Federal Home Loan Bank of Atlanta

11/06/2025 | Press release | Distributed by Public on 11/06/2025 11:52

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Information
Some of the statements made in this quarterly report on Form 10-Q (Report) may be "forward-looking statements", which include statements with respect to the plans, objectives, expectations, estimates, and future performance of the Bank and involve known and unknown risks, uncertainties, and other factors, many of which are beyond the Bank's control and may cause the Bank's actual results, performance, or achievements to be materially different from future results, performance, or achievements expressed or implied by the forward-looking statements. All statements other than statements of historical fact are forward-looking statements. The reader can identify these forward-looking statements through the use of words such as "may," "will," "anticipate," "hope," "project," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "estimate," "continue," "plan," "point to," "could," "intend," "seek," "target" and other similar words and expressions of the future.
Forward-looking statements may include statements related to, among others, the interest-rate environment; demand for Bank advances and for FHLBank consolidated obligations; gains and losses on derivatives; plans to pay dividends or repurchase excess capital stock; the impact of changes in product offerings and demand; product offerings and pricing; AHP and voluntary programs; the impact of housing reform and the impact of prospective legislative or regulatory changes on the Bank or its members; and the impact changes in Nationally Recognized Statistical Rating Organization (NRSRO) ratings may have on the Bank's investments. These statements may involve matters pertaining to, but not limited to: projections regarding revenue, income, earnings, capital expenditures, dividends, liquidity, the Bank's capital structure, AHP and voluntary housing contributions and other financial items; statements of plans or objectives for future operations; expectations for future economic performance; and statements of assumptions underlying certain of the foregoing types of statements.
The forward-looking statements may not be realized due to a variety of factors, including, but not limited to risks and uncertainties relating to economic, competitive, governmental, technological, housing reform, regulatory changes, various market factors, as well as the risk factors provided under Item 1A of the Bank's Form 10-K, and in the Bank's other filings with the SEC from time to time, and elsewhere in this Report.
All such written or oral statements that are made by or are attributable to the Bank are expressly qualified in their entirety by this cautionary notice. The reader should not place undue reliance on forward-looking statements. Those statements speak only as of the date that they are made and the Bank has no obligation and does not undertake to update, revise, or correct any of the forward-looking statements after the date of this Report, or after the respective dates on which the statements are made, whether as a result of new information, future events, or otherwise, except as required by law.
The discussion presented below provides an analysis of the Bank's financial condition as of September 30, 2025 and December 31, 2024, and results of operations for the third quarter and first nine months of 2025 and 2024. Management's discussion and analysis should be read in conjunction with the financial statements and accompanying notes presented elsewhere in this Report, as well as the Bank's audited financial statements for the year ended December 31, 2024.
Executive Summary
Business Overview
The material factors impacting the Bank's business outlook remain largely unchanged from the discussion in the Bank's Form 10-K. The Bank considers macroeconomic drivers in its strategic planning process and business models. External factors such as interest rates, liquidity levels at member institutions, fiscal and monetary policies, and regulatory changes could have a significant effect either positive or negative on the Bank's financial performance.
Financial Condition
The following table presents the Bank's total assets, total liabilities, and total capital (dollars in millions).
Change
As of September 30, 2025 As of December 31, 2024 Amount Percent
Total assets $ 153,864 $ 147,091 $ 6,773 4.60
Total liabilities 145,375 139,158 6,217 4.47
Total capital 8,489 7,933 556 7.00
•Total assets increased primarily due to a $8.3 billion, or 9.71 percent, increase in advances, partially offset by a $1.7 billion, or 2.80 percent, decrease in total investments.
•Total liabilities increased primarily due to a $5.7 billion, or 4.20 percent, increase in consolidated obligations as a result of increased funding and liquidity needs during the period.
•Total capital increased primarily due to a $373 million increase in advances activity-based capital stock and a $145 million increase in retained earnings.
Results of Operations
The following table presents the Bank's significant income and expense items (dollars in millions). These items are discussed in more detail below.
For the Three Months Ended September 30, Change For the Nine Months Ended September 30, Change
2025 2024 Amount Percent 2025 2024 Amount Percent
Net interest income $ 212 $ 221 $ (9) (4.24) $ 631 $ 716 $ (85) (11.95)
Noninterest income 9 6 3 54.74 19 17 2 9.44
Noninterest expense 49 60 (11) (18.63) 162 154 8 5.11
Affordable Housing Program assessment 17 17 - 2.98 49 58 (9) (15.85)
Net income $ 155 $ 150 $ 5 2.97 $ 439 $ 521 $ (82) (15.87)
•The decrease in net interest income was primarily due to a decrease in interest rates, partially offset by an increase in average advance balances and investment balances during the third quarter and first nine months of 2025, compared to the same periods in 2024.
•Average advance balances were $102.8 billion and $101.0 billion for the third quarter and first nine months of 2025, respectively, compared to $89.8 billion and $99.7 billion for the same periods in 2024.
•The increase in net income for the third quarter of 2025, compared to the same periods in 2024, was primarily due to a $12 million decrease in voluntary housing and community investment expense, partially offset by the $9 million decrease in net interest income.
•The decrease in net income for the first nine months of 2025, compared to the same periods in 2024, was primarily due to the decrease in net interest income.
•Voluntary housing and community investment contributions were $6 million and $37 million for the third quarter and first nine months of 2025, respectively, compared to $18 million and $33 million for the same periods in 2024.
The following table presents the Bank's significant income ratios. These items are discussed in more detail below.
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2025 2024 Change 2025 2024 Change
Return on average equity 6.95 % 7.50 % (0.55) 6.73 % 8.29 % (1.56)
Average daily SOFR 4.33 5.28 (0.95) 4.33 5.30 (0.97)
Return on average equity spread to average daily SOFR 2.62 2.22 0.40 2.40 2.99 (0.59)
Net yield on interest-earning assets 0.53 0.61 (0.08) 0.54 0.63 (0.09)
•The decrease in return on average equity for the third quarter of 2025, compared to the same period in 2024, was primarily due to an increase in the average total capital partially offset by an increase in net income.
•The decrease in return on average equity for the first nine months of 2025, compared to the same periods in 2024, was primarily due to the decrease in net income.
Financial Condition
The following table presents the distribution of the Bank's total assets, liabilities, and capital by major class (dollars in millions). These items are discussed in more detail below.
As of September 30, 2025 As of December 31, 2024 Change
Amount Percent
of Total 		Amount Percent
of Total 		Amount Percent
Advances $ 94,167 61.20 $ 85,829 58.35 $ 8,338 9.71
Investment securities 33,329 21.66 30,233 20.55 3,096 10.24
Other investments 25,071 16.30 29,851 20.30 (4,780) (16.01)
Mortgage loans held for portfolio, net 81 0.05 89 0.06 (8) (9.83)
Other assets 1,216 0.79 1,089 0.74 127 11.63
Total assets $ 153,864 100.00 $ 147,091 100.00 $ 6,773 4.60
Consolidated obligations, net:
Discount notes $ 39,325 27.05 $ 32,152 23.10 $ 7,173 22.31
Bonds 102,229 70.32 103,699 74.52 (1,470) (1.42)
Total consolidated obligations, net 141,554 97.37 135,851 97.62 5,703 4.20
Deposits 2,415 1.66 2,312 1.66 103 4.45
Other liabilities 1,406 0.97 995 0.72 411 41.34
Total liabilities $ 145,375 100.00 $ 139,158 100.00 $ 6,217 4.47
Capital stock $ 5,560 65.50 $ 5,148 64.90 $ 412 8.01
Retained earnings 2,930 34.51 2,785 35.11 145 5.16
Accumulated other comprehensive loss (1) (0.01) - (0.01) (1) (143.65)
Total capital $ 8,489 100.00 $ 7,933 100.00 $ 556 7.00
Advances
Total advances increased by 9.71 percent as of September 30, 2025, compared to December 31, 2024. A significant percentage of advances originated during the first nine months of 2025 were short-term advances.
