Federal Home Loan Bank of Pittsburgh
03/04/2026 | Press release | Distributed by Public on 03/04/2026 08:26
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Information
This Form 10-K includes "forward-looking statements". Such statements may include descriptions of the objectives, projections, estimates, or predictions of the future of the Bank . Such statements do not relate strictly to historical or current facts. They often use words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," "likely," and similar expressions.
Forward-looking statements involve risks and uncertainties, and as such, actual results could differ materially from those that the statements express or imply due to factors such as:
•economic and market conditions, including, but not limited to, conditions in real estate, credit and mortgage markets;
•volatility of market prices, rates, and indices related to financial instruments;
•natural or man-made disasters, pandemics, climate change, conflicts or terrorist attacks or other geopolitical events, such as ongoing hostilities between Russia and Ukraine and in the Middle East;
•political uncertainties related to global trade policies, supply chain disruptions and tariff tensions;
•executive, legislative, regulatory, and judicial events and actions that affect the Bank, its members, counterparties, other Federal Home Loan Banks (FHLBanks) or investors in FHLBank debt;
•risks related to the Bank's investments, including investments in mortgage-backed securities (MBS);
•changes in the assumptions used to estimate credit losses;
•changes in the Bank's ability to introduce new products and services to meet market demand;
•changes in the Bank's: credit rating, capital structure, capital requirements, membership composition, membership's demand for advances and other products, and competitive environment;
•changes in expectations regarding the Bank's payment of dividends;
•increases or decreases in advances prepayments;
•changes in investor demand for FHLBank debt or in the ratings of FHLBank System debt;
•the Bank's ability to enter financial instruments to meet its investment, balance sheet and risk management goals;
•disruptions in the capital markets;
•the ability of each of the other FHLBanks to repay the principal and interest on consolidated obligations for which it is the primary obligor and with respect to which the Bank has joint and several liability; and
•technology and cybersecurity risks (including cybersecurity risk driven by artificial intelligence).
Readers of this report should not rely solely on the forward-looking statements and should consider all risks and uncertainties addressed throughout this report, as well as those discussed under Item 1A. Risk Factors. Information on the Bank's website referred to in this Form 10-K is not incorporated in, or a part of, this Form 10-K. Forward-looking statements in this Form 10-K should not be relied on as representing the Bank's expectations or assumptions as of any time subsequent to the time this Form 10-K is filed with the SEC. Forward-looking statements speak only as of the date made, and the Bank has no obligation, and does not undertake publicly, to update or revise any forward-looking statement for any reason.
This Management's Discussion and Analysis (MD&A) should be read in conjunction with the Bank's audited financial statements in Item 8. Financial Statements and Supplementary Data and all risks and uncertainties addressed throughout this report, as well as those discussed under Item 1A. Risk Factors included herein.
Executive Summary
Overview.The Bank's financial condition and results of operations are influenced by global and national economies, local economies within its three-state district, and the conditions in the financial, housing and credit markets, which impact the interest rate environment.
The interest rate environment significantly impacts the Bank's profitability. Net interest income is affected by several external factors, including market interest rate levels and volatility, credit spreads and the general state of the economy. To manage interest rate risk in connection with advances and debt, the Bank executes interest rate derivatives. Short-term interest rates also directly affect the Bank's earnings on invested capital. Finally, the Bank's mortgage-related assets make it sensitive to changes in mortgage rates. The Bank earns relatively narrow spreads between yields on assets (particularly advances, its largest asset) and the rates paid on corresponding liabilities.
The U.S. economy remained resilient in 2025 despite global trade and immigration policy uncertainty, allowing for the Federal Reserve to hold rates constant for the first half of the year. The labor market, however, started to show signs of weakness in the second half of 2025. The Federal Reserve responded with three consecutive 25 basis point rate cuts at the September, October and December meetings, bringing the federal funds target range from 4.25%-4.50% to 3.50%-3.75%. These actions resulted in the steepening of the Treasury curve with yields declining except for the 30-year bond, which remained elevated due to fiscal concerns. Long-term FHLBank debt spreads relative to U.S. Treasuries narrowed during 2025, driven by lower FHLBank debt issuance and declining market volatility in the second half of the year.
Results of Operations. The Bank's net income for 2025 totaled $418.3 million, compared to $587.5 million for 2024. The $169.2 million decrease was driven primarily by lower net interest income and lower non interest income. The decrease in net interest income was the result of lower average advances and lower short-term interest rates. The decrease in noninterest income was due to primarily to valuation changes in the Bank's derivative portfolio resulting from interest rate volatility. The net interest margin was 70 basis points and 71 basis points for 2025 and 2024, respectively.
Statutory AHP assessments were $46.6 million as a result of the Bank's earnings in 2025, compared to $65.5 million as a result of earnings in 2024.
In addition to statutory AHP assessments under the FHLBank Act, in 2025 and 2024, the Bank committed to make voluntary contributions of 5% of prior year's earnings to its suite of voluntary community products. The Bank intends to continue to make a supplemental voluntary contribution to AHP to increase the pool of available AHP funds to the amount that would have been statutorily required, absent the Bank's voluntary contributions. The Bank exceeded its commitment in 2025 and in 2024. The Bank's voluntary contributions were 6.3% and 6.9% of its prior year's earnings during 2025 and 2024 respectively. For additional information on the Bank's Community Products, see the Community Products discussion in Earnings Performance in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 10 - Affordable Housing Program (AHP) and Voluntary Contributions in this Form 10-K.
Financial Condition. Advances. Advances totaled $36.8 billion at December 31, 2025, a decrease of $33.1 billion compared to $69.9 billion at December 31, 2024. In addition, the par value of advances that had a remaining maturity of more than one year increased to 37% at December 31, 2025 compared to 27% at December 31, 2024. Member demand for advances continues to be primarily driven by members' liquidity management practices, which are influenced by their loan demand, deposit balances and investment activities. Although advance levels decreased, it is not uncommon for the Bank to experience fluctuations in the overall advance portfolio driven primarily by changes in member needs.
The ability to grow and/or maintain the advance portfolio is affected by, among other things, the following: (1) the liquidity demands of the Bank's borrowers; (2) the composition of the Bank's membership; (3) members' regulatory requirements; (4) current and future credit market conditions; (5) housing market trends; (6) the shape of the yield curve; and (7) advance pricing.
Liquidity Investments.The Bank maintains liquidity to meet member borrowing needs and regulatory standards. The liquidity investment portfolio is comprised of cash, interest-bearing deposits, Federal funds sold, securities purchased under agreements to resell, and U.S. Treasury obligations classified as trading or AFS. At December 31, 2025, the Bank held $16.0 billion of liquid assets, relatively flat compared to $15.8 billion at December 31, 2024. Liquid assets can fluctuate due to routine portfolio management practices.
Investments. The Bank's investment portfolio, excluding those investments included in the liquidity portfolio, is comprised of trading, AFS and HTM investments. The investments are subject to the Bank's risk guidelines and certain other requirements, such as yield. The Bank held $14.5 billion in its investment portfolio at December 31, 2025, compared to $15.5
billion at December 31, 2024, a decrease of $1.0 billion. During 2025, the MBS portfolio declined as the Bank curtailed MBS purchases because the portfolio reached the regulatory limit relative to equity.
Consolidated Obligations. The Bank's consolidated obligations totaled $67.5 billion at December 31, 2025, a decrease of $32.2 billion from December 31, 2024. At December 31, 2025, bonds represented 75% of the Bank's consolidated obligations, compared with 88% at December 31, 2024. Discount notes represented 25% of the Bank's consolidated obligations at December 31, 2025 compared with 12% at year-end 2024. The overall decrease in consolidated obligations outstanding is consistent with the decrease in advance balances. The funding mix shifted towards fixed-rate callable bonds and discount notes that replaced maturing floating-rate bonds as the Bank took advantage of favorable funding spreads.
Capital Position and Regulatory Requirements. Total capital at December 31, 2025 was $4.6 billion, compared to $5.6 billion at December 31, 2024. Total capital decreased due to decreased capital stock as a result of lower advances. Total retained earnings at December 31, 2025 were $2.2 billion, compared with $2.1 billion at December 31, 2024.
In February 2026, the Bank declared quarterly dividends of 9.50% annualized on activity stock and 4.85% annualized on membership stock. The dividends were based on average member capital stock held for the fourth quarter of 2025.
Dividends paid by the Bank are subject to Board approval and may be paid in either capital stock or cash; historically, the Bank has paid cash dividends. These dividends are based on stockholders' average balances for the previous quarter.
Dividends paid in 2025, 2024 and 2023 are presented in the table below.
| Dividend - Annual Yield | ||||||||||||||||||||
|
2025
|
2024
|
2023
|
||||||||||||||||||
| Membership | Activity | Membership | Activity | Membership | Activity | |||||||||||||||
| February | 5.10% | 9.00% | 5.35% | 8.50% | 4.00% | 7.95% | ||||||||||||||
| April | 4.60% | 9.00% | 5.60% | 8.75% | 5.00% | 7.95% | ||||||||||||||
| July | 4.85% | 9.50% | 5.60% | 9.00% | 5.25% | 7.95% | ||||||||||||||
| October | 4.85% | 9.50% | 5.60% | 9.00% | 5.35% | 8.25% | ||||||||||||||
The dividend rates demonstrate that the Bank continues to return value to its member shareholders. Looking forward, market and business conditions can impact the Bank's overall performance, as well as the levels of future dividends. The Bank's intent is to continue to provide meaningful shareholder return; future dividend rates may not correspond directly with the pace or direction of interest rate changes.
Based on the financial information as of December 31, 2025, the Finance Agency determined the Bank was adequately capitalized under the capital rule.
2026 Outlook
The Bank is a cooperative designed to meet the liquidity and other needs of its members. The Bank expects advance levels to remain relatively consistent with year-end 2025 as members are expected to continue to use advances to meet liquidity needs. Member demand will continue to be impacted by member loan demand, deposit levels, market liquidity, Federal Reserve actions to adjust short-term interest rates, and regulatory requirements for members. The borrowing activities of larger members will continue to be the predominant driver of change in the Bank's advances. In addition, the Bank expects members usage of letters of credit to be consistent with 2025.
The Bank expects mortgage loans held for portfolio purchased through the MPF Program to increase slightly during 2026. Elevated mortgage rates have slowed purchase and paydown activity relative to years with lower rates or decreasing rate environments.
The Bank expects MBS investment securities to remain consistent throughout 2026 as the Bank has limited capacity to increase the size of the MBS investment portfolio under its regulatory purchasing authority. Purchasing MBS investment securities is expected to occur as long as spreads remain attractive and there is regulatory capacity. Spread levels may be impacted by the Federal Reserve's balance sheet management decisions and level of investor demand.
Access to debt markets has been reliable, and the Bank expects this access to remain reliable.
Current forward interest rate curves reflect market projections for short-term interest rates to decline in 2026 assuming Federal Reserve inflation targets are achieved, and long-term rates to increase slightly during 2026. The Bank expects lower net interest income compared with 2025 due to lower average advance balances, reduced earnings on the re-investment of capital in short-term investments due to the expectation of lower short-term interest rates, and favorable funding expiring which will result in a normalization of net interest spread. In addition, the Bank expects operating expenses, exclusive of voluntary contributions, to be relatively flat compared to the prior year. The Bank expects to continue to contribute at least 5% of prior year's pre-assessment net income to its suite of voluntary community products during 2026. The Bank's intent is to continue to provide meaningful shareholder return; future dividend rates may not correspond directly with the pace or direction of interest rate changes.
Future opportunities and challenges may arise with potential changes in the Bank's operating landscape including various legislative actions and changes in the Bank's regulatory compliance requirements. For more details, refer to Item 1A. Risk Factors and the Legislative and Regulatory Developments section in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K. However, the Bank has been, and will continue to be, mission driven to meet the needs of its membership and communities.
Earnings Performance
The following is the Bank's earnings performance for the years ended December 31, 2025 and 2024, which should be read in conjunction with the Bank's audited financial statements included in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
Net Interest Income
Average Balances and Interest Yields/Rates Paid. The following table summarizes the average balances, yields or rates paid, and net interest margin on interest-earning assets and interest-bearing liabilities for 2025 , 2024, and 2023.
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||
|
(dollars in millions) |
Average Balance |
Interest Income/ Expense |
Avg. Yield/ Rate (%) |
Average Balance |
Interest Income/ Expense |
Avg. Yield/ Rate (%) |
Average Balance |
Interest Income/ Expense |
Avg. Yield/ Rate (%) |
||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
|
Securities purchased under agreements to resell
|
$ | 3,623.3 | $ | 155.2 | 4.28 | $ | 7,981.5 | $ | 413.5 | 5.18 | $ | 6,085.2 | $ | 310.9 | 5.11 | ||||||||||||||
|
Federal funds sold
|
8,303.2 | 352 | 4.24 | 3,155.0 | 164.3 | 5.21 | 3,842.1 | 192.9 | 5.02 | ||||||||||||||||||||
|
Interest-bearing deposits (1)
|
3,194.5 | 137.9 | 4.32 | 3,789.2 | 200.7 | 5.30 | 4,024.9 | 205.8 | 5.11 | ||||||||||||||||||||
|
Investment securities (2)
|
19,479.1 | 964.4 | 4.95 | 18,276.6 | 1,044.6 | 5.72 | 14,460.5 | 769.2 | 5.32 | ||||||||||||||||||||
|
Advances (3)
|
49,433.5 | 2,349.0 | 4.75 | 73,005.1 | 4,096.0 | 5.61 | 78,097.3 | 4,219.0 | 5.40 | ||||||||||||||||||||
|
Mortgage loans held for portfolio (4)
|
5,056.8 | 197.3 | 3.90 | 4,748.7 | 168.6 | 3.55 | 4,616.3 | 148.4 | 3.22 | ||||||||||||||||||||
| Total interest-earning assets | 89,090.4 | 4,155.8 | 4.66 | 110,956.1 | 6,087.7 | 5.49 | 111,126.3 | 5,846.2 | 5.26 | ||||||||||||||||||||
|
Other assets
|
1,009.3 | 1,415.2 | 1,443.5 | ||||||||||||||||||||||||||
| Total assets | $ | 90,099.7 | $ | 112,371.3 | $ | 112,569.8 | |||||||||||||||||||||||
| Liabilities and capital: | |||||||||||||||||||||||||||||
|
Deposits (1)
|
$ | 663.7 | $ | 27.7 | 4.18 | $ | 678.7 | $ | 35.0 | 5.15 | $ | 658.4 | $ | 33.1 | 5.03 | ||||||||||||||
|
Consolidated obligation discount notes
|
10,205.4 | 423.9 | 4.15 | 11,569.6 | 601.4 | 5.20 | 22,897.7 | 1,118.9 | 4.89 | ||||||||||||||||||||
|
Consolidated obligation bonds
|
72,830.4 | 3,078.3 | 4.23 | 92,285.4 | 4,664.9 | 5.05 | 81,052.3 | 3,953.4 | 4.88 | ||||||||||||||||||||
| Other borrowings | 8.3 | 0.8 | 8.96 | 27.6 | 2.4 | 8.76 | 31.4 | 2.5 | 7.84 | ||||||||||||||||||||
| Total interest-bearing liabilities | 83,707.8 | 3,530.7 | 4.22 | 104,561.3 | 5,303.7 | 5.07 | 104,639.8 | 5,107.9 | 4.88 | ||||||||||||||||||||
| Other liabilities | 1,453.1 | 2,188.3 | 2,468.1 | ||||||||||||||||||||||||||
| Total capital | 4,938.8 | 5,621.7 | 5,461.9 | ||||||||||||||||||||||||||
| Total liabilities and capital | $ | 90,099.7 | $ | 112,371.3 | $ | 112,569.8 | |||||||||||||||||||||||
| Net interest spread | 0.44 | 0.42 | 0.38 | ||||||||||||||||||||||||||
| Impact of noninterest-bearing funds | 0.26 | 0.29 | 0.28 | ||||||||||||||||||||||||||
|
Net interest income/net interest margin(5)
|
$ | 625.1 | 0.70 | $ | 784.0 | 0.71 | $ | 738.3 | 0.66 | ||||||||||||||||||||
Notes:
(1) Average balances of deposits (assets and liabilities) include cash collateral received from/paid to counterparties which is reflected in the Statements of Condition as derivative assets/liabilities.
(2) Investment securities include trading, AFS and HTM securities. The average balances of AFS and HTM are reflected at amortized cost.
(3)Interest on advances includes prepayment fees, net of $1.8 million, $8.5 million and $0.1 million in 2025, 2024 and 2023, respectively.
(4) Nonaccrual mortgage loans are included in average balances in determining the average rate.
(5) Net interest margin is net interest income before provision (reversal) for credit losses as a percentage of average interest-earning assets.
The Bank's business model is intended to protect the net interest spread earned by the Bank and withstand fluctuations in both the level of interest rates and volume of business. Net interest spread increased to 44 basis points in 2025, compared to 42 basis points in the same prior year period. This was primarily due to changes in the Bank's balance sheet composition with relatively lower net spread advances now making up a smaller portion of total assets.
Overall, net interest margin decreased 1 basis point to 70 basis points in 2025 compared to 71 basis points in 2024 due to a reduction in earnings on capital from lower capital levels and lower short-term interest rates.
For discussion related to 2024 compared to 2023, refer to the Net Interest Income disclosure included in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Bank's 2024 Form 10-K.
Rate/Volume Analysis.Changes in both volume and interest rates influence changes in net interest income and net interest margin. The following table summarizes changes in interest income and interest expense between 2025, 2024, and 2023.
|
Increase (Decrease) in Interest Income/Expense Due to Changes in Rate/Volume |
Increase (Decrease) in Interest Income/Expense Due to Changes in Rate/Volume |
|||||||||||||||||||
|
2025 Compared to 2024
|
2024 Compared to 2023
|
|||||||||||||||||||
| (in millions) |
Volume (1) (3)
|
Rate(2) (3)
|
Total |
Volume (1) (3)
|
Rate(2) (3)
|
Total | ||||||||||||||
| Securities purchased under agreements to resell | $ | (196.1) | $ | (62.2) | $ | (258.3) | $ | 98.2 | $ | 4.4 | $ | 102.6 | ||||||||
| Federal funds sold | 223.3 | (35.6) | 187.7 | (35.6) | 7.0 | (28.6) | ||||||||||||||
| Interest-bearing deposits | (28.8) | (34.0) | (62.8) | (12.3) | 7.2 | (5.1) | ||||||||||||||
| Investment securities | 65.7 | (145.9) | (80.2) | 214.8 | 60.6 | 275.4 | ||||||||||||||
| Advances | (1,185.2) | (561.8) | (1,747.0) | (281.7) | 158.7 | (123.0) | ||||||||||||||
| Mortgage loans held for portfolio | 11.4 | 17.3 | 28.7 | 4.3 | 15.9 | 20.2 | ||||||||||||||
| Total interest-earning assets | $ | (1,109.7) | $ | (822.2) | $ | (1,931.9) | $ | (12.3) | $ | 253.8 | $ | 241.5 | ||||||||
| Deposits | $ | (0.8) | $ | (6.5) | $ | (7.3) | $ | 1.1 | $ | 0.8 | $ | 1.9 | ||||||||
| Consolidated obligation discount notes | (65.6) | (111.9) | (177.5) | (584.9) | 67.4 | (517.5) | ||||||||||||||
| Consolidated obligation bonds | (892.7) | (693.9) | (1,586.6) | 563.7 | 147.8 | 711.5 | ||||||||||||||
| Other borrowings | (1.7) | 0.1 | (1.6) | (0.3) | 0.2 | (0.1) | ||||||||||||||
| Total interest-bearing liabilities | $ | (960.8) | $ | (812.2) | $ | (1,773.0) | $ | (20.4) | $ | 216.2 | $ | 195.8 | ||||||||
| Total increase (decrease) in net interest income | $ | (148.9) | $ | (10.0) | $ | (158.9) | $ | 8.1 | $ | 37.6 | $ | 45.7 | ||||||||
Notes:
(1)Volume changes are calculated as the change in volume multiplied by the prior year rate.
(2)Rate changes are calculated as the change in rate multiplied by the prior year average balance.
(3) Changes that are not identifiable as either volume-related or rate-related, but rather are equally attributable to both volumes and rates, have been allocated to the volume and rate categories based upon the proportion of the absolute value of the volume and rate changes.
Interest income decreased in 2025 compared to 2024. The decrease was driven by lower average advances and lower yields due to a decrease in short-term interest rates.
Interest expense decreased in 2025 compared to 2024 driven by lower average consolidated obligations and lower rates paid on consolidated obligations due to decreases in short-term interest rates.
For discussion related to 2024 compared to 2023, refer to the Net Interest Income disclosure included in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Bank's 2024 Form 10-K.
