Federal Home Loan Bank of Boston - 10-K

ITEM 1A. RISK FACTORS

The following discussion summarizes some of the most important risks that we face. This discussion is not exhaustive, and there may be other risks that we face, which are not described below. The risks described below, if realized, may result in us being prohibited from paying dividends and/or repurchasing and redeeming our capital stock, and could adversely impact our business operations, financial condition, and future results of operations.

BUSINESS AND REPUTATION RISKS

Sustained low advances balances and/or limited opportunities for loan purchases at our offered pricing could adversely impact results of operations.

Our primary business is providing liquidity to our members by making advances to, and purchasing residential mortgage loans from, our members. As can happen from time-to-time, the availability to our members of alternative liquidity sources, with terms that may be more attractive than the terms of products we offer, may significantly decrease the demand for our advances and/or loan purchases. Further, any changes we make in the pricing of our advances or for residential mortgage loans in an effort to compete effectively with these competitive funding sources could decrease the profitability of advances and purchased loans, which could reduce earnings. More generally, a decrease in the demand for advances and/or loan purchases, or a decrease in the profitability of advances and/or mortgage loan investments, could adversely impact our financial condition and results of operations.

The loss of large members could result in lower demand for our products and services.

As of December 31, 2025, our five largest stock-holding members held 29.5 percent of our advances and 25.5 percent of our capital stock. The loss of large members or a significant reduction in the level of business they conduct with us would likely lower overall demand for our products and services in the future and adversely impact our performance.

Also, consolidations within the financial services industry could reduce the number of current and potential members in our district. Industry consolidation could also cause us to lose multiple members whose business and ownership of our stock are so substantial that their loss could threaten our viability. In turn, we might be forced to consider strategic alternatives, which could include a merger with another FHLBank.

We are subject to a complex body of laws and regulations, which could change in a manner detrimental to our business operations and/or financial condition .

The FHLBanks are GSEs, organized under the authority of the FHLBank Act, and as such, are governed by federal laws and by regulations promulgated, adopted, and applied by the FHFA, by statute an independent agency in the executive branch of the U.S. government that regulates the FHLBanks, Fannie Mae, and Freddie Mac. Congress may amend the FHLBank Act or other statutes in ways that significantly affect (1) the rights and obligations of the FHLBanks and (2) the manner in which the FHLBanks carry out their mission and business operations. New or modified legislation enacted by Congress or regulations adopted by the FHFA or other financial services regulators could adversely impact our ability to conduct business or the cost of doing business.

We note continuing developments in the current federal executive administration’s and the FHFA’s areas of focus and regulatory priorities that may result in potential changes to our regulatory environment, including without limitation, as discussed in Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Legislative and Regulatory Developments . We cannot predict changes in legislative or regulatory requirements or guidance, or any new legislation or regulations, or how they might impact our business or operations. We also cannot predict the federal executive administration’s or the FHFA’s actions on U.S. housing finance and government-sponsored enterprises, including actions taken relating to large institutional investor purchases of single family homes, actions regarding 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, or any corresponding impacts to the FHLBank System, the secondary mortgage and mortgage-backed securities market, or the mortgage industry. Any such changes, as well as any resulting increased scrutiny of us and the FHLBank System and its

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mission and activities, however, could materially affect our business operations, results of operations and reputation, and the value of FHLBank membership.

Finally, the FHFA is the FHLBank System's safety and soundness regulator and has broad powers, including enforcement powers, to cause us to take or refrain from taking certain actions including, but not limited to, paying dividends, repurchasing excess stock, redeeming capital stock, increasing or decreasing our total assets, and curtailing our investing activities.

Our dividend practices could decrease demand for our products that require capital stock purchases and/or result in withdrawals from membership.

Historically, our board of directors has varied dividend declarations based on our financial condition, performance, outlook and economic environment. Throughout 2025, our board maintained dividends at a consistent level relative to short-term interest rates, as represented by SOFR. If our financial performance or condition were to deteriorate significantly in the future, our board of directors could determine to reduce or eliminate dividends.

A reduction or suspension of our dividend could result in decreased member demand for our products requiring capital stock purchases, reduced ability to add new members, and/or withdrawals from membership that could adversely impact our business operations and financial condition.

Limiting or ending repurchases of excess stock from members could decrease demand for advance products and increase membership withdrawals.

A period of financial distress could cause the Bank to impose a moratorium on repurchases of excess stock, which could provide an incentive for members to limit certain business with us to avoid associated stock purchase requirements and a disincentive to prospective members from becoming members, either of which could adversely impact our results of operations and financial condition.

An NRSRO's downgrade of the U.S. federal government's credit ratings could adversely impact our funding costs and/or access to the capital markets, and/or adversely impact demand for certain of our products.

Certain NRSROs have indicated that the credit ratings, including the ratings outlooks, of the FHLBanks are constrained by the credit ratings of the U.S. federal government, even though our obligations and other debts are not guaranteed by the U.S. federal government. Accordingly, a downgrade of the U.S. federal government's credit rating by an NRSRO is likely to be followed by a similar downgrade of the FHLBanks' credit rating. Downgrades of the U.S. federal government's credit rating, resulting from, among other things, the U.S. federal government’s failure to increase the U.S. Treasury debt ceiling or prolonged government shutdowns, are possible and could cause a downgrade in the FHLBanks’ credit rating, and any resulting downgrades to our credit ratings could adversely impact our funding costs and/or access to the capital markets. Further, member and housing associate demand for certain of our products, such as letters of credit, is influenced by our credit ratings, and downgrade of our credit ratings could weaken or eliminate demand for such products. To the extent that we cannot access funding when needed on acceptable terms to effectively manage our cost of funds or demand for our products falls, our financial condition and results of operations could be adversely impacted.

Negative information about the FHLBanks or housing GSEs in general could adversely impact our cost and availability of financing, or limit membership growth.

Negative information about us or any other FHLBank, such as material losses or increased risk of losses, could adversely impact our cost of funds. More broadly, negative information about housing GSEs, in general, from sources such as, but not limited to NRSROs, the FHFA, and its Office of Inspector General, and other political scrutiny, could adversely impact our financial condition and results of operation.

The FHLBanks issue highly rated agency debt to fund their operations. Negative announcements about or by the FHLBanks, or any of the housing GSEs, concerning topics such as accounting problems, risk-management issues, and regulatory enforcement actions may create pressure on debt pricing for all GSEs, as investors have perceived such instruments as bearing increased risk.

Any negative information or other factors could result in the FHLBanks having to pay a higher rate of interest on COs to make them attractive to investors. If we maintain our existing pricing on our advances products and other services notwithstanding increases in CO interest rates, the spreads we earn would fall adversely impacting our results of operations. If, in response to

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this decrease in spreads, we change the pricing of our advances, the advances may be less attractive to members, and the amount of new advances and our outstanding advance balances may decrease. In either case, the increased cost of issuing COs could adversely impact our financial condition and results of operations. Moreover, such negative information could deter prospective members from becoming members and could adversely impact our financial condition and results of operations.

We could fail to meet our minimum regulatory capital requirements or maintain a capital classification of "adequately capitalized," or we could be subject to enforcement action, any of which could result in prohibitions on dividends, excess stock repurchases, or capital stock redemptions, additional regulatory prohibitions, and/or could adversely impact our results of operations.

We are required to satisfy certain minimum regulatory capital requirements, including risk-based capital requirements and certain regulatory capital and leverage ratios, and are subject to the FHFA's regulation on FHLBank capital classification and critical capital levels (the Capital Rule), as described in Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital . Any failure to satisfy these requirements would result in our becoming subject to certain capital restoration requirements and being prohibited from paying dividends and redeeming or repurchasing capital stock without the prior approval of the FHFA, which could adversely affect our members' investment in our capital stock.

The Capital Rule, among other things, establishes criteria for four capital classifications and corrective action requirements for FHLBanks that are classified in any classification other than adequately capitalized. An adequately capitalized FHLBank is one that has sufficient permanent and total capital to satisfy its risk-based and minimum capital requirements. We satisfied these requirements on September 30, 2025. However, pursuant to the Capital Rule, the FHFA has discretion to reclassify an FHLBank and modify or add to corrective action requirements for a particular capital classification. If we become classified into a capital classification other than adequately capitalized, we would be subject to the corrective action requirements for that capital classification in addition to being subject to prohibitions on declaring dividends and redeeming or repurchasing capital stock.

We could become primarily liable for all or a portion of the COs of one or more other FHLBanks, which could adversely impact our financial condition and results of operations.

Each of the FHLBanks relies upon the issuance of COs as a primary source of funds. COs are the joint and several obligations of all of the FHLBanks, backed only by the financial resources of the FHLBanks. Accordingly, we are jointly and severally liable with the other FHLBanks for the COs issued by the FHLBanks through the Office of Finance, regardless of whether we receive all or any portion of the proceeds from any particular issuance of COs. The FHFA, at its discretion, may require any FHLBank to make principal or interest payments due on any COs, whether or not the primary obligor FHLBank has defaulted on the payment of that obligation. Accordingly, we could incur significant liability beyond our primary obligation under COs due to the failure of other FHLBanks to meet their obligations, which could adversely impact our financial condition and results of operations.

Compliance with regulatory contingency liquidity requirements could adversely impact our results of operations.

We are required to maintain liquidity in accordance with the FHLBank Act, FHFA regulations and guidance, and policies established by our management and board of directors, as discussed in  Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources . The requirement is designed to enhance our protection against temporary disruptions in access to the capital markets resulting from a rise in capital markets volatility. To satisfy this requirement, we maintain balances in shorter-term investments, which could earn lower interest rates than alternative investment options and could, in turn, adversely impact net interest income. To meet our liquidity requirements, we generally fund overnight or shorter-term advances with short-term discount notes that have maturities beyond the maturities of the related advances, thus potentially increasing our short-term advance pricing or reducing net income through lower net interest spread. To the extent such increased prices make our advances less competitive, advance levels and, therefore, our net interest income could be adversely impacted. Furthermore, any changes in regulatory liquidity requirements could adversely affect our financial condition and results of operations.

Failure to meet acquired member asset housing goals may materially adversely affect our business, results of operations and financial condition.

We are subject to FHFA-established affordable housing goals regarding our acquired member asset program that require a portion of the mortgage loans we purchase meet specified standards relating to affordability or location. If we do not meet our acquired member asset housing goals, we may be required to develop an FHFA approved housing plan with additional

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requirements that could have a material adverse effect on our results of operations and financial condition. For example, a housing plan may limit our ability to acquire more than a certain amount of mortgage loans that do not meet the FHFA's affordability criteria through our acquired member asset program or require that we pay a premium for mortgage loans that meet the FHFA's affordability criteria. In addition, the penalties for failure to comply with any such housing plan may include cease-and-desist orders and civil money penalties.

Natural or man-made disasters, including health emergencies, could have a material adverse effect on the Bank’s results of operations or financial condition.

The occurrence of natural disasters, war or other international conflict, civil unrest, political protest or instability, acts of terrorism, and health emergencies, including the spread of infectious diseases or a pandemic, the effects of climate change, or other unexpected or disastrous conditions, events, or emergencies could adversely affect our business, including demand for the Bank’s products and services and the value of our assets and member-pledged collateral. The effects of these unexpected or disastrous conditions, events, or emergencies could also disrupt general economic conditions and financial markets and interfere with our employees, our workplace, our vendors and service providers, the businesses of our members, and our counterparties and thus could impair our ability to manage our business, as well as our results of operations and financial condition.

Our ability to obtain funds through the issuance of COs depends in part on prevailing conditions in the capital markets (including investor demand), such as the effects of any reduced liquidity in financial markets, which are beyond our control. Volatility in the capital markets caused by a natural or man-made disaster (such as a pandemic or act of war, respectively) can affect demand for and cost of our debt, which could impact our liquidity and profitability.

Significant borrower defaults on loans made by our members could occur as a result of reduced economic activity and these defaults could cause members to fail. We could be adversely impacted by the reduction in business volume that would arise from the failure of one or more of our members. Our investments in mortgages and MBS could be negatively affected by delays or failures of borrowers to make payments of principal and interest when due or delays in foreclosures resulting from the economic effects of a natural or man-made disaster (such as a pandemic or act of war, respectively). Our other investments could also be negatively affected by extreme price volatility caused by uncertainties stemming from the results of a natural or man-made disaster. Our financial counterparties could be adversely impacted by a natural or man-made disaster, and related fiscal stimulus and monetary policies that may affect their profitability, asset quality, and capitalization.

MARKET AND LIQUIDITY RISKS

Changes in interest rates, which is affected by U.S. government monetary and fiscal policies, could adversely impact our financial condition and results of operations.

