Federal Home Loan Bank of Des Moines - 10-K

ITEM 1A. RISK FACTORS

The following discussion summarizes some of the more significant risks we face. This discussion is not exhaustive, and there may be other risks we face, which are not described below. In particular, we may fail to identify and manage risks related to a variety of aspects of our business, including but not limited to, interest rate, liquidity, and legal, regulatory, and compliance risks. We have adopted controls, procedures, policies, and systems to monitor and manage these risks. Management cannot provide complete assurance that those controls, procedures, policies, and systems are adequate to identify and manage the risks inherent in our business. In addition, because our business continues to evolve, we may fail to fully understand the implications of changes in the business, and therefore, we may fail to enhance our risk governance framework to timely or adequately address those changes. This risk and any of the other risks described below, if realized, could negatively affect our business operations, financial condition, future results of operations, and among other things, could result in our inability to pay dividends on our capital stock or repurchase capital stock or adversely impact our reputation.

BUSINESS AND REGULATORY RISK

WE ARE SUBJECT TO A COMPLEX BODY OF LAWS AND REGULATIONS THAT COULD CHANGE IN A MANNER DETRIMENTAL TO OUR BUSINESS OPERATIONS

The FHLBanks are GSEs, organized under the authority of the FHLBank Act and, as such, are governed by federal laws and regulations adopted and applied by the Finance Agency. Congress may amend the FHLBank Act or other statutes in ways that significantly affect the rights and obligations of the FHLBanks or the manner in which the FHLBanks carry out their mission and business operations. In addition, new or modified legislation enacted by Congress or changes in regulatory requirements applied or imposed by the Finance Agency could affect the composition of our membership and the extent to which members engage in business with us. There continue to be uncertainties surrounding our legislative and regulatory environment, and new or modified legislation enacted by Congress or regulations adopted or guidance issued by the Finance Agency or other financial services regulators.

Additionally, the FASB or SEC may amend financial accounting and reporting standards that govern our accounting and disclosure practices that may result in additional responsibilities or costs for us, such as compliance requirements, operational or technological changes, and increased disclosures.

For a discussion of new and proposed legislative and regulatory developments that could affect us, refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Legislative and Regulatory Developments.”

FAILURE TO MEET MINIMUM CAPITAL AND OTHER REGULATORY REQUIREMENTS COULD ADVERSELY AFFECT OUR ABILITY TO REDEEM OR REPURCHASE CAPITAL STOCK, PAY DIVIDENDS, AND ATTRACT NEW MEMBERS

We are regulated by the Finance Agency and if we fail to meet regulatory requirements, we could be subject to corrective action that could adversely impact our financial condition and results of operations. For example, we are required to maintain capital to meet specific minimum requirements, as defined by the Finance Agency. Historically, our capital has exceeded all capital requirements and we have maintained adequate capital and leverage ratios. If we fail to meet any of these requirements or if our Board of Directors or the Finance Agency determines that we have incurred, or are likely to incur, losses resulting in, or losses that are expected to result in, a charge against capital, we would not be able to redeem or repurchase any capital stock while such charges are continuing or expected to continue. In addition, failure to meet our capital requirements could result in the Finance Agency’s imposition of restrictions pertaining to dividend payments, lending, investing, or other business activities. Additionally, the Finance Agency could require that we call upon our members to purchase additional capital stock to meet our minimum regulatory capital requirements. Members may be unable or unwilling to satisfy such calls for additional capital, which could lead to a member’s involuntary termination of membership as a result of noncompliance with our Capital Plan, which could adversely impact our financial condition and results of operations.

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WE FACE COMPETITION FOR ADVANCES, MORTGAGE LOANS, AND FUNDING

Our primary business activities are providing advances to members and housing associates and acquiring residential mortgage loans from our members. Demand for our advances is affected by, among other things, the cost of other available sources of funding for our borrowers. We may from time to time compete with other suppliers of secured and unsecured wholesale funding including, but not limited to, investment banks, commercial banks, other GSEs, and U.S. Government agencies, including the Federal Reserve. We may compete with other FHLBanks to the extent that member institutions have affiliated institutions located outside of our district. Furthermore, our members may have access to customer deposits, brokered or reciprocal deposits, and resale agreements, all of which represent competitive alternatives to our advances.

Many of our competitors are not subject to the same body of regulation that we are, which may enable them to offer products and terms that we cannot. Efforts to effectively compete with other suppliers of wholesale funding by changing the pricing of our advances may result in a decrease in our profitability. The availability of alternative funding sources for our members could also change their perception of the value of FHLBank membership. A decrease in the demand for advances or a decrease in the profitability on advances could negatively affect our financial condition and results of operations.

The purchase of mortgage loans through the MPF program is subject to competition on the basis of prices paid for mortgage loans, customer service, and ancillary services, such as automated underwriting and loan servicing options. We compete primarily with other GSEs, such as Fannie Mae, Freddie Mac, other financial institutions, and private investors for acquisition of fixed rate mortgage loans. Increased competition could result in a reduction in the amount of mortgage loans we are able to purchase, which could negatively affect our financial condition and results of operations.

We also compete with the U.S. Government, Fannie Mae, Freddie Mac, and other GSEs as well as corporate, sovereign, and supranational entities for raising funds through the issuance of debt in the national and global markets. In the absence of increased demand, increased supply of competing debt products may result in higher debt costs or lesser amounts of debt issued at the same cost. An increase in funding costs would negatively affect our financial condition and results of operations.

WE COULD BE ADVERSELY AFFECTED BY OUR EXPOSURE TO CUSTOMER CONCENTRATION RISK

We are subject to customer concentration risk as a result of our reliance on a relatively small number of member institutions for a large portion of our total advances and resulting interest income. At December 31, 2025 and 2024, advances outstanding to our top five borrowers totaled $51.6 billion and $31.3 billion, representing 47 and 31 percent of our total advances outstanding. At December 31, 2025 and 2024, our single largest borrower, Athene Annuity and Life Company, accounted for 21 percent and 16 percent of total advances outstanding and for approximately 19 percent and nine percent of advance interest income for the years ended December 31, 2025 and 2024. Advance balances with members could change due to factors such as a change in member demand or borrowing capacity, which can be influenced by economic conditions, relocation of members out of our district, or members with affiliated institutions located outside of our district choosing to do business with another FHLBank. In addition, advance balances could change as a result of new or modified legislation impacting us or our members or regulations or other directives adopted by the Finance Agency or other financial services regulators. If we experience a decrease in the amount of business with our top five borrowers, our financial condition and results of operations could be negatively affected. Refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Statements of Condition — Advances ” for additional information on our top five borrowers.

MEMBER CONSOLIDATIONS AND FAILURES COULD ADVERSELY AFFECT OUR BUSINESS

Member consolidations and failures could reduce the number of current and potential members in our district. During 2025, our number of members declined slightly; however, if the number of member consolidations and/or failures were to accelerate, we could experience a reduction in the level of our members’ advance and other business activities. This loss of business could negatively impact our business operations, financial condition, and results of operations.

MARKET AND LIQUIDITY RISK

WE COULD BE ADVERSELY AFFECTED BY OUR INABILITY TO ACCESS THE CAPITAL MARKETS

Our primary source of funds is through the issuance of consolidated obligations in the capital markets. Our ability to obtain funds through the issuance of consolidated obligations depends in part on our real and perceived relationship to the U.S. Government, prevailing market conditions in the capital markets, and rating agency actions, all of which are beyond our control. In addition, changes to the regulatory environment that affect bank counterparties, debt underwriters, and investors could adversely affect our ability to access the capital markets and the cost of that funding. We cannot make any assurance that we will be able to obtain funding on terms acceptable to us, if at all. For example, previous money market fund reform resulted in a significant increase in demand for U.S. government and agency debt, including our short-term consolidated obligations.

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While this increased demand benefited our ability to access short-term funding at attractive costs, there could be a scenario in which regulatory change may cause a decrease in demand that could lead to significant investor outflows and unfavorable market conditions due to our concentration in money market investors. Any further change in regulatory requirements governing money market funds, including any reversal of money market fund reforms, could negatively impact our short-term funding costs and strategies.

If we cannot access funding when needed, our ability to support and continue business operations, including our ability to refund maturing debt and maintain compliance with regulatory liquidity requirements, could be adversely impacted, which could adversely impact our financial condition and results of operations. Although our debt issuances have historically kept pace with the funding needs of our members and eligible housing associates, there can be no assurance that this will continue.

CHANGES IN ECONOMIC CONDITIONS OR FEDERAL FISCAL AND MONETARY POLICY COULD ADVERSELY IMPACT OUR BUSINESS

We operate with narrow margins and our net income is sensitive to changes in market conditions that can impact the interest we earn and pay and introduce volatility in net income. These conditions include, but are not limited to, the following:

• volatility in interest rates;

• fluctuations in both debt and equity capital markets;

• changes in the fair value of our assets and liabilities;

• conditions in the financial, credit, mortgage, and housing markets;

• the willingness and ability of financial institutions to expand lending; and

• the strength of the U.S. economy and the local economies in which we conduct business, which may be impacted by inflation/deflation, employment rates, and geopolitical instability or conflicts.

Our financial condition, results of operations, and ability to pay dividends could be negatively affected by changes in one or more of these conditions. Additionally, our business and results of operations may be affected by the fiscal and monetary policies of the federal government and its agencies, including the Federal Reserve, which regulates the supply of money and credit in the U.S. The Federal Reserve’s policies directly and indirectly influence the yield on interest-earning assets and the cost of interest-bearing liabilities . For example, in response to changes in inflation and employment rates, the FOMC increased and subsequently decreased the target range for the federal funds rate in recent years. Any future rate changes will continue to impact our business as well as the business of our members.

Further events impacting market conditions, such as civil unrest or natural disasters, may impact the economy and require actions by the federal government and its agencies in an effort to stabilize market conditions. Responses to those actions and the resulting impact on demand for advances could adversely affect our financial condition, results of operations, and ability to pay dividends. Refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Conditions in the Financial Markets ” for additional information on recent market activity.

WE COULD BE ADVERSELY AFFECTED BY INEFFECTIVE USE OF HEDGING STRATEGIES OR OUR INABILITY TO ENTER INTO DERIVATIVE INSTRUMENTS ON ACCEPTABLE TERMS

We use derivatives to manage interest rate risk. Our effective use of derivative instruments depends upon management’s ability to determine the appropriate hedging strategies and positions in light of our assets and liabilities as well as prevailing and anticipated market conditions. In addition, the effectiveness of our hedging strategies depends upon our ability to enter into derivatives with acceptable counterparties, on terms desirable to us, and in quantities necessary to hedge our corresponding assets and liabilities. Further, the cost of entering into derivative instruments could increase as a result of changes in legislation and regulations regarding over-the-counter derivatives, including increased margin and capital requirements, and increased regulatory costs and transaction fees associated with clearing and custodial agreements. If we are unable to manage our hedging positions properly, or are unable to enter into derivative instruments on desirable terms, we may incur higher funding costs and be unable to effectively manage our interest rate risk and other risks, which could negatively affect our financial condition and results of operation.

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EXPOSURE TO OPTION RISK IN OUR FINANCIAL ASSETS AND LIABILITIES COULD HAVE AN ADVERSE EFFECT ON OUR BUSINESS

Our mortgage assets provide homeowners the option to prepay their mortgages prior to maturity. The effect of changes in interest rates can exacerbate prepayment or extension risk, which is the risk that mortgage assets will be refinanced by the mortgagor in low interest rate environments or will remain outstanding longer than expected at below-market yields when interest rates increase. Our advances, consolidated obligations, and derivatives may provide us, the borrower, the issuer, or the counterparty with the option to call or put the asset or liability. These options leave us susceptible to unpredictable cash flows associated with our financial assets and liabilities. The exercise of the option and the prepayment or extension risk is dependent upon general market conditions and could have an adverse effect on our financial condition and results of operations.

CREDIT RISK

WE COULD BE ADVERSELY AFFECTED BY OUR EXPOSURE TO CREDIT RISK

We are exposed to credit risk based on the deterioration in the creditworthiness of the obligor or the credit quality of a security instrument. We assume unsecured and secured credit risk exposure in that a borrower or counterparty could default and we may suffer a loss if we are not able to fully recover amounts owed to us in a timely manner. Our risk of credit losses may be exacerbated by economic conditions, such as a downturn in the real estate markets, including a reduction in property values, higher delinquencies resulting from increased unemployment and the effect of mortgage forbearance and other relief, as well as financial difficulties due in part to the effects of inflation as well as financial difficulties or failures of mortgage servicers. In addition, increased risk of credit losses may be the result of a decrease in the value of collateral securing our advances or mortgage loans, which could be due to the effects of natural disasters or other catastrophic events.

We require full collateralization on all advances, standby letters of credit, applicable mortgage loan credit enhancements provided by PFIs, certain investments, and derivatives. We evaluate the types of collateral pledged by our borrowers and counterparties and assign a borrowing capacity to the collateral, generally based on a percentage of its unpaid principal balance or estimated market value, if available. We generally have the ability to call for additional or substitute collateral during the life of an obligation to ensure we are fully collateralized. Although these products are collateralized, a significant decline in the value of pledged collateral could lead to greater exposure to credit losses in the event of a member default.