Advance Prepayment Fees. When a borrower elects to prepay an advance, the Bank charges a borrower a prepayment fee, which makes the Bank financially indifferent to a borrower's decision to prepay an advance. The Bank records prepayment fees net of basis adjustments, if applicable, which are primarily related to hedging activities included in the carrying value of the advance, as interest income on advances on the Statements of Income. The following table summarizes the advance prepayment fees for 2025, 2024, and 2023.
|
Year ended December 31,
|
|||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||
| Gross amount of prepayment fees received from advance borrowers | $ | 1.8 | $ | 1.4 | $ | 0.1 | |||||
|
Hedging fair value adjustments
|
- | 7.2 | - | ||||||||
|
Other adjustments
|
- | (0.1) | - | ||||||||
|
Total advance prepayment fees, net
|
$ | 1.8 | $ | 8.5 | $ | 0.1 | |||||
Derivative Effects on Net Interest Income.The following tables show the impact on net interest income from the effect of derivatives and hedging activities. Gains (losses) on derivatives and hedges items in qualifying fair value hedge relationships are recorded in interest income or expense. In addition, for derivatives designated as fair value hedges, the net interest settlements and the price alignment amount related to such derivatives are recognized as adjustments to the interest income or expense of the designated hedged item. As such, all the effects on earnings of derivatives qualifying for fair value hedge accounting are reflected in net interest income.
The effect on earnings from derivatives not receiving fair value hedge accounting are included in" Non-Interest Income".
| 2025 | ||||||||||||||||||||
| (in millions) | Advances | Investments | Mortgage Loans | Bonds | Discount Notes | Total | ||||||||||||||
|
Amortization/accretion of hedging activities
|
$ | 0.3 | $ | (0.1) | $ | 0.8 | $ | - | $ | - | $ | 1.0 | ||||||||
| Gains (losses) on designated fair value hedges | - | (0.7) | - | 0.4 | 2.5 | 2.2 | ||||||||||||||
|
Net interest settlements on designated fair value hedges
|
99.1 | 145.3 | - | (215.7) | (2.0) | 26.7 | ||||||||||||||
|
Other - price alignment amount on cleared derivatives
|
(3.4) | (9.9) | - | (0.5) | - | (13.8) | ||||||||||||||
| Total effect on net interest income | $ | 96.0 | $ | 134.6 | $ | 0.8 | $ | (215.8) | $ | 0.5 | $ | 16.1 | ||||||||
| 2024 | ||||||||||||||||||||
| (in millions) | Advances | Investments | Mortgage Loans | Bonds | Discount Notes | Total | ||||||||||||||
|
Amortization/accretion of hedging activities
|
$ | 0.3 | $ | (0.1) | $ | (0.2) | $ | - | $ | - | $ | - | ||||||||
| Gains (losses) on designated fair value hedges | - | (0.5) | - | 1.2 | (1.4) | (0.7) | ||||||||||||||
|
Net interest settlements on designated fair value hedges
|
302.6 | 229.0 | - | (491.6) | (5.3) | 34.7 | ||||||||||||||
| Other - price alignment amount on cleared derivatives | (13.4) | (21.0) | - | (0.6) | 0.1 | (34.9) | ||||||||||||||
| Total effect on net interest income | $ | 289.5 | $ | 207.4 | $ | (0.2) | $ | (491.0) | $ | (6.6) | $ | (0.9) | ||||||||
| 2023 | ||||||||||||||||||||
| (in millions) | Advances | Investments | Mortgage Loans | Bonds | Discount Notes | Total | ||||||||||||||
|
Amortization/accretion of hedging activities
|
$ | 0.3 | $ | (0.1) | $ | (0.5) | $ | - | $ | - | $ | (0.3) | ||||||||
| Gains (losses) on designated fair value hedges | - | (0.4) | - | (1.1) | (0.5) | (2.0) | ||||||||||||||
|
Net interest settlements on designated fair value hedges
|
266.9 | 129.7 | - | (618.5) | (8.7) | (230.6) | ||||||||||||||
| Other - price alignment amount on cleared derivatives | 49.0 | 59.6 | - | (10.4) | (0.2) | 98.0 | ||||||||||||||
| Total effect on net interest income | $ | 316.2 | $ | 188.8 | $ | (0.5) | $ | (630.0) | $ | (9.4) | $ | (134.9) | ||||||||
The Bank's primary hedging strategy uses derivatives to hedge the fair market value changes attributable to changes in the benchmark interest rates. The purpose of this strategy is to protect the net interest spread against adverse interest rate changes. Using derivatives to convert interest rates from fixed to variable can increase or decrease net interest income. The variances in the derivative impacts from period to period are driven by the change in the average variable rate, the timing of interest rate resets and the average hedged portfolio balances outstanding during any given period.
In addition, the Bank uses many different funding and hedging strategies. These strategies involve closely match-funding bullet advances with bullet debt. This is designed in part to avoid the use of derivatives where prudent and reduce the Bank's reliance on short-term funding.
Provision (Reversal) for Credit Losses. The provision for credit losses was $2.8 million for 2025 compared to a provision of $2.1 million for 2024. The provisions reflected in both 2025 and 2024 were driven by private label MBS classified as AFS primarily due to slower prepayment speeds and declines in market values on certain securities.
Noninterest Income
| (in millions) | 2025 | 2024 | 2023 | ||||||||
| Net gains (losses) on investment securities | $ | 4.6 | $ | 0.3 | $ | 3.9 | |||||
| Net gains (losses) on derivatives | (22.8) | 8.5 | (0.1) | ||||||||
| Standby letters of credit fees | 34.6 | 34.8 | 31.0 | ||||||||
| Other, net | 2.2 | 4.4 | 2.0 | ||||||||
| Total noninterest income (loss) | $ | 18.6 | $ | 48.0 | $ | 36.8 | |||||
The change in the Bank's total noninterest income for 2025 compared to 2024 was due primarily to valuation changes in the Bank's derivative portfolio resulting from interest rate volatility.
2024 vs 2023. For discussion of this year-to-year comparison, refer to the Noninterest Income disclosure included in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Bank's 2024 Form 10-K.
Derivatives and Economic Hedging Activities.The Bank enters into interest rate swaps, TBAs, interest rate caps and floors and swaption agreements, all of which are referred to as derivatives transactions. The Bank enters into derivatives transactions to offset all or portions of the financial risk exposures inherent in its member lending, investment and funding activities. Derivatives are recorded on the balance sheet at fair value. Changes in derivatives' fair values are recorded in the Statements of Income.
Economic hedges address specific risks inherent in the Bank's balance sheet, but either they do not qualify for hedge accounting or the Bank does not elect to apply hedge accounting. As a result, income recognition on the derivatives in economic hedges may vary considerably compared to the timing of income recognition on the underlying asset or liability. The Bank does not enter into derivatives for speculative purposes nor does it have any cash flow hedges.
The Bank's predominant hedging instrument is an interest rate swap. At the time of inception, the fair market value of an interest rate swap generally equals or is close to zero. Notwithstanding the exchange of interest payments made during the life of the swap, which are recorded as either interest income/expense or as a gain (loss) on derivatives, depending upon the accounting classification of the hedging instrument, the fair value of an interest rate swap returns to zero at the end of its contractual term. Therefore, although the fair value of an interest rate swap is likely to change over the course of its full term, upon maturity any unrealized gains and losses generally net to zero.
The following tables detail the net effect of economic derivatives on noninterest income during 2025, 2024 and 2023. For information on derivative utilizing hedge accounting reported in net interest income, see Derivative Effects on Net Interest Income within the Earnings Performance - Net Interest Income in this Item.
| 2025 | |||||||||||||||||||||||
| (in millions) | Advances | Investments | Mortgage Loans | Bonds | Discount Notes | Other | Total | ||||||||||||||||
| Net gains (losses) on derivatives: | |||||||||||||||||||||||
|
Gains (losses) on derivatives not receiving hedge accounting, including net interest settlements
|
$ | (1.1) | $ | (10.2) | $ | (17.0) | $ | 5.6 | $ | 0.1 | $ | - | $ | (22.6) | |||||||||
|
Other - price alignment amount on cleared derivatives
|
- | - | - | - | - | (0.2) | (0.2) | ||||||||||||||||
| Total net gains (losses) on derivatives | $ | (1.1) | $ | (10.2) | $ | (17.0) | $ | 5.6 | $ | 0.1 | $ | (0.2) | $ | (22.8) | |||||||||
| 2024 | |||||||||||||||||||||||
| (in millions) | Advances | Investments | Mortgage Loans | Bonds | Discount Notes | Other | Total | ||||||||||||||||
| Net gains (losses) on derivatives: | |||||||||||||||||||||||
|
Gains (losses) on derivatives not receiving hedge accounting, including net interest settlements
|
$ | 9.6 | $ | 9.9 | $ | 6.1 | $ | (15.6) | $ | - | $ | - | $ | 10.0 | |||||||||
|
Other - price alignment amount on cleared derivatives
|
- | - | - | - | - | (1.5) | (1.5) | ||||||||||||||||
| Total net gains (losses) on derivatives | $ | 9.6 | $ | 9.9 | $ | 6.1 | $ | (15.6) | $ | - | $ | (1.5) | $ | 8.5 | |||||||||
| 2023 | |||||||||||||||||||||||
| (in millions) | Advances | Investments | Mortgage Loans | Bonds | Discount Notes | Other | Total | ||||||||||||||||
| Net gains (losses) on derivatives: | |||||||||||||||||||||||
|
Gains (losses) on derivatives not receiving hedge accounting, including net interest settlements
|
$ | 10.8 | $ | (0.6) | $ | (4.2) | $ | (4.4) | $ | 0.1 | $ | - | $ | 1.7 | |||||||||
|
Other - price alignment amount on cleared derivatives
|
- | - | - | - | - | (1.8) | (1.8) | ||||||||||||||||
| Total net gains (losses) on derivatives | $ | 10.8 | $ | (0.6) | $ | (4.2) | $ | (4.4) | $ | 0.1 | $ | (1.8) | $ | (0.1) | |||||||||
Derivatives not receiving hedge accounting.For derivatives not receiving hedge accounting (i.e., economic hedges and mortgage delivery commitments), the Bank includes the net interest settlements and the fair value changes in the "Net gains (losses) on derivatives" financial statement line item. For economic hedges, the Bank recorded net losses of $(22.6) million in 2025 compared to net gains of $10.0 million in 2024. The net losses observed during 2025 were driven by a decline in asset swap valuations, partially offset by gains on liability swaps, due to decreases in mid- and long- term rates in 2025 as well as an increase in the total size of the portfolio. The total notional amount of economic hedges, which includes mortgage delivery commitments, increased to $8.6 billion at December 31, 2025 from $4.9 billion at December 31, 2024.
2024 vs 2023. For discussion of this year-to-year comparison, refer to the Derivatives and Hedging Activities disclosure included in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Bank's 2024 Form 10-K.
Other Expense
| (in millions) | 2025 | 2024 | 2023 | ||||||||
| Compensation and benefits | $ | 63.5 | $ | 63.3 | $ | 58.7 | |||||
|
Other operating
|
47.9 | 48.3 | 41.8 | ||||||||
| Finance Agency | 8.9 | 8.6 | 7.0 | ||||||||
| Office of Finance | 7.1 | 7.5 | 6.0 | ||||||||
|
Voluntary contributions
|
48.6 | 49.2 | 11.7 | ||||||||
| Total other expense | $ | 176.0 | $ | 176.9 | $ | 125.2 | |||||
The Bank's total other expense was $176.0 million for 2025, relatively flat compared to 2024.
2024 vs 2023. For discussion of this year-to-year comparison, refer to the Other Expense disclosure included in Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations in the Bank's 2024 Form 10-K.
Community Products
The Bank's mission includes the important public policy goal of making funds available for housing and economic development in the communities served by the Bank's member financial institutions. In support of this goal, the Bank administers a number of products, some mandated and some voluntary. The AHP funds, which are offered on a competitive basis, provide grants for both rental and owner-occupied housing for households at 80% or less of the area median income.
AHP. AHP, mandated by the FHLBank Act, is the largest and primary public policy product of the Bank. Through AHP, members have access to grants to create affordable rental and homeownership opportunities that benefit low- and moderate-income neighborhoods. Award recipients are required to have a Bank member sponsor their application.
The Bank is required by statute to contribute 10% of its current year earnings (GAAP net income before interest expense related to mandatorily redeemable capital stock and the assessment for AHP) to AHP and makes these funds available for use in the subsequent year. Statutory AHP assessments for 2025, 2024 and 2023 were $46.6 million, $65.5 million and $64.9 million, respectively.
In addition, the Bank made supplemental voluntary contributions to AHP of $5.0 million in 2025 and $5.1 million in 2024 to restore the amount available for AHP, absent the Bank's voluntary contribution. These funds are available for use in the subsequent year. The Bank did not make such a supplemental voluntary contribution to AHP in 2023. The supplemental voluntary AHP contribution is reported in the Statements of Income as a Voluntary Contributions.
|
Statutory AHP Assessments and AHP Voluntary Contributions (in millions)
|
2025
|
2024
|
2023
|
||||||||
|
Net income subject to statutory assessment
|
$465.6 | $655.4 | $646.5 | ||||||||
|
Statutory AHP assessment percentage
|
10% | 10% | 10% | ||||||||
|
Statutory AHP Assessment
|
$46.6 | $65.5 | $64.7 | ||||||||
|
Adjustment:
|
|||||||||||
|
Supplemental voluntary AHP contributions
|
$5.0 | 5.1 |
N/A
|
||||||||
|
Total contributions to AHP
|
$51.6 | $70.6 | $64.7 | ||||||||
The following table details that the statutory AHP assessment plus the supplemental voluntary AHP contribution restored the amount contributed to AHP to 10%, absent the Bank's voluntary contributions.
|
Restoration of AHP Proof (in millions)
|
2025
|
2024 | ||||||
|
Net income subject to statutory assessment
|
$465.6 | $655.4 | ||||||
|
Voluntary contributions recognized in net income
|
44.8 | 45.5 | ||||||
|
Supplemental voluntary AHP contributions
|
5.0 | 5.1 | ||||||
|
Total net income absent voluntary contributions
|
$515.4 | $706.0 | ||||||
|
Statutory AHP assessment percentage
|
10% | 10% | ||||||
|
AHP assessment absent voluntary contributions
|
$51.6 | $70.6 | ||||||
Each year, the Bank's Board adopts an AHP Implementation Plan that defines the structure of AHP pursuant to the AHP regulations. The following table details the funding round attributes and the distribution of AHP funds during 2025 and 2024.
| 2025 | 2024 | |||||||
| Funding Rounds | 1 | 1 | ||||||
| Eligible Applications | 160 | 216 | ||||||
| Grants |
$61.3 million
|
$50.8 million | ||||||
| Projects | 51 | 44 | ||||||
| Project Development Costs |
$292.8 million
|
$304.7 million | ||||||
| Units of Affordable Housing | 1,082 | 898 | ||||||
In addition, the Board has approved a homeownership set-aside program in its AHP Implementation Plan, the First Front Door program (FFD). FFD offers grant funds to first time homebuyers to assist with the purchase of a home. First time homebuyers could receive grants up to $15,000. FFD grants are available to households earning 80% or less of the area median income. Members apply for FFD on behalf of their borrowers.
| 2025 | 2024 | |||||||
| Homebuyers Funded | 913 | 931 | ||||||
| Amounts Funded |
$13.5 million
|
$13.3 million
|
||||||
Loan Programs.Pursuant to the requirements of the Community Investment Cash Advance Regulation, the Bank offers a mandatory loan product, the Community Lending Program (CLP). The Bank also offers a voluntary loan product, Banking On Business (BOB).
CLP offers advances to members at the Bank's cost of funds if a member demonstrates qualified lending activity. CLP provides the advantage of a low-cost funding source. CLP advances help member institutions finance housing construction and rehabilitation, infrastructure improvement, and economic and community development projects that benefit targeted neighborhoods and households. CLP advances are recorded as Advances on the Statements of Condition.
The Bank's BOB loan product is targeted to assist in the growth and development of small business, including both start-up and expansion. The Bank's member applies for a BOB loan on behalf of the borrower. An approved BOB loan makes funds available to members to extend credit to approved small business borrowers, enabling small businesses to qualify for credit that would otherwise not be available. BOB loans are unsecured and secondary to a member's loan. As a result, BOB loans are recorded net of an Allowance for Credit Losses (ACL), as discussed below, and are recorded in Other assets on the Statements of Condition. In addition, in 2025 and 2024, the Bank offered a set-aside of BOB for specified eligible borrowers, the Banking On Business Inclusion and Equity fund (BOBIE), which was established in accordance with applicable law as a special purpose credit program. Following the closing of BOBIE's 2025 program year, the Bank ceased offering this set-aside program.
The following table presents the loans funded to members during 2025 and 2024 and the outstanding loan balances as of December 31, 2025 and 2024.
|
Loans Funded
|
Balance, net
|
|||||||||||||
|
(in millions)
|
2025 | 2024 | December 31, 2025 | December 31, 2024 | ||||||||||
|
Mandatory Loan Products
|
||||||||||||||
|
CLP
|
$412.8 | $481.7 | $1,171.0 | $1,275.1 | ||||||||||
|
Voluntary Loan Products
|
||||||||||||||
|
BOB
|
5.1 | 6.8 | 22.2 | 21.2 | ||||||||||
|
BOBIE
|
5.5 | 5.1 | 13.4 | 9.8 | ||||||||||
|
Total Loan Products
|
$423.4 | $493.6 | $1,206.6 | $1,306.1 | ||||||||||
The following table presents the CLP advances committed and also includes the expected economic impact of qualifying activity represented in the commitments during 2025 and 2024.
| 2025 | 2024 | |||||||||||||||||||||||||
|
(dollars in millions)
|
Funds Committed | Number of Commitments | Housing Units Supported | Jobs Supported | Funds Committed | Number of Commitments | Housing Units Supported | Jobs Supported | ||||||||||||||||||
|
CLP
|
$536.5 | 62 | 232 | 3,005 | $536.8 | 81 | 527 | 4,859 | ||||||||||||||||||
The Bank approves the BOB loan, which commits the Bank to fund the BOB loan at a future date. The following table presents the BOB loans committed and the economic impact of those BOB loans during 2025 and 2024.
|
2025
|
2024
|
|||||||||||||||||||
| (dollars in millions) | Funds Committed | Number of Commitments | Expected Jobs Created/Retained | Funds Committed | Number of Commitments | Expected Jobs Created/Retained | ||||||||||||||
| BOB | $5.3 | 35 | 369 | $7.0 | 50 | 765 | ||||||||||||||
| BOBIE | 5.8 | 36 | 612 | 5.5 | 49 | 588 | ||||||||||||||
| Total | $11.1 | 71 | 981 | $12.5 | 99 | 1,353 | ||||||||||||||
BOB loans are unsecured loans to small businesses, and the Bank expects to incur credit losses on them. This estimated expected credit loss is recorded when the Bank commits to fund the BOB loan and is subsequently assessed quarterly. The estimated expected credit loss is based on a loan's probability of default and loss given default. Loss given default is 100% because the BOB loans are unsecured, secondary loans. The probability of default is based on the actual performance of the BOB program. The Bank considers BOB loans that are delinquent to be nonperforming assets. The estimated expected credit loss is recorded in "Other" income.
At the time of the BOB loan commitment, the Bank promised to provide credit support to the small business for economic development. The estimated credit support recognized on the commitment date was $1.2 million, $1.4 million and $0.9 million for the years ended December 31, 2025, 2024 and 2023, respectively and recorded as an ACL. The ACL, associated with outstanding BOB loans at December 31, 2025 and 2024 was $5.4 million and $4.7 million, respectively.
Housing Discretionary Grants and Contributions.The amounts shown in the following table represent voluntary contributions reported on the Bank's Statements of Income. These contributions were provided through various initiatives and programs during 2025, 2024, and 2023.
| (in millions) |
2025
|
2024
|
2023
|
||||||||
| Voluntary Housing Grants | $28.9 | $30.0 | $8.0 | ||||||||
| Home4Good | 6.0 | 6.0 | 3.5 | ||||||||
|
First Front Door Keys to Equity fund
|
7.6 | 7.4 | - | ||||||||
|
Supplemental voluntary AHP contributions
|
5.0 | 5.1 | - | ||||||||
|
Blueprint Communities®
|
1.0 | 0.7 | 0.2 | ||||||||
|
Disaster Relief
|
0.1 | - | - | ||||||||
| Total | $48.6 | $49.2 | $11.7 | ||||||||
Note:
®"Blueprint Communities" is a registered service mark of the Federal Home Loan Bank of Pittsburgh
During 2025 and 2024, the Bank awarded $28.9 million and $30.0 million, respectively in voluntary housing grants to support affordable housing projects exclusively in Delaware, Pennsylvania and West Virginia. All in-district projects applying for statutory AHP funding were automatically considered for the voluntary housing grant funding if the submitted project did not rank high enough to receive statutory AHP funding. The voluntary housing grant initiative is a separate and distinct offering and not part of the statutory AHP. The following table details voluntary housing grant round attributes for 2025 and 2024.
|
2025
|
2024
|
|||||||
| Funding Rounds | 1 | 1 | ||||||
| Eligible Applications | 90 | 191 | ||||||
| Grants |
$28.9 million
|
$30.0 million | ||||||
| Projects |
24 (1)
|
29 (2)
|
||||||
| Project Development Costs |
$129.6 million
|
$148.9 million | ||||||
| Units of Affordable Housing | 741 | 683 | ||||||
Notes:
(1) Includes 5 projects in Delaware, 14 in Pennsylvania and 5 in West Virginia.
(2)Includes 4 projects in Delaware, 21 in Pennsylvania and 4 in West Virginia.
