Federal Home Loan Bank of Boston

11/13/2025 | Press release | Distributed by Public on 11/13/2025 11:49

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

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Index to Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
36
Executive Summary
37
Economic Conditions
38
Selected Financial Data
39
Results of Operations
41
Financial Condition
48
Liquidity and Capital Resources
55
Critical Accounting Estimates
60
Legislative and Regulatory Developments
60
Forward-Looking Statements
This report includes statements describing anticipated developments, projections, estimates, or predictions of ours that are "forward-looking statements." These statements may involve matters related to, but not limited to, projections of revenues, income, earnings, capital expenditures, dividends, capital structure, or other financial items; repurchases of excess stock, our minimum retained earnings target, or the interest-rate environment in which we do business; statements of management's plans or objectives for future operations; expectations of effects or changes in fiscal and monetary policies and our future economic performance; or statements of assumptions underlying certain of the foregoing types of statements. These statements may use forward-looking terminology such as, but not limited to, "anticipates," "believes," "continued," "expects," "plans," "intends," "may," "could," "estimates," "assumes," "should," "will," "likely," or their negatives or other variations of these terms. We caution that, by their nature, forward-looking statements are subject to a number of risks or uncertainties, including the risk factors set forth in Part I - Item 1A - Risk Factors in the 2024 Annual Report and Part II - Item 1A - Risk Factorsof this report and the risks set forth below. Actual results could differ materially from those expressed or implied in these forward-looking statements or could affect the extent to which a particular objective, projection, estimate, or prediction is realized. As a result, you are cautioned not to place undue reliance on such statements.
These forward-looking statements involve risks and uncertainties including, but not limited to, the following:
•the effects of economic, financial, credit, and market conditions on our financial and regulatory condition and results of operations, including changes in economic growth, general liquidity conditions, inflation and deflation, employment rates, interest rates, interest-rate spreads, interest-rate volatility, mortgage originations, prepayment activity, housing prices, asset delinquencies, members' deposit flows, liquidity needs, and loan demand; changes in the general economy, including changes resulting from U.S. fiscal and monetary policy, including international trade policy and tariffs, actions of the Federal Open Market Committee (FOMC), or changes in credit ratings of the U.S. federal government; the condition of the mortgage and housing markets on our mortgage-related assets; and the condition of the capital markets on our COs;
•political events, including legislative, regulatory, judicial, government actions, including government shutdowns and executive orders, or other developments that affect the Bank, its members, investors in the consolidated obligations of the
FHLBanks, the FHFA, the organization and structure of the FHLBank System, our ability to access the capital markets, or our counterparties, such as any GSE reforms, any changes resulting from the FHFA's comprehensive review and analysis of the FHLBank System, changes to the FHLBank Act, or changes to other statutes or regulations applicable to the FHLBanks;
•our ability to declare and pay dividends consistent with past practices as well as any plans to repurchase excess capital stock, and any amendments to our Capital Plan;
•competitive forces including, without limitation, other sources of funding available to our members and other entities borrowing funds in the capital markets;
•changes in the value and liquidity of collateral we hold as security for obligations of our members and counterparties;
•the impact of new accounting standards and the application of accounting rules, including the impact of regulatory guidance on our application of such standards and rules;
•changes in the fair value and economic value of, impairments of, and risks associated with the Bank's investments in mortgage loans and MBS or other assets and the related credit-enhancement protections;
•membership conditions and changes, including changes resulting from member failures, mergers or changing financial health, changes due to member eligibility, changes in the principal place of business of members, or the addition of new members;
•external events, such as general economic and financial instabilities, political instability, wars, pandemics and other health emergencies, and natural disasters;
•the pace of technological change and our ability to develop and support internal controls, information systems, and other operating technologies that effectively manage the risks we face including, but not limited to, failures, interruptions, or security breaches and other cybersecurity incidents; and
•our ability to attract and retain skilled employees, including our key personnel.
These forward-looking statements speak only as of the date they are made, and we do not undertake to update any forward- looking statement herein or that may be made from time to time on our behalf.
The Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our interim financial statements and notes, which begin on page three, and the 2024 Annual Report.
EXECUTIVE SUMMARY
Net income increased $5.7 million to $66.0 million for the three months ended September 30, 2025, from $60.4 million for the same period of 2024. The increase in net income was primarily due to an increase of $11.1 million in net interest income after provision for credit losses, partially offset by an increase of $1.7 million in discretionary housing and community investment programs expense and voluntary affordable housing program contributions, and an increase of $1.6 million in operating expenses.
Net interest income after provision for credit losses for the three months ended September 30, 2025, was $100.9 million, compared with $89.8 million for the corresponding period in 2024. The $11.1 million increase in net interest income after provision for credit losses was primarily driven by a $9.1 million decrease in mortgage-backed security net amortization, and an $8.9 million favorable variance in net unrealized gains and losses on fair value hedge ineffectiveness, both of which were attributable to a significantly smaller decline in intermediate- and long-term interest rates during the three months ended September 30, 2025 compared to the same quarter one year ago. In addition, our average outstanding advances, mortgage-backed securities and mortgage loans increased $3.6 billion, $602.5 million, and $603.5 million, respectively, while average capital increased $222.9 million. Partially offsetting these increases to net interest income after provision for credit losses was the effect on earnings from average short-term interest rates that were approximately 100 basis points lower than during the same quarter one year ago.
Total assets increased $3.7 billion to $75.7 billion over the nine months ended September 30, 2025. At September 30, 2025, investment securities and short-term money-market investments totaled $28.2 billion, an increase of $5.7 billion from December 31, 2024, comprised primarily of a $5.7 billion increase in low-yielding short-term money market investments held on our balance sheet to manage our liquidity position, and a $1.0 billion increase in mortgage-backed securities. Partially offsetting the increases to investments is a $1.1 billion decrease in U.S. Treasury obligations. Mortgage loans totaled $4.2 billion, an increase of $478.2 million from December 31, 2024. Advances totaled $42.8 billion at September 30, 2025, a decrease of $2.4 billion from December 31, 2024.
Management continues to monitor the effects of the U.S. federal government shutdown that ended on November 12, 2025. The Bank remained fully operational during the shutdown and it does not receive or rely on any appropriated funding from the U.S. government. It remains unknown what impact, if any, the shutdown and the return to normal operations may have on broad economic activity, including economic growth and labor market conditions. For additional discussion of the risks that may result from the shutdown, refer to Part 1 -Item 1A -Risk Factors -Business and Reputation Risks in the 2024 Annual Report.
Our retained earnings grew to $2.0 billion at September 30, 2025, an increase of $47.3 million from December 31, 2024, equaling 2.6 percent of total assets at September 30, 2025. We continue to satisfy all regulatory capital requirements as of September 30, 2025.
On October 24, 2025, our board of directors declared a cash dividend that was equivalent to an annual yield of 7.39 percent on the average daily balance of capital stock outstanding during the third quarter of 2025. The yield is equivalent to the approximate daily average of the secured overnight financing rate (SOFR) for the third quarter of 2025 plus 300 basis points.
Our overall results of operations are influenced by the economy, interest rates, members' demand for liquidity, and our ability to maintain sufficient access to funding at relatively favorable costs.
Generally, investor demand for high credit quality, fixed-income investments, including COs, continued to be strong relative to other investments. Yield spreads on CO debt relative to benchmark yields for comparable debt remained relatively stable during the period covered by this report. Our flexibility in utilizing various funding tools, in combination with a diverse investor base and our status as a government-sponsored enterprise, have helped provide reliable market access and demand for COs throughout fluctuating market environments and regulatory changes affecting dealers of and investors in COs. The Bank has continued to meet all funding needs during the nine months ended September 30, 2025.
Net Interest Margin and Spread
Net interest spread was 0.27 percent for the three months ended September 30, 2025, an increase of eight basis points from the same period in 2024, and net interest margin was 0.52 percent, unchanged from the three months ended September 30, 2024. The increase in net interest spread was primarily attributable to the increase in net interest income after provision for credit losses discussed above.
Housing and Community Investment Programs
The Bank made a $6.1 million contribution to our discretionary housing and community investment programs and a voluntary contribution of $681 thousand to the Affordable Housing Program for the quarter ended September 30, 2025. Through September 30, 2025, we have committed most of our budgeted annual funding for discretionary housing and community investment programs. Accordingly, we anticipate significantly lower expenses for these programs during the remainder of 2025. See - Housing and Community Investment Program Expensesbelow for additional information.
Legislative and Regulatory Developments
Legislation has been proposed or enacted, and the FHFA and others with authority over the economy, our industry, and our business activities have taken action during 2025 as described below in - Legislative and Regulatory Developments. Such developments affect the way we conduct business and could impact how we satisfy our mission as well as the value of membership in the Bank.