Like many financial institutions, we realize a significant portion of our income from the spread between interest earned on our outstanding loans and investments and interest paid on our borrowings and other liabilities, as measured by our net interest spread. Although we use various methods and procedures to monitor and manage exposures due to changes in interest rates, we could experience instances when either our interest-bearing liabilities will be more sensitive to changes in interest rates than our interest-earning assets, or vice versa. These impacts are exacerbated by prepayment risk, which is the risk that mortgage-related assets will be refinanced and prepaid in low interest-rate environments. The realization of such risk could require us to reinvest the proceeds of prepaid assets at lower, and possibly negative, spreads, or such assets could remain outstanding at below-market yields when interest rates increase. Moreover, accelerated prepayments in a low interest-rate environment could result in elevated levels of premium expense recognition.

The businesses and results of operations of the FHLBanks are significantly affected by the monetary policies of the U.S. government and its agencies, including the Federal Reserve. The policies of the Federal Reserve directly and indirectly influence the yield on interest-earning assets and the yield on interest-bearing liabilities and could adversely affect the demand for advances, mortgage loan purchases, and for COs. These policies could also adversely affect the FHLBanks through lower yields on our investments, higher yields on our debt, or both, which could adversely affect our financial condition and results of operations. These policies also can impact our members’ needs for liquidity, which can impact the volume of advances borrowed by members. In addition, the FHLBanks currently play a predominant role as lenders in the federal funds market; therefore, any disruption in the federal funds market or any related regulatory or policy change may adversely affect the FHLBanks’ cash management activities, results of operations, and reputation.

Any inability or curtailment of our ability to access the capital markets could adversely impact our business operations, financial condition, and results of operations.

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Our primary source of funds is the issuance of COs in the capital markets. Our ability to obtain funds through the sale of COs depends in part on prevailing conditions in the capital markets at that time, which are beyond our control. For example, Congressional failure to raise the U.S. Treasury debt ceiling could raise the potential for defaults on U.S. Treasury debt, which, in turn, would likely impact the demand and pricing for our COs. Accordingly, we cannot make any assurance that we will be able to obtain funding on terms acceptable to us, if at all. If we cannot access funding when needed, our ability to support and continue our operations would be adversely impacted, which would thereby adversely impact our financial condition and results of operations.

We use derivatives to manage interest-rate risk, however, we could be unable to enter into effective derivative instruments on acceptable terms.

We use derivatives to manage interest-rate risk. If, due to an absence of creditworthy swap dealers or guarantors, or to a decline in our own creditworthiness, we are unable to manage our hedging positions properly, or we are unable to enter into hedging instruments upon acceptable terms, we could be unable to effectively manage our interest-rate and other risks without altering our business strategies, which could adversely impact our financial condition and results of operations. If we are unable to manage our hedging positions properly or are unable to enter into hedging instruments upon acceptable terms, the effectiveness of our management of interest-rate and other risks may be adversely affected, or we may be required to change our investment strategies and advance product offerings, which could adversely affect our financial condition and results of operations.

We may not be able to profitably invest excess cash needed for liquidity.

We maintain significant investments in overnight money market instruments to ensure adequate liquidity to meet member borrowing needs in the event of market disruptions. The availability and pricing of these investments is subject to the availability of sufficient demand for funding by high-quality financial institutions that are willing to pay us a rate that exceeds our funding cost. Insufficient demand by such financial institutions could result in negative spreads on these assets or in the need to place funds in our Federal Reserve Bank account, which pays no interest.

CREDIT RISKS

We are subject to credit-risk exposures related to advances, mortgage loans, derivatives, money-market transactions, investments, credit products, and member failures. Increased delinquency rates and credit losses beyond those currently expected could adversely impact the yield on or value of investments.

We are exposed to secured and unsecured credit risk as part of our normal business operations through funding advances, purchasing mortgage loans, derivatives, money-market transactions, investments, and extending other credit products, such as standby letters or credit, and future advance commitments. Members are required to fully secure advances and other extensions of credit with collateral. We evaluate the type of collateral pledged by members and assign a borrowing capacity to the collateral, based on the risk associated with that type of collateral. If we have insufficient collateral before or after an event of payment default or failure of a member or we are unable to liquidate the collateral for the value assigned to it in the event of a payment default or failure of a member, we could experience a credit loss on advances or standby letters of credit, which could adversely affect our financial condition or results of operations. In addition, we extend short-dated unsecured credit and secured credit to U.S. and global financial institution counterparties. Failures by these counterparties to perform on their obligations to us could have an adverse effect on our financial condition, results of operations, or ability to pay dividends or redeem or repurchase capital stock.

During economic downturns or periods of significant economic and financial uncertainties, the number of our members or financial counterparties exhibiting financial stress may increase, which could expose us to additional member or other credit risks. Potential defaults on mortgage loans beyond what we have currently forecasted could cause an increase in our allowance for credit losses on mortgage loans.

Declines in real estate values, including residential and commercial properties, or inactivity in the U.S. housing and commercial lending markets or rising delinquency or default rates on mortgage loans could result in credit losses and adversely impact our business operations and/or financial condition.

A deterioration of the U.S. real estate market, including residential and commercial markets, and a national decline in real estate prices could adversely impact the financial condition of a number of our borrowers, particularly those whose businesses are concentrated in the mortgage industry. One or more of our borrowers may default on their obligations to us for a number of

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reasons, such as changes in financial condition, a reduction in liquidity, operational failures, or insolvency. In addition, the value of mortgage loans or MBS pledged to us as collateral may decrease. If a borrower defaults, and we are unable to obtain additional collateral to make up for the reduced value of such collateral, we could incur losses. A default by a borrower lacking sufficient collateral to cover its obligations to us could result in significant financial losses, which would adversely impact our results of operations and financial condition.

Further, our methodology for determining our allowance for loan losses on our investments in MPF loans considers factors relevant to those investments, including market delinquency rates and trends in the delinquency rates on our investments in conventional mortgage loans. If delinquency or default rates rise for these investments or other factors used in determining the allowance worsen, we may determine to increase our allowance for loan losses, which would adversely impact our results of operations and financial condition.

We have geographic concentrations that could adversely impact our business operations and/or financial condition.

We, by nature of our charter and our business operations, are exposed to credit risk resulting from limited geographic diversity. Our advances business is generally limited to operations within our district, although members may pledge mortgage loan collateral secured by real estate from outside our district. While we employ conservative credit underwriting and collateral practices to limit exposure, a decline in our district's economic conditions could create a credit exposure to our members' advances obligations in excess of collateral held.

We have concentrations of mortgage loans in some geographic areas based on our investments in MPF loans and on our receipt of collateral pledged for advances. See Part II — Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Mortgage Loans for additional information on these concentrations. To the extent that any of these geographic areas experience significant declines in the local housing markets, declining economic conditions, or natural disasters, the nature and severity of which may be impacted by climate change, we could experience increased losses on our investments in MPF loans.

OPERATIONAL RISKS

A failure, breach, or other cybersecurity incident of the information systems at the Bank or any of our critical service providers could disrupt our operations or result in significant financial loss or reputational damage.

We rely heavily on information systems and other technology to conduct and manage our business. See Part I — Item 1 — Business — Risk Management — Operational Risk and Item 1C – Cybersecurity for additional information on our use of information systems and technology. Any failures or interruptions of these information systems or other technology could have a material adverse impact on our financial condition and results of operations. Moreover, cyber-attacks, in particular those on financial institutions and financial market infrastructures, have become more frequent, more sophisticated, and increasingly difficult to detect and prevent, including as a result of the increased capabilities of artificial intelligence and other emerging technologies, such as ransomware-as-a-service, that may be used maliciously.

For example, most of our information systems are hosted with infrastructure-as-a-service (IaaS) or software-as-a-service (SaaS) providers on which we are reliant to provide a secure and stable operating environment for these systems. Any failure to provide such stability or security by the IaaS or SaaS providers could result in failures or interruptions in our ability to conduct business. As another example, our AHP, MPF, and certain collateral activities rely on the secure processing, storage, and transmission of private borrower information. We could experience an event where this information is exposed in several ways, including through unauthorized access to computer systems, computer viruses that attack our computer systems, software or networks, accidental delivery of information to an unauthorized party, loss of encrypted media containing this information, and similar circumstances at service providers with access to or possession of such information. Any of these events could result in significant financial losses, legal and regulatory sanctions, and reputational damage.

We are maintaining a continuous strategy to ensure our mission critical applications and supporting infrastructure remain protected against evolving security threats. The pace of change to our information technology increases the risk of failures or interruptions of information systems or other technology, which could have a material adverse impact on our financial condition and results of operations.

We rely on third parties for certain important or critical services and could be adversely impacted by disruptions in those services.

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We have engaged various third parties to provide certain important or critical services that include, but not limited to, hardware, software, IaaS, SaaS, connectivity, and other technology services, including third parties for which there are few substitutes or would be difficult to replace in a timely manner. A significant failure by any of these third parties, including failure to adequately perform contracted-for-services, loss of availability, or data breaches, could result in significant disruptions to our ability to conduct business, improper access to confidential information, or other harm to our business or our members. The occurrence of any failures, data issues, or interruptions could have a material adverse effect on our business, financial condition, and results of operations.

For example, in participating in the MPF Program, we rely on the FHLBank of Chicago in its capacity as the MPF Provider. Our investments in mortgage loans through the MPF Program account for 6.2 percent of our total assets as of December 31, 2025, and 5.1 percent of interest income for the year ended December 31, 2025. If the FHLBank of Chicago changes or ceases to operate the MPF Program or experiences a failure or interruption in its information systems and other technology in its operation of the MPF Program, our mortgage-investment activities could be adversely impacted, and we could experience a related decrease in net interest margin, financial condition, and profitability. In the same way, we could be adversely impacted if the FHLBank of Chicago's third-party vendors engaged in the operation of the MPF Program were to experience operational or technological difficulties.

The use of artificial intelligence and machine learning within products or services that we use or that are used by our third-party service providers presents risks, including the potential for outages, inefficiencies, data loss, and bias or errors in the technology’s analysis and conclusions while the technology and our use of the technology matures. As a new technology, use of artificial intelligence by us or our third-party service providers without sufficient controls, governance, and risk management may result in increased risks across all of our risk categories and negatively impact our business, financial condition, and results of operations.

As another example, we rely on the Office of Finance for, among other things, the placement of COs, our primary source of funds. A disruption in this service would disrupt our access to these funds, as also discussed under — Market and Liquidity Risks — Any inability or curtailment of our ability to access the capital markets could adversely impact our business operations, financial condition, and results of operations.

We rely on models for many of our business operations and changes in the assumptions used could have a significant effect on our financial position, results of operations, and assessments of risk exposure.

For example, we use models to assist in our determination of the fair values of financial instruments. The degree of management judgment involved in determining the fair value of a financial instrument is dependent upon the availability of quoted market prices or observable market pricing parameters. For financial instruments 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 flow analyses using market estimates of discount rates, forward interest rates, and volatility. Pricing models and changes in their underlying assumptions are based on our best estimates for discount rates, prepayments, market volatility, and other factors. These assumptions could have a significant effect on the reported fair values of assets and liabilities, including derivatives, the related income and expense, and the expected future behavior of assets and liabilities. While the models we use to value instruments and measure risk exposures are subject to periodic validation by our staff and by independent parties, rapid changes in market conditions in the interim could impact our financial position. The use of different models and assumptions, as well as changes in market conditions, could significantly impact our financial condition and results of operations.

GENERAL RISK FACTORS

The inability to retain key personnel could adversely impact our operations .

We rely on key personnel for many of our functions and have a relatively small workforce, relative to the size and complexity of our business. Our ability to retain such personnel is important for us to conduct our operations and measure and maintain risk and financial controls. Our ability to retain key personnel could be challenged because in the U.S., and the Boston area in particular, competition for talent remains high.

Our board of directors has the statutory authority and responsibility to select, employ and fix the compensation of Bank executive officers and employees to help ensure the hiring and retention of qualified staff. However, as the regulator of the FHLBanks, the FHFA may determine that compensation paid to any executive officer or director is in its view not reasonable and comparable with compensation for such services in other similar businesses involving similar duties and responsibilities.

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Depending on how such authority is exercised, our ability to recruit and retain qualified executive officers and directors could be adversely affected.

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

Forward-Looking Statements

This report includes statements describing anticipated developments, projections, estimates, or predictions of ours that are “forward-looking statements.” These statements may involve matters related to, but not limited to, projections of revenues, income, earnings, capital expenditures, dividends, capital structure, or other financial items; repurchases of excess stock, our minimum retained earnings target, or the interest-rate environment in which we do business; statements of management’s plans or objectives for future operations; expectations of effects or changes in fiscal and monetary policies and our future economic performance; or statements of assumptions underlying certain of the foregoing types of statements. These statements may use forward-looking terminology such as, but not limited to, “anticipates,” “believes,” “continued,” “expects,” “plans,” “intends,” “may,” “could,” “estimates,” “assumes,” “should,” “will,” “likely,” or their negatives or other variations of these terms. We caution that, by their nature, forward-looking statements are subject to a number of risks or uncertainties, including the risk factors set forth in Part I — Item 1A — Risk Factors of this report and the risks set forth below. Actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, you are cautioned not to place undue reliance on such statements.