Home4Good helps those who are experiencing or at risk of experiencing homelessness in collaboration with three state housing finance agencies (HFAs), the Delaware State Housing Authority, the Pennsylvania Housing Finance Agency and the West Virginia Housing Development Fund. All grant awards are made to homeless service providers and Continuums of Care serving those experiencing homelessness.
|
2025
|
2024
|
2023
|
|||||||||||||||||||||||||||
|
(dollars in millions)
|
Bank Contribution | HFA Contribution | Projects Approved | Bank Contribution | HFA Contribution | Projects Approved | Bank Contribution | HFA Contribution | Projects Approved | ||||||||||||||||||||
| Delaware | $0.8 | $0.6 | 26 | $0.9 | $0.6 | 16 | $0.5 | $0.6 | 14 | ||||||||||||||||||||
| Pennsylvania | $3.8 | $1.5 | 60 | $3.8 | $1.5 | 59 | $2.2 | $1.5 | 55 | ||||||||||||||||||||
| West Virginia | $1.4 | $0.3 | 24 | $1.3 | $0.4 | 20 | $0.8 | $0.3 | 21 | ||||||||||||||||||||
| Total | $6.0 | $2.4 | 110 | $6.0 | $2.5 | 95 | $3.5 | $2.4 | 90 | ||||||||||||||||||||
In 2025 and 2024, the Bank offered a separate voluntary program, the First Front Door Keys to Equity fund (Keys to Equity), that provided grant funds to specified eligible first-time homebuyers, and a portion of Keys to Equity was established in accordance with applicable law as a special purpose credit program. Under the 2025 and 2024 Keys to Equity program years, specified eligible households earning 120% or less of the area median income could receive grants up to $20,000. Members applied for Keys to Equity grants on behalf of their borrowers. Following the closing of Keys to Equity's 2025 program year, the Bank ceased offering the program. In 2026, the Bank expects to offer a new and unrelated voluntary program, First Front Door Keys (FFD Keys), for the benefit of eligible first-time, first-generation homebuyers. FFD Keys will not be established as a special purpose credit program.
|
(dollars in millions)
|
2025
|
2024
|
||||||
| Homebuyers Funded | 384 | 377 | ||||||
| Amounts Funded | $7.6 | $7.4 | ||||||
The Bank's Blueprint Communities® initiative was created to help revitalize communities. Since its 2005 inception, 74 communities have participated in the initiative. Initiative participation during 2025, 2024 and 2023 was 17 communities, 23 communities, and 18 communities, respectively. Instead of a one-time project or grant, the program gives local leaders the tools to create and implement a long-term revitalization strategy. Intermittent application periods are conducted on a state-by-state basis within the Bank's district. When a new application period begins, application information is shared with the Bank's member financial institutions and other stakeholders via the Bank's website and several other channels. Community applicants, typically groups led by dedicated individuals or organizations, generally have populations of 30,000 or less.
Commitment to Contribute 5% of Earnings to Community Products. In addition to statutory AHP assessments under the FHLBank Act, the Bank committed to make voluntary contributions of 5% of earnings to its suite of voluntary community
products in 2025, 2024 and 2023. The following table details the Bank's 5% voluntary contribution commitment target and the actual fulfillment of that target for 2025, 2024 and 2023.
In 2025 and 2024, the Bank adjusted the calculation of the 5% voluntary contribution commitment target to more closely align with the regulatory calculation for AHP. Specifically, the Bank adjusted prior year GAAP pre-assessment net income by adding back interest expense related to mandatorily redeemable capital stock. Further, the Bank adjusted calculated voluntary contribution commitment target for the impact of prior years' voluntary contributions on net income to restore the amount available for AHP, absent the Bank's voluntary contribution. The Bank did not make such adjustments in 2023.
In 2025 and 2024, the Bank made supplemental voluntary AHP contributions to restore the amount available for AHP, absent the Bank's voluntary contribution. The supplemental voluntary AHP contribution is excluded from the Bank's fulfillment of its 5% voluntary contribution commitment. However, it is reported as a Voluntary Contributions in the Statements of Income. The Bank did not make such a supplemental voluntary contribution to AHP in 2023.
|
(dollars in millions)
|
2025 | 2024 | 2023 | ||||||||
|
Voluntary Contribution Commitment Target
|
|||||||||||
|
Prior year's pre-assessment net income
|
$653.1 | $646.5 | $252.5 | ||||||||
|
Interest expense on mandatorily redeemable capital stock
|
$2.4 | $2.3 |
N/A
|
||||||||
|
Adjusted prior year's pre-assessment net income
|
$655.5 | $648.8 | $252.5 | ||||||||
|
Voluntary contribution commitment %
|
5% | 5% | 5% | ||||||||
|
Unadjusted 5% target
|
$32.8 | $32.4 | $12.6 | ||||||||
|
Adjustments:
|
|||||||||||
|
Contribution for prior year Voluntary Contributions
|
$2.5 | $0.7 | - | ||||||||
|
Total Adjusted 5% Voluntary Commitment Target
|
$35.3 | $33.1 | 12.6 | ||||||||
|
Voluntary Contribution Commitment Fulfillment
|
2025 | 2024 | 2023 | ||||||||
|
Non-interest income - Other, net
|
|||||||||||
|
BOB Estimated Credit Support
|
$1.2 | $1.4 | $0.9 | ||||||||
|
Other expense - Voluntary Contributions (1)
|
|||||||||||
|
Voluntary Housing Grants
|
28.9 | 30.0 | 8.0 | ||||||||
| Home4Good | 6.0 | 6.0 | 3.5 | ||||||||
| Keys | 7.6 | 7.4 | - | ||||||||
|
Blueprint Communities ®
|
1.0 | 0.7 | 0.2 | ||||||||
|
Disaster Relief
|
0.1 | - | - | ||||||||
|
Total Other expense - Voluntary Contributions
|
43.6 | 44.1 | 11.7 | ||||||||
|
Total
|
$44.8 | $45.5 | $12.6 | ||||||||
|
Fulfillment %
|
6.3% | 6.9% | 5.0% | ||||||||
Notes:
(1) Excludes $5.0 million and $5.1 million of supplemental voluntary AHP contributions in 2025 and 2024, respectively.
®"Blueprint Communities" is a registered service mark of the Federal Home Loan Bank of Pittsburgh.
Financial Condition
The following should be read in conjunction with the Bank's audited financial statements in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
Assets
Total assets were $73.3 billion at December 31, 2025, compared with $106.9 billion at December 31, 2024. The decrease of $33.6 billion was primarily due to a decline in advances. Advances totaled $36.8 billion at December 31, 2025, a decrease of $33.1 billion, compared to $69.9 billion at December 31, 2024. The MBS portfolio declined to $13.4 billion at December 31, 2025 compared to $14.3 billion at December 31, 2024 as the Bank curtailed MBS purchases once the portfolio reached the regulatory limit relative to equity. The Bank's return on average assets was 0.46% for 2025 and 0.52% for 2024.
The Bank's core mission activities include the issuance of advances and acquiring member assets through the MPF®program. "Mortgage partnership Finance" and "MPF" are registered trademarks of the Federal Home Loan Bank of Chicago. The core mission asset ratio, defined as the ratio of par amount of advances and MPF loans relative to consolidated obligations adjusted for certain U.S. Treasury securities using full year average balances, was 68.9% as of December 31, 2025 and 77.8% as of December 31, 2024. The decrease in this ratio is primarily due to lower average advances.
Advances. Advances (par) totaled $36.8 billion at December 31, 2025 compared to $70.0 billion at December 31, 2024, a decrease of 47.4%. Advance demand continues to be driven by members' liquidity management, which are influenced by their loan demand, deposit balances and investment activities. Although advance demand decreased, it is not uncommon for fluctuation in the overall advance portfolio driven by changes in member needs. At December 31, 2025, the Bank had advances to 128 borrowing members, compared to 153 borrowing members at December 31, 2024. Advances outstanding to the Bank's five largest borrowers totaled 70.6% in 2025 compared to 80.5% in 2024. Fixed rate advances with a balance of $21.2 billion comprised 57.6% of the total par value of advances outstanding at December 31, 2025 compared to $22.4 billion comprising 32.0% at December 31, 2024.
The following table provides information on advances at par by redemption terms at December 31, 2025 and December 31, 2024.
| December 31, 2025 | ||||||||||||||||||||
| (in millions) |
Due in 1 year or less (1)
|
Due after 1 year through 3 years | Due after 3 years through 5 years | Due after 5 years through 15 years | Thereafter | Total par value | ||||||||||||||
| Fixed-rate | $ | 13,108.0 | $ | 7,361.8 | $ | 248.7 | $ | 70.0 | $ | 74.8 | $ | 20,863.3 | ||||||||
| Variable-rate | 9,990.9 | 5,010.0 | - | - | - | 15,000.9 | ||||||||||||||
|
Variable-rate, callable or prepayable (2)
|
15.0 | 595.0 | - | - | - | 610.0 | ||||||||||||||
|
Other (3)
|
219.0 | 128.5 | 14.6 | 7.4 | - | 369.5 | ||||||||||||||
|
Total par balance
|
$ | 23,332.9 | $ | 13,095.3 | $ | 263.3 | $ | 77.4 | $ | 74.8 | $ | 36,843.7 | ||||||||
| December 31, 2024 | ||||||||||||||||||||
| (in millions) |
Due in 1 year or less (1)
|
Due after 1 year through 3 years | Due after 3 years through 5 years | Due after 5 years through 15 years | Thereafter | Total par value | ||||||||||||||
| Fixed-rate | $ | 12,497.3 | $ | 7,589.3 | $ | 1,605.5 | $ | 71.0 | $ | 74.8 | $ | 21,837.9 | ||||||||
| Variable-rate | 36,253.0 | 8,225.0 | 1,000.0 | - | - | 45,478.0 | ||||||||||||||
|
Variable-rate, callable or prepayable (2)
|
2,000.0 | 27.5 | 92.5 | - | - | 2,120.0 | ||||||||||||||
|
Other (3)
|
223.9 | 321.0 | 34.6 | 12.2 | - | 591.7 | ||||||||||||||
| Total par balance | $ | 50,974.2 | $ | 16,162.8 | $ | 2,732.6 | $ | 83.2 | $ | 74.8 | $ | 70,027.6 | ||||||||
Notes:
(1) Includes overnight advances.
(2) Prepayable advances are those advances that may be contractually prepaid by the borrower on specified dates without incurring prepayment or termination fees.
(3) Includes fixed-rate amortizing/mortgage matched, convertible, and other advances.
The Bank had no putable advances at December 31, 2025 or December 31, 2024.
The following table provides a distribution of the number of members, categorized by individual member asset size (as reported quarterly) that had an outstanding advance balance during 2025 and 2024. Commercial bank and savings institution members are classified by asset size as follows: Super-Regional (over $150 billion), Regional ($25 billion to $150 billion), Mid-size ($1.5 billion to $25 billion) and Community Financial Institutions (CFIs) (under $1.5 billion). Credit union and insurance members are classified separately.
| December 31, | ||||||||
| Member Classification | 2025 | 2024 | ||||||
| Super-Regional | 3 | 3 | ||||||
| Regional | 6 | 5 | ||||||
| Mid-size | 33 | 37 | ||||||
|
CFI
|
114 | 119 | ||||||
| Credit Union | 48 | 43 | ||||||
| Insurance | 35 | 26 | ||||||
| Total borrowing members during the period | 239 | 233 | ||||||
| Total membership | 282 | 284 | ||||||
| Percentage of members borrowing during the period | 84.8 | % | 82.0 | % | ||||
The following table provides information at par on advances by member classification at December 31, 2025 and December 31, 2024.
| (in millions) |
December 31,
|
|||||||
| Member Classification | 2025 | 2024 | ||||||
| Super-Regional | $ | 21,350.0 | $ | 49,325.0 | ||||
| Regional | 4,312.8 | 7,884.4 | ||||||
| Mid-size | 5,798.4 | 6,891.7 | ||||||
| CFI | 2,265.8 | 2,717.1 | ||||||
| Credit Union | 1,388.6 | 1,913.1 | ||||||
| Insurance | 1,692.8 | 1,275.4 | ||||||
| Non-member | 35.3 | 20.9 | ||||||
| Total | $ | 36,843.7 | $ | 70,027.6 | ||||
ACL - Advances. The Bank evaluates its advances for an allowance for credit losses on a collective, or pooled basis unless an individual assessment is deemed necessary because the instruments do not possess similar risk characteristics. The Bank pools advances by member type. Based on the collateral held as security, the Bank's credit extension and collateral policies and repayment history on advances, including that the Bank has not incurred any credit losses since inception, the Bank has not recorded an ACL at December 31, 2025 or December 31, 2024. For additional information on the allowance methodology, see Note 5 - Advances in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
Mortgage Loans Held for Portfolio, Net. Mortgage loans held for portfolio, net of ACL, was $5.2 billion and $4.8 billion at December 31, 2025 and December 31, 2024, respectively.
The following table provides mortgage loans held for portfolio by redemption term at December 31, 2025 and 2024.
| (in millions) | December 31, 2025 | December 31, 2024 | ||||||
| Redemption Term | ||||||||
| Due in 1 year or less | $ | 158.8 | $ | 152.0 | ||||
| Due after 1 year through 5 years | 672.2 | 642.0 | ||||||
| Due after 5 years through 15 years | 1,880.0 | 1,759.7 | ||||||
| Thereafter | 2,464.2 | 2,215.9 | ||||||
|
Total unpaid principal balance (1)
|
$ | 5,175.2 | $ | 4,769.6 | ||||
|
Other adjustments, net (2)
|
47.6 | 49.3 | ||||||
| Total mortgage loans held for portfolio | $ | 5,222.8 | $ | 4,818.9 | ||||
| Allowance for credit losses on mortgage loans | (2.5) | (2.4) | ||||||
| Mortgage loans held for portfolio, net | $ | 5,220.3 | $ | 4,816.5 | ||||
Notes:
(1) Consists of fixed-rate mortgages.
(2) Consists of premiums, discounts, and other adjustments.
The Bank places conventional mortgage loans that are 90 days or more delinquent on nonaccrual status. In addition, the Bank records cash payments received as a reduction of principal until the remaining principal amount due is expected to be collected and then as a recovery of any charge-off, if applicable, followed by the recording of interest income. However, government mortgage loans that are 90 days or more delinquent remain in accrual status due to government guarantees or insurance. The Bank may provide a loan modification to borrowers experiencing financial difficulty. Performing loan modifications are not placed on nonaccrual status.
Foregone interest represents income the Bank would have recorded if the loan was paying according to its contractual terms. Foregone interest was immaterial for the Bank's mortgage loans for both 2025 and 2024.
The Bank continues to accrue interest on its government-insured or -guaranteed mortgage loans after becoming 90 days or more delinquent. The amount of mortgage loans 90 days or more delinquent and still accruing interest was $1.7 million and $2.8 million at December 31, 2025 and December 31, 2024, respectively.
The performance of the mortgage loans in the Bank's MPF Program remained stable compared to December 31, 2024, and the MPF Original portfolio continues to outperform the market based on national delinquency statistics. As of December 31, 2025, the Bank's seriously delinquent mortgage loans (90 days or more delinquent or in the process of foreclosure) represented 0.2% of the MPF Original portfolio, 0.9% of the MPF Plus portfolio and 0.5% of the MPF 35 portfolio, compared with 0.3%, 1.6%, and 0.5%, respectively, at December 31, 2024.
ACL - Conventional MPF.The Bank's conventional mortgage loan portfolio is comprised of large groups of smaller-balance homogeneous loans made to borrowers of PFIs that are secured by residential real estate. Expected credit losses are evaluated based on either an individual or collective assessment of the loans, depending on whether the loans share similar risk characteristics. The Bank purchases government-guaranteed and/or insured and conventional fixed-rate residential mortgage loans. Because the credit risk on the government-guaranteed/insured loans is predominantly assumed by other entities, only conventional mortgage loans are evaluated for an ACL.
The Bank determines its ACL through consideration of various loan portfolio and collateral-related characteristics, including past performance, current conditions, and reasonable and supportable forecasts of economic conditions. To estimate credit losses, the Bank uses a third-party model which incorporates certain assumptions, including forecasted housing prices and interest rates, as well as historical borrower behavior experience. The estimate of the expected credit losses includes coverage of certain losses by primary mortgage insurance (PMI), if applicable. The Bank may incorporate a qualitative adjustment to the model results, if deemed appropriate, based on current market conditions or results. For loans determined to be collateral dependent, the Bank charges-off the estimated credit loss against the reserve. However, if the estimated loss can be recovered through credit enhancement (CE), a receivable is established, resulting in a net charge-off. The expected credit loss of
a collateral dependent mortgage loan to determine the charge-off is equal to the difference between the amortized cost basis of the loan and the estimated fair value of the underlying collateral, less selling costs.
The Bank recognizes a recovery when expected credit losses, including credit losses charged-off for collateral dependent loans, are less than the amounts previously charged-off. Expected recoveries of prior charge-offs, if any, are included as a reduction to the ACL through the Bank's provision (reversal) for credit losses. The reduction to the ACL is partially offset by a reversal of expected CE, resulting in a net impact to the Bank's provision (reversal) for credit losses.
The Bank's conventional MPF loans held for portfolio are required to be credit enhanced as determined through the use of a validated model so the risk of loss is limited to the losses within the Bank's risk tolerance. Credit losses on a mortgage loan may only be absorbed by the CE amount in the master commitment related to the loan. In addition, the CE structure of the MPF Program is designed such that initial losses on mortgage loans are incurred by the Bank up to an agreed upon amount, referred to as the First Loss Account (FLA). Additional eligible credit losses are covered by CE provided by PFIs (available CE) until exhausted. Certain losses incurred by the Bank on MPF 35 and MPF Plus can be recaptured by withholding fees paid to the PFI for its retention of credit risk. All additional losses are incurred by the Bank.
The following table presents the balance of the MPF CE structure as of December 31, 2025 and 2024.
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||
| (in millions) |
Par Value
|
FLA |
Available CE
|
Par Value
|
FLA |
Available CE
|
||||||||||||||
| MPF Original | $ | 1,915.1 | $ | 10.0 | $ | 83.0 | $ | 1,849.3 | $ | 9.3 | $ | 76.7 | ||||||||
| MPF 35 | 3,095.1 | 22.3 | 127.3 | 2,728.8 | 20.1 | 128.6 | ||||||||||||||
| MPF Plus | 80.8 | 14.9 | 0.6 | 99.2 | 14.9 | 0.7 | ||||||||||||||
| Total | $ | 5,091.0 | $ | 47.2 | $ | 210.9 | $ | 4,677.3 | $ | 44.3 | $ | 206.0 | ||||||||
The following table presents certain metrics and ratios related to the Bank's mortgage loans held for portfolio. The ratios in the table below are reported after the application of CE.
| Year ended December 31, | ||||||||
| (dollars in millions) | 2025 | 2024 | ||||||
|
Average mortgage loans outstanding during the period (unpaid principal balance (UPB))
|
$ | 5,008.4 | $ | 4,694.4 | ||||
|
(Charge-offs) Recoveries, net(1)
|
$ | (0.3) | $ | (0.5) | ||||
|
Net charge-offs (recoveries) to average loans outstanding during the period
|
- | % | (0.01) | % | ||||
| (dollars in millions) | December 31, 2025 | December 31, 2024 | ||||||
| Mortgage loans held for portfolio (UPB) | $ | 5,175.2 | $ | 4,769.6 | ||||
|
Nonaccrual loans (UPB)
|
$ | 23.8 | $ | 24.9 | ||||
| ACL on mortgage loans held for portfolio | $ | 2.5 | $ | 2.4 | ||||
|
ACL to mortgage loans held for portfolio
|
0.05 | % | 0.05 | % | ||||
|
Nonaccrual loans to mortgage loans held for portfolio
|
0.46 | % | 0.52 | % | ||||
|
ACL to nonaccrual loans
|
10.38 | % | 9.75 | % | ||||
Note:
(1) Net charge-offs that the Bank does not expect to recover through CE receivable.
The ACL on mortgage loans increased by $0.1 million during 2025. Changes in the ACL are typically not significant, as expected credit losses are reduced by the CE available to absorb losses on the loans in accordance with the credit structure of the MPF Program.
Real Estate Owned (REO).When a PFI or servicer forecloses on a delinquent mortgage loan, the Bank reclassifies the carrying value of the loan to other assets as REO at fair value less estimated selling expenses. If the fair value of the REO property is lower than the carrying value of the loan, then the difference to the extent such amount is not expected to be recovered through recapture of performance-based CE fees is recorded as a charge-off to the ACL. The fair value less estimated
costs to sell the property becomes the new cost basis for subsequent accounting. If the fair value of the REO property is higher than the carrying value of the loan, then the REO property is recorded at fair value less estimated selling costs. This is rare as the Bank believes this situation would require additional validation of the fair value. The servicer is charged with the responsibility for disposing of real estate on defaulted mortgage loans on behalf of the Bank. Once a property has been sold, the servicer presents a summary of the gain or loss for the individual mortgage loan to the master servicer for reimbursement of any loss. Gains on the sale of REO property are held and offset by future losses in the pool of loans, ahead of any remaining balances in the FLA. Losses are deducted from the FLA, if it has not been fully used. The amount of REO was immaterial at both December 31, 2025 and December 31, 2024.