ECONOMIC CONDITIONS
Economic Environment
Third quarter 2025 data for real gross domestic product (GDP) and September 2025 employment data is not yet available, so our analysis of economic conditions during the third quarter is reliant on the limited data available. Real GDP increased at an annual rate of 3.8 percent in the second quarter of 2025, the latest data available. This increase was driven mainly by a reduction in imports and an increase in consumer spending.
Employment increased in the first two months of the third quarter of 2025 with job gains of 79,000 and 22,000 in July and August, 2025, respectively. The unemployment rate for the New England region in August 2025 was 4.1 percent, ranging from 2.5 percent in Vermont to 4.8 percent in Massachusetts.
In September 2025, the Consumer Price Index (CPI) excluding food and energy increased 0.2 percent from the preceding month, representing a year-over-year increase of 3.0 percent. The core CPI increase was driven mainly by the cost of shelter, airline fares and recreation. The FHFA reported that housing prices rose 2.3 percent across the U.S. from August 2024 to August 2025. Over the same period, housing prices in New England rose 4.7 percent.
Interest-Rate Environment
On October 29, 2025, the FOMC announced that it would lower the federal funds rate by 25 basis points from a target range of 400 to 425 basis points to a target range of 375 to 400 basis points. The FOMC stated that in considering any additional adjustments to the target range for the federal funds rate, the FOMC will carefully assess incoming data, the evolving outlook, and the balance of risks. The FOMC also stated that it will conclude the reduction of its aggregate securities holdings on December 1, 2025, and it is strongly committed to supporting maximum employment and returning inflation to its two percent objective.
In the third quarter of 2025, short-term rates remained stable and were approximately 100 basis points lower than the average short-term rates for the corresponding period of the prior year, consistent with the FOMC's target range for the federal funds rate. Meanwhile, intermediate- and long-term interest rates declined during the third quarter of 2025. At various times during 2024 and the first nine months of 2025, the yield curve inverted as the difference between 10-year and 3-month U.S. Treasury yields became negative.
Table 1 - Key Interest Rates(1)
Three Month Daily Average Nine Month Daily Average Ending Rate
September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 September 30, 2025 December 31, 2024
SOFR 4.33% 5.28% 4.33% 5.30% 4.24% 4.49%
Federal funds effective rate 4.30% 5.27% 4.32% 5.31% 4.09% 4.33%
3-month U.S. Treasury yield 4.18% 5.12% 4.27% 5.29% 3.93% 4.31%
2-year U.S. Treasury yield 3.73% 4.06% 3.91% 4.46% 3.61% 4.24%
5-year U.S. Treasury yield 3.80% 3.81% 4.00% 4.13% 3.74% 4.38%
10-year U.S. Treasury yield 4.25% 3.95% 4.35% 4.18% 4.15% 4.57%
________________
(1) Source: Bloomberg
SELECTED FINANCIAL DATA
The following financial highlights for the statement of condition and statement of operations for December 31, 2024, have been derived from our audited financial statements. Financial highlights for the quarter-ends have been derived from our unaudited financial statements.
Table 2 - Selected Financial Data
(dollars in thousands)
September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 September 30, 2024
Statement of Condition
Total assets $ 75,733,967 $ 78,693,574 $ 76,794,158 $ 71,992,966 $ 72,396,841
Investments(1)
28,220,995 26,965,851 26,965,568 22,499,068 26,137,824
Advances 42,774,048 47,167,639 45,427,914 45,163,175 42,006,806
Mortgage loans held for portfolio, net(2)
4,157,362 3,941,304 3,765,267 3,679,150 3,543,560
Deposits and other borrowings 1,077,463 806,270 810,253 877,081 765,831
Consolidated obligations:
Bonds
48,429,538 53,899,536 57,203,139 48,192,171 52,338,590
Discount notes
21,833,395 19,421,619 14,301,193 18,546,504 14,941,067
Total consolidated obligations
70,262,933 73,321,155 71,504,332 66,738,675 67,279,657
Mandatorily redeemable capital stock 4,234 4,234 4,471 5,086 5,086
Class B capital stock outstanding-putable(3)
2,107,549 2,291,941 2,207,384 2,195,167 2,161,471
Unrestricted retained earnings 1,416,765 1,404,666 1,407,846 1,403,455 1,380,713
Restricted retained earnings 543,244 530,034 520,643 509,245 492,833
Total retained earnings 1,960,009 1,934,700 1,928,489 1,912,700 1,873,546
Accumulated other comprehensive loss (207,923) (249,051) (214,983) (255,022) (227,659)
Total capital 3,859,635 3,977,590 3,920,890 3,852,845 3,807,358
For the Three Months Ended
Results of Operations September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 September 30, 2024
Net interest income after provision for credit losses $ 100,910 $ 97,827 $ 92,789 $ 125,598 $ 89,791
Other income, net 4,543 2,223 3,902 1,144 5,483
Other expense 32,057 47,866 33,358 35,553 28,185
AHP assessments 7,348 5,226 6,342 9,129 6,720
Net income $ 66,048 $ 46,958 $ 56,991 $ 82,060 $ 60,369
Other Information
Dividends declared $ 40,739 $ 40,746 $ 41,202 $ 42,906 $ 43,020
Dividend payout ratio 61.68 % 86.77 % 72.30 % 52.29 % 71.26 %
Weighted-average dividend rate(4)
7.38 7.39 7.74 8.36 8.41
Return on average equity(5)
6.77 4.84 5.88 8.69 6.57
Return on average assets 0.34 0.24 0.30 0.45 0.34
Net interest margin(6)
0.52 0.51 0.49 0.70 0.52
Average equity to average assets 5.04 5.01 5.08 5.21 5.22
Total regulatory capital ratio(7)
5.38 5.38 5.39 5.71 5.58
_______________________
(1)Investments include available-for-sale securities, held-to-maturity securities, trading securities, interest-bearing deposits, securities purchased under agreements to resell and federal funds sold.
(2)The allowance for credit losses for mortgage loans amounted to $2.6 million at September 30, 2025, $2.4 million at June 30, 2025, and $2.2 million at March 31, 2025, December 31, 2024, and September 30, 2024, respectively.
(3)Capital stock is putable at the option of a member upon five years' written notice, subject to applicable restrictions.
(4)Weighted-average dividend rate is the dividend amount declared divided by the average daily balance of capital stock eligible for dividends.
(5)Return on average equity is net income divided by the total of the average daily balance of outstanding Class B capital stock, accumulated other comprehensive income and total retained earnings.
(6)Net interest margin is net interest income before provision for credit losses as a percentage of average earning assets.
(7)Total regulatory capital ratio is capital stock (including mandatorily redeemable capital stock) plus total retained earnings as a percentage of total assets. See Part I - Item 1 - Financial Statements - Notes to the Financial Statements - Note 10 - Capital.
RESULTS OF OPERATIONS
The following table presents the Bank's significant statements of operations line items for the three and nine months ended September 30, 2025 and 2024, and information regarding the changes during those quarters is provided below.
Table 3 - Statements of Operations Summary
(dollars in thousands)
Change
For the Three Months Ended September 30, 2025 vs. 2024
2025 2024 Amount Percent
Net Interest Income after provision for credit losses
$ 100,910 $ 89,791 $ 11,119 12.4 %
Noninterest income
4,543 5,483 (940) (17.1)
Noninterest expense
32,057 28,185 3,872 13.7
AHP assessment
7,348 6,720 628 9.3
Net Income
$ 66,048 $ 60,369 $ 5,679 9.4 %
Change
For the Nine Months Ended September 30, 2025 vs. 2024
2025 2024 Amount Percent
Net Interest Income after provision for credit losses
$ 291,526 $ 307,688 $ (16,162) (5.3) %
Noninterest income
10,668 11,303 (635) (5.6)
Noninterest expense
113,281 87,403 25,878 29.6
AHP assessment
18,916 23,193 (4,277) (18.4)
Net Income
$ 169,997 $ 208,395 $ (38,398) (18.4) %
Third Quarter of 2025 Compared with the Third Quarter of 2024
Net income increased $5.7 million to $66.0 million for the three months ended September 30, 2025, from $60.4 million for the same period in 2024, while net interest income after provision for credit losses for the three months ended September 30, 2025, was $100.9 million, compared with $89.8 million for the corresponding period in 2024. The primary reasons for these increases are discussed under Executive Summary.
Nine Months Ended September 30, 2025, Compared with the Nine Months Ended September 30, 2024
Net income decreased $38.4 million to $170.0 million for the nine months ended September 30, 2025, from $208.4 million for 2024. The decrease in net income was primarily due to a decrease of $16.2 million in net interest income after provision for credit losses, and a $19.9 million increase in discretionary housing and community investment programs expense and voluntary affordable housing program contributions.
