
|
8,537 | 101 | 4.68 | % | 8,633 | 121 | 5.59 | % | |||||||||||||||||||||||||||
|
Advances4
|
39,375 | 473 | 4.76 | % | 38,107 | 549 | 5.73 | % | |||||||||||||||||||||||||||
|
Mortgage loans held for portfolio4,5
|
12,248 | 134 | 4.33 | % | 9,682 | 93 | 3.82 | % | |||||||||||||||||||||||||||
|
Other assets (interest-earning)6
|
2,123 | 23 | 4.27 | % | 2,177 | 28 | 5.19 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | 84,126 | 997 | 4.70 | % | 78,721 | 1,090 | 5.51 | % | |||||||||||||||||||||||||||
|
Other assets, net7
|
28 | (379) | |||||||||||||||||||||||||||||||||
| Total assets | $ | 84,154 | $ | 78,342 | |||||||||||||||||||||||||||||||
| Liabilities and Capital: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 963 | 10 | 4.14 | % | $ | 881 | 11 | 5.12 | % | |||||||||||||||||||||||||
|
Discount notes4
|
24,441 | 263 | 4.27 | % | 18,920 | 252 | 5.30 | % | |||||||||||||||||||||||||||
|
CO bonds4
|
53,121 | 587 | 4.38 | % | 53,324 | 692 | 5.16 | % | |||||||||||||||||||||||||||
| MRCS | 291 | 4 | 5.78 | % | 363 | 5 | 5.50 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 78,816 | 864 | 4.35 | % | 73,488 | 960 | 5.20 | % | |||||||||||||||||||||||||||
| Other liabilities | 966 | 882 | |||||||||||||||||||||||||||||||||
| Total capital | 4,372 | 3,972 | |||||||||||||||||||||||||||||||||
| Total liabilities and capital | $ | 84,154 | $ | 78,342 | |||||||||||||||||||||||||||||||
| Net interest income | $ | 133 | $ | 130 | |||||||||||||||||||||||||||||||
|
Net spread on interest-earning assets less interest-bearing liabilities2
|
0.35 | % | 0.31 | % | |||||||||||||||||||||||||||||||
|
Net interest margin8
|
0.62 | % | 0.66 | % | |||||||||||||||||||||||||||||||
| Average interest-earning assets to interest-bearing liabilities | 1.07 | 1.07 | |||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
|
Average
Balance
|
Interest
Income/
Expense1
|
Average
Yield/ Cost of Funds1,2
|
Average Balance |
Interest
Income/
Expense1
|
Average
Yield/ Cost of Funds1,2
|
||||||||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||||||||
| Securities purchased under agreements to resell | $ | 4,235 | $ | 139 | 4.39 | % | $ | 3,343 | $ | 135 | 5.39 | % | |||||||||||||||||||||||
| Federal funds sold | 3,794 | 124 | 4.39 | % | 3,883 | 157 | 5.41 | % | |||||||||||||||||||||||||||
|
MBS3,4
|
13,218 | 517 | 5.22 | % | 12,194 | 578 | 6.33 | % | |||||||||||||||||||||||||||
|
Other investment securities3,4
|
8,471 | 298 | 4.70 | % | 8,316 | 354 | 5.69 | % | |||||||||||||||||||||||||||
|
Advances4
|
39,526 | 1,402 | 4.74 | % | 36,487 | 1,572 | 5.75 | % | |||||||||||||||||||||||||||
|
Mortgage loans held for portfolio4,5
|
11,681 | 374 | 4.29 | % | 9,176 | 255 | 3.72 | % | |||||||||||||||||||||||||||
|
Other assets (interest-earning)6
|
2,154 | 69 | 4.28 | % | 2,251 | 89 | 5.28 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | 83,079 | 2,923 | 4.70 | % | 75,650 | 3,140 | 5.54 | % | |||||||||||||||||||||||||||
|
Other assets, net7
|
31 | (467) | |||||||||||||||||||||||||||||||||
| Total assets | $ | 83,110 | $ | 75,183 | |||||||||||||||||||||||||||||||
| Liabilities and Capital: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 956 | 30 | 4.15 | % | $ | 839 | 32 | 5.18 | % | |||||||||||||||||||||||||
|
Discount notes4
|
23,473 | 756 | 4.31 | % | 18,788 | 751 | 5.34 | % | |||||||||||||||||||||||||||
|
CO bonds4
|
53,157 | 1,738 | 4.37 | % | 50,530 | 1,957 | 5.17 | % | |||||||||||||||||||||||||||
| MRCS | 307 | 13 | 5.70 | % | 366 | 16 | 5.79 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 77,893 | 2,537 | 4.35 | % | 70,523 | 2,756 | 5.22 | % | |||||||||||||||||||||||||||
| Other liabilities | 923 | 744 | |||||||||||||||||||||||||||||||||
| Total capital | 4,294 | 3,916 | |||||||||||||||||||||||||||||||||
| Total liabilities and capital | $ | 83,110 | $ | 75,183 | |||||||||||||||||||||||||||||||
| Net interest income | $ | 386 | $ | 384 | |||||||||||||||||||||||||||||||
|
Net spread on interest-earning assets less interest-bearing liabilities2
|
0.35 | % | 0.32 | % | |||||||||||||||||||||||||||||||
|
Net interest margin8
|
0.62 | % | 0.68 | % | |||||||||||||||||||||||||||||||
| Average interest-earning assets to interest-bearing liabilities | 1.07 | 1.07 | |||||||||||||||||||||||||||||||||
1 Includes hedging gains (losses) and net interest settlements on qualifying fair-value hedging relationships. Excludes impact of purchase discount (premium) recorded through mark-to-market gains (losses) on trading securities and net interest settlements on derivatives hedging trading securities.
2 Annualized.
3 The average balances of AFS securities are based on amortized cost; therefore, the resulting yields do not reflect changes in the estimated fair value that are a component of OCI.
4 Interest income/expense and average yield/cost of funds include all components of interest, including the impact of net interest payments or receipts on derivatives in qualifying hedge relationships, amortization of hedge accounting basis adjustments, and prepayment fees on advances. Excludes net interest payments or receipts on derivatives in economic hedging relationships, including those hedging trading securities.
5 Includes non-accrual loans.
6 Consists of interest-bearing deposits and loans to other FHLBanks (if applicable). Includes the rights or obligations to cash collateral, except for variation margin payments characterized as daily settled contracts.
7 Includes cumulative changes in the estimated fair value of AFS securities and grantor trust assets.
8 Annualized net interest income expressed as a percentage of the average balances of interest-earning assets.
Changes in both volume and interest rates determine changes in net interest income and net interest margin. However, changes in the estimated fair values of derivatives in fair-value hedge relationships, and changes in the fair value of the hedged item that are attributable to the hedged risk, are recorded in net interest income. Interest income on trading securities is also included, but the net interest settlements on derivatives hedging trading securities and the purchase discount (premium) recorded through mark-to-market gains (losses) on trading securities are recorded in other income.