Cash and Investments. The Bank's strategy is to maintain its short-term liquidity position in part to be able to meet members' advance demand and Bank regulatory liquidity requirements. Excess cash is typically invested in overnight investments. The Bank also maintains an investment portfolio to enhance earnings. These investments may be classified as trading, AFS or HTM.
The Bank maintains a liquidity portfolio comprised of cash, interest-bearing deposits, Federal funds sold, securities purchased under agreements to resell, and U.S. Treasury obligations classified as trading or AFS. The liquidity portfolio remained relatively flat at $16.0 billion at December 31, 2025 compared to $15.8 billion at December 31, 2024. Liquid assets can fluctuate due to routine portfolio management practices.
The Bank's investment portfolio, excluding those investments included in the liquidity portfolio, is comprised of trading, AFS and HTM investments. The investments are subject to meet the Bank's risk guidelines and certain other requirements, such as yield. The Bank's investment portfolio was $14.5 billion at December 31, 2025 and $15.5 billion at December 31, 2024. During 2025, the Bank's MBS portfolio declined as the Bank curtailed MBS purchases once the portfolio reached the regulatory limit relative to equity.
Investment securities, defined as all trading, AFS, and HTM securities, totaled $19.5 billion at December 31, 2025, compared to $19.6 billion at December 31, 2024. Details of the investment securities portfolio follow.
| Carrying Value | ||||||||
| December 31, | ||||||||
| (in millions) | 2025 | 2024 | ||||||
| Trading securities: | ||||||||
| Non-MBS: | ||||||||
| Government-sponsored enterprises (GSE) | $ | 119.7 | $ | 149.2 | ||||
| Total trading securities | $ | 119.7 | $ | 149.2 | ||||
| AFS securities: | ||||||||
| Non-MBS: | ||||||||
| U.S. Treasury obligations | $ | 4,912.3 | $ | 4,113.0 | ||||
| GSE and Tennessee Valley Authority (TVA) obligations | 834.1 | 907.1 | ||||||
| State or local agency obligations | 174.8 | 169.3 | ||||||
| MBS: | ||||||||
| U.S. obligations single-family | 1,303.9 | 1,712.4 | ||||||
| GSE single-family | 4,547.8 | 4,597.9 | ||||||
| GSE multifamily | 6,314.3 | 6,550.6 | ||||||
| Private label | 102.1 | 113.5 | ||||||
| Total AFS securities | $ | 18,189.3 | $ | 18,163.8 | ||||
| HTM securities: | ||||||||
| MBS: | ||||||||
| U.S. obligations single-family | $ | 470.2 | $ | 636.0 | ||||
| GSE single-family | 405.2 | 382.4 | ||||||
| GSE multifamily | 238.8 | 243.9 | ||||||
| Private label | 29.5 | 36.5 | ||||||
| Total HTM securities | $ | 1,143.7 | $ | 1,298.8 | ||||
| Total investment securities | $ | 19,452.7 | $ | 19,611.8 | ||||
The following table presents the composition of investment securities, assuming no principal prepayments, as of December 31, 2025 and December 31, 2024. Contractual maturity of MBS is not a reliable indicator of their expected life because borrowers generally have the right to prepay their obligations at any time.
| December 31, 2025 | |||||||||||||||||
| (dollars in millions) | Due in 1 year or less | Due after 1 year through 5 years | Due after 5 years through 10 years | Due after 10 years | Net Carrying Value | ||||||||||||
| AFS securities: | |||||||||||||||||
| Non-MBS: | |||||||||||||||||
|
U.S. Treasury obligations
|
$ | 396.7 | $ | 3,768.9 | $ | 746.7 | $ | - | $ | 4,912.3 | |||||||
|
GSE and TVA obligations
|
92.7 | 588.6 | 152.8 | - | 834.1 | ||||||||||||
|
State or local agency obligations
|
- | 11.0 | 89.3 | 74.5 | 174.8 | ||||||||||||
| MBS: | |||||||||||||||||
| U.S. obligations single-family | - | - | - | 1,303.9 | 1,303.9 | ||||||||||||
| GSE single-family | 0.3 | 11.5 | 83.0 | 4,453.0 | 4,547.8 | ||||||||||||
| GSE multifamily | 8.3 | 3,695.3 | 2,610.7 | - | 6,314.3 | ||||||||||||
| Private label | - | - | 7.5 | 94.6 | 102.1 | ||||||||||||
| Total AFS securities | $ | 498.0 | $ | 8,075.3 | $ | 3,690.0 | $ | 5,926.0 | $ | 18,189.3 | |||||||
|
Yield on AFS Securities (1) (2)
|
1.45 | % | 3.34 | % | 4.24 | % | 4.78 | % | 3.94 | % | |||||||
| HTM securities: | |||||||||||||||||
| MBS: | |||||||||||||||||
| U.S. obligations single-family | $ | - | $ | - | $ | 2.3 | $ | 467.9 | $ | 470.2 | |||||||
| GSE single-family | - | 0.9 | 3.2 | 401.1 | 405.2 | ||||||||||||
| GSE multifamily | - | 238.8 | - | - | 238.8 | ||||||||||||
| Private label | - | - | 29.5 | - | 29.5 | ||||||||||||
| Total HTM securities | $ | - | $ | 239.7 | $ | 35.0 | $ | 869.0 | $ | 1,143.7 | |||||||
|
Yield on HTM securities (1) (2)
|
- | % | 3.88 | % | 5.52 | % | 4.28 | % | 4.23 | % | |||||||
(1) Yield excludes the impact of derivatives in a hedging relationship.
(2) The yields on AFS and HTM securities represent weighted averages of the coupon rates adjusted by the impact of amortization and accretion of premiums and discounts for the total debt securities in the applicable portfolio.
| December 31, 2024 | |||||||||||||||||
| (dollars in millions) | Due in 1 year or less | Due after 1 year through 5 years | Due after 5 years through 10 years | Due after 10 years | Net Carrying Value | ||||||||||||
| AFS securities: | |||||||||||||||||
| Non-MBS: | |||||||||||||||||
| U.S. Treasury obligations | $ | 365.4 | $ | 3,352.9 | $ | 394.7 | $ | - | $ | 4,113.0 | |||||||
| GSE and TVA obligations | 99.2 | 540.6 | 267.3 | - | 907.1 | ||||||||||||
| State or local agency obligations | - | 11.3 | 73.1 | 84.9 | 169.3 | ||||||||||||
| MBS: | |||||||||||||||||
| U.S. obligations single-family | - | - | - | 1,712.4 | 1,712.4 | ||||||||||||
| GSE single-family | 0.3 | 4.4 | 120.1 | 4,473.1 | 4,597.9 | ||||||||||||
| GSE multifamily | 21.2 | 3,765.2 | 2,764.2 | - | 6,550.6 | ||||||||||||
| Private label | - | - | 3.9 | 109.6 | 113.5 | ||||||||||||
| Total AFS securities | $ | 486.1 | $ | 7,674.4 | $ | 3,623.3 | $ | 6,380.0 | $ | 18,163.8 | |||||||
|
Yield on AFS Securities(1) (2)
|
1.37 | % | 3.10 | % | 4.48 | % | 5.39 | % | 4.13 | % | |||||||
| HTM securities: | |||||||||||||||||
| MBS: | |||||||||||||||||
| U.S. obligations single-family | $ | - | $ | - | $ | 2.6 | $ | 633.4 | $ | 636.0 | |||||||
| GSE single-family | - | 1.0 | 3.3 | 378.1 | 382.4 | ||||||||||||
| GSE multifamily | - | 243.9 | - | - | 243.9 | ||||||||||||
| Private label | - | - | 29.2 | 7.3 | 36.5 | ||||||||||||
| Total HTM securities | $ | - | $ | 244.9 | $ | 35.1 | $ | 1,018.8 | $ | 1,298.8 | |||||||
|
Yield on HTM securities (1) (2)
|
- | % | 3.87 | % | 5.85 | % | 4.44 | % | 4.37 | % | |||||||
(1) Yield excludes the impact of derivatives in a hedging relationship.
(2) The yields on AFS and HTM securities represent weighted averages of the coupon rates adjusted by the impact of amortization and accretion of premiums and discounts for the total debt securities in the applicable portfolio.
For additional information on the credit risk of the investment portfolio, see the Credit and Counterparty Risk - Investments discussion in the Risk Management section of this Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K.
ACL - Investments.There was no ACL on investments except for certain of the Bank's private label MBS classified as AFS. Private label MBS classified as AFS are evaluated quarterly for expected credit losses on an individual security basis. In assessing whether a credit loss exists, the Bank considers whether there would be a shortfall in receiving all cash flows contractually due. The allowance is limited to the amount of the AFS security's unrealized loss, if any. If the AFS security is in an unrealized gain position, the ACL is zero. The ACL on AFS private label MBS was $16.7 million at December 31, 2025 and $14.2 million at December 31, 2024. The increase in the ACL was driven by private label MBS classified as AFS primarily due to slower prepayment speeds and a decline in market values on certain of those securities.
For additional information on the Bank's ACL methodology on investments, see Note 4 - Investments in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
Liabilities and Capital
Deposits.The Bank offers demand, overnight and term deposits for members and qualifying nonmembers. Total deposits at December 31, 2025 decreased to $590.8 million from $774.9 million at December 31, 2024. Interest-bearing deposits classified as demand and overnight pay interest based on a daily interest rate. The average balances of deposits were $709.0 million, $717.4 million, and $693.5 million and the weighted-average interest rates paid on interest bearing deposits were 4.18% , 5.15% and 5.03% during 2025, 2024 and 2023, respectively. Term deposits pay interest based on a fixed rate determined at the issuance of the deposit. The Bank had no term deposits during 2025, 2024 and 2023. All of the Bank's deposits are uninsured.
Factors that generally influence deposit levels include turnover in members' investment securities portfolios, changes in member demand for liquidity driven by member institution deposit growth, the slope of the yield curve and the Bank's deposit pricing compared to other short-term money market rates. Fluctuations in this source of the Bank's funding are typically offset by changes in the issuance of consolidated obligation discount notes. The FHLBank Act requires the Bank to have assets, referred to as deposit reserves, invested in obligations of the United States, deposits in eligible banks or trust companies or loans with a maturity not exceeding five years, totaling at least equal to the current deposit balance. As of December 31, 2025 and 2024, excess deposit reserves were $42.0 billion and $74.3 billion, respectively.
Consolidated Obligations. Consolidated obligations consist of bonds and discount notes. The Bank's consolidated obligations totaled $67.5 billion at December 31, 2025, a decrease of $32.2 billion from December 31, 2024. The overall decrease in consolidated obligations outstanding is consistent with the decrease in advance balances. At December 31, 2025, the Bank's bonds outstanding decreased to $50.8 billion compared to $88.0 billion at December 31, 2024. Discount notes outstanding at December 31, 2025 increased to $16.7 billion from $11.7 billion at December 31, 2024. The funding mix shifted towards fixed rate callable bonds and discount notes that replaced maturing floating-rate bonds as the Bank took advantage of favorable funding spreads.
Consolidated obligations bonds often have investor-determined features. The decision to issue a bond using a particular structure is based upon the desired amount of funding, and the ability of the Bank to hedge the risks. The issuance of a bond with a simultaneously-transacted interest-rate exchange agreement usually results in a funding vehicle with a lower cost than the Bank could otherwise achieve. The continued attractiveness of such debt/swap transactions depends on price relationships in both the consolidated bond and interest-rate exchange markets. If conditions in these markets change, the Bank may alter the types or terms of the bonds issued. The increase in funding alternatives available to the Bank through negotiated debt/swap transactions is beneficial to the Bank because it may reduce funding costs and provide additional asset/liability management tools. The types of consolidated obligations bonds issued can fluctuate based on comparative changes in their cost levels, supply and demand conditions, advance demand, and the Bank's balance sheet management strategy.
The following table provides information on consolidated obligations by product type and contractual maturity at December 31, 2025 and December 31, 2024.
| December 31, 2025 | |||||||||||||||||
| (in millions) | Due in 1 year or less | Due after 1 year through 3 years | Due after 3 years through 5 years | Thereafter |
Total par value
|
||||||||||||
| Discount Notes | $ | 16,813.6 | $ | - | $ | - | $ | - | $ | 16,813.6 | |||||||
| Fixed-rate, non-callable | 4,374.0 | 2,813.6 | 943.7 | 663.0 | 8,794.3 | ||||||||||||
| Fixed-rate, callable | 12,379.5 | 2,894.0 | 1,614.0 | 2,530.0 | 19,417.5 | ||||||||||||
| Variable- rate, non-callable | 17,075.5 | 315.0 | - | - | 17,390.5 | ||||||||||||
| Variable- rate, callable | 4,210.0 | - | - | - | 4,210.0 | ||||||||||||
| Step-up, non-callable | 520.0 | 80.0 | - | - | 600.0 | ||||||||||||
| Step-up, callable | 345.0 | - | 20.0 | 110.0 | 475.0 | ||||||||||||
| Total par balance | $ | 55,717.6 | $ | 6,102.6 | $ | 2,577.7 | $ | 3,303.0 | $ | 67,700.9 | |||||||
|
Other Adjustments (1)
|
$ | (208.6) | |||||||||||||||
| Total consolidated obligations | $ | 67,492.3 | |||||||||||||||
| December 31, 2024 | |||||||||||||||||
| (in millions) | Due in 1 year or less | Due after 1 year through 3 years | Due after 3 years through 5 years | Thereafter |
Total par value
|
||||||||||||
| Discount Notes | $ | 11,777.4 | $ | - | $ | - | $ | - | $ | 11,777.4 | |||||||
| Fixed-rate, non-callable | 4,581.9 | 2,887.4 | 1,917.2 | 752.0 | 10,138.5 | ||||||||||||
| Fixed-rate, callable | 4,060.0 | 7,411.5 | 2,382.0 | 2,423.0 | 16,276.5 | ||||||||||||
| Variable- rate, non-callable | 54,224.4 | - | - | - | 54,224.4 | ||||||||||||
| Variable- rate, callable | 6,315.0 | - | - | - | 6,315.0 | ||||||||||||
| Step-up, non-callable | 156.0 | 515.0 | 50.0 | - | 721.0 | ||||||||||||
| Step-up, callable | 75.0 | 395.0 | 40.0 | 110.0 | 620.0 | ||||||||||||
| Total par balance | $ | 81,189.7 | $ | 11,208.9 | $ | 4,389.2 | $ | 3,285.0 | $ | 100,072.8 | |||||||
|
Other Adjustments (1)
|
$ | (422.5) | |||||||||||||||
| Total consolidated obligations | $ | 99,650.3 | |||||||||||||||
Note:
(1) Consists of premiums, discounts, and hedging and other adjustments.
For additional information on the Bank's consolidated obligations, refer to Note 9 - Consolidated Obligations in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
Commitments and Off-Balance Sheet Items. As of December 31, 2025, the Bank was obligated to fund approximately $33.3 million of mortgage loans and to issue $1,059.0 million in consolidated obligations. In addition, the Bank had $27.5 billion in outstanding standby letters of credit as of December 31, 2025. The Bank does not consolidate any off-balance sheet special purpose entities or other off-balance sheet conduits.
In accordance with regulations governing the operations of the FHLBanks, each FHLBank, including the Bank, is jointly and severally liable for the FHLBank System's consolidated obligations. Applicable law authorizes the Finance Agency to require any FHLBank to repay all or a portion of the principal or interest on consolidated obligations for which another FHLBank is the primary obligor. For additional information on the Bank's commitments and contingencies, refer to Note 15 in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
Capital and Retained Earnings. The Bank's return on average equity was 8.47% for December 31, 2025 and 10.45% for December 31, 2024. Capital adequacy, including the level of retained earnings, is monitored through the evaluation of market value of equity to par value of capital stock (MV/CS) as well as other risk metrics. Details regarding these metrics are discussed in the Risk Management portion in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K.
The Bank's capital stock is owned by its members and former members. The concentration of the Bank's capital stock by institution type is presented below.
| (dollars in millions) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Commercial banks | 114 | $ | 1,931.7 | 121 | $ | 3,179.3 | ||||||||
| Savings institutions | 46 | 138.0 | 48 | 156.6 | ||||||||||
| Insurance companies | 48 | 131.1 | 43 | 114.0 | ||||||||||
| Credit unions | 71 | 91.1 | 69 | 111.5 | ||||||||||
| Community Development Financial Institutions | 3 | 0.3 | 3 | 0.3 | ||||||||||
| Total member institutions / total GAAP capital stock | 282 | $ | 2,292.2 | 284 | $ | 3,561.7 | ||||||||
| Mandatorily redeemable capital stock | 12.3 | 7.0 | ||||||||||||
| Total capital stock | $ | 2,304.5 | $ | 3,568.7 | ||||||||||
The total number of members as of December 31, 2025 decreased by two compared to December 31, 2024. The Bank added eight new members and lost ten members: eight members merged with another institution within the Banks's district, one members merged with another institution outside of the Bank's district, and one member withdrew from membership
The following tables present member holdings of 10% or more of the Bank's total capital stock including mandatorily redeemable capital stock outstanding as of December 31, 2025 and December 31, 2024.
| (dollars in millions) | December 31, 2025 | (dollars in millions) | December 31, 2024 | |||||||||||||||||
| Capital Stock | % of Total | Capital Stock | % of Total | |||||||||||||||||
|
PNC Bank, N.A., Wilmington, DE (1)
|
$ | 547.9 | 23.8 | % |
TD Bank U.S. Holding Company (2)
|
$ | 1,039.5 | 29.1 | % | |||||||||||
|
Ally Bank
|
$ | 359.0 | 15.6 | % |
PNC Bank, N.A., Wilmington, DE (1)
|
$ | 907.0 | 25.4 | % | |||||||||||
(1) For Bank membership purposes, the principal place of business is Pittsburgh, PA.
(2) Member affiliates aggregated at the U.S. holding company level.
The Finance Agency has issued regulatory guidance to the FHLBanks relating to capital management and retained earnings. The guidance directs each FHLBank to assess, at least annually, the adequacy of its retained earnings with consideration given to future possible financial and economic scenarios. The guidance also outlines the considerations that each FHLBank should undertake in assessing the adequacy of its retained earnings.
The Bank uses a framework for evaluating retained earnings adequacy, consistent with regulatory guidance and requirements. Retained earnings are intended to cover unexpected losses and protect members' par value of capital stock. The framework also assists management in its overall analysis of the level of future dividends. The framework includes four risk elements that comprise the Bank's total retained earnings target: (1) market risk; (2) credit risk; (3) operational risk; and (4) accounting risk. The retained earnings target generated from this framework is sensitive to changes in the Bank's risk profile, whether favorable or unfavorable. The framework generated a retained earnings target of $780 million as of December 31, 2025 and $772 million as of December 31, 2024.
In addition to the retained earnings target, the Bank considers the amount of retained earnings needed for compliance with the regulatory minimum capital-to-asset ratio of 4% to determine an overall retained earnings need. The Bank's overall retained earnings need is $1,607 million as of December 31, 2025 and $1,652 million as of December 31, 2024.
The following table presents retained earnings information for the current and prior year.
|
(in millions)
|
December 31, 2025 | December 31, 2024 | ||||||
| Unrestricted Retained Earnings | $ | 1,462.3 | $ | 1,370.0 | ||||
|
Restricted Retained Earnings
|
783.4 | 732.9 | ||||||
| Total Retained Earnings | $ | 2,245.7 | $ | 2,102.9 | ||||
At December 31, 2025, the Bank's total required contribution to the restricted retained earnings account was $691.5 million compared with the current restricted retained earnings account balance of $783.4 million. These contributions have been made pursuant and are subject to an agreement among the FHLBanks, as discussed in Note 11 - Capital - Dividends and Retained Earnings in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
Retained earnings increased $142.8 million compared to December 31, 2024. The increase reflected net income that was partially offset by dividends paid. For additional information, see Note 11 - Capital in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
Dividends. The Bank declares dividends based on an annualized yield and differentiates between membership and activity capital stock. The dividend received by the member is calculated based on the average capital stock owned by the member for the previous quarter. Historically, the Bank has paid cash dividends although dividends may be paid in capital stock. The following table presents dividend information for the current and prior years.
| Year ended December 31, | |||||||||||
| 2025 | 2024 | 2023 | |||||||||
| Dividends (in millions) | $ | 275.5 | $ | 316.3 | $ | 286.1 | |||||
| Dividends per share | $ | 9.87 | $ | 8.58 | $ | 7.42 | |||||
|
Dividend payout ratio (1)
|
65.87 | % | 53.84 | % | 49.20 | % | |||||
|
Weighted average dividend rate (2)
|
8.75 | % | 8.53 | % | 7.76 | % | |||||
| Average Fed Funds rate | 4.21 | % | 5.15 | % | 5.03 | % | |||||
| Dividend spread to Fed Funds | 4.54 | % | 3.38 | % | 2.73 | % | |||||
Notes:
(1)Represents dividends declared as a percentage of net income for the respective periods presented.
(2)Weighted average dividend rate is the dividend amount paid during the period divided by the average daily balance of prior period capital stock for the eligible dividends.