Net interest income after provision for credit losses for the nine months ended September 30, 2025, was $291.5 million, compared with $307.7 million for the corresponding period in 2024. The $16.2 million decrease in net interest income after provision for credit losses was primarily driven by average short-term yields being approximately 100 basis points lower than during the nine months ended September 30, 2024. Partially offsetting this decrease were the impacts of increases of $4.5 billion, $717.8 million, and $607.4 million in our average advances, average mortgage-backed securities and average mortgage loan portfolios, respectively, as well as a $302.5 million increase in average capital.
Table 4 presents major categories of average balances, related interest income/expense, and average yields/rates for interest-earning assets and interest-bearing liabilities. Our primary source of earnings is net interest income, which is the interest earned on advances, mortgage loans, and investments less interest paid on COs, deposits, and other sources of funds.
Table 4 - Net Interest Spread and Margin
(dollars in thousands)
For the Three Months Ended September 30,
2025 2024
Average
Balance 		Interest
Income /
Expense
Average
Yield/Rate(1)
Average
Balance 		Interest
Income /
Expense
Average
Yield/Rate(1)
Assets
Advances $ 44,072,098 $ 508,062 4.57 % $ 40,444,505 $ 535,520 5.27 %
Interest-bearing deposits 2,299,648 25,360 4.38 2,584,853 34,893 5.37
Securities purchased under agreements to resell 4,000,652 43,958 4.36 1,353,261 18,108 5.32
Federal funds sold 4,939,772 54,330 4.36 3,990,446 53,249 5.31
Investment securities(2)
17,178,613 202,520 4.68 17,137,942 235,533 5.47
Mortgage loans(2)(3)
4,057,197 44,853 4.39 3,453,744 34,570 3.98
Total interest-earning assets 76,547,980 879,083 4.56 68,964,751 911,873 5.26
Other non-interest-earning assets 621,329 1,296,156
Fair-value adjustments on investment securities (296,326) (310,746)
Total assets $ 76,872,983 $ 879,083 4.54 % $ 69,950,161 $ 911,873 5.19 %
Liabilities and capital
Consolidated obligations
Discount notes $ 20,116,411 $ 215,234 4.24 % $ 18,464,088 $ 245,922 5.30 %
Bonds 51,174,017 556,232 4.31 45,208,790 567,157 4.99
Other interest-bearing liabilities 737,260 6,515 3.51 791,514 9,007 4.53
Total interest-bearing liabilities 72,027,688 777,981 4.29 64,464,392 822,086 5.07
Other non-interest-bearing liabilities 974,499 1,837,853
Total capital 3,870,796 3,647,916
Total liabilities and capital $ 76,872,983 $ 777,981 4.02 % $ 69,950,161 $ 822,086 4.68 %
Net interest income $ 101,102 $ 89,787
Net interest spread 0.27 % 0.19 %
Net interest margin 0.52 % 0.52 %
For the Nine Months Ended September 30,
2025 2024
Average
Balance 		Interest
Income /
Expense
Average
Yield/Rate(1)
Average
Balance 		Interest
Income /
Expense
Average
Yield/Rate(1)
Assets
Advances $ 44,977,025 $ 1,532,140 4.55 % $ 40,484,484 $ 1,616,299 5.33 %
Interest-bearing deposits 2,402,165 78,975 4.40 2,678,183 108,505 5.41
Securities purchased under agreements to resell 3,113,787 101,957 4.38 1,246,792 50,291 5.39
Federal funds sold 5,378,707 176,388 4.38 3,880,430 156,389 5.38
Investment securities(2)
17,062,924 599,055 4.69 16,450,063 710,742 5.77
Mortgage loans(2)(3)
3,875,469 125,663 4.34 3,268,114 94,281 3.85
Total interest-earning assets 76,810,077 2,614,178 4.55 68,008,066 2,736,507 5.37
Other non-interest-earning assets 752,350 1,457,307
Fair-value adjustments on investment securities (297,866) (326,006)
Total assets $ 77,264,561 $ 2,614,178 4.52 % $ 69,139,367 $ 2,736,507 5.29 %
Liabilities and capital
Consolidated obligations
Discount notes $ 17,755,120 $ 571,044 4.30 % $ 19,782,547 $ 791,065 5.34 %
Bonds 53,696,320 1,731,947 4.31 42,812,929 1,609,188 5.02
Other interest-bearing liabilities 723,381 19,261 3.56 812,639 28,370 4.66
Total interest-bearing liabilities 72,174,821 2,322,252 4.30 63,408,115 2,428,623 5.12
Other non-interest-bearing liabilities 1,193,061 2,137,072
Total capital 3,896,679 3,594,180
Total liabilities and capital $ 77,264,561 $ 2,322,252 4.02 % $ 69,139,367 $ 2,428,623 4.69 %
Net interest income $ 291,926 $ 307,884
Net interest spread 0.25 % 0.25 %
Net interest margin 0.51 % 0.60 %
_________________________
(1) Yields are annualized.
(2) Average balances are reflected at amortized cost.
(3) Nonaccrual loans are included in the average balances used to determine average yield.
Rate and Volume Analysis
Changes in both average balances (volume) and interest rates influence changes in net interest income and net interest margin. Table 5 summarizes changes in interest income and interest expense for the three and nine months ended September 30, 2025 and 2024. Changes in interest income and interest expense that are not identifiable as either volume or rate-related, but equally attributable to both volume and rate changes, have been allocated to the volume and rate categories based upon the proportion of the absolute value of the volume and rate changes.
Table 5 - Rate and Volume Analysis
(dollars in thousands)
For the Three Months Ended
September 30, 2025 vs 2024 		For the Nine Months Ended
September 30, 2025 vs 2024
Increase (Decrease) due to Increase (Decrease) due to
Volume Rate Total Volume Rate Total
Interest income
Advances $ 45,488 $ (72,946) $ (27,458) $ 168,028 $ (252,187) $ (84,159)
Interest-bearing deposits (3,585) (5,948) (9,533) (10,438) (19,092) (29,530)
Securities purchased under agreements to resell 29,620 (3,770) 25,850 62,715 (11,049) 51,666
Federal funds sold 11,387 (10,306) 1,081 52,795 (32,796) 19,999
Investment securities 558 (33,571) (33,013) 25,656 (137,343) (111,687)
Mortgage loans 6,435 3,848 10,283 18,824 12,558 31,382
Total interest income 89,903 (122,693) (32,790) 317,580 (439,909) (122,329)
Interest expense
Consolidated obligations
Discount notes 20,654 (51,342) (30,688) (75,620) (144,401) (220,021)
Bonds 69,868 (80,793) (10,925) 371,823 (249,064) 122,759
Other interest-bearing liabilities (585) (1,907) (2,492) (2,882) (6,227) (9,109)
Total interest expense 89,937 (134,042) (44,105) 293,321 (399,692) (106,371)
Change in net interest income $ (34) $ 11,349 $ 11,315 $ 24,259 $ (40,217) $ (15,958)
Average Balance of Advances
The average balance of total advances increased by $4.5 billion, or 11.1 percent, for the nine months ended September 30, 2025, compared with the same period in 2024. This increase in the average balance of advances was primarily concentrated in variable-rate advances, partially offset by a decrease in long-term fixed rate and short-term fixed rate advances. We cannot predict future member demand for advances.
Average Balance of Investments
Average short-term money-market investments, consisting of interest-bearing deposits, securities purchased under agreements to resell, federal funds sold, and loans to other FHLBanks, increased $3.1 billion, or 39.6 percent, for the nine months ended September 30, 2025, compared with the same period in 2024, to manage our liquidity position and remain compliant with all regulatory guidance. The yield earned on short-term money-market investments is highly correlated to short-term market interest rates. As a result of decreases in the FOMC's target range for the federal funds rate in the second half of 2024 and in the third quarter of 2025, average yields on overnight federal funds sold decreased from 5.38 percent during the nine months ended September 30, 2024, to 4.38 percent during the nine months ended September 30, 2025, while average yields on securities purchased under agreements to resell decreased from 5.39 percent for the nine months ended September 30, 2024, to 4.38 percent for the nine months ended September 30, 2025.
Average investment-securities balances increased $612.9 million, or 3.7 percent for the nine months ended September 30, 2025, compared with the same period in 2024. The increase was primarily the result of a $717.8 million increase in average MBS.
Average Balance of COs
Average CO balances increased $8.9 billion, or 14.1 percent, for the nine months ended September 30, 2025, compared with the same period in 2024. This increase consisted of a $10.9 billion increase in CO bonds, offset by a $2.0 billion decline in CO discount notes.