In addition, we have credit risk exposure on unsecured liquidity investments. We transact these investments with highly-rated, investment-grade institutions, have limits on dollar and maturity exposure to each institution, and have strong credit underwriting practices. Notwithstanding these factors, we may still suffer losses that could adversely impact our financial condition and results of operations.

WE ARE JOINTLY AND SEVERALLY LIABLE FOR THE CONSOLIDATED OBLIGATIONS OF OTHER FHLBANKS AND MAY BE REQUIRED TO PROVIDE FINANCIAL ASSISTANCE TO OTHER FHLBANKS

Each of the FHLBanks relies upon the issuance of consolidated obligations as a primary source of funds. Consolidated obligations are the joint and several obligations of the 11 FHLBanks and are backed only by the financial resources of the FHLBanks. They are not obligations of the U.S. Government, and the U.S. Government does not guarantee them. The Finance Agency, at its discretion, may require any FHLBank to make principal and/or interest payments due on any consolidated obligation, whether or not the primary obligor FHLBank has defaulted on the payment of that consolidated obligation. Furthermore, if the Finance Agency determines that an FHLBank is unable to satisfy its obligations, it may allocate the outstanding liability among the remaining FHLBanks on a pro-rata basis in proportion to each FHLBank’s participation in all consolidated obligations outstanding, or on any other basis that it may determine. Accordingly, we could incur liability beyond our primary obligation under consolidated obligations, which could negatively affect our financial condition and results of operations. Moreover, we may not pay dividends to, or redeem or repurchase capital stock from, any of our members if timely payment of principal and interest on all FHLBank consolidated obligations has not been made. Accordingly, our ability to pay dividends or to redeem or repurchase capital stock may be affected not only by our financial condition, but by the financial condition of the other FHLBanks.

Due to our relationship with other FHLBanks, we could also be impacted by events other than the default on a consolidated obligation. Events that impact other FHLBanks include, but are not limited to, member failures and capital deficiencies. These events may cause the Finance Agency, at its discretion, to require any FHLBank to either provide capital to or buy assets of any other FHLBank. If we are called upon by the Finance Agency to do either of these items, it may negatively impact our financial condition.

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Additionally, the FHLBank Act requires each FHLBank to establish and fund an AHP. Annually, the FHLBanks recognize AHP assessment expense, in aggregate, equal to the greater of $100 million or 10 percent of their current year earnings. If the FHLBanks do not make the minimum $100 million AHP contribution in a given year (i.e., a shortfall), we could be required to contribute more than 10 percent of our current year net earnings. An increase in our AHP contributions due to a shortfall or other legislative or regulatory actions could impact our financial condition and results of operations as well as our ability to pay dividends.

ACTUAL OR PERCEIVED CHANGES IN THE FHLBANKS’ CREDIT RATINGS AS WELL AS THE U.S. GOVERNMENT’S CREDIT RATING COULD ADVERSELY AFFECT OUR BUSINESS

Our consolidated obligations are currently rated AA+/A-1+ with a stable outlook by S&P and Aa1/P-1 with a stable outlook by Moody’s. In addition, our consolidated obligations are currently rated AA+ with a stable outlook by Fitch Ratings. These ratings are subject to reduction or withdrawal at any time by a NRSRO, and the FHLBank System may not be able to maintain these credit ratings. For example, in May 2025, Moody’s downgraded the long-term U.S. sovereign credit rating to Aa1 with a stable outlook. Following this action, Moody’s also downgraded our long-term credit rating to Aa1 with a stable outlook and affirmed our P-1 short-term issuer credit rating. Adverse rating agency actions on the FHLBank System or U.S. Government may reduce investor confidence and negatively affect our cost of funds and ability to issue consolidated obligations on acceptable terms, which could adversely impact our financial condition and results of operations.

Certain products and transactions that we offer or use may be impacted by rating downgrades. Demand for certain Bank products, including, but not limited to, standby letters of credit and standby bond purchase agreements, is influenced by our credit rating. A reduction in our credit rating could weaken or eliminate demand for such products, and our financial condition and results of operations could be adversely affected. For cleared derivatives, the clearinghouse determines initial margin requirements and generally credit ratings are not factored into the initial margin. However, clearing agents may require additional initial margin to be posted based on credit considerations, including but not limited to, credit rating downgrades.

INCREASES IN DELINQUENCY OR LOSS ESTIMATES ON OUR MORTGAGE LOANS MAY HAVE AN ADVERSE IMPACT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The condition of the U.S. housing market can have a significant impact on the Bank. If economic conditions weaken and result in increased unemployment and a decline in home prices, we could see an increase in loan delinquencies or loss estimates and decide to increase our allowance for credit losses on mortgage loans. In addition, the occurrence of weather-related events, other natural or environmental disasters, civil unrest, widespread health emergencies, or other disruptive events could impact the ability of borrowers to continue to make principal and interest payments on mortgage loans or cause a decline in the underlying value of the mortgage loans, resulting in additional loss estimates. Further, to the extent that mortgage insurance providers fail to fulfill their obligations to pay us for claims, we could bear additional losses on certain mortgage loans with outstanding mortgage insurance coverage. As a result, our financial condition and results of operations could be adversely impacted.

OPERATIONAL RISK

FAILURES OR INTERRUPTIONS IN INTERNAL CONTROLS, INFORMATION SYSTEMS, AND OTHER OPERATING TECHNOLOGIES COULD HARM OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS, REPUTATION, AND RELATIONS WITH MEMBERS

Control failures, including failures in our controls over financial reporting, or business interruptions with members, could result from human error, fraud, breakdowns in information and computer systems, lapses in operating processes, natural or man-made disasters, civil unrest, or widespread health emergencies. If a significant control failure or business interruption were to occur, it could materially damage our financial condition and results of operations. We may not be able to foresee, prevent, mitigate, reverse, or repair the negative effects of such failures or interruptions.

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We rely heavily upon information systems and other operating technologies to conduct and manage our business. To the extent that our technology fails to keep up with changing environments, we may be unable to conduct and manage our business effectively. In addition, any technical failures or interruptions in key systems or other operating technologies, including any “cyberattacks” or other breaches of technical security, could jeopardize the confidentiality or integrity of our information, or otherwise cause interruptions in our operations. These threats may increase as a result of the increased capabilities of artificial intelligence and other emerging technologies that may be used maliciously, as well as geopolitical instability or conflicts. Although we have implemented a disaster recovery and business continuity plan, we can make no assurance that it will be able to prevent, timely and adequately address, or mitigate the negative effects of all technical failures or interruptions. Any technical failure or interruption could harm our member relations, risk management, and profitability, and could adversely impact our financial condition and results of operations. Refer to “ Item 1C. Cybersecurity ” for additional information on our information security risk management.

RELIANCE ON THIRD PARTIES COULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS

As part of our business, we rely on third parties for certain services essential to ongoing operations, including but not limited to, IT infrastructure and software services, administration of our mortgage loan program, and servicing of our consolidated obligations, and could be adversely impacted by disruptions in those services. In addition, we utilize professional and contractual services to support certain strategic initiatives. The success or timing of those initiatives could be adversely impacted if services are not performed or executed as expected.

We participate in the MPF program with the FHLBank of Chicago. In its role as MPF Provider, the FHLBank of Chicago provides the infrastructure and operational support for the MPF program and is responsible for publishing and maintaining the MPF Guides, which detail the requirements PFIs must follow in originating, selling, and servicing MPF loans. If the FHLBank of Chicago changes its MPF Provider role, ceases to operate the MPF program, or experiences a failure or interruption in its information systems and other technology, our mortgage purchase business could be adversely affected, and we could experience a related decrease in our net interest margin and profitability. In the same way, we could be adversely affected if any of the FHLBank of Chicago’s third-party vendors supporting the operation of the MPF program were to experience operational or technical difficulties.

We also rely on the Office of Finance for, among other things, the issuance of consolidated obligations, servicing of all outstanding debt, and managing the FHLBank System’s relationship with the rating agencies with respect to consolidated obligations. A disruption in any of these services due to events such as IT or operational failures, including cyber-attacks, civil unrest, or natural disasters, could affect our ability to access funding, and could negatively impact our business operations, financial condition, and results of operations.

FINANCIAL MODELS AND THE UNDERLYING ASSUMPTIONS USED TO VALUE FINANCIAL INSTRUMENTS AND COLLATERAL MAY HAVE AN ADVERSE IMPACT ON OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The degree of management judgment involved in determining the fair value of financial instruments or collateral is dependent upon the availability of quoted market prices or observable market parameters. For financial instruments and collateral that are actively traded and have quoted market prices or parameters readily available, there is little to no subjectivity in determining fair value. If market quotes are not available, fair values are based on discounted cash flows using market estimates of interest rates and volatility or on dealer prices or prices of similar instruments. We utilize external and internal pricing models to determine the fair value of certain financial instruments and collateral. For prices obtained externally, as per our established procedure, we review the prices and compare them to other vendors for reasonableness. In addition, on an annual basis, we conduct reviews of our pricing vendors to confirm and further augment our understanding of the vendors’ pricing processes, methodologies, and control procedures for investment securities. For prices determined by internal pricing models, the underlying assumptions are based on management’s best estimates for discount rates, prepayments, market volatility, and other factors.

The assumptions used in both external and internal pricing models could have a significant effect on the reported fair values of assets and liabilities or collateral, the related income and expense, and the expected future behavior of assets and liabilities or collateral. While models we use to value financial instruments and collateral are subject to periodic validation by independent parties, rapid changes in market conditions could impact the value of our financial instruments and collateral. The use of different models and assumptions, as well as changes in market conditions, could impact our financial condition and results of operations as well as the amount of collateral we require from borrowers and counterparties.

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The information provided by our internal financial models is also used in making business decisions relating to strategies, initiatives, transactions, and products. We have adopted controls, procedures, and policies to monitor and manage assumptions used in our internal models. However, models are inherently imperfect predictors of actual results because they are based on assumptions about future performance or activities. Changes in any models or in any of the assumptions, judgments, or estimates used in the models may cause the results generated by the model to be materially different. If the results are not reliable due to inaccurate assumptions, we could make poor business decisions, including asset and liability management, or other decisions, which could result in an adverse financial impact.

GENERAL RISK FACTORS

THE INABILITY TO ATTRACT AND RETAIN KEY PERSONNEL COULD ADVERSELY IMPACT OUR BUSINESS

We rely heavily upon our employees in order to successfully execute our business and strategies. The success of our business mission depends, in large part, on our ability to attract and retain key personnel with required talents and skills. We may be unable to hire or retain key personnel with the needed talents or skills if we fail to offer a competitive employment package and work arrangements. In addition, if we fail to develop and execute a succession plan, our business operations could be adversely impacted.

NATURAL DISASTERS COULD ADVERSELY AFFECT OUR MEMBERS AND OUR BUSINESS, FINANCIAL CONDITION, AND RESULTS OF OPERATIONS

The occurrence of weather-related events and other natural or environmental disasters, especially ones affecting our district, could negatively impact our members and business, financial condition, and results of operations. The frequency, intensity, and duration of extreme weather disaster events have increased. These natural disasters could destroy or damage our facilities or other properties of our members (such as collateral that members have pledged to secure advances or mortgages), disrupt business, increase the probability of power or other outages, negatively affect the livelihood of borrowers of members, or otherwise cause significant economic dislocation in the affected regions. Any of these situations may adversely affect our financial condition and results of operations.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our MD&A is designed to provide information that will help the reader develop a better understanding of our financial statements, changes in our financial statements from year to year, and the primary factors driving those changes. Readers also should carefully review “ Forward-Looking Information ” and “ Item 1A. Risk Factors ” for a description of the forward-looking statements contained in this annual report on Form 10-K and a discussion of the factors that might cause our actual results to differ, perhaps materially, from these forward-looking statements. Unless expressly stated otherwise, the comparisons presented in this MD&A refer to the year-over-year comparison of changes in our financial condition and results of operations as of and for the years ended December 31, 2025 and December 31, 2024. Discussion of 2023 items and the year-over-year comparison of changes in our financial condition and results of operations as of and for the years ended December 31, 2024 and December 31, 2023 can be found in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 2024 Form 10-K, filed with the SEC on March 7, 2025.

Our MD&A is organized as follows:

CONTENTS

Executive Overview

Conditions in the Financial Markets

Selected Financial Data

Results of Operations

Net Interest Income

Other Income (Loss)

Hedging Activities

Other Expense

Supporting Housing and Community Investment

Affordable Housing Program Assessments

Statements of Condition

Advances

Mortgage Loans

Investments

Consolidated Obligations

Deposits

Capital

Derivatives

Liquidity and Capital Resources

Critical Accounting Estimates

Legislative and Regulatory Developments

Off-Balance Sheet Arrangements

Risk Management

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EXECUTIVE OVERVIEW

Liquidity Mission

We provide liquidity to our members to support the housing, business, and economic development needs of their communities. Members pledge mortgage loans and other collateral to access our core liquidity products of advances, letters of credit, and mortgage loans held for portfolio under the MPF program. During the year ended December 31, 2025, advance balances averaged $108.1 billion, letters of credit averaged $18.4 billion, mortgage loan balances averaged $13.2 billion, and we held an average of $29.9 billion of short-term assets as a ready source of liquidity for our members.