As of September 30, 2025, 35.9 percent of the Bank's advances were fixed-rate, compared to 42.6 percent as of December 31, 2024. However, the Bank often simultaneously entered into derivatives with the issuance of advances to convert the rates on them, in effect, into short-term variable interest rates, primarily based on SOFR. As of September 30, 2025 and December 31, 2024, 70.2 percent and 68.3 percent, respectively, of the total Bank's fixed-rate advances were swapped. SOFR-indexed and OIS-indexed advances comprised 85.9 percent and 12.4 percent, respectively, of the Bank's variable-rate advances as of September 30, 2025. The Bank also offers variable-rate advances that may be tied to other indices, such as the federal funds rate, prime rate, or constant maturity swap rates.
The following table presents the par value of outstanding advances by product characteristics (dollars in millions).
As of September 30, 2025 As of December 31, 2024
Amount Percent of Total Amount Percent of Total
Adjustable or variable-rate indexed $ 60,439 64.09 $ 49,512 57.36
Fixed rate (1)
28,499 30.22 32,608 37.78
Convertible 5,150 5.46 3,916 4.54
Principal reducing credit 211 0.23 272 0.32
Total par value $ 94,299 100.00 $ 86,308 100.00
____________
(1)Includes convertible advances whose conversion options have expired.
Refer to Note 4-Advancesto the Bank's interim financial statements for the concentration of the Bank's advances to its 10 largest borrowing institutions.
Investments
The following table presents more detailed information regarding investments held by the Bank (dollars in millions).
Change
As of September 30, 2025
As of December 31, 2024 Amount Percent
Available-for-sale securities:
U.S. Treasury obligations $ 5,574 $ 4,063 $ 1,511 37.19
Mortgage-backed securities:
Government-sponsored enterprises commercial 2,209 727 1,482 203.97
Total available-for-sale securities 7,783 4,790 2,993 62.50
Held-to-maturity securities:
State or local housing agency debt obligations 1 1 - -
Government-sponsored enterprises debt obligations 795 795 - -
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential 1,823 2,010 (187) (9.31)
Government-sponsored enterprises residential 10,556 8,420 2,136 25.36
Government-sponsored enterprises commercial 12,371 14,217 (1,846) (12.98)
Total held-to-maturity mortgage-backed securities: 24,750 24,647 103 0.42
Total held-to-maturity securities 25,546 25,443 103 0.40
Total investment securities 33,329 30,233 3,096 10.24
Other investments:
Interest-bearing deposits
2,530 1,493 1,037 69.50
Securities purchased under agreements to resell 6,500 21,200 (14,700) (69.34)
Federal funds sold 16,041 7,158 8,883 124.10
Total other investments 25,071 29,851 (4,780) (16.01)
Total investments $ 58,400 $ 60,084 $ (1,684) (2.80)
The Finance Agency regulations prohibit an FHLBank from purchasing MBS and asset-backed securities if its investment in such securities would exceed 300 percent of the FHLBank's previous month-end regulatory capital on the day it intends to purchase the securities. As of September 30, 2025, these investments were 317 percent of the Bank's regulatory capital. The Bank was in compliance with this regulatory requirement at the time of its MBS purchases and is not required to sell any previously purchased MBS. However, the Bank is precluded from purchasing additional MBS until its MBS to regulatory capital declines below 300 percent.
The amount held in other investments varies each day based on the Bank's liquidity needs as a result of advances demand, the earnings rates, and the availability of high-quality counterparties in the federal funds market.
Consolidated Obligations
The Bank funds its assets primarily through the issuance of consolidated obligation bonds and consolidated obligation discount notes. Consolidated obligation issuances financed 92.0 percent of the $153.9 billion in total assets as of September 30, 2025, a slight decrease from the financing ratio of 92.4 percent as of December 31, 2024.
The Bank often simultaneously enters into derivatives with the issuance of fixed-rate consolidated obligation bonds to convert the interest rates, in effect, into short-term variable interest rates, primarily based on SOFR. As of September 30, 2025 and December 31, 2024, 93.5 percent and 92.1 percent, respectively, of the Bank's fixed-rate consolidated obligation bonds were swapped. None of the Bank's variable-rate consolidated obligation bonds were swapped as of September 30, 2025 and December 31, 2024. As of September 30, 2025 and December 31, 2024, 99.7 percent and 64.3 percent, respectively, of the Bank's fixed-rate consolidated obligation discount notes were swapped.
Deposits
The Bank offers demand and overnight deposit programs to members and qualifying non-members primarily as a liquidity management service. In addition, a member that services mortgage loans may deposit funds in the Bank that are collected in connection with the mortgage loans, pending disbursement of those funds. All the Bank's deposits are uninsured. For demand deposits, the Bank pays interest at the overnight rate. Most of these deposits represent member liquidity investments, which members may withdraw on demand. Therefore, the total account balance of the Bank's deposits may fluctuate significantly. As a matter of prudence, the Bank typically invests deposit funds in liquid short-term assets. Member loan demand, deposit flows, and liquidity management strategies influence the amount and volatility of deposit balances carried with the Bank.
Capital
The FHLBank Act and Finance Agency regulations specify that each FHLBank must meet certain minimum regulatory capital standards. The Bank was in compliance with these regulatory capital rules and requirements as shown in Note 8-Capitalto the Bank's interim financial statements.
The Finance Agency issued an Advisory Bulletin providing for each FHLBank to maintain a ratio of at least two percent of capital stock to total assets, measured on a daily average basis at month end. As of September 30, 2025, the Bank was in compliance with this ratio.
The Bank's financial management policy and capital plan are discussed in more detail in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations-Financial Condition-Capital and in Note 10 - Capital to the Bank's audited financial statements included in the Bank's Form 10-K.
Results of Operations
The following is a discussion and analysis of the Bank's results of operations.
Net Interest Income
The primary source of the Bank's earnings is net interest income. Net interest income equals interest earned on assets (including member advances, mortgage loans, MBS held in portfolio, and other investments), less the interest expense incurred on liabilities (including consolidated obligations, deposits, and other borrowings). Also included in net interest income are miscellaneous related items such as prepayment fees, the amortization of debt issuance discounts, concession fees, and certain derivative instruments and hedging activities related adjustments.
When an advance is prepaid, the Bank could suffer lower future income if the principal portion of the prepaid advance is reinvested in lower-yielding assets. To protect against this risk, the Bank charges a borrower a prepayment fee when the borrower prepays certain advances before the original maturity, which makes the Bank financially indifferent to a borrower's decision to prepay an advance. The Bank records prepayment fees net of basis adjustments, which are primarily related to hedging activities included in the carrying value of the advance, as interest income on advances on the Statements of Income.