The average balance of CO discount notes represented approximately 24.8 percent of total average COs for the nine months ended September 30, 2025, compared with 31.6 percent of total average COs for the nine months ended September 30, 2024. The average balance of CO bonds represented 75.2 percent and 68.4 percent of total average COs outstanding during the nine months ended September 30, 2025 and 2024, respectively.
Impact of Derivatives and Hedging Activities
Net interest income includes interest accrued on interest-rate-exchange agreements that are associated with advances, investments, and debt instruments that qualify for hedge accounting. The fair value gains and losses of derivatives and hedged items designated in fair-value hedge relationships are also recognized as interest income or interest expense. We enter into derivatives to manage the interest-rate-risk exposures inherent in otherwise unhedged assets and liabilities and to achieve our risk-management objectives. We generally use derivative instruments that qualify for hedge accounting as interest-rate risk-management tools. These derivatives serve to stabilize net income when interest rates fluctuate by better matching the rate repricing characteristics of financial assets and liabilities. Accordingly, the impact of derivatives on net interest income and net interest margin, as well as other income, should be viewed in the overall context of our risk-management strategy.
Table 6 provides a summary of the impact of derivatives and hedging activities on our earnings.
Table 6 - Effect of Derivative and Hedging Activities
(dollars in thousands)
For the Three Months Ended September 30, 2025
Net Effect of Derivatives and Hedging Activities Advances Investments Mortgage Loans CO Bonds CO Discount Notes Total
Net interest income
Amortization / accretion of hedging activities (1)
$ (292) $ 14,468 $ 19 $ 2,352 $ - $ 16,547
Gains (losses) on designated fair-value hedges 112 601 - (411) - 302
Net interest settlements (2)
28,173 62,468 - (79,079) - 11,562
Price alignment interest (3)
190 (3,295) - 309 - (2,796)
Total net interest income 28,183 74,242 19 (76,829) - 25,615
Net (losses) gains on derivatives and hedging activities
Losses on derivatives not receiving hedge accounting - - - - (539) (539)
Mortgage delivery commitments - - 543 - - 543
Price alignment interest (3)
- - - - 916 916
Net gains on derivatives and hedging activities - - 543 - 377 920
Total net effect of derivatives and hedging activities $ 28,183 $ 74,242 $ 562 $ (76,829) $ 377 $ 26,535
For the Three Months Ended September 30, 2024
Net Effect of Derivatives and Hedging Activities Advances Investments Mortgage Loans CO Bonds CO Discount Notes Total
Net interest income
Amortization / accretion of hedging activities (1)
$ (166) $ - $ (63) $ 467 $ - $ 238
(Losses) gains on designated fair-value hedges (3,306) (5,331) - 54 - (8,583)
Net interest settlements (2)
56,387 122,394 - (151,214) - 27,567
Price alignment interest (3)
(2,204) (10,679) - 416 - (12,467)
Total net interest income 50,711 106,384 (63) (150,277) - 6,755
Net (losses) gains on derivatives and hedging activities
Losses on derivatives not receiving hedge accounting - - - - 767 767
Mortgage delivery commitments - - 485 - - 485
Price alignment interest (3)
- - - - (197) (197)
Net gains on derivatives and hedging activities - - 485 - 570 1,055
Total net effect of derivatives and hedging activities $ 50,711 $ 106,384 $ 422 $ (150,277) $ 570 $ 7,810
For the Nine Months Ended September 30, 2025
Net Effect of Derivatives and Hedging Activities Advances Investments Mortgage Loans CO Bonds CO Discount Notes Total
Net interest income
Amortization / accretion of hedging activities (1)
$ (804) $ 38,963 $ 75 $ 9,052 $ - $ 47,286
(Losses) gains on designated fair-value hedges (1,710) (2,113) - 54 - (3,769)
Net interest settlements (2)
82,209 198,217 - (239,799) - 40,627
Price alignment interest (3)
(2,692) (10,361) - 687 - (12,366)
Total net interest income 77,003 224,706 75 (230,006) - 71,778
Net (losses) gains on derivatives and hedging activities
Losses on derivatives not receiving hedge accounting - - - - (2,358) (2,358)
Mortgage delivery commitments - - 908 - - 908
Price alignment interest (3)
- - - - 1,571 1,571
Net gains (losses) on derivatives and hedging activities - - 908 - (787) 121
Total net effect of derivatives and hedging activities $ 77,003 $ 224,706 $ 983 $ (230,006) $ (787) $ 71,899
For the Nine Months Ended September 30, 2024
Net Effect of Derivatives and Hedging Activities Advances Investments Mortgage Loans CO Bonds CO Discount Notes Total
Net interest income
Amortization / accretion of hedging activities (1)
$ (813) $ - $ (34) $ (3,589) $ - $ (4,436)
Losses on designated fair-value hedges (938) (2,319) - (653) - (3,910)
Net interest settlements (2)
172,692 371,440 - (470,450) - 73,682
Price alignment interest (3)
(4,075) (40,184) - 1,302 - (42,957)
Total net interest income 166,866 328,937 (34) (473,390) - 22,379
Net gains (losses) on derivatives and hedging activities
Gains on derivatives not receiving hedge accounting 15 - - - 648 663
Mortgage delivery commitments - - 76 - - 76
Price alignment interest (3)
- - - - (149) (149)
Net gains on derivatives and hedging activities 15 - 76 - 499 590
Total net effect of derivatives and hedging activities $ 166,881 $ 328,937 $ 42 $ (473,390) $ 499 $ 22,969
________________________
(1) Represents the amortization/accretion of hedging fair-value adjustments and cash-flow hedge amortization reclassified from accumulated other comprehensive income.
(2) Represents interest income/expense on derivatives included in net interest income.
(3) Relates to derivatives for which variation margin payments are characterized as daily settled contracts.
Housing and Community Investment Program Expenses
In addition to providing a readily available, competitively-priced source of funds to members, one of our core missions is to support affordable housing and community investment. We administer a number of programs that are targeted to fulfill that mission, some of which are statutory, and some are discretionary. For additional information on these specific programs, see Part I - Item 1 - Business - Targeted Housing and Community Investment Programs in the 2024 Annual Report.
We are required to annually set aside a portion of our earnings for our Affordable Housing Program. These funds assist members serving very low-, low-, and moderate-income households and support community economic development. The Bank's net income for the nine months ended September 30, 2025, resulted in an accrual of $18.9 million to the AHP pool of funds that will be available to members in 2026. Contributions made to our discretionary housing and community investment program reduce the Bank's net income for the year, therefore reducing our statutory accrual of funds to the AHP pool. The Bank's board of directors continued its commitment to affordable housing by making a voluntary AHP contribution of $7.4 million for the nine months ended September 30, 2025.
Table 7 - Statutory AHP Assessment and Voluntary AHP Contributions
(dollars in thousands)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2025 2024 2025 2024
Net income subject to AHP statutory assessment $ 73,475 $ 67,196 $ 189,156 $ 231,928
Statutory AHP percentage 10 % 10 % 10 % 10 %
Statutory AHP assessment 7,348 6,720 18,916 23,193
AHP voluntary contributions 681 507 7,353 1,852
Total contribution to the AHP $ 8,029 $ 7,227 $ 26,269 $ 25,045
Discretionary housing and community investment program expenses are shown in the table below, by program.
Table 8 - Discretionary Housing and Community Investment Program Expenses
(dollars in thousands)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
Program
2025 2024 2025 2024
Affordable housing
Housing Our Workforce program $ 1,999 $ 56 $ 7,320 $ 5,000
Lift Up Homeownership program 1,570 1,550 7,270 5,000
MPF permanent rate buy-down program 1,296 1,264 5,054 1,264
Economic development
Jobs for New England program 1,090 1,288 5,064 5,000
CDFIs
CDFI advance program 170 409 6,376 409
Total discretionary housing and community investment program expenses $ 6,125 $ 4,567 $ 31,084 $ 16,673
FINANCIAL CONDITION
Advances
At September 30, 2025, the advances portfolio totaled $42.8 billion, a decrease of $2.4 billion from $45.2 billion at December 31, 2024.
Table 9 - Advances Outstanding by Product Type
(dollars in thousands)
September 30, 2025 December 31, 2024
Par Value Percent of Total Par Value Percent of Total
Fixed-rate advances
Short-term $ 10,716,033 25.0 % $ 10,604,134 23.4 %
Long-term 9,220,282 21.5 11,909,336 26.3
Putable 7,183,970 16.8 7,488,170 16.5
Overnight 1,774,347 4.1 2,221,057 4.9
Amortizing 961,792 2.3 984,750 2.2
29,856,424 69.7 33,207,447 73.3
Variable-rate advances
Simple variable (1)
12,955,344 30.3 12,065,070 26.7
Putable - - 15,000 -
All other variable-rate indexed advances 76 - 4,709 -
12,955,420 30.3 12,084,779 26.7
Total par value $ 42,811,844 100.0 % $ 45,292,226 100.0 %
________________________
(1) Includes floating-rate advances that may be contractually prepaid by the borrower on a floating-rate reset date without incurring prepayment or termination fees.
