Federal Home Loan Bank of Indianapolis

11/10/2026 | Press release | Distributed by Public on 11/10/2026 09:27

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Presentation
This discussion and analysis by management of the Bank's financial condition and results of operations should be read in conjunction with our 2025 Form 10-K and the interim Financial Statements and related Notes to Financial Statements contained in Item 1. Financial Statements.
Unless otherwise stated, amounts disclosed in this Item are rounded to the nearest million; therefore, dollar amounts of less than one million may not be reflected or, due to rounding, may not appear to agree to the amounts presented in thousands in the Financial Statements and related Notes to Financial Statements. Amounts used to calculate dollar and percentage changes are based on numbers in the thousands. Accordingly, calculations based upon the disclosed amounts (millions) may not produce the same results.
Executive Summary
Overview. As an FHLBank, we are a regional wholesale bank that serves as a financial intermediary between the capital markets and our members. The Bank is structured as a financial cooperative, which allows our business to be scalable and self-capitalizing without taking undue risks, diminishing capital adequacy, or jeopardizing profitability. Therefore, the Bank is generally designed to expand and contract in asset size as the needs of our members and their communities change.
Our primary source of revenue is interest earned on advances, mortgage loans, and investments, including MBS. Our net interest income is primarily determined by the size of our balance sheet and the spread between the interest rate earned on our assets and the interest rate paid on our share of the consolidated obligations. A portion of net interest income may also be derived from deploying our capital which produces an asset yield but has no associated interest cost, i.e., interest-free capital. We use funding and hedging strategies to manage the interest-rate risk that arises from our lending and investing activities.
For further discussion of our business and mission, see Item 1. Business in our 2025 Form 10-K.
Business Environment. The Bank's financial performance is influenced by several key national economic and market factors, including fiscal and monetary policies, the conditions in the housing markets and the level and volatility of market interest rates.
The level and volatility of interest rates, including the shape of the yield curve, are affected by several factors, principally efforts by the Federal Reserve. In support of the Federal Reserve's goals to achieve maximum employment and inflation at the rate of 2% over the longer run, at its meeting on September 16, 2026, the Federal Open Market Committee ("FOMC") decided to raise the target range for the federal funds rate by 25 bps from 3.50% to 3.75% to 3.75% to 4.00%, the FOMC's first increase in the range in over two years.
The following table presents certain key interest rates for the relevant periods.
Average for Three Months Ended Average for Nine Months Ended Period End
September 30, September 30, September 30, December 31,
2026 2025 2026 2025 2026 2025
Federal Funds Effective 3.67 % 4.30 % 3.65 % 4.32 % 3.88 % 3.64 %
SOFR 3.67 % 4.33 % 3.65 % 4.33 % 3.90 % 3.87 %
1-week Overnight-Indexed Swap 3.69 % 4.28 % 3.65 % 4.31 % 3.88 % 3.64 %
3-month U.S. Treasury yield 3.87 % 4.19 % 3.75 % 4.27 % 4.12 % 3.63 %
2-year U.S Treasury yield 4.36 % 3.73 % 3.98 % 3.92 % 4.89 % 3.48 %
10-year U.S. Treasury yield 4.75 % 4.26 % 4.46 % 4.36 % 5.29 % 4.17 %
Source: Bloomberg
At its meeting on October 28, 2026, the FOMC decided to maintain the target range for the federal funds rate at 3.75% to 4.00%. The FOMC's related statement provides that "inflation remains elevated", but also provides "the accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee's 2% goal."
Results of Operations for the Three and Nine Months Ended September 30, 2026 and 2025. The following table presents the comparative highlights of our results of operations ($ amounts in millions).
Three Months Ended September 30, Nine Months Ended September 30,
Condensed Statements of Income 2026 2025 $ Change % Change 2026 2025 $
Change 		%
Change
Interest income $ 900 $ 997 $ (97) (10) % $ 2,655 $ 2,923 $ (268) (9) %
Interest expense 770 864 (94) (11) % 2,282 2,537 (255) (10) %
Net interest income after provision for (reversal of) credit losses 130 133 (3) (2) % 373 386 (13) (3) %
Other income 2 8 (6) 9 17 (8)
Other expenses 45 44 1 118 123 (5)
Income before assessments 87 97 (10) (10) % 264 280 (16) (6) %
AHP assessments 9 10 (1) 27 29 (2)
Net income $ 78 $ 87 $ (9) (10) % $ 237 $ 251 $ (14) (6) %
Net interest income for the three months ended September 30, 2026 was $130 million, a net decrease of $3 million compared to the corresponding period in the prior year. The decrease was primarily due to lower average market interest rates, partially offset by the favorable impact of higher average balances of interest-earning assets.
Net interest income for the nine months ended September 30, 2026 was $373 million, a net decrease of $13 million compared to the corresponding period in the prior year. The decrease was primarily due to lower average market interest rates, partially offset by the favorable impact of higher average balances of interest-earning assets.
For our hedging relationships that qualified for hedge accounting, the differences between the changes in fair value of the hedged items and the associated derivatives (i.e., hedge ineffectiveness) are recorded in net interest income and resulted in net hedging gains for the three months ended September 30, 2026 of $3 million, compared to net hedging losses for the corresponding period in the prior year of less than $1 million, and net hedging losses for the nine months ended September 30, 2026 of less than $1 million, compared to net hedging losses for the corresponding period in the prior year of $(3) million.
Our net gains (losses) on derivatives fluctuate due to volatility in the overall interest-rate environment as we hedge our asset and liability risk exposures. In general, we hold derivatives and associated hedged items to the maturity, call, or put date. Therefore, due to timing, nearly all of the cumulative net gains and losses for these financial instruments will generally reverse over the remaining contractual terms of the hedged item. However, there may be instances when we terminate these instruments prior to the maturity, call or put date, which may result in a realized gain or loss.
Net income for the three months ended September 30, 2026 was $78 million, a net decrease of $9 million compared to the corresponding period in the prior year. The decrease was primarily due to lower net interest income, unfavorable fair value changes on investments recorded in other income, and an increase in voluntary contributions to housing and community investment programs, reflecting changes in the timing and availability of these programs compared to the corresponding period in the prior year.