The increase in the weighted average dividend rate is reflective of the Bank's performance and intent to provide meaningful shareholder return. Details regarding the Bank's payment of dividends, including annual yields, for current and prior years are provided in Note 11 - Capital in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
Capital Resources
The following should be read in conjunction with Note 11 - Capital in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
Liquidity and Funding.Refer to the Liquidity and Funding Risk section of Risk Management in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K for details.
Capital Plan and Dividends. Refer to the Capital Resources section of Item 1. Business in this Form 10-K for details.
Risk-Based Capital (RBC)
The Finance Agency's RBC regulatory framework requires the Bank to maintain sufficient permanent capital, defined as retained earnings plus capital stock, to meet its combined credit risk, market risk and operations risk. Each of these components is computed as specified in regulations and directives issued by the Finance Agency.
| December 31, | ||||||||
| (in millions) | 2025 | 2024 | ||||||
| Permanent capital: | ||||||||
|
Capital stock (1)
|
$ | 2,304.5 | $ | 3,568.7 | ||||
| Retained earnings | 2,245.7 | 2,102.9 | ||||||
| Total permanent capital | $ | 4,550.2 | $ | 5,671.6 | ||||
| RBC requirement: | ||||||||
| Credit risk capital | $ | 199.9 | $ | 209.6 | ||||
| Market risk capital | 459.6 | 521.6 | ||||||
| Operations risk capital | 197.9 | 219.4 | ||||||
| Total RBC requirement | $ | 857.4 | $ | 950.6 | ||||
| Excess permanent capital over RBC requirement | $ | 3,692.8 | $ | 4,721.0 | ||||
Note:
(1) Capital stock includes mandatorily redeemable capital stock.
The decrease in the total RBC requirement as of December 31, 2025 was primarily due to lower market risk capital and operational risk requirements. The decrease was primarily driven by declines in short-term interest rates in the third and fourth quarters of 2025 and corresponding changes to the scenarios used to determine the required market risk capital.
Based on the financial information as of December 31, 2025, the Finance Agency determined the Bank was adequately capitalized under the capital rule.
Credit Risk Capital.The Bank's credit risk capital requirement is the sum of credit risk capital charges computed for assets, off-balance sheet items, and derivative contracts based on the credit risk percentages assigned to each item as determined by the Finance Agency. Credit risk amounts for private-label MBS and MPF assets are based upon projected losses from the simulation of stressed house price levels provided by the Finance Agency.
Market Risk Capital.The Bank's market risk capital requirement is the market value of the Bank's portfolio at risk of loss due to adverse movements in interest rates as of the measurement calculation date. The Bank calculates the market value of its portfolio at risk using a market risk model that is subject to annual independent validation.
The market risk component of the overall RBC framework is designed around a "stress test" approach. Simulations of hundreds of historical market interest rate scenarios provided by the Finance Agency are generated and, under each scenario, the hypothetical beneficial/adverse effects on the Bank's current market value of equity are determined. The hypothetical beneficial/adverse effect associated with each historical scenario is calculated by simulating the effect of each set of market conditions upon the Bank's current risk position, which reflects current assets, liabilities, derivatives and off-balance sheet commitment positions as of the measurement date. From the resulting simulated scenarios, the average of the five largest deteriorations in market value of capital represents the market value risk component of the Bank's regulatory RBC requirement.
Operations Risk Capital.The Bank's operations risk capital requirement as prescribed by Finance Agency regulation is equal to 30% of the sum of its credit risk capital requirement and its market risk capital requirement.
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 fair value estimates of interest rate related derivatives and hedged items.
Fair Value Estimates of Interest Rate Related Derivatives and Hedged Items. The Bank enters into derivatives, primarily interest rate swaps, to manage interest rate risk. The Bank normally designates eligible advances, investment securities or consolidated obligations as hedged items in fair value hedging relationships. Derivatives are recognized on the Statements of Condition at fair value and the hedged items are recognized on the Statements of Condition at benchmark fair value. At December 31, 2025 and 2024, the total notional amount of derivatives was $62.2 billion and $50.3 billion, respectively.
The fair value of interest rate related derivatives and hedged items is estimated using standard valuation techniques such as discounted cash flow analysis. The discounted cash flow analysis (i.e., pricing model) used to determine the fair value of derivatives and hedged items may have a significant effect on the reported fair values of assets and liabilities and the income and expense related thereto. These assumptions are highly subjective and are based on the best estimates of management regarding the amount and timing of future cash flows, volatility of interest rates and the selection of discount rates that appropriately reflect market and credit risks. The use of different assumptions, as well as changes in market conditions, could result in a material impact to the Bank's financial results, including reported carrying values and increased earnings volatility.
The Bank regularly validates its pricing models that use discounted cash flows. Such model validations are performed by the Bank's model risk management department, which is separate from the model owner. In addition, the Bank benchmarks model-derived fair values to those provided by third-parties or alternative internal valuation models and applies thresholds at the trade and portfolio levels. The benchmarking analysis is performed by a group that is separate from the model owner. Results of the model validations and benchmarking analyses, as well as changes to the valuation methodologies and inputs, are reported to the Bank's Asset and Liability Committee (ALCO) (or subcommittee of), which is responsible for overseeing market risk.
To estimate the fair value of interest rate related derivatives, the pricing model utilizes market-observable inputs (inputs that are actively quoted and can be validated to external sources). Inputs are as follows:
•Discount rate assumption. SOFR curve for SOFR indexed derivatives. Overnight Index Swap (OIS) curve for OIS indexed derivatives;
•Forward interest rate assumption (rates projected in order to calculate cash flows through the designated term of the hedging relationship). OIS curve or SOFR curve; and
•Volatility assumption. Market-based expectations of future interest rate volatility implied from current market prices for similar options.
To estimate the fair value of a hedged item in a long-haul hedging relationship, the Bank calculates a gain or loss on the hedged item attributable to changes in the benchmark interest rate being hedged. The change in value associated with the hedged item is calculated each period by projecting future hedged item cash flows based on the fixed interest rate assigned to the hedged item. For floating rate option embedded hedged items, the model projects cash flows utilizing the assigned forward interest rate curve and appropriate option pricing model. The projected future cash flows are then discounted using the rate curves corresponding to the designated benchmark rate plus a discount spread. The discount spread is calculated and set at hedge inception and is the amount added to the discount rate resulting in a fair value of zero at the inception of the hedging relationship. For additional information regarding the Bank's fair value estimates, refer to Note 14 - Estimated Fair Values in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
Changes in the fair value of derivatives are recorded each period in earnings, regardless of whether the transaction qualifies for hedge accounting. If the transaction is designated and qualifies for fair value hedge accounting, offsetting gains or losses on the hedged assets or liabilities are also recognized each period in earnings. The change in fair value of the derivatives and hedged items should effectively offset, which reduces earnings volatility. For example, gains (losses) on these derivatives were $(156.2) million, $283.6 million, and $112.2 million offset by (losses) gains on hedged items of $159.3 million, $(284.4) million, and $(114.5) million for the years ended December 31, 2025, 2024, and 2023, respectively. Not receiving hedge accounting could have a material impact on the Bank's financial results, including increased earnings volatility.
Recent Accounting Developments. See Note 2 - Changes in Accounting Principle and Recently Issued Accounting Standards and Interpretations in Item 8. Financial Statements and Supplementary Data in this Form 10-K. Note 2 contains information on new accounting pronouncements impacting the 2025 financial statements or that will become effective for the Bank in future periods.
Legislative and Regulatory Developments
Certain significant legislative and regulatory actions and developments are summarized below.
The Bank is subject to various legal and regulatory requirements and priorities. Certain actions, regulatory priorities, and areas of focus, such as deregulation, by the federal executive administration have changed and continue to change the regulatory environment. For example, the Finance Agency repealed the Fair Lending, Fair Housing, and Equitable Housing Finance Plans regulation applicable to the FHLBanks, effective March 9, 2026, citing the federal executive administration's deregulatory priorities. Furthermore, during 2025, withdrawals and rescissions of certain rules, proposed rules, and advisory, regulatory, or technical guidance have affected, and likely will continue to affect, certain aspects of the Bank's business operations. These changes could have impact on the Bank's financial condition, results of operations, and reputation.
On January 20, 2026, the federal executive administration issued an executive order that seeks to restrict acquisitions by large institutional investors of single-family homes. Among other things, the executive order directs certain agencies, including the Finance Agency, to issue guidance to (i) prevent agencies and government-sponsored enterprises from providing for, approving, insuring, guaranteeing, securitizing, or facilitating the acquisition by a large institutional investor of a single-family home that could otherwise be purchased by an individual owner-occupant, or disposing of federal assets in a manner that transfers a single-family home to a large institutional investor; and (ii) promote sales to individual owner-occupants, including through anti-circumvention provisions, first-look policies, and disclosure requirements. The executive order also calls for legislative recommendations to codify related policies and directs certain agencies to conduct reviews and consider additional measures to combat speculation by large institutional investors in single-family housing markets. The Bank is unable to predict the nature of the guidance, measures, or recommendations, or how each may impact the Bank's 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 the Bank and the FHLBank System. The Bank 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 support, or any corresponding impacts to the FHLBank System, the secondary mortgage and mortgage-backed securities market, or the mortgage industry. The Bank continues to monitor these actions as they evolve and to evaluate their potential impact on the Bank. For a discussion of related risks, refer to Item 1A Risk Factors.
Risk Management
The Bank employs a corporate governance and internal control framework intended to support the effective management of the Bank's business activities and the related inherent risks. As part of this framework, the Bank's Board has approved a Risk Governance Policy and a Member Products Policy, both of which are reviewed regularly and re-approved at least annually. The Risk Governance Policy establishes risk guidelines, limits (if applicable), and standards for credit risk, market risk, liquidity risk, business risk and various forms of operational and technology risk, in accordance with Finance Agency regulations and consistent with the Bank's risk appetite. The Member Products Policy establishes the eligibility and authorization requirements, policy limits and restrictions, and the terms applicable to each type of Bank product or service, as well as collateral requirements. The risk appetite is established by the Board, as are other applicable guidelines in connection with the Bank's Capital Plan and overall risk management.
Risk Governance
The Bank's lending, investment and funding and hedging activities expose the Bank to a number of risks that include market and interest rate risk, credit and counterparty risk, liquidity and funding risk, and operational and business risks. These include risks such as use and reliance on models and end-user computing tools, technology and information security risk, among others. In addition, the Bank's risks are affected by current and projected financial and residential mortgage market trends including those described in Item 1A. Risk Factors in this Form 10-K.
The Bank believes that a strong and dynamic risk management process serves as a base for building member value in the cooperative. The Bank has a risk management infrastructure that addresses risk governance, appetite, measurement and assessment, and reporting, along with top and emerging risks, as follows:
•the Bank's policies and committees provide effective governance over the risk management process;
•the Bank's risk appetite is integrated with the strategic plan and reinforced through management initiatives;
•all material risk exposures have been reviewed to establish a robust set of key indicators, many with associated limits and guidelines;
•the Bank has a risk reporting system that provides for management and Board oversight of risk and a clear understanding of risks that the Bank faces; and
•management and the Board are actively engaged in surveying and assessing top and emerging risks.
Top risks are existing, material risks the Bank faces; these are regularly reviewed and actively managed. Emerging risks are those risks that are new or evolving forms of existing risks; once identified, potential action plans are considered based on probability and severity.
The Board and its committees have adopted a comprehensive risk governance framework to oversee the risk management process and manage the Bank's risk exposures. The framework is shown in the chart below. All Board members are provided training dealing with the specific risk issues relevant to the Bank. The following table describes the Committees of the Board and their focus in relation to risk governance:
| Committee Title | Major Responsibilities | ||||
| Audit |
•Legal and regulatory compliance
•Integrity of internal and external financial reporting
•Oversight of the internal and external audit functions
|
||||
|
Enterprise Risk Management *
|
•Focus on the Bank's comprehensive risk appetite and position
•Risk issues that are significant for several committees
•Updates on regulatory issues
|
||||
| Finance |
•Balance Sheet Management
•Oversight of market events and risk activities over interest rate, pricing, liquidity, funding and hedging and counterparty risk
|
||||
| Governance & Public Policy |
•Develop and maintain best practices in governing the Bank
•Keep abreast of public policy issues impacting Bank's mission and purpose
|
||||
|
Human Resources and OMWI Committee
|
•Oversight on strategies and policies around total rewards, culture, engagement and other matters affecting the workforce
•Compliance with OMWI requirements
|
||||
|
Membership, Credit and Community Investment
|
•Member credit risk and collateral management
•Mortgage credit (MPF)
•AHP
|
||||
| Operational Risk |
•Oversight of operating risks including compliance, fraud and Bank-wide risk assessment
•Oversight of risks related to information technology, continuity, vendor, model and cyber risk
|
||||
* Comprised of the entire Board
As previously mentioned, key components of this risk governance framework are the Board-level Member Products Policy and Risk Governance Policy. The Member Products Policy, which applies to products offered to members and housing associates, addresses the credit risk of secured credit by establishing appropriate collateralization levels and collateral valuation methodologies. The Risk Governance Policy establishes risk limits for the Bank in accordance with the risk profile established by the Board, Finance Agency regulations, credit underwriting criteria, and other applicable guidelines. The magnitude of the risk limits reflects the Bank's risk appetite given the market environment, the business strategy and the financial resources available to absorb potential losses. The limits are reviewed and continually re-evaluated with adjustments requiring Board approval and processes are included in the Risk Governance Policy. All breaches of risk limits are reported in a timely manner
to the appropriate Board and senior management and the affected business unit must take appropriate action, as applicable, to rationalize and/or reduce affected positions. The risk governance framework also includes supplemental risk management policies and procedures that are reviewed on a regular basis to ensure that they provide effective governance of the Bank's risk-taking activities.
The following table describes the Management Committees which provide oversight and operational support in managing risks.
| Committee Title | Major Responsibilities | ||||
| Asset/Liability |
•Reviews and approves financial management strategies and decisions
•Oversight of market events and risk activities over interest rate, pricing, liquidity, funding and hedging risks
|
||||
| Market Risk |
•Sub-Committee of Asset/Liability Committee
•Oversees and analyzes trends in market risk positions and fair market value pricing
|
||||
| Risk Management |
•Bank-wide oversight of the Bank's primary risks
•Approves key overarching risk policies and Bank objectives to manage risk
|
||||
| Operational Risk Management |
•Sub-Committee of Risk Management Committee
•Oversight of specific technology and operational risks
|
||||
|
Executive
|
•Manages overall strategic direction of the Bank, along with key tactical decisions
|
||||
|
Membership, Community and Credit Committee(1)
|
•Oversees member credit and collateral risk
•Mortgage credit (MPF)
•Oversees member business activity
•Oversees community products and services
|
||||
(1)Effective January 1, 2026, the Bank merged the Membership Credit Risk Committee and the Membership and Community Committee into a single committee: Membership, Community and Credit Committee
Further, Internal Audit provides an assessment of the internal control systems. Internal Audit activities are intended to provide reasonable assurance for the Board that: (1) risks are appropriately identified and managed; (2) significant financial, managerial and operating information is materially accurate, reliable and timely; and (3) employees' actions are in compliance with Bank policies, standards, procedures and applicable laws and regulations. Additionally, as a GSE, the Bank is subject to a comprehensive examination by the Finance Agency which executes its responsibilities via annual examinations, periodic evaluations, and monitoring of the various compliance and activity reports provided by the Bank.
Capital Adequacy Measures. The MV/CS ratio provides a current assessment of the liquidation value of the balance sheet and measures the Bank's current ability to honor the par put redemption feature of its capital stock. This is one of the risk metrics used to evaluate the adequacy of retained earnings which is used to develop dividend payment recommendations and support the repurchase of excess capital stock.
The current Board-approved floor for the MV/CS ratio is 90.0%. The MV/CS ratio is measured against the floor monthly. When the MV/CS ratio is below the established floor, excess capital stock repurchases and dividend payouts are restricted. The MV/CS ratio was 198.7% at December 31, 2025 and 157.2% at December 31, 2024. The increase was primarily due to decrease in capital stock outstanding following the Bank's repurchases of excess stock, which excesses resulted from decreases in advance balances.
Subprime and Nontraditional Loan Exposure. The Bank policy definitions of subprime and nontraditional residential mortgage loans and securities are consistent with FFIEC and Finance Agency guidance. According to policy, the Bank does not accept subprime residential mortgage loans (defined as FICO score of 660 or below) as qualifying collateral unless certain mitigating factors are met. The Bank requires members to identify the amount of subprime and nontraditional mortgage collateral in their QCR each quarter and provide periodic certification that they comply with the FFIEC guidance. See the Credit and Counterparty Risk - TCE and Collateral discussion in Risk Management in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K for specific requirements regarding subprime and nontraditional loan collateral.
Qualitative and Quantitative Disclosures Regarding Market Risk
Managing Market Risk. The Bank's market risk management objective is to protect member/shareholder and bondholder value consistent with the Bank's housing mission and safe and sound operations across a wide range of interest rate environments. Management believes that a disciplined approach to market risk management is essential to maintaining a strong capital base and uninterrupted access to the capital markets.
Market risk is defined as the risk to earnings or capital arising from adverse changes in market rates, prices and other relevant market factors. Interest rate risk, which represents the primary market risk exposure to the Bank, is the risk that relative and absolute changes in prevailing interest rates may adversely affect an institution's financial performance or condition. Interest rate risk arises from a variety of sources, including repricing risk, yield curve risk, basis risk and options risk. The Bank invests in mortgage assets, such as mortgage loans and MBS, which together represent the primary source of options risk. Management regularly reviews the estimated market risk of the entire portfolio of assets and related funding and hedges to assess the need for re-balancing strategies. These re-balancing strategies may include entering into new funding and hedging transactions, terminating existing funding and hedging transactions, or forgoing or modifying certain funding or hedging transactions normally executed with asset acquisition or debt issuance.
The Bank's Market Risk Model. Significant resources are devoted to ensuring that the level of market risk in the balance sheet is accurately measured, thus allowing management to monitor the risk against policy and regulatory limits. The Bank uses externally developed models to evaluate its financial position and market risk. One of the most critical market-based models relates to the prepayment of principal on mortgage-related instruments. Management regularly reviews the major assumptions and methodologies used in its models, as well as the performance of the models relative to empirical results, so that appropriate changes to the models can be made. Economic conditions, such as market liquidity and Federal Reserve actions to adjust short-term interest rates, may impact the performance of the Bank's models used to measure market risk. Management considers the impact of current economic conditions on key market risk measures and makes changes as deemed appropriate.
The Bank regularly validates the models used to measure market risk. Such model validations are performed by the Bank's model risk management department, which is separate from the model owner. The model validations are supplemented by performance monitoring by the model owner which is reported to the Bank's model risk management department. In addition, the Bank benchmarks model-derived fair values to those provided by third-party services or alternative internal valuation models. The benchmarking analysis is performed by a group that is separate from the model owner. Results of the model validations and benchmarking analysis, as well as any changes to the valuation methodologies and inputs, are reported to the Bank's ALCO (or subcommittee of), which is responsible for overseeing market risk.
Duration of Equity. One key risk metric used by the Bank is duration. Duration is a measure of the sensitivity of a financial instrument's value, or the value of a portfolio of instruments, to a 100 basis point parallel shift in interest rates. Duration (typically expressed in years) is commonly used by investors throughout the fixed income securities market as a measure of financial instrument price sensitivity.
The Bank's asset/liability management policy approved by the Board calls for actual duration of equity to be maintained within a +4.5 year range in the base case. In addition, the duration of equity exposure limit in an instantaneous parallel interest rate shock of +200 basis points is +7 years. Management analyzes the duration of equity exposure against this policy limit on a daily basis and regularly evaluates its market risk management strategies.
The following table presents the Bank's duration of equity exposure at December 31, 2025 and December 31, 2024.
| (in years) | Down 200 basis points | Down 100 basis points |
Base Case |
Up 100 basis points |
Up 200 basis points |
||||||||||||
|
Duration of Equity:
|
|||||||||||||||||
| December 31, 2025 | 0.3 | 1.1 | 1.7 | 2.1 | 2.7 | ||||||||||||
| December 31, 2024 | 0.7 | 1.2 | 1.4 | 1.8 | 2.3 | ||||||||||||
The duration of equity changes in the down scenarios at December 31, 2025 were primarily driven by the decrease in interest rates, whereas the duration of equity changes in the base and up scenarios were due to the declines in capital stock as a result of lower advances. The Bank regularly monitors the mortgage and related fixed-income markets, including the impact that changes in the market or anticipated modeling changes may have on duration of equity and other market risk measures and may take actions to reduce market risk exposures as needed.
Return on Equity (ROE) Spread Volatility. Interest rate risk is also measured based on the volatility in the Bank's projected return on capital in excess of the return of an established benchmark market index. ROE spread is defined as the Bank's return on average equity, including capital stock and retained earnings, in excess of the average of the projected Federal funds rate.
ROE spread volatility is a measure of the variability of the Bank's projected ROE spread in response to shifts in interest rates and represents the change in ROE spread compared to an ROE spread that is generated by the Bank in its base forecasting scenario. ROE spread volatility is measured over a rolling forward 12 month period for selected interest rate scenarios and excludes the income sensitivity resulting from mark-to-market changes, which are separately described below.