These forward-looking statements involve risks and uncertainties including, but not limited to, the following:

• the effects of economic, financial, credit, and market conditions on our financial and regulatory condition and results of operations, including changes in economic growth, general liquidity conditions, inflation and deflation, employment rates, interest rates, interest-rate spreads, interest-rate volatility, mortgage originations, prepayment activity, housing prices, asset delinquencies, members’ deposit flows, liquidity needs, and loan demand; changes in the general economy, including changes resulting from U.S. fiscal and monetary policy, including international trade policy and tariffs, actions of the Federal Open Market Committee (FOMC), or changes in credit ratings of the U.S. federal government; the condition of the mortgage and housing markets on our mortgage-related assets; and the condition of the capital markets on our COs;

• political events, including legislative, regulatory, judicial, government actions, including government shutdowns and executive orders, or other developments that affect us, our members, investors in the consolidated obligations of the FHLBanks, the FHFA, the organization and structure of the FHLBank System, our ability to access the capital markets, or our counterparties, such as any GSE reforms, changes to the FHLBank Act, or changes to other statutes or regulations applicable to the FHLBanks;

• our ability to declare and pay dividends consistent with past practices as well as any plans to repurchase excess capital stock, and any amendments to our Capital Plan;

• competitive forces including, without limitation, other sources of funding available to our members and other entities borrowing funds in the capital markets;

• changes in the value and liquidity of collateral we hold as security for obligations of our members and counterparties;

• the impact of new accounting standards and the application of accounting rules, including the impact of regulatory guidance on our application of such standards and rules;

• changes in the fair value and economic value of, impairments of, and risks associated with the Bank’s investments in mortgage loans and MBS or other assets and the related credit-enhancement protections;

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• membership conditions and changes, including changes resulting from member failures, mergers or changing financial health, changes due to member eligibility, changes in the principal place of business of members, or the addition of new members;

• external events, such as general economic and financial instabilities, political instability, wars, pandemics and other health emergencies, and natural disasters;

• the pace of technological change and our ability to develop and support internal controls, information systems, and other operating technologies that effectively manage the risks we face including, but not limited to, failures, interruptions, or security breaches and other cybersecurity incidents; and

• our ability to attract and retain skilled employees, including our key personnel.

These forward-looking statements speak only as of the date they are made, and we do not undertake to update any forward- looking statement herein or that may be made from time to time on our behalf.

EXECUTIVE SUMMARY

Net income decreased $63.9 million to $226.6 million for the year ended December 31, 2025, from $290.5 million for 2024. The decrease in net income was primarily due to a decrease of $56.2 million in net interest income after provision for credit losses, and an increase of $11.1 million in discretionary housing and community investment programs expense and voluntary affordable housing program contributions.

Net interest income after provision for credit losses for the year ended December 31, 2025, was $377.1 million, compared with $433.3 million for 2024. The $56.2 million decrease in net interest income after provision for credit losses was primarily driven by lower short-term interest rates, partially offset by increases of $2.0 billion, $710.4 million and $609.4 million in our average advances, average mortgage-backed securities, and average mortgage loan portfolios, respectively.

Total assets decreased $3.2 billion to $68.8 billion over the year ended December 31, 2025. At December 31, 2025, investment securities and short-term money-market investments totaled $25.2 billion, an increase of $2.7 billion from December 31, 2024, comprised primarily of a $3.5 billion increase in low-yielding short-term money market investments held on our balance sheet to manage our liquidity position, and a $697.6 million increase in mortgage-backed securities. Partially offsetting the increases to investments is a $1.5 billion decrease in U.S. Treasury obligations. Mortgage loans totaled $4.3 billion, an increase of $606.6 million from December 31, 2024. Advances totaled $38.8 billion at December 31, 2025, a decrease of $6.4 billion from December 31, 2024.

Our retained earnings grew to $2.0 billion at December 31, 2025, an increase of $63.3 million from December 31, 2024, equaling 2.9 percent of total assets at December 31, 2025. We continue to satisfy all regulatory capital requirements as of December 31, 2025.

On February 13, 2026, our board of directors declared a cash dividend that was equivalent to an annual yield of 7.05 percent on the average daily balance of capital stock outstanding during the fourth quarter of 2025. The yield is equivalent to the approximate daily average of SOFR for the fourth quarter of 2025 plus 300 basis points.

Our overall results of operations are influenced by the economy, interest rates, members’ demand for liquidity, and our ability to maintain sufficient access to funding at relatively favorable costs.

Generally, investor demand for high credit quality, fixed-income investments, including COs, continued to be strong relative to other investments. Yield spreads on CO debt relative to benchmark yields for comparable debt remained relatively stable during the period covered by this report. Our flexibility in utilizing various funding tools, in combination with a diverse investor base and our status as a government-sponsored enterprise, have helped provide reliable market access and demand for COs throughout fluctuating market environments and regulatory changes affecting dealers of and investors in COs. The Bank has continued to meet all funding needs during the year ended December 31, 2025.

Net Interest Margin and Spread

Net interest spread was 0.24 percent for the year ended December 31, 2025, a decrease of five basis points from the same period in 2024, and net interest margin was 0.50 percent, a decrease of 13 basis points from the year ended December 31, 2024. The decrease in net interest spread and margin was primarily attributable to the decrease in net interest income after provision for credit losses discussed above.

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Housing and Community Investment Programs

In addition to our $25.2 million statutory assessment for the Affordable Housing Program, we made a $31.4 million contribution to our discretionary housing and community investment programs and a voluntary contribution of $7.4 million to the Affordable Housing Program for the year ended December 31, 2025. See — Housing and Community Investment Program Expenses below for additional information.

Legislative and Regulatory Developments

Legislation has been proposed or enacted, and the FHFA and others with authority over the economy, our industry, and our business activities have taken action during 2025 as described below in — Legislative and Regulatory Developments . Such developments affect the way we conduct business and could impact how we satisfy our mission as well as the value of membership in the Bank.

ECONOMIC CONDITIONS

Interest-Rate Environment

During the fourth quarter of 2025, the FOMC lowered the target range for the federal funds rate from a range of 400 to 425 basis points to a range of 350 to 375 basis points. As a result, the yield curve steepened during the quarter, reflecting declines in short-term interest rates while intermediate-term interest rates and long-term interest rates were relatively stable.

On January 28, 2026, the FOMC announced that it would maintain the federal funds rate in a target range of 350 to 375 basis points. The FOMC stated that in considering any additional adjustments to the target range for the federal funds rate, the FOMC will carefully assess incoming data, the evolving outlook, and the balance of risks. The FOMC also stated it is strongly committed to supporting maximum employment and returning inflation to its two percent objective.

Table 5 - Key Interest Rates (1)

Ending

Average

Ending

Average

Ending

Average

SOFR

Federal funds effective rate

3-month U.S. Treasury yield

2-year U.S. Treasury yield

5-year U.S. Treasury yield

10-year U.S. Treasury yield

(1)    Source: Bloomberg

SELECTED FINANCIAL DATA

We derived the selected results of operations for the years ended December 31, 2025, 2024, and 2023, and the selected statement of condition data as of December 31, 2025 and 2024, from financial statements included elsewhere herein. We derived the selected results of operations for the years ended December 31, 2022 and 2021, and the selected statement of condition data as of December 31, 2023, 2022, and 2021, from financial statements not included herein. This selected financial data should be read in conjunction with the financial statements and the related notes appearing in this report.

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Table 6 - Selected Financial Data

(dollars in thousands)

December 31,

Statement of Condition

Total assets

Investments (1)

Advances

Mortgage loans held for portfolio, net (2)

Deposits and other borrowings

Consolidated obligations:

Bonds

Discount notes

Total consolidated obligations

Mandatorily redeemable capital stock

Class B capital stock outstanding-putable (3)

Unrestricted retained earnings

Restricted retained earnings

Total retained earnings

Accumulated other comprehensive (loss) income

Total capital

Results of Operations

Net interest income after provision for credit losses

Other income (loss), net

Other expense

AHP assessments

Net income

Other Information

Dividends declared

Dividend payout ratio

Weighted-average dividend rate (4)

Return on average equity (5)

Return on average assets

Net interest margin (6)

Average equity to average assets

Total regulatory capital ratio (7)

(1) Investments include available-for-sale securities, held-to-maturity securities, trading securities, interest-bearing deposits, securities purchased under agreements to resell and federal funds sold.

(2) The allowance for credit losses for mortgage loans amounted to $2.6 million, $2.2 million, $2.0 million, $1.9 million, and $1.7 million, as of December 31, 2025, 2024, 2023, 2022, and 2021, respectively.

(3) Capital stock is putable at the option of a member upon five years' written notice, subject to applicable restrictions. For additional information see Liquidity and Capital Resources — Internal Capital Practices and Policies .

(4) Weighted-average dividend rate is the dividend amount declared divided by the average daily balance of capital stock eligible for dividends. See Part II — Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities for additional information.

(5) Return on average equity is net income divided by the total of the average daily balance of outstanding Class B capital stock, accumulated other comprehensive income and total retained earnings.

(6) Net interest margin is net interest income before provision for credit losses as a percentage of average earning assets.

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(7) Total regulatory capital ratio is capital stock (including mandatorily redeemable capital stock) plus total retained earnings as a percentage of total assets. See Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 1 2 — Capital .

RESULTS OF OPERATIONS

The following table presents the Bank’s significant statements of operations line items for the years ended December 31, 2025, 2024, and 2023 and information regarding the changes during those year is provided below.

Table 7 - Statements of Operations Summary

(dollars in thousands)

Change

For the Year Ended December 31,

Amount

Percent

Amount

Percent

Net interest income after provision for credit losses

Noninterest income

Noninterest expense

AHP assessment

Net Income

Net income decreased $63.9 million to $226.6 million for the year ended December 31, 2025, from $290.5 million for 2024. The decrease in net income was primarily due to a decrease of $56.2 million in net interest income after provision for credit losses, and an $11.1 million increase in discretionary housing and community investment programs expense and voluntary affordable housing program contributions.

Net interest income after provision for credit losses for the year ended December 31, 2025, was $377.1 million, compared with $433.3 million for 2024. The $56.2 million decrease in net interest income after provision for credit losses was primarily driven by lower short-term interest rates, partially offset by increases of $2.0 billion, $710.4 million and $609.4 million in our average advances, average mortgage-backed securities, and average mortgage loan portfolios, respectively.

Table 8 presents major categories of average balances, related interest income/expense, and average yields/rates for interest-earning assets and interest-bearing liabilities. Our primary source of earnings is net interest income, which is the interest earned on advances, mortgage loans, and investments less interest paid on COs, deposits, and other sources of funds.

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Table 8 - Net Interest Spread and Margin

(dollars in thousands)

For the Year Ended December 31,

Average

Balance

Interest

Income /

Expense

Average

Yield/Rate (1)

Average

Balance

Interest

Income /

Expense

Average

Yield/Rate (1)

Average

Balance

Interest

Income /

Expense

Average

Yield/Rate

Assets

Advances

Interest-bearing deposits

Securities purchased under agreements to resell

Federal funds sold

Investment securities (1)

Mortgage loans (1)(2)

Other earning assets

Total interest-earning assets

Other non-interest-earning assets

Fair-value adjustments on investment securities

Total assets

Liabilities and capital

Consolidated obligations

Discount notes

Bonds

Other interest-bearing liabilities

Total interest-bearing liabilities

Other non-interest-bearing liabilities

Total capital

Total liabilities and capital

Net interest income

Net interest spread

Net interest margin

(1)    Average balances are reflected at amortized cost.

(2)    Nonaccrual loans are included in the average balances used to determine average yield.

Rate and Volume Analysis

Changes in both average balances (volume) and interest rates influence changes in net interest income and net interest margin. Table 9 summarizes changes in interest income and interest expense for the years December 31, 2025 and 2024. Changes in interest income and interest expense that are not identifiable as either volume or rate-related, but equally attributable to both volume and rate changes, have been allocated to the volume and rate categories based upon the proportion of the absolute value of the volume and rate changes.

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Table 9 - Rate and Volume Analysis

(dollars in thousands)

For the Year Ended

December 31, 2025 vs. 2024

For the Year Ended

December 31, 2024 vs. 2023

Increase (Decrease) due to

Increase (Decrease) due to

Volume

Rate

Total

Volume

Rate

Total

Interest income

Advances

Interest-bearing deposits

Securities purchased under agreements to resell

Federal funds sold

Investment securities

Mortgage loans

Other earning assets

Total interest income

Interest expense

Consolidated obligations

Discount notes

Bonds

Other interest-bearing liabilities

Total interest expense

Change in net interest income

Average Balance of Advances

The average balance of total advances increased by $2.0 billion, or 4.9 percent, for the year ended December 31, 2025, compared with the same period in 2024. This increase in the average balance of advances was primarily concentrated in variable-rate advances, partially offset by a decrease in long-term fixed rate and short-term fixed rate advances. We cannot predict future member demand for advances.