Net income for the nine months ended September 30, 2026 was $237 million, a net decrease of $14 million compared to the corresponding period in the prior year. The decrease was primarily due to lower net interest income and unfavorable fair value changes on investments recorded in other income, partially offset by the decrease in voluntary contributions to housing and community investment programs, reflecting changes in the timing and availability of these programs compared to the corresponding period in the prior year.
The following table presents the returns on average assets and returns on average equity.
Three Months Ended
September 30, 		Nine Months Ended
September 30,
Ratios (annualized) 2026 2025 2026 2025
Return on average assets 0.36 % 0.41 % 0.37 % 0.40 %
Return on average equity 6.53 % 7.88 % 6.75 % 7.82 %
The decline in the returns for the three and nine months ended September 30, 2026, compared to the corresponding period in the prior year, primarily reflects proportionally greater decreases in net income relative to increases in average balances.
Changes in Financial Condition for the Nine Months Ended September 30, 2026. The following table presents the comparative highlights of our changes in financial condition ($ amounts in millions).
Condensed Statements of Condition September 30, 2026 December 31, 2025 $ Change % Change
Advances $ 38,604 $ 39,611 $ (1,007) (3) %
Mortgage loans held for portfolio, net 13,492 12,444 1,048 8 %
Cash and short-term investments 11,805 11,011 794 7 %
Investment securities 21,418 22,418 (1,000) (4) %
Other assets 755 776 (21) (3) %
Total assets $ 86,074 $ 86,260 $ (186) - %
Consolidated obligations $ 79,443 $ 79,677 $ (234) - %
MRCS 207 282 (75) (27) %
Other liabilities 1,665 1,747 (82) (5) %
Total liabilities 81,315 81,706 (391) - %
Capital stock 2,802 2,696 106 4 %
Retained earnings 1,872 1,798 74 4 %
Accumulated other comprehensive income 85 60 25 43 %
Total capital 4,759 4,554 205 5 %
Total liabilities and capital $ 86,074 $ 86,260 $ (186) - %
Total assets at September 30, 2026 were $86.1 billion, a net decrease of $186 million, or less than 1%, from December 31, 2025.
Total capital at September 30, 2026 was $4.8 billion, a net increase of $205 million, or 5%, from December 31, 2025. The net increase resulted primarily from growth in retained earnings and members' purchases of capital stock to support their advances activity, partially offset by a repurchase of excess capital stock in the second quarter.
Outlook. We believe that our financial performance will continue to provide sufficient, risk-adjusted returns for our members across a wide range of business, financial, and economic environments.
Our board of directors seeks to reward our members with an appropriate return on their investment, particularly those who actively utilize our products and services. On October 27, 2026, our board of directors declared a cash dividend on Class B-2 activity-based stock at an annualized rate of 9.25% and on Class B-1 non-activity-based stock at an annualized rate of 4.00%, resulting in a spread between the rates of 5.25 percentage points. The overall weighted-average annualized rate paid on member capital stock was 7.80%. The dividends were paid in cash on October 28, 2026.
The ultimate effects of economic and financial markets activity, including fiscal and monetary policies, the conditions in the housing markets and the level and volatility of market interest rates, as well as legislative and regulatory actions and geopolitical developments, continue to evolve and are highly uncertain and, therefore, the future impact on our business is difficult to predict. However, the Bank has been, and will continue to be, mission driven to meet the needs of its membership and communities.
Analysis of Results of Operations
Net Interest Income. The following tables presents average daily balances, interest income/expense, and average yields/cost of funds of our major categories of interest-earning assets and their funding sources ($ amounts in millions).
Three Months Ended September 30,
2026 2025
Average
Balance
Interest
Income/
Expense1
Average
Yield/ Cost of Funds1
Average
Balance
Interest
Income/
Expense1
Average
Yield/ Cost of Funds1
Assets:
Securities purchased under agreements to resell $ 2,031 $ 19 3.73 % $ 3,670 $ 40 4.35 %
Federal funds sold 5,365 50 3.72 % 4,717 52 4.38 %
MBS2
13,869 157 4.51 % 13,456 174 5.14 %
Other investment securities2
8,287 88 4.17 % 8,537 101 4.68 %
Advances 40,439 416 4.08 % 39,375 473 4.76 %
Mortgage loans held for portfolio3
13,321 152 4.51 % 12,248 134 4.33 %
Other assets (interest-earning)4
1,961 18 3.64 % 2,123 23 4.27 %
Total interest-earning assets 85,273 900 4.18 % 84,126 997 4.70 %
Other assets, net 335 28
Total assets $ 85,608 $ 84,154
Liabilities and Capital:
Interest-bearing deposits $ 1,024 9 3.55 % $ 963 10 4.14 %
Discount notes 27,228 256 3.73 % 24,441 263 4.27 %
CO bonds 51,608 502 3.86 % 53,121 587 4.38 %
MRCS 208 3 5.69 % 291 4 5.78 %
Total interest-bearing liabilities 80,068 770 3.81 % 78,816 864 4.35 %
Other liabilities 798 966
Total capital 4,742 4,372
Total liabilities and capital $ 85,608 $ 84,154
Net interest income $ 130 $ 133
Net spread on interest-earning assets less interest-bearing liabilities 0.37 % 0.35 %
Net interest margin5
0.60 % 0.62 %
Average interest-earning assets to interest-bearing liabilities 1.07 1.07
Nine Months Ended September 30,
2026 2025
Average
Balance
Interest
Income/
Expense
Average
Yield/ Cost of Funds1
Average
Balance 		Interest
Income/
Expense
Average
Yield/ Cost of Funds1
Assets:
Securities purchased under agreements to resell $ 2,704 $ 75 3.71 % $ 4,235 $ 139 4.39 %
Federal funds sold 4,960 137 3.70 % 3,794 124 4.39 %
MBS2
14,006 471 4.50 % 13,218 517 5.22 %
Other investment securities2
8,457 262 4.12 % 8,471 298 4.70 %
Advances 40,691 1,232 4.05 % 39,526 1,402 4.74 %
Mortgage loans held for portfolio3
12,872 426 4.43 % 11,681 374 4.29 %
Other assets (interest-earning)4
1,940 52 3.61 % 2,154 69 4.28 %
Total interest-earning assets 85,630 2,655 4.15 % 83,079 2,923 4.70 %
Other assets, net 281 31
Total assets $ 85,911 $ 83,110
Liabilities and Capital:
Interest-bearing deposits $ 936 24 3.51 % $ 956 30 4.15 %
Discount notes 27,403 759 3.70 % 23,473 756 4.31 %
CO bonds 51,707 1,489 3.85 % 53,157 1,738 4.37 %
MRCS 239 10 5.33 % 307 13 5.70 %
Total interest-bearing liabilities 80,285 2,282 3.80 % 77,893 2,537 4.35 %
Other liabilities 938 923
Total capital 4,688 4,294
Total liabilities and capital $ 85,911 $ 83,110
Net interest income $ 373 $ 386
Net spread on interest-earning assets less interest-bearing liabilities 0.35 % 0.35 %