Management uses both parallel and non-parallel rate scenarios to assess interest rate risk. The steeper and flatter yield curve shift scenarios are represented by appropriate increases and decreases in short-term and long-term interest rates using the three-year point on the yield curve as the pivot point.
| ROE Spread Volatility Increase/(Decline) | |||||||||||||||||
| (in basis points) |
Down 200 bps Parallel Shock
|
Down 100 bps Longer Term Rate Shock | 100 bps Steeper | 100 bps Flatter | Up 200 bps Parallel Shock | ||||||||||||
| December 31, 2025 | 47 | 2 | 48 | (3) | (12) | ||||||||||||
| December 31, 2024 | 21 | (1) | 10 | 3 | (2) | ||||||||||||
The changes in ROE spread volatility in 2025 as compared to the prior year-end mostly reflect lower fixed rate liability exposure. For each scenario, the Board's limit on the decline in ROE spread is set at no greater than 100 basis points. The Bank was in compliance with the ROE spread volatility limit across all selected interest rate shock scenarios at December 31, 2025 and December 31, 2024.
Mark-to-Market Risk. The Bank measures earnings risk associated with certain mark-to-market positions, including economic hedges. This framework measures forward-looking, scenario-based exposure based on interest rate and volatility shocks that are applied to any existing transaction that is marked to market through the income statement without an offsetting mark arising from a qualifying hedging relationship. In addition, the Bank's Capital Markets and Corporate Risk Management departments monitor the actual profit/loss change on a daily, monthly cumulative, and quarterly cumulative basis. The Bank's ALCO monitors mark-to-market risk through a daily exposure guideline and quarterly profit/loss reporting trigger.
Derivatives and Hedging Activities. Members may obtain loans through a variety of product types that include features such as variable- and fixed-rate coupons, overnight to 30-year maturities, and bullet or amortizing redemption schedules. The Bank funds loans primarily through the issuance of consolidated obligation bonds and discount notes. The terms and amounts of these consolidated obligations and the timing of their issuance is determined by the Bank and is subject to investor demand as well as FHLBank System debt issuance policies. The intermediation of the timing, structure, and amount of Bank members' credit needs with the investment requirements of the Bank's creditors is made possible by the extensive use of interest rate derivatives. The Bank's general practice is to simultaneously execute interest rate swaps or other derivative transactions when extending term and option-embedded advances and/or issuing liabilities to convert the instruments' cash flows to a floating-rate that is indexed to OIS or SOFR. By doing so, the Bank strives to reduce its interest rate risk exposure and preserve the value of, and attempts to earn more stable returns on, its members' capital investment.
The Bank may also acquire assets with structural characteristics that reduce the Bank's ability to enter into interest rate exchange agreements having mirror image terms. These assets can include small fixed-rate, fixed-term loans and small fixed schedule amortizing loans. These assets may require the Bank to employ risk management strategies in which the Bank hedges the aggregated risks. The Bank may use fixed-rate, callable or non-callable debt or interest rate swaps to manage these aggregated risks.
The use of derivatives is integral to the Bank's financial management strategy, and their impact on the Bank's financial statements is significant. Management has a risk management framework that outlines the permitted uses of derivatives that adjusts the effective maturity, repricing frequency or option characteristics of various financial instruments to achieve the Bank's risk and earnings objectives. The Bank utilizes derivatives to hedge identifiable risks; none are used for speculative purposes.
The Bank uses derivatives as follows: (1) by designating them as either a fair value hedge of an underlying financial instrument or a firm commitment; or (2) in asset/liability management (i.e., an economic hedge). For example, the Bank uses derivatives in its overall interest rate risk management to adjust the interest rate sensitivity of consolidated obligations to approximate more closely the interest rate sensitivity of assets (advances, investment securities, and mortgage loans), and/or to
adjust the interest rate sensitivity of advances, investment securities, or mortgage loans to approximate more closely the interest rate sensitivity of liabilities. In addition to using derivatives to hedge mismatches of interest rates between assets and liabilities, the Bank also uses derivatives to hedge: (1) embedded options in assets and liabilities; (2) the market value of existing assets and liabilities and anticipated transactions; or (3) the duration risk of prepayable instruments. See Note 7 - Derivatives and Hedging Activities in Item 8. Financial Statements and Supplementary Data in this Form 10-K for additional information regarding the Bank's derivative and hedging activities.
The following tables summarize the derivative instruments, along with the specific hedge transaction utilized to manage various interest rate and other risks as noted below.
| Hedged Item/Hedging Instrument | Hedging Objective |
Hedge Accounting Designation (1)
|
Notional Amount at December 31, 2025
(in billions)
|
Notional Amount at December 31, 2024
(in billions)
|
||||||||||
| Advances | ||||||||||||||
| Pay-fixed, receive floating interest rate swap (without options) | Converts the advance's fixed rate to a variable rate index. | Fair Value | $ | 12.1 | $ | 13.8 | ||||||||
| Economic | 0.4 | 0.8 | ||||||||||||
| Pay-fixed, receive float interest rate swap (with options) | Converts the advance's fixed rate to a variable rate index and offsets option risk in the advance. | Fair Value | - | - | ||||||||||
| Subtotal-advances | $ | 12.5 | $ | 14.6 | ||||||||||
| Investments | ||||||||||||||
| Pay-fixed, receive floating interest-rate swap | Converts the investment's fixed rate to a variable-rate index. | Fair Value | $ | 9.9 | $ | 9.0 | ||||||||
| Economic | 0.5 | 0.6 | ||||||||||||
| Interest-rate cap or floor | Offsets the interest-rate cap or floor embedded in a variable rate investment. | Economic | 2.6 | 2.2 | ||||||||||
| Subtotal - investments | $ | 13.0 | $ | 11.8 | ||||||||||
| Mortgage Loans | ||||||||||||||
| Pay-fixed, receive floating interest rate swap | Converts the mortgage loan's fixed rate to a variable rate index. | Economic | $ | 0.5 | $ | 0.3 | ||||||||
| Consolidated Obligation Bonds | ||||||||||||||
| Receive-fixed, pay floating interest rate swap (without options) | Converts the bond's fixed rate to a variable rate index. | Fair Value | $ | 2.2 | $ | 3.1 | ||||||||
| Economic | 0.2 | 0.4 | ||||||||||||
| Receive-fixed, pay floating interest rate swap (with options) | Converts the bond's fixed rate to a variable rate index and offsets option risk in the bond. | Fair Value | 14.5 | 14.8 | ||||||||||
| Economic | 4.2 | 0.6 | ||||||||||||
| Subtotal - consolidated obligation bonds | $ | 21.1 | $ | 18.9 | ||||||||||
| Consolidated Obligation Discount Notes | ||||||||||||||
| Receive-fixed, pay floating interest rate swap | Converts the discount note's fixed rate to a variable-rate index. | Fair Value | $ | 14.9 | $ | 4.7 | ||||||||
| Economic | 0.2 | - | ||||||||||||
| Subtotal - consolidated obligation discount notes | $ | 15.1 | $ | 4.7 | ||||||||||
| Total notional amount | $ | 62.2 | $ | 50.3 | ||||||||||
Note:
(1) The Fair Value designation represents hedging strategies for which qualifying hedge accounting is achieved. The Economic designation represents hedging strategies for which qualifying hedge accounting is not achieved.
Credit and Counterparty Risk - Total Credit Exposure (TCE) and Collateral
TCE. The Bank manages the credit risk of each member on the basis of the member's total credit exposure (TCE) to the Bank, which includes advances and related accrued interest, fees, basis adjustments and estimated prepayment fees; letters of credit; forward-dated advance commitments; and MPF credit enhancement and related obligations. This credit risk is managed by monitoring the financial condition of borrowers and by requiring all borrowers (and, where applicable in connection with member affiliate pledge arrangements approved by the Bank, their affiliates) to pledge sufficient eligible collateral for all borrower obligations to the Bank as the Bank seeks to cover all potential forms of credit-related exposure with sufficient eligible collateral. At December 31, 2025, aggregate TCE was $67.0 billion, comprised of approximately $36.8 billion in advance principal outstanding, $29.8 billion in letters of credit (including forward commitments) and $0.4 billion in accrued interest, prepayment fees, MPF credit enhancement obligations and other fees.
The Bank establishes a maximum borrowing capacity (MBC) for each member based on collateral weightings applied to eligible collateral as described in the Bank's Member Products Policy. MBC is limited to a percentage of the members' assets based on the institution size and type subject to a maximum prudential lending limit. According to the policy, eligible collateral is weighted so that the collateral value is likely to exceed the amount that may be owed to the Bank in the event of a default. The Bank also has the ability to call for additional or substitute collateral while any indebtedness is outstanding to protect the Bank's secured position. At December 31, 2025and December 31, 2024, on a borrower-by-borrower basis, the Bank had a perfected security interest in eligible collateral with an estimated collateral value (after collateral weightings) in excess of the book value of all members' and nonmember housing associates' obligations to the Bank.
As part of the assessment of member creditworthiness, the Bank regularly monitors banking system and financial markets for signs of stress, considers events and conditions impacting a member individually or members generally and utilizes qualitative overrides to model internal credit ratings, as appropriate.
The financial condition of all members and eligible non-member housing associates is closely monitored for compliance with financial criteria as set forth in the Bank's credit policies. The Bank has developed an internal credit rating (ICR) system that calculates financial scores and rates member institutions on a quarterly basis using a numerical rating scale from one to ten, with one being the best rating. The Bank's determination of rating is derived using a holistic credit analysis which incorporates quantitative and qualitative factors. A quantitative scoring system uses financial ratios computed from publicly available data. The scoring system gives the highest weighting to the member's asset quality and capitalization. Other key factors include earnings, liquidity, and balance sheet composition. Operating results which include net income, liquidity levels and liquidity composition, capital levels, reserve coverage and other factors for the previous four quarters are used. The most recent quarter's results are given a higher weighting. Qualitative factors, such as unique business models or characteristics, recent events, and/or regulatory ratings are also considered in determining the ICR. A higher number (i.e., worse) rating indicates that a member exhibits well defined financial weaknesses. Members in these categories are reviewed for potential change to their collateral delivery status, advance tenor restrictions, and potential limitations on access to Bank products. Other uses of the ICR include the scheduling of on-site collateral verification reviews. Insurance company members are also rated on a ten-point scale with the rating based on both quantitative and qualitative factors. While depository institution member analysis uses standardized regulatory call report data and risk modeling, along with qualitative analysis, insurance company credit risk analysis is based on various forms of financial data, including, but not limited to, statutory reporting filed by insurance companies with state insurance regulators, which requires specialized methodologies and dedicated underwriting resources.
As noted above, the Bank monitors member credit quality on a regular basis. Management believes that it has adequate policies and procedures in place to effectively manage credit risk exposure related to member TCE. These credit and collateral policies are intended to balance the Bank's goals of being a reliable source of liquidity for members while employing appropriate credit and collateral terms for members with deteriorating creditworthiness to mitigate the risk of loss due to member credit exposure. The Bank has never experienced a loss on its advance exposure.
The following table presents the Bank's top five financial entities by their TCE at December 31, 2025.
| December 31, 2025 | ||||||||
| (dollars in millions) | TCE | % of Total | ||||||
|
TD Bank U.S. Holding Company (1)
|
$ | 17,133.5 | 25.6 | % | ||||
|
PNC Bank, National Association, DE (2)
|
13,463.2 | 20.1 | ||||||
|
Ally Bank, UT (3)
|
8,373.6 | 12.5 | ||||||
| Fulton Bank, N.A. | 4,458.5 | 6.7 | ||||||
|
Customers Bank
|
3,152.0 | 4.7 | ||||||
| $ | 46,580.8 | 69.6 | % | |||||
| Other financial institutions | 20,461.2 | 30.4 | ||||||
| Total TCE outstanding | $ | 67,042.0 | 100.0 | % | ||||
Notes:
(1) Member affiliates aggregated at the U.S. holding company level.
(2) For Bank membership purposes, principal place of business is Pittsburgh, PA.
(3) For Bank membership purposes, principal place of business is Horsham, PA.
Advance Concentration Risk. The following table lists the Bank's top five borrowers based on advances at par as of December 31, 2025.
| December 31, 2025 | ||||||||
| (dollars in millions) | Advance Balance | % of Total | ||||||
|
PNC Bank, National Association, DE (1)
|
$ | 13,000.0 | 35.3 | % | ||||
|
Ally Bank, UT (2)
|
8,350.0 | 22.7 | ||||||
|
First National Bank of Pennsylvania
|
2,155.0 | 5.8 | ||||||
|
Customers Bank
|
1,320.0 | 3.6 | ||||||
|
WesBanco Bank, Inc
|
1,200.0 | 3.2 | ||||||
| $ | 26,025.0 | 70.6 | % | |||||
| Other borrowers | 10,818.7 | 29.4 | ||||||
| Total advances | $ | 36,843.7 | 100.0 | % | ||||
Notes:
(1) For Bank membership purposes, principal place of business is Pittsburgh, PA.
(2) For Bank membership purposes, principal place of business is Horsham, PA.
Letters of Credit. The letter of credit product is collateralized under the same policies, procedures and guidelines that apply to advances. Outstanding letters of credit totaled $27.5 billion at December 31, 2025 and $29.6 billion at December 31, 2024, primarily related to public unit deposits. Not included in these totals are additional authorized but unused standby letters of credit of $2.3 billion at December 31, 2025 and $2.2 billion at December 31, 2024. The Bank had a concentration of letters of credit with two members, TD Bank N.A. of $15.8 billion or 57.4% and Fulton Bank of $3.4 billion or 12.4% of the total at December 31, 2025 and two members, TD Bank N.A. of $18.8 billion or 64% and Fulton Bank of $3.5 billion or 11.8% of the total at December 31, 2024.
Collateral Policies and Practices.All members are required to maintain eligible collateral to secure their TCE in accordance with the Member Products Policy. The Bank periodically reviews the collateral pledged by members or affiliates, where applicable. Additionally, the Bank conducts periodic collateral verification reviews to ensure the eligibility, adequacy and sufficiency of the collateral pledged. The Bank may, in its discretion, require the delivery of loan collateral at any time.
The Bank reviews and assigns borrowing capacities based on this collateral, taking into account the known credit attributes in assigning the appropriate secondary market discounts to determine that a member's TCE is fully collateralized. Other factors that the Bank may consider in calculating a member's MBC include the collateral status for loans, frequency of loan data reporting, collateral field review results, the member's financial strength and condition, and the concentration of collateral type by member.
The Bank uses a QCR process that is intended to provide timely, detailed collateral information. Depending on a member's credit product usage and financial condition, a member may be required to file the QCR on a quarterly or monthly basis. The
QCR is intended to strengthen the Bank's collateral analytical review procedures. The output of the QCR is a member's loan-based MBC. For the small number of members who opt out of QCR filing, MBC is calculated by the Bank, based on the member's regulatory filing data. For such members, final MBC is established at 20% of the aggregate weighted collateral value. Such members are required to file an Annual Collateral Certification Report.
At December 31, 2025, less than 10% of the Bank's total pledged collateral was considered to be nontraditional, subprime and low FICO mortgage loans.
The Bank is allowed by regulation to expand eligible collateral for many of its members. Members that qualify as CFIs can pledge expanded collateral which includes small-business, small-farm, small-agribusiness and community development loans as collateral for credit products from the Bank. At December 31, 2025, loans to CFIs secured with both eligible standard and expanded collateral represented approximately $2.6 billion, or 6.9% of total par value of loans outstanding. Eligible expanded collateral represented 5.3% of total eligible collateral for these loans. However, these loans were collateralized by sufficient levels of standard collateral.
Collateral Agreements and Valuation. The Bank provides members with two types of collateral agreements: a blanket lien collateral pledge agreement and a specific collateral pledge agreement. Under a blanket lien agreement, the Bank obtains a lien against all of the member's unencumbered eligible collateral assets and most ineligible assets to secure the member's obligations with the Bank. Under a specific collateral pledge agreement, the Bank obtains a lien against specific eligible collateral assets of the member or its affiliate (if applicable) to secure the member's obligations with the Bank. The member provides a detailed listing, as an addendum to the specific collateral agreement, identifying those assets pledged as collateral or delivered to the Bank or its third-party custodian.
High quality investment securities are defined as U.S. Treasury and U.S. Agency securities, REFCORP bonds, GSE MBS, commercial and residential private label MBS with a minimum credit rating of single A-minus, which the Bank considers as part of its evaluation of the collateral. In addition, municipal securities (or portions thereof) with a real estate nexus (e.g. proceeds primarily used for real estate development) with a minimum credit rating of single A-minus are included. Members have the option to deliver such high quality investment securities to the Bank to increase their maximum borrowing capacity. Upon delivery, these securities are valued daily and all non-government or agency securities are subject to weekly ratings reviews. The reported amount also includes cash that the member has pledged to the Bank for collateral purposes.
The following tables present information regarding the type of collateral securing credit exposure and the collateral status as of December 31, 2025 and December 31, 2024.
| December 31, 2025 | ||||||||||||||||||||||||||
| (dollars in millions) | Blanket Lien | Listing | Delivery | Total | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | Amount | % | |||||||||||||||||||
|
One-to-four single-family residential mortgage loans |
$ | 108,934.1 | 44.9 | % | $ | 1,067.4 | 9.7 | % | $ | 6.7 | 4.3 | % | $ | 110,008.2 | 43.4 | % | ||||||||||
| High quality investment securities | 12,048.6 | 5.0 | 5,580.6 | 50.7 | 150.6 | 95.7 | 17,779.8 | 7.0 | ||||||||||||||||||
|
Other real estate-related collateral (ORERC)/CFI eligible collateral
|
94,788.0 | 39.1 | 2,266.6 | 20.6 | - | - | 97,054.6 | 38.3 | ||||||||||||||||||
|
Multi-family residential mortgage loans |
26,620.9 | 11.0 | 2,094.9 | 19.0 | - | - | 28,715.8 | 11.3 | ||||||||||||||||||
| Total eligible collateral value | $ | 242,391.6 | 100.0 | % | $ | 11,009.5 | 100.0 | % | $ | 157.3 | 100.0 | % | $ | 253,558.4 | 100.0 | % | ||||||||||
| Total TCE | $ | 61,804.5 | 92.2 | % | $ | 5,152.6 | 7.7 | % | $ | 84.9 | 0.1 | % | $ | 67,042.0 | 100.0 | % | ||||||||||
| Number of members | 142 | 83.5 | % | 22 | 13.0 | % | 6 | 3.5 | % | 170 | 100.0 | % | ||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| (dollars in millions) | Blanket Lien | Listing | Delivery | Total | ||||||||||||||||||||||
| Amount | % | Amount | % | Amount | % | Amount | % | |||||||||||||||||||
|
One-to-four single-family residential mortgage loans |
$ | 117,486.5 | 45.0 | % | $ | 661.5 | 15.5 | % | $ | 0.4 | 0.3 | % | $ | 118,148.4 | 44.5 | % | ||||||||||
| High quality investment securities | 16,498.1 | 6.3 | 2,775.9 | 65.0 | 158.3 | 99.6 | 19,432.3 | 7.3 | ||||||||||||||||||
| ORERC/ CFI eligible collateral | 98,112.5 | 37.5 | 792.3 | 18.6 | 0.2 | 0.1 | 98,905.0 | 37.2 | ||||||||||||||||||
|
Multi-family residential mortgage loans |
29,226.2 | 11.2 | 40.3 | 0.9 | - | - | 29,266.5 | 11.0 | ||||||||||||||||||
| Total eligible collateral value | $ | 261,323.3 | 100.0 | % | $ | 4,270.0 | 100.0 | % | $ | 158.9 | 100.0 | % | $ | 265,752.2 | 100.0 | % | ||||||||||
| Total TCE | $ | 100,922.4 | 98.4 | % | $ | 1,608.4 | 1.6 | % | $ | 69.0 | - | % | $ | 102,599.8 | 100.0 | % | ||||||||||
| Number of members | 161 | 85.6 | % | 21 | 11.2 | % | 6 | 3.2 | % | 188 | 100.0 | % | ||||||||||||||
Credit and Counterparty Risk - Investments
The Bank is also subject to credit risk on investments consisting of money market investments and investment securities. The Bank considers a variety of credit quality factors when analyzing potential investments, including collateral performance, marketability, asset class or sector considerations, local and regional economic conditions, nationally recognized statistical organization (NRSRO) credit ratings, and/or the financial health of the underlying issuer.