The following table presents the components of net advances prepayment fees for the periods presented (dollars in millions):
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2025 2024 2025 2024
Gross amount of prepayment fees received from advance borrowers $ 15 $ 4 $ 36 $ 9
Gross amount of prepayment credits paid to advance borrowers (1) (2) (20) (30)
Hedging fair value adjustments on prepaid advances (5) 1 1 37
Other (4) (1) (5) (3)
Net advances prepayment fees $ 5 $ 2 $ 12 $ 13
The following tables present the change in interest income and expense due to volume or rate variance for the third quarter and first nine months of 2025 and 2024 (dollars in millions). The interest-rate spread is affected by the inclusion or exclusion of net interest income or expense associated with the Bank's derivatives. For example, as discussed above, when derivatives qualify for fair-value hedge accounting under GAAP, the interest income or expense associated with the derivatives is included in net
interest income and in the calculation of interest-rate spread. When derivatives do not qualify for fair-value hedge accounting under GAAP, the interest income or expense associated with the derivatives is excluded from net interest income and from the calculation of interest-rate spread and is recorded in "Noninterest income (loss)." Amortization associated with hedging-related basis adjustments is also reflected in net interest income, which affects interest-rate spread.
The net yield on interest-earning assets was 53 basis points and 54 basis points for the third quarter and first nine months of 2025, compared to 61 basis points and 63 basis points for the same periods in 2024. The decrease in net interest income during the third quarter of 2025, compared to the same period in 2024, was primarily due to a decrease in interest rates, partially offset by an increase in average advance and investment balances. The decrease in net interest income during the first nine months of 2025, compared to the same period in 2024, was primarily due to a decrease in interest rates.
For the Three Months Ended September 30, Change due to
2025 2024
Average Balance Interest Yield/
Rate
(%) 		Average Balance Interest Yield/
Rate
(%)
Volumes
(6)
Rate
(6)
Net Change
Assets
Interest-bearing deposits(1)
$ 3,174 $ 35 4.39 $ 3,124 $ 43 5.43 $ - $ (8) $ (8)
Securities purchased under agreements to resell
5,723 63 4.33 6,484 87 5.33 (9) (15) (24)
Federal funds sold 13,872 152 4.35 13,358 179 5.35 7 (34) (27)
Investment securities (2)
33,206 409 4.89 30,150 437 5.77 42 (70) (28)
Advances (3)
102,807 1,205 4.65 89,767 1,267 5.62 170 (232) (62)
Mortgage loans (4)
82 1 5.27 94 2 5.13 (1) - (1)
Loans to other FHLBanks 1 - 4.39 - - - - - -
Total interest-earning assets 158,865 1,865 4.66 142,977 2,015 5.61 209 (359) (150)
Noninterest-earning assets 1,837 1,773
Total assets $ 160,702 $ 144,750
Liabilities and Capital
Interest-bearing deposits (5)
$ 2,301 24 4.22 $ 2,097 27 5.14 2 (5) (3)
Consolidated obligations, net:
Discount notes 32,457 355 4.34 17,104 230 5.35 175 (50) 125
Bonds 115,084 1,274 4.39 114,991 1,537 5.32 1 (264) (263)
Other borrowings 1 - 6.16 2 - 5.50 - - -
Total interest-bearing liabilities 149,843 1,653 4.38 134,194 1,794 5.32 178 (319) (141)
Noninterest-bearing liabilities 2,014 2,566
Total capital 8,845 7,990
Total liabilities and capital $ 160,702 $ 144,750
Interest-rate spread 0.28 0.29
Average interest-earning assets to interest-bearing liabilities
106.02 106.54
Net yield on interest-earning assets(7)
$ 158,865 $ 212 0.53 $ 142,977 $ 221 0.61
Changes in net interest income $ 31 $ (40) $ (9)
For the Nine Months Ended September 30, Change due to
2025 2024
Average Balance Interest Yield/
Rate
(%) 		Average Balance Interest Yield/
Rate
(%)
Volumes
(6)
Rate
(6)
Net Change
Assets
Interest-bearing deposits(1)
$ 3,119 $ 102 4.39 $ 3,321 $ 136 5.47 $ (8) $ (26) $ (34)
Securities purchased under agreements to resell
5,528 180 4.35 5,963 240 5.37 (17) (43) (60)
Federal funds sold 13,386 438 4.38 13,237 534 5.39 6 (102) (96)
Investment securities (2)
31,910 1,173 4.91 30,354 1,296 5.70 64 (187) (123)
Advances (3)
101,004 3,506 4.64 99,736 4,242 5.68 54 (790) (736)
Mortgage loans (4)
85 3 5.39 98 4 5.14 (1) - (1)
Total interest-earning assets 155,032 5,402 4.66 152,709 6,452 5.64 98 (1,148) (1,050)
Noninterest-earning assets 1,643 1,757
Total assets $ 156,675 $ 154,466
Liabilities and Capital
Interest-bearing deposits (5)
$ 2,230 71 4.24 $ 1,967 77 5.21 10 (16) (6)
Consolidated obligations, net:
Discount notes 23,811 772 4.34 20,393 821 5.38 125 (174) (49)
Bonds 119,924 3,928 4.38 120,815 4,838 5.35 (36) (874) (910)
Other borrowings 6 - 5.03 1 - 5.68 - - -
Total interest-bearing liabilities 145,971 4,771 4.37 143,176 5,736 5.35 99 (1,064) (965)
Noninterest -bearing liabilities 1,995 2,895
Total capital 8,709 8,395
Total liabilities and capital $ 156,675 $ 154,466
Interest-rate spread 0.29 0.29
Average interest-earning assets to interest-bearing liabilities
106.21 106.66
Net yield on interest-earning assets (7)
$ 155,032 $ 631 0.54 $ 152,709 $ 716 0.63
Changes in net interest income $ (1) $ (84) $ (85)
____________
(1)Includes amounts recognized for the right to reclaim cash collateral paid under master netting agreements with derivative counterparties.
(2)Includes available-for-sale securities at amortized cost basis.
(3) Interest income and average yield include net prepayment fees on advances that were not material for the reported periods.
(4) Nonperforming mortgage loans are included in average balances used to determine average rate.
(5) Includes amounts recognized for the right to return cash collateral received under master netting agreements with derivative counterparties.
(6) Volume change is calculated as the change in volume multiplied by the previous rate, while rate change is calculated as the change in rate multiplied by the
previous volume. The rate/volume change, calculated as the change in rate multiplied by the change in volume, is allocated between volume change and rate
change at the ratio each component bears to the absolute value of its total.
(7) Calculated as net interest earnings divided by total-earning assets, with net interest earnings equaling the difference between total interest earned and total
interest paid.
Derivatives and Hedging Activity
As discussed above, net interest income includes components of hedging activity. When hedging relationships qualify for hedge accounting, the interest components of the hedging derivatives will be reflected in interest income or expense. Fair value gains and losses on derivatives and hedged items designated in fair value hedging relationships are also recognized in interest income or interest expense. When a hedging relationship is discontinued, the cumulative fair value adjustment on the hedged item will be amortized into interest income or expense over the remaining life of the asset or liability.
The following tables present the net effect of derivatives and hedging activity on the Bank's results of operations (dollars in millions).