Affordable Housing and Community Impact

Our housing and community development programs are central to our mission. We contribute 10 percent of our net income each year to our AHP, a grant program that supports the creation, rehabilitation, or purchase of affordable housing. This program includes a competitive AHP and two down payment assistance products called Home$tart and the Native American Homeownership Initiative. During the year ended December 31, 2025, we accrued statutory AHP assessments of $98 million and voluntarily accrued $15 million, to be awarded through this program.

In addition to our AHP, we offer our members voluntary programs to further our housing mission. During the year ended December 31, 2025, we recorded a total of $78 million in voluntary community and housing contributions, including the voluntary AHP contribution. Through our voluntary programs during 2025, we:

• provided $23 million in 0% rate advances to members that originated or purchased mortgage loans from a Habitat for Humanity ® affiliate and recorded $5 million in subsidy expense;

• funded $346 million of home mortgages with an interest rate lower than the current market rate under the Mortgage Rate Relief program, which provided $30 million in grants for those seeking affordable homeownership;

• recorded contributions of $26 million to our Member Impact Fund to match member donations to local housing and community development organizations; and

• provided $2 million in support of communities impacted by floods in Alaska.

Financial Results

Our financial condition and results of operations are influenced by global and national economies, local economies within our district, and the conditions in the financial, housing, and credit markets, all of which impact the interest rate environment. The interest rate environment significantly impacts our profitability. FOMC actions in response to inflation, as well as trade disruptions, such as those arising from tariffs imposed or proposed by the U.S. or its trading partners, impact the interest rate environment, and in turn, our net interest income. Refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Conditions in the Financial Markets ” for additional discussion on economic conditions, including interest rates, impacting our financial results.

In 2025, we reported net income of $881 million compared to $914 million in the prior year.

Net interest income decreased $86 million when compared to the prior year primarily due to the yield on interest-earning assets declining quicker than the cost of interest-bearing liabilities driven primarily by changes in interest rates, which also reduced earnings on invested capital, and a decrease in certain longer-term advances. The decline in net interest income was offset in part by mortgage loan and MBS portfolio growth, as well as the call of higher-costing consolidated obligation bonds.

Other income (loss) increased $63 million when compared to the prior year primarily due to the net changes in the fair value of our trading securities, fair value option instruments, and economic derivatives, including the related interest settlements.

Other expense increased $12 million when compared to the prior year primarily due to an increase in voluntary community and housing contributions.

Refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations ” for additional discussion on our results of operations.

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Our total assets increased to $186.5 billion at December 31, 2025, from $165.3 billion at December 31, 2024, driven primarily by an increase in advances and investments. Advances increased $10.3 billion due mainly to an increase in borrowings by large depository institution members and insurance companies. Investments increased $9.0 billion due in part to an increase in securities purchased under agreements to resell, as well as the purchase of agency MBS and U.S. Treasury obligations.

Total capital increased to $10.5 billion at December 31, 2025, from $9.5 billion at December 31, 2024, primarily due to an increase in activity-based capital stock resulting from an increase in advance balances. Our regulatory capital ratio decreased to 5.54 percent at December 31, 2025, from 5.74 percent at December 31, 2024, but remained above the required regulatory limit at each period end. Regulatory capital includes capital stock, MRCS, and retained earnings.

Refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Statements of Condition ” for additional discussion on our financial condition.

CONDITIONS IN THE FINANCIAL MARKETS

Economy and Financial Markets

In late 2024 and continuing into 2025, the FOMC began reducing the target range for the federal funds rate, in light of the progress on inflation. The FOMC reduced the target range for the federal funds rate by 0.25 percent in October 2025, and an additional 0.25 percent in December 2025, to a range of 3.50 to 3.75 percent. In December 2025, the FOMC stated that recent indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up. In addition, inflation has moved up and remains somewhat elevated. More recently, in January 2026, the FOMC maintained the target range for the federal funds rate and stated that the unemployment rate has shown some signs of stabilization.

The following table shows information on key market interest rates 1 :

12-Month Average

Period End

December 31, 2025

December 31, 2024

December 31, 2025

December 31, 2024

Federal funds

SOFR

2-year U.S. Treasury

10-year U.S. Treasury

30-year residential mortgage note

1    Source: Bloomberg.

Mortgage Markets

During 2025, mortgage rates were lower compared to 2024; however, remained elevated. The primary driver of activity within the mortgage markets during 2025 was home purchases. New and existing home sales increased relative to the prior year, as well as home prices and prepayment activity.

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SELECTED FINANCIAL DATA

The following tables present selected financial data for the periods indicated (dollars in millions):

December 31,

Statements of Condition

Cash and due from banks

Investments 1

Advances

Mortgage loans held for portfolio, net 2

Total assets

Consolidated obligations

Discount notes

Bonds

Total consolidated obligations 3

Mandatorily redeemable capital stock

Total liabilities

Capital stock — Class B putable

Retained earnings

Accumulated other comprehensive income (loss)

Total capital

Regulatory capital ratio 4

For the Years Ended December 31,

Statements of Income

Net interest income

Provision (reversal) for credit losses on mortgage loans

Other income (loss) 5

Voluntary community and housing contributions

All other expense 6

AHP assessments

Net income

Selected Financial Ratios

Net interest spread 7

Net interest margin 8

Return on average equity

Return on average capital stock

Return on average assets

Average equity to average assets

1    Investments include interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, trading securities, AFS securities, and HTM securities.

2    Includes an allowance for credit losses of $6 million, $5 million, $6 million, $5 million, and $1 million at December 31, 2025, 2024, 2023, 2022, and 2021.

3    The total par value of outstanding consolidated obligations of the 11 FHLBanks was $1,151.8 billion, $1,193.0 billion,$1,204.3 billion, $1,181.7 billion, and $652.9 billion at December 31, 2025, 2024, 2023, 2022, and 2021.

4    Represents period-end regulatory capital expressed as a percentage of period-end total assets. Regulatory capital includes Class B capital stock (including MRCS) and retained earnings.

5    Other income (loss) includes, among other things, net gains (losses) on investment securities, net gains (losses) on derivatives, net gains (losses) on financial instruments held under fair value option, and standby letter of credit fees.

6    All other expense includes, among other things, compensation and benefits, professional fees, and contractual services.

7     Represents yield on total interest-earning assets minus cost of total interest-bearing liabilities.

8    Represents net interest income expressed as a percentage of average interest-earning assets.

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RESULTS OF OPERATIONS

Net Interest Income

Our net interest income is impacted by changes in average interest-earning asset and interest-bearing liability balances, and the related yields and costs. The following table presents average balances and yields/costs of major asset and liability categories (dollars in millions):

For the Years Ended December 31,

Average

Balance 1

Yield/Cost 2

Interest

Income/

Expense 3

Average

Balance 1

Yield/Cost 2

Interest

Income/

Expense 3

Average

Balance 1

Yield/Cost 2

Interest

Income/

Expense 3

Interest-earning assets

Interest-bearing deposits

Securities purchased under agreements to resell

Federal funds sold

MBS 4,5,6

Other investments 4,5,6,7

Advances 5,8

Mortgage loans 9

Loans to other FHLBanks

Total interest-earning assets

Non-interest-earning assets

Total assets

Interest-bearing liabilities

Deposits

Consolidated obligations

Discount notes 5

Bonds 5

Other interest-bearing liabilities 10

Total interest-bearing liabilities

Non-interest-bearing liabilities

Total liabilities

Capital

Total liabilities and capital

Net interest income and spread 11

Net interest margin 12

Average interest-earning assets to interest-bearing liabilities

1    Average balances are calculated on a daily weighted average basis and do not reflect the effect of derivative master netting arrangements with counterparties and/or clearing agents.

2    In instances where the average balance and/or related income/expense is less than $1 million, the yield/cost will continue to be presented, based on numbers in actuals.

3    Interest income and expense amounts reported for advances, MBS, other investments, and consolidated obligation bonds include gains (losses) on hedged items and derivatives in qualifying fair value hedge relationships.

4    The average balance of AFS and HTM securities is reflected at amortized cost.

5    Average balances reflect the impact of fair value hedging adjustments and/or fair value option adjustments.

6    Interest income on investment securities includes prepayment fees, net of related amortization, of less than $1 million, $7 million, and $11 million for the years ended December 31, 2025 , 2024 , and 2023.

7    Other investments primarily include U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, and taxable municipal bonds.

8    Interest income includes net prepayment fees on advances.

9    Non-accrual loans are included in the average balance used to determine the average yield.

10    Other interest-bearing liabilities consists of MRCS and/or borrowings from other FHLBanks.

11    Represents yield on total interest-earning assets minus cost of total interest-bearing liabilities. Amounts used to calculate net interest spread are based on numbers in actuals. Accordingly, recalculations using numbers in millions may not produce the same results.

12    Represents net interest income expressed as a percentage of average interest-earning assets. Amounts used to calculate net interest margin are based on numbers in actuals. Accordingly, recalculations using numbers in millions may not produce the same results.

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The following table presents changes in interest income and interest expense. Changes in interest income and interest expense that are not identifiable as either volume-related or rate-related, but rather attributable to both volume and rate changes, are allocated to the volume and rate categories based on the proportion of the absolute value of the volume and rate changes (dollars in millions).

Total Increase

(Decrease) Due to

Total Increase

(Decrease)

Total Increase

(Decrease) Due to

Total Increase

(Decrease)

Volume

Rate

Volume

Rate

Interest income

Interest-bearing deposits

Securities purchased under agreements to resell

Federal funds sold

MBS

Other investments

Advances

Mortgage loans

Loans to other FHLBanks

Total interest income

Interest expense

Deposits

Consolidated obligations

Discount notes

Bonds

Other interest-bearing liabilities

Total interest expense

Net interest income

NET INTEREST SPREAD AND MARGIN

Net interest spread represents the yield on total interest-earning assets minus the cost of total interest-bearing liabilities. Net interest margin equals net interest income expressed as a percentage of average interest-earning assets. Our net interest spread decreased during 2025, when compared to 2024 due to the yield on our interest-earning assets declining quicker than the cost of our interest-bearing liabilities, driven primarily by changes in interest rates and a decline in certain longer-term advances. The decline in net interest spread was offset in part by mortgage loan and MBS portfolio growth, as well as the call of higher-costing consolidated obligation bonds. Our net interest income does not include net interest settlements on economic hedges, which are recorded in other income (loss). As a result, our net interest spread does not reflect the full impact of our funding and hedging strategies and may experience volatility as interest rates change.

Net interest margin equals net interest income expressed as a percentage of average interest-earning assets. Our net interest margin decreased during 2025, when compared to 2024 due primarily to lower net interest spread and lower interest rates, which reduced our earnings on invested capital.

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ADVANCE PREPAYMENT FEES

The following table summarizes our advance prepayment fees (dollars in millions):

For the Years Ended

December 31,

Prepayment fees on advances, gross 1

Basis adjustment amortization

Deferred prepayment fees on modified advances

Prepayment fees on advances, net

1    Includes symmetrical fees on advances for which we may charge the borrower a prepayment fee or pay the borrower a prepayment credit, depending on certain circumstances, such as movements in interest rates.

Other Income (Loss)

The following table summarizes the components of other income (loss) (dollars in millions):

For the Years Ended

December 31,

Net gains (losses) on trading securities

Net gains (losses) on financial instruments held under fair value option

Net gains (losses) on derivatives

Other, net

Total other income (loss)

Other income (loss) increased $63 million during 2025 when compared to 2024, primarily due to the net change in fair value on our trading securities, fair value option instruments, and economic derivatives, including the related interest settlements. We utilize economic derivatives to hedge certain instruments held at fair value that do not qualify for fair value hedge accounting. These fair value elections are made primarily in an effort to mitigate the potential income statement volatility that can arise when an economic derivative is adjusted for changes in fair value, but the related hedged item is not. As a result, we review the related gains (losses) on these items on a net basis. During 2025, we recorded net combined gains of $58 million on our trading securities, fair value option instruments, and the related economic derivatives, compared to net combined losses of $5 million in 2024. The net increase was primarily driven by changes in interest rates. Refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Hedging Activities ” for additional discussion on our economic derivatives.

Hedging Activities

We use derivatives to manage interest rate risk. Accounting rules affect the timing and recognition of income and expense on derivatives and therefore we may be subject to income statement volatility. If a hedging activity qualifies for hedge accounting treatment (fair value hedge), the net interest settlements of interest receivables or payables related to the derivative are recognized as interest income or expense in the relevant income statement line item consistent with the hedged asset or liability. The net fair value gains and losses of derivatives and hedged items designated in fair value hedge relationships are also recognized as interest income or expense. Amortization of basis adjustments from terminated hedges is also recorded in interest income or expense.