Changes in interest income and interest expense that are not identifiable as either volume-related or rate-related, but are attributable to both volume and rate changes, have been allocated to the volume and rate categories based upon the proportion of the volume and rate changes.
The following table presents the changes in interest income and interest expense by volume and rate ($ amounts in millions).
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
|
2025 vs. 2024
|
2025 vs. 2024
|
|||||||||||||||||||||||||||||||||||||
| Components | Volume | Rate | Total | Volume | Rate | Total | ||||||||||||||||||||||||||||||||
| Increase (decrease) in interest income: | ||||||||||||||||||||||||||||||||||||||
| Securities purchased under agreements to resell | $ | (16) | $ | (11) | $ | (27) | $ | 32 | $ | (28) | $ | 4 | ||||||||||||||||||||||||||
| Federal funds sold | 24 | (7) | 17 | (4) | (29) | (33) | ||||||||||||||||||||||||||||||||
| MBS | 13 | (36) | (23) | 47 | (108) | (61) | ||||||||||||||||||||||||||||||||
| Other investment securities | (1) | (19) | (20) | 3 | (59) | (56) | ||||||||||||||||||||||||||||||||
| Advances | 18 | (94) | (76) | 123 | (293) | (170) | ||||||||||||||||||||||||||||||||
| Mortgage loans held for portfolio | 27 | 14 | 41 | 77 | 42 | 119 | ||||||||||||||||||||||||||||||||
| Other assets (interest-earning) | - | (5) | (5) | (4) | (16) | (20) | ||||||||||||||||||||||||||||||||
| Total | 65 | (158) | (93) | 274 | (491) | (217) | ||||||||||||||||||||||||||||||||
| Increase (decrease) in interest expense: | ||||||||||||||||||||||||||||||||||||||
| Interest-bearing deposits | 1 | (2) | (1) | 4 | (6) | (2) | ||||||||||||||||||||||||||||||||
| Discount notes | 65 | (54) | 11 | 167 | (162) | 5 | ||||||||||||||||||||||||||||||||
| CO bonds | (2) | (103) | (105) | 98 | (317) | (219) | ||||||||||||||||||||||||||||||||
| MRCS | (1) | - | (1) | (3) | - | (3) | ||||||||||||||||||||||||||||||||
| Total | 63 | (159) | (96) | 266 | (485) | (219) | ||||||||||||||||||||||||||||||||
| Increase (decrease) in net interest income | $ | 2 | $ | 1 | $ | 3 | $ | 8 | $ | (6) | $ | 2 | ||||||||||||||||||||||||||
Average Balances. The average balances of interest-earning assets for the three months ended September 30, 2025 increased by 7%compared to the corresponding period in the prior year. The average balances of mortgage loans increased by 27% as a result of increases in purchases from our members. The average balances of advances increased by 3% as a result of growth in advance demand. The average balances of MBS and other investment securities increased by 4%, reflecting our goal to maintain investments in MBS near the 300% regulatory limit. The average balances of interest-bearing liabilities for the three months ended September 30, 2025 increased by 7% compared to the corresponding period in the prior year. The average balances of discount notes increased by 29%, reflecting increased funding needs. As a result, the average balances of total interest-earning assets, net of interest-bearing liabilities, increased by 1%.
The average balances of interest-earning assets for the nine months ended September 30, 2025 increased by 10% compared to the corresponding period in the prior year. The average balances of mortgage loans increased by 27% as a result of increases in purchases from our members. The average balances of advances increased by 8% as a result of growth in advance demand. The average balances of MBS and other investment securities increasedby6%, reflecting our goal to maintain investments in MBS near the 300% regulatory limit. The average balances of interest-bearing liabilities for the nine months ended September 30, 2025 increased by 10% compared to the corresponding period in the prior year. The average balances of discount notes increased by 25% and the average balances of CO bonds increased by 5%, reflecting increased funding needs. As a result, the average balances of total interest-earning assets, net of interest-bearing liabilities, increased by 1%.
Yields/Cost of Funds. The average yield on total interest-earning assets, including the impact of hedging gains and (losses) but excluding certain impacts of trading securities and associated derivatives, for the three months ended September 30, 2025 was 4.70%, a decrease of 81 bps compared to the corresponding period in the prior year, resulting substantially from lower short-term market interest rates that led to lower yields on our interest-earning assets. Such decrease contributed to the decrease in interest income on the portion of the Bank's assets funded by its interest-free capital. The average cost of funds of total interest-bearing liabilities, including the impact of hedging gains and (losses), for the three months ended September 30, 2025 was 4.35%, a decrease of 85 bps due to lower funding costs on our interest-bearing liabilities, resulting substantially from lower short-term market interest rates.The net effect was an increase in the overall net interest spread of 4 bps, including the impact of hedging gains and (losses) but excluding certain impacts of trading securities, compared to the corresponding period in the prior year.
The average yield on total interest-earning assets, including the impact of hedging gains and (losses) but excluding certain impacts of trading securities and associated derivatives, for the nine months ended September 30, 2025 was 4.70%, a decrease of 84 bps compared to the corresponding period in the prior year, resulting substantially from lower short-term market interest rates that led to lower yields on our interest-earning assets. Such decrease contributed to the decrease in interest income on the portion of the Bank's assets funded by its interest-free capital. The average cost of funds of total interest-bearing liabilities, including the impact of hedging gains and (losses), for the nine months ended September 30, 2025 was 4.35%, a decrease of 87 bps due to lower funding costs on our interest-bearing liabilities, resulting substantially from lower short-term market interest rates. The net effect was an increase in the overall net interest spread of 3 bps, including the impact of hedging gains and (losses) but excluding certain impacts of trading securities, compared to the corresponding period in the prior year.
Net interest margin for the three months ended September 30, 2025 was 0.62%, a decrease of 4 bps compared to the corresponding period in the prior year, primarily due to lower interest income on the portion of the Bank's assets funded by its capital.
Net interest margin for the nine months ended September 30, 2025 was 0.62%, a decrease of 6 bps compared to the corresponding period in the prior year, primarily due to lower interest income on the portion of the Bank's assets funded by its capital.
Other Income. The following table presents a comparison of the components of other income ($ amounts in millions).
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| Components | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Net unrealized gains on trading securities¹ | $ | 2 | $ | 25 | $ | 11 | $ | 24 | ||||||||||||||||||
| Net realized gains (losses) on trading securities² | - | - | - | (1) | ||||||||||||||||||||||
| Net gains on trading securities | 2 | 25 | 11 | 23 | ||||||||||||||||||||||
| Net gains (losses) on derivatives hedging trading securities | 1 | (23) | (5) | (19) | ||||||||||||||||||||||
| Net gains (losses) on other derivatives not designated as hedging instruments³ | 1 | - | (5) | - | ||||||||||||||||||||||
|
Net interest settlements on economic derivatives4
|
(1) | 3 | 1 | 7 | ||||||||||||||||||||||
| Net gains (losses) on derivatives | 1 | (20) | (9) | (12) | ||||||||||||||||||||||
|
Change in fair value of investments indirectly funding the liabilities under the SERP
|
3 | 3 | 7 | 7 | ||||||||||||||||||||||
| Net realized gains on sales of AFS securities | - | - | 3 | 2 | ||||||||||||||||||||||
| Other, net | 2 | 1 | 5 | 6 | ||||||||||||||||||||||
| Total other income | $ | 8 | $ | 9 | $ | 17 | $ | 26 | ||||||||||||||||||
1 Includes impact of purchase discount (premium) recorded through mark-to-market gains (losses). Excludes impact of associated derivatives.