For the Three Months Ended September 30, 2025
Advances Investments Consolidated
Obligation
Bonds 		Consolidated Obligation Discount Notes Total
Effect on net interest income:
Amortization or accretion of active hedging relationships $ 1 $ - $ (46) $ - $ (45)
Net changes in fair value hedges (1) - 46 - 45
Net interest settlements on derivatives (1)
67 8 (123) (6) (54)
Price alignment amount (2)
(3) 1 - (1) (3)
Amortization or accretion of inactive hedging relationships - - (1) - (1)
Total effect on net interest income $ 64 $ 9 $ (124) $ (7) $ (58)
Effect on Noninterest income:
Gains on derivatives not receiving hedge accounting including net interest settlements - noninterest income $ - $ - $ 1 $ - $ 1
For the Three Months Ended September 30, 2024
Advances Investments Consolidated
Obligation
Bonds 		Consolidated Obligation Discount Notes Total
Effect on net interest income:
Amortization or accretion of active hedging relationships $ - $ - $ (107) $ - $ (107)
Net changes in fair value hedges (9) - 108 - 99
Net interest settlements on derivatives (1)
123 9 (281) (4) (153)
Price alignment amount (2)
(4) 1 - (4) (7)
Amortization or accretion of inactive hedging relationships - - (1) - (1)
Total effect on net interest income $ 110 $ 10 $ (281) $ (8) $ (169)
For the Nine Months Ended September 30, 2025
Advances Investments Consolidated
Obligation
Bonds 		Consolidated Obligation Discount Notes Total
Effect on net interest income:
Amortization or accretion of active hedging relationships $ 3 $ - $ (166) $ - $ (163)
Net changes in fair value hedges (8) 1 167 - 160
Net interest settlements on derivatives (1)
200 18 (368) 2 (148)
Price alignment amount (2)
(11) 2 (1) (4) (14)
Amortization or accretion of inactive hedging relationships - - (3) - (3)
Total effect on net interest income $ 184 $ 21 $ (371) $ (2) $ (168)
Effect on noninterest income:
Gains on derivatives not receiving hedge accounting including net interest settlements - noninterest income $ - $ - $ 1 $ - $ 1
For the Nine Months Ended September 30, 2024
Advances Investments Consolidated
Obligation
Bonds 		Consolidated Obligation Discount Notes Total
Effect on net interest income:
Amortization or accretion of active hedging relationships $ - $ - $ (381) $ - $ (381)
Net changes in fair value hedges (4) - 387 - 383
Net interest settlements on derivatives (1)
383 21 (927) (10) (533)
Price alignment amount (2)
(22) 1 (1) (7) (29)
Amortization or accretion of inactive hedging relationships 10 - (4) - 6
Total effect on net interest income $ 367 $ 22 $ (926) $ (17) $ (554)
____________
(1)Represents interest income or expense on derivatives included in net interest income.
(2)This amount is for derivatives for which variation margin is characterized as daily settled contract.
Noninterest Income (Loss)
The following table presents the components of noninterest income (loss) (dollars in millions).
For the Three Months Ended September 30, Change For the Nine Months Ended September 30, Change
2025 2024 Amount Percent 2025 2024 Amount Percent
Standby letters of credit fees $ 6 $ 5 $ 1 50.55 $ 15 $ 13 $ 2 21.89
Other 3 1 2 58.85 4 4 - (20.33)
Total noninterest income $ 9 $ 6 $ 3 54.74 $ 19 $ 17 $ 2 9.44
Noninterest Expense and AHP Assessment
The Bank's board of directors authorized $41 million in voluntary contributions for 2025 consisting of $9 million in voluntary AHP contributions and $32 million in voluntary non-AHP contributions. These amounts are anticipated to be expensed during 2025. Refer to Note 7-Affordable Housing Program and Voluntary Contributionsto the Bank's interim financial statements for additional information regarding voluntary housing contributions expensed during the reported periods.
The Bank records statutory AHP assessment expense at a rate of 10 percent of income before assessment, excluding interest expense on mandatorily redeemable capital stock.
Additional Financial Data
The following table presents additional financial data for the Bank for the periods presented (dollars in millions):
As of and for the Three Months Ended
September 30,
2025 		June 30,
2025 		March 31,
2025 		December 31,
2024 		September 30,
2024
Statements of Condition (at period end)
Total assets $ 153,864 $ 146,372 $ 146,233 $ 147,091 $ 135,793
Advances 94,167 90,867 85,672 85,829 86,536
Investments(1)
58,400 54,283 59,326 60,084 47,882
Mortgage loans held for portfolio, net 81 84 87 89 93
Consolidated obligations, net (2)
141,554 134,406 135,022 135,851 124,414
Total Capital stock Class B putable 5,560 5,397 5,164 5,148 5,159
Retained earnings 2,930 2,873 2,828 2,785 2,708
Accumulated other comprehensive loss (1) (13) (3) - (7)
Total capital 8,489 8,257 7,989 7,933 7,860
Statements of Income (for the period ended)
Net interest income 212 212 207 250 221
Standby letters of credit fees 6 5 4 4 5
Net income 155 141 143 176 150
Performance Ratios (%)
Return on average equity (3)
6.95 6.43 6.82 8.36 7.50
Return on average assets (4)
0.38 0.36 0.38 0.46 0.41
Net yield on interest-earning assets 0.53 0.54 0.56 0.67 0.61
Interest-rate spread 0.28 0.29 0.30 0.39 0.29
Regulatory capital ratio (at period end) (5)
5.52 5.65 5.47 5.39 5.79
Total average equity to average assets 5.50 5.55 5.63 5.55 5.52
Dividend payout ratio (6)
63.47 68.12 70.40 56.06 74.45
____________
(1)Investments consist of interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, and securities classified as available-for-sale and held-to-maturity.
(2) The amounts presented are the Bank's primary obligations on consolidated obligations outstanding. The par value of the other FHLBanks' outstanding consolidated obligations for which the Bank is jointly and severally liable was as follows (dollars in millions):
September 30, 2025 $ 1,041,834
June 30, 2025 1,097,144
March 31, 2025 1,019,324
December 31, 2024 1,056,184
September 30, 2024 1,047,579
(3)Calculated as net income, divided by average total equity.
(4) Calculated as net income, divided by average total assets.
(5)Regulatory capital ratio is regulatory capital, which does not include accumulated other comprehensive other income (loss), but does include mandatorily redeemable capital stock, as a percentage of total assets as of period end.
(6)Calculated as dividends declared during the period divided by net income during the period.
Liquidity and Capital Resources
Liquidity is necessary to satisfy members' borrowing needs on a timely basis, repay maturing and called consolidated obligations, and meet other obligations and operating requirements. Many members rely on the Bank as a source of standby liquidity, so the Bank attempts to be in a position to meet member funding needs on a timely basis. The Bank is required to maintain liquidity in accordance with the FHLBank Act, Finance Agency regulations, and policies established by the Bank's management and board of directors. In addition, the Finance Agency, at times, has issued guidance and expectations to the FHLBanks related to liquidity.
Sources of Liquidity.
The Bank's principal source of liquidity is consolidated obligation debt instruments. To provide additional liquidity, the Bank may also use other short-term borrowings, such as federal funds purchased, securities sold under agreements to repurchase, and loans from other FHLBanks. The Bank's consolidated obligations are not obligations of the U.S. and are not guaranteed by
either the U.S. or any government agency, but have historically received the same credit rating as the government bond credit rating of the United States. As a result, the Bank generally has comparatively stable access to funding through a diverse investor base at relatively favorable spreads to U.S. Treasury rates. The Bank's income and liquidity would be adversely affected if it were not able to access the capital markets at competitive rates for an extended period.