If a hedging activity does not qualify for hedge accounting treatment (economic hedge), the net interest settlements of interest receivables or payables related to the derivative as well as the fair value gains and losses on the derivative are recorded as a component of other income (loss) in “Net gains (losses) on derivatives;” however, there is no fair value adjustment for the corresponding asset or liability being hedged unless changes in the fair value of the asset or liability are normally marked to fair value through earnings (i.e., trading securities and fair value option instruments).

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The following table categorizes the net effect of hedging activities on net income by product (dollars in millions):

For the Year Ended December 31, 2025

Net Effect of Hedging Activities

Advances

Investments

Mortgage

Loans

Discount Notes

Bonds

Other

Total

Net interest income:

Net amortization/accretion 1

Net gains (losses) on derivatives and hedged items

Price alignment amount on derivatives

Net interest settlements on derivatives 2

Total impact to net interest income

Other income (loss):

Net gains (losses) on derivatives

Gains (losses) related to derivatives not designated as hedging instruments 3

Price alignment amount on derivatives

Total net gains (losses) on derivatives

Net gains (losses) on trading securities 4

Net gains (losses) on financial instruments held under fair value option 4

Total impact to other income (loss)

Total net effect of hedging activities 5

1    Represents the amortization/accretion of basis adjustments on closed hedge relationships.

2    Represents the interest component on derivatives that qualify for fair value hedge accounting.

3    Represents net gains (losses) on economic derivatives and the related interest settlements.

4    Represents the net gains (losses) on those trading securities and fair value option instruments for which we are utilizing economic derivatives to hedge the risk of changes in fair value.

5    The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.

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The following table categorizes the net effect of hedging activities on net income by product (dollars in millions):

For the Year Ended December 31, 2024

Net Effect of Hedging Activities

Advances

Investments

Mortgage

Loans

Discount Notes

Bonds

Other

Total

Net interest income:

Net amortization/accretion 1

Net gains (losses) on derivatives and hedged items

Price alignment amount on derivatives

Net interest settlements on derivatives 2

Total impact to net interest income

Other income (loss):

Net gains (losses) on derivatives

Gains (losses) related to derivatives not designated as hedging instruments 3

Price alignment amount on derivatives

Total net gains (losses) on derivatives

Net gains (losses) on trading securities 4

Net gains (losses) on financial instruments held under fair value option 4

Total impact to other income (loss)

Total net effect of hedging activities 5

1    Represents the amortization/accretion of basis adjustments on closed hedge relationships.

2    Represents the interest component on derivatives that qualify for fair value hedge accounting.

3    Represents net gains (losses) on economic derivatives and the related interest settlements.

4    Represents the net gains (losses) on those trading securities and fair value option instruments for which we are utilizing economic derivatives to hedge the risk of changes in fair value.

5    The hedging activity tables do not include the interest component on the related hedged items or the gross prepayment fee income on terminated advance or investment hedge relationships.

NET AMORTIZATION/ACCRETION

Net amortization/accretion varies from period to period depending on our hedge relationship termination activities and the maturity, call, or prepayment of assets or liabilities previously in hedge relationships.

NET GAINS (LOSSES) ON DERIVATIVES AND HEDGED ITEMS

Net gains and losses on derivatives and hedged items designated in fair value hedge relationships are recorded in net interest income. Gains (losses) on derivatives and hedged items fluctuate with changes in market conditions and are based on a range of factors, including current and projected levels of interest rates and volatility.

PRICE ALIGNMENT AMOUNT ON DERIVATIVES

The price alignment amount on derivatives for which variation margin is characterized as a daily settled contract fluctuates with changes in the interest rate environment. The price alignment amount on derivatives that qualify for fair value hedge accounting is recorded in net interest income. The price alignment amount on economic derivatives is recorded in other income (loss) as “Net gains (losses) on derivatives” on our Statements of Income.

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NET INTEREST SETTLEMENTS ON DERIVATIVES

Net interest settlements represent the interest component on derivatives that qualify for fair value hedge accounting. These amounts vary from period to period depending on our hedging activities and interest rates and are partially offset by the interest component on the related hedged item within net interest income. The hedging activity tables do not include the impact of the interest component on the related hedged item.

NET GAINS (LOSSES) ON DERIVATIVES

We utilize economic derivatives to manage certain risks on our Statements of Condition. Gains and losses on economic derivatives include interest settlements and price alignment amounts. Interest settlements represent the interest component on economic derivatives. These amounts vary from period to period depending on our hedging activities and interest rates.

Other Expense

The following table shows the components of other expense (dollars in millions):

For the Years Ended

December 31,

Compensation and benefits

Contractual services

Professional fees

Other operating expenses

Total operating expenses

Voluntary community and housing contributions

Federal Housing Finance Agency

Office of Finance

Other, net

Total other expense

Other expense increased $12 million during 2025 when compared to 2024, primarily due to an increase in voluntary community and housing contributions and compensation and benefits. This increase was offset in part by a decline in professional fees, driven primarily by lower contract labor costs.

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. To help fulfill that mission, we administer a number of programs, some of which are statutory while others are voluntary. These include grants through AHP to support low-to-moderate income households, as well as Community Investment Advances, which are discounted advances to support economical development and housing in the communities our members serve. In addition, we offer voluntary programs that provide grants and/or discounted advances to further support our mission.

We recognize statutory AHP assessment expense equal to 10 percent of our annual income subject to assessment (GAAP net income before interest expense related to MRCS and the assessment for AHP) and these funds are required to be granted in the subsequent year. AHP grants include performance-based criteria, which can result in the awards being disbursed over a period of several years or recaptured if performance under the award is not achieved. Refer to “ Item 8. Financial Statements and Supplementary Data — Note 10 — Affordable Housing Program ” for additional information about the statutory AHP expenses and related liability.

In addition to statutory AHP assessments, the FHLBanks are committed to making voluntary contributions representing five percent or more of their earnings in support of affordable housing and community investment initiatives, collectively referred to as voluntary contributions.

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The following table provides the calculation of our voluntary contribution targets (dollars in millions):

For the Years Ended

December 31,

Prior year net income before assessment

Adjustment:

Prior year interest expense on MRCS

Prior year net income subject to assessment

Unadjusted voluntary contribution commitment (5%)

Adjustment:

Adjustment for prior year voluntary contributions 1

Voluntary contribution commitment target

1    The income statement effects of our voluntary contributions reduce net income before assessments which, in turn, reduces the voluntary contributions in the subsequent year. In order to restore our voluntary contributions to the dollar amount it would be in the absence of these effects, we voluntarily contributed an additional amount to our voluntary affordable housing and community investment initiatives.

We provided voluntary initiatives that support affordable housing and community investments, which are recorded within “Other expense” on our Statements of Income. The following table provides the components of how we fulfilled our voluntary contribution commitment (dollars in millions):

For the Years Ended

December 31,

Voluntary contributions

Affordable housing

Voluntary AHP 1

Community investment

Disaster relief and climate resiliency

Voluntary contribution fulfillment

Fulfillment, as a percent of prior year net income subject to assessment, as adjusted

1     Excludes $8 million and $7 million of supplemental voluntary contributions to AHP for the years ended December 31, 2025 and 2024. The income statement effects of the voluntary programs reduce net income before assessments which, in turn, reduces the statutory AHP assessment each year. We have committed to make supplemental voluntary contributions to AHP by an amount that equals what the statutory AHP assessment would be in the absence of these effects.

Based on the amount of net income subject to assessment in 2025, our five percent voluntary contribution commitment target for 2026 will be $53 million (excluding supplemental voluntary AHP contributions). In 2026, we also expect to award 2025 statutory AHP assessments of $98 million.

Affordable Housing Program Assessments

Annually, we must set aside for the AHP the greater of 10 percent of our annual income subject to assessment, or our prorated portion of the sum required to ensure the aggregate contribution by the FHLBanks is no less than $100 million for each year. For purposes of the required AHP assessment, income subject to assessments is defined as net income before assessments, plus interest expense related to mandatorily redeemable capital stock. The exclusion of interest expense related to mandatorily redeemable capital stock is a regulatory interpretation of the Finance Agency.

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The following table provides a calculation of the net income subject to assessment, adjusted for voluntary contribution fulfillment, to show how our supplemental voluntary AHP contribution restores the AHP amounts to 10 percent of earnings absent the five percent voluntary commitment fulfillment (dollars in millions):

For the Years Ended

December 31,

Net income subject to statutory assessment

Adjustment:

Voluntary commitment fulfillment, recognized in net income 1

Supplemental AHP contributions for the current year 2

Net income subject to assessment, as adjusted

10% of net income subject to assessment, as adjusted 3

Statutory AHP assessments

Supplemental voluntary AHP contributions for the current year 2

Total statutory AHP assessment and supplemental voluntary AHP contributions for the current year

1    Refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Supporting Housing and Community Investment ” for the composition of this amount.

2    Included in “Voluntary community and housing contributions” expense on the Statements of Income.

3    Represents the calculated amount of earnings that would be available for AHP assessment if we had not made voluntary contributions to other initiatives, which reduce net income before assessment which, in turn, reduces the statutory AHP assessment.

The AHP helps members to provide grants or subsidized advances to support the acquisition, development, or rehabilitation of affordable rental or owner-occupied housing. All operating and administrative costs for the AHP are included in our operating expenses, so all AHP contributions go directly to support affordable housing projects and eligible households. For the years ended December 31, 2025 and 2024, AHP contributions were used to award $107 million and $103 million in grants that funded 58 projects and 59 projects that provided approximately 1,927 and 2,100 units of affordable housing. In addition, during the years ended December 31, 2025 and 2024, a portion of AHP was allocated to our down payment products, which support homeownership for households with incomes at or below 80 percent of the area median, adjusted for family size. During the years ended December 31, 2025 and 2024, $15 million and $11 million of grants were disbursed to 944 and 800 eligible households, the majority of whom were first-time homebuyers.

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STATEMENTS OF CONDITION

Advances

The following table summarizes our advances by type of institution (dollars in millions):

December 31,

Commercial banks

Savings institutions

Credit unions

Insurance companies

CDFIs

Total member advances

Housing associates

Non-member borrowers

Total par value

Our total advance par value increased $9.4 billion, or nine percent, at December 31, 2025, when compared to December 31, 2024. The increase was primarily due to an increase in borrowings by large depository institution members and insurance companies.

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INTEREST RATE PAYMENT AND REDEMPTION TERMS

The following table summarizes advances by interest rate payment and redemption terms (dollars in millions):

December 31, 2025

December 31, 2024

Amount

% of Total

Amount

% of Total

Fixed rate

Due in one year or less

Due after one year through three years

Due after three years through five years

Due after five years through 15 years

Thereafter

Total par value

Variable rate

Due in one year or less

Due after one year through three years

Due after three years through five years

Due after five years through 15 years

Total par value

Variable rate, callable 1

Due in one year or less

Due after one year through three years

Due after three years through five years

Total par value

Other 2

Due in one year or less

Due after one year through three years

Due after three years through five years

Due after five years through 15 years

Thereafter

Total par value

Overdrawn demand deposit accounts

Total advance par value

Premiums

Discounts

Fair value hedging adjustments

Total

1    Callable advances are those advances that may be contractually prepaid by the borrower on predetermined dates without incurring prepayment or termination fees.

2    Includes fixed-rate amortizing and fixed-rate callable advances.

During the year ended December 31, 2025, the composition of our advance portfolio shifted to a higher concentration of variable rate advances due in part to increased usage of short-term non-callable variable rate advances and the maturity of short-term fixed rate advances. Fair value hedging adjustments changed $833 million at December 31, 2025 when compared to December 31, 2024, due primarily to the interest rate environment.

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At December 31, 2025 and 2024, advances outstanding to our five largest member borrowers totaled $51.6 billion and $31.3 billion, representing 47 percent and 31 percent of our total advances outstanding. The following table summarizes advances outstanding to our five largest member borrowers at December 31, 2025 (dollars in millions):

Amount

% of Total Advances

Athene Annuity and Life Company

Wells Fargo Bank, N.A.

EquiTrust Life Insurance Company

UBS Bank USA

Symetra Life Insurance Company

Total par value

We evaluate advances for credit losses on a quarterly basis and have never experienced a credit loss on our advances. For additional discussion on our advance credit risk, refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Advances .”

Mortgage Loans

The following table summarizes information on our mortgage loans held for portfolio (dollars in millions):

December 31,

Fixed rate conventional loans

Fixed rate government-insured loans

Total unpaid principal balance

Premiums

Discounts

Basis adjustments from mortgage loan purchase commitments

Total mortgage loans held for portfolio

Allowance for credit losses

Total mortgage loans held for portfolio, net

Our total mortgage loans increased $2.6 billion, or 22 percent, at December 31, 2025, when compared to December 31, 2024. The increase was primarily due to new loan purchases exceeding principal paydowns, driven in part by low prepayment activity as mortgage rates remain elevated.

REDEMPTION TERMS

The following table summarizes our fixed rate mortgage loans held for portfolio by redemption terms (dollars in millions):

December 31,

Redemption Term

Due in one year or less

Due after one year through five years

Due after five years through fifteen years

Thereafter

Total unpaid principal balance

We evaluate mortgage loans for credit losses on a quarterly basis. For additional discussion on our mortgage loan credit risk, refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Mortgage Loans .”