2 Includes, at maturity, 100% of original discount (premium) as gain (loss). Excludes impact of associated derivatives.
3 Includes swap termination fees received (paid) associated with sales of AFS securities.
4 Generally offsetting interest income on trading securities or interest expense on the associated funding is included in net interest income.
Total other income for the three months ended September 30, 2025 compared to the corresponding period in the prior year stayed relatively consistent.
The decreasein total other income for the nine months ended September 30, 2025 compared to the corresponding period in the prior year was primarily due to net gains (losses) on our derivatives not designated as hedging instruments. However, if these derivatives are held to their maturity dates, nearly all of the losses are expected to be recovered over their remaining contractual terms.
Other Expenses.The following table presents a comparison of the components of other expenses ($ amounts in millions).
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| Components | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Compensation and benefits | $ | 17 | $ | 15 | $ | 51 | $ | 46 | ||||||||||||||||||
| Other operating expenses | 9 | 9 | 27 | 26 | ||||||||||||||||||||||
| Finance Agency and Office of Finance | 3 | 2 | 10 | 8 | ||||||||||||||||||||||
| Voluntary contributions to housing and community investment | 13 | 10 | 30 | 17 | ||||||||||||||||||||||
| Other | 2 | 1 | 5 | 6 | ||||||||||||||||||||||
| Total other expenses | $ | 44 | $ | 37 | $ | 123 | $ | 103 | ||||||||||||||||||
The net increase in total other expenses for the three and nine months ended September 30, 2025 compared to the corresponding period in the prior year was primarily due to increases in voluntary contributions to housing and community investment.
Supporting Housing and Community Investment.The following table presents additional information regarding our voluntary contributions to housing and community investment ($ amounts in millions). The timing of the recognition of such contributions in other expenses can vary due to applicable accounting requirements.
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| Voluntary Contribution Components | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Contributions to AHP | $ | 3 | $ | 1 | $ | 3 | $ | 4 | ||||||||||||||||||
| Grants and donations to affordable housing and community investment | 9 | 8 | 24 | 12 | ||||||||||||||||||||||
| Total voluntary contribution fulfillment | 12 | 9 | 27 | 16 | ||||||||||||||||||||||
|
Supplemental voluntary contributions to AHP1
|
1 | 1 | 3 | 1 | ||||||||||||||||||||||
| Total voluntary contributions to housing and community investment | $ | 13 | $ | 10 | $ | 30 | $ | 17 | ||||||||||||||||||
1To restore the statutory AHP assessments to what the total otherwise would have been without any voluntary contributions recorded as an expense.
AHP Assessments.For the three and nine months ended September 30, 2025, our AHP assessments were $10 million and $29 million, respectively. Our AHP assessment fluctuates in accordance with our net earnings.
The Bank's combined required and voluntary allocation for the nine months ended September 30, 2025 totaled $59 million, an increase of $10 million compared to the corresponding period in the prior year.
Total Other Comprehensive Income (Loss).Total OCI for the three months ended September 30, 2025 consisted substantially of net unrealized gains on AFS securities compared to net unrealized losses for the corresponding period in the prior year. Total OCI for the nine months ended September 30, 2025 consisted substantially of net unrealized losses on AFS securities compared to net unrealized gains for the corresponding period in the prior year. These amounts represent the portion of the changes in fair value that are not attributable to the risks being hedged in fair-value hedge relationships and were primarily impacted by changes in interest rates, credit spreads and volatility.
Analysis of Financial Condition
Total Assets. The table below presents the comparative highlights of our major asset categories ($ amounts in millions).
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Major Asset Categories | Carrying Value | % of Total | Carrying Value | % of Total | ||||||||||||||||||||||
| Advances | $ | 39,058 | 45 | % | $ | 39,833 | 47 | % | ||||||||||||||||||
| Mortgage loans held for portfolio, net | 12,389 | 14 | % | 10,796 | 13 | % | ||||||||||||||||||||
| Cash and short-term investments | 12,388 | 15 | % | 11,823 | 14 | % | ||||||||||||||||||||
| Trading securities | 1,099 | 1 | % | 1,088 | 1 | % | ||||||||||||||||||||
| MBS | 13,606 | 16 | % | 12,863 | 15 | % | ||||||||||||||||||||
| Other investment securities | 7,477 | 8 | % | 7,326 | 9 | % | ||||||||||||||||||||
|
Other assets1
|
774 | 1 | % | 806 | 1 | % | ||||||||||||||||||||
| Total assets | $ | 86,791 | 100 | % | $ | 84,535 | 100 | % | ||||||||||||||||||
1 Includes accrued interest receivable, premises, software and equipment, derivative assets and other miscellaneous assets.
Total assets at September 30, 2025 were $86.8 billion, a net increase of $2.3 billion, or 3%, compared to December 31, 2024, primarily due to the increase in mortgage loans held for portfolio. The mix of our assets at September 30, 2025 remained relatively consistent with December 31, 2024, with the largest change being to advances which decreased from 47% to 45%.
Advances.In general, advances fluctuate in accordance with our members' funding needs, primarily determined by their deposit levels, mortgage pipelines, loan growth, investment opportunities, available collateral, other balance sheet strategies, and the cost of alternative funding options.
Advances at September 30, 2025 at carrying value totaled $39.1 billion, a net decrease of $775 million, or 2%, compared to December 31, 2024. Advances outstanding, at par, totaled $39.0 billion, a net decrease of $1.1 billion, or 3%.
The table below presents advances outstanding by type of financial institution ($ amounts in millions).
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Borrower Type | Par Value | % of Total | Par Value | % of Total | ||||||||||||||||||||||
| Depository institutions: | ||||||||||||||||||||||||||
| Commercial banks and savings institutions | $ | 17,162 | 44 | % | $ | 19,280 | 48 | % | ||||||||||||||||||
| Credit unions | 5,363 | 14 | % | 5,567 | 14 | % | ||||||||||||||||||||
| Former members | 1,402 | 3 | % | 1,605 | 4 | % | ||||||||||||||||||||
| Total depository institutions | 23,927 | 61 | % | 26,452 | 66 | % | ||||||||||||||||||||
| Insurance companies: | ||||||||||||||||||||||||||
| Insurance companies | 15,083 | 39 | % | 13,692 | 34 | % | ||||||||||||||||||||
| Former members | 5 | - | % | 5 | - | % | ||||||||||||||||||||
| Total insurance companies | 15,088 | 39 | % | 13,697 | 34 | % | ||||||||||||||||||||
| CDFIs | 4 | - | % | 1 | - | % | ||||||||||||||||||||
| Total advances outstanding | $ | 39,019 | 100 | % | $ | 40,150 | 100 | % | ||||||||||||||||||
Advances outstanding, at par, to our depository members decreased by $2.5 billion, or 10%, and advances outstanding, at par, to our insurance company members increased by $1.4 billion, or 10%.