See Part I - Item 1 - Financial Statements - Notes to the Financial Statements - Note 4 - Advancesfor disclosures relating to redemption terms of advances.
Advances Credit Risk
We manage credit risk on advances by monitoring the financial condition of our borrowers and by holding sufficient collateral to protect the Bank from credit losses. The Bank has an internal credit rating methodology that estimates each borrower's credit risk utilizing call report data and other quantitative factors as well as qualitative considerations including, but not limited to, regulatory examination reports. Based on its rating, we assign each member and non-member housing associate to one of the four credit categories below to allow the Bank to leverage risk mitigation strategies across groups of similarly rated members. Each credit category reflects increasing limitations on borrowing capacity and terms to maturity, as well as our increasing level of control over the collateral pledged by the borrower.
•Credit category one (Credit Category-1), a borrower is generally in satisfactory financial condition.
•Credit category two (Credit Category-2), a borrower shows financial weakness or weakening financial trends.
•Credit category three (Credit Category-3), a borrower demonstrates financial weaknesses that present an elevated level of concern.
•Credit category four (Credit Category-4), a borrower shows significant financial weaknesses and an increased likelihood of failure over the next 12 months.
The Bank may impose different borrowing capacity limitations or collateral pledging requirements on a borrower if the Bank determines that doing so mitigates risks to the Bank and/or the borrower.
The following table presents a summary of the status of the credit outstanding and overall collateral borrowing capacity of the Bank's borrowers as of September 30, 2025.
Table 10 - Credit Outstanding and Collateral Borrowing Capacity by Credit Category
(dollars in thousands)
September 30, 2025
Borrowers with Credit Outstanding
Number
Other Credit Outstanding(1)
Total Credit Outstanding
Collateral Borrowing Capacity(2)
Borrower Credit Category Advances Total Used
Member borrowers(3)
Credit Category-1 282 $ 41,184,243 $ 9,713,887 $ 50,898,130 $ 151,147,579 33.7 %
Credit Category-2 33 1,189,252 44,682 1,233,934 3,120,464 39.5
Credit Category-3 11 349,660 56,998 406,658 776,098 52.4
Credit Category-4 - - - - - -
Nonmember borrowers(4)
Former members 7 48,709 1,818 50,527 142,072 35.6
Housing associates 5 39,980 50 40,030 44,643 89.7
Total 338 $ 42,811,844 $ 9,817,435 $ 52,629,279 $ 155,230,856 33.9 %
_______________________
(1) Includes accrued interest on advances, letters of credit, unused lines of credit, and credit-enhancement obligations on purchased mortgage loans.
(2) Collateral borrowing capacity does not represent any commitment to lend on the part of the Bank.
(3) Because they are subject to different laws and regulations than depository institutions, non-depository members are obligated to deliver eligible collateral regardless of their assigned credit category.
(4) Nonmember borrowers, consisting of housing associates and institutions that are former members or have acquired former members, are obligated to deliver all required collateral. Other than housing associates, nonmember borrowers may not request new advances and are not permitted to extend or renew any advances they have assumed.
The Bank may adjust the credit category of a member from time to time based on financial reviews and other information pertinent to that member.
We have not recorded any allowance for credit losses on advances as of September 30, 2025, and December 31, 2024, for the reasons discussed in Part I - Item 1 - Financial Statements - Notes to the Financial Statements - Note 4 - Advances.
Table 11 - Top Five Advance-Borrowing Institutions
(dollars in thousands)
September 30, 2025
Name Par Value of Advances Percent of Total Par Value of Advances
Weighted-Average Rate (1)
State Street Bank and Trust Company $ 9,815,000 22.9 % 4.55 %
Webster Bank, N.A. 2,560,816 6.0 4.31
Hingham Institution for Savings 1,526,250 3.6 4.06
Massachusetts Mutual Life Insurance Company 1,520,000 3.5 2.18
Salem Five Cents Savings Bank 1,502,814 3.5 4.21
Total of top five advance-borrowing institutions $ 16,924,880 39.5 %
December 31, 2024
Name Par Value of Advances Percent of Total Par Value of Advances
Weighted-Average Rate (1)
State Street Bank and Trust Company $ 9,815,000 21.7 % 4.84 %
Webster Bank, N.A. 2,110,108 4.7 4.51
Massachusetts Mutual Life Insurance Company 2,100,000 4.6 1.78
Hingham Institution for Savings 1,497,000 3.3 4.34
Institution for Savings in Newburyport and its Vicinity 1,321,080 2.9 3.77
Total of top five advance-borrowing institutions $ 16,843,188 37.2 %
_______________________
(1) Weighted-average rates are based on the contract rate of each advance without taking into consideration the effects of interest-rate-exchange agreements that we may use as hedging instruments.
Investments
At September 30, 2025, investment securities and short-term money-market instruments totaled $28.2 billion, an increase of $5.7 billion from $22.5 billion at December 31, 2024.
Short-term money-market investments increased $5.7 billion to $11.7 billion at September 30, 2025, compared with December 31, 2024. The increase was primarily attributable to an increase of $4.0 billion in securities purchased under agreements to resell and an increase of $1.8 billion in federal funds sold.
Investment securities increased $28.3 million to $16.6 billion at September 30, 2025, compared with $16.5 billion at December 31, 2024.
Investments Credit Risk
We are subject to credit risk on unsecured investments consisting primarily of short-term (meaning one year or less to maturity) money-market instruments issued by high-quality financial institutions and long-term (original maturity greater than one year) debentures issued or guaranteed by U.S. agencies, U.S government-owned corporations, GSEs, and supranational institutions.
We place short-term funds with large, high-quality financial institutions that must be rated in at least the third-highest internal rating category on a rating scale of FHFA1 through FHFA7, reflecting progressively lower credit quality. The internal rating categories of FHFA1 through FHFA4 are considered to be investment quality. As of September 30, 2025, all of these placements either expired within one business day or were payable upon demand. See Part I - Item 1 - Business - Business Lines - Investments in the 2024 Annual Report for additional information.
In addition to these unsecured investments, we also make secured investments in the form of securities purchased under agreements to resell secured by U.S. Treasury, U.S. government guaranteed, or agency obligations with current term limits of
up to 95 days to maturity and in the form of MBS and HFA securities that are directly or indirectly supported by underlying mortgage loans.
We actively monitor our investment credit exposures and the credit quality of our counterparties, including assessments of each counterparty's financial performance, capital adequacy, sovereign support, and collateral quality and performance, as well as related market signals such as equity prices and credit default swap spreads. We may reduce or suspend credit limits and/or seek to reduce existing exposures, as appropriate, as a result of these monitoring activities.
Table 12 - Credit Ratings of Investments at Carrying Value
(dollars in thousands)
As of September 30, 2025
Long-Term Credit Rating
Investment Category Triple-A Double-A Single-A Unrated
Money-market instruments: (1)
Interest-bearing deposits $ - $ 514,150 $ 1,337,833 $ -
Securities purchased under agreements to resell - - 5,500,000 -
Federal funds sold - 1,300,000 3,005,000 -
Total money-market instruments - 1,814,150 9,842,833 -
Investment securities:(2)
Non-MBS:
U.S. Treasury obligations - 4,754,129 - -
Corporate bonds - - - 1,338
U.S. government-owned corporations - 230,967 - -
GSE - 96,730 - -
Supranational institutions 323,753 - - -
HFA securities 5,622 40,766 - -
Total non-MBS 329,375 5,122,592 - 1,338
MBS:
U.S. government guaranteed - single-family - 126,169 - -
U.S. government guaranteed - multifamily - 452,802 - -
GSE - single-family - 2,238,431 - -
GSE - multifamily - 8,293,305 - -
Total MBS - 11,110,707 - -
Total investment securities 329,375 16,233,299 - 1,338
Total investments $ 329,375 $ 18,047,449 $ 9,842,833 $ 1,338
_______________________
(1) The counterparty NRSRO rating is used for money-market instruments. Counterparty ratings are obtained from Moody's, Fitch, Inc. (Fitch), and S&P and are each as of September 30, 2025. If there is a split rating, the lowest rating is used. In certain instances where a counterparty is unrated, the Bank may assign a deemed rating to the counterparty and that deemed rating is used.
(2) The issue rating is used for investment securities. Issue ratings are obtained from Moody's, Fitch, and S&P. If there is a split rating, the lowest rating is used.