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Investments

The following table summarizes the carrying value of our investments (dollars in millions):

December 31, 2025

December 31, 2024

Amount

% of Total

Amount

% of Total

Short-term investments 1

Interest-bearing deposits

Securities purchased under agreements to resell

Federal funds sold

Total short-term investments

Long-term investments 2

MBS

GSE single-family

GSE multifamily

U.S. obligations single-family 3

Private-label residential

Total MBS

Non-MBS

U.S. Treasury obligations 3

Other U.S. obligations 3

GSE and TVA obligations

State or local housing agency obligations

Other 4

Total non-MBS

Total long-term investments

Total investments

1    Short-term investments have original maturities equal to or less than one year.

2    Long-term investments have original maturities of greater than one year.

3    Represents investment securities backed by the full faith and credit of the U.S. Government.

4    Consists of taxable municipal bonds.

Our investments increased $9.0 billion, or 17 percent, at December 31, 2025, when compared to December 31, 2024, due in part to an increase in securities purchased under agreements to resell, as well as the purchase of agency MBS and U.S. Treasury obligations. At December 31, 2025, we had no investment purchases that were traded but not yet settled. At December 31, 2024, we had agency MBS purchases with a total par value of $162 million that were traded but not yet settled. These investments were recorded as “Available-for-sale” on our Statements of Condition with a corresponding payable recorded in “Other liabilities.”

The Finance Agency limits our investments in MBS by requiring that the balance of our MBS not exceed three times regulatory capital at the time of purchase. At December 31, 2025, our ratio of MBS to regulatory capital was 2.64 compared to 2.71 at December 31, 2024.

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REDEMPTION TERMS AND YIELDS

The following table summarizes the carrying value and yield characteristics of our AFS and HTM investment portfolios on the basis of remaining terms to contractual maturity. Expected maturities of some securities may differ from contractual maturities, as borrowers may have the right to call or prepay obligations with or without call or prepayment fees (dollars in millions):

December 31,

Due in one year or less

Due after one year through five years

Due after five years through 10 years

Due after 10 years

Carrying Value

Carrying Value

AFS securities

Non-MBS

Other U.S. obligations 1

GSE and TVA obligations

State or local housing agency obligations

Other 2

Total non-MBS

MBS

U.S. obligations

single-family 1

GSE single-family

GSE multifamily

Total MBS

Total AFS securities

HTM securities

Non-MBS

GSE and TVA obligations

State or local housing agency obligations

Total non-MBS

MBS

U.S. obligations

single-family 1

GSE single-family

Private-label

Total MBS

Total HTM securities

Weighted-average yields on:

AFS securities 3

HTM securities 3

1    Represents investment securities backed by the full faith and credit of the U.S. Government.

2    Consists of taxable municipal bonds.

3    The weighted average yields on AFS and HTM securities are calculated as the sum of each debt security using the period end balances multiplied by the coupon rate, divided by the total debt securities in the applicable HTM or AFS portfolio. The result is then multiplied by 100 to express it as a percentage.

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INTEREST RATE PAYMENT TERMS

The following table summarizes the interest rate payment terms of investment securities (dollars in millions):

December 31,

Trading securities at fair value

Fixed rate

Total trading securities

AFS securities at amortized cost

Fixed rate

Variable rate

Total AFS securities

HTM securities at amortized cost

Fixed rate

Variable rate

Total HTM securities

We evaluate investments for credit losses on a quarterly basis. For additional discussion on our investment credit risk, refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Credit Risk — Investments .”

Consolidated Obligations

Consolidated obligations, which include bonds and discount notes, are the primary source of funds to support our advances, mortgage loans, and investments. At December 31, 2025 and 2024, the carrying value of consolidated obligations for which we are primarily liable totaled $173.9 billion and $153.3 billion.

DISCOUNT NOTES

The following table summarizes our discount notes, all of which are due within one year (dollars in millions):

December 31,

Par value

Discounts and concession fees 1

Fair value hedging adjustments

Fair value option adjustments

Total

1    Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation discount notes.

Our discount notes increased $19.9 billion, or 31 percent, at December 31, 2025, when compared to December 31, 2024. During the year ended December 31, 2025, we continued to utilize discount notes in an effort to capture attractive funding and/or meet our liquidity requirements and began electing fair value hedge accounting for certain discount notes. Fair value option adjustments changed $13 million at December 31, 2025, when compared to December 31, 2024, driven primarily by the reversal of historic gains and losses on instruments as they approach maturity and the impact of new trades, offset in part by changes in the interest rate environment.

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BONDS

The following table summarizes information on our bonds (dollars in millions):

December 31,

Par value

Premiums

Discounts and concession fees 1

Fair value hedging adjustments

Total

1    Concessions represent fees paid to dealers in connection with the issuance of certain consolidated obligation bonds.

Our bonds remained relatively stable at December 31, 2025, when compared to December 31, 2024. Fair value hedging adjustments changed $78 million at December 31, 2025, when compared to December 31, 2024, driven primarily by the interest rate environment.

INTEREST RATE PAYMENT TERMS

Bonds are issued with either a fixed or variable rate, such as SOFR. The following table summarizes our bonds by interest rate payment terms (dollars in millions):

December 31,

Fixed rate

Simple variable rate

Total par value

For additional information on our consolidated obligations, refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Liquidity — Sources of Liquidity .”

Deposits

Deposits represent a small portion of our funding, totaling $1.1 billion at December 31, 2025, a decrease of $167 million, or 13 percent, from December 31, 2024. All of our deposits are uninsured and the balance of deposits varies depending on market factors, such as the attractiveness of our deposit pricing relative to rates available on alternative money market instruments, our members’ investment preferences and the availability of alternative short-term investments, and our members’ liquidity levels.

Interest-bearing demand and overnight deposits pay interest based on a daily interest rate. The average balances of demand and overnight deposits were $1.1 billion, $1.0 billion, and $1.0 billion, and the weighted-average interest rates paid on demand and overnight deposits were 3.21 percent, 4.15 percent, and 4.07 percent during the years ended December 31, 2025, 2024, and 2023.

The following table summarizes our uninsured term deposits (dollars in millions):

December 31,

Three months or less

Over three months through six months

Over six months through 12 months

Total

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Capital

The following table summarizes information on our capital (dollars in millions):

December 31,

Capital stock

Retained earnings

Accumulated other comprehensive income (loss)

Total capital

Our capital increased $1.0 billion, or 11 percent, at December 31, 2025, when compared to December 31, 2024. The increase was primarily due to an increase in activity-based capital stock resulting from an increase in advance balances and an increase in retained earnings. Refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital ” for additional information on our capital.

Derivatives

We use derivatives to manage interest rate risk. The notional amount of derivatives serves as a factor in determining periodic interest payments and cash flows received and paid. However, the notional amount of derivatives represents neither the actual amounts exchanged nor our overall exposure to credit and market risk.

The following table categorizes the notional amount of our derivatives by type (dollars in millions):

December 31,

Interest rate swaps

Noncallable

Callable by counterparty

Callable by the Bank

Total interest rate swaps

Forward settlement agreements

Mortgage loan purchase commitments

Total notional amount

The notional amount of our derivative contracts increased $31.1 billion, or 20 percent, at December 31, 2025, when compared to December 31, 2024. The increase was primarily due to the utilization of interest rate swaps to hedge the growth in our consolidated obligations. During 2025, we increased our utilization of non-callable swaps on discount notes, and callable swaps on consolidated obligation bonds in an effort to capture attractive funding and/or meet our liquidity requirements. For additional discussion regarding our use of derivatives, see “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk — Derivatives .”

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital positions are actively managed in an effort to preserve stable, reliable, and cost-effective sources of funds to meet current and projected operating financial commitments, as well as regulatory, liquidity, and capital requirements.

Liquidity

SOURCES OF LIQUIDITY

We utilize several sources of liquidity to carry out our business activities. These include, but are not limited to, proceeds from the issuance of consolidated obligations, payments collected on advances and mortgage loans, proceeds from investment securities, member deposits, the issuance of capital stock, and current period earnings.

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Our primary source of liquidity is proceeds from the issuance of consolidated obligations (bonds and discount notes) in the capital markets. During 2025, proceeds from the issuance of bonds and discount notes were $122.9 billion and $1,476.1 billion compared to $55.9 billion and $1,688.5 billion in 2024. During 2025, although we increased our utilization of consolidated obligation bonds, we continued to issue discount notes in an effort to capture attractive funding and/or meet our liquidity requirements.

Access to debt markets has been reliable because investors, driven by increased liquidity preference and our GSE status, have sought the FHLBanks’ debt as an asset of choice. However, due to the short-term maturity of the debt, we may be exposed to additional risks associated with refinancing and our ability to access the capital markets.

We are focused on maintaining an adequate liquidity balance and a funding balance between our financial assets and financial liabilities and work collectively with the other FHLBanks to manage the system-wide liquidity and funding needs. We monitor our debt refinancing risk and liquidity position primarily by tracking the maturities of financial assets and financial liabilities. In managing and monitoring the amounts of assets that require refunding, we consider contractual maturities of our financial assets and liabilities, as well as certain assumptions regarding expected cash flows (e.g., estimated prepayments). External factors, including member borrowing needs, supply and demand in the debt markets, and other factors may affect liquidity balances and the funding balances between financial assets and financial liabilities. Refer to “ Item 8. Financial Statements and Supplementary Data ” for additional information regarding the contractual maturities or redemption terms of certain of our financial assets and liabilities.

Our ability to raise funds in the capital markets as well as our cost of borrowing may be affected by our credit ratings. For our current credit ratings and further discussion of how credit rating changes and our ability to access the capital markets may impact us in the future, refer to “ Ite m 1. Business ” and “ Item 1A. Risk Factors .”

Although we are primarily liable for the portion of consolidated obligations that are issued on our behalf, we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on all consolidated obligations issued by the FHLBank System. At December 31, 2025 and 2024, the total par value of outstanding consolidated obligations for which we are primarily liable was $174.4 billion and $153.8 billion. At December 31, 2025 and 2024, the total par value of outstanding consolidated obligations issued on behalf of other FHLBanks for which we are jointly and severally liable was $977.4 billion and $1,039.2 billion.

The Office of Finance and FHLBanks have contingency plans in place that prioritize the allocation of proceeds from the issuance of consolidated obligations during periods of financial distress if consolidated obligations cannot be issued in sufficient amounts to satisfy all FHLBank demand. In the event of significant market disruptions or local disasters, our President and CEO or designee is authorized to establish interim borrowing relationships with other FHLBanks. To provide further access to funding, the FHLBank Act also authorizes the U.S. Treasury to directly purchase new issue consolidated obligations of the GSEs, including FHLBanks, up to an aggregate principal amount of $4.0 billion. As of February 28, 2026, no purchases had been made by the U.S. Treasury under this authorization.

USES OF LIQUIDITY

We use our available liquidity, including proceeds from the issuance of consolidated obligations, primarily to repay consolidated obligations, fund advances, and purchase investments. During 2025, repayments of consolidated obligations totaled $1,578.0 billion compared to $1,763.1 billion in 2024.

During 2025, advance disbursements (excluding daily renewals) totaled $695.4 billion compared to $406.0 billion in 2024. Advance disbursements will vary from period to period depending on member needs. In addition, during the second quarter of 2024, we began offering an overnight advance with a one day maturity. The increase during 2025 was due primarily to member utilization of short-term advances, including overnight advances. During 2025, investment purchases (excluding overnight investments) totaled $5.7 billion compared to $7.9 billion in 2024, a decrease due primarily to fewer purchases of securities purchased under agreements to resell and agency MBS.

We also use liquidity to purchase mortgage loans, redeem member deposits, pledge collateral to derivative counterparties, redeem or repurchase capital stock, pay expenses, and pay dividends.

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LIQUIDITY REQUIREMENTS

We are subject to certain liquidity requirements set forth by the Finance Agency, as further outlined below. We also maintain a liquidity contingency funding plan designed to enable us to meet our obligations and the liquidity needs of our members in the event of short-term capital market disruptions, or operational disruptions at our Bank and/or the Office of Finance.

Liquidity Guidance AB – This guidance requires us to maintain sufficient liquidity for a period of 10 to 30 calendar days. The base case scenario requires 20 days of positive daily cash balances and assumes that we cannot access the capital markets to issue debt, and during that time we will automatically renew maturing and called advances for all members, including large highly-rated members, and we hold additional liquid assets equal to one percent of our letters of credit balances. At December 31, 2025 and 2024, we were in compliance with this base case liquidity guidance.

The Liquidity Guidance AB also specifies appropriate funding gap limits to address the risks associated with an FHLBank having too large a mismatch between the contractual maturities of its assets and liabilities. A funding gap measures the difference between assets and liabilities that are scheduled to mature during a specified period and is expressed as a percentage of total assets. The guidance provides recommended maximum funding gap limits of negative 15 percent at the three-month horizon and negative 30 percent at the one-year horizon. At December 31, 2025 and 2024, we adhered to these funding gap requirements.