Investment Quality and External Credit Ratings. The following tables present the Bank's investment carrying values as of December 31, 2025 and December 31, 2024 based on the lowest credit rating from the NRSROs (Moody's, S&P and Fitch).
|
December 31, 2025 (1)
|
|||||||||||||||||||||||
| Long-Term Rating | |||||||||||||||||||||||
| (in millions) | AAA | AA | A | BBB | Below Investment Grade | Unrated | Total | ||||||||||||||||
| Money market investments: | |||||||||||||||||||||||
| Interest-bearing deposits | $ | - | $ | 549.0 | $ | 1,854.3 | $ | - | $ | - | $ | - | $ | 2,403.3 | |||||||||
| Securities purchased under agreements to resell | - | - | 2,680.0 | - | - | - | 2,680.0 | ||||||||||||||||
| Federal funds sold | - | 3,302.0 | 2,675.0 | - | - | - | 5,977.0 | ||||||||||||||||
| Total money market investments | $ | - | $ | 3,851.0 | $ | 7,209.3 | $ | - | $ | - | $ | - | $ | 11,060.3 | |||||||||
| Investment securities: | |||||||||||||||||||||||
| U.S. Treasury obligations | $ | - | $ | 4,912.3 | $ | - | $ | - | $ | - | $ | - | $ | 4,912.3 | |||||||||
| GSE and TVA obligations | - | 953.7 | - | - | - | - | 953.7 | ||||||||||||||||
| State or local agency obligations | $ | 13.1 | $ | 161.7 | $ | - | $ | - | $ | - | $ | - | $ | 174.8 | |||||||||
| Total non-MBS | $ | 13.1 | $ | 6,027.7 | $ | - | $ | - | $ | - | $ | - | $ | 6,040.8 | |||||||||
| U.S. obligations single-family MBS | $ | - | $ | 1,774.0 | $ | - | $ | - | $ | - | $ | - | $ | 1,774.0 | |||||||||
| GSE single-family MBS | - | 4,953.0 | - | - | - | - | 4,953.0 | ||||||||||||||||
| GSE multifamily MBS | - | 6,553.2 | - | - | - | - | 6,553.2 | ||||||||||||||||
| Private label MBS | $ | 3.3 | $ | 2.6 | $ | 5.2 | $ | 0.5 | $ | 27.7 | $ | 92.4 | $ | 131.7 | |||||||||
| Total MBS | $ | 3.3 | $ | 13,282.8 | $ | 5.2 | $ | 0.5 | $ | 27.7 | $ | 92.4 | $ | 13,411.9 | |||||||||
| Total investments | $ | 16.4 | $ | 23,161.5 | $ | 7,214.5 | $ | 0.5 | $ | 27.7 | $ | 92.4 | $ | 30,513.0 | |||||||||
Note:
(1)Balances exclude $5.6 million of interest-bearing deposits with FHLBank of Chicago at December 31, 2025, and total accrued interest of $69.6 millionat December 31, 2025.
The Bank also manages its investments' credit risks based on an internal credit rating system. For purposes of determining the internal credit rating, the Bank measures credit exposure through a process which includes internal credit review and various external factors, including NRSRO analysis. The Bank does not rely solely on any NRSRO rating in deriving its final internal credit rating.
Short-term Investments.Within the portfolio of short-term investments, the Bank faces credit risk from unsecured exposures. The Bank's unsecured investments have maturities generally ranging between overnight and six months and may include the following types:
•Interest-bearing deposits. Primarily consists of unsecured deposits that earn interest; and
•Federal funds sold. Unsecured loans of reserve balances at the Federal Reserve Banks between financial institutions that are made on an overnight and term basis.
Under the Bank's Risk Governance Policy, the Bank can place money market investments, which include those investment types listed above, on an unsecured basis with large financial institutions with long-term credit ratings no lower than BBB. Management actively monitors the credit quality of these counterparties. The Bank also invests in securities purchased under agreements to resell which are secured investments.
As of December 31, 2025, the Bank had unsecured exposure to 16 counterparties totaling $8.4 billion with one counterparty exceeding 10% of the total exposure. The following table presents the Banks' unsecured credit exposure with non-
governmental counterparties by investment type at December 31, 2025 and December 31, 2024. The unsecured investment credit exposure presented may not reflect the average or maximum exposure during the period.
| (in millions) | |||||
| Carrying Value | December 31, 2025 | ||||
|
Interest-bearing deposits (1)
|
$ | 2,403.3 | |||
| Federal funds sold | 5,977.0 | ||||
| Total | $ | 8,380.3 | |||
Note:
(1)Excludes $5.6 million of Interest-bearing deposits with FHLBank of Chicago at December 31, 2025.
As of December 31, 2025, 55.0% of the Bank's unsecured investment credit exposures were to U.S. branches and agency offices of foreign commercial banks. The Bank actively monitors its credit exposures and the credit quality of its counterparties, including an assessment of each counterparty's financial performance, capital adequacy, sovereign support, and the current market perceptions of the counterparties. General macro-economic, political and market conditions may also be considered when deciding on unsecured exposure. As a result, the Bank may limit or suspend existing counterparties.
Finance Agency regulations include limits on the amount of unsecured credit the Bank may extend to a counterparty or to a group of affiliated counterparties. This limit is based on a percentage of eligible regulatory capital and the counterparty's overall internal credit rating. Under these regulations, the level of eligible regulatory capital is determined as the lesser of the Bank's total regulatory capital or the eligible amount of regulatory capital of the counterparty. The eligible amount of regulatory capital is then multiplied by a stated percentage. This percentage is 1% to 15% and is based on the counterparty's internal credit rating. The calculation of term extensions of unsecured credit includes on-balance sheet transactions, off-balance sheet commitments, and derivative transactions.
Finance Agency regulation also permits the Bank to extend additional unsecured credit for overnight transactions and for sales of Federal funds subject to continuing contracts that renew automatically. For overnight exposures only, the Bank's total unsecured exposure to a counterparty may not exceed twice the applicable regulatory limit, or a total of 2% to 30% of the eligible amount of regulatory capital, based on the counterparty's internal credit rating. As of December 31, 2025, the Bank was in compliance with the regulatory limits established for unsecured credit.
The Bank's unsecured credit exposures to U.S. branches and agency offices of foreign commercial banks include the risk that, as a result of political or economic conditions in a country, the counterparty may be unable to meet their contractual repayment obligations. The Bank's unsecured credit exposures to domestic counterparties and U.S. subsidiaries of foreign commercial banks include the risk that these counterparties have extended credit to foreign counterparties.
The following table presents the long-term credit ratings of the unsecured investment credit exposures by the domicile of the counterparty or the domicile of the counterparty's immediate parent for U.S. subsidiaries or branches and agency offices of foreign commercial banks based on the NRSROs used. This table does not reflect the foreign sovereign government's credit rating.
| (in millions) | |||||||||||
|
December 31, 2025 (1) (2)
|
|||||||||||
| Carrying Value | |||||||||||
| Domicile of Counterparty |
Investment Grade (3) (4)
|
||||||||||
| AA | A | Total | |||||||||
| Domestic | $ | 1,201.0 | $ | 2,579.3 | $ | 3,780.3 | |||||
| U.S. branches and agency offices of foreign commercial banks: | |||||||||||
| Australia | 725.0 | - | 725.0 | ||||||||
| Canada | 1,100.0 | 1,450.0 | 2,550.0 | ||||||||
| Finland | 625.0 | - | 625.0 | ||||||||
| France | - | 150.0 | 150.0 | ||||||||
| Germany | 200.0 | - | 200.0 | ||||||||
| Netherlands | - | 350.0 | 350.0 | ||||||||
| Total U.S. branches and agency offices of foreign commercial banks | 2,650.0 | 1,950.0 | 4,600.0 | ||||||||
| Total unsecured investment credit exposure | $ | 3,851.0 | $ | 4,529.3 | $ | 8,380.3 | |||||
Notes:
(1)Ratings are as of the respective dates.
(2)These ratings represent the lowest rating available for each security owned by the Bank based on the NRSROs used by the Bank. The Bank's internal ratings may differ from those obtained from the NRSROs.
(3)Excludes unsecured investment credit exposure to U.S. government, U.S. government agencies and instrumentalities, GSEs, and supranational entities.
(4)Represents the NRSRO rating of the counterparty not the country. There were no AAA rated investments at December 31, 2025.
The following table presents the remaining contractual maturity of the Bank's unsecured investment credit exposure by the domicile of the counterparty or the domicile of the counterparty's parent for U.S. subsidiaries or branches and agency offices of foreign commercial banks. The Bank also mitigates the credit risk on investments by generally investing in investments that have short-term maturities.
| (in millions) | ||||||||||||||
| December 31, 2025 | ||||||||||||||
| Carrying Value | ||||||||||||||
| Domicile of Counterparty | Overnight | Due 2 days through 30 days | Due 31 days through 90 days | Total | ||||||||||
| Domestic | $ | 3,780.3 | $ | - | $ | - | $ | 3,780.3 | ||||||
| U.S. branches and agency offices of foreign commercial banks: | ||||||||||||||
| Australia | 725.0 | - | - | 725.0 | ||||||||||
| Canada | 2,550.0 | - | - | 2,550.0 | ||||||||||
| Finland | 625.0 | - | - | 625.0 | ||||||||||
| France | 150.0 | - | - | 150.0 | ||||||||||
| Germany | 200.0 | - | - | 200.0 | ||||||||||
| Netherlands | 350.0 | - | - | 350.0 | ||||||||||
| Total U.S. branches and agency offices of foreign commercial banks | 4,600.0 | - | - | 4,600.0 | ||||||||||
| Total unsecured investment credit exposure | $ | 8,380.3 | $ | - | $ | - | $ | 8,380.3 | ||||||
U.S. Treasury Obligations. The Bank invests in U.S. Treasury obligations that are explicitly fully guaranteed by the U.S. government. This portfolio totaled $4.9 billion at December 31, 2025 and $4.1 billion at December 31, 2024.
Agency/GSE Securities and Agency/GSE MBS.The Bank invests in and is subject to credit risk related to securities issued by Federal Agencies or U.S. government corporations. In addition, the Bank invests in MBS issued by these same entities that are directly supported by underlying mortgage loans. Both the securities and MBS are either explicitly or implicitly guaranteed by the U.S. government. These portfolios totaled $14.2 billion at December 31, 2025 and $15.2 billion at December 31, 2024.
State and Local Agency Obligations. The Bank invests in and is subject to credit risk related to a portfolio of state and local agency obligations (i.e., Housing Finance Agency bonds) that are directly or indirectly supported by underlying mortgage loans. These portfolios totaled $174.8 million at December 31, 2025 and $169.3 million at December 31, 2024.
Private Label MBS. The Bank also holds investments in private label MBS, which are supported by underlying mortgage loans. The Bank made investments in private label MBS that were rated AAA at the time of purchase with the exception of one, which was rated AA. However, since the time of purchase, there have been significant ratings downgrades. In 2007, the Bank discontinued the purchase of private label MBS. The carrying value of the Bank's private label MBS portfolio was $131.7 million at December 31, 2025 and $150.0 million at December 31, 2024.
Credit Losses. The Bank evaluates its private label MBS for expected credit losses quarterly. There was no ACL recorded on HTM private label MBS. With respect to AFS private label MBS, the Bank had an ACL of $16.7 million at December 31, 2025 and $14.2 million as of December 31, 2024. For additional information on the Bank's ACL on AFS private label MBS, see Note 4 - Investments in Item 8. Financial Statements and Supplementary Data in this Form 10-K.
For those AFS private label MBS with a credit loss previously recorded, when the Bank projects an increase in cash flows during its quarterly assessment of expected credit losses, the Bank will first reverse the ACL by recognizing a reversal for credit losses up to the amount of the ACL, if any. If the Bank projects a significant increase in cash flows, the Bank adjusts the accretable yield prospectively and recognizes the interest income over the remaining lives of the securities. The amount recognized in interest income on these securities was $6.8 million, $8.6 million and $9.4 million for 2025, 2024 and 2023, respectively.
Credit and Counterparty Risk - Mortgage Loans and Derivatives
Mortgage Loans. The Finance Agency has authorized the Bank to hold mortgage loans under the MPF Program whereby the Bank acquires mortgage loans from participating members in a shared credit risk structure. Conventional mortgage loans carry CE requirements such that the Bank has a high degree of confidence that it will be paid principal and interest in all material respects, even under reasonably likely adverse changes to expected economic conditions. Loans are assessed by a third-party credit model at acquisition, and a CE requirement is calculated based on loan attributes and the Bank's risk tolerance with respect to its MPF portfolio.
The Bank had net mortgage loans held for portfolio of $5.2 billion and $4.8 billion at December 31, 2025 and December 31, 2024, respectively, after an allowance for credit losses of $2.5 million and $2.4 million, respectively. The Bank maintains portfolio level limits and thresholds to monitor and control certain MPF portfolio characteristics including, but not limited to, geographic concentrations, aggregate portfolio size and pricing attributes, and exposures from any single PFI.
The table below presents additional statistics of the MPF portfolio including par value balances by product type.
| (dollars in millions) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Balance | % of Total | Balance | % of Total | |||||||||||
| Conventional loans: | ||||||||||||||
| MPF 35 | $ | 3,095.2 | 59.8 | % | $ | 2,728.8 | 57.2 | % | ||||||
| MPF Original | 1,915.1 | 37.0 | 1,849.3 | 38.8 | ||||||||||
| MPF Plus | 80.7 | 1.6 | 99.2 | 2.1 | ||||||||||
| Total conventional loans | $ | 5,091.0 | 98.4 | % | $ | 4,677.3 | 98.1 | % | ||||||
| Government-insured loans: | ||||||||||||||
| MPF Government | 84.2 | 1.6 | 92.3 | 1.9 | ||||||||||
| Total par value | $ | 5,175.2 | 100.0 | % | $ | 4,769.6 | 100.0 | % | ||||||
| (dollars in millions) | 2025 | 2024 | ||||||
| Mortgage loans interest income | $ | 197.3 | $ | 168.6 | ||||
| Average mortgage loans portfolio balance | $ | 5,056.8 | $ | 4,748.7 | ||||
| Average yield | 3.90 | % | 3.55 | % | ||||
| Weighted average coupon (WAC) | 4.48 | % | 4.13 | % | ||||
| Weighted average estimated life (WAL) |
8.4 years
|
8.0 years | ||||||
The data in the FICO and LTV ratio range below are based on unpaid principal balance for the loans remaining in the portfolio at December 31, 2025 and December 31, 2024.
| FICO score at origination | December 31, 2025 | December 31, 2024 | Original LTV Ratio Range | December 31, 2025 | December 31, 2024 | |||||||||||||||
|
≥ 740
|
60.5 | % | 58.9 | % |
< 60%
|
8.2 | % | 7.8 | % | |||||||||||
| 700 to 739 | 20.9 | % | 21.0 | % | 60% to 70% | 9.1 | % | 9.3 | % | |||||||||||
| 660 to 699 | 14.5 | % | 15.7 | % | 70% to 80% | 49.5 | % | 50.9 | % | |||||||||||
| 620 to 659 | 3.8 | % | 4.1 | % |
80% to 90%
|
15.5 | % | 14.9 | % | |||||||||||
|
≤ 620
|
0.3 | % | 0.3 | % |
> 90%
|
17.7 | % | 17.1 | % | |||||||||||
| Total | 100.0 | % | 100.0 | % | Total | 100.0 | % | 100.0 | % | |||||||||||
The geographic breakdown below is based on the unpaid principal balance at December 31, 2025 and December 31, 2024.
|
Regional Concentrations
|
December 31, 2025 | December 31, 2024 |
State Concentrations
|
December 31, 2025 | December 31, 2024 | |||||||||||||||
| Midwest | 7.6 | % | 7.1 | % | Pennsylvania | 54.2 | % | 53.7 | % | |||||||||||
| Northeast | 59.0 | % | 57.7 | % | Virginia | 12.3 | % | 13.3 | % | |||||||||||
| Southeast | 32.7 | % | 34.3 | % | Maryland | 7.3 | % | 7.6 | % | |||||||||||
| Southwest | 0.4 | % | 0.5 | % | Ohio | 6.9 | % | 6.3 | % | |||||||||||
| West | 0.3 | % | 0.4 | % | Other States | 19.3 | % | 19.1 | % | |||||||||||
| Total | 100.0 | % | 100.0 | % | Total | 100.0 | % | 100.0 | % | |||||||||||
Underwriting Standards. Purchased mortgage loans must meet certain underwriting standards established in the MPF Program guidelines. Key standards and/or eligibility guidelines include the following loan criteria:
a.Conforming loan size, established annually; may not exceed the loan limits set by the Finance Agency;
b.Fixed-rate, fully-amortizing loans with terms from 5 to 30 years;
c.Secured by first lien mortgages on owner-occupied residential properties and second homes;
d.Generally, 95% maximum LTV; all LTV ratio criteria generally are based on the loan purpose, occupancy and borrower citizenship status; all loans with LTV ratios above 80% require PMI coverage; and
e.Unseasoned or current production with up to 24 payments made by the borrowers.
The following types of mortgage loans are not eligible for delivery under the MPF Program: (1) mortgage loans that are not ratable by S&P; (2) mortgage loans not meeting the MPF Program eligibility requirements as set forth in the MPF Guides and agreements; and (3) mortgage loans that are classified as high cost, high rate, Home Ownership and Equity Protection Act loans, or loans in similar categories defined under predatory lending or abusive lending laws.
Under the MPF Program, the FHLBank of Chicago (in its role as MPF Provider) and the PFI both conduct quality assurance reviews on a sample of the conventional mortgage loans to ensure compliance with MPF Program requirements. The PFI may be required to repurchase at book value the individual loans which fail these reviews. Subsequent to this quality assurance review, any loans which are discovered to breach representations and warranties may be required to be repurchased by the PFI. Additionally, MPF Government residential mortgage loans which are 90 days or more past due are contractually permitted to be repurchased by the PFI. For 2025 and 2024, the PFIs repurchased conventional and government mortgage loans of $2.7 million or 0.3% and $4.2 million or 0.8%, respectively, of total funded loans.
Layers of Loss Protection.The Bank is required to put a CE structure in place at purchase that assures that, on any mortgage loans acquired, the Bank has a high degree of confidence that it will be paid the principal and interest in all material respects, even under reasonably likely adverse changes to expected economic conditions. The PFI must bear a specified portion of the direct economic consequences of actual loan losses on the individual mortgage loans or pool of loans, which may be provided by a CE obligation or SMI. Each MPF product structure has various layers of loss protection as presented below.
| Layer | MPF 35 | MPF Original | MPF Plus | ||||||||
| First | Borrower's equity in the property | Borrower's equity in the property | Borrower's equity in the property | ||||||||
| Second (required for mortgage loans with LTV greater than 80%) | PMI issued by qualified mortgage insurance companies (if applicable) | PMI issued by qualified mortgage insurance companies (if applicable) | PMI issued by qualified mortgage insurance companies (if applicable) | ||||||||
| Third |
Bank FLA (1)
(upfront amount)
|
Bank FLA (1)
(allocated amount)
|
Bank FLA (1)
(upfront amount)
|
||||||||
| Fourth |
PFI CE amount (2)
|
PFI CE amount (2)
|
SMI and/or PFI CE amount, if applicable (2)
|
||||||||
| Final | Bank loss | Bank loss | Bank loss | ||||||||
Notes:
(1)The FLA either builds over time (allocated amount) or is an amount equal to an agreed-upon percentage of the aggregate balance of the mortgage loans purchased (upfront amount). The Bank does not receive fees in connection with the FLA.
(2)The PFI's CE amount for each pool of loans, together with any PMI or SMI, is sized at the time of loan purchase to equal the amount of losses in excess of the FLA to the equivalent of AMA Investment Grade.
By credit enhancing each master commitment, the PFI maintains an interest in the performance of the mortgage loans it sells to the Bank and may service for the Bank. For managing this risk, the PFI is paid a monthly CE fee by the Bank. CE fees are recorded as an offset to mortgage loan net interest income in the Statements of Income. For 2025 and 2024, CE fees were $6.1 million and $5.7 million, respectively. Performance-based CE fees paid are reduced by losses absorbed through the FLA, where applicable.
MPF 35.Under MPF 35, the FLA is equal to a specified percentage of the amount of loans funded in the Master Commitment. Loan losses not covered by PMI, but not to exceed the FLA, are recorded as losses by the Bank. Losses in excess of FLA are allocated to the PFI under its CE obligation. The PFI is paid a fixed CE fee and a performance-based fee for providing the CE obligation. Losses incurred by the Bank up to its exposure under the FLA may be recaptured through recovery of future performance-based CE fees earned by the PFI. Any loan losses in excess of both the FLA and the CE amounts are recorded as losses by the Bank.
MPF Original.Under MPF Original, the FLA is zero on the day the first loan is purchased and increases steadily over the life of the Master Commitment based on the month-end outstanding aggregate principal balance. Loan losses not covered by PMI, but not to exceed the FLA, are recorded as losses by the Bank. Losses in excess of FLA are allocated to the PFI under its CE obligation for each pool of loans. The PFI is paid a fixed CE fee for providing this CE obligation. Loan losses in excess of both the FLA and the CE amount are recorded as losses by the Bank.
MPF Plus.MPF Plus has the same structure as MPF 35, with the exception of the PFI's CE obligation. Under MPF Plus, the PFI may obtain an SMI policy to cover its CE obligation to the Bank. If applicable, the SMI policy has a deductible that approximates the FLA. The Bank has not purchased loans through MPF Plus since 2006.
The following table presents the outstanding balances in the FLAs for the MPF Original, MPF Plus, and MPF 35 products.
| (in millions) | MPF 35 | MPF Original | MPF Plus | Total | ||||||||||
| December 31, 2025 | $ | 22.3 | $ | 10.0 | $ | 14.9 | $ | 47.2 | ||||||
| December 31, 2024 | 20.1 | 9.3 | 14.9 | 44.3 | ||||||||||
Mortgage Insurers. The Bank's MPF Program currently has credit exposure to ten mortgage insurance companies which provide PMI and/or supplemental mortgage insurance (SMI) for the Bank's various products. To be active, the mortgage insurance company must be approved as a qualified insurer in accordance with the Finance Agency regulations. At least every two years, the Bank reviews the qualified insurers to determine if they continue to meet the financial and operational standards set by the Bank.