Table 13 - Unsecured Credit Related to Money-Market Instruments and Debentures by Carrying Value
(dollars in thousands)
Carrying Value
September 30, 2025 December 31, 2024
Federal funds sold $ 4,305,000 $ 2,505,000
Interest bearing deposits 1,851,983 1,958,353
Supranational institutions 323,753 337,352
U.S. government-owned corporations 230,967 221,769
GSEs 96,730 94,614
Corporate bonds 1,338 1,489
FHFA regulations include limits on the amount of unsecured credit we may extend to a counterparty or to a group of affiliated counterparties based on a percentage of regulatory capital and an internal credit rating determined by each FHLBank. See Part 1 - Item 1 - Business - Business Lines - Investments in the 2024 Annual Report for additional information. Under these regulations, the level of regulatory capital is determined as the lesser of our total regulatory capital or the regulatory capital of the counterparty. The applicable regulatory capital is then multiplied by a specified percentage for each counterparty, the product of which is the maximum amount of unsecured credit exposure we may extend to that counterparty. The percentage that we may offer for extensions of unsecured credit other than overnight sales of federal funds ranges from one to 15 percent based on the counterparty's credit rating. Extensions of unsecured credit for overnight sales of federal funds range from one to 30 percent based on the counterparty's credit rating. From time to time, we may establish internal credit limits lower than permitted by regulation for individual counterparties.
Mortgage Loans
We invest in mortgages through the MPF Program. The MPF Program is further described under - Mortgage Loans Credit Risk and in Part I - Item 1 - Business - Business Lines - Mortgage Loan Finance in the 2024 Annual Report.
As of September 30, 2025, our mortgage loan investment portfolio totaled $4.2 billion, an increase of $478.2 million from December 31, 2024. This increase is the result of an increase in mortgage loan purchase volume during 2025. We expect continued competition from Fannie Mae and Freddie Mac, as well as from private mortgage loan acquirers, for loan investment opportunities.
Mortgage Loans Credit Risk
We are subject to credit risk from the mortgage loans in which we invest due to our exposure to the credit risk of the underlying borrowers and the credit risk of the participating financial institutions when the participating financial institutions retain credit-enhancement and/or servicing obligations. For additional information on the credit risks arising from our participation in the MPF Program, see Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Mortgage Loans - Mortgage Loans Credit Risk in the 2024 Annual Report. For information on the credit performance of our mortgage loan portfolio as of September 30, 2025, see Part I - Item 1 - Financial Statements - Notes to Financial Statements - Note 5 - Mortgage Loans Held for Portfolioin this report.
Although our mortgage loan portfolio includes loans throughout the U.S., concentrations of 5 percent or greater of the par value of our conventional mortgage loan portfolio are shown in Table 14.
Table 14 - State Concentrations by Par Value
Percentage of Total Par Value of Conventional Mortgage Loans
September 30, 2025 December 31, 2024
Massachusetts 55 % 58 %
Maine 18 16
Vermont 9 7
Connecticut 6 6
All others 12 13
Total 100 % 100 %
We place conventional mortgage loans on nonaccrual status when the collection of interest or principal is doubtful or contractual principal or interest is 90 days or more past due. Accrued interest on nonaccrual loans is excluded from interest income. We monitor the delinquency levels of the mortgage loan portfolio on a monthly basis.
Table 15 - Mortgage Loans - Risk Elements and Credit Losses
(dollars in thousands)
For the Nine Months Ended September 30,
2025 2024
Average par value of mortgage loans outstanding during the period $ 3,837,989 $ 3,228,740
Net charge-offs - 4
Net charge-offs to average loans outstanding during the period - % - %
As of September 30, 2025 As of December 31, 2024
Mortgage loans held for portfolio, par value $ 4,121,070 $ 3,643,537
Nonaccrual loans, par value 5,996 6,083
Allowance for credit losses on mortgage loans 2,600 2,200
Ratio of allowance for credit losses to mortgage loans held for portfolio 0.06 % 0.06 %
Ratio of nonaccrual loans to mortgage loans held for portfolio 0.15 0.17
Ratio of allowance for credit losses to nonaccrual loans 43.36 36.17
Consolidated Obligations
See Liquidity and Capital Resourcesfor information regarding our COs.
Derivative Instruments
All derivatives are recorded on the statement of condition at fair value and classified as either derivative assets or derivative liabilities. Bilateral and cleared derivatives outstanding are classified as assets or liabilities according to the net fair value of derivatives aggregated by each counterparty. Derivative assets' net fair value, net of cash collateral and accrued interest, totaled $253.5 million and $301.9 million as of September 30, 2025, and December 31, 2024, respectively. Derivative liabilities' net fair value, net of cash collateral and accrued interest, totaled $3.2 million and $4.7 million as of September 30, 2025, and December 31, 2024, respectively.
The following table presents a summary of the notional amounts and estimated fair values of our outstanding derivatives, excluding accrued interest, and related hedged item by product and type of accounting treatment as of September 30, 2025, and December 31, 2024. The notional amount represents the hypothetical principal basis used to determine periodic interest payments received and paid. However, the notional amount does not represent an actual amount exchanged or our overall exposure to credit and market risk.
Table 16 - Derivatives and Hedge-Accounting Treatment
(dollars in thousands)
September 30, 2025 December 31, 2024
Hedged Item Derivative
Designation(1)
Notional
Amount 		Fair
Value 		Notional
Amount 		Fair
Value
Advances Swaps Fair value $ 11,526,939 $ (90,757) $ 12,157,089 $ (83,874)
Available-for-sale securities Swaps Fair value 11,422,743 (168,083) 11,790,008 (154,592)
COs Swaps Fair value 22,340,385 (264,457) 22,285,710 (595,614)
Swaps Economic 5,009,837 2,649 2,987,274 723
Forward starting swaps Cash Flow 641,000 (40) 741,000 224
Total associated with COs 27,991,222 (261,848) 26,013,984 (594,667)
Total 50,940,904 (520,688) 49,961,081 (833,133)
Mortgage delivery commitments 99,856 (107) 32,729 (100)
Total derivatives $ 51,040,760 (520,795) $ 49,993,810 (833,233)
Accrued interest 204,168 241,767
Cash collateral, including related accrued interest 566,883 888,593
Net derivatives $ 250,256 $ 297,127
Derivative asset $ 253,481 $ 301,873
Derivative liability (3,225) (4,746)
Net derivatives $ 250,256 $ 297,127
_______________________
(1) The hedge designation "fair value" represents the hedge classification for transactions that qualify for hedge-accounting treatment and hedge changes in fair value attributable to changes in the designated benchmark interest rate. The hedge designation "cash flow" represents the hedge classification for transactions that qualify for hedge-accounting treatment and hedge the exposure to variability in expected future cash flows. The hedge designation "economic" represents derivatives hedging specific or nonspecific assets, liabilities, or firm commitments that do not qualify or were not documented as fair-value or cash-flow hedges but are documented as serving a non-speculative use and are hedging strategies under our risk-management policy.
Derivative Instruments Credit Risk. We are subject to credit risk on derivatives, which is the risk of counterparty default on the derivative contract. The amount of unsecured credit exposure to derivative counterparty default is the amount by which the replacement cost of the defaulted derivative contract exceeds the value of any collateral held by us (if the counterparty is the net obligor on the derivative contract) or is exceeded by the value of collateral pledged by us to counterparties (if we are the net obligor on the derivative contract). We accept cash and securities collateral in accordance with the terms of the applicable master netting agreement for uncleared derivatives (principal-to-principal derivatives that are not centrally cleared) from counterparties with whom we are in a current positive fair-value position. We pledge cash and securities collateral in accordance with the terms of the applicable master netting agreement for uncleared derivatives to counterparties with whom we are in a current negative fair-value position. We currently pledge only cash collateral, including initial and variation margin, for cleared derivatives, but may also pledge securities for initial margin as allowed by the applicable DCO and clearing member.
Our daily average aggregate notional amount for uncleared derivatives transactions between June 2024 and August 2024 exceeded $8 billion and, as a result, we remained subject to two-way initial margin obligations as required by the Wall Street Reform and Consumer Protection Act. For uncleared derivatives transactions executed on or after September 1, 2022, a party whose initial margin requirement exceeds a specified threshold (which may not exceed $50 million) would be required to deliver collateral in the amount by which the initial margin requirement exceeds such specified threshold. Initial margin is required to be held at a third-party custodian for the benefit of the secured party, which can only assert ownership of such collateral upon the occurrence of certain events, which may include an event of default due to bankruptcy, insolvency, or similar proceeding. As of September 30, 2025, all initial margin requirements owed to our uncleared derivative counterparties by us or owed to us by our uncleared derivative counterparties were less than specified delivery thresholds.
From time to time, due to timing differences or derivatives-valuation differences, between our calculated derivatives values and those of our counterparties, and to the contractual haircuts applied to securities, we receive from (or pledge to) our counterparties cash or securities collateral whose fair value is less (or more) than the current net positive (or net negative) fair-value of derivatives positions outstanding with them.