The Bank's short-term funding is generally driven by member advance demand and is achieved through the issuance of consolidated discount notes and short-term consolidated bonds. Access to short-term debt markets has been reliable because investors, driven by increased liquidity preferences and risk aversion, including the effects of SEC money market fund reforms, have often sought the Bank's short-term debt as an asset of choice.
The Bank is focused on maintaining an adequate liquidity balance and a funding balance between its financial assets and financial liabilities. The Bank monitors the funding balance between financial assets and financial liabilities and is committed to prudent risk management practices. In managing and monitoring the amounts of assets that require refunding, the Bank considers contractual maturities of its financial assets, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments and scheduled amortizations). External factors including Bank member borrowing needs, supply and demand in the debt markets, and other factors may also affect the liquidity balance and the funding balance between financial assets and financial liabilities.
Contingency plans are in place that prioritize the allocation of liquidity resources in the event of operational disruptions at the Bank or the Office of Finance and extraordinary market events. Under the FHLBank Act, the Secretary of the Treasury has the authority, at their discretion, to purchase consolidated obligations up to an aggregate amount of $4.0 billion. No borrowings under this authority have been outstanding since 1977.
Liquidity Reserves for Deposits.
Finance Agency regulations require the Bank to hold a total amount of obligations of the United States, deposits in eligible banks or trust companies, or advances with maturities not exceeding five years, in an amount not less than the amount of total member deposits. The Bank has complied with this requirement throughout the first nine months of 2025.
Operational Liquidity.
In order to ensure adequate operational liquidity (generally, the ready cash and borrowing capacity available to meet the Bank's intraday needs) each day, Bank policy establishes a daily liquidity target based upon member deposit levels and current day liability maturities and asset settlements. The Bank has met this liquidity requirement throughout the first nine months of 2025.
Additional Liquidity Guidance.
The Finance Agency issued an Advisory Bulletin on FHLBank liquidity (Liquidity Guidance AB) that communicates the Finance Agency's expectations with respect to the maintenance of sufficient liquidity to enable the Bank to provide advances and standby letters of credit for members during a sustained capital market disruption, assuming no access to capital markets and assuming renewal of all maturing advances for a period of between ten to thirty calendar days. The Finance Agency periodically issues supervisory letters that identify thresholds for measures of liquidity within the established ranges set forth in the Liquidity Guidance AB.
The Liquidity Guidance AB's measurements of liquidity include a cash flow scenario, on a daily basis, that projects forward the number of days for which the Bank should maintain positive cash balances assuming the renewal of all maturing advances and the maintenance of a liquidity reserve for outstanding standby letters of credit. The measurements of liquidity also include a funding gap measurement of the difference between assets and liabilities that are scheduled to mature during a specified period, expressed as a percentage of the Bank's total assets to reduce the liquidity risks associated with a mismatch in asset and liability maturities, including an undue reliance on short-term debt funding, which may increase debt rollover risk. The Liquidity Guidance AB permits an FHLBank to temporarily decrease its liquidity position, in a safe and sound manner, below the stated regulatory levels, as necessary for providing unanticipated extensions of advances to members or draws on standby letters of credit to beneficiaries. The Bank has met this liquidity requirement as directed by the Finance Agency throughout the first nine months of 2025.
Summary of Cash Flows
The following table presents a summary of net cash provided by (used in) the Bank's operating, investing, and financing activities (dollars in millions):
For the NineMonths Ended September 30,
2025 2024
Net cash provided by (used in):
Operating activities $ (182) $ 14
Investing activities (5,447) 17,499
Financing activities 5,672 (17,621)
Net change in cash and due from banks $ 43 $ (108)
The primary drivers that can impact net operating cash flows are fluctuations in net income and changes in certain adjustments to net income which may include amortization, accretion, derivative and hedging activities, and other adjustments. Cash flows related to investing and financing activities primarily relate to providing liquidity for various Bank-related activities. The Bank's primary uses of liquidity are advance originations and consolidated obligation payments. Other uses of liquidity are investment purchases and dividends.
Anticipated Cash Expenditures
As of September 30, 2025, there have been no material changes outside the ordinary course of business in the Bank's anticipated cash expenditures, as reported in the Bank's Form 10-K.
Off-balance Sheet Commitments
The Bank's primary off-balance sheet commitments are as follows:
•the Bank's joint and several liability for all FHLBank consolidated obligations; and
•the Bank's outstanding commitments arising from standby letters of credit.
As of September 30, 2025, the FHLBanks had $1,184.1 billion in aggregate par value of consolidated obligations issued and outstanding, $142.2 billion of which was attributable to the Bank. Should an FHLBank be unable to satisfy its payment obligation under a consolidated obligation for which it is the primary obligor, any of the other FHLBanks, including the Bank, can be called upon to repay all or any part of such payment obligation, as determined or approved by the Finance Agency. No FHLBank has ever defaulted on its principal or interest payments under any consolidated obligation, and the Bank has never been required to make payments under any consolidated obligation because of the failure of another FHLBank to meet its obligations. As of September 30, 2025 and December 31, 2024, the Finance Agency was not required to allocate any obligation among the FHLBanks and the Bank currently believes the likelihood it would have to pay any amounts beyond those for which it is primarily liable is remote. Accordingly, the Bank has not recognized a liability for its joint and several obligations related to other FHLBanks' consolidated obligations as of September 30, 2025 and December 31, 2024.
The Bank generally requires standby letters of credit to contain language permitting the Bank, upon annual renewal dates and prior notice to the beneficiary, to choose not to renew the standby letter of credit, which effectively terminates the standby letter of credit prior to its scheduled final expiration date. Based on the creditworthiness of the member applicant and appropriate additional fees, the Bank may issue standby letters of credit that have terms longer than one year without annual renewals or that have no stated maturity and are subject to renewal on an annual basis.
Commitments to extend credit, including standby letters of credit, are agreements to lend. The Bank issues a standby letter of credit on behalf of a member in exchange for a fee. A member may use these standby letters of credit to facilitate a financing arrangement. Management regularly reviews its standby letter of credit pricing in light of several factors, including the Bank's potential liquidity needs related to draws on its standby letters of credit. Based on management's credit analyses and collateral requirements, the Bank does not deem it necessary to have an allowance for credit losses for unfunded standby letters of credit as of September 30, 2025.
Refer to Note 12-Commitments and Contingenciesto the Bank's interim financial statements for more information about the Bank's outstanding standby letters of credit.
Legislative and Regulatory Developments
Significant regulatory actions and developments for the period covered by this Report not previously disclosed are summarized below.
The Bank is 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 will likely continue to affect, certain aspects of the Bank's business operations, and could impact the Bank's financial condition, 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. The Bank is reviewing this rescission and assessing the potential impact on the Bank's 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 the Bank's capital requirements by modifying limits on the Bank's extensions of unsecured credit. In October 2025, the Finance Agency rescinded several advisory bulletins and technical guidance documents. The Bank is reviewing these rescissions and assessing any potential impact they may have on the Bank and its policies and procedures.
Considering the changes in the regulatory environment, there is uncertainty with respect to the ultimate result of future regulatory actions and their ultimate impact on the Bank and the FHLBank System. The Bank continues to monitor these actions as they evolve and to evaluate their potential impact on the Bank. For a discussion of related risks, please refer to Item 1A Risk Factors in the Bank's Form 10-K.