Net interest margin5
0.58 % 0.62 %
Average interest-earning assets to interest-bearing liabilities 1.07 1.07
1 Annualized.
2 The average balances of AFS securities are based on amortized cost.
3 Includes non-accrual loans.
4 Consists of interest-bearing deposits and loans to other FHLBanks (if applicable). Includes the rights or obligations to cash collateral, except for variation margin payments characterized as daily settled contracts.
5 Annualized net interest income expressed as a percentage of the average balances of interest-earning assets.
Changes in both volume and interest rates determine changes in net interest income and net interest margin. Changes in interest income and interest expense that are not identifiable as either volume-related or rate-related, but are attributable to both volume and rate changes, have been allocated to the volume and rate categories based upon the proportion of the volume and rate changes.
The following table presents the changes in interest income and interest expense by volume and rate ($ amounts in millions).
Three Months Ended September 30, Nine Months Ended September 30,
2026 vs. 2025
2026 vs. 2025
Components Volume Rate Total Volume Rate Total
Increase (decrease) in interest income:
Securities purchased under agreements to resell $ (16) $ (5) $ (21) $ (45) $ (19) $ (64)
Federal funds sold 7 (9) (2) 35 (22) 13
MBS 5 (22) (17) 29 (75) (46)
Other investment securities (2) (11) (13) - (36) (36)
Advances 12 (69) (57) 40 (210) (170)
Mortgage loans held for portfolio 12 6 18 40 12 52
Other assets (interest-earning) (2) (3) (5) (7) (10) (17)
Total 16 (113) (97) 92 (360) (268)
Increase (decrease) in interest expense:
Interest-bearing deposits - (1) (1) (1) (5) (6)
Discount notes 28 (35) (7) 117 (114) 3
CO bonds (16) (69) (85) (46) (203) (249)
MRCS (1) - (1) (2) (1) (3)
Total 11 (105) (94) 68 (323) (255)
Increase (decrease) in net interest income $ 5 $ (8) $ (3) $ 24 $ (37) $ (13)
Average Balances. The average balances of interest-earning assets for the three months ended September 30, 2026 increased by 1% compared to the corresponding period in the prior year. The average balances of advances increased by 3% as a result of growth in advance demand. The average balances of mortgage loans increased by 9% as purchases from our members exceeded principal repayments by borrowers. The average balances of MBS increased by 3%, reflecting our goal to maintain investments in MBS near the 300% regulatory limit. The average balances of interest-bearing liabilities for the three months ended September 30, 2026 increased by 2% compared to the corresponding period in the prior year. The average balances of discount notes increased by 11% while the average balances of CO bonds decreased by 3%, reflecting a change in the mix of funding.
The average balances of interest-earning assets for the nine months ended September 30, 2026 increased by 3% compared to the corresponding period in the prior year. The average balances of advances increased by 3% as a result of growth in advance demand. The average balances of mortgage loans increased by 10% as purchases from our members exceeded principal repayments by borrowers. The average balances of MBS increased by 6%, reflecting our goal to maintain investments in MBS near the 300% regulatory limit. The average balances of interest-bearing liabilities for the nine months ended September 30, 2026 increased by 3% compared to the corresponding period in the prior year. The average balances of discount notes increased by 17% while the average balances of CO bonds decreased by 3%, reflecting a change in the mix of funding.
Yields/Cost of Funds. The average yield on total interest-earning assets, including the impact of hedging gains and losses but excluding certain impacts of trading securities and associated derivatives, for the three months ended September 30, 2026 was 4.18%, a decrease of 52 bps compared to the corresponding period in the prior year, resulting substantially from lower average short-term market interest rates that led to lower yields on our interest-earning assets. The average cost of funds of total interest-bearing liabilities, including the impact of hedging gains and losses, for the three months ended September 30, 2026 was 3.81%, a decrease of 54 bps due to lower funding costs on our interest-bearing liabilities, resulting substantially from lower average short-term market interest rates. The net effect was an increase in the net interest spread of 2 bps.
The average yield on total interest-earning assets, including the impact of hedging gains and losses but excluding certain impacts of trading securities and associated derivatives, for the nine months ended September 30, 2026 was 4.15%, a decrease of 55 bps compared to the corresponding period in the prior year, resulting substantially from lower average short-term market interest rates that led to lower yields on our interest-earning assets. The average cost of funds of total interest-bearing liabilities, including the impact of hedging gains and losses, for the nine months ended September 30, 2026 was 3.80%, a decrease of 55 bps due to lower funding costs on our interest-bearing liabilities, resulting substantially from lower average short-term market interest rates. The net effect was no change in our net interest spread.
Net interest margin for the three months ended September 30, 2026 was 0.60%, a decrease of 2 bps compared to the corresponding period in the prior year, reflecting a proportionally greater decrease in net interest income relative to the increase in interest-earning assets.
Net interest margin for the nine months ended September 30, 2026 was 0.58%, a decrease of 4 bps compared to the corresponding period in the prior year, reflecting a proportionally greater decrease in net interest income relative to the increase in interest-earning assets.
Other Income. The following table presents a comparison of the components of other income ($ amounts in millions).
Three Months Ended
September 30, 		Nine Months Ended
September 30,
Components 2026 2025 2026 2025
Net gains on sales of AFS securities $ - $ - $ 1 $ 3
Net gains (losses) on trading securities (2) 2 (8) 11
Net gains (losses) on derivatives 4 1 9 (9)
Other, net - 5 7 12
Total other income $ 2 $ 8 $ 9 $ 17
The net decrease in total other income for the three months ended September 30, 2026 compared to the corresponding period in the prior year was primarily driven by declines in the fair values of investments.