Table 17 - Credit Exposure to Derivatives Counterparties
(dollars in thousands)
As of September 30, 2025
Notional Amount Net Derivatives Fair Value Before Collateral Cash Collateral Pledged to Counterparty Net Credit Exposure to Counterparties
Asset positions with credit exposure:
Uncleared derivatives
Single-A $ 2,457,500 $ 11,597 $ (11,086) $ 511
Liability positions with credit exposure:
Uncleared derivatives
Single-A 12,132,500 (248,075) 252,083 4,008
Cleared derivatives
23,453,934 (15,870) 264,687 248,817
Total interest-rate swap positions with nonmember counterparties to which we had credit exposure 38,043,934 (252,348) 505,684 253,336
Mortgage delivery commitments (1)
99,856 145 - 145
Total $ 38,143,790 $ (252,203) $ 505,684 $ 253,481
_______________________
(1) Total fair-value exposures related to commitments to invest in mortgage loans are offset by certain pair-off fees. Commitments to invest in mortgage loans are reflected as derivatives. We do not collateralize these commitments. However, should the participating financial institution fail to deliver the mortgage loans as agreed, the participating financial institution is charged a fee to compensate us for the nonperformance.
For information on our approach to the credit risks arising from our use of derivatives, see Part II - Item 7 - Management's Discussion and Analysis and Results of Operations - Financial Condition - Derivative Instruments - Derivative Instruments Credit Risk in the 2024 Annual Report.
LIQUIDITY AND CAPITAL RESOURCES
Our financial structure is designed to enable us to expand and contract our assets, liabilities, and capital in response to changes in membership composition and member credit needs. Our primary source of liquidity is our access to the capital markets through CO issuance, which is described in Part I - Item 1 - Business - Consolidated Obligations of the 2024 Annual Report. Outstanding COs and the condition of the market for COs are discussed below under - Debt Financing - Consolidated Obligations. Our equity capital resources are governed by our Capital Plan, certain portions of which are described under - Capital below as well as by applicable legal and regulatory requirements.
Liquidity
We are required to maintain liquidity in accordance with the FHLBank Act, FHFA regulations and guidance, and policies established by our management and board of directors. We seek to be in a position to meet the credit and liquidity needs of our members and all current and future financial commitments by managing liquidity positions to maintain stable, reliable, and cost-effective sources of funds while taking into account market conditions, member demand, and the maturity profile of our assets and liabilities.
We are unable to predict future trends in member credit needs because they are driven by complex interactions among several factors, including, but not limited to, increases and decreases in members assets and deposits, and the attractiveness of advances compared to other sources of wholesale funding. We regularly monitor current trends and anticipate future debt issuance needs and maintain a portfolio of highly liquid assets to be prepared to fund member credit needs and investment opportunities. We are generally able to expand our CO debt issuance in response to members' increased need for advances and to increase our acquisitions of mortgage loans. Alternatively, in response to reduced member credit needs, we may shrink our balance sheet by
allowing our COs to mature without replacement, transferring debt to another FHLBank, repurchasing and retiring outstanding COs, or redeeming callable COs on eligible redemption dates.
Sources and Uses of Liquidity.Our primary sources of liquidity are proceeds from the issuance of COs and advance repayments, and maturing short-term investments, as well as cash and investment holdings that are primarily high-quality, short- and intermediate-term financial instruments that can be sold or pledged as collateral under a repurchase agreement. During the nine months ended September 30, 2025, we maintained continuous access to funding and adapted our debt issuance to meet the needs of our members.
Secondary sources of liquidity include payments collected on mortgage loans, proceeds from the issuance of capital stock, and member deposits. In addition, under the FHLBank Act, the U.S. Treasury may purchase up to $4 billion of FHLBank COs. The terms, conditions, and interest rates in such a purchase would be determined by the U.S. Treasury. This authority may be exercised at the discretion of the U.S. Treasury with the agreement of the FHFA only if alternative means cannot be effectively employed to permit members of the FHLBanks to continue to supply reasonable amounts of funds to the mortgage market, and the ability to supply such funds is substantially impaired because of monetary stringency and high interest rates. There were no such purchases by the U.S. Treasury during the nine months ended September 30, 2025.
Our uses of liquidity are advance originations and consolidated obligation principal and interest payments. Other uses of liquidity are mortgage loan and investment purchases, dividend payments, general operating expenses, and other contractually obligated payments. We also maintain liquidity to redeem or repurchase excess capital stock, through our daily excess stock repurchases, upon the request of a member or as required under our Capital Plan.
For information and discussion of our guarantees and other commitments we may have, see Part I - Item 1 - Financial Statements - Notes to the Financial Statements - Note 13 - Commitments and Contingencies. For further information and discussion of the joint and several liability for FHLBank COs, see below - Debt Financing - Consolidated Obligations.
Internal Liquidity Sources / Liquidity Management
Projected Net Cash Flow.We define projected net cash flow as projected sources of funds less projected uses of funds based on contractual maturities or expected option exercise periods, and settlement of committed assets and liabilities, as applicable. For mortgage-related cash flows and callable debt, we incorporate projected prepayments and call exercise.
Liquidity Management. We maintain our liquidity so that if projected net cash flow falls below zero on or before the 21stday following the measurement date, then management of the Bank is notified and determines whether any corrective action is necessary. We did not breach this threshold at any time during the nine months ended September 30, 2025. Table 18 below shows this calculation as of September 30, 2025.
Table 18 - Projected Net Cash Flow
(dollars in thousands)
As of September 30, 2025
21 Days
Uses of funds
Interest payable $ 214,881
Maturing or expected option exercise of liabilities 8,976,633
Committed asset settlements 160,000
Capital outflow 43,775
MPF delivery commitments 99,856
Projected Calls 233,000
Other 6,394
Gross uses of funds 9,734,539
Sources of funds
Interest receivable 261,687
Maturing or projected amortization of assets 21,226,325
Committed liability settlements 663,107
Cash and due from banks and interest bearing deposits 1,861,712
Gross sources of funds 24,012,831
Projected net cash flow $ 14,278,292
Base Case Liquidity Requirement. The Bank is subject to FHFA guidance on liquidity, including Advisory Bulletin 2018-07 (Liquidity Guidance AB), which communicates the FHFA's expectations with respect to the maintenance of sufficient liquidity to enable us to provide advances and fund standby letters of credit for members for a specified time without access to the capital markets or other unsecured funding sources.
The Liquidity Guidance AB provides guidance on the level of on-balance sheet liquid assets related to base case liquidity. As part of the base case liquidity measure, the guidance also includes a separate provision covering off-balance sheet commitments from standby letters of credit. In addition, the Liquidity Guidance AB provides guidance related to asset/liability maturity funding gap limits.
Under the Liquidity Guidance AB, FHLBanks are required to maintain sufficient liquid assets to achieve positive projected net cash flow while rolling over maturing advances to all members and assuming no access to capital markets for a period of time between 10 and 30 calendar days, with a specific measurement period set forth in a supervisory letter. The Liquidity Guidance AB also sets forth the initial cash flow assumptions and formula to calculate base case liquidity. With respect to standby letters of credit, the guidance states that FHLBanks should maintain a liquidity reserve of between one percent and 20 percent of its outstanding standby letters of credit commitments, as specified in a supervisory letter.
We were in compliance with the Base Case Liquidity Requirement at all times during the nine months ended September 30, 2025.
Balance Sheet Funding Gap Policy. We may use a portion of the short-term COs issued to fund assets with longer terms, including longer-term floating-rate assets. Funding longer-term floating-rate assets with shorter-term liabilities generally does not expose us to significant interest-rate risk because the interest rates on both the floating-rate assets and liabilities typically reset similarly (either through rate resets or re-issuance of the obligations). However, deviations in the cost of our short-term liabilities relative to resetting assets can cause fluctuations in our net interest margin.
Additionally, the Bank is exposed to refinancing risk since, over certain time horizons, it has more liabilities than assets maturing. In order to manage the Bank's refinancing risk, we maintain a policy that limits the potential difference between the amount of financial assets and the amount of financial liabilities expected to mature within three-month and one-year time horizons inclusive of projected mortgage-related prepayment activity. We measure this difference, or gap, as a percentage of
total assets over three-month and one-year time horizons. In conformity with the provisions of the Liquidity Guidance AB, the Bank has instituted a limit framework around these metrics as follows:
Table 19 - Funding Gap Metric
Funding Gap Metric (1)
Limit Three-Month Average
September 30, 2025 		Three-Month Average
December 31, 2024
3-month Funding Gap 15% (3.8)% 4.9%
1-year Funding Gap 30% 12.5% 11.1%
_______________________
(1) The funding gap metric is a positive value when maturing liabilities exceed maturing assets, as defined, within the given period. Compliance with limits are evaluated against the rolling three-month average of the month-end funding gaps.