When a conventional mortgage loan requires PMI, the MPF Program modeling applied to the Bank's acquisitions requires additional CE from the PFI to compensate for the mortgage insurer rating when it is below BBB+. The unpaid principal balance and maximum coverage outstanding for seriously delinquent loans with PMI as of December 31, 2025 was $10.8 million and $3.0 million, respectively. The corresponding amounts at December 31, 2024 were $7.8 million and $2.4 million.
The MPF Plus product required SMI under the MPF Program when each pool was established. At December 31, 2025, five of the 14 MPF Plus pools still have SMI policies in place. The Bank does not currently offer the MPF Plus product and has not purchased loans under MPF Plus Commitments since July 2006. Per MPF Program guidelines, the existing MPF Plus product exposure is required to be secured by the PFI once the SMI company is rated below AA-. As of December 31, 2025, all of the SMI exposure is fully collateralized.
Derivative Counterparties. To manage interest rate risk, the Bank enters into derivative contracts. Derivative transactions may be either executed with a counterparty (referred to as uncleared derivatives) or cleared through a Futures Commission Merchant (i.e., clearing agent) or a Swap Execution Facility with a Derivatives Clearing Organization (referred to as cleared derivatives). For uncleared derivatives, the Bank transacts most of its derivatives with large banks and major broker-dealers. Some of these banks and broker-dealers or their affiliates buy, sell, and distribute consolidated obligations. The Bank is not a derivatives dealer and does not trade derivatives for short-term profit.
The Bank uses either CME Clearing or LCH Ltd as the Clearing House for all its cleared derivative transactions. Variation margin payments are characterized as daily settlement payments, rather than collateral. Initial margin is considered cash collateral. The Bank is subject to credit risk due to the risk of non-performance by counterparties to its derivative transactions. The amount of credit risk on derivatives depends on the extent to which netting procedures, collateral requirements, daily settlement and other credit enhancements are used and are effective in mitigating the risk. The Bank manages credit risk through credit analysis, collateral management, and other credit enhancements.
Uncleared Derivatives. The Bank is subject to the risk of non-performance by counterparties to its uncleared derivative transactions. The Bank requires collateral on uncleared derivative transactions. Generally, the Bank's ISDA agreements for uncleared derivatives have collateral delivery thresholds set to zero (subject to minimum transfer amounts). The Bank has a small number of legacy trades that require collateral amounts from its counterparties based on credit rating. As a result of these risk mitigation initiatives, the Bank does not anticipate any credit losses on its uncleared derivative transactions with counterparties as of December 31, 2025. The Bank's total net credit exposure to uncleared derivative counterparties is immaterial.
Credit risk related to uncleared derivatives may be further mitigated by the exchange of initial margin with the Bank's derivative counterparties. However, as of December 31, 2025, the Bank did not exceed initial margin thresholds with any of its counterparties and was not required to post initial margin. If the Bank's aggregate uncleared derivative transactions exposure to a counterparty exceeds the applicable threshold, certain investment securities are required to be posted and held at a third-party custodian.
Cleared Derivatives. The Bank is subject to credit risk exposure to the Clearing Houses and the Bank's clearing agents. The requirement that the Bank post initial margin and exchange variation margin settlement payments, through its clearing agents, to the Clearing Houses, exposes the Bank to institutional credit risk in the event that a clearing agent or a Clearing House fails to meet its obligations. Initial margin is the amount calculated based on anticipated exposure to future changes in the value of a swap and protects the Clearing Houses from market risk in the event of default by one of its clearing agents. Variation margin is the amount accumulated through daily settlement of the current exposure arising from changes in the market value of the position since the trade was executed. The Bank's use of cleared derivatives is intended to mitigate credit risk exposure because a central counterparty is substituted for individual counterparties and collateral postings and variation margin settlement payments are made daily for changes in the value of cleared derivatives through a clearing agent. The Bank does not anticipate any credit losses on its cleared derivatives as of December 31, 2025.
The contractual or notional amount of derivative transactions reflects the involvement of the Bank in the various classes of financial instruments. The maximum credit risk of the Bank with respect to derivative transactions is the estimated cost of replacing the derivative transactions if there is a default, minus the value of any related collateral, including initial margin and variation margin settlements on cleared derivatives. In determining maximum credit risk, the Bank considers accrued interest receivables and payables as well as the netting requirements to net assets and liabilities. The following table presents the derivative positions with non-member counterparties and member institutions to which the Bank has credit exposure at December 31, 2025.
| (in millions) | December 31, 2025 | |||||||||||||
|
Credit Rating (1)
|
Notional Amount | Fair Value Before Collateral |
Cash Collateral Pledged To (From) Counterparties
|
Net Credit Exposure to Counterparties | ||||||||||
| Non-member counterparties | ||||||||||||||
| Asset positions with credit exposure: | ||||||||||||||
| Uncleared derivatives | ||||||||||||||
| A | $ | 3,356.3 | $ | 6.2 | $ | (5.7) | $ | 0.5 | ||||||
| Cleared derivatives | 40,382.0 | 15.5 | 333.4 | 348.9 | ||||||||||
|
Liability positions with credit exposure:
|
||||||||||||||
| Uncleared derivatives | ||||||||||||||
| A | 2,496.0 | (22.8) | 23.4 | 0.6 | ||||||||||
| BBB | 3,320.0 | $ | (10.2) | $ | 10.3 | $ | 0.1 | |||||||
|
Total derivative positions with credit exposure to non-member counterparties
|
$ | 49,554.3 | $ | (11.3) | $ | 361.4 | $ | 350.1 | ||||||
|
Member institutions (2)
|
33.3 | - | - | - | ||||||||||
| Total | $ | 49,587.6 | $ | (11.3) | $ | 361.4 | $ | 350.1 | ||||||
|
Derivative positions without credit exposure
|
12,583.3 | |||||||||||||
|
Total notional
|
$ | 62,170.9 | ||||||||||||
Notes:
(1) This table does not reflect any changes in rating, outlook or watch status occurring after December 31, 2025. The ratings presented in this table represent the lowest long-term counterparty credit rating available for each counterparty based on the NRSROs used by the Bank.
(2) Member institutions include mortgage delivery commitments.
The Bank annually underwrites each counterparty and country and regularly monitors NRSRO rating actions and other publications to assess credit risk and determine if there have been any changes to credit quality. This includes actively monitoring counterparties with an elevated risk profile and assessing approximate indirect exposure to foreign sovereign debt.
Liquidity and Funding Risk
As a wholesale bank, the Bank employs financial strategies which enable it to expand and contract its assets, liabilities and capital in response to changes in member credit demand, membership composition and other market factors. In addition, the Bank is required to maintain a level of liquidity in accordance with the FHLBank Act, Finance Agency regulations and policies established by its management and Board. The Bank's liquidity resources are intended to support these strategies and requirements through a focus on maintaining a liquidity and funding balance between its financial assets and financial liabilities.
Asset/Liability Maturity Profile. The Bank is focused on maintaining adequate liquidity and funding balances with its financial assets and financial liabilities, and the FHLBanks work collectively to manage system-wide liquidity and funding needs. The Bank monitors the funding balance between financial assets and financial liabilities and is committed to prudent risk management practices and complies with Finance Agency requirements regarding this funding balance. External factors including member borrowing needs, supply and demand in the debt markets, and other factors may affect liquidity balances and the funding balances between financial assets and financial liabilities.
Sources of Liquidity. The Bank's primary sources of liquidity are proceeds from the issuance of consolidated obligations and a liquidity investment portfolio, as well as proceeds from the issuance of capital stock.
Consolidated Obligations. The Bank's ability to operate its business, meet its obligations and generate net interest income depends primarily on the ability to issue large amounts of various debt structures at attractive rates. Consolidated obligation bonds and discount notes, along with member deposits and capital, represent the primary funding sources used by the Bank to support its asset base. Consolidated obligations benefit from the Bank's GSE status; however, they are not obligations of the U.S., and the U.S. government does not guarantee them. Consolidated obligation bonds and discount notes are rated Aa1 with stable outlook/P-1 by Moody's and AA+ with stable outlook/A-1+ by S&P as of December 31, 2025. On May 19, 2025, Moody's downgraded the Bank to Aa1 from Aaa following the long-term credit ratings downgrade of the U.S. to Aa1 from Aaa, with outlooks changing from negative to stable. These ratings express these NRSROs' opinions of the likelihood of timely payment of principal and interest. See Note 9 - Consolidated Obligations in Item 8. Financial Statements and Supplementary Data in this Form 10-K for additional information regarding the Bank's consolidated obligations.
Liquidity Investment Portfolio. The following investments are eligible to be included in the Bank's liquidity investment portfolio for regulatory purposes: cash, interest-bearing deposits, Federal funds sold, securities purchased under agreements to resell, and U.S. Treasury obligations classified as trading or AFS.
Contingency Liquidity.If a market or operational disruption occurred that prevented the issuance of new consolidated obligations or discount notes, the Bank could meet its obligations by: (1) allowing short-term liquid investments to mature; (2) purchasing Federal funds; (3) using eligible securities as collateral for repurchase agreement borrowings; and (4) if necessary, allowing advances to mature without renewal. The Bank's GSE status and the FHLBank System consolidated obligation credit rating, which reflects the fact that all 11 FHLBanks share a joint and several liability on the consolidated obligations, have historically provided excellent capital market access.
The Bank's liquidity measures are estimates which are dependent upon certain assumptions which may or may not prove valid in the event of an actual complete capital market disruption. Management believes that under normal operating conditions, routine member borrowing needs and consolidated obligation maturities could be met under these requirements; however, under extremely adverse market conditions, the Bank's ability to meet a significant increase in member loan demand could be impaired without immediate access to the consolidated obligation debt markets.
The Bank's access to the capital markets has never been interrupted to the extent the Bank's ability to meet its membership needs and obligations was compromised, and the Bank currently has no reason to believe that its ability to issue consolidated obligations will be impeded to that extent. Specifically, the Bank's sources of contingency liquidity include maturing overnight and short-term investments, maturing advances, unencumbered repurchase-eligible assets, trading securities, AFS securities,
and MBS repayments. Uses of contingency liquidity include net settlements of consolidated obligations, member loan commitments, mortgage loan purchase commitments, deposit outflows and maturing other borrowed funds. Excess contingency liquidity is calculated as the difference between sources and uses of contingency liquidity. Excess contingency liquidity as of December 31, 2025 and December 31, 2024 was approximately $33.0 billion and $32.4 billion, respectively.
If consolidated obligations cannot be issued in sufficient amounts to satisfy all FHLBank demand for funding during periods of financial distress and its existing allocation processes are deemed insufficient, the OF has a methodology for the allocation of the proceeds from the issuance of consolidated obligations. In general, this methodology provides that the proceeds in such circumstances will be allocated among the FHLBanks based on relative FHLBank total regulatory capital unless the OF determines that there is an overwhelming reason to adopt a different allocation method. As is the case during any instance of a disruption in the Bank's ability to access the capital markets, market conditions or this allocation could adversely impact the Bank's ability to finance operations, which could thereby adversely impact its financial condition and results of operations.
In addition, by law, the Secretary of the Treasury may acquire up to $4 billion of consolidated obligations of the FHLBanks. This authority may be exercised only if alternative means cannot be effectively employed to permit 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 a high level of interest rates. Any funds borrowed shall be repaid by the FHLBanks at the earliest practicable date.
Funding and Debt Issuance. Changes or disruptions in the capital markets could limit the Bank's ability to issue consolidated obligations, which could impact the Bank's liquidity and cost of funds. During 2025, the Bank maintained continual access to funding. Access to short-term debt markets has been reliable because investors, driven by liquidity preferences and risk aversion have sought the FHLBank's short-term debt as an asset of choice. The FHLBanks have maintained comparatively stable access to funding through a diverse investor base at relatively favorable spreads to U.S. Treasury rates. Changes or disruptions in the capital markets could limit the Bank's ability to issue consolidated obligations, which could impact the Bank's liquidity and cost of funds. As discussed in this Form 10-K, including in Part I, Item 1A. Risk Factors-Market/Liquidity Risk, rating agency actions or negative guidance may adversely affect the Bank's cost of funds and ability to issue consolidated obligations and enter derivative transactions on acceptable terms, which could negatively affect the Bank's financial condition and results of operations, including acceptance of the Bank's letters of credit. The downgrade by
Moody's did not impact any current obligations of the Bank or its members, nor did it have an impact on the Bank's cost of
funding, access to liquidity or the Bank's financial condition and results of operations or acceptance of the Bank's letters of
credit. Moody's downgrade on FHLBank debt had a minimal impact on FHLBank debt costs, illustrated through long-term
FHLBank debt spreads to U.S. Treasuries remaining attractive relative to historical spreads.
The Bank was able to access liquidity to meet its members' needs during the period covered by this report.
Refinancing Risk. There are inherent risks in utilizing short-term funding to support longer-dated assets and the Bank may be exposed to refinancing and investor concentration risks (collectively, refinancing risk). Refinancing risk includes the risk the Bank could have difficulty in rolling over short-term obligations when market conditions change. In managing and monitoring the amounts of financial assets that require refinancing, the Bank considers their contractual maturities, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments, embedded call optionality, and scheduled amortizations). The Bank and the OF jointly monitor the combined refinancing risk of the FHLBank System. In managing and monitoring the amounts of assets that require refunding, the Bank may consider contractual maturities of the financial assets, as well as certain assumptions regarding expected cash flows (i.e., estimated prepayments and scheduled amortizations).
Interest Rate Risk. The Bank may use a portion of the short-term consolidated obligations issued to fund both short- and long-term variable rate-indexed assets. However, funding longer-term variable rate-indexed assets with shorter-term liabilities generally does not expose the Bank to interest rate risk because the rates on the variable rate-indexed assets reset similar to the liabilities. The Bank measures and monitors interest rate-risk with commonly used methods and metrics, which include a calculations of market value of equity and duration of equity.
Regulatory Liquidity Requirements. The Bank is required to maintain a level of liquidity in accordance with certain Finance Agency guidance. Under these policies and guidelines, the Bank is required to maintain contingency liquidity to meet liquidity needs in an amount at least equal to its anticipated net cash outflows under certain scenarios. One scenario assumes that the Bank cannot access the capital markets for a period of 20 days and during that time members would renew any maturing, prepaid or called advances. In addition, the Bank is required to perform and report to the Finance Agency the results of an annual liquidity stress test. During 2025, the Bank was in compliance with these liquidity requirements.
Negative Pledge Requirement. Finance Agency regulations require the Bank to maintain qualifying assets free from any lien or pledge in an amount at least equal to its portion of the total consolidated obligations outstanding issued on its behalf. Qualifying assets meeting the negative pledge requirement are defined as: (1) cash; (2) obligations of, or fully guaranteed by, the United States; (3) secured advances; (4) mortgages which have any guaranty, insurance or commitment from the United States or a Federal agency; and (5) investments described in Section 16(a) of the FHLBank Act, which includes securities that a fiduciary or trust fund may purchase under the laws of any of the three states in which the Bank operates. The Bank held total negative pledge qualifying assets in excess of total consolidated obligations at December 31, 2025. FHLBanks will continue to be required to operate individually and collectively to ensure that consolidated obligations maintain a high level of acceptance and are perceived by investors as presenting a low level of credit risk. Any assets subject to a lien or pledge for the benefit of holders of any issues of consolidated obligations are treated as if they were free from lien or pledge for purposes of compliance with these regulations.
Joint and Several Liability. Although the Bank is primarily liable for its portion of consolidated obligations, (i.e., those issued on its behalf), the Bank is also jointly and severally liable with the other 10 FHLBanks for the payment of principal and interest on consolidated obligations of all the FHLBanks. The Finance Agency, in its discretion and notwithstanding any other provisions, may at any time order any FHLBank to make principal or interest payments due on any consolidated obligation, even in the absence of default by the primary obligor. To the extent that an FHLBank makes any payment on a consolidated obligation on behalf of another FHLBank, the paying FHLBank shall be entitled to reimbursement from the non-paying FHLBank, which has a corresponding obligation to reimburse the FHLBank to the extent of such assistance and other associated costs. However, if the Finance Agency determines that the non-paying FHLBank is unable to satisfy its obligations, then the Finance Agency may allocate the outstanding liability among the remaining FHLBanks on a pro rata basis in proportion to each FHLBank's participation in all consolidated obligations outstanding, or on any other basis the Finance Agency may determine. Finance Agency regulations govern the issuance of debt on behalf of the FHLBanks and authorize the FHLBanks to issue consolidated obligations, through the OF as its agent. The Bank is not permitted to issue individual debt without Finance Agency approval. See Note 9 - Consolidated Obligations in Item 8. Financial Statements and Supplementary Data in this Form 10-K for additional information.
Operational and Business Risks
Operational Risk. Operational risk is defined as the potential for loss resulting from inadequate or failed internal processes, people, and systems, or from external events and encompasses risks related to housing mission-related activities, including the Bank's member products and services activities and those associated with affordable housing programs or goals and other Bank business activities. The Bank considers various sources of risk of unexpected loss, including human error, fraud, unenforceability of legal contracts, deficiencies in internal controls and/or information systems, and the impact of cybersecurity attacks, vendor breakdown, or damage from fire, theft, natural disaster or acts of terrorism. Generally, the category of operational risk includes loss exposures of a physical or procedural nature. Specifically, operational risk includes compliance, fraud, information/transaction, legal, cyber, vendor, people, succession and model risk. The Bank has established policies and procedures to manage each of the specific operational risks. The Bank's approach to cybersecurity risk is discussed in Item 1C. Cybersecurity in this Form 10-K.
Business areas retain primary responsibility for identifying, assessing and reporting their operational risks. To assist them in discharging this responsibility and to ensure that operational risk is managed consistently throughout the organization, the Bank has an operational risk management framework, which includes quantitative and qualitative key risk indicators that includes emerging risks and an annual risk and control self-assessment, as well as a Bank-wide compliance program designed to promote awareness of compliance requirements and monitor compliance activities. Some operational risk may also result from external factors, such as the failure of other parties with which the Bank conducts business to adequately address their own operational risks (see additional discussion below). In addition, the Bank's Internal Audit department reports directly to the Audit Committee of the Board and regularly monitors compliance with established policies and procedures.
The Bank relies on third-party vendors and other service providers for ongoing support of business activities. Disruption or failure of service or breach of security at a vendor or other service provider could impact the Bank's ability to conduct business or expose the Bank to fraud, financial loss, damage to the Bank's reputation or loss of intellectual property or confidential information. The Bank has processes in place to manage vendor and third-party risks. The Bank is also exposed to the risk that a catastrophic event could result in significant business disruption and an inability to process transactions through normal business processes. To mitigate this risk and support the Bank's resiliency, the Bank maintains and tests business continuity plans and has established backup capabilities away from its headquarters. The Bank also has a reciprocal backup agreement in place with another FHLBank to provide its members short-term loans and debt servicing in the event that Pittsburgh facilities are inoperable. The results of the Bank's periodic business continuity tests as well as various tabletop and crisis management
exercises are presented to the Board. Management can make no assurances that these measures will be sufficient to respond to the full range of catastrophic events that might occur.
The Bank's business is dependent upon its ability to effectively exchange and process information using its computer information systems. The Bank's products and services require a complex and sophisticated cloud computing environment, which includes SaaS, IaaS, licensed or purchased software and custom-developed software. The effectiveness and efficiency of the Bank's operations is dependent upon the continued functionality of technology solutions and systems, which may require ongoing expenditures, as well as the ability to sustain ongoing operations during technology implementations, upgrades or patches. If the Bank were unable to sustain its technological capabilities or implement new or emerging technologies, such as artificial intelligence (AI), it may not be able to remain competitive, and its business, financial condition and profitability may be significantly compromised. To advance its disaster recovery and continuous operations, the Bank continues to take steps to review and improve its processes and resiliency through its business continuity plan. Nonetheless, the Bank cannot guarantee the effectiveness of its business continuity plan or other related policies, procedures and systems to protect the Bank in any particular future situation.
The Bank maintains insurance, including director and officer liability protection and coverage for cyber/breach response, as well as other insurance protection, as deemed appropriate. The Bank regularly reviews its insurance coverage for adequacy as well as the financial claims-paying ability of its insurance carriers.
Business Risk. Business risk is the possibility of an adverse impact on the Bank's profitability or financial or business strategies resulting from external factors that may occur in the short-term and/or long-term. This risk includes the potential for strategic business constraints to be imposed through regulatory, legislative or political changes. Examples of external factors may include, but are not limited to: financial services industry consolidation, a declining membership base, concentration of borrowing among members, the introduction of new competing products and services, increased non-Bank competition, weakening of the FHLBank System's GSE status, changes in the deposit and mortgage markets for the Bank's members, changes that could occur as a result of new legislation or new or changed regulatory guidance, geopolitical instability, AI and other factors that may have a significant direct or indirect impact on the ability of the Bank to achieve its dual mission and strategic objectives. The Bank's various Risk Management Committees monitor economic indicators and the external environment in which the Bank operates for alignment with the Bank's risk appetite. A discussion of various Bank risks is also included in Item 1A. Risk Factors in this Form 10-K.
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