Average Balance of Investments

Average short-term money-market investments, consisting of interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, and loans to other FHLBanks, increased $3.3 billion, or 42.8 percent, for the year ended December 31, 2025, compared with the same period in 2024, to manage our liquidity position and remain compliant with all regulatory guidance. The yield earned on short-term money-market investments is highly correlated to short-term market interest rates. As a result of decreases in the FOMC's target range for the federal funds rate in 2024 and in 2025, average yields on overnight federal funds sold decreased from 5.23 percent during the year ended December 31, 2024, to 4.30 percent during the year ended December 31, 2025, while average yields on securities purchased under agreements to resell decreased from 5.19 percent for the year ended December 31, 2024, to 4.25 percent for the year ended December 31, 2025.

Average investment-securities balances increased $287.9 million, or 1.7 percent for the year ended December 31, 2025, compared with the same period in 2024.

Average Balance of COs

Average CO balances increased $6.4 billion, or 10.1 percent, for the year ended December 31, 2025, compared with the same period in 2024. This increase consisted primarily of a $7.0 billion increase in CO bonds, offset by a $580.2 million decline in CO discount notes.

The average balance of CO discount notes represented approximately 26.5 percent of total average COs for the year ended December 31, 2025, compared with 30.1 percent of total average COs for the year ended December 31, 2024. The average

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balance of CO bonds represented 73.5 percent and 69.9 percent of total average COs outstanding during the years ended December 31, 2025 and 2024, respectively.

Impact of Derivatives and Hedging Activities

Net interest income includes interest accrued on interest-rate-exchange agreements that are associated with advances, investments, and debt instruments that qualify for hedge accounting. The fair value gains and losses of derivatives and hedged items designated in fair-value hedge relationships are also recognized as interest income or interest expense. We enter into derivatives to manage the interest-rate-risk exposures inherent in otherwise unhedged assets and liabilities and to achieve our risk-management objectives. We generally use derivative instruments that qualify for hedge accounting as interest-rate risk-management tools. These derivatives serve to stabilize net income when interest rates fluctuate by better matching the rate repricing characteristics of financial assets and liabilities. Accordingly, the impact of derivatives on net interest income and net interest margin, as well as other income, should be viewed in the overall context of our risk-management strategy.

Table 10 provides a summary of the impact of derivatives and hedging activities on our earnings.

Table 10 - Effect of Derivative and Hedging Activities

(dollars in thousands)

For the Year Ended December 31, 2025

Net Effect of Derivatives and Hedging Activities

Advances

Investments

Mortgage Loans

CO Bonds

CO Discount Notes

Total

Net interest income

Amortization / accretion of hedging activities (1)

Losses on designated fair-value hedges

Net interest settlements (2)

Price alignment interest (3)

Total net interest income

Net gains (losses) on derivatives and hedging activities

Losses on derivatives not receiving hedge accounting

Mortgage delivery commitments

Price alignment interest (3)

Net gains (losses) on derivatives and hedging activities

Total net effect of derivatives and hedging activities

For the Year Ended December 31, 2024

Net Effect of Derivatives and Hedging Activities

Advances

Investments

Mortgage Loans

CO Bonds

CO Discount Notes

Total

Net interest income

Amortization / accretion of hedging activities (1)

Gains (losses) on designated fair-value hedges

Net interest settlements (2)

Price alignment interest (3)

Total net interest income

Net gains (losses) on derivatives and hedging activities

Gains on derivatives not receiving hedge accounting

Mortgage delivery commitments

Price alignment interest (3)

Net gains (losses) on derivatives and hedging activities

Total net effect of derivatives and hedging activities

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For the Year Ended December 31, 2023

Net Effect of Derivatives and Hedging Activities

Advances

Investments

Mortgage Loans

CO Bonds

CO Discount Notes

Total

Net interest income

Amortization / accretion of hedging activities (1)

(Losses) gains on designated fair-value hedges

Net interest settlements (2)

Price alignment interest (3)

Total net interest income

Net gains (losses) on derivatives and hedging activities

Gains on derivatives not receiving hedge accounting

Mortgage delivery commitments

Net gains (losses) on derivatives and hedging activities

Total net effect of derivatives and hedging activities

(1)    Represents the amortization/accretion of hedging fair-value adjustments and cash-flow hedge amortization reclassified from accumulated other comprehensive income.

(2)    Represents interest income/expense on derivatives included in net interest income.

(3)    Relates to derivatives for which variation margin payments are characterized as daily settled contracts.

Housing and Community Investment Program Expenses

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. We administer a number of programs that are targeted to fulfill that mission, some of which are statutory, and some are discretionary. For additional information on these specific programs, see Part I — Item 1 — Business — Targeted Housing and Community Investment Programs .

We are required to annually set aside a portion of our earnings for our Affordable Housing Program. These funds assist members serving very low-, low-, and moderate-income households and support community economic development. The Bank's net income for the year ended December 31, 2025, resulted in an accrual of $25.2 million to the AHP pool of funds that will be available to members in 2026. Contributions made to our discretionary housing and community investment programs reduce the Bank’s net income for the year, therefore reducing our statutory accrual of funds to the AHP pool. The Bank's board of directors made a voluntary AHP contribution of $7.4 million for the year ended December 31, 2025.

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Table 11 - Statutory AHP Assessment and Voluntary AHP Contributions

(dollars in thousands)

For the Year Ended December 31,

Net income subject to AHP statutory assessment

Statutory AHP percentage

Statutory AHP assessment

AHP voluntary contribution

AHP supplemental contribution (1)

Total AHP voluntary and supplemental contributions

Total statutory and voluntary contribution to the AHP

Net income subject to AHP statutory assessment

Discretionary housing and community investment program expense

Total AHP voluntary and supplemental contributions

Net income subject to assessment, as adjusted

Statutory AHP percentage

AHP Assessment without discretionary housing and community investment expense and AHP voluntary contribution

AHP voluntary contribution

Total contribution to the AHP

(1)    The supplemental voluntary contribution to the AHP is the amount that restores the statutory AHP assessment amount to what it otherwise would have been in the absence of the voluntary AHP contribution and the discretionary housing and community investment contribution.

Discretionary housing and community investment program expenses are shown in the table below, by program.

Table 12 - Discretionary Housing and Community Investment Program Expenses

(dollars in thousands)

For the Year Ended December 31,

Program

Affordable housing

Housing Our Workforce program

Lift Up Homeownership program

MPF permanent rate buy-down program

Economic development

Jobs for New England program

CDFIs

CDFI advance program

Total discretionary housing and community investment program expenses

FINANCIAL CONDITION

Advances

At December 31, 2025, the advances portfolio totaled $38.8 billion, a decrease of $6.4 billion from $45.2 billion at December 31, 2024.

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Table 13 - Advances Outstanding by Product Type

(dollars in thousands)

December 31, 2025

December 31, 2024

Par Value

Percent of Total

Par Value

Percent of Total

Fixed-rate advances

Short-term

Long-term

Putable

Overnight

Amortizing

Variable-rate advances

Simple variable (1)

Putable

All other variable-rate indexed advances

Total par value

(1)    Includes floating-rate advances that may be contractually prepaid by the borrower on a floating-rate reset date without incurring prepayment or termination fees.

See Part I I — Item 8 — Financial Statements — Notes to the Financial Statements — Note 6 — Advances for disclosures relating to redemption terms of advances.

Advances Credit Risk

We manage credit risk on advances by monitoring the financial condition of our borrowers and by holding sufficient collateral to protect the Bank from credit losses. All pledged collateral is subject to collateral discounts, or haircuts, to the market value or par value, as applicable, based on our opinion of the risk such collateral presents. We are prohibited by Section 10(a) of the FHLBank Act from making advances without sufficient collateral. We have never experienced a credit loss on an advance.

We monitor the financial condition of all members and housing associates by reviewing available financial data, such as regulatory call reports filed by depository institution members, regulatory financial statements filed with the appropriate state insurance departments by insurance company members, audited financial statements of housing associates, SEC filings, and rating-agency reports to ensure that potentially troubled members are identified as soon as possible. In addition, we have access to most members' regulatory examination reports. We analyze this information on a regular basis.

Our depository members generally experienced modest deterioration in key financial metrics over the 12 months ending December 31, 2025, principally as a result of an increase in non-performing assets, partially offset by an improvement in net interest margin. Although interest rates decreased in late 2025, the sustained elevated interest rates, coupled with other economic events, such as potential effects of prolonged government shutdowns, over the past several years have caused a tenuous economic outlook. However, particularly in New England, the prospect of a recession in 2026 remains low. Aggregate nonperforming assets reported publicly by depository institution members in their regulatory filings increased modestly during the twelve months ending December 31, 2025, and were 0.64 percent of assets at December 31, 2025, compared to 0.56 percent at December 31, 2024. The overall financial condition of our insurance company members was stable over the 12 months ending December 31, 2025 except for our health insurance members, who continue to face challenges driven primarily by increased medical costs and increased utilization.

We experienced no member failures during 2025. All Bank members except for one had positive tangible capital as of December 31, 2025, measured in accordance with accounting principles generally accepted in the United States of America (GAAP), though higher interest rates present increased potential for more of our members (those that can experience material unrealized losses on available-for-sale securities) to have negative tangible capital. All extensions of credit to members are fully

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secured by eligible collateral as noted herein. However, we could incur losses if a member were to default, the value of the collateral pledged by the member declined to a point such that we were unable to realize sufficient value from the pledged collateral to cover the member’s obligations, and we were unable to obtain additional collateral to make up for the reduction in value of such collateral.

The Bank has an internal credit rating methodology that estimates each borrower’s credit risk utilizing call report data and other quantitative factors as well as qualitative considerations including, but not limited to, regulatory examination reports. Based on its rating, we assign each member and non-member housing associate to one of the four credit categories below to allow the Bank to leverage risk mitigation strategies across groups of similarly rated members. Each credit category reflects increasing limitations on borrowing capacity and terms to maturity, as well as our increasing level of control over the collateral pledged by the borrower.

• Credit category one (Credit Category-1), a borrower is generally in satisfactory financial condition.

• Credit category two (Credit Category-2), a borrower shows financial weakness or weakening financial trends.

• Credit category three (Credit Category-3), a borrower demonstrates financial weaknesses that present an elevated level of concern.

• Credit category four (Credit Category-4), a borrower shows significant financial weaknesses and an increased likelihood of failure over the next 12 months.

The Bank may impose different borrowing capacity limitations or collateral pledging requirements on a borrower if the Bank determines that doing so mitigates risks to the Bank and/or the borrower.

The following table presents a summary of the status of the credit outstanding and overall collateral borrowing capacity of the Bank’s borrowers as of December 31, 2025.

Table 14 - Credit Outstanding and Collateral Borrowing Capacity by Credit Category

(dollars in thousands)

December 31, 2025

Borrowers with Credit Outstanding

Number

Other Credit Outstanding (1)

Total Credit Outstanding

Collateral Borrowing Capacity (2)

Borrower Credit Category

Advances

Total

Used

Member borrowers (3)

Credit Category-1

Credit Category-2

Credit Category-3

Credit Category-4

Nonmember borrowers (4)

Former members

Housing associates

Total

(1)    Includes accrued interest on advances, letters of credit, unused lines of credit, and credit-enhancement obligations on purchased mortgage loans.

(2)    Collateral borrowing capacity does not represent any commitment to lend on the part of the Bank.

(3)    Because they are subject to different laws and regulations than depository institutions, non-depository members are obligated to deliver eligible collateral regardless of their assigned credit category.

(4)    Nonmember borrowers, consisting of housing associates and institutions that are former members or have acquired former members, are obligated to deliver all required collateral. Other than housing associates, nonmember borrowers may not request new advances and are not permitted to extend or renew any advances they have assumed.

The Bank may adjust the credit category of a member from time to time based on financial reviews and other information pertinent to that member.

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We have not recorded any allowance for credit losses on advances as of December 31, 2025, and December 31, 2024, for the reasons discussed in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 6 — Advances .

To mitigate the credit risk, market risk, liquidity risk, model risk, and operational risk associated with collateral, we discount the par value or market value of pledged collateral to establish the lending value. Collateral that we have determined to contain a low level of risk, such as U.S. government obligations, is discounted at a lower rate than collateral that carries a higher level of risk, such as commercial real estate mortgage loans. We periodically analyze the discounts applied to all eligible collateral types to verify that current discounts are sufficient to secure us against losses in the event of a borrower default.