Risk Management
The Bank's lending, investment and funding activities, and use of derivative hedge instruments expose the Bank to a number of risks. A robust risk management framework aligns risk-taking activities with the Bank's strategies and risk appetite. A risk management framework also balances risks and rewards. The Bank's risk management framework consists of risk governance, risk appetite, and risk management policies.
The Bank's board of directors and management recognize that risks are inherent to the Bank's business model and that the process of establishing a risk appetite does not imply that the Bank seeks to mitigate or eliminate all risk. By defining and managing to a specific risk appetite, the board of directors and management ensure that there is a common understanding of the Bank's desired risk profile, which enhances strategic and tactical decisions. Additionally, the Bank aspires to (1) sustain a corporate culture of transparency, integrity, and adherence to legal and ethical obligations; and (2) achieve best practices in governance, ethics, and compliance.
The Bank's board of directors and management have established a risk appetite statement and risk metrics for controlling and escalating actions based on the continuing objectives that represent the foundation of the Bank's strategic and tactical planning, as described in the Bank's Form 10-K.
Credit Risk
The Bank faces credit risk primarily with respect to its advances, investments, derivatives, and mortgage loan assets.
Advances
Secured advances to member financial institutions account for the largest category of Bank assets; thus, advances are a major source of the Bank's credit risk exposure. The Bank uses a risk-focused approach to credit and collateral underwriting. The Bank attempts to reduce credit risk on advances by monitoring the financial condition of borrowers and the quality and value of the assets that borrowers pledge as eligible collateral.
The Bank determines credit risk ratings for its members by evaluating each institution's overall financial health, taking into account the quality of assets, earnings, liquidity, and capital position. The Bank assigns each borrower that is an insured depository institution a credit risk rating from 101 to 104 by utilizing an internal model (101 being the least amount of credit risk and 104 the greatest amount of credit risk). The Bank assigns each borrower that is an insurance company a credit risk rating from 101 to 104 by utilizing an external model. The Bank assigns each borrower that is not an insured depository
institution or an insurance company (including housing associates, community development financial institutions, and corporate credit unions) a credit risk rating from 101 to 104 based on an internal risk matrix developed for each entity type.
In general, borrowers with the greatest amount of credit risk may have more restrictions on the types of collateral they may use to secure advances, may be required to maintain higher collateral maintenance levels and deliver loan collateral, may be restricted from obtaining further advances, and may face more stringent collateral reporting requirements. At times, based upon the Bank's assessment of a borrower and its collateral, the Bank may place more restrictive requirements on a borrower than those generally applicable to borrowers with the same rating. Management and the board also monitor the Bank's concentration in secured credit and standby letters of credit exposure to individual borrowers.
The following table presents the number of borrowers and the par value of advances outstanding to borrowers with the specified ratings as of the specified dates (dollars in millions).
As of September 30, 2025 As of December 31, 2024
Rating Number of Borrowers Par Value of Outstanding Advances Number of Borrowers Par Value of Outstanding Advances
101 265 $ 71,546 275 $ 67,495
102 60 22,098 57 17,703
103 11 529 16 1,076
104 1 126 2 34
Total 337 $ 94,299 350 $ 86,308
The Bank establishes a credit limit for each borrower. The credit limit is not a committed line of credit, but rather an indication of the borrower's general borrowing capacity with the Bank. The Bank determines the credit limit in its sole and absolute discretion by evaluating a wide variety of factors that indicate the borrower's overall creditworthiness. The credit limit is generally expressed as a percentage of the borrower's total assets. Credit exposure is defined as the borrower's total liabilities to the Bank, which includes the face amount of outstanding standby letters of credit, the par value of outstanding advances, and the total exposure of the Bank to the borrower under any derivative contract. Generally, borrowers are held to a credit limit of no more than 30 percent. However, the Bank's board of directors may approve a higher limit at its discretion, and such borrowers may be subject to certain additional collateral, reporting, and maintenance requirements. Five borrowers have been approved for a credit limit higher than 30 percent, however, none of these borrowers exceeded the 30 percent credit usage as of September 30, 2025, and their total outstanding advance and standby letters of credit balance was $12.8 billion and $2 million, respectively, as of September 30, 2025.
The Bank obtains collateral on advances to protect against losses, but Finance Agency regulations permit the Bank to accept only certain types of collateral. Each borrower must maintain an amount of qualifying collateral that, when discounted to the lendable collateral value (LCV), is equal to at least 100 percent of the borrower's outstanding par value of all advances and other liabilities from the Bank. The LCV is the value that the Bank assigns to each type of qualifying collateral for purposes of determining the amount of credit that such qualifying collateral will support. For each type of qualifying collateral, the Bank discounts the market value of the qualifying collateral to calculate the LCV. The Bank regularly reevaluates the appropriate level of discounting. The Bank had rights to collateral on a borrower-by-borrower basis with an estimated value equal to or greater than its outstanding extension of credit as of September 30, 2025 and December 31, 2024. The following table presents information about the types of collateral held for the Bank's advances (dollars in millions).
Total Par
Value of
Outstanding Advances 		LCV of
Collateral
Pledged by Members 		First Mortgage
Collateral (%) 		Securities
Collateral (%) 		Other Real Estate Related Collateral (%)
As of September 30, 2025 $ 94,299 $ 425,212 60.37 18.54 21.09
As of December 31, 2024 86,308 403,961 58.25 19.60 22.15
For purposes of determining each member's LCV, the Bank estimates the current market value of all residential first mortgage loans, commercial real estate loans, home equity loans, and lines of credit pledged as collateral based on information provided by the member on its loan portfolio or on individual loans through the regular collateral reporting process. The estimated market value is discounted to account for the (1) price volatility of loans, (2) model data uncertainty, and (3) estimated liquidation and servicing costs in the event of the member's default. Market values, and thus LCVs, change monthly. The use of this market-based valuation methodology allows the Bank to establish its collateral discounts with greater precision and to provide greater transparency with respect to the valuation of collateral pledged for advances and other credit products offered by the Bank.
The FHLBank Act affords any security interest granted to the Bank by any member of the Bank, or any affiliate of any such member, priority over the claims and rights of any party (including any receiver, conservator, trustee, or similar party having rights of a lien creditor), other than the claims and rights of a party that (1) would be entitled to priority under otherwise applicable law; and (2) is an actual bona fide purchaser for value or is an actual secured party whose security interest is perfected in accordance with applicable state law. Most members provide the Bank with a blanket lien covering substantially all of the member's real estate-related assets and their consent for the Bank to file a financing statement evidencing the blanket lien. The Bank requires delivery of cash and securities pledged to the Bank as collateral. Delivery of loan collateral is also required when pledged by insurance company, community development financial institution, or housing associate members. For most commercial bank and credit union members, delivery of loan collateral is not required. The Bank periodically works with commercial bank and credit union members to release collateral from the Bank's lien to permit such members to pledge those assets to support borrowings, or potential borrowings, from the Federal Reserve Banks' discount window.
In its history, the Bank has never experienced a credit loss on an advance. In consideration of this and the Bank's policies and practices detailed above, the Bank has not established an allowance for credit losses on advances as of September 30, 2025 and December 31, 2024.