Our advances portfolio is well-diversified with advances to commercial banks and savings institutions, credit unions, and insurance companies.
The following table presents the par value of advances outstanding by product type and redemption term, some of which contain call or put options ($ amounts in millions).
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Product Type and Redemption Term | Par Value | % of Total | Par Value | % of Total | ||||||||||||||||||||||
| Fixed-rate: | ||||||||||||||||||||||||||
| Without call or put options | ||||||||||||||||||||||||||
| Due in 1 year or less | $ | 7,736 | 20 | % | $ | 8,491 | 21 | % | ||||||||||||||||||
| Due after 1 through 5 years | 14,146 | 36 | % | 12,546 | 31 | % | ||||||||||||||||||||
| Due after 5 through 15 years | 649 | 2 | % | 1,436 | 4 | % | ||||||||||||||||||||
| Thereafter | 8 | - | % | 10 | - | % | ||||||||||||||||||||
| Total | 22,539 | 58 | % | 22,483 | 56 | % | ||||||||||||||||||||
| Callable or prepayable | ||||||||||||||||||||||||||
| Due after 1 through 5 years | 5 | - | % | 5 | - | % | ||||||||||||||||||||
| Due after 5 through 15 years | 36 | - | % | 36 | - | % | ||||||||||||||||||||
| Total | 41 | - | % | 41 | - | % | ||||||||||||||||||||
| Putable | ||||||||||||||||||||||||||
| Due in 1 year or less | 5 | - | % | - | - | % | ||||||||||||||||||||
| Due after 1 through 5 years | 2,153 | 5 | % | 1,772 | 4 | % | ||||||||||||||||||||
| Due after 5 through 15 years | 2,665 | 7 | % | 4,269 | 11 | % | ||||||||||||||||||||
| Total | 4,823 | 12 | % | 6,041 | 15 | % | ||||||||||||||||||||
| Total fixed-rate | 27,403 | 70 | % | 28,565 | 71 | % | ||||||||||||||||||||
| Variable-rate: | ||||||||||||||||||||||||||
| Without call or put options | ||||||||||||||||||||||||||
| Due in 1 year or less | 71 | - | % | 100 | - | % | ||||||||||||||||||||
| Due after 1 through 5 years | 630 | 2 | % | 510 | 1 | % | ||||||||||||||||||||
| Total | 701 | 2 | % | 610 | 1 | % | ||||||||||||||||||||
|
Callable or prepayable
|
||||||||||||||||||||||||||
| Due in 1 year or less | 6,066 | 16 | % | 6,464 | 16 | % | ||||||||||||||||||||
| Due after 1 through 5 years | 2,979 | 7 | % | 2,652 | 7 | % | ||||||||||||||||||||
| Due after 5 through 15 years | 1,411 | 4 | % | 1,455 | 4 | % | ||||||||||||||||||||
| Thereafter | 459 | 1 | % | 404 | 1 | % | ||||||||||||||||||||
| Total | 10,915 | 28 | % | 10,975 | 28 | % | ||||||||||||||||||||
| Total variable-rate | 11,616 | 30 | % | 11,585 | 29 | % | ||||||||||||||||||||
| Total advances | $ | 39,019 | 100 | % | $ | 40,150 | 100 | % | ||||||||||||||||||
The mix of fixed- vs. variable-rate advances at September 30, 2025 remained consistent with December 31, 2024. At September 30, 2025 and December 31, 2024, fixed-rate advances included $22.4 billion and $22.9 billion that are swapped to effectively create variable-rate advances, consistent with our balance sheet strategies to manage interest-rate risk.
During the nine months ended September 30, 2025, the par value of advances due in one year or less decreased by 8%, while advances due after one year remained relatively flat. As a result, advances due in one year or less, as a percentage of the total outstanding at par, totaled 36% at September 30, 2025, a decrease from 37% at December 31, 2024. However, based on the earlier of the redemption or next put date, advances due in one year or less, as a percentage of the total outstanding, at par, at September 30, 2025 totaled 46%, a decrease from 49% at December 31, 2024.
The following table presents our variable-rate advances outstanding by the associated interest-rate index ($ amounts in millions).
| Variable Interest-Rate Index | September 30, 2025 | December 31, 2024 | ||||||||||||
| SOFR | $ | 2,614 | $ | 2,579 | ||||||||||
| FHLBanks cost of funds | 3,221 | 3,183 | ||||||||||||
| EFFR | 5,704 | 5,752 | ||||||||||||
| Other | 77 | 71 | ||||||||||||
| Total variable-rate advances, at par value | $ | 11,616 | $ | 11,585 | ||||||||||
Mortgage Loans Held for Portfolio. Mortgage loans held for portfolio at September 30, 2025, at carrying value, totaled $12.4 billion, a net increase of $1.6 billion, or 15%, from December 31, 2024, as the Bank's purchases from its members exceeded principal repayments by borrowers.
In general, our volume of mortgage loans purchased is affected by several factors, including interest rates, competition, the general level of housing and refinancing activity in the United States, consumer product preferences, our balance sheet capacity and risk appetite, and regulatory considerations.
The following table summarizes the activity in the UPB of mortgage loans held for portfolio ($ amounts in millions).
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| Mortgage Loans Activity | 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||||
| Balance, beginning of period | $ | 11,790 | $ | 9,216 | $ | 10,591 | $ | 8,453 | ||||||||||||||||||
| Purchases by Bank | 700 | 792 | 2,444 | 1,951 | ||||||||||||||||||||||
| Principal repayments by borrowers | (337) | (249) | (882) | (645) | ||||||||||||||||||||||
| Balance, end of period | $ | 12,153 | $ | 9,759 | $ | 12,153 | $ | 9,759 | ||||||||||||||||||
Liquidity and Other Investment Securities. The following table presents a comparison of the components of our liquidity investments and other investment securities at carrying value ($ amounts in millions).