External Sources of Liquidity
Amended and Restated FHLBanks P&I Funding Contingency Plan Agreement. All FHLBanks have a source of emergency external liquidity through the Amended and Restated FHLBanks P&I Funding Contingency Plan Agreement. Under the terms of that agreement, in the event any FHLBank does not fund principal and interest payments due with respect to any CO for which issuance proceeds were allocated to it within deadlines established in the agreement, the other FHLBanks will be obligated to fund any shortfall to the extent that any of the other FHLBanks has a net positive settlement balance (that is, the amount by which end-of-day proceeds received by such FHLBank from the sale of COs exceeds payments by such FHLBank on COs on the same day) in its account with the Office of Finance on the day the shortfall occurs. The FHLBank that received assistance pursuant to this agreement would then be required to repay the funding to the other FHLBanks. We have never drawn funding under this agreement, nor have we ever been required to provide funding to another FHLBank under this agreement.
Debt Financing -Consolidated Obligations
At September 30, 2025, and December 31, 2024, outstanding COs for which we are primarily liable, including both CO bonds and CO discount notes, totaled $70.3 billion and $66.7 billion, respectively. CO bonds outstanding for which we are primarily liable at September 30, 2025, and December 31, 2024, include issued callable bonds totaling $17.8 billion and $18.0 billion, respectively.
CO discount notes comprised 31.1 percent and 27.8 percent of the outstanding COs for which we are primarily liable at September 30, 2025, and December 31, 2024, respectively, but accounted for 56.2 percent and 68.5 percent of the proceeds from the issuance of such COs during the nine months ended September 30, 2025 and 2024, respectively.
Overall, we continued to experience strong demand for COs among investors. During the period covered by this report, the capital markets have supported our funding needs and we have been able to issue debt in the amounts and structures required to satisfy the demand for advances and meet our funding and risk-management needs.
Capital
Total capital was $3.9 billion at both September 30, 2025, and December 31, 2024, respectively.
The FHLBank Act and FHFA regulations specify that each FHLBank is required to satisfy certain minimum regulatory capital requirements. We were in compliance with these requirements at September 30, 2025, as discussed in Part I - Item 1 - Financial Statements - Notes to the Financial Statements - Note 10 - Capital.
Capital Rule
The FHFA's regulation on FHLBank capital classification and critical capital levels (the Capital Rule), among other things, establishes criteria for capital classifications and corrective action requirements for FHLBanks that are classified in any classification other than adequately capitalized. The Capital Rule requires the FHFA to determine on no less than a quarterly basis the capital classification of each FHLBank. Based on financial information as of June 30, 2025, the FHFA determined that we met the definition of adequately capitalized under the Capital Rule.
Internal Capital Practices and Policies
We also take steps as we believe prudent beyond legal or regulatory requirements in an effort to ensure capital adequacy, reflected in our internal minimum capital requirement, which exceeds regulatory requirements, our minimum retained earnings target, and limitations on our dividends.
Internal Minimum Capital Requirement in Excess of Regulatory Requirements
In an effort to provide protection for our capital base, we maintain an internal minimum capital requirement whereby the amount of paid-in capital stock and retained earnings (together, our actual regulatory capital) must be at least equal to the sum of 4 percent of our total assets plus an amount we measure as our risk exposure with 99 percent confidence using our economic capital model (together, our internal minimum capital requirement). As of September 30, 2025, this internal minimum capital requirement equaled $3.7 billion, which was satisfied by our actual regulatory capital of $4.1 billion.
Minimum Retained Earnings Target
Our limit for our minimum level of retained earnings is determined monthly using rolling three-month averages. Retained earnings must be at least 4.0 percent of our total assets less outstanding capital stock plus the higher of (a) the risk-based capital requirement or (b) the economic capital requirement.
At September 30, 2025, we had total retained earnings of $2.0 billion, which exceeded the limit of $1.6 billion. In the event that the Bank's balance of retained earnings is below the limit, dividends may not exceed 40 percent of the prior quarter's net income.
Repurchases of Excess Stock
We have the authority, but are not obliged, to repurchase excess stock, as discussed under Part I - Item 1 - Business - Capital Resources - Repurchase of Excess Stock in the 2024 Annual Report.
Table 20 - Capital Stock Requirements and Excess Capital Stock
(dollars in thousands)
Membership Stock
Investment
Requirement 		Activity-Based
Stock Investment
Requirement
Total Stock
Investment
Requirement (1)
Outstanding Class B
Capital Stock (2)
Excess Class B
Capital Stock
September 30, 2025 $ 353,008 $ 1,714,980 $ 2,068,008 $ 2,111,783 $ 43,775
December 31, 2024 348,504 1,808,806 2,157,331 2,200,253 42,922
_______________________
(1) Total stock investment requirement is rounded up to the nearest $100 on an individual member basis.
(2) Class B capital stock outstanding includes mandatorily redeemable capital stock.
To facilitate our ability to maintain a prudent level of capitalization and an efficient capital structure, while providing for an equitable allocation of excess stock ownership among members, we conduct daily repurchases of excess stock from any shareholder whose excess stock exceeds the lesser of $3 million or 3 percent of the shareholder's total stock investment requirement, subject to the minimum repurchase of $100,000. We plan to continue this practice, subject to regulatory requirements and our liquidity or capital management needs, although repurchase decisions remain at our sole discretion, and we retain authority to adjust our excess stock repurchase practices subject to notice requirements defined in our Capital Plan, or to suspend repurchases of excess stock from any shareholder or all shareholders without prior notice.
Restricted Retained Earnings and the Joint Capital Agreement
At September 30, 2025, our total required contribution to the restricted retained earnings account was $716.0 million compared with the current restricted retained earnings account balance of $543.2 million.
Off-Balance-Sheet Arrangements
Our significant off-balance-sheet arrangements consist of the following:
• commitments that obligate us for additional advances;
• standby letters of credit;
• commitments for unused lines-of-credit advances; and
• unsettled COs.
Off-balance-sheet arrangements are more fully discussed in Part I - Item 1 - Financial Statements - Notes to the Financial Statements - Note 13 - Commitments and Contingencies.
CRITICAL ACCOUNTING ESTIMATES
The preparation of financial statements in accordance with GAAP requires management to make a number of judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, income and expense. To understand the Bank's financial position and results of operations, it is important to understand the Bank's most significant accounting policies and the extent to which management uses judgment, estimates and assumptions in applying those policies. The Bank's critical accounting estimates include:
•Estimation of Fair Values, for derivatives, hedged items in a fair-value hedge relationship, and available-for-sale investment securities; and
•Amortization of Premiums and Accretion of Discounts Associated with Prepayable MBS.
Management considers these policies to be critical because they require us to make subjective and complex judgments about matters that are inherently uncertain. Management bases its judgment and estimates on current market conditions and industry practices, historical experience, changes in the business environment and other factors that it believes to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions and/or conditions. The Audit Committee of our board of directors has reviewed these estimates. The assumptions involved in applying these policies are discussed in Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates in the 2024 Annual Report.
As of September 30, 2025, we have not made any significant changes to the estimates and assumptions used in applying our critical accounting policies and estimates from those used to prepare our audited financial statements.
LEGISLATIVE AND REGULATORY DEVELOPMENTS
We are subject to various legal and regulatory requirements and priorities. Certain actions by the current federal executive administration are changing the regulatory environment, including regulatory priorities and areas of focus, such as deregulation, which have affected, and will likely continue to affect, certain aspects of our business operations, and could impact our financial condition, results of operations and reputation.
During the third quarter of 2025, the FHFA rescinded the regulatory interpretation that imposed restrictions on acceptance of municipal securities by the FHLBanks therefore allowing us to broadly accept those securities as collateral. In addition, the FHFA withdrew two proposed rules published in 2024: (i) the proposed rule published in November 2024 that would have amended regulations addressing boards of directors and overall corporate governance of the FHLBanks and the Office of Finance, and (ii) the proposed rule published in October 2024 that would have modified unsecured credit limits on interest-bearing deposit accounts. In October 2025, the FHFA rescinded several advisory bulletins and technical guidance documents. We are reviewing these rescissions and assessing any potential impact that they may have on our policies and procedures.
Considering the changes in the regulatory environment, there is uncertainty with respect to the ultimate result of future regulatory actions and the ultimate impact they may have on us and the FHLBank System. We continue to monitor these actions as they evolve and to evaluate their potential impact on us. For a discussion of related risks, please refer to Part I - Item IA - Risk Factors in the 2024 Annual Report.
Federal Home Loan Bank of Boston published this content on November 13, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 13, 2025 at 17:49 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]