Investments
The Bank is subject to credit risk on investments consisting of investment securities, interest-bearing deposits, securities purchased under agreements to resell, and federal funds sold. These investments are generally transacted with government agencies and large financial institutions that are considered to be of investment quality. The Finance Agency defines investment quality as a security with adequate financial backing, so that full and timely payment of principal and interest on such security is expected, and there is minimal risk that the timely payment of principal and interest would not occur because of adverse changes in economic and financial conditions during the projected life of the security.
In addition to Finance Agency regulations, the Bank has established guidelines approved by its board of directors regarding unsecured extensions of credit, with respect to term limits and eligible counterparties.
Finance Agency regulations prohibit the Bank from investing in any of the following securities:
•instruments, such as common stock, that represent an ownership interest in an entity, other than stock in small business investment companies, or certain investments targeted to low-income people or communities;
•instruments issued by non-U.S. entities, other than those issued by U.S. branches and agency offices of foreign commercial banks;
•debt instruments that are not of investment quality, other than certain investments targeted to low-income people or communities and instruments that the Bank determined became less than investment quality because of developments or events that occurred after purchase by the Bank;
•whole mortgages or other whole loans, other than the following: (1) those acquired under the Bank's mortgage purchase programs; (2) certain investments targeted to low-income people or communities; (3) certain marketable direct obligations of state, local, or tribal government units or agencies that are of investment quality; (4) MBS or asset-backed securities that are backed by manufactured housing loans or home equity loans; and (5) certain foreign housing loans that are authorized under section 12(b) of the FHLBank Act;
•interest-only or principal-only stripped MBS, collateralized mortgage obligations (CMOs), collateralized debt obligations, and real estate mortgage investment conduits (REMICs);
•residual-interest or interest-accrual classes of CMOs and REMICs;
•fixed-rate or variable-rate MBS, CMOs, and REMICs that are at rates equal to their contractual cap on the trade date and that have average lives that vary by more than six years under an assumed instantaneous interest-rate change of 300 basis points; and
•non-U.S. dollar denominated securities.
Finance Agency regulations do not permit the Bank to rely exclusively on NRSRO ratings with respect to its investments. The Bank is required to make a determination of whether a security is of investment quality based on its own documented analysis,
which includes the NRSRO rating as one of the factors that is assessed to determine investment quality. The Bank monitors the financial condition of investment counterparties to ensure that they are in compliance with the Bank's Risk Management Policy (RMP) and Finance Agency regulations. Unsecured credit exposure to any counterparty is limited by the credit quality and capital of the counterparty and by the capital of the Bank. On a regular basis, management produces financial monitoring reports detailing the financial condition of the Bank's counterparties. These reports are reviewed by the Bank's board of directors. In addition to the Bank's RMP and regulatory requirements, the Bank may limit or suspend overnight and term trading. Limiting or suspending counterparties limits the pool of available counterparties, shifts the geographical distribution of counterparty exposure, and may reduce the Bank's overall investment opportunities.
The Bank only enters into investments with U.S. counterparties or U.S. branch offices of foreign banks that have been approved by the Bank through its internal approval process, but the Bank may still have exposure to foreign entities if a counterparty's parent entity is located in another country. The following tables present the Bank's gross exposure, by instrument type, according to the location of the parent company of the counterparty (dollars in millions).
As of September 30, 2025
Federal Funds Sold
Interest-bearing
Deposits
Net Derivative Exposure (1)
Total
Australia $ 1,100 $ - $ - $ 1,100
Canada 4,480 - - 4,480
Finland 1,646 - - 1,646
France 1,165 - - 1,165
Germany 1,650 - 5 1,655
Japan - - 18 18
Norway 550 - - 550
Sweden 3,100 - - 3,100
United Kingdom 1,000 - 4 1,004
United States of America 1,350 2,530 2 3,882
Total $ 16,041 $ 2,530 $ 29 $ 18,600
As of December 31, 2024
Federal Funds Sold
Interest-bearing
Deposits
Net Derivative Exposure (1)
Total
Australia $ 900 $ - $ - $ 900
Canada 1,200 - - 1,200
Finland 1,498 - - 1,498
France 550 - - 550
Germany 1,325 - - 1,325
Japan - - 12 12
Netherlands 150 - - 150
Sweden 200 - - 200
United States of America 1,335 1,493 5 2,833
Total $ 7,158 $ 1,493 $ 17 $ 8,668
___________
(1)Amounts do not reflect collateral; see the table under Risk Management-Credit Risk-Derivatives below for a breakdown of the credit ratings of and the Bank's credit exposure to derivative counterparties, including net exposure after collateral.
The Bank experienced an increase in unsecured credit exposure in its investment portfolio related to non-U.S. government and non-U.S. government agency counterparties to $18.6 billion as of September 30, 2025 from $8.6 billion as of December 31, 2024 and Royal Bank of Canada (Canada) was the only counterparty that had greater than 10 percent of such credit exposure (representing 13.5 percent). As of September 30, 2025, total unsecured credit portfolio consisted primarily of federal funds sold with overnight maturities.
The Bank's RMP permits the Bank to invest in U.S. government or any U.S. government agency (i.e., Fannie Mae, Freddie Mac and Ginnie Mae) obligations including the following: (1) CMOs and REMICS that are backed by U.S. agencies; and (2) other MBS, CMOs, and REMICS that are of sufficient investment quality, which typically have the highest ratings issued by S&P or Moody's at the time of purchase. In addition to NRSRO ratings, the Bank considers a variety of credit quality factors when analyzing potential investments, such as collateral performance, marketability, asset class considerations, local and regional economic conditions, and the financial health of the underlying issuer.
The following table presents information on the credit ratings of the Bank's investments held as of September 30, 2025 (dollars in millions), based on their credit ratings as of September 30, 2025. The credit ratings reflect the lowest long-term credit ratings as reported by an NRSRO.
Carrying Value as of September 30, 2025
Investment Grade
AAA AA A BBB Total
Investment securities:
U.S. Treasury obligations
$ - $ 5,574 $ - $ - $ 5,574
State or local housing agency debt obligations
- 1 - - 1
Government-sponsored enterprises debt obligations
- 795 - - 795
Mortgage-backed securities:
U.S. agency obligations-guaranteed residential - 1,823 - - 1,823
Government-sponsored enterprises residential - 10,556 - - 10,556
Government-sponsored enterprises commercial 429 14,151 - - 14,580
Total mortgage-backed securities
429 26,530 - - 26,959
Total investment securities
429 32,900 - - 33,329
Other investments:
Interest-bearing deposits - 983 1,547 - 2,530
Securities purchased under agreements to resell - 2,500 3,000 1,000 6,500
Federal funds sold - 7,506 7,960 575 16,041
Total other investments - 10,989 12,507 1,575 25,071
Total investments $ 429 $ 43,889 $ 12,507 $ 1,575 $ 58,400
Securities Purchased Under Agreements to Resell
Securities purchased under agreements to resell are considered collateralized financing arrangements and effectively represent short-term loans transacted with counterparties that the Bank considers to be of investment quality. The terms of these loans 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. If an agreement to resell is deemed to be impaired, the difference between the fair value of the collateral and the amortized cost of the agreement is recognized in earnings.