The net decrease in total other income for the nine months ended September 30, 2026 compared to the corresponding period in the prior year was primarily driven by declines in the fair values of investments and lower net gains on sales of available-for-sale securities.
Other Expenses. The following table presents a comparison of the components of other expenses ($ amounts in millions).
Three Months Ended September 30, Nine Months Ended
September 30,
Components 2026 2025 2026 2025
Compensation and benefits $ 16 $ 17 $ 52 $ 51
Other operating expenses 10 9 29 27
Finance Agency and Office of Finance 3 3 9 10
Voluntary contributions to housing and community investment 14 13 24 30
Other, net 2 2 4 5
Total other expenses $ 45 $ 44 $ 118 $ 123
The net increase in total other expenses for the three months ended September 30, 2026 compared to the corresponding period in the prior year was primarily due to an increase in voluntary contributions to housing and community investment, reflecting changes in the timing and availability of these programs.
The net decrease in total other expenses for the nine months ended September 30, 2026 compared to the corresponding period in the prior year was primarily due to a decrease in voluntary contributions to housing and community investment, reflecting changes in the timing and availability of these programs.
Supporting Housing and Community Investment. The following table presents additional information regarding our voluntary contributions to housing and community investment ($ amounts in millions).
Three Months Ended September 30, Nine Months Ended
September 30,
Voluntary Contribution Components 2026 2025 2026 2025
Contributions to AHP $ 6 $ 3 $ 6 $ 3
Grants, donations, and other contributions to affordable housing and community investment 7 9 16 24
Total voluntary contribution fulfillment 13 12 22 27
Supplemental voluntary contributions to AHP 1 1 2 3
Total voluntary contributions to housing and community investment $ 14 $ 13 $ 24 $ 30
Voluntary contributions to the AHP or other housing and community investment programs recognized as expense reduce income before assessments which, in turn, reduces the statutory AHP assessment. As such, we make supplemental voluntary contributions to the AHP in an amount that restores the statutory AHP assessment amount to what it otherwise would have been.
Consistent with 2025, the Bank has committed to allocating voluntary funding in the amount of 7.5% of prior year's net earnings to various affordable housing and community investment programs in 2026.
AHP Assessments. Our AHP assessment fluctuates in accordance with our net earnings. For the three months ended September 30, 2026, our AHP assessments were $9 million, a decrease of $1 million compared to the corresponding period in the prior year. For the nine months ended September 30, 2026, our AHP assessments were $27 million, a decrease of $2 million compared to the corresponding period in the prior year.
For the nine months ended September 30, 2026, the Bank's combined required and voluntary allocation totaled $51 million, a decrease of $8 million compared to the corresponding period in the prior year, primarily reflecting changes in the timing and availability of our voluntary housing and community investment programs.
Analysis of Financial Condition
Total Assets. The table below presents the comparative highlights of our major asset categories ($ amounts in millions).
September 30, 2026 December 31, 2025
Major Asset Categories Carrying Value % of Total Carrying Value % of Total
Advances $ 38,604 45 % $ 39,611 46 %
Mortgage loans held for portfolio, net 13,492 16 % 12,444 14 %
Cash and short-term investments 11,805 14 % 11,011 13 %
Trading securities 667 - % 1,102 1 %
MBS 13,735 16 % 13,760 16 %
Other investment securities 7,016 8 % 7,556 9 %
Other assets 755 1 % 776 1 %
Total assets $ 86,074 100 % $ 86,260 100 %
Total assets at September 30, 2026 were $86.1 billion, a net decrease of $186 million, or less than 1%, compared to December 31, 2025. The mix of our assets at September 30, 2026 remained relatively consistent with December 31, 2025, with the largest change being the 2% increase in mortgage loans held for portfolio as a percentage of total assets.
Advances. In general, advances fluctuate in accordance with our members' funding needs, primarily determined by their deposit levels, mortgage pipelines, loan growth, investment opportunities, available collateral, other balance sheet strategies, and the cost of alternative funding options.
Advances at September 30, 2026, at carrying value, totaled $38.6 billion, a net decrease of $1.0 billion, or 3%, compared to December 31, 2025. Advances outstanding, at par, totaled $39.1 billion, a net decrease of $465 million, or 1%.
The table below presents advances outstanding by type of financial institution ($ amounts in millions).
September 30, 2026 December 31, 2025
Borrower Type Par Value % of Total Par Value % of Total
Depository institutions:
Commercial banks and savings institutions $ 17,014 43 % $ 19,512 49 %
Credit unions 5,698 15 % 5,151 13 %
Former members 1,404 4 % 1,400 4 %
Total depository institutions 24,116 62 % 26,063 66 %
Insurance companies:
Insurance companies 14,995 38 % 13,508 34 %
Former members - - % 5 - %
Total insurance companies 14,995 38 % 13,513 34 %
CDFIs 4 - % 4 - %
Total advances outstanding $ 39,115 100 % $ 39,580 100 %
Advances outstanding, at par, to our depository members decreased by $1.9 billion, or 7%, and advances outstanding, at par, to our insurance company members increased by $1.5 billion, or 11%.
Our advances portfolio continues to be well-diversified with advances to commercial banks and savings institutions, credit unions, insurance companies, and CDFIs.
The following table presents the par value of advances outstanding by product type and redemption term, some of which contain call or put options ($ amounts in millions).