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Components | Carrying Value | % of Total | Carrying Value | % of Total | ||||||||||||||||||||||
| Liquidity investments: | ||||||||||||||||||||||||||
| Cash and short-term investments: | ||||||||||||||||||||||||||
| Cash and due from banks | $ | 80 | - | % | $ | 71 | - | % | ||||||||||||||||||
| Interest-bearing deposits | 1,322 | 4 | % | 857 | 3 | % | ||||||||||||||||||||
| Securities purchased under agreements to resell | 6,900 | 20 | % | 7,500 | 23 | % | ||||||||||||||||||||
| Federal funds sold | 4,086 | 12 | % | 3,395 | 10 | % | ||||||||||||||||||||
| Total cash and short-term investments | 12,388 | 36 | % | 11,823 | 36 | % | ||||||||||||||||||||
| Trading securities: | ||||||||||||||||||||||||||
| U.S. Treasury obligations | 1,099 | 3 | % | 1,088 | 3 | % | ||||||||||||||||||||
| Total trading securities | 1,099 | 3 | % | 1,088 | 3 | % | ||||||||||||||||||||
| Total liquidity investments | 13,487 | 39 | % | 12,911 | 39 | % | ||||||||||||||||||||
| Other investment securities: | ||||||||||||||||||||||||||
| AFS securities: | ||||||||||||||||||||||||||
| U.S. Treasury obligations | 5,900 | 17 | % | 5,695 | 17 | % | ||||||||||||||||||||
| GSE and TVA debentures | 1,517 | 4 | % | 1,583 | 5 | % | ||||||||||||||||||||
| GSE multifamily MBS | 7,496 | 22 | % | 7,072 | 21 | % | ||||||||||||||||||||
| Total AFS securities | 14,913 | 43 | % | 14,350 | 43 | % | ||||||||||||||||||||
| HTM securities: | ||||||||||||||||||||||||||
| State housing agency obligations | 60 | - | % | 48 | - | % | ||||||||||||||||||||
| Other U.S. obligations - guaranteed single-family MBS | 3,267 | 9 | % | 3,598 | 11 | % | ||||||||||||||||||||
| GSE single-family MBS | 2,303 | 7 | % | 1,653 | 5 | % | ||||||||||||||||||||
| GSE multifamily MBS | 540 | 2 | % | 540 | 2 | % | ||||||||||||||||||||
| Total HTM securities | 6,170 | 18 | % | 5,839 | 18 | % | ||||||||||||||||||||
| Total other investment securities | 21,083 | 61 | % | 20,189 | 61 | % | ||||||||||||||||||||
| Total cash and investments, carrying value | $ | 34,570 | 100 | % | $ | 33,100 | 100 | % | ||||||||||||||||||
Liquidity Investments. The total outstanding balance and composition of our liquidity investments are influenced by our liquidity needs, regulatory requirements, actual and anticipated member advance activity, market conditions, and the availability of short-term investments at attractive interest rates, relative to our cost of funds.
Cash and short-term investments at September 30, 2025 totaled $12.4 billion, an increase of $565 million, or 5%, from December 31, 2024. As a result, cash and short-term investments as a percent of total cash and investments were 36% at September 30, 2025 and December 31, 2024.
The Bank purchases U.S. Treasury obligations as trading securities to enhance its liquidity. Such securities outstanding at September 30, 2025 totaled $1.1 billion, an increase of $11 million, or 1%, from December 31, 2024.
Liquidity investments at September 30, 2025 totaled $13.5 billion, a net increase of $576 million, or 4%, from December 31, 2024.
Other Investment Securities. AFS securities at September 30, 2025 totaled $14.9 billion, a net increase of $563 million, or 4%, from December 31, 2024.
Net unrealized gains on AFS securities, excluding the portion of the changes in fair value that are attributable to the risks being hedged in fair-value hedging relationships, at September 30, 2025 totaled $8 million, compared to net unrealized gains at December 31, 2024 of $12 million, reflecting generally offsetting changes in interest rates, credit spreads and volatility.
HTM securities at September 30, 2025 totaled $6.2 billion, a net increase of $330 million, or 6%, from December 31, 2024, substantially due to purchases of GSE single-family MBS.
Net unrecognized losses on HTM securities at September 30, 2025 totaled $41 million, a decrease in the net losses of $2 million compared to December 31, 2024, primarily due to changes in interest rates, credit spreads and volatility.
Interest-Rate Payment Terms. Our other investment securities are presented below by interest-rate payment terms ($ amounts in millions).
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Interest-Rate Payment Terms | Amortized Cost | % of Total | Amortized Cost | % of Total | ||||||||||||||||||||||
|
AFS Securities1:
|
||||||||||||||||||||||||||
| Total non-MBS fixed-rate | $ | 7,406 | 50 | % | $ | 7,260 | 51 | % | ||||||||||||||||||
| Total MBS fixed-rate | 7,499 | 50 | % | 7,078 | 49 | % | ||||||||||||||||||||
| Total AFS securities | $ | 14,905 | 100 | % | $ | 14,338 | 100 | % | ||||||||||||||||||
| HTM Securities: | ||||||||||||||||||||||||||
| Total non-MBS fixed-rate | $ | 60 | 1 | % | $ | 48 | 1 | % | ||||||||||||||||||
| Total MBS fixed-rate | 192 | 3 | % | 195 | 3 | % | ||||||||||||||||||||
| Total MBS variable-rate | 5,918 | 96 | % | 5,596 | 96 | % | ||||||||||||||||||||
| Total HTM securities | $ | 6,170 | 100 | % | $ | 5,839 | 100 | % | ||||||||||||||||||
| AFS and HTM securities: | ||||||||||||||||||||||||||
| Total fixed-rate | $ | 15,157 | 72 | % | $ | 14,581 | 72 | % | ||||||||||||||||||
| Total variable-rate | 5,918 | 28 | % | 5,596 | 28 | % | ||||||||||||||||||||
| Total AFS and HTM securities | $ | 21,075 | 100 | % | $ | 20,177 | 100 | % | ||||||||||||||||||
1 Carrying value for AFS is equal to estimated fair value.
The mix of fixed- vs. variable-rate AFS and HTM securities at September 30, 2025 did not change from December 31, 2024. However, all of the fixed-rate AFS securities are swapped to effectively create variable-rate securities, consistent with our balance sheet strategies to manage interest-rate risk. All of our variable-rate MBS are indexed to SOFR.
Deposits (Liabilities).Total deposits at September 30, 2025 were $878 million, a net decrease of $35 million, or 4%, from December 31, 2024. These deposits provide a relatively small portion of our funding but can fluctuate from period to period and vary depending upon such factors as the attractiveness of our deposit pricing relative to the rates available on alternative money market instruments, members' preferences with respect to the maturity of their investments, and members' liquidity. The balances of these accounts are uninsured.
Consolidated Obligations. The overall balance of our consolidated obligations fluctuates in relation to our total assets. The carrying value of consolidated obligations outstanding at September 30, 2025 totaled $80.2 billion, a net increase of $2.1 billion, or 3%, from December 31, 2024, which reflected increased funding needs associated with the net increase in the Bank's total assets.
The following table presents a breakdown by term of our consolidated obligations outstanding ($ amounts in millions).
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Term | Par Value | % of Total | Par Value | % of Total | ||||||||||||||||||||||
| Consolidated obligations due in 1 year or less: | ||||||||||||||||||||||||||
| Discount notes | $ | 28,205 | 35 | % | $ | 25,294 | 32 | % | ||||||||||||||||||
| CO bonds | 21,556 | 27 | % | 21,863 | 28 | % | ||||||||||||||||||||
| Total due in 1 year or less | 49,761 | 62 | % | 47,157 | 60 | % | ||||||||||||||||||||
| Long-term CO bonds | 31,080 | 38 | % | 31,997 | 40 | % | ||||||||||||||||||||
| Total consolidated obligations | $ | 80,841 | 100 | % | $ | 79,154 | 100 | % | ||||||||||||||||||
The mix of our funding changed from December 31, 2024 as discount notes outstanding increased, primarily the result of increased short-term assets. We continue to seek to maintain a sufficient liquidity and funding balance between our financial assets and financial liabilities.