We generally require our members and housing associates to execute a security agreement that grants us a blanket lien on all unencumbered assets of such borrowers that consist of, among other things: fully disbursed whole first-mortgage loans and deeds of trust constituting first liens against real property; U.S. federal, state, and municipal obligations; GSE securities; corporate debt obligations; commercial paper; funds placed in deposit accounts with us; such other items or property that are offered to us by the borrower as collateral; and all proceeds of all of the foregoing. In the case of insurance companies, housing associates, and CDFIs, in some instances we establish a specific lien instead of a blanket lien subject to additional safeguards including, among other things, larger haircuts on collateral. We protect our security interests in pledged assets by filing a Uniform Commercial Code (UCC) financing statement in the appropriate jurisdiction, or by taking possession or control of such collateral, or by taking other appropriate steps. such as delivering the security to an approved safekeeping agent or to be held by the borrower’s securities corporation in custodial account with us. We have control agreements with approved safekeeping agents which are intended to give us appropriate control over the related collateral. We conduct reviews of loan collateral pledged by borrowers to determine that the pledged collateral conforms to our eligibility requirements, and to adjust, if warranted, the lendable value of loan collateral pledged. We may conduct collateral reviews at any time. See Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 6 — Advances for the types of assets we generally accept as collateral.

Our agreements with borrowers require each borrower to have sufficient eligible collateral pledged to us to fully secure all outstanding extensions of credit, including advances, accrued interest receivable, standby letters of credit, MPF-credit enhancement obligations, and lines of credit (collectively, extensions of credit). Further, our agreements with borrowers allow us, at our sole discretion, to refuse to make extensions of credit against any collateral, restrict the maturity on the extension of credit, require substitution of collateral, or adjust the discounts applied to collateral at any time based on our assessment of the borrower's financial condition, the quality of collateral pledged, or the overall volatility of the value of the collateral. We also may require members to pledge additional collateral regardless of whether the collateral would be eligible to originate a new extension of credit. Our agreements with borrowers also afford us the right, at our sole discretion, to declare any borrower to be in default if we deem ourselves to be insecure.

Beyond our practice of taking security interests in collateral, Section 10(e) of the FHLBank Act affords any security interest granted to us by a federally-insured depository institution member or such member's affiliate priority over the claims or rights of any other party, including any receiver, conservator, trustee, or similar entity that has the rights of a lien creditor, unless these claims and rights would be entitled to priority under otherwise applicable law and are held by actual purchasers or by parties that are secured by actual perfected security interests. In this regard, the priority granted to our security interests under Section 10(e) may not apply when lending to insurance company members due to the anti-preemption provision contained in the McCarran-Ferguson Act in which Congress declared that federal law would not preempt state insurance law unless the federal law expressly regulates the business of insurance. Thus, if state law conflicts with Section 10(e) of the FHLBank Act, the protection afforded by this provision may not be available to us.

However, we protect our security interests in the collateral pledged by our borrowers, including insurance company members, by filing UCC financing statements, by taking possession or control of such collateral, or by taking other appropriate steps. We have not experienced any rehabilitation, conservatorship, receivership, liquidation or other insolvency event for an insurance company member and therefore have continuing uncertainty on the potential inapplicability of Section 10(e). Additionally, we note that in certain states where our insurance company members are domiciled, the relevant state insolvency authority could take actions that impede our ability to sell collateral that any such insolvent insurance company member has pledged to us. To protect ourselves from the potential inapplicability of Section 10(e), we require the delivery of collateral from non-depository members, which currently encompass insurance companies and CDFIs, as well as nonmember housing associates.

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Table 15 - Top Five Advance-Borrowing Institutions

(dollars in thousands)

December 31, 2025

Name

Par Value of Advances

Percent of Total Par Value of Advances

Weighted-Average Rate (1)

State Street Bank and Trust Company

Webster Bank, N.A.

Citizens Bank, N.A.

Institution for Savings in Newburyport and its Vicinity

Hingham Institution for Savings

Total of top five advance-borrowing institutions

December 31, 2024

Name

Par Value of Advances

Percent of Total Par Value of Advances

Weighted-Average Rate (1)

State Street Bank and Trust Company

Webster Bank, N.A.

Massachusetts Mutual Life Insurance Company

Hingham Institution for Savings

Institution for Savings in Newburyport and its Vicinity

Total of top five advance-borrowing institutions

(1)    Weighted-average rates are based on the contract rate of each advance without taking into consideration the effects of interest-rate-exchange agreements that we may use as hedging instruments.

Investments

At December 31, 2025, investment securities and short-term money-market instruments totaled $25.2 billion, an increase of $2.7 billion from $22.5 billion at December 31, 2024.

Short-term money-market investments increased $3.5 billion to $9.5 billion at December 31, 2025, compared with December 31, 2024. The increase was primarily attributable to an increase of $3.0 billion in securities purchased under agreements to resell and an increase of $454.0 million in federal funds sold.

Investment securities declined $840.7 million to $15.7 billion at December 31, 2025, compared with $16.5 billion at December 31, 2024.

Held-to-Maturity Securities

Certain investments for which we have both the ability and intent to hold to maturity are classified as held-to-maturity.

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Table 16 - Held-to-Maturity Securities

(dollars in thousands)

December 31,

Due in one year or less

Due after one year through five years

Due after five years through ten years

Due after ten years

Total Carrying Value

Total Carrying Value

MBS (1)

U.S. government guaranteed - single-family

GSEs - single-family

Total MBS

Yield on held-to-maturity securities (2)

(1)    Maturity ranges are based on the contractual final maturity of the security.

(2)    The weighted average yields are calculated as the sum of each debt security using the period end balances multiplied by the coupon rate adjusted by the effect of amortization and accretion of premiums and discounts, divided by the total debt securities in the applicable portfolio.

Available-for-Sale Securities

We classify certain investment securities as available-for-sale to enable liquidation at a future date or to enable the application of hedge accounting using interest-rate swaps. By classifying investments as available-for-sale, we can consider these securities to be a source of short-term liquidity, if needed. Additionally, we own certain fixed rate available-for-sale securities for which the interest earned is synthetically converted to a floating rate basis through the use of interest-rate swaps, a strategy we employ consistent with overall balance sheet management objectives and in alignment with variable rate funding.

Table 17 - Available-for-Sale Securities

(dollars in thousands)

December 31,

Due in one year or less

Due after one year through five years

Due after five years through ten years

Due after ten years

Total Carrying Value

Total Carrying Value

Non-MBS

U.S. Treasury obligations

HFA securities

Supranational institutions

U.S. government corporations

GSEs

Total non-MBS

MBS (1)

U.S. government guaranteed - single-family

U.S. government guaranteed - multifamily

GSEs - single-family

GSEs - multifamily

Total MBS

Total available-for-sale securities

Yield on available-for-sale securities (2)

(1)    MBS maturity ranges are based on the contractual final maturity of the security.

(2)    The weighted average yields are calculated as the sum of each debt security using the period end balances multiplied by the coupon rate adjusted by the effect of amortization and accretion of premiums and discounts, divided by the total debt securities in the applicable portfolio.

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Investments Credit Risk

We are subject to credit risk on unsecured investments consisting primarily of short-term (meaning one year or less to maturity) money-market instruments issued by high-quality financial institutions and long-term (original maturity greater than one year) debentures issued or guaranteed by U.S. agencies, U.S government-owned corporations, GSEs, and supranational institutions.

We place short-term funds with large, high-quality financial institutions that must be rated in at least the fourth highest internal rating category on a rating scale of FHFA1 through FHFA7, reflecting progressively lower credit quality. The internal rating categories of FHFA1 through FHFA4 are considered to be investment quality. As of December 31, 2025, all of these placements either expired within one business day or were payable upon demand. See Part I — Item 1 — Business — Business Lines — Investments for additional information.

In addition to these unsecured investments, we also make secured investments in the form of securities purchased under agreements to resell secured by U.S. Treasury, U.S. government guaranteed, or agency obligations with current term limits of up to 95 days to maturity and in the form of MBS and HFA securities that are directly or indirectly supported by underlying mortgage loans.

We actively monitor our investment credit exposures and the credit quality of our counterparties, including assessments of each counterparty's financial performance, capital adequacy, sovereign support, and collateral quality and performance, as well as related market signals such as equity prices and credit default swap spreads. We may reduce or suspend credit limits and/or seek to reduce existing exposures, as appropriate, as a result of these monitoring activities.

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Table 18 - Credit Ratings of Investments at Carrying Value

(dollars in thousands)

As of December 31, 2025

Long-Term Credit Rating

Investment Category

Triple-A

Double-A

Single-A

Unrated

Money-market instruments: (1)

Interest-bearing deposits

Securities purchased under agreements to resell

Federal funds sold

Total money-market instruments

Investment securities: (2)

Non-MBS:

U.S. Treasury obligations

Corporate bonds

U.S. government-owned corporations

GSE

Supranational institutions

HFA securities

Total non-MBS

MBS:

U.S. government guaranteed - single-family

U.S. government guaranteed - multifamily

GSE – single-family

GSE – multifamily

Total MBS

Total investment securities

Total investments

(1)    The counterparty NRSRO rating is used for money-market instruments. Counterparty ratings are obtained from Moody's, Fitch, Inc. (Fitch), and S&P and are each as of December 31, 2025. If there is a split rating, the lowest rating is used. In certain instances where a counterparty is unrated, the Bank may assign a deemed rating to the counterparty and that deemed rating is used.

(2)    The issue rating is used for investment securities. Issue ratings are obtained from Moody’s, Fitch, and S&P. If there is a split rating, the lowest rating is used.

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Table 19 - Unsecured Credit Related to Money-Market Instruments and Debentures by Carrying Value

(dollars in thousands)

Carrying Value

December 31, 2025

December 31, 2024

Federal funds sold

Interest bearing deposits

Supranational institutions

U.S. government-owned corporations

GSEs

Corporate bonds

FHFA regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties based on a percentage of regulatory capital and an internal credit rating determined by each FHLBank. Under these regulations, the level of regulatory capital is determined as the lesser of our total regulatory capital or the regulatory capital of the counterparty. The applicable regulatory capital is then multiplied by a specified percentage for each counterparty, the product of which is the maximum amount of unsecured credit exposure we may extend to that counterparty. The percentage that we may offer for extensions of unsecured credit other than overnight sales of federal funds ranges from one to 15 percent based on the counterparty's credit rating. From time to time, we may establish internal credit limits lower than permitted by regulation for individual counterparties.

FHFA regulations allow additional unsecured credit for sales of overnight federal funds. The specified percentage of regulatory capital used for determining the maximum amount of unsecured credit exposure we may offer to a counterparty for overnight sales of federal funds is twice the amount that we may extend to that counterparty for extensions of credit other than overnight sales of federal funds reduced by the amount of any other unsecured credit exposure attributable to other than overnight sales of federal funds.

We are generally prohibited by FHFA regulations 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. We are also prohibited by FHFA regulations from investing in financial instruments issued by foreign sovereign governments or denominated in currencies other than U.S. dollars. Our unsecured money-market credit risk to U.S. branches and agency offices of foreign commercial banks includes, among other things, the risk that, as a result of political or economic conditions in a country, the counterparty may be unable to meet its contractual repayment obligations. Notwithstanding the foregoing credit limits based on FHFA regulations, from time to time, we impose internal limits on all or specific individual counterparties that are lower than the maximum credit limits allowed by regulation.

Table 20 - Ratings of Unsecured Investment Credit Exposure by Domicile of Counterparty

(dollars in thousands)

December 31, 2025 (1)

Credit Rating

Domicile of Counterparty

Double-A

Single-A

Total

Domestic - interest bearing deposits

U.S branches and agency offices of foreign commercial banks - federal funds

Australia

Canada

United Kingdom

Germany

The Netherlands

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

Total unsecured investment credit exposure

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(1)    Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies, government instrumentalities,    government-sponsored enterprises,    and supranational    entities, and does    not include related accrued     interest.

Table 21 - Issuers / Counterparties Representing Greater Than 10 Percent of Total Unsecured Credit Related to Money-Market Instruments and to Debentures

Issuer / counterparty

As of December 31, 2025

Australia and New Zealand Bank

Standard Chartered Bank

Mortgage Loans

We invest in mortgages through the MPF Program. The MPF Program is further described under — Mortgage Loans Credit Risk and in Part I — Item 1 — Business — Business Lines — Mortgage Loan Finance .

As of December 31, 2025, our mortgage loan investment portfolio totaled $4.3 billion, an increase of $606.6 million from December 31, 2024. This increase is the result of an increase in mortgage loan purchase volume during 2025. We expect continued competition from Fannie Mae and Freddie Mac, as well as from private mortgage loan acquirers, for loan investment opportunities.

Table 22 - Par Value of Mortgage Loans Held for Portfolio

(dollars in thousands)

December 31,

Conventional mortgage loans

MPF 35

MPF Original

MPF 125

MPF Plus

Total conventional mortgage loans

Government mortgage loans

Total

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Mortgage Loans Credit Risk

We are subject to credit risk from the mortgage loans in which we invest due to our exposure to the credit risk of the underlying borrowers and the credit risk of the participating financial institutions when the participating financial institutions retain credit-enhancement and/or servicing obligations.