Liquidity Reserves for Deposits – We are required to have advances with maturities not to exceed five years, deposits in banks or trust companies, or obligations of the U.S. Treasury in an aggregate amount greater than or equal to members’ current deposits available at all times. At December 31, 2025 and 2024, we were in compliance with this liquidity guidance.

Unpledged Qualifying Assets – We are required to maintain, in the aggregate, unpledged qualifying assets in an amount at least equal to the amount of our participation in total consolidated obligations outstanding. The following table shows our compliance with this requirement (dollars in billions):

December 31,

Qualifying assets free of lien or pledge

Consolidated obligations outstanding

Excess liquidity

Capital

CAPITAL REQUIREMENTS

We are subject to certain regulatory capital requirements. Refer to “ Item 8. Financial Statements and Supplementary Data — Note 11 — Capital ” for additional information on our regulatory capital requirements.

CAPITAL STOCK

Our capital stock has a par value of $100 per share, and all shares are issued, redeemed, and repurchased only at the stated par value. We issue a single class of capital stock (Class B capital stock) and have two subclasses of Class B capital stock: membership and activity-based. All Class B capital stock issued is subject to a notice of redemption period of five years.

The capital stock requirements established in our Capital Plan are designed so that we can remain adequately capitalized as member activity changes. Our Board of Directors may make adjustments to the capital stock requirements within ranges established in our Capital Plan.

Each member must purchase and hold membership capital stock in an amount equal to 0.06 percent of its total assets as of the preceding December 31st, subject to a cap of $10.0 million and a floor of $10,000. Each member is also required to purchase activity-based capital stock equal to 4.50 percent of its advances, 4.00 percent of mortgage loans outstanding, and 0.10 percent of its standby letters of credit.

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Because membership is voluntary, a member can provide a notice of withdrawal from membership at any time. If a member provides a notice of withdrawal from membership, we will not repurchase or redeem any membership stock until five years from the date of receipt of a notice of withdrawal. To the extent membership is terminated involuntarily, we may elect to repurchase that institution’s membership stock prior to the end of the five-year redemption period. If a member withdraws or is involuntarily terminated from membership and holds activity-based capital stock, we will repurchase any such stock that is not required to support remaining business activity with the institution.

A member may cancel any pending notice of redemption before the completion of the five-year redemption period by providing a written notice of cancellation. We charge a cancellation fee equal to a percentage of the par value of the shares of capital stock subject to redemption. This fee is currently set at a range of one to five percent depending on when we receive notice of cancellation from the member. Our Board of Directors retains the right to change the cancellation fee at any time. We will provide at least 15 days’ written notice to each member of any adjustment or amendment to our cancellation fee.

We cannot repurchase or redeem any membership or activity-based capital stock if the repurchase or redemption would cause a member to be out of compliance with its required investment. In addition, there are statutory and regulatory restrictions on our obligation or right to redeem outstanding capital stock.

First, in no case may we redeem any capital stock if, following such redemption, we would fail to satisfy our minimum regulatory capital requirements. By law, all member holdings of our capital stock immediately become nonredeemable if we become undercapitalized.

Second, we are precluded by regulation from redeeming any capital stock without the prior approval of the Finance Agency if either our Board of Directors or the Finance Agency determines that we incurred or are likely to incur losses resulting in or likely to result in a charge against capital.

Third, we cannot redeem shares of capital stock from any member if the principal or interest on any consolidated obligation is not paid in full when due, or under certain circumstances if (i) we project, at any time, that we will fail to comply with statutory or regulatory liquidity requirements, or will be unable to timely and fully meet all of our current obligations, (ii) we actually fail to comply with statutory or regulatory liquidity requirements or to timely and fully meet all of our current obligations, or enter or negotiate to enter into an agreement with one or more other FHLBanks to obtain financial assistance to meet our current obligations, or (iii) the Finance Agency determines that we will cease to be in compliance with statutory or regulatory liquidity requirements, or will lack the capacity to timely or fully meet all of our current obligations.

If we are liquidated, after payment in full to our creditors, our stockholders will be entitled to receive the par value of their capital stock as well as any retained earnings, in an amount proportional to the stockholder’s share of the total shares of capital stock. In the event of a merger or consolidation, our Board of Directors shall determine the rights and preferences of our stockholders, subject to applicable Finance Agency regulations, as well as any terms and conditions imposed by the Finance Agency.

Regulatory Capital Stock

The following table summarizes our regulatory capital stock by type of member (dollars in millions):

December 31,

Commercial banks

Savings institutions

Credit unions

Insurance companies

CDFIs

Total GAAP capital stock

MRCS

Total regulatory capital stock

The increase in regulatory capital stock at December 31, 2025, when compared to December 31, 2024, was primarily due to an increase in activity-based capital stock resulting from an increase in advance balances. For additional information on our capital stock, refer to “ Item 8. Financial Statements and Supplementary Data — Note 11 — Capital .”

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RETAINED EARNINGS

Our risk management policies outline a targeted level of retained earnings based on the amount we believe necessary to help protect the redemption value of capital stock, facilitate safe and sound operations, maintain regulatory capital ratios, and support our ability to pay a relatively stable dividend. We monitor our achievement of this targeted level and may utilize tools such as restructuring our balance sheet, generating additional income, reducing our risk exposures, increasing capital stock requirements, or reducing our dividends to achieve this level of retained earnings. At December 31, 2025 and 2024, our actual retained earnings exceeded our targeted level of retained earnings.

Under the JCE Agreement with all of the other FHLBanks, we are required to allocate 20 percent of our quarterly net income to a separate restricted retained earnings account until the balance of that account, calculated as of the last day of each calendar quarter, equals at least one percent of our average balance of outstanding consolidated obligations for the calendar quarter. The restricted retained earnings are not available to pay dividends and are presented separately on our Statements of Condition. At December 31, 2025 and 2024, our restricted retained earnings account totaled $1.3 billion and $1.1 billion. One percent of our average balance of outstanding consolidated obligations for the three months ended December 31, 2025, was $1.7 billion.

DIVIDENDS

Our Board of Directors may declare and pay different dividends for each subclass of capital stock. Dividend payments may be made in the form of cash and/or additional shares of capital stock. Historically, we have only paid cash dividends. By regulation, we may only pay dividends from current earnings or unrestricted retained earnings. We are prohibited from paying a dividend in the form of additional shares of capital stock if, after the issuance, the outstanding excess capital stock would be greater than one percent of our total assets. Our Board of Directors may not declare or pay dividends if it would result in our non-compliance with regulatory capital requirements.

Our dividend philosophy is to pay a consistent dividend equal to or greater than the current market rate for a highly-rated investment (i.e. SOFR), and at a rate that the Board of Directors believes is sustainable under current and projected earnings to maintain an appropriate level of capital and retained earnings. Our actual dividend is determined quarterly by our Board of Directors, based on policies, regulatory requirements, actual performance, and other considerations that the Board of Directors determines to be appropriate.

The following table summarizes dividend-related information (dollars in millions):

For the Years Ended

December 31,

Aggregate cash dividends paid 1

Effective combined annualized dividend rate paid on capital stock 2

Annualized dividend rate paid on membership capital stock

Annualized dividend rate paid on activity-based capital stock

Average SOFR

1    Includes aggregate cash dividends paid during the period. Amount excludes cash dividends paid on MRCS. For financial reporting purposes, these dividends were recorded as interest expense on our Statements of Income.

2    Effective combined annualized dividend rate is paid on total capital stock, including MRCS.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our financial statements in accordance with GAAP requires management to make a number of judgments, estimates, and assumptions that affect our reported results and disclosures. Given the assumptions and judgment used, we have identified fair value measurements as our critical accounting estimate.

For a discussion of recently adopted or issued accounting standards, refer to “ Item 8. Financial Statements and Supplementary Data — Note 2 — Recently Adopted and Issued Accounting Guidance .” For additional information on our fair value estimates, refer to “ Item 8. Financial Statements and Supplementary Data — Note 1 — Summary of Significant Accounting Policies .”

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Fair Value Measurements

Fair values play an important role in our valuation of certain assets, liabilities, and hedging instruments. They are inherently subjective and may require the use of significant assumptions, adjustments, and judgment including, among others, discount rates, forward interest rates, and volatility assumptions. We evaluate our fair value measurements on an ongoing basis. While management believes our estimates and assumptions are reasonable based on historical experience and other factors, actual results could differ from those estimates and differences could be material to the financial statements.

We categorize our financial instruments carried at fair value into a three-level hierarchy. The hierarchy is based upon the observability of inputs used to value the asset or liability as of the measurement date. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. At December 31, 2025 and 2024, we did not carry any financial assets or liabilities, measured on a recurring basis, at fair value on our Statements of Condition based on unobservable inputs.

While all fair value measurements inherently have a significant level of estimation uncertainty, the following items are those most likely to have a material impact on our financial statements:

• Trading and AFS Investment Securities . Our valuation technique incorporates prices from third-party pricing vendors, that generally use various proprietary models to price investment securities. The inputs to those models are derived from various sources including, but not limited to, benchmark securities and yields, reported trades, dealer estimates, issuer spreads, bids, offers, and other market-related data. Since many investment securities do not trade on a daily basis, the pricing vendors use available information, as applicable, such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing to determine the prices for individual securities. Each pricing vendor has an established process in place to challenge investment valuations, which facilitates resolution of questionable prices we may identify. Periodically, we conduct reviews of our pricing vendors to confirm and further augment our understanding of the vendors’ pricing processes, methodologies, and control procedures. In limited instances, when no prices are available from the designated pricing services, we obtain prices from dealers or use the purchase price if the investment security is unsettled.

• Derivative Assets and Liabilities and Related Hedged Items.  The fair value of our derivatives is generally estimated using standard valuation techniques such as a discounted cash flow analysis and includes variation margin payments for daily settled contracts. Our cash flow model utilizes market-observable inputs (inputs that are actively quoted and can be validated to external sources). These inputs include assumptions on discount rates, forward interest rates, and volatility. In limited instances, fair value estimates for derivatives may be obtained using an external pricing model that utilizes observable market data. For the related hedged items, the fair value is estimated using a discounted cash flow analysis which also considers assumptions on discount rates and volatility.

Throughout 2025, there were no material changes in our valuation techniques or primary inputs used to develop fair value measurements for investment securities or derivatives and the related hedged items. Further, the risk profile and composition of these instruments did not materially change when compared to prior year. Refer to “ Item 8. Financial Statements and Supplementary Data — Note 12 — Fair Value ” for additional discussion on our fair value measurements, including the quantitative impact these fair value estimates had on our financial statements and disclosures at December 31, 2025 and 2024.

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LEGISLATIVE AND REGULATORY DEVELOPMENTS

Regulatory Environment

Certain significant regulatory actions and developments are summarized below.

We are subject to various legal and regulatory requirements and priorities. Certain actions, regulatory priorities, and areas of focus, such as deregulation, by the federal executive administration have changed and continue to change the regulatory environment. For example, the Finance Agency repealed the Fair Lending, Fair Housing, and Equitable Housing Finance Plans regulation applicable to the FHLBanks, effective March 9, 2026, citing the federal executive administration’s deregulatory priorities. Furthermore, during 2025, withdrawals and rescissions of certain rules, proposed rules, and advisory, regulatory, or technical guidance, have affected, and likely will continue to affect, certain aspects of our business operations. These changes could have impact on our financial condition, results of operations, and reputation.

On January 20, 2026, the federal executive administration issued an executive order that seeks to restrict acquisitions by large institutional investors of single-family homes. Among other things, the executive order directs certain agencies, including the Finance Agency, to issue guidance to (i) prevent agencies and government-sponsored enterprises from providing for, approving, insuring, guaranteeing, securitizing, or facilitating the acquisition by a large institutional investor of a single-family home that could otherwise be purchased by an individual owner-occupant, or disposing of federal assets in a manner that transfers a single-family home to a large institutional investor; and (ii) promote sales to individual owner-occupants, including through anti-circumvention provisions, first-look policies, and disclosure requirements. The executive order also calls for legislative recommendations to codify related policies and directs certain agencies to conduct reviews and consider additional measures to combat speculation by large institutional investors in single-family housing markets. We are unable to predict the nature of the guidance, measures, or recommendations, or how any such measure may impact our business.

Considering the changes in the regulatory environment, there is uncertainty with respect to the ultimate result of future regulatory actions and the impact they may have on us and the FHLBank System. We also cannot predict the federal executive administration’s actions on U.S. housing finance and GSEs, including relating to the revision or end of conservatorships of Fannie Mae and Freddie Mac or potential reforms or enhancements to their capital structure, the imposition of new requirements or limitations on their existing authorities or changes in the nature of their government-backed guarantees. Similarly, we cannot predict any corresponding impacts of GSE reform on the FHLBank System, the secondary mortgage and MBS markets, or the mortgage industry. We continue to monitor these actions as they evolve and to evaluate their potential impact on us. For a discussion of related risks, please refer to “ Item 1A Risk Factors .”