At September 30, 2025 and December 31, 2024, callable CO bonds were 48% and 49% of total CO bonds outstanding, respectively.
At September 30, 2025 and December 31, 2024, 62% and 72%, respectively, of our fixed-rate CO bonds were swapped using derivative instruments to effectively create variable-rate CO bonds, consistent with our balance sheet strategies to manage interest-rate risk. All of our variable-rate CO bonds outstanding at September 30, 2025 and December 31, 2024 were indexed to SOFR.
Derivatives.The volume of derivative hedges is often expressed in terms of notional amounts, which is the amount upon which interest payments are calculated.
The following table presents the notional amounts by type of hedged item regardless of whether it is in a qualifying hedge relationship ($ amounts in millions).
| Hedged Item | September 30, 2025 | December 31, 2024 | ||||||||||||
| Advances | $ | 22,208 | $ | 22,904 | ||||||||||
| Investments | 16,946 | 17,467 | ||||||||||||
| Mortgage loans MDCs | 247 | 216 | ||||||||||||
| CO bonds | 18,771 | 26,644 | ||||||||||||
| Discount notes | 13,726 | 11,982 | ||||||||||||
| Total notional outstanding | $ | 71,898 | $ | 79,213 | ||||||||||
The total notional amount outstanding at September 30, 2025 decreased compared to the amount outstanding at December 31, 2024. The decrease in derivatives hedging CO bonds was driven primarily by a decrease in fixed-rate CO bonds outstanding, partially offset by the increase in derivatives hedging discount notes to manage the impact of actual and anticipated changes in short-term interest rates.
The following table presents the cumulative impact of fair-value hedging basis adjustments on our statement of condition ($ amounts in millions).
| September 30, 2025 | ||||||||||||||||||||||||||||||||
| Advances | AFS Securities | Discount Notes | CO Bonds | Total | ||||||||||||||||||||||||||||
| Cumulative fair-value hedging basis gains (losses) on hedged items | $ | 45 | $ | (429) | $ | - | $ | 533 | $ | 149 | ||||||||||||||||||||||
| Estimated fair value of associated derivatives, net | (45) | 540 | 1 | (531) | (35) | |||||||||||||||||||||||||||
| Net cumulative fair-value hedging gains | $ | - | $ | 111 | $ | 1 | $ | 2 | $ | 114 | ||||||||||||||||||||||
Substantially all of the net cumulative fair-value hedging gains on AFS securities resulted from a previous strategy of terminating certain interest-rate swaps associated with certain MBS and entering into hedging relationships with new interest-rate swaps in connection with our transition from the London Interbank Offered Rate (LIBOR). Such gains include hedging basis adjustments that are being amortized into earnings as interest expense over the life of the original swap, but are generally being offset by the lower interest expense on the new swaps.
Total Capital. Total capital at September 30, 2025 was $4.4 billion, a net increase of $202 million, or 5%, from December 31, 2024. The net increase resulted primarily from members' purchases of capital stock to support their advance activity and the growth in retained earnings, offset by the Bank's repurchases of capital stock in the first quarter.
The following table presents a percentage breakdown of the components of GAAP capital.
| Components | September 30, 2025 | December 31, 2024 | ||||||||||||
| Capital stock | 60 | % | 60 | % | ||||||||||
| Retained earnings | 40 | % | 40 | % | ||||||||||
| Accumulated other comprehensive income (loss) | - | % | - | % | ||||||||||
| Total GAAP capital | 100 | % | 100 | % | ||||||||||
The components of GAAP capital at September 30, 2025 are unchanged compared to December 31, 2024.
The following table presents a reconciliation of GAAP capital to regulatory capital ($ amounts in millions).
| Reconciliation | September 30, 2025 | December 31, 2024 | ||||||||||||
| Total GAAP capital | $ | 4,437 | $ | 4,235 | ||||||||||
| Exclude: Accumulated other comprehensive (income) loss | 7 | 4 | ||||||||||||
| Include: MRCS | 282 | 363 | ||||||||||||
| Total regulatory capital | $ | 4,726 | $ | 4,602 | ||||||||||
Liquidity
Our primary sources of liquidity are holdings of liquid assets, comprised of cash, short-term investments, and trading securities, as well as the issuance of consolidated obligations.
During the nine months ended September 30, 2025, we maintained sufficient access to funding; our net proceeds from the issuance of consolidated obligations totaled$618.7 billion.
Changes in Cash Flow. Net cash used in operating activities for the nine months ended September 30, 2025 was $(240) million, compared to net cash used in operating activities for the nine months ended September 30, 2024 of $(135) million. The net change in cash used of $(105) million was substantially due to the fluctuation in variation margin payments on cleared derivatives. Such payments are treated by the Clearinghouses as daily settled contracts.
Capital Resources
Total Regulatory Capital Stock. The following table provides a breakdown of our outstanding capital stock and MRCS by type of member ($ amounts in millions).
| September 30, 2025 | December 31, 2024 | |||||||||||||||||||||||||
| Type of Member | Amount | % of Total | Amount | % of Total | ||||||||||||||||||||||
| Capital Stock: | ||||||||||||||||||||||||||
| Depository institutions: | ||||||||||||||||||||||||||
| Commercial banks and savings institutions | $ | 1,302 | 44 | % | $ | 1,245 | 43 | % | ||||||||||||||||||
| Credit unions | 506 | 17 | % | 488 | 17 | % | ||||||||||||||||||||
| Total depository institutions | 1,808 | 61 | % | 1,733 | 60 | % | ||||||||||||||||||||
| Insurance companies | 857 | 29 | % | 822 | 28 | % | ||||||||||||||||||||
| CDFIs | - | - | % | - | - | % | ||||||||||||||||||||
| Total capital stock, putable at par value | 2,665 | 90 | % | 2,555 | 88 | % | ||||||||||||||||||||
| MRCS: | ||||||||||||||||||||||||||
| Depository institutions | 280 | 10 | % | 345 | 11 | % | ||||||||||||||||||||
| Insurance companies | 2 | - | % | 18 | 1 | % | ||||||||||||||||||||
| Total MRCS | 282 | 10 | % | 363 | 12 | % | ||||||||||||||||||||
| Total regulatory capital stock | $ | 2,947 | 100 | % | $ | 2,918 | 100 | % | ||||||||||||||||||
Required and Excess Capital Stock. The following table presents the composition of our regulatory capital stock ($ amounts in millions).
| Components | September 30, 2025 | December 31, 2024 | ||||||||||||
| Required capital stock: | ||||||||||||||
| Member capital stock | $ | 2,035 | $ | 2,054 | ||||||||||
| MRCS | 63 | 73 | ||||||||||||
| Total required capital stock | 2,098 | 2,127 | ||||||||||||
| Excess capital stock: | ||||||||||||||
| Member capital stock not subject to outstanding redemption requests | 592 | 498 | ||||||||||||
| Member capital stock subject to outstanding redemption requests | 38 | 3 | ||||||||||||
| MRCS | 219 | 290 | ||||||||||||
| Total excess capital stock | 849 | 791 | ||||||||||||
| Total regulatory capital stock | $ | 2,947 | $ | 2,918 | ||||||||||
| Excess stock as a percentage of regulatory capital stock | 29 | % | 27 | % | ||||||||||
The net increase in total regulatory capital stock was due to members' purchases of capital stock to support their advance activity, substantially offset by the Bank voluntarily repurchasing excess capital stock during the nine months ended September 30, 2025.