Table 23 - Mortgage Loans by Contractual Repayment Term

(dollars in thousands)

Redemption Term

December 31, 2025

December 31, 2024

Due in 1 year or less

Due after 1 year through 5 years

Due after 5 years through 15 years

Thereafter

Total par value

Other adjustments, net (1)

Total mortgage loans held for portfolio

Allowance for credit losses on mortgage loans

Mortgage loans held for portfolio, net

(1) Consists of premiums, discounts, and deferred derivative gains, net.

Although our mortgage loan portfolio includes loans throughout the U.S., concentrations of 5 percent or greater of the par value of our conventional mortgage loan portfolio are shown in Table 24.

Table 24 - State Concentrations by Par Value

Percentage of Total Par Value of Conventional Mortgage Loans

December 31, 2025

December 31, 2024

Massachusetts

Maine

Vermont

Connecticut

All others

Total

We place conventional mortgage loans on nonaccrual status when the collection of interest or principal is doubtful or contractual principal or interest is 90 days or more past due. Accrued interest on nonaccrual loans is excluded from interest income. We monitor the delinquency levels of the mortgage loan portfolio on a monthly basis.

Although delinquent loans in our portfolio are spread throughout the U.S., delinquent loan concentrations by state of 5 percent or greater of the par value of our total conventional mortgage loans delinquent by more than 30 days are shown in Table 25.

Table 25 - State Concentrations of Delinquent Conventional Mortgage Loans

December 31,

Percentage of Par Value of Delinquent Conventional Mortgage Loans

Massachusetts

Maine

Connecticut

Vermont

All others

Total

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Table 26 - Characteristics of Our Investments in Mortgage Loans (1)

December 31,

Loan-to-value ratio at origination

Greater than 90.00%

Total

Weighted average loan-to-value ratio

FICO score at origination

Total

Weighted average FICO score

(1) Percentages are calculated based on par value at the end of each period.

Table 27 - Mortgage Loans - Risk Elements and Credit Losses

(dollars in thousands)

December 31, 2025

December 31, 2024

Average par value of mortgage loans outstanding during the period

Mortgage loans held for portfolio, par value

Nonaccrual loans, par value

Allowance for credit losses on mortgage loans

Net recoveries

Net charge-offs to average loans outstanding during the period

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

Ratio of nonaccrual loans to mortgage loans held for portfolio

Ratio of allowance for credit losses to nonaccrual loans

Government mortgage loans may not exceed the loan-to-value limits set by the applicable federal agency. Conventional mortgage loans with loan-to-value ratios greater than 80 percent require certain amounts of primary mortgage insurance from a mortgage insurance company rated at least triple-B (or equivalent rating).

Higher-Risk Loans. Our portfolio includes certain higher-risk subprime conventional mortgage loans. The higher-risk subprime loans represent a relatively small portion of our conventional mortgage loan portfolio (3.8 percent by par value), but a disproportionately higher portion of the conventional mortgage loan portfolio delinquencies (22.0 percent by par value).

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Table 28 - Summary of Higher-Risk Conventional Mortgage Loans

(dollars in thousands)

As of December 31, 2025

High-Risk Loan Type

Total Par Value

Percent Delinquent 30 Days

Percent Delinquent 60 Days

Percent Delinquent 90 Days or More and Nonaccruing

Subprime loans (1)

High loan-to-value loans (2)

Total high-risk loans

(1)    Subprime loans are loans to borrowers with FICO ® credit scores of 660 or lower.

(2)     High loan-to-value loans are loans with an estimated current loan-to-value ratio greater than 100 percent.

Our portfolio of higher-risk loans consists solely of fixed-rate conventionally amortizing first-mortgage loans. The portfolio does not include adjustable-rate mortgage loans, pay-option adjustable-rate mortgage loans, interest-only mortgage loans, junior lien mortgage loans, or loans with initial teaser rates.

Mortgage Insurance Companies. We are exposed to credit risk from primary mortgage insurance (PMI) coverage on individual loans. As of December 31, 2025, we were the beneficiary of PMI coverage of $182.3 million on $700.3 million of conventional mortgage loans. These amounts relate to loans originated with PMI and for which current loan-to-value ratios exceed 78 percent (determined by recalculating the original loan-to-value ratio using the current par value divided by the appraised home value at the time of loan origination).

We have analyzed our potential loss exposure to all of the mortgage insurance companies and do not expect incremental losses based on these exposures at this time.

Deposits

We offer demand and overnight deposits and custodial mortgage accounts to our members. Deposit programs are intended to provide members with a low-risk earning asset that satisfies liquidity requirements. Deposit balances depend on members' needs to place excess liquidity and can fluctuate significantly. Due to the relatively small size of our deposit base and the unpredictable nature of member demand for deposits, we do not rely on deposits as a core component of our funding. At December 31, 2025, and December 31, 2024, deposits totaled $915.3 million and $877.1 million, respectively.

Consolidated Obligations

See Liquidity and Capital Resources for information regarding our COs.

Derivative Instruments

All derivatives are recorded on the statement of condition at fair value and classified as either derivative assets or derivative liabilities. Bilateral and cleared derivatives outstanding are classified as assets or liabilities according to the net fair value of derivatives aggregated by each counterparty. Derivative assets' net fair value, net of cash collateral and accrued interest, totaled $295.7 million and $301.9 million as of December 31, 2025, and December 31, 2024, respectively. Derivative liabilities' net fair value, net of cash collateral and accrued interest, totaled $2.3 million and $4.7 million as of December 31, 2025, and December 31, 2024, respectively.

We offset fair-value amounts recognized for derivative instruments with fair-value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from derivatives recognized at fair value executed with the same counterparty under a master-netting arrangement as well as arising from derivatives cleared through a DCO.

We determine the fair values of interest-rate-exchange agreements using standard valuation techniques for derivatives such as discounted cash-flow analysis that employ market-observable inputs for discount rates, forward interest-rates and volatility assumptions. Estimates developed using these methods are subjective and require judgments regarding significant matters such as the amount and timing of future cash flows and the selection of discount rates that appropriately reflect market and credit

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risks. We formally establish hedging relationships associated with balance-sheet items and forecasted transactions to obtain desired economic results. These hedge relationships may include fair-value and cash-flow hedges, as well as economic hedges.

All firm commitments to invest in mortgage loans are recorded at fair value on the statement of condition as derivatives. Upon satisfaction of the commitment, the recorded fair value is then reclassified as a basis adjustment of the purchased mortgage assets. We had commitments for which we were obligated to invest in mortgage loans with par values totaling $59.3 million and $32.7 million at December 31, 2025 and 2024, respectively.

The following table presents a summary of the notional amounts and estimated fair values of our outstanding derivatives, excluding accrued interest, and related hedged item by product and type of accounting treatment as of December 31, 2025, and December 31, 2024. The notional amount represents the hypothetical principal basis used to determine periodic interest payments received and paid. However, the notional amount does not represent an actual amount exchanged or our overall exposure to credit and market risk.

Table 29 - Derivatives and Hedge-Accounting Treatment

(dollars in thousands)

December 31, 2025

December 31, 2024

Hedged Item

Derivative

Designation (1)

Notional

Amount

Fair

Value

Notional

Amount

Fair

Value

Advances

Swaps

Fair value

Available-for-sale securities

Swaps

Fair value

COs

Swaps

Fair value

Swaps

Economic

Forward starting swaps

Cash Flow

Total associated with COs

Total

Mortgage delivery commitments

Total derivatives

Accrued interest

Cash collateral, including related accrued interest

Net derivatives

Derivative asset

Derivative liability

Net derivatives

(1)    The hedge designation “fair value” represents the hedge classification for transactions that qualify for hedge-accounting treatment and hedge changes in fair value attributable to changes in the designated benchmark interest rate. The hedge designation "cash flow" represents the hedge classification for transactions that qualify for hedge-accounting treatment and hedge the exposure to variability in expected future cash flows. The hedge designation “economic” represents derivatives hedging specific or nonspecific assets, liabilities, or firm commitments that do not qualify or were not documented as fair-value or cash-flow hedges but are documented as serving a non-speculative use and are hedging strategies under our risk-management policy.

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Table 30 - Hedging Strategies

(dollars in thousands)

Notional Amount

Hedged Item / Hedging Instrument

Hedging Objective

Hedge Designation

December 31, 2025

December 31, 2024

Advances

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

Converts the advance's fixed rate to a variable rate index

Fair value

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

Converts the advance's fixed rate to a variable rate index and offsets the option embedded in the advance

Fair value

Pay floating with embedded coupon features, receive floating interest-rate swap (noncallable)

Reduces interest-rate sensitivity and repricing gaps by converting the advance's variable rate to a different variable rate index and/or offsets embedded coupon features 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

CO Bonds

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

Converts the bond's fixed rate to a variable rate index

Fair value

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

Converts the bond's fixed rate to a variable rate index and offsets the option embedded in the bond

Fair value

Forward-starting interest-rate swap

To lock in the cost of funding on anticipated issuance of debt

Cash flow

CO Discount Notes

Receive-fixed, pay float interest-rate swap

Converts the discount notes fixed rate to a variable rate index

Economic

Stand-Alone Derivatives

Mortgage delivery commitments

Total

Derivative Instruments Credit Risk. See Part II – Item 8 – Financial Statements – Notes to the Financial Statements – Note 8 – Derivatives and Hedging Activ i ties for a discussion of how we manage our credit risk exposure related to derivative agreements. For derivative instruments, we have credit exposure on net asset positions where we have not received adequate collateral from our counterparties and where we have pledged collateral in excess of our liability to a counterparty.

From time to time, due to timing differences, derivatives-valuation differences between our calculated derivatives values and those of our counterparties, or to the contractual haircuts applied to securities, we may receive from (or pledge to) our counterparties cash or securities collateral whose fair value is less (or more) than the current net positive (or net negative) fair- value of derivatives positions outstanding with them.

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Table 31 - Credit Exposure to Derivatives Counterparties

(dollars in thousands)

As of December 31, 2025

Notional Amount

Net Derivatives Fair Value Before Collateral

Cash Collateral Pledged to (from) Counterparty

Net Credit Exposure to Counterparties

Asset positions with credit exposure:

Uncleared derivatives

Single-A

Cleared derivatives

Liability positions with credit exposure:

Uncleared derivatives

Single-A

Total interest-rate swap positions with nonmember counterparties to which we had credit exposure

Mortgage delivery commitments (1)

Total

(1)    Total fair-value exposures related to commitments to invest in mortgage loans are offset by certain pair-off fees. Commitments to invest in mortgage loans are reflected as derivatives. We do not collateralize these commitments. However, should the participating financial institution fail to deliver the mortgage loans as agreed, the participating financial institution is charged a fee to compensate us for the nonperformance.

Uncleared derivatives. The credit risk arising from unsecured credit exposure on derivatives is mitigated by the credit quality of the counterparties and by the early termination ratings triggers contained in all master derivatives agreements. We enter into new uncleared derivatives only with nonmember institutions that are at or above our fourth highest internal rating, although risk-reducing trades could be approved for counterparties whose ratings had fallen below these ratings. See Part I — Item 1 — Business — Business Lines — Investments for additional information on our internal ratings. We actively monitor these exposures and the credit quality of our counterparties, using stress testing of counterparty exposures and assessments of each counterparty's financial performance, capital adequacy, sovereign support, and related market signals such as credit default swap spreads. We can reduce or suspend credit limits and/or seek to reduce existing exposures, as appropriate, as a result of these monitoring activities. We do not enter into interest-rate-exchange agreements with other FHLBanks. We use master-netting agreements to reduce our credit exposure from counterparty defaults. The master agreements contain bilateral-collateral-exchange provisions that require credit exposures to be secured by U.S. federal government, U.S. government guaranteed, GSE securities, or cash. Exposures are measured daily, and adjustments to collateral positions are made daily. These agreements may require us to deliver additional collateral to certain of our counterparties if our credit rating is downgraded by an NRSRO, which could increase our exposure to loss in the event of a default by a counterparty to which we were the net creditor at the time of any such default, as further detailed in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 8 — Derivatives and Hedging Activities .

We may deposit funds with certain of these counterparties and their affiliates for short-term money-market investments, including overnight federal funds, term federal funds, and interest-bearing deposits. We may also engage in short-term secured reverse repurchase agreements with affiliates of these counterparties. Some of these counterparties have affiliates that buy, sell, and distribute our COs.

Cleared derivatives. The credit risk from unsecured credit exposure on cleared swaps is principally mitigated by the DCO's structural risk protections. We actively monitor these exposures and the credit quality of our DCO counterparties, using stress testing of DCO counterparties exposures and assessments of the DCO's structural risk protections. We can reduce existing exposures to a DCO by unwinding any trade, entering into an offsetting trade, or by moving trades to another DCO.