September 30, 2026 December 31, 2025
Product Type and Redemption Term Par Value % of Total Par Value % of Total
Fixed-rate:
Without call or put options
Due in 1 year or less $ 5,867 15 % $ 7,387 19 %
Due after 1 through 5 years 14,472 37 % 13,629 34 %
Due after 5 through 15 years 645 2 % 639 2 %
Thereafter 6 - % 8 - %
Total 20,990 54 % 21,663 55 %
Callable or prepayable
Due after 1 through 5 years 215 1 % 10 - %
Due after 5 through 15 years 36 - % 36 - %
Total 251 1 % 46 - %
Putable
Due in 1 year or less - - % 80 - %
Due after 1 through 5 years 1,094 2 % 2,262 6 %
Due after 5 through 15 years 1,483 4 % 2,545 6 %
Total 2,577 6 % 4,887 12 %
Total fixed-rate 23,818 61 % 26,596 67 %
Variable-rate:
Without call or put options
Due in 1 year or less 24 - % 102 - %
Due after 1 through 5 years 909 2 % 630 2 %
Due after 5 through 15 years 50 - % - - %
Total 983 2 % 732 2 %
Callable or prepayable
Due in 1 year or less 10,377 27 % 7,527 19 %
Due after 1 through 5 years 1,906 5 % 2,796 7 %
Due after 5 through 15 years 1,449 4 % 1,411 4 %
Thereafter 582 1 % 518 1 %
Total 14,314 37 % 12,252 31 %
Total variable-rate 15,297 39 % 12,984 33 %
Total advances $ 39,115 100 % $ 39,580 100 %
The mix of fixed- vs. variable-rate advances at September 30, 2026 changed compared to December 31, 2025, due primarily to member demand. At September 30, 2026 and December 31, 2025, fixed-rate advances included $20.2 billion and $22.0 billion, respectively, that are swapped to effectively create variable-rate advances, consistent with our balance sheet strategies to manage interest-rate risk.
During the nine months ended September 30, 2026, the par value of advances due in one year or less increased by 8%, while advances due after one year decreased by 7%. As a result, advances due in one year or less, as a percentage of the total outstanding at par, totaled 42% at September 30, 2026, an increase from 38% at December 31, 2025. However, based on the earlier of the redemption or next put date, advances due in one year or less, as a percentage of the total outstanding, at par, at September 30, 2026 totaled 47%, a decrease from 49% at December 31, 2025.
Mortgage Loans Held for Portfolio. In general, our volume of mortgage loans purchased is affected by several factors, including interest rates, competition, the general level of housing and refinancing activity in the United States, consumer product preferences, our balance sheet capacity and risk appetite, and regulatory considerations.
The following table summarizes the activity in the UPB of mortgage loans held for portfolio ($ amounts in millions).
Three Months Ended September 30, Nine Months Ended
September 30,
Mortgage Loans Activity 2026 2025 2026 2025
Balance, beginning of period $ 12,792 $ 11,790 $ 12,207 $ 10,591
Purchases by Bank 838 700 2,387 2,444
Principal repayments by borrowers (382) (337) (1,346) (882)
Balance, end of period $ 13,248 $ 12,153 $ 13,248 $ 12,153
Demand by our members to participate in our MPP continues to result in purchases outpacing principal repayments. Fluctuations in mortgage market rates throughout the year have resulted in higher levels of prepayments by our borrowers compared to the corresponding periods in the prior year.
Liquidity and Other Investment Securities. The following table presents a comparison of the components of our liquidity investments and other investment securities at carrying value ($ amounts in millions).
September 30, 2026 December 31, 2025
Components Carrying Value % of Total Carrying Value % of Total
Liquidity investments:
Cash and short-term investments:
Cash and due from banks $ 55 - % $ 52 - %
Interest-bearing deposits 1,372 4 % 1,327 4 %
Securities purchased under agreements to resell 4,400 13 % 4,550 14 %
Federal funds sold 5,978 18 % 5,082 15 %
Total cash and short-term investments 11,805 35 % 11,011 33 %
Trading securities:
U.S. Treasury obligations 667 2 % 1,102 3 %
Total trading securities 667 2 % 1,102 3 %
Total liquidity investments 12,472 37 % 12,113 36 %
Other investment securities:
AFS securities:
U.S. Treasury obligations 6,250 19 % 6,008 18 %
GSE and TVA debentures 694 2 % 1,474 4 %
GSE multifamily MBS 7,815 24 % 7,837 24 %
Total AFS securities 14,759 45 % 15,319 46 %
HTM securities:
State housing agency obligations 72 - % 74 - %
Other U.S. obligations - guaranteed single-family MBS 3,028 9 % 3,160 10 %
GSE single-family MBS 2,467 8 % 2,323 7 %
GSE multifamily MBS 425 1 % 440 1 %
Total HTM securities 5,992 18 % 5,997 18 %
Total other investment securities 20,751 63 % 21,316 64 %
Total cash and investments, carrying value $ 33,223 100 % $ 33,429 100 %
Liquidity Investments. The total outstanding balance and composition of our liquidity investments are influenced by our liquidity needs, regulatory requirements, actual and anticipated member advances activity, market conditions, and the availability of short-term investments at attractive interest rates, relative to our cost of funds.
Cash and short-term investments at September 30, 2026 totaled $11.8 billion, a net increase of $794 million, or 7%, from December 31, 2025, primarily due to an increase in federal funds sold.
The Bank purchases certain U.S. Treasury obligations as trading securities to enhance its liquidity. Such securities outstanding at September 30, 2026 totaled $667 million, a decrease of $435 million, or 39%, from December 31, 2025, primarily due to maturities.
Liquidity investments at September 30, 2026 totaled $12.5 billion, a net increase of $359 million, or 3%, from December 31, 2025. As a result, liquidity investments as a percent of total cash and investments increased from December 31, 2025.
Other Investment Securities. AFS securities at September 30, 2026 totaled $14.8 billion, a net decrease of $560 million, or 4%, from December 31, 2025, primarily due to maturities and sales outpacing new purchases.
Net unrealized gains on AFS securities, excluding the portion of the changes in fair value that are attributable to the risks being hedged in fair-value hedging relationships, at September 30, 2026 totaled $93 million, compared to net unrealized gains at December 31, 2025 of $68 million, primarily due to changes in interest rates, credit spreads and volatility.
HTM securities at September 30, 2026 totaled $6.0 billion, a net decrease of $5 million, or less than 1%, from December 31, 2025.
Net unrecognized losses on HTM securities at September 30, 2026 totaled $(44) million, compared to net unrecognized losses of $(17) million at December 31, 2025, primarily due to changes in interest rates, credit spreads and volatility.
Interest-Rate Payment Terms. Our other investment securities are presented below by interest-rate payment terms ($ amounts in millions).