Capital Distributions. The following table summarizes the weighted-average dividend rate paid on our Class B stock and dividend payout ratio.
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
|
Weighted-average dividend rate1
|
8.14 | % | 7.82 | % | 7.94 | % | 7.70 | % | ||||||||||||||||||
|
Dividend payout ratio2
|
61.52 | % | 52.24 | % | 62.00 | % | 50.66 | % | ||||||||||||||||||
1 Annualized dividends paid in cash during the period, including the portion recorded as interest expense on MRCS, divided by the average amount of Class B stock eligible for dividends under our capital plan, including MRCS, for that same period.
2 Dividends paid in cash during the period, excluding the portion recorded as interest expense on MRCS, divided by net income for that same period.
Adequacy of Capital. We must maintain sufficient permanent capital to meet the combined credit risk, market risk and operational risk components of the risk-based capital requirement.
The following table presents our risk-based capital requirement in relation to our permanent capital at September 30, 2025 and December 31, 2024 ($ amounts in millions).
| Risk-Based Capital Components | September 30, 2025 | December 31, 2024 | ||||||||||||
| Credit risk | $ | 195 | $ | 181 | ||||||||||
| Market risk | 693 | 649 | ||||||||||||
| Operational risk | 267 | 249 | ||||||||||||
| Total risk-based capital requirement | $ | 1,155 | $ | 1,079 | ||||||||||
| Permanent capital | $ | 4,726 | $ | 4,602 | ||||||||||
| Permanent capital as a percentage of required risk-based capital | 409 | % | 427 | % | ||||||||||
The increase in our total risk-based capital requirement was primarily caused by an increase in the market risk component due to changes in the market rate environment and balance sheet composition. The operational risk component is calculated as 30% of the credit and market risk components. Our permanent capital at September 30, 2025 remained well in excess of our total risk-based capital requirement.
Critical Accounting Estimates
A full discussion of our critical accounting estimates is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates in our 2024 Form 10-K.
Recent Accounting and Regulatory Developments
Accounting Developments. For a description of how recent accounting developments may impact our financial condition, results of operations or cash flows, see Notes to Financial Statements - Note 2 - Recently Adopted and Issued Accounting Guidance.
Legislative and Regulatory Developments. We are subject to various legal and regulatory requirements and priorities. Certain actions by the current federal executive administration are changing the regulatory environment including regulatory priorities and areas of focus such as deregulation, which have affected, and likely will continue to affect, certain aspects of our business operations, and could have impacts on our results of operations and reputation.
As of the third quarter of 2025, the Finance Agency has rescinded the regulatory interpretation that had imposed detailed criteria on FHLBank acceptance of municipal securities as eligible collateral and outlined how to determine and verify eligibility of municipal bonds. We are reviewing this rescission and assessing the potential impact on our collateral eligibility policies. In addition, the Finance Agency has withdrawn two proposed rules published in 2024: (i) the proposed rule published in November 2024 that would have amended regulations addressing boards of directors and overall corporate governance of the FHLBanks and the Office of Finance; and (ii) the proposed rule published in October 2024 that would have amended our capital requirements by modifying limits on our extensions of unsecured credit. In October 2025, the Finance Agency rescinded several advisory bulletins and certain technical guidance documents. We are reviewing these rescissions and assessing any potential impact they may have on our policies and procedures.
Considering the changes in the regulatory environment, there is uncertainty with respect to the ultimate result of future regulatory actions and the ultimate impact they may have on us and the FHLBank System. We continue to monitor these actions as they evolve and to evaluate their potential impact on the Bank. For a discussion of related risks, please refer to Item 1A. Risk Factorsin our 2024 Form 10-K.
Risk Management
We have exposure to a number of risks in pursuing our business objectives. These risks may be broadly classified as market, credit, liquidity, operational, and business. Market risk is discussed in Item 3. Quantitative and Qualitative Disclosures about Market Risk. For additional information, seeItem 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management in our 2024 Form 10-K.
Credit Risk Management. We face credit risk on advances and other credit products, investments, mortgage loans, derivative financial instruments, and AHP grants.
Advances and Other Credit Products.
Concentration.Our credit risk is magnified due to the concentration of advances in a few borrowers. As of September 30, 2025, our top borrower held 13% of total advances outstanding, at par, and our top five borrowers held 39% of total advances outstanding, at par.
The following table presents the par value of advances outstanding to our largest borrowers ($ amounts in millions).
| September 30, 2025 | ||||||||||||||
| Borrower | Amount | % of Total | ||||||||||||
| Old National Bank | $ | 5,151 | 13 | % | ||||||||||
| Delaware Life Insurance Company | 3,293 | 8 | % | |||||||||||
| Merchants Bank of Indiana | 2,748 | 7 | % | |||||||||||
| First National Bank of America | 2,171 | 6 | % | |||||||||||
| The Lincoln National Life Insurance Company | 2,015 | 5 | % | |||||||||||
| Subtotal - five largest borrowers | 15,378 | 39 | % | |||||||||||
| Next five largest borrowers | 7,743 | 20 | % | |||||||||||
| Remaining borrowers | 15,898 | 41 | % | |||||||||||
| Total advances, par value | $ | 39,019 | 100 | % | ||||||||||
Because of this concentration in advances, we perform frequent credit and collateral reviews on our largest borrowers. In addition, we regularly analyze the implications to our financial management and profitability if we were to lose the business of one or more of these borrowers.
Investments.We are also exposed to credit risk through our investment portfolio. Our policies restrict the acquisition of investments to high-quality, short-term money market instruments and high-quality long-term securities.
The following table presents the unsecured investment credit exposure to private counterparties, categorized by the domicile of the counterparty's ultimate parent, based on the lowest of the counterparty's NRSRO long-term credit ratings, stated in terms of the S&P equivalent. The table does not reflect the foreign sovereign government's credit rating ($ amounts in millions).
| September 30, 2025 | ||||||||||||||||||||
| Country | AA | A | Total | |||||||||||||||||
| Domestic | $ | 515 | $ | 907 | $ | 1,422 | ||||||||||||||
| Australia | 1,100 | - | 1,100 | |||||||||||||||||
| Canada | - | 1,490 | 1,490 | |||||||||||||||||
| Finland | 51 | - | 51 | |||||||||||||||||
| Germany | 1,195 | - | 1,195 | |||||||||||||||||
| Netherlands | - | 150 | 150 | |||||||||||||||||
| Total unsecured credit exposure | $ | 2,861 | $ | 2,547 | $ | 5,408 | ||||||||||||||
Trading Securities.Our liquidity portfolio includes shorter-term U.S. Treasury obligations, which are direct obligations of the U.S. government and are classified as trading securities.