OFF-BALANCE SHEET ARRANGEMENTS

In the ordinary course of business, we engage in financial transactions that, in accordance with GAAP, are not recorded on our Statements of Condition or may be recorded on our Statements of Condition in amounts that are different from the full contract or notional amount of the transactions. For additional information on our off-balance sheet arrangements, refer to “ Item 8 — Financial Statements and Supplementary Data — Note 13 — Commitments and Contingencies .”

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RISK MANAGEMENT

We have risk management policies, established by our Board of Directors, that allow us to monitor and control our exposure to various risks, including interest rate, liquidity, credit, operational, model, information security, legal, regulatory and compliance, strategic, and reputational, as well as capital adequacy. Our primary risk management objective is to manage our assets and liabilities in ways that ensure liquidity is available to our members and protect the par redemption value of our capital stock. We periodically evaluate our risk management policies in order to respond to changes in our financial position and general market conditions.

Interest Rate Risk

We define interest rate risk as the risk that changes in interest rates or spreads will adversely affect our financial condition (market value) or performance (income). Interest rate risk is the principal type of risk to which we are exposed, as our cash flows, and therefore earnings and equity value, can change significantly as interest rates change. Our general approach toward managing interest rate risk is to acquire and maintain a portfolio of assets, liabilities, and derivatives which, taken together, limit our expected exposure to interest rate risk. Our key interest rate risk measures are MVE and Projected 24-Month Income. Management regularly monitors these key measures, as discussed further in the sections below.

MARKET VALUE OF EQUITY

MVE measures the net present value of the Bank by either marking positions to market or discounting all future cash flows using market discount rates. MVE is measured as the market value of our assets minus the market value of our liabilities (excluding MRCS). MVE is an estimate of the Bank’s value and takes into account short-term market price fluctuations.

The MVE calculation is derived by a model that uses market prices which are computed using interest rates. This model allows for items such as spreads, volatilities, and prepayment speeds, and assumes a run-off balance sheet. To ensure the accuracy of the MVE calculation, we benchmark the computed market prices of complex instruments, such as derivatives and mortgage assets, to market observed prices or dealers’ quotes.

Interest rate risk stress tests of MVE involve instantaneous parallel and non-parallel changes in interest rates. The resulting percentage change in MVE from the base case value is an indication of longer-term repricing risk and option risk embedded in the balance sheet.

In an effort to protect MVE from large interest rate swings, we manage the interest rate risk of our balance sheet by using hedging transactions, such as issuing consolidated obligation bonds, including floating rate, simple bullet, callable, or other structured features, and entering into or canceling interest rate swaps, caps, floors, and swaptions.

We monitor and manage to MVE policy limits in an effort to ensure the stability of the Bank’s value. Our policy limits are based on declines from the base case in parallel and non-parallel interest rate change scenarios. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner. At December 31, 2025 and 2024, we were in compliance with all MVE policy limits.

MVCS represents our MVE divided by the total outstanding shares of our capital stock (including MRCS). To ensure we remain adequately capitalized, we must ensure our MVCS remains at or above our $100 par value.

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The following tables show our base case and change from base case MVE in percent change, MVE policy limits, and MVCS, assuming instantaneous parallel changes in interest rates at December 31, 2025 and 2024:

MVE Assuming Parallel Changes (dollars in millions)

Down 200

Down 100

Base Case

% Change from Base Case

Down 200

Down 100

Base Case

Policy Limits (declines from base case)

Down 200 1

Down 100

Base Case

2025 and 2024

MVCS Assuming Parallel Changes (dollars per share)

Down 200

Down 100

Base Case

1    The down 200 basis point policy limit is suspended when the 10-year swap rate falls below a threshold for five consecutive days. At December 31, 2025 and 2024, the threshold was 1.50 percent and the 10-year swap rate was above this level; as such, the associated policy limits were in effect.

The following tables show our base case and change from base case MVE in percent change, MVE policy limits, and MVCS, assuming instantaneous non-parallel changes in interest rates at December 31, 2025 and 2024:

MVE Assuming Non-Parallel Changes (dollars in millions)

Down 200

Down 100

Base Case

% Change from Base Case

Down 200

Down 100

Base Case

Policy Limits (declines from base case)

Down 200 1

Down 100

Base Case

2025 and 2024

MVCS Assuming Non-Parallel Changes (dollars per share)

Down 200

Down 100

Base Case

1    The down 200 basis point policy limit is suspended when the 10-year swap rate falls below a threshold for five consecutive days. At December 31, 2025 and 2024, the threshold was 1.50 percent and the 10-year swap rate was above this level; as such, the associated policy limits were in effect.

Our base case MVE and MVCS increased at December 31, 2025, when compared to December 31, 2024, and the increase between periods was primarily attributable to an increase in retained earnings and improved valuations of multifamily MBS and our mortgage loan portfolio. In addition, our base case MVE improved primarily due to higher asset balances and increased invested capital, specifically activity-based capital stock.

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PROJECTED 24-MONTH INCOME

The projected 24-month income simulation measures our short-term earnings forecast over a two-year horizon based on forward interest rates and business assumptions. Our primary measure of profitability is the spread between projected AROCS and average SOFR. In this measure, AROCS adjusts GAAP net income for certain non-routine or unpredictable items, such as market value adjustments, prepayment fee income, and other non-routine items.

We monitor and manage to policy limits, which are based on the spread between our projected AROCS and average SOFR in parallel and non-parallel interest rate change scenarios. Additionally, there is a limit on the decline in projected AROCS from base case AROCS for certain basis shock scenarios to limit basis risk exposure. Any policy limit breach must be reported to the Enterprise Risk Committee of the Bank and the Risk and Compliance Committee of the Board of Directors and be remediated in a timely manner. We were in compliance with all projected 24-month income policy limits at December 31, 2025 and 2024.

The following tables show our projected 24-month AROCS spread to average SOFR and associated policy limits, assuming instantaneous parallel shifts in interest rates at December 31, 2025 and 2024:

Projected AROCS Spread to SOFR

Down 200

Down 100

Base Case

Policy Limits 1

Down 200 1

Down 100

Base Case

2025 and 2024

1    The down 200 basis point policy limit is suspended when the 10-year swap rate falls below a threshold for five consecutive days. At December 31, 2025 and 2024 , the threshold was 1.50 percent and the 10-year swap rate was above this level; as such, the associated policy was in effect.

The following tables show our projected 24-month AROCS spread to average SOFR and associated policy limits, assuming instantaneous non-parallel shifts in interest rates at December 31, 2025 and 2024:

Projected AROCS Spread to SOFR

Down 100

Base Case

Policy Limits

Down 100

Base Case

2025 and 2024

The following tables show our change from base projected 24-month AROCS for index specific shock scenarios and our associated policy limits at December 31, 2025 and 2024:

Projected AROCS

% Change from Base Case

Policy Limit

Base Case

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DERIVATIVES

We use derivatives to manage interest rate risk. Finance Agency regulations and our risk management policies establish guidelines for derivatives, prohibit the speculative use of derivatives, and limit credit risk arising from derivatives. Our hedging strategies include hedges of specific assets and liabilities that qualify for fair value hedge accounting and economic hedges that are used to reduce overall market risk exposure. All new hedging strategies are approved by our Asset-Liability Committee. See additional discussion regarding our derivative contracts in “ Item 8. Financial Statements and Supplementary Data — Note 7 — Derivatives and Hedging Activities .”

The following table summarizes our interest rate exchange agreements by type of hedged item, hedging instrument, associated hedging strategy, hedge accounting designation, and notional amount (dollars in millions):

December 31,

Hedged Item / Hedging Instrument

Hedging Strategy

Hedge Accounting Designation

Notional Amount

Notional Amount

Advances

Pay-fixed, receive floating interest rate swap (without options)

Converts the advance’s fixed rate to a variable rate index.

Fair Value

Economic

Pay-fixed, receive floating interest rate swap (with options)

Converts the advance’s fixed rate to a variable rate index and offsets option risk in the advance.

Fair Value

Investments

Pay-fixed, receive floating interest rate swap

Converts the investment’s fixed rate to a variable rate index.

Fair Value

Economic

Mortgage Loans

Mortgage loan purchase commitment

Represents a stand-alone derivative that exposes us to fair value risk due to the fixed rate purchase commitment.

Economic

Forward settlement agreement

Protects against changes in market value of fixed rate mortgage loan purchase commitments resulting from changes in interest rates.

Economic

Bonds

Receive-fixed or structured, pay floating interest rate swap (without options)

Converts the bond’s fixed or structured rate to a variable rate index.

Fair Value

Receive-fixed or structured, pay floating interest rate swap (with options)

Converts the bond’s fixed or structured rate to a variable rate index and offsets option risk in the bond.

Fair Value

Discount Notes

Receive-fixed, pay-float interest rate swap

Converts the discount note’s fixed rate to a variable rate index.

Fair Value

Economic

Total

For more information on our hedging strategies, refer to “ Item 8. Financial Statements and Supplementary Data — Note 7 — Derivatives and Hedging Activities .”

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Capital Adequacy

An adequate capital position is necessary for facilitating safe and sound business operations, protecting the redemption value of our capital stock, maintaining regulatory capital ratios, and supporting our ability to pay dividends and redeem excess capital stock. To ensure capital adequacy, we maintain a targeted level of retained earnings to achieve business imperatives and cover unexpected losses. Our key capital adequacy measures are regulatory capital and targeted retained earnings in order to maintain capital levels in accordance with Finance Agency regulations. In addition, our risk management policies require that we maintain MVCS at or above our $100 par value.

For additional information on our compliance with regulatory capital requirements as well as our targeted retained earnings, refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital. ”

For additional information o n MVCS, r efer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Management — Interest Rate Risk — Market Value of Equity .”

Liquidity Risk

We define liquidity risk as the risk that we will be unable to meet our financial obligations as they come due or meet the credit needs of our members in a timely and cost-efficient manner. To manage this risk, we maintain liquidity in accordance with Finance Agency regulations. For additional information on our compliance with these requirements, refer to “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Liquidity — Liquidity Requirements .”

Credit Risk

We define credit risk as the risk that a member or counterparty will fail to meet its financial obligations. Our primary credit risks arise from our ongoing lending, investing, and hedging activities. Our overall objective in managing credit risk is to operate a sound credit granting process and to maintain appropriate credit administration, measurement, and monitoring practices.

ADVANCES

We manage our credit exposure to advances through a lending policy that provides for an established credit limit for each borrower, ongoing reviews of each borrower’s financial condition and ability to repay, and detailed collateral and lending policies to limit risk of loss while balancing borrowers’ needs for a reliable source of funding. In addition, we lend to our borrowers in accordance with the FHLBank Act, Finance Agency regulations, and other applicable laws.

We are required by regulation to evaluate our members’ creditworthiness and ability to repay, and to obtain sufficient collateral to fully secure our advances, standby letters of credit, and other extensions of credit to borrowers (collectively, credit products). The estimated value of the collateral required to secure each borrower’s credit products is calculated by applying loan-to-value discounts, or haircuts, to the unpaid principal or market value, as applicable, of the collateral. We also have policies and procedures for validating the reasonableness of our collateral valuations. In addition, we perform collateral verifications and on-site reviews based on the risk profile of the borrower. Management believes that these policies effectively manage our credit risk from advances.

At December 31, 2025 and 2024, borrowers pledged $442.4 billion and $388.8 billion of collateral (net of applicable discounts) to support activity with us, including advances. At December 31, 2025 and 2024, all of our advances met the requirement to be collateralized at a minimum of 100 percent, net of applicable discounts. Borrowers pledge collateral in excess of their collateral requirement mainly to demonstrate available liquidity and to borrow additional amounts in the future.

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The following table shows the amount of collateral pledged to us (net of applicable discounts) (dollars in billions):

December 31, 2025

Collateral Type

Discount Range 1

Amount

% of Total

Single-family loans

Multi-family loans

Other real estate

Securities

Cash, agency securities and residential MBS

Commercial MBS

Government-insured loans

Secured small business and agri-business loans

Total

1    Represents the discount or the range of discounts applied to the unpaid principal balance or market value of collateral pledged.

We evaluate advances for credit losses on a quarterly basis and have never experienced a credit loss on our advances. Based upon our collateral and lending policies, the collateral held as security, and the repayment history on advances, management has determined that there were no expected credit losses on our advances as of December 31, 2025 and 2024. Refer to “ Item 8. Financial Statements and Supplementary Data — Note 5 — Advances ” for additional information on our eligible collateral types, collateral practices, and allowance for credit losses.

MORTGAGE LOANS

Mortgage loan credit risk is the risk that we will not receive timely payments of principal and interest due from mortgage borrowers because of borrower defaults. Credit risk on mortgage loans is affected by a number of factors, including loan type, borrower’s credit history, and other factors such as home price fluctuations, unemployment levels, and other economic factors in the local market or nationwide.

The following table presents the unpaid principal balance of our mortgage loans by product type (dollars in millions):

December 31,

Product Type

Conventional

Government

Total unpaid principal balance

We manage the credit risk on mortgage loans by (i) adhering to our underwriting standards, (ii) using agreements to establish credit risk sharing responsibilities with our PFIs, and (iii) monitoring the performance of the mortgage loan portfolio and creditworthiness of PFIs.

We evaluate mortgage loans for credit losses on a quarterly basis and establish an allowance for credit losses to reflect management’s estimate of expected credit losses inherent in the portfolio. At December 31, 2025 and 2024, the allowance for credit losses on our conventional mortgage loans was $6 million and $5 million. At December 31, 2025, over 99 percent of our conventional loan portfolio was performing (i.e. current payment status) and charge-offs recorded during the year ended December 31, 2025, were less than one percent of the total conventional portfolio.

We have never experienced a credit loss on our government-insured mortgage loans. At December 31, 2025 and 2024, we determined no allowance for credit losses was necessary on our government-insured mortgage loans.

Refer to “ Item 8. Financial Statements and Supplementary Data — Note 6 — Mortgage Loans Held for Portfolio ” for additional information on our allowance for credit losses and the payment status of our conventional mortgage loans.

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The following table presents supplemental information on our mortgage loans (dollars in millions):

December 31,

Unpaid Principal Balance

Average mortgage loans outstanding during the period

Mortgage loans held for portfolio

Non-accrual loans

Allowance for credit losses on mortgage loans held for portfolio

Net charge-offs (recoveries) 1

Ratio of net charge-offs (recoveries) to average mortgage loans outstanding during the period 1

Ratio of allowance for credit losses to mortgage loans held for portfolio

Ratio of non-accrual loans to mortgage loans held for portfolio

Ratio of allowance for credit losses to non-accrual loans

1     Net charge-offs and recoveries were less than $1 million at both December 31, 2025 and 2024.

The following table shows our conventional mortgage loans by FICO ® score. All percentages are calculated based on unpaid principal balances as of the period end.

FICO ® Score 1

December 31, 2025

Total

Weighted average FICO score

1    Represents the lowest original FICO ® score of the borrowers and co-borrowers.

The following table shows our conventional mortgage loans by loan-to-value ratio. All percentages are calculated based on unpaid principal balances as of the period end.

Loan-to-Value 1

December 31, 2025

Total

Weighted average loan-to-value

1    Represents the loan-to-value at origination for the related loan.

2    These conventional loans were required to have PMI at origination.

The following table shows the five largest state concentrations of our conventional mortgage loan portfolio. All percentages are calculated based on unpaid principal balances as of the period end.

December 31, 2025

Minnesota

Missouri

Iowa

South Dakota

Idaho

All others

Total

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INVESTMENTS

We maintain an investment portfolio primarily to provide liquidity as well as investment income. Our primary credit risk on investments is the counterparties’ ability to meet repayment terms. We mitigate this credit risk by purchasing investment quality securities. We define investment quality as a security with adequate financial backings 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. We consider a variety of credit quality factors when analyzing potential investments, including collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, NRSRO credit ratings, and/or the financial health of the underlying issuer. We limit our purchases of MBS to those guaranteed by the U.S. Government or issued by a GSE. We perform ongoing analysis on these investments in an effort to determine potential credit issues.

Finance Agency regulations also limit the type of investments we may purchase. We are prohibited from investing in financial instruments issued by non-U.S. entities other than those issued by U.S. branches and agency offices of foreign commercial banks, unless otherwise approved by the Finance Agency. Our unsecured credit exposures to U.S. branches and agency offices of foreign commercial banks include the risk that, as a result of political or economic conditions in a country, the counterparty may be unable to meet their contractual repayment obligations. Our unsecured credit exposures to domestic counterparties and U.S. subsidiaries of foreign commercial banks include the risk that these counterparties have extended credit to foreign counterparties. At December 31, 2025, we were in compliance with the above regulation and did not own any financial instruments issued by non-U.S. entities, other than those issued by U.S. branches and agency offices of foreign commercial banks, and those approved by the Finance Agency.

In addition, Finance Agency regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties. These limits are based on a percentage of regulatory capital and the counterparty’s overall credit rating. Under these regulations, the level of regulatory capital is determined as the lesser of our total regulatory capital or the amount of regulatory capital of the counterparty. The amount of regulatory capital is then multiplied by a stated percentage. The percentage that we may offer for extensions of unsecured credit, excluding overnight federal funds sold, ranges from one to 15 percent based on the counterparty’s credit rating. Our total unsecured exposure to a counterparty, including overnight federal funds sold, may not exceed twice that amount, or a total of two to 30 percent of the amount of regulatory capital, based on the counterparty’s credit rating. At December 31, 2025, we were in compliance with the regulatory limits established for unsecured credit.

Our short-term portfolio may include, but is not limited to, interest-bearing deposits, federal funds sold, securities purchased under agreements to resell, certificates of deposit, commercial paper, and U.S. Treasury obligations. Our long-term portfolio may include, but is not limited to, U.S. Treasury obligations, other U.S. obligations, GSE and TVA obligations, state or local housing agency obligations, taxable municipal bonds, and agency MBS. We consider our long-term investments issued or guaranteed by the U.S. Government, an agency or instrumentality of the U.S. Government, or the FDIC to be of the highest credit quality and therefore those exposures are not monitored with other unsecured investments. Given the credit quality of our unsecured long-term investments, our unsecured credit risk is primarily in the short-term portfolio.

We limit short-term unsecured credit exposure primarily to the following overnight investment types:

• Interest-bearing deposits. Primarily consists of unsecured deposits that earn interest.

• Federal funds sold. Unsecured loans of reserve balances at the Federal Reserve Banks between financial institutions.

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At December 31, 2025, our unsecured short-term investment exposure consisted of overnight interest-bearing deposits and federal funds sold. The following table presents our unsecured short-term investment exposure by counterparty credit rating and domicile (excluding accrued interest receivable) (dollars in millions):

December 31, 2025

Credit Rating 1,2

Domicile of Counterparty

Total

Domestic

U.S. branches and agency offices of foreign commercial banks

Australia

Belgium

Canada

Finland

Germany

Netherlands

United Kingdom

Total U.S. branches and agency offices of foreign commercial banks

Total unsecured short-term investment exposure

1    Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.

2    Table excludes investments issued or guaranteed by the U.S. Government, U.S. government agencies, government instrumentalities, GSEs, and supranational entities, and does not include related accrued interest.

The following table summarizes the carrying value of our investments by credit rating (dollars in millions):

December 31, 2025

Credit Rating 1

AAA

Unrated

Total

Interest-bearing deposits 2

Securities purchased under agreements to resell 3

Federal funds sold

Investment securities:

MBS

GSE single-family

GSE multifamily

U.S. obligations single-family 4

Private-label residential

Total MBS

Non-MBS

U.S. Treasury obligations 4

Other U.S. obligations 4

GSE and TVA obligations

State or local housing agency obligations

Other 5

Total non-MBS

Total investments

1    Represents either the lowest credit rating available for each investment based on an NRSRO, or the guarantor credit rating, if applicable. In instances where an NRSRO rating or guarantor rating is not available for the investment, the investment is classified as unrated.

2    Balance includes $6 million of interest-bearing deposits with another FHLBank. These investments are rated AA, based on the credit rating of the FHLBank System.

3    Although a portion of the securities purchased under agreements to resell is with unrated counterparties, the underlying collateral supporting these investments is investment grade.

4    Represents investment securities backed by the full faith and credit of the U.S. Government.

5    Consists of taxable municipal bonds.

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We evaluate investments for credit losses on a quarterly basis. At December 31, 2025 and 2024, we determined no allowance for credit losses was necessary on our investments. Refer to “ Item 8. Financial Statements and Supplementary Data — Note 4 — Investments ” for additional information our allowance for credit losses.

DERIVATIVES

We execute most of our derivative transactions with large banks and major broker-dealers. Over-the-counter derivative transactions may be either executed directly with a counterparty, referred to as uncleared derivatives, or cleared through a clearing agent with a clearinghouse, referred to as cleared derivatives.

We are subject to credit risk due to the risk of nonperformance by counterparties to our derivative agreements. The amount of credit risk on derivatives depends on the extent to which netting procedures and collateral requirements are used and are effective in mitigating the risk. We manage credit risk through credit analysis of derivative counterparties, collateral requirements, and adherence to the requirements set forth in our policies, CFTC regulations, and Finance Agency regulations.

Uncleared Derivatives . Uncleared derivative transactions executed on or after September 1, 2022 are subject to two-way initial margin requirements, if our 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. Uncleared derivative agreements are also fully collateralized with a zero unsecured threshold in accordance with variation margin requirements issued by the U.S. federal bank regulatory agencies and the CFTC. As a result of these risk mitigation initiatives, we do not anticipate any credit losses on our uncleared derivative agreements.

Cleared Derivatives . For cleared derivatives, the clearinghouse is our counterparty. We are subject to risk of nonperformance by the clearinghouse and clearing agent. The requirement that we post initial and variation margin through the clearing agent, to the clearinghouse, exposes us to institutional credit risk in the event that the clearing agent or the clearinghouse fails to meet its obligations. However, the use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral/payments are posted daily, through a clearing agent, for changes in the fair value of cleared derivatives. We do not anticipate any credit losses on our cleared derivatives.

The contractual or notional amount of derivatives reflects our involvement in the various classes of financial instruments. Our maximum credit risk is the estimated cost of replacing derivatives if there is a default, minus the value of any related collateral. In determining maximum credit risk, we consider accrued interest receivables and payables as well as our ability to net settle positive and negative positions with the same counterparty and/or clearing agent when netting requirements are met.

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The following table shows our derivative counterparty credit exposure (dollars in millions):

December 31, 2025

Credit Rating 1

Notional Amount

Net Derivatives

Fair Value Before Collateral

Cash Collateral Pledged

To (From) Counterparty

Non-cash Collateral Pledged

To (From) Counterparty

Net Credit Exposure

to Counterparties

Non-member counterparties:

Asset positions with credit exposure

Uncleared derivatives

Cleared derivative 3

Liability positions with credit exposure

Uncleared derivatives

Total derivative positions with credit exposure to non-member counterparties

Member institutions 2,4

Total

Derivative positions without credit exposure

Total notional

1    Represents either the lowest credit rating available for each counterparty based on an NRSRO, or the guarantor credit rating, if applicable.

2    Net credit exposure is less than $1 million.

3    Represents derivative transactions cleared with CME Clearing and LCH Ltd, our clearinghouses. CME Clearing is not rated, but its parent, CME Group Inc. was rated Aa3 by Moody’s and AA- by S&P at December 31, 2025. LCH Ltd. was rated AA- by S&P at December 31, 2025.

4    Represents mortgage loan purchase commitments with our member institutions.

Refer to “ Item 8. Financial Statements and Supplementary Data — Note 7 — Derivatives and Hedging Activities ” for additional information on our derivatives and hedging activities.

Operational Risk

We define operational risk as the risk of loss arising from inadequate or failed processes, people, and/or systems, including those emanating from external sources. All of our activities and processes generate operational risk. Management has established policies, procedures, and controls to reduce the level of operational risk. We perform annual risk assessments to identify, assess, mitigate, and report on operational risks outside of the Board’s risk appetite. Due to the manual nature of many of our processes, our operational risk exposure is closely monitored. Refer to “ Item 1A. Risk Factors ” for additional information.

Model Risk

We define model risk as the risk of adverse consequences from decisions due to model utilization. Throughout the course of our day-to-day activities, we utilize external and internal pricing and financial models as important inputs into business and risk management decision-making processes.

Models are inherently imperfect predictors of actual results because they are based on assumptions about future performance. Changes in any models or in any of the assumptions, judgments, or estimates used in the models may cause the results generated by the model to be materially different. Refer to “ Item 1A. Risk Factors ” for additional information.

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Information Security Risk

We define information security risk as the risk arising from unauthorized access, use, disclosure, disruption, modification, or destruction of information or information systems. Importantly, this definition includes the confidentiality, integrity, and availability of both digital and non-digital information managed within information systems and processes. Refer to “ Item 1C. Cybersecurity ” for additional information.

Legal, Regulatory, and Compliance Risk

We define legal, regulatory, and compliance risk as the risk of violations of laws, rules, regulations, regulatory and supervisory guidance, and internal enterprise governing documents. Our legal and compliance departments are responsible for coordinating with various business units in connection with the identification, evaluation, and mitigation of our legal, regulatory, and compliance risks. We manage compliance risk by the development of, and adherence to, appropriate policies, procedures, and controls.

Strategic Risk

We define strategic risk as the risk arising from adverse strategic business decisions, poor implementation of strategic plans, or a lack of responsiveness to changes in the industry and operating environment. Strategic risk includes legislative risk. From time to time, proposals are made, or legislative and regulatory changes are considered, which could affect our cost of doing business or other aspects of our business. To support our mission, we endeavor to manage and mitigate strategic risk through the business planning process and by monitoring the external environment.

Reputational Risk

We define reputational risk as the risk arising from negative publicity that could adversely affect our reputation and consequently our financial performance or ability to meet our key business objectives. We manage reputational risk by the identification of emerging risks, development of crisis response and contingency plans, and monitoring the effectiveness of the overall risk management processes.

For additional information on some of the more important risks we face, refer to “ Item 1A. Risk Factors .”