September 30, 2026 December 31, 2025
Interest-Rate Payment Terms Amortized Cost % of Total Amortized Cost % of Total
AFS Securities:
Total non-MBS fixed-rate $ 6,918 47 % $ 7,453 49 %
Total MBS fixed-rate 7,748 53 % 7,798 51 %
Total AFS securities $ 14,666 100 % $ 15,251 100 %
HTM Securities:
Total non-MBS fixed-rate $ 72 1 % $ 74 1 %
Total MBS fixed-rate 188 3 % 191 3 %
Total MBS variable-rate 5,732 96 % 5,732 96 %
Total HTM securities $ 5,992 100 % $ 5,997 100 %
AFS and HTM securities:
Total fixed-rate $ 14,926 72 % $ 15,516 73 %
Total variable-rate 5,732 28 % 5,732 27 %
Total AFS and HTM securities $ 20,658 100 % $ 21,248 100 %
The mix of fixed- vs. variable-rate AFS and HTM securities at September 30, 2026 remained relatively consistent with December 31, 2025. However, all of the fixed-rate AFS securities are swapped to effectively create variable-rate securities, consistent with our balance sheet strategies to manage interest-rate risk.
Total Liabilities. Total liabilities at September 30, 2026 were $81.3 billion, a net decrease of $391 million, or less than 1%, from December 31, 2025.
Deposits (Liabilities). Total deposits at September 30, 2026 were $736 million, a net decrease of $3 million, or less than 1%, from December 31, 2025. These deposits provide a relatively small portion of our funding but can fluctuate from period to period and vary depending upon such factors as the attractiveness of our deposit pricing relative to the rates available on alternative money market instruments, members' preferences with respect to the maturity of their investments, and members' liquidity. The balances of these accounts are uninsured.
Consolidated Obligations. The overall balance of our consolidated obligations fluctuates in relation to our total assets. The carrying value of consolidated obligations outstanding at September 30, 2026 totaled $79.4 billion, a net decrease of $234 million, or less than 1%, from December 31, 2025.
The following table presents a breakdown by term of our consolidated obligations outstanding ($ amounts in millions).
September 30, 2026 December 31, 2025
Term Par Value % of Total Par Value % of Total
Consolidated obligations due in 1 year or less:
Discount notes $ 26,962 34 % $ 27,554 34 %
CO bonds 21,865 27 % 25,317 32 %
Total due in 1 year or less 48,827 61 % 52,871 66 %
Long-term CO bonds 31,382 39 % 27,416 34 %
Total consolidated obligations $ 80,209 100 % $ 80,287 100 %
The mix of our funding changed from December 31, 2025 as long-term CO bonds comprised a larger portion of consolidated obligations outstanding at September 30, 2026. We continue to seek to maintain a sufficient liquidity and funding balance between our financial assets and financial liabilities.
At September 30, 2026 and December 31, 2025, callable CO bonds were 42% and 43% of total CO bonds outstanding, respectively.
At September 30, 2026 and December 31, 2025, 56% and 62%, respectively, of our fixed-rate CO bonds were swapped using derivative instruments to effectively create variable-rate CO bonds, consistent with our balance sheet strategies to manage interest-rate risk.
Derivatives. The volume of derivative hedges is often expressed in terms of notional amounts, which is the amount upon which interest payments are calculated.
The following table presents the notional amounts by type of hedged item regardless of whether it is in a qualifying hedge relationship ($ amounts in millions).
Hedged Item September 30, 2026 December 31, 2025
Advances $ 20,227 $ 21,959
Investments 17,009 17,209
Mortgage loans MDCs 748 521
CO bonds 15,328 17,786
Discount notes 11,104 14,690
Total notional outstanding $ 64,416 $ 72,165
The total notional amount outstanding at September 30, 2026 decreased compared to December 31, 2025. The decrease in derivatives hedging discount notes was primarily due to actual and anticipated changes in the interest rate environment, which made swapping discount notes less attractive, while the decrease in derivatives hedging CO bonds was primarily due to a decrease in fixed-rate CO bonds outstanding.
Total Capital. Total capital at September 30, 2026 was $4.8 billion, a net increase of $205 million, or 5%, from December 31, 2025. The net increase resulted primarily from growth in retained earnings and members' purchases of capital stock to support their advances activity, partially offset by the Bank's repurchase of excess capital stock in the second quarter.
The following table presents a percentage breakdown of the components of GAAP capital.
Components September 30, 2026 December 31, 2025
Capital stock 59 % 59 %
Retained earnings 39 % 40 %
Accumulated other comprehensive income (loss) 2 % 1 %
Total GAAP capital 100 % 100 %
The components of GAAP capital at September 30, 2026 remained relatively consistent with December 31, 2025.
The following table presents a reconciliation of GAAP capital to regulatory capital ($ amounts in millions).
Reconciliation September 30, 2026 December 31, 2025
Total GAAP capital $ 4,759 $ 4,554
Exclude: Accumulated other comprehensive (income) loss (85) (60)
Include: MRCS 207 282
Total regulatory capital $ 4,881 $ 4,776
Liquidity
Our primary sources of liquidity are holdings of liquid assets, comprised of cash, short-term investments, and trading securities, as well as the issuance of consolidated obligations.
During the nine months ended September 30, 2026, we maintained sufficient access to funding; our net proceeds from the issuance of consolidated obligations totaled $424.6 billion.
Changes in Cash Flow. Net cash provided by operating activities for the nine months ended September 30, 2026 was $1.1 billion, compared to net cash used in operating activities for the nine months ended September 30, 2025 of $(240) million. The net change of $1.3 billion was substantially due to the fluctuation in variation margin payments on cleared derivatives. Such payments are treated by the Clearinghouses as daily settled contracts.
Capital Resources
Total Regulatory Capital Stock. The following table provides a breakdown of our outstanding capital stock and MRCS by type of member ($ amounts in millions).
September 30, 2026 December 31, 2025
Type of Member Amount % of Total Amount % of Total
Capital Stock:
Depository institutions:
Commercial banks and savings institutions $ 1,344 44 % $ 1,321 45 %
Credit unions 535 18 % 510 17 %
Total depository institutions 1,879 62 % 1,831 62 %
Insurance companies 923 31 % 865 29 %
CDFIs - - % - - %
Total capital stock, putable at par value 2,802 93 % 2,696 91 %
MRCS:
Depository institutions 205 7 % 280 9 %
Insurance companies 2 - % 2 - %
Total MRCS 207 7 % 282 9 %
Total regulatory capital stock $ 3,009 100 % $ 2,978 100 %
Required and Excess Capital Stock. The following table presents the composition of our regulatory capital stock ($ amounts in millions).