Other Investment Securities.Our long-term investments include MBS guaranteed by the housing GSEs (Fannie Mae and Freddie Mac), other U.S. obligations - guaranteed MBS (Ginnie Mae), longer-term U.S. Treasury obligations, debentures issued by Fannie Mae, Freddie Mac, the TVA and the Federal Farm Credit Banks and state housing agency obligations.
A Finance Agency regulation provides that the total amount of our investments in MBS, calculated using amortized historical cost excluding the impact of certain derivatives adjustments, must not exceed 300% of our total regulatory capital, as of the day we purchase the securities, based on the capital amount most recently reported to the Finance Agency. If our outstanding investments in MBS exceed the limitation at any time, but were in compliance at the time we purchased the investments, we would not be considered out of compliance with the regulation, but we would not be permitted to purchase additional investments in MBS until these outstanding investments were within the limitation. Generally, our goal is to maintain investments in MBS near the 300% regulatory limit in order to enhance earnings and capital for our members and diversify our revenue stream. At September 30, 2025, these investments totaled 295% of total regulatory capital.
The following table presents the carrying values of our investments, excluding accrued interest, grouped by credit rating and investment category. Applicable rating levels are determined using the lowest relevant long-term rating from S&P and Moody's, each stated in terms of the S&P equivalent. Rating modifiers are ignored when determining the applicable rating level for a given counterparty. Amounts reported do not reflect any subsequent changes in ratings, outlook, or watch status ($ amounts in millions).
| September 30, 2025 | ||||||||||||||||||||||||||
| Investment Category | AA | A |
Unrated1
|
Total
|
||||||||||||||||||||||
| Short-term investments: | ||||||||||||||||||||||||||
| Interest-bearing deposits | $ | 515 | $ | 807 | $ | - | $ | 1,322 | ||||||||||||||||||
| Securities purchased under agreements to resell | - | 6,500 | 400 | 6,900 | ||||||||||||||||||||||
| Federal funds sold | 2,346 | 1,740 | - | 4,086 | ||||||||||||||||||||||
| Total short-term investments | 2,861 | 9,047 | 400 | 12,308 | ||||||||||||||||||||||
| Trading securities: | ||||||||||||||||||||||||||
| U.S. Treasury obligations | 1,099 | - | - | 1,099 | ||||||||||||||||||||||
| Total trading securities | 1,099 | - | - | 1,099 | ||||||||||||||||||||||
| Other investment securities: | ||||||||||||||||||||||||||
| U.S. Treasury obligations | 5,900 | - | - | 5,900 | ||||||||||||||||||||||
| GSE and TVA debentures | 1,517 | - | - | 1,517 | ||||||||||||||||||||||
| State housing agency obligations | 60 | - | - | 60 | ||||||||||||||||||||||
| GSE MBS | 10,339 | - | - | 10,339 | ||||||||||||||||||||||
| Other U.S. obligations-guaranteed MBS | 3,267 | - | - | 3,267 | ||||||||||||||||||||||
| Total other investment securities | 21,083 | - | - | 21,083 | ||||||||||||||||||||||
| Total investments, carrying value | $ | 25,043 | $ | 9,047 | $ | 400 | $ | 34,490 | ||||||||||||||||||
| Percentage of total | 73 | % | 26 | % | 1 | % | 100 | % | ||||||||||||||||||
1 Although the counterparty is unrated, the underlying collateral supporting these investments are U.S. Treasury obligations with arating of AA.
Mortgage Loans Held for Portfolio.
LRA. The following table presents the changes in the LRA ($ amounts in millions).
| Nine Months Ended | ||||||||
| LRA Activity | September 30, 2025 | |||||||
| Liability, beginning of period | $ | 262 | ||||||
| Additions | 28 | |||||||
| Claims paid | - | |||||||
| Distributions to Participating Financial Institutions | (10) | |||||||
| Liability, end of period | $ | 280 | ||||||
Mortgage Loan Concentration.During the nine months ended September 30, 2025, our top-selling PFI sold us mortgage loans totaling $218 million, or 9% of the total mortgage loans that we purchased. Our five top-selling PFIs sold us 42% of the total. Because of this concentration, we regularly analyze the implications to our financial management and profitability if we were to lose the business of one or more of these sellers.
The properties underlying the mortgage loans in our portfolio are dispersed across 50 states, the District of Columbia and the U.S. Virgin Islands, with concentrations in Michigan and Indiana, the two states in our district.
The following table presents the percentage of UPB of conventional loans outstanding for the five largest state concentrations.
| State | September 30, 2025 | |||||||
| Michigan | 41 | % | ||||||
| Indiana | 35 | % | ||||||
| Florida | 3 | % | ||||||
| Kentucky | 2 | % | ||||||
| California | 2 | % | ||||||
| All others | 17 | % | ||||||
| Total | 100 | % | ||||||
Derivatives. The following table presents key information on derivative positions with counterparties on a settlement date basis using the lower credit rating from S&P and Moody's, stated in terms of the S&P equivalent ($ amounts in millions).
| September 30, 2025 | ||||||||||||||||||||||||||
| Counterparty and Credit Rating |
Notional
Amount
|
Net Estimated Fair Value
Before Collateral
|
Cash Collateral
Pledged To (From)
Counterparties
|
Net Credit
Exposure
|
||||||||||||||||||||||
| Non-member counterparties: | ||||||||||||||||||||||||||
| Asset positions with credit exposure | ||||||||||||||||||||||||||
| Uncleared derivatives - A | $ | 660 | $ | 2 | $ | (1) | $ | 1 | ||||||||||||||||||
| Liability positions with credit exposure | ||||||||||||||||||||||||||
| Uncleared derivatives - AA | 545 | (12) | 12 | - | ||||||||||||||||||||||
| Uncleared derivatives - A | 5,164 | (42) | 42 | - | ||||||||||||||||||||||
|
Cleared derivatives1
|
40,037 | (10) | 424 | 414 | ||||||||||||||||||||||
| Total derivative positions with credit exposure to non-member counterparties | 46,406 | (62) | 477 | 415 | ||||||||||||||||||||||
|
Total derivative positions with credit exposure to member institutions2
|
23 | - | - | - | ||||||||||||||||||||||
| Subtotal - derivative positions with credit exposure | 46,429 | $ | (62) | $ | 477 | $ | 415 | |||||||||||||||||||
|
Derivative positions without credit exposure3
|
25,469 | |||||||||||||||||||||||||
| Total derivative positions | $ | 71,898 | ||||||||||||||||||||||||
1 Represents derivative transactions cleared by two Clearinghouses, each rated AA-.
2 Includes MDCs from member institutions under our MPP.
3Represents derivative transactions in which the counterparty has the credit exposure.
Federal Home Loan Bank of Indianapolis published this content on November 12, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 12, 2025 at 18:29 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]