LIQUIDITY AND CAPITAL RESOURCES

Our financial structure is designed to enable us to expand and contract our assets, liabilities, and capital in response to changes in membership composition and member credit needs. Our primary source of liquidity is our access to the capital markets through CO issuance, which is described in Part I — Item 1 — Business — Consolidated Obligations . Outstanding COs and the

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condition of the market for COs are discussed below under — Debt Financing — Consolidated Obligations. Our equity capital resources are governed by our Capital Plan, certain portions of which are described under — Capital below as well as by applicable legal and regulatory requirements.

Liquidity

We are required to maintain liquidity in accordance with the FHLBank Act, FHFA regulations and guidance, and policies established by our management and board of directors. We seek to be in a position to meet the credit and liquidity needs of our members and all current and future financial commitments by managing liquidity positions to maintain stable, reliable, and cost-effective sources of funds while taking into account market conditions, member demand, and the maturity profile of our assets and liabilities.

We are unable to predict future trends in member credit needs because they are driven by complex interactions among several factors, including, but not limited to, increases and decreases in members assets and deposits, and the attractiveness of advances compared to other sources of wholesale funding. We regularly monitor current trends and anticipate future debt issuance needs and maintain a portfolio of highly liquid assets to be prepared to fund member credit needs and investment opportunities. We are generally able to expand our CO debt issuance in response to members' increased need for advances and to increase our acquisitions of mortgage loans. Alternatively, in response to reduced member credit needs, we may shrink our balance sheet by allowing our COs to mature without replacement, transferring debt to another FHLBank, repurchasing and retiring outstanding COs, or redeeming callable COs on eligible redemption dates.

Sources and Uses of Liquidity. Our primary sources of liquidity are proceeds from the issuance of COs and advance repayments, and maturing short-term investments, as well as cash and investment holdings that are primarily high-quality, short- and intermediate-term financial instruments that can be sold or pledged as collateral under a repurchase agreement. During the year ended December 31, 2025, we maintained continuous access to funding and adapted our debt issuance to meet the needs of our members.

Secondary sources of liquidity include payments collected on mortgage loans, proceeds from the issuance of capital stock, and member deposits. In addition, under the FHLBank Act, the U.S. Treasury may purchase up to $4 billion of FHLBank COs. The terms, conditions, and interest rates in such a purchase would be determined by the U.S. Treasury. This authority may be exercised at the discretion of the U.S. Treasury with the agreement of the FHFA only if alternative means cannot be effectively employed to permit members of the FHLBanks to continue to supply reasonable amounts of funds to the mortgage market, and the ability to supply such funds is substantially impaired because of monetary stringency and high interest rates. There were no such purchases by the U.S. Treasury during the year ended December 31, 2025.

Our uses of liquidity are advance originations and consolidated obligation principal and interest payments. Other uses of liquidity are mortgage loan and investment purchases, dividend payments, general operating expenses, and other contractually obligated payments. We also maintain liquidity to redeem or repurchase excess capital stock, through our daily excess stock repurchases, upon the request of a member, or as required under our Capital Plan.

For information and discussion of our guarantees and other commitments we may have, see Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 1 6 — Commitments and Contingencies . For further information and discussion of the joint and several liability for FHLBank COs, see below — Debt Financing — Consolidated Obligations.

Internal Liquidity Sources / Liquidity Management

Liquidity Reserves for Deposits. Applicable law requires us to hold cash, obligations of the U.S., and advances with maturities of less than five years, in a total amount not less than the amount of total member deposits with us. We have complied with this requirement during the year ended December 31, 2025.

Projected Net Cash Flow. We define projected net cash flow as projected sources of funds less projected uses of funds based on contractual maturities or expected option exercise periods, and settlement of committed assets and liabilities, as applicable. For mortgage-related cash flows and callable debt, we incorporate projected prepayments and call exercise.

Liquidity Management. We maintain our liquidity so that if projected net cash flow falls below zero on or before the 21 st day following the measurement date, then management of the Bank is notified and determines whether any corrective action is necessary. We did not breach this threshold at any time during the year ended December 31, 2025. Table 32 below shows this calculation as of December 31, 2025.

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Table 32 - Projected Net Cash Flow

(dollars in thousands)

As of December 31, 2025

21 Days

Uses of funds

Interest payable

Maturing or expected option exercise of liabilities

Committed asset settlements

Capital outflow

MPF delivery commitments

Projected Calls

Gross uses of funds

Sources of funds

Interest receivable

Maturing or projected amortization of assets

Committed liability settlements

Cash and due from banks and interest bearing deposits

Other

Gross sources of funds

Projected net cash flow

Base Case Liquidity Requirement. The Bank is subject to FHFA guidance on liquidity, including Advisory Bulletin 2018-07 (Liquidity Guidance AB), which communicates the FHFA’s expectations with respect to the maintenance of sufficient liquidity to enable us to provide advances and fund standby letters of credit for members for a specified time without access to the capital markets or other unsecured funding sources.

The Liquidity Guidance AB provides guidance on the level of on-balance sheet liquid assets related to base case liquidity. As part of the base case liquidity measure, the guidance also includes a separate provision covering off-balance sheet commitments from standby letters of credit. In addition, the Liquidity Guidance AB provides guidance related to asset/liability maturity funding gap limits.

Under the Liquidity Guidance AB, FHLBanks are required to maintain sufficient liquid assets to achieve positive projected net cash flow while rolling over maturing advances to all members and assuming no access to capital markets for a period of time between 10 and 30 calendar days, with a specific measurement period set forth in a supervisory letter. The Liquidity Guidance AB also sets forth the initial cash flow assumptions and formula to calculate base case liquidity. With respect to standby letters of credit, the guidance states that FHLBanks should maintain a liquidity reserve of between one percent and 20 percent of its outstanding standby letters of credit commitments, as specified in a supervisory letter.

We were in compliance with the Base Case Liquidity Requirement at all times during the year ended December 31, 2025.

Balance Sheet Funding Gap Policy. We may use a portion of the short-term COs issued to fund assets with longer terms, including longer-term floating-rate assets. Funding longer-term floating-rate assets with shorter-term liabilities generally does not expose us to significant interest-rate risk because the interest rates on both the floating-rate assets and liabilities typically reset similarly (either through rate resets or re-issuance of the obligations). However, deviations in the cost of our short-term liabilities relative to resetting assets can cause fluctuations in our net interest margin.

Additionally, the Bank is exposed to refinancing risk since, over certain time horizons, it has more liabilities than assets maturing. In order to manage the Bank’s refinancing risk, we maintain a policy that limits the potential difference between the amount of financial assets and the amount of financial liabilities expected to mature within three-month and one-year time horizons inclusive of projected mortgage-related prepayment activity. We measure this difference, or gap, as a percentage of

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total assets over three-month and one-year time horizons. In conformity with the provisions of the Liquidity Guidance AB, the Bank has instituted a limit framework around these metrics as follows:

Table 33 - Funding Gap Metric

Funding Gap Metric (1)

Limit

Three-Month Average

December 31, 2025

Three-Month Average

December 31, 2024

3-month Funding Gap

1-year Funding Gap

(1)    The funding gap metric is a positive value when maturing liabilities exceed maturing assets, as defined, within the given period. Compliance with limits are evaluated against the rolling three-month average of the month-end funding gaps.

External Sources of Liquidity

Amended and Restated FHLBanks P&I Funding Contingency Plan Agreement. All FHLBanks have a source of emergency external liquidity through the Amended and Restated FHLBanks P&I Funding Contingency Plan Agreement. Under the terms of that agreement, in the event any FHLBank does not fund principal and interest payments due with respect to any CO for which issuance proceeds were allocated to it within deadlines established in the agreement, the other FHLBanks will be obligated to fund any shortfall to the extent that any of the other FHLBanks has a net positive settlement balance (that is, the amount by which end-of-day proceeds received by such FHLBank from the sale of COs exceeds payments by such FHLBank on COs on the same day) in its account with the Office of Finance on the day the shortfall occurs. The FHLBank that received assistance pursuant to this agreement would then be required to repay the funding to the other FHLBanks. We have never drawn funding under this agreement, nor have we ever been required to provide funding to another FHLBank under this agreement.

Debt Financing — Consolidated Obligations

Our primary source of liquidity is through CO issuances. At December 31, 2025, and December 31, 2024, outstanding COs for which we are primarily liable, including both CO bonds and CO discount notes, totaled $63.6 billion and $66.7 billion, respectively. CO bonds are generally issued with either fixed-rate coupon-payment terms or variable-rate coupon-payment terms that use a variety of indices for interest-rate resets. Some of the fixed-rate bonds that we have issued are callable bonds that may be redeemed at par on one or more dates prior to their maturity date. In addition, to meet our needs and the needs of certain investors in COs, fixed- and variable-rate bonds may also contain certain provisions that may result in complex coupon-payment terms and call or amortization features. When such COs (structured bonds) are issued, we enter into interest-rate-exchange agreements containing offsetting features, which effectively change the characteristics of the bond to those of a simple variable-rate bond.

The Office of Finance has established a methodology for the allocation of the proceeds from the issuance of COs when COs cannot be issued in sufficient amounts to satisfy all FHLBank demand for funding during periods of financial distress and when its existing allocation processes are deemed insufficient. See Part I — Item 1 — Business — Consolidated Obligations for additional information on the methodology.

See Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 10 — Consolidated Obligations for a summary of CO bonds by contractual maturity dates and call dates as of December 31, 2025, and December 31, 2024. CO bonds outstanding for which we are primarily liable at December 31, 2025, and December 31, 2024, include issued callable bonds totaling $17.7 billion and $18.0 billion, respectively.

CO discount notes are also a significant funding source for us. CO discount notes are short-term instruments with maturities ranging from overnight to one year. We use CO discount notes primarily to fund short-term advances and investments, and longer-term advances and investments with short-term variable coupon repricing intervals. CO discount notes comprised 33.3 percent and 27.8 percent of the outstanding COs for which we are primarily liable at December 31, 2025, and December 31, 2024, respectively, but accounted for 57.9 percent and 67.3 percent of the proceeds from the issuance of such COs during the years ended December 31, 2025 and 2024, respectively.

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Although we are primarily liable for the portion of COs allocated to us, we are also jointly and severally liable with the other FHLBanks for the payment of principal and interest on COs issued by all of the FHLBanks. The par amounts of the FHLBanks' outstanding COs were $1.2 trillion at both December 31, 2025 and 2024. COs are backed only by the combined financial resources of the FHLBanks. We have never repaid the principal or interest on any COs on behalf of another FHLBank.

We have evaluated the financial condition of the other FHLBanks based on known regulatory actions, publicly-available financial information, and individual long-term credit rating downgrades as of each period presented. Based on this evaluation, as of December 31, 2025, and through the filing of this report, we do not believe it is likely that we will be required to repay the principal or interest on any CO on behalf of another FHLBank.

Overall, we continued to experience strong demand for COs among investors. During the period covered by this report, the capital markets have supported our funding needs and we have been able to issue debt in the amounts and structures required to satisfy the demand for advances and meet our funding and risk-management needs.

Capital

Total capital was $3.8 billion and $3.9 billion at December 31, 2025, and December 31, 2024, respectively.

The FHLBank Act and FHFA regulations specify that each FHLBank is required to satisfy certain minimum regulatory capital requirements. We were in compliance with these requirements at December 31, 2025, as discussed in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 12 — Capital .

Table 34 - Capital Stock Outstanding by Member Institution Type

(dollars in thousands)

December 31, 2025

Savings institutions

Commercial banks

Insurance companies

Credit unions

Community development financial institutions

Total GAAP capital stock

Mandatorily redeemable capital stock

Total regulatory capital stock

Capital stock subject to a stock redemption period is reclassified to mandatorily redeemable capital stock, a liability in the statement of condition. Mandatorily redeemable capital stock totaled $4.1 million and $5.1 million at December 31, 2025, and December 31, 2024, respectively. For additional information on the redemption of our capital stock, see Part I— Item 1 — Business — Capital Resources — Redemption of Excess Stock and Part II — Item 8 — Financial Statements —Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies — Mandatorily Redeemable Capital Stock .

Capital Rule

The FHFA's regulation on FHLBank capital classification and critical capital levels (the Capital Rule), among other things, establishes criteria for capital classifications and corrective action requirements for FHLBanks that are classified in any classification other than adequately capitalized. An FHLBank is adequately capitalized if it has sufficient permanent and total capital to meet or exceed its risk-based and minimum capital requirements. FHLBanks that are adequately capitalized have no corrective action requirements. FHLBanks that are not adequately capitalized must submit capital restoration plans, are subject to corrective action requirements and are prohibited from paying dividends, redeeming or repurchasing excess stock, and are subject to certain asset growth restrictions. The FHFA may place critically undercapitalized FHLBanks into conservatorship or receivership.