Components September 30, 2026 December 31, 2025
Required capital stock:
Member capital stock $ 2,057 $ 2,055
MRCS 63 63
Total required capital stock 2,120 2,118
Excess capital stock:
Member capital stock not subject to outstanding redemption requests 745 603
Member capital stock subject to outstanding redemption requests - 38
MRCS 144 219
Total excess capital stock 889 860
Total regulatory capital stock $ 3,009 $ 2,978
Excess stock as a percentage of regulatory capital stock 30 % 29 %
The net increase in total regulatory capital stock was primarily driven by members' purchases of capital stock to support their advances activity, partially offset by the repurchase of $200 million par value of excess capital stock from shareholders in April 2026 to reduce the amount of excess stock relative to total assets.
Under Finance Agency regulations, dividends cannot be paid in the form of capital stock if our excess stock is greater than 1% of our total assets. At September 30, 2026, our excess stock was 1.03% of our total assets.
Capital Distributions. The following table summarizes the weighted-average dividend rate paid on our Class B stock and dividend payout ratio.
Three Months Ended September 30, Nine Months Ended
September 30,
2026 2025 2026 2025
Weighted-average dividend rate1
7.92 % 8.14 % 7.76 % 7.94 %
Dividend payout ratio2
71.58 % 61.52 % 68.87 % 62.00 %
1 Annualized dividends paid in cash during the period, including the portion recorded as interest expense on MRCS, divided by the average amount of Class B stock eligible for dividends under our capital plan, including MRCS, for that same period.
2 Dividends paid in cash during the period, excluding the portion recorded as interest expense on MRCS, divided by net income for that same period.
Adequacy of Capital. We must maintain sufficient permanent capital to meet the combined credit risk, market risk, and operational risk components of the risk-based capital requirement.
The following table presents our risk-based capital requirement in relation to our permanent capital at September 30, 2026 and December 31, 2025 ($ amounts in millions).
Risk-Based Capital Components September 30, 2026 December 31, 2025
Credit risk $ 204 $ 200
Market risk 638 677
Operational risk 253 263
Total risk-based capital requirement $ 1,095 $ 1,140
Permanent capital $ 4,881 $ 4,776
Permanent capital as a percentage of required risk-based capital 446 % 419 %
The decrease in our total risk-based capital requirement was primarily attributable to a reduction in the market risk component, resulting from changes to the discount curves used in the market risk calculation. The operational risk component is calculated as 30% of the credit and market risk components. Our permanent capital at September 30, 2026 remained well in excess of our total risk-based capital requirement.
Critical Accounting Estimates
A full discussion of our critical accounting estimates is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates in our 2025 Form 10-K.
Recent Accounting and Regulatory Developments
Accounting Developments. For a description of how recent accounting developments may impact our financial condition, results of operations, or cash flows, see Notes to Financial Statements - Note 2 - Recently Adopted and Issued Accounting Guidance.
Legislative and Regulatory Developments. We continue to be subject to various legal and regulatory requirements and monitor related developments to evaluate their potential effects on us. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Legislative and Regulatory Developments in our 2025 Form 10-K and in our quarterly reports on Form 10-Q for the periods ended March 31, 2026 filed with the SEC on May 7, 2026 and June 30, 2026 filed with the SEC on August 6, 2026 for a description of certain legislative and regulatory developments that occurred prior to the publication of those reports. For discussion of related risks, see Item 1A. Risk Factors in our 2025 Form 10-K.
Risk Management
We have exposure to a number of risks in pursuing our business objectives. These risks may be broadly classified as market, credit, liquidity, operational, and business. Market risk is discussed in Item 3. Quantitative and Qualitative Disclosures about Market Risk. For additional information, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Management in our 2025 Form 10-K.
Credit Risk Management. We face credit risk on advances and other credit products, investments, mortgage loans, derivative financial instruments, and AHP grants.
Advances and Other Credit Products.
Concentration. Our credit risk is magnified due to the concentration of advances in a few borrowers. As of September 30, 2026, our top borrower held 13% of total advances outstanding, at par, and our top five borrowers held 44% of total advances outstanding, at par.
The following table presents the par value of advances outstanding to our largest borrowers ($ amounts in millions).
September 30, 2026
Borrower Amount % of Total
Old National Bank $ 5,151 13 %
Delaware Life Insurance Company 4,808 12 %
Merchants Bank of Indiana 2,953 8 %
First National Bank of America 2,482 6 %
Jackson National Life Insurance Company 1,987 5 %
Subtotal - five largest borrowers 17,381 44 %
Next five largest borrowers 7,421 19 %
Remaining borrowers 14,313 37 %
Total advances, par value $ 39,115 100 %
Because of this concentration, we perform frequent credit and collateral reviews on our largest borrowers. In addition, we regularly analyze the implications to our financial management and profitability if we were to lose the business of one or more of these borrowers.
For the three and nine months ended September 30, 2026 and 2025, we did not have gross interest income on advances, excluding the effects of interest-rate swaps, from any one borrower that exceeded 10% of our total interest income.
Collateral. Eligible borrowers pledge collateral to support activity with us, including advances. At September 30, 2026, all of our advances met the requirement to be collateralized at a minimum of 100 percent, net of applicable discounts. Eligible borrowers pledge collateral, including mission-related assets, in excess of their collateral requirement mainly to demonstrate available liquidity and to borrow additional amounts in the future. The following table summarizes the UPB of eligible outstanding collateral pledged by borrower type ($ amounts in millions):
September 30, 2026
Collateral Type Depository Institutions Insurance Companies Other Borrowers Total Collateral % of Total
Single-family
Single-family loans $ 71,711 $ 5,203 $ 6 $ 76,920 48 %
MBS1
11,362 8,922 - 20,284 13 %
Total single-family 83,073 14,125 6 97,204 61 %
Multi-family
Multi-family loans 8,846 8,096 - 16,942 11 %
MBS1
1,875 1,412 - 3,287 2 %
Total multi-family 10,721 9,508 - 20,229 13 %
Commercial
Real estate loans 20,814 12,114 - 32,928 20 %
MBS1
66 1,219 - 1,285 1 %
Total commercial 20,880 13,333 - 34,213 21 %
Other
Other real estate 383 1,753 - 2,136 1 %
Cash and agency securities 2,631 2,009 1 4,641 3 %
Government-insured loans 1,433 - - 1,433 1 %
Secured small business and agri-business loans 501 - - 501 - %
Total $ 119,622 $ 40,728 $ 7 $ 160,357 100 %
1 Amount may contain securities consisting of multiple collateral types (single-, multi-family or commercial). Reporting categorization is based on property type at issuance.