Available-for-sale Securities
Available-for-sale securities are evaluated at the individual security level for impairment on a quarterly basis by comparing the security's fair value to its amortized cost. Accrued interest receivable is recorded separately on the Statements of Condition. Impairment exists when the fair value of the investment is less than its amortized cost (i.e., in an unrealized loss position). In assessing whether a credit loss exists on an impaired security, the Bank considers whether there would be a shortfall in receiving all cash flows contractually due. In the case of U.S. obligations, they carry an explicit U.S. government guarantee and GSE securities are purchased under an assumption that the issuers' obligation to pay principal and interest on those securities will be honored, taking into account their status as GSEs. When a shortfall is considered possible, the Bank compares the present value of cash flows to be collected from the security with the amortized cost basis of the security. If the present value of cash flows is less than amortized cost, an allowance for credit losses is recorded with a corresponding adjustment to the provision (reversal) for credit losses. The allowance is limited by the amount of the unrealized loss. The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately. If management intends to sell an impaired security classified as available-for-sale, or more likely than not will be required to sell the security before expected recovery of its amortized cost basis, any allowance for credit losses is written off and the amortized cost basis is written down to the security's fair value at the reporting date with any incremental impairment reported in earnings. If management does not intend to sell an impaired security classified as available-for-sale and it is not more likely than not that management will be required to sell the debt security, then the credit portion of the difference is recognized as an allowance for credit losses and any remaining difference between the security's fair value and amortized cost is recorded as net unrealized gains (losses) on available-for-sale securities within other comprehensive income (loss). The Bank has not established an allowance for credit loss on any of its available-for-sale sale securities as of September 30, 2025.
Held-to-maturity Securities
Held-to-maturity securities are evaluated quarterly for expected credit losses on a collective or pool basis unless an individual assessment is deemed necessary because the securities do not possess similar risk characteristics. If applicable, an allowance for credit losses is recorded with a corresponding credit loss expense (or reversal of credit loss expense). The allowance for credit losses excludes uncollectible accrued interest receivable, which is measured separately. The Bank has not established an allowance for credit loss on any of its held-to-maturity securities as of September 30, 2025 because the securities: (1) were all highly-rated, (2) had not experienced, nor did the Bank expect, any payment default on the instruments and (3) in the case of U.S. obligations, they carry an explicit U.S. government guarantee, and (4) in the case of GSE securities, they are purchased under an assumption that the issuers' obligation to pay principal and interest on those securities will be honored, taking into account their status as GSEs.
Derivatives
The Bank is subject to credit risk due to the risk of nonperformance by counterparties to its derivative transactions. The amount of credit risk on derivatives depends on the extent to which netting procedures, collateral requirements, and other credit enhancements are used and are effective in mitigating the risk. The Bank manages credit risk through credit analysis, collateral management, and other credit enhancements. The Bank is also required to follow the requirements set forth by applicable regulations.
The Bank's over-the-counter derivative transactions may either be (1) uncleared derivatives, which are executed bilaterally with a counterparty; or (2) cleared derivatives, which are cleared through a clearing agent with a Clearinghouse. Once a derivative transaction has been accepted for clearing by a Clearinghouse, the derivative transaction is novated, and the executing counterparty is replaced with the Clearinghouse as the counterparty.
For uncleared derivatives, the Bank is subject to nonperformance by counterparties. The Bank generally requires collateral on uncleared derivative transactions. A counterparty must deliver collateral to the Bank if the total market value of the Bank's exposure to that counterparty rises above a specific trigger point. As a result, the Bank does not expect any credit losses on its uncleared derivatives as of September 30, 2025.
Uncleared derivative transactions executed on or after the dates specified in applicable regulations are subject to two-way initial margin requirements as mandated by the Wall Street Reform and Consumer Protection Act, or Dodd-Frank Act, if the Bank's aggregate uncleared derivative transactions exposure to a counterparty exceeds a specified threshold. The initial margin is required to be held at a third-party custodian and does not change ownership. Rather, the party in respect of which the initial margin has been posted to the third-party custodian will have a security interest in the amount of initial margin required under the uncleared margin rules and can only take ownership upon the occurrence of certain events, including an event of default due to bankruptcy, insolvency, or similar proceeding.
For cleared derivatives, the Bank is subject to credit risk due to nonperformance by the Clearinghouse and clearing agent. The requirement that the Bank post initial and variation margin through the clearing agent, to the Clearinghouse, exposes the Bank to institutional credit risk in the event that the clearing agent or the Clearinghouse fails to meet its obligations. The use of cleared derivatives mitigates credit risk exposure because a central counterparty is substituted for individual counterparties, and collateral is posted daily for changes in the value of cleared derivatives through a clearing agent. This does introduce, however, a risk of concentration among the limited number of Clearinghouses and clearing agents. The Bank actively monitors Clearinghouses and clearing agents. An annual review of the Bank's Clearinghouses is performed, and the Bank also monitors its exposure to Clearinghouses on a monthly basis. The Bank currently utilizes two approved Clearinghouses, CME Clearing and LCH Ltd. The Bank also monitors the clearing agents through its unsecured credit system, and the Bank subjects these clearing agents to the same limits as other bilateral derivative counterparties. The parent companies of the clearing agents are monitored through annual reviews, as well as through the Bank's daily monitoring tools, which include reviewing equity triggers, debt triggers, and credit default swap spread triggers. In addition, exposures to the clearing agents are monitored daily on a swap counterparty report. The Bank currently has two approved clearing agents, Morgan Stanley & Co. LLC and Goldman Sachs & Co. The Bank does not expect any credit losses on its cleared derivatives as of September 30, 2025. Refer to Note 10 -Derivatives and Hedging Activitiesto the Bank's interim financial statements for more information about cleared derivatives.
The contractual or notional amount of derivative transactions reflects the involvement of the Bank in the various classes of financial instruments; however, the Bank's maximum credit risk with respect to derivative transactions is the estimated cost of replacing the derivative transactions if there is default, less the value of any related collateral, including initial and variation margin. In determining maximum credit risk, the Bank considers accrued interest receivables and payables, as well as the netting requirements to net assets and liabilities.
The following table presents the derivative positions with counterparties to which the Bank had credit exposure as of September 30, 2025 (dollars in millions). The credit ratings reflect the lowest long-term credit rating by an NRSRO.
As of September 30, 2025
Notional Amount Net Derivatives Fair Value Before Collateral Cash Collateral Pledged To (From) Counterparty Net Credit Exposure to Counterparties
Counterparties:
Asset positions with credit exposure:
Single-A
$ 23,139 $ 27 $ (23) $ 4
Cleared derivatives
33,511 2 33 35
Liability positions with credit exposure:
Single-A 8,667 (108) 110 2
Triple-B 8,765 (149) 149 -
Cleared derivatives
34,723 (10) 327 317
Total derivative positions with counterparties to which
the Bank had credit exposure 		$ 108,805 $ (238) $ 596 $ 358
Mortgage Loan Programs
The Bank seeks to manage the credit risk associated with the Mortgage Purchase Program (MPP) and the Mortgage Partnership Finance®Program (MPF®Program or MPF) by maintaining underwriting and eligibility standards and structuring possible losses into several layers to be shared with the participating financial institutions.
No allowance for credit losses on mortgage loans was deemed necessary by the Bank as of September 30, 2025 and December 31, 2024.
Critical Accounting Estimates
A detailed description of the Bank's critical accounting estimates is contained in the Bank's Form 10-K. There have been no material changes to these estimates during the periods presented.
Recently Issued But Not Yet Adopted Accounting Guidance
See Note 2-Recently Issued But Not Yet Adopted Accounting Standardsto the Bank's interim financial statements for a discussion of recently issued but not yet adopted accounting standards.
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