The Director of the FHFA has discretion to add to or modify the corrective action requirements for each capital classification other than adequately capitalized if the Director of the FHFA determines that such action is necessary to ensure the safe and sound operation of the FHLBank and the FHLBank's compliance with its risk-based and minimum capital requirements.

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If we become classified into a capital classification other than adequately capitalized, we could be adversely impacted by the corrective action requirements for that capital classification.

The Capital Rule requires the Director of the FHFA to determine on no less than a quarterly basis the capital classification of each FHLBank. Based on financial information as of September 30, 2025, the FHFA determined that we met the definition of adequately capitalized under the Capital Rule.

Internal Capital Practices and Policies

We also take steps as we believe prudent beyond legal or regulatory requirements in an effort to ensure capital adequacy, reflected in our internal minimum capital requirement, which exceeds regulatory requirements, our minimum retained earnings target, and limitations on our dividends.

Internal Minimum Capital Requirement in Excess of Regulatory Requirements

In an effort to provide protection for our capital base, we maintain an internal minimum capital requirement whereby the amount of paid-in capital stock and retained earnings (together, our actual regulatory capital) must be at least equal to the sum of 4 percent of our total assets plus an amount we measure as our risk exposure with 99 percent confidence using our economic capital model (together, our internal minimum capital requirement). As of December 31, 2025, this internal minimum capital requirement equaled $3.4 billion, which was satisfied by our actual regulatory capital of $3.9 billion.

Minimum Retained Earnings Target

Our limit for our minimum level of retained earnings is determined monthly using rolling three-month averages. Retained earnings must be at least 4.0 percent of our total assets less outstanding capital stock plus the economic capital requirement.

At December 31, 2025, we had total retained earnings of $2.0 billion, which exceeded the limit of $1.5 billion. In the event that the Bank’s balance of retained earnings is below the limit, dividends may not exceed 40 percent of the prior quarter’s net income.

Our minimum retained earnings limit could be superseded by FHFA mandates, either in the form of an order specific to us or by promulgation of new regulations requiring a level of retained earnings that is different from our current target. Moreover, we may, at any time, change our methodology or assumptions for modeling our minimum retained earnings target and will do so when prudent or when other reasons warrant such a change. Either of these events could result in us increasing our minimum retained earnings target and, in turn, reducing or eliminating dividends, as necessary.

For information on limitations on dividends, including limitations when we are under our minimum retained earnings target, see Part II — Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .

Repurchases of Excess Stock

We have the authority, but are not obliged, to repurchase excess stock, as discussed under Part I — Item 1 — Business — Capital Resources — Repurchase of Excess Stock .

Table 35 - Capital Stock Requirements and Excess Capital Stock

(dollars in thousands)

Membership Stock

Investment

Requirement

Activity-Based

Stock Investment

Requirement

Total Stock

Investment

Requirement (1)

Outstanding Class B

Capital Stock (2)

Excess Class B

Capital Stock

December 31, 2025

December 31, 2024

(1)    Total stock investment requirement is rounded up to the nearest $100 on an individual member basis.

(2)    Class B capital stock outstanding includes mandatorily redeemable capital stock.

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To facilitate our ability to maintain a prudent level of capitalization and an efficient capital structure, while providing for an equitable allocation of excess stock ownership among members, we conduct daily repurchases of excess stock from any shareholder whose excess stock exceeds the lesser of $3 million or 3 percent of the shareholder’s total stock investment requirement, subject to a minimum repurchase of $100,000. We plan to continue this practice, subject to regulatory requirements and our liquidity or capital management needs, although repurchase decisions remain at our sole discretion, and we retain authority to adjust our excess stock repurchase practices subject to notice requirements defined in our Capital Plan, or to suspend repurchases of excess stock from any shareholder or all shareholders without prior notice.

Restricted Retained Earnings and the Joint Capital Agreement

Our Capital Plan and the Joint Capital Agreement require us to allocate a certain percentage of quarterly net income to a restricted retained earnings account, which we refer to as restricted retained earnings. The Joint Capital Agreement, the terms of which are reflected in the Capital Plans of the 11 FHLBanks, is a voluntary contractual agreement among the FHLBanks, intended to build greater safety and soundness in the FHLBank System. Generally, the Joint Capital Agreement requires each FHLBank to allocate a certain amount, at least 20 percent of each of its quarterly net income (net of that FHLBank's obligation to its AHP) and adjustments to prior net income, to a restricted retained earnings account until the total amount in that account is equal to 1 percent of the daily average carrying value of that FHLBank's outstanding total COs (excluding fair-value adjustments) for the calendar quarter (total required contribution). The percentage of the required allocation is subject to adjustment when an FHLBank has had an adjustment to a prior calendar quarter's net income.

At December 31, 2025, our total required contribution to the restricted retained earnings account was $651.6 million compared with the current restricted retained earnings account balance of $554.6 million.

The Joint Capital Agreement refers to the period of required contributions to the restricted retained earnings account as the “dividend restriction period.” Additionally, the agreement provides that:

• amounts held in an FHLBank's unrestricted retained earnings account may not be transferred into the restricted retained earnings account;

• during the dividend restriction period, an FHLBank shall redeem or repurchase capital stock only at par value, and shall only conduct such redemption or repurchase if it would not result in the FHLBank's total regulatory capital falling below its aggregate paid in amount of capital stock;

• any quarterly net losses will be netted against the FHLBank's other quarters' net income during the same calendar year so that the minimum required annual allocation into the FHLBank's restricted retained earnings account is satisfied;

• if the FHLBank sustains a net loss for a calendar year, the net loss will be applied to reduce the FHLBank's retained earnings that are not in the FHLBank's restricted retained earnings account to zero prior to application of such net loss to reduce any balance in the FHLBank's restricted retained earnings account;

• if the FHLBank incurs net losses for a cumulative year-to-date period resulting in a decline to the balance of its restricted retained earnings account, the FHLBank's required allocation percentage will increase from 20 percent to 50 percent of quarterly net income until its restricted retained earnings account balance is restored to an amount equal to the regular required allocation (net of the amount of the decline);

• if the balance in the FHLBank's restricted retained earnings account exceeds 150 percent of its total required contribution to the account, the FHLBank may release such excess from the account;

• in the event of the liquidation of the FHLBank, or the taking of the FHLBank's retained earnings by future federal action, such event will not affect the rights of the FHLBank's Class B stockholders under the FHLBank Act in the FHLBank's retained earnings, including those held in the restricted retained earnings account;

• the payment of dividends from amounts in the restricted retained earnings account be restricted for at least one year following the termination of the Joint Capital Agreement; and

• certain procedural mechanisms be followed for determining when an automatic termination event has occurred.

The agreement will terminate upon an affirmative vote of two-thirds of the boards of directors of the then existing FHLBanks, or automatically if a change in the FHLBank Act, FHFA regulations, or other applicable law has the effect of:

• creating any new or higher assessment or taxation on the net income or capital of any FHLBank;

• requiring the FHLBanks to retain a higher level of restricted retained earnings than what is required under the agreement; or

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• establishing general restrictions on dividend payments requiring a new or higher mandatory allocation of an FHLBank's net income to any retained earnings account than the amount specified in the agreement or prohibiting dividend payments from any portion of an FHLBank's retained earnings not held in the restricted retained earnings account.

Off-Balance-Sheet Arrangements

Our significant off-balance-sheet arrangements consist of the following:

•    commitments that obligate us for additional advances;

•    standby letters of credit;

•    commitments for unused lines-of-credit advances; and

•    unsettled COs.

Off-balance-sheet arrangements are more fully discussed in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 16 — Commitments and Contingencies .

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, income and expense. To understand the Bank's financial position and results of operations, it is important to understand the Bank's most significant accounting policies and the extent to which management uses judgment, estimates and assumptions in applying those policies. The Bank's critical accounting estimate relates to the Bank's valuation of derivatives and hedged items in a fair-value hedge relationship.

Management considers these policies to be critical because they require us to make subjective and complex judgments about matters that are inherently uncertain. Management bases its judgment and estimates on current market conditions and industry practices, historical experience, changes in the business environment and other factors that it believes to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions and/or conditions. The Audit Committee of our board of directors has reviewed these estimates. For additional discussion regarding the application of these and other accounting policies, see Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 2 — Summary of Significant Accounting Policies .

Valuation of Derivatives and Hedged Items

All derivatives are presented in the statements of condition at fair value. Management also estimates the changes in fair value of hedged items in fair-value hedge relationships (e.g., advance, investment security, or consolidated obligation) that are attributable to changes in the designated benchmark interest rate (hereinafter referred to as "changes in the benchmark fair value"), which we have designated as either the overnight-index swap rate based on SOFR (SOFR-OIS) or the overnight-index swap rate based on the federal funds effective rate (Federal Funds-OIS) at the inception of each hedge relationship.

These instruments lack an available trading market characterized by frequent transactions between a willing buyer and willing seller engaging in an exchange. In these cases, such values are estimated using a valuation model and inputs that are observable, either directly or indirectly. The assumptions and inputs used have a significant effect on the reported carrying values of assets and liabilities and the related income and expense. The use of different assumptions or inputs could result in materially different net income and reported carrying values.

The fair values of our derivatives, along with a description of the fair value hierarchy and the valuation methodologies used to determine the fair values of these financial instruments, is disclosed in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 15 — Fair Values . Additional information on our derivatives, hedge-accounting treatment, and hedge strategies is provided in Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition – Derivative Instruments .

For hedging relationships that are designated as fair-value hedges and qualify for hedge accounting, the change in the benchmark fair value of the hedged item is recorded in earnings. The difference between the change in fair value of the derivative and the change in the benchmark fair value of the hedged item represents hedge ineffectiveness. All of our fair-value hedge relationships are treated as long-haul fair-value hedge relationships, where the change in the benchmark fair value of the hedged item is measured separately from the change in fair value of the derivative. See Table 7.2 - Net Gains (Losses) on Fair Value Hedging Relationships in Part II — Item 8 — Financial Statements — Notes to the Financial Statements — Note 8 —

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Derivatives and Hedging Activities for a summary of our fair-value hedge ineffectiveness for the three years ended December 31, 2025, 2024, and 2023.

For hedging relationships to qualify for long-haul fair-value hedge-accounting treatment, hedge effectiveness testing is performed at the inception of each hedging relationship to determine whether the hedge is expected to be highly effective in offsetting the identified risk, and at each month-end thereafter to ensure that the hedge relationship has been effective historically and to determine whether the hedge is expected to be highly effective in the future.

For purposes of estimating the fair value of derivatives and hedged items for which we are hedging changes in the benchmark fair value, we employ a valuation model that uses market data from the Federal Funds-OIS, SOFR-OIS, and the U.S. dollar interest-rate-swap markets to construct discount and forward-yield curves using standard financial market techniques.

• Discount rate assumption . We use an applicable interest-rate index as the discount rate for the valuation of derivatives. For all derivatives cleared through a DCO, the discount rate used is SOFR-OIS, while for our bilateral, non-cleared interest-rate derivatives the discount rate used is either Federal Funds-OIS or SOFR-OIS. For the valuation of hedged assets or liabilities in fair-value hedging relationships where the hedged risk is changes in the benchmark fair value, we use either SOFR-OIS or Federal Funds-OIS as the discount rate, depending on which interest-rate index was designated as the benchmark rate at inception of the hedge relationship.

• Forward interest-rate assumption. Forward rates based on the Federal Funds-OIS swap curve or forward rates based on the SOFR-OIS swap curve.

• Volatility assumption . Our volatility assumptions are market-based expectations of future interest-rate volatility implied from current market prices for similar options.

RECENT ACCOUNTING DEVELOPMENTS

See P art II – Item 8 – Financial Statements – Notes to the Financial Statements – Note 3 – Recently Issued and Adopted Accounting Guidance for information on recent accounting developments.

LEGISLATIVE AND REGULATORY DEVELOPMENTS

Significant legislative and regulatory actions and developments for the period covered by this report are summarized below.

We are subject to various legal and regulatory requirements and priorities. Certain actions, regulatory priorities and areas of focus by the federal executive administration have changed and continue to change the regulatory environment. During 2025, withdrawals and rescissions of certain rules, proposed rules and advisory, regulatory, or technical guidance, have affected, and likely will continue to affect, certain aspects of our business operations. These changes could have an impact on our financial condition, results of operations, and reputation. For example, the FHFA 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 and deference to other federal agencies.

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 FHFA, to issue guidance (i) to 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) to 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 action 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 government-sponsored enterprises, 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, or any corresponding impacts to the FHLBank System, the secondary mortgage and mortgage-backed securities

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market, 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 .

CREDIT RATING AGENCY DEVELOPMENTS

As of February 28, 2026, Moody’s long- and short-term credit ratings for us and the 10 other FHLBanks are Aaa and P-1, with a negative outlook.

As of February 28, 2026, S&P’s long- and short-term credit ratings for us and the 10 other FHLBanks are AA+ and A-1+, with a stable outlook.