Investments. We are also exposed to credit risk through our investment portfolio. Our policies restrict the acquisition of investments to high-quality, short-term money market instruments and high-quality long-term securities.
The following table presents the unsecured investment credit exposure to private counterparties, categorized by the domicile of the counterparty's ultimate parent, based on the lowest of the counterparty's NRSRO long-term credit ratings, stated in terms of the S&P equivalent. The table does not reflect the foreign sovereign government's credit rating ($ amounts in millions).
September 30, 2026
Country AA A Total
Domestic $ 535 $ 1,907 $ 2,442
Australia 1,800 - 1,800
Canada - 2,158 2,158
France - 200 200
Netherlands - 750 750
Total unsecured credit exposure $ 2,335 $ 5,015 $ 7,350
Trading Securities. Our liquidity portfolio includes shorter-term U.S. Treasury obligations, which are direct obligations of the U.S. government and are classified as trading securities.
Other Investment Securities. Our long-term investments include MBS guaranteed by the housing GSEs (Fannie Mae and Freddie Mac), other U.S. obligations - guaranteed MBS (Ginnie Mae), longer-term U.S. Treasury obligations, debentures issued by Fannie Mae, Freddie Mac, the TVA and the Federal Farm Credit Banks, and state housing agency obligations.
A Finance Agency regulation provides that the total amount of our investments in MBS, calculated using amortized historical cost excluding the impact of certain derivatives adjustments, must not exceed 300% of our total regulatory capital, as of the day we purchase the securities, based on the capital amount most recently reported to the Finance Agency. If our outstanding investments in MBS exceed the limitation at any time, but were in compliance at the time we purchased the investments, we would not be considered out of compliance with the regulation, but we would not be permitted to purchase additional investments in MBS until these outstanding investments were within the limitation. Generally, our goal is to maintain investments in MBS near the 300% regulatory limit in order to enhance earnings and capital for our members and diversify our revenue stream. At September 30, 2026, these investments totaled 295% of total regulatory capital.
The following table presents the carrying values of our investments, excluding accrued interest, grouped by credit rating and investment category. Applicable rating levels are determined using the lowest relevant long-term rating from S&P and Moody's, each stated in terms of the S&P equivalent. Rating modifiers are ignored when determining the applicable rating level for a given counterparty. Amounts reported do not reflect any subsequent changes in ratings, outlook, or watch status ($ amounts in millions).
September 30, 2026
Investment Category AA A
Unrated1
Total
Short-term investments:
Interest-bearing deposits $ 535 $ 837 $ - $ 1,372
Securities purchased under agreements to resell - 4,000 400 4,400
Federal funds sold 1,800 4,178 - 5,978
Total short-term investments 2,335 9,015 400 11,750
Trading securities:
U.S. Treasury obligations 667 - - 667
Total trading securities 667 - - 667
Other investment securities:
U.S. Treasury obligations 6,250 - - 6,250
GSE and TVA debentures 694 - - 694
State housing agency obligations 72 - - 72
GSE MBS 10,707 - - 10,707
Other U.S. obligations-guaranteed MBS 3,028 - - 3,028
Total other investment securities 20,751 - - 20,751
Total investments, carrying value $ 23,753 $ 9,015 $ 400 $ 33,168
Percentage of total 72 % 27 % 1 % 100 %
1 Although the counterparty is unrated, the underlying collateral supporting these investments are U.S. Treasury obligations with a rating of AA.
Mortgage Loans Held for Portfolio.
LRA. The following table presents the changes in the LRA ($ amounts in millions).
Nine Months Ended
LRA Activity September 30, 2026
Liability, beginning of period $ 284
Additions 27
Claims paid -
Distributions to Participating Financial Institutions (11)
Liability, end of period $ 300
Mortgage Loan Concentration. During the nine months ended September 30, 2026, our top-selling PFI sold us mortgage loans totaling $219 million, or 9% of the total mortgage loans that we purchased. Our five top-selling PFIs sold us 42% of the total. Because of this concentration, we regularly analyze the implications to our financial management and profitability if we were to lose the business of one or more of these sellers.
For the three and nine months ended September 30, 2026 and 2025, no aggregate mortgage loans outstanding previously purchased from any one PFI contributed interest income that exceeded 10% of our total interest income.
The properties underlying the mortgage loans in our portfolio are dispersed across 50 states, the District of Columbia and the U.S. Virgin Islands, with concentrations in Michigan and Indiana, the two states in our district.
The following table presents the percentage of UPB of conventional loans outstanding for the five largest state concentrations.
State September 30, 2026
Michigan 42 %
Indiana 34 %
Kentucky 3 %
Florida 2 %
California 2 %
All others 17 %
Total 100 %
Derivatives. The following table presents key information on derivative positions with counterparties on a settlement date basis using the lower credit rating from S&P and Moody's, stated in terms of the S&P equivalent ($ amounts in millions).
September 30, 2026
Counterparty and Credit Rating
Notional
Amount
Net Estimated Fair Value
Before Collateral
Cash Collateral
Pledged To (From)
Counterparty
Net Credit
Exposure
Non-member counterparties:
Asset positions with credit exposure
Uncleared derivatives - A $ 9,404 $ 247 $ (243) $ 4
Uncleared derivatives - BBB 1,846 8 (7) 1
Cleared derivatives 36,944 8 400 408
Liability positions with credit exposure
Uncleared derivatives - AA 351 (9) 9 -
Uncleared derivatives - A 1,509 (9) 9 -
Cleared derivatives - AA
45 - 1 1
Total derivative positions with credit exposure to non-member counterparties 50,099 245 169 414
Subtotal - derivative positions with credit exposure 50,099 $ 245 $ 169 $ 414
Derivative positions without credit exposure 14,317
Total derivative positions $ 64,416
Derivative positions without credit exposure represent derivative transactions in which the counterparty has the credit exposure.
Federal Home Loan Bank of Indianapolis published this content on November 10, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 10, 2026 at 